SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- -------------------
Commission file number: 0-27718
NEOSE TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3549286
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 Witmer Road, Horsham, Pennsylvania 19044
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 441-5890
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------- -------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 9,495,290 shares of common
stock, $.01 par value, were outstanding as of April 30, 1997.
<PAGE>
NEOSE TECHNOLOGIES, INC.
(a development-stage company)
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Balance Sheets (unaudited) at December 31, 1996 and March 31, 1997...... 3
Statements of Operations (unaudited) for the three months ended
March 31, 1996 and 1997, and from the period of inception
through March 31, 1997.................................................. 4
Statements of Cash Flows (unaudited) for the three months ended
March 31, 1996 and 1997, and from the period of inception
through March 31, 1997.................................................. 5
Notes to Unaudited Financial Statements................................. 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 9
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings....................................................... 14
Item 2. Changes in Securities................................................... 14
Item 3. Defaults Upon Senior Securities......................................... 14
Item 4. Submission of Matters to a Vote of Security Holders..................... 14
Item 5. Other Information....................................................... 14
Item 6. Exhibits and Reports on Form 8-K........................................ 14
SIGNATURES.............................................................................. 16
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NEOSE TECHNOLOGIES, INC.
(a development-stage company)
BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
ASSETS December 31, 1996 March 31, 1997
----------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 32,845,025 $ 51,378,170
Restricted funds 73,828 3,091,474
Prepaid expenses and other 210,122 482,098
------------ ------------
Total current assets 33,128,975 54,951,742
PROPERTY AND EQUIPMENT, net 3,973,619 10,187,973
OTHER ASSETS 15,049 3,400
------------ ------------
$ 37,117,643 $ 65,143,115
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 678,122 $ 577,168
Accounts payable 217,283 441,998
Accrued compensation 264,440 103,000
Other accrued expenses 161,130 144,637
Deferred revenue 41,667 229,167
------------ ------------
Total current liabilities 1,362,642 1,495,970
OTHER LIABILITIES 78,806 --
LONG-TERM DEBT 556,405 9,837,090
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
5,000,000 shares authorized; none
issued -- --
Common stock, $.01 par value; 30,000,000
shares authorized; 8,214,624 and
9,495,290 shares issued and outstanding 82,146 94,953
Additional paid-in capital 60,830,513 81,313,952
Deferred compensation (269,925) (247,431)
Deficit accumulated during the development
stage (25,522,944) (27,351,419
------------ ------------
Total stockholders' equity $ 35,119,790 $ 53,810,055
------------ ------------
$ 37,117,643 $ 65,143,115
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
NEOSE TECHNOLOGIES, INC.
(a development-stage company)
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Period
March 31, From Inception
------------------------------- (January 17, 1989)
1996 1997 to March 1997
------------ ------------- ------------------
<S> <C> <C> <C>
REVENUES FROM COLLABORATIVE
AGREEMENTS: $ 337,500 $ 312,500 $ 5,542,213
OPERATING EXPENSES:
Research and development 1,649,635 1,768,895 24,747,453
General and administrative 560,528 913,411 10,107,097
------------ ------------- -------------
Total operating expenses 2,210,163 2,682,306 34,854,550
------------ ------------- -------------
Operating loss (1,872,663) (2,369,806) (29,312,337)
------------ ------------- -------------
INTEREST INCOME 298,476 584,402 3,130,332
INTEREST EXPENSE (72,358) (43,071) 1,169,414
------------ ------------- -------------
NET LOSS $ (1,646,545) $ (1,828,475) $ (27,351,419)
============ ============= =============
PRO FORMA NET LOSS PER SHARE $ (0.24) $ (0.20)
============ =============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,808,000 9,092,000
============ =============
</TABLE>
The accompanying notes are an integral part of these statements
4
<PAGE>
NEOSE TECHNOLOGIES, INC.
(a development-stage company)
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31, Period from Inception
------------------------------- (January 17, 1989)
1996 1997 to March 31, 1997
------------- ------------- -------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,646,545) $ (1,828,475) $ (27,351,419)
Adjustments to reconcile net loss to cash
used in operating activities--
Depreciation and amortization 153,712 191,467 2,130,265
Common stock issued for non-cash
charges -- -- 34,961
Changes in operating assets and liabilities-
Restricted funds 37,070 (3,017,646) (3,091,474)
Prepaid expenses and other (241,410) (271,976) (482,098)
Other assets -- 11,649 (3,400)
Accounts payable 164,634 224,715 441,998
Accrued compensation (103,318) (161,440) 147,473
Other accrued expenses (24,463) (16,493) 144,637
Deferred revenue 187,500 187,500 229,167
Other liabilities 3,973 (78,806) --
------------ ------------ -------------
Net cash used in operating activities (1,468,847) (4,759,505) (27,799,890)
------------ ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (241,227) (6,383,327) (11,343,415)
Proceeds from sale-leaseback of equipment -- -- 1,382,027
------------ ------------ -------------
Net cash used in investing activities (241,227) (6,383,327) (9,961,388)
------------ ------------ -------------
</TABLE>
(Continued)
5
<PAGE>
NEOSE TECHNOLOGIES, INC.
(a development-stage company)
STATEMENTS OF CASH FLOWS
(unaudited)
(continued)
<TABLE>
<CAPTION>
Three Months
Ended March 31, Period from Inception
------------------------------- (January 17, 1989)
1996 1997 to March 31, 1997
------------- ------------- -------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of notes $ -- $ -- $ 1,225,000
Repayment of notes payable -- -- (565,250)
Proceeds from issuance of short-term debt -- -- 290,000
Repayment of short-term debt -- -- (290,000)
Proceeds from issuance of long-term debt -- 9,400,000 10,510,869
Repayment of long-term debt (180,672) (220,268) (1,983,087)
Proceeds from issuance of preferred stock, net -- -- 29,497,297
Proceeds from issuance of common stock, net -- 87,041 467,706
Proceeds from public offering, net 29,536,164 20,339,013 49,466,174
Proceeds from exercise of warrants -- -- 333,920
Proceeds from exercise of stock options 104,998 70,191 295,221
Dividends paid (18,000) -- (72,000)
Issuance costs resulting from conversion of
notes to common stock -- -- (36,402)
------------ ----------- -------------
Net cash provided by financing activities 29,442,490 29,675,977 89,139,448
------------ ----------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 27,732,416 18,533,145 51,378,170
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 11,189,001 32,845,025 --
------------ ----------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 38,921,417 $51,378,170 $ 51,378,170
============ =========== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 74,595 $ 45,768 $ 1,095,479
============ =========== =============
Non-cash financing activities--
Issuance of common stock for dividends $ -- $ -- $ 90,000
============ =========== =============
Issuance of common stock to employees
in lieu of cash compensation $ -- $ -- $ 44,473
============ =========== =============
</TABLE>
The accompanying notes are an integral part of these statements
6
<PAGE>
NEOSE TECHNOLOGIES, INC.
(a development-stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited financial statements at March 31, 1997, for the three
months ended March 31, 1996 and 1997, and for the period from inception (January
17, 1989) to March 31, 1997, contained herein have been prepared in accordance
with generally accepted accounting principles for interim financial information.
They do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
management's opinion, the unaudited information includes all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of the financial position, results of operations and cash flows for the periods
presented. The results of operations for the interim periods shown in this
report are not necessarily indicative of results expected for the full year. The
financial statements should be read in conjunction with the financial statements
and notes for the year ended December 31, 1996, included in Neose Technologies,
Inc. ("Neose" or the "Company") Form 10-K and the Company's 1996 Annual Report.
2. Sale of Common Stock
On January 29, 1997, the Company sold 1,250,000 shares of Common Stock
in a public offering at a price of $17.50 per share (the "Follow-on Offering").
The net proceeds to the Company after the payment of placement fees and offering
expenses were approximately $20,339,000.
The Company's initial public offering of Common Stock (the "Offering")
closed on February 22, 1996. The company offered and sold 2,250,000 shares of
Common Stock at a public offering price of $12.50 per share. The net proceeds to
the Company from the Offering were approximately $25,204,000. Pursuant to the
underwriters' over-allotment option, an additional 337,500 shares of Common
Stock were offered and sold by the Company on March 4, 1996, resulting in
additional net proceeds to the Company of approximately $3,923,000.
3. Acquisition of Facility and Issuance of Long-term Debt
On March 20, 1997, the Company purchased its previously leased facility
for a total of approximately $3.8 million.
In connection with the purchase of its facility and its planned GMP
manufacturing expansion, on March 20, 1997, the Company issued, through the
Montgomery County (Pennsylvania) Industrial Development Authority, the aggregate
amount of $9.4 million of taxable and tax-exempt bonds. The bonds are supported
by a AA-rated letter of credit, and a reimbursement agreement between the
7
<PAGE>
Company's bank and the letter of credit issuer. The interest rate on the bonds
will vary weekly, depending on market rates for AA-rated taxable and tax-exempt
obligations, respectively. To provide credit support for this arrangement, the
Company has given a first mortgage on the land, building, improvements, and
certain machinery and equipment to its bank. In addition, the Company has agreed
to certain covenants for the maintenance of minimum cash and short-term
investment balances, and for minimum working capital requirements.
4. Net Loss Per Share
For the three months ended March 31, 1996, pro forma net loss per share
was computed using the weighted-average number of common shares outstanding
during the period, and includes all Convertible Preferred Stock which converted
into shares of Common Stock immediately prior to the closing of the Offering as
if they were converted into Common Stock on their original dates of issuance.
For the three months ended March 31, 1997, net loss per share was computed using
the weighted-average number of common shares outstanding during the period.
Common stock equivalents were excluded for all periods presented because they
are antidilutive.
5. New Accounting Pronouncements
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings per Share," which supersedes APB Opinion No. 15, "Earnings per Share,"
was issued in February 1997. SFAS 128 requires dual presentation of basic and
diluted earnings per share ("EPS") for complex capital structures on the face of
the income statement. Basic EPS is computed by dividing income by the
weighted-average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution from the exercise or conversion of securities
into common stock, such as stock options. SFAS 128 is required to be adopted for
year-end 1997; earlier application is not permitted. The Company does not expect
the basic or diluted EPS measured under SFAS 128 to be materially different than
its primary or fully-diluted EPS measured under APB No. 15.
Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure," was issued in February 1997. The Company
does not expect it to result in any substantive change in its disclosure.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. These
forward-looking statements include statements regarding the Company's future
plans, events, or performance. Such statements are based on management's current
expectations and are subject to a number of uncertainties and risks that could
cause actual results to differ materially from those described in the
forward-looking statements. Factors that may cause such a difference include,
but are not limited to, the early stage of development of the Company's
products, technological uncertainties, dependence on collaborative partners, the
need for regulatory approval and effects of government regulation, and
dependence on patents and trade secrets, as well as those described under
"Business--Factors Affecting the Company's Business, Operating Results and
Financial Condition" in Part I of the Company's 1996 Annual Report on Form 10-K.
The Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three months ended March 31, 1997, and as of March
31, 1997, should be read in conjunction with the Management's Discussion and
Analysis of Financial Condition and Results of Operations for the year ended
December 31, 1996, included in the Company's Form 10-K and the Company's 1996
Annual Report.
Overview
Neose, a development-stage company, commenced operations in 1990, and
has devoted substantially all of its resources to the development of its
enzymatic carbohydrate synthesis technology and to the discovery and development
of complex carbohydrates for a variety of applications, including nutritional
additives and pharmaceuticals. The Company anticipates that its primary sources
of revenue for the next several years will be payments under its strategic
alliance with Abbott Laboratories ("Abbott") and other collaborative
arrangements, license fees, payments from future strategic alliances and
collaborative arrangements, if any, and interest income. Payments under
strategic alliances and collaborative arrangements will be subject to
significant fluctuation in both timing and amount. Therefore, the Company's
results of operations for any period may not be comparable to the results of
operations for any other period.
In December 1992, the Company entered into its strategic alliance with
Abbott for the development of breast milk oligosaccharides as nutritional
additives. The Company has received approximately $11.2 million in contract
payments, license fees, milestone payments, and equity investments in connection
with its strategic alliance with Abbott.
The Company has not generated any revenues from operations, except for
interest income and revenues from strategic alliances. The Company has incurred
losses since its inception and, as of March 31, 1997, had a deficit accumulated
during the development
9
<PAGE>
stage of approximately $27.4 million. The Company anticipates incurring
additional losses over at least the next several years. Such losses may
fluctuate significantly from quarter to quarter and are expected to increase as
the Company expands its research and development programs, including preclinical
studies and clinical studies for its pharmaceutical product candidates under
development, and as the Company expands its manufacturing capabilities.
Results of Operations
Revenues
Revenues from collaborative agreements for the three months ended March
31, 1997, were $312,500, compared to $337,500 for the corresponding period in
1996. The decrease for the comparable three month period was due to
non-recurring revenues received during the 1996 period.
Operating Expenses
Research and development expenses for the three months ended March 31,
1997, were $1,768,895, compared to $1,649,635 for the corresponding period in
1996. The increase was primarily attributable to the hiring of additional
scientific personnel, increased purchases of laboratory supplies and services,
increased clinical trial expenditures for NE-0080, and increased funding of
external research.
General and administrative expenses for the three months ended March 31,
1997, were $913,411, compared to $560,528 for the corresponding period in 1996.
The increase was primarily attributable to increased patent and business
development expenses, and expenses associated with being public company.
Interest Income and Expense
Interest income for the three months ended March 31, 1997, was $584,402,
compared to $298,476 for the corresponding period in 1996. The increase was
primarily attributable to higher average cash balances during the 1997 period
resulting from the closing of the Company's Follow-on Offering in January 1997.
Interest expense for the three months ended March 31, 1997, was $43,071,
compared to $72,358 for the corresponding period in 1996. The decrease was due
to lower average loan balances during the three months ended March 31, 1997, as
compared to the corresponding period in 1996.
10
<PAGE>
Net Loss
The Company incurred a net loss of $1,828,475, or $0.20 per share, for
the three months ended March 31, 1997, compared to a net loss of $1,646,545, or
$0.24 per share, for the corresponding period in 1996. The decrease in the net
loss per share for the three months ended March 31, 1997 was primarily
attributable to an increase in the shares used in computing net loss per share
subsequent to the issuance of Common Stock in the Follow-on Offering in January
1997, which offset the increased actual loss for the 1997 period.
Liquidity and Capital Resources
From inception through March 31, 1997, the Company has incurred a
cumulative net loss of approximately $27.4 million, and has financed its
operations through private and public offerings of its securities and revenues
from its strategic alliances. The Company had $51.4 million in cash and cash
equivalents at March 31, 1997, compared to $32.8 million at December 31, 1996.
This increase is primarily attributable to the receipt of net proceeds from the
Follow-on Offering in January 1997. In January 1997, the Company sold 1,250,000
shares of Common Stock to the public at a price per share of $17.50. The Company
received proceeds of approximately $20.3 million after deducting placement fees
and offering expenses.
The Company and Abbott, have entered into collaborative agreements to
develop breast milk oligosaccharides as additives to infant formula and other
nutritional products. Under this strategic alliance, the Company has received
approximately $11.2 million in contract payments, license fees, milestone
payments, and equity investments. In addition, Abbott is required to make an
additional payment of $5 million to Neose within 60 days of the first commercial
sale, if any, of infant formula containing the Company's nutritional additive.
Abbott may (i) at any time prior to the first commercial sale, if any, of infant
formula containing the Company's nutritional additive, elect to make its license
agreement non-exclusive, in which event the license fees payable by Abbott after
commercialization would be reduced by 50%, and Abbott's obligations to make
contract and milestone payments, including the $5 million milestone payment,
would be terminated, or (ii) elect to terminate the license agreement and return
the licensed technology to Neose upon 60 days' notice, in which event it would
have no further funding obligation to the Company, including no obligation to
make the $5 million milestone payment. In addition, under the terms of the
Abbott agreement, if Abbott fails to make appropriate regulatory filings with
the FDA for the addition of Neose's oligosaccharide to infant formula prior to
December 1, 1997, Neose, at its option, may elect to convert the license of
Neose technology to a non-exclusive license to Abbott, in which event the
license fees payable by Abbott after commercialization would be reduced by 50%,
and Abbott's obligations to make contract and milestone payments, including the
$5 million milestone payment, would be terminated.
11
<PAGE>
On March 20, 1997, the Company purchased its previously leased facility
for a total of approximately $3.8 million. In addition, the Company expects to
incur a total of approximately $7.5 million of capital expenditures, which began
in the fourth quarter of 1996, to expand GMP manufacturing capabilities for
NE-0080, and to establish GMP manufacturing capabilities for NE-1530 and
NE-0501. In each case, the Company believes that the planned GMP capacity will
be adequate to complete clinical trials for the respective compounds. In
addition, the Company believes that the planned expansion will give it capacity
to manufacture under GMP conditions certain amounts of these and other
carbohydrates for third parties.
In connection with the purchase of its facility and the planned GMP
manufacturing expansion, on March 20, 1997, the Company issued, through the
Montgomery County (Pennsylvania) Industrial Development Authority, the aggregate
amount of $9.4 million of taxable and tax-exempt bonds. The bonds are supported
by a AA-rated letter of credit, and a reimbursement agreement between the
Company's bank and the letter of credit issuer. The interest rate on the bonds
will vary weekly, depending on market rates for AA-rated taxable and tax-exempt
obligations, respectively. The initial effective, blended interest rate at
issuance was 6.7% per annum, including letter-of-credit and other fees. To
provide credit support for this arrangement, the Company has given a first
mortgage on the land, building, improvements, and certain machinery and
equipment to its bank. In addition, the Company has agreed to certain covenants
for the maintenance of minimum cash and short-term investment balances, and for
minimum working capital requirements.
During the three months ended March 31, 1997, the Company purchased
approximately $241,000 of capital equipment and items previously characterized
as leasehold improvements.
The Company also has obligations to certain of its employees under
employment agreements.
The Company has incurred negative cash flows from operations since its
inception, and has expended, and expects to continue to expend in the future,
substantial funds to continue its research and development programs. The Company
expects that its existing capital resources will be adequate to fund its capital
requirements through 1999. No assurance can be given that there will be no
change that would consume available resources significantly before such time.
The Company's future capital requirements and the adequacy of available funds
will depend on many factors, including progress in its research and development
activities, including its pharmaceutical discovery and development programs, the
magnitude and scope of these activities, progress with preclinical studies and
clinical trials, the costs involved in preparing, filing, prosecuting,
maintaining, and enforcing patent claims and other intellectual property rights,
competing technological and market developments, changes in existing
collaborative research relationships and strategic alliances, the ability of the
Company to establish additional collaborative arrangements for product
development, the cost of manufacturing scale-up, and developing effective
marketing activities and arrangements.
12
<PAGE>
To the extent that funds generated from the Company's operations,
together with its existing capital resources, and the interest earned thereon,
are insufficient to meet current or planned operating requirements, it is likely
that the Company will seek to obtain additional funds through equity or debt
financings, collaborative or other arrangements with corporate partners and
others, and from other sources. The terms and prices of any such financings may
be significantly more favorable than those obtained by present stockholders of
the Company, which could have the effect of diluting or adversely affecting the
holdings or the rights of existing stockholders of the Company. The Company does
not currently have any committed sources of additional financing. There can be
no assurance that additional financing will be available when needed, if at all,
or on terms acceptable to the Company.
If adequate additional funds are not available, for these purposes or
otherwise, the Company's business, financial condition, and results of
operations will be materially and adversely affected. In such circumstances, the
Company may be required to delay, scale back, or eliminate certain of its
research and product development activities or certain other aspects of its
business or attempt to obtain funds through collaborative arrangements that may
require the Company to relinquish some or all of its rights to certain of its
intellectual property, product candidates, or products.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits. The following is a list of exhibits filed as part of
this Quarterly Report on Form 10-Q:
2.1 Agreement for Purchase and Sale of Real Property,
dated March 14, 1997, by and between the Registrant and
Pennsylvania Business Campus Delaware, Inc.
4.1 Representation of the Registrant pursuant to Item
601(b)(4)(iii)(A) of Regulation S-K.
4.2 Trust Indenture, dated as of March 1, 1997, between
Montgomery County Industrial Development Authority and
Dauphin Deposit Bank and Trust Company.
4.3 Form of Montgomery County Industrial Development Authority
Federally Taxable Variable Rate Demand Revenue Bond (Neose
Technologies, Inc. Project) Series B of 1997.
10.1 Loan Agreement, dated as of March 1, 1997, between the
Registrant and Montgomery County Industrial Development
Authority.
10.2 Participation and Reimbursement Agreement, dated as of
March 1, 1997, between Jefferson Bank and CoreStates Bank,
N.A.
10.3 Form of CoreStates Bank, N.A. Irrevocable Letter of Credit.
14
<PAGE>
10.4 Pledge, Security and Indemnification Agreement, dated as of
March 1, 1997, by and among the Registrant, CoreStates
Bank, N.A. and Jefferson Bank.
10.5 Reimbursement Agreement, dated as of March 1, 1997, between
the Registrant and Jefferson Bank.
10.6 Specimen of Note from Registrant to Jefferson Bank.
10.7 Mortgage, Assignment and Security Agreement, dated
March 20, 1997, between the Registrant and Jefferson Bank.
10.8 Security Agreement, dated as of March 1, 1997, by and
between the Registrant and Jefferson Bank.
10.9 Assignment of Contract, dated as of March 20, 1997,
between the Registrant and Jefferson Bank.
10.10 Custodial and Collateral Security Agreement, dated as of
March 20, 1997, by and among the Registrant, Offitbank and
Jefferson Bank.
10.11 Placement Agreement, dated March 20, 1997, among the
Registrant, Montgomery County Industrial Development
Authority and CoreStates Capital Markets.
10.12 Remarketing Agreement, dated as of March 1, 1997, between
the Registrant and CoreStates Capital Markets
10.13 Amended and Restated 1995 Stock Option/Stock Issuance Plan.
27 Financial Data Schedule.
B. Reports on Form 8-K. None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
NEOSE TECHNOLOGIES, INC.
Date: May 14, 1997 By: /s/ P. Sherrill Neff
------------------------------------
P. Sherrill Neff
President and Chief Financial Officer
16
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
2.1 Agreement for Purchase and Sale of Real Property, dated March
14, 1997, by and between the Registrant and Pennsylvania
Business Campus Delaware, Inc.
4.1 Representation of the Registrant pursuant to Item 601(b)(4)(iii)(A) of
Regulation S-K.
4.2 Trust Indenture, dated as of March 1, 1997, between Montgomery County
Industrial Development Authority and Dauphin Deposit Bank and Trust
Company.
4.3 Form of Montgomery County Industrial Development Authority Federally
Taxable Variable Rate Demand Revenue Bond (Neose Technologies, Inc.
Project) Series B of 1997.
10.1 Loan Agreement, dated as of March 1, 1997, between the
Registrant and Montgomery County Industrial Development
Authority.
10.2 Participation and Reimbursement Agreement, dated as of March 1, 1997,
between Jefferson Bank and CoreStates Bank, N.A.
10.3 Form of CoreStates Bank, N.A. Irrevocable Letter of Credit.
10.4 Pledge, Security and Indemnification Agreement, dated as of March 1, 1997, by
and among the Registrant, CoreStates Bank, N.A. and Jefferson Bank.
10.5 Reimbursement Agreement, dated as of March 1, 1997, between the Registrant
and Jefferson Bank.
10.6 Specimen of Note from Registrant to Jefferson Bank.
10.7 Mortgage, Assignment and Security Agreement, dated March 20, 1997, between
the Registrant and Jefferson Bank.
10.8 Security Agreement, dated as of March 1, 1997, by and between the Registrant
and Jefferson Bank.
10.9 Assignment of Contract, dated as of March 20, 1997, between the Registrant
and Jefferson Bank.
10.10 Custodial and Collateral Security Agreement, dated as of March 20, 1997, by
and among the Registrant, Offitbank and Jefferson Bank.
10.11 Placement Agreement, dated March 20, 1997, among the Registrant,
Montgomery County Industrial Development Authority and CoreStates Capital
Markets.
10.12 Remarketing Agreement, dated as of March 1, 1997, between the Registrant and
CoreStates Capital Markets.
10.13 Amended and Restated 1995 Stock Option/Stock Issuance Plan.
27 Financial Data Schedule.
</TABLE>
Exhibit 2.1
AGREEMENT FOR PURCHASE AND SALE
OF
REAL PROPERTY
By and Between
PENNSYLVANIA BUSINESS CAMPUS DELAWARE, INC.,
a Delaware corporation,
as Seller,
and
NEOSE TECHNOLOGIES, INC.,
a Delaware corporation,
as Buyer
March 14, 1997
Property Located At:
102 Witmer Road
Horsham, Pennsylvania
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. BASIC DEFINITIONS................................1
Section 1.1 Closing Date..........................................1
Section 1.2 Contract Period.......................................1
Section 1.3 Inspection Period.....................................1
Section 1.4 Intangible Property...................................1
Section 1.5 Lease.................................................1
Section 1.6 Personal Property.....................................2
Section 1.7 Title Report..........................................2
Section 1.8 Property..............................................2
Section 1.9 Real Property.........................................2
Section 1.10 Title Company........................................2
ARTICLE 2. PURCHASE AND SALE................................2
Section 2.1 Purchase and Sale.....................................2
Section 2.2 Purchase Price........................................2
Section 2.3 Buyer's Review and Seller's Disclaimer................3
Section 2.4 Condition of Title....................................5
ARTICLE 3. CONDITIONS PRECEDENT.............................6
Section 3.1 Conditions............................................6
Section 3.2 Failure or Waiver of Conditions Precedent.............7
ARTICLE 4. COVENANTS, WARRANTIES AND REPRESENTATIONS........8
Section 4.1 Seller's Warranties and Representations...............8
Section 4.2 Seller's Covenants....................................9
Section 4.3 Buyer's Warranties and Representations................9
Section 4.4 Limitations..........................................10
ARTICLE 5. ESCROW AND CLOSING..............................10
Section 5.1 Escrow Arrangements..................................10
Section 5.2 Title Company's Duties and Closing...................12
Section 5.3 Closing Costs........................................13
Section 5.4 Prorations...........................................13
Section 5.5 Closing Date.........................................13
Section 5.6 Insurance............................................14
Section 5.7 Delivery of Original Documents.......................14
Section 5.8 Filing of Reports....................................14
- i -
<PAGE>
ARTICLE 6. DEPOSIT.........................................14
ARTICLE 7. MISCELLANEOUS...................................15
Section 7.1 Damage or Destruction................................15
Section 7.2 Sales Brokerage Commissions and Finder's Fees........17
Section 7.3 Leasing Commissions..................................18
Section 7.4 Successors and Assigns...............................18
Section 7.5 Notices..............................................18
Section 7.6 Time.................................................19
Section 7.7 Possession...........................................19
Section 7.8 Incorporation by Reference...........................19
Section 7.9 No Deductions or Off-Sets............................19
Section 7.10 Attorneys' Fees.....................................19
Section 7.11 Construction........................................20
Section 7.12 No Merger...........................................20
Section 7.13 Governing Law.......................................20
Section 7.14 Claims Against Seller...............................20
Section 7.15 Termination Without Breach..........................21
Section 7.16 Counterparts........................................21
Section 7.17 Entire Agreement....................................21
Section 7.18 Limited Liability...................................22
Section 7.19 Confidentiality.....................................22
- ii -
<PAGE>
EXHIBITS (Omitted)
Exhibit A - Title Report
Exhibit A-1 - List of Exceptions
Exhibit B - Legal Description
Exhibit C - Form of Covenants and Restrictions
Exhibit D - Form of Subordination Agreement
Exhibit E - Disclosed Conditions
Exhibit F - Buyer's Closing Certificate
Exhibit G - Lease Termination Agreement
Exhibit H - Form of Deed
Exhibit I - Form of General Assignment
Exhibit J - Form of Bill of Sale
Exhibit K - Affidavit of Non-Foreign Status
Exhibit L - Form of Affidavit
The Registrant hereby agrees to furnish supplementally a copy of any omitted
exhibit to the Securities and Exchange Commission upon request.
- iii -
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
OF
REAL PROPERTY
THIS AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY is made and
entered into as of March 14, 1997, by and between PENNSYLVANIA BUSINESS CAMPUS
DELAWARE, INC., a Delaware corporation ("Seller"), and NEOSE TECHNOLOGIES, INC.,
a Delaware corporation ("Buyer").
ARTICLE 1.
BASIC DEFINITIONS
Section 1.1 Closing Date. The term "Closing Date" shall mean the date
upon which the escrow described in Article 5 closes, which date shall be no
later than the date specified in Section 5.5 hereof.
Section 1.2 Contract Period. The term "Contract Period" shall mean the
period from the date of this Agreement through and including the Closing Date.
Section 1.3 Inspection Period. The term "Inspection Period" shall mean
the period commencing December 7, 1996, and ending February 7, 1997, at 5:00
p.m., Eastern Standard Time.
Section 1.4 Intangible Property. The term "Intangible Property" shall
mean Seller's rights and interests in the following: (i) any service contracts
pertaining to the Real Property and set forth in Schedule 1 to Exhibit I
attached hereto and made a part hereof, (ii) any governmental licenses, permits
and approvals held by Seller relating to the occupancy or use of the Real
Property, and (iii) any existing warranties held by Seller and given by third
parties with respect to the Real Property.
Section 1.5 Lease. The term "Lease" shall mean that certain Lease
Agreement, dated January 9, 1992, by and between Seller, as "Landlord," and
Buyer, as "Tenant," as such Lease has been subsequently amended by an undated
First Amendment to Lease, a Second Amendment to Lease dated as of June 24, 1993,
a Third Amendment of Lease, dated as of January 31, 1994, and a Fourth Amendment
of Lease, dated as of April 20, 1994, respectively.
-1-
<PAGE>
Section 1.6 Personal Property. The term "Personal Property" shall mean
Seller's interest, if any, in all furniture, fixtures, machinery, appliances,
equipment and other personal property located on the Real Property and utilized
in connection with the ownership and operation of the Real Property by Seller.
Section 1.7 Title Report. The term "Title Report" shall mean that
certain commitment for title insurance with respect to the Real Property dated
as of December 1, 1996, issued by Title Company under its Order No. 96-7934-M, a
copy of which is attached to this Agreement as Exhibit A.
Section 1.8 Property. The term "Property" shall mean the Real Property,
as more particularly described in Exhibit B attached to this Agreement, the
Personal Property and the Intangible Property.
Section 1.9 Real Property. The term "Real Property" shall mean that
certain real property (including, without limitation, any and all improvements),
with a mailing address of 102 Witmer Road, Horsham, Pennsylvania. The land
component of the Real Property is described with precision in Exhibit B.
Section 1.10 Title Company. The term "Title Company" shall mean Lawyers
Title Insurance Corporation, c/o Keystone Agency, Inc., whose address for this
transaction is as follows:
1500 Walnut Street, Suite 301
Philadelphia, Pennsylvania 19102
Escrow No.: 96-7934-M
Attn: Jerry Sokolow, President
Fax No.: (215) 545-5329
Phone No.: (215) 732-3764
ARTICLE 2.
PURCHASE AND SALE
Section 2.1 Purchase and Sale. Seller agrees to sell the Property to
Buyer, and Buyer agrees to purchase the Property from Seller upon all of the
terms, covenants and conditions set forth in this Agreement.
Section 2.2 Purchase Price. The purchase price for the Property (the
"Purchase Price") shall be the sum of Three Million Seven Hundred Fifty-One
Thousand Six Hundred and 00/100 Dollars ($3,751,600.00) payable as follows:
-2-
<PAGE>
(a) Payment of the Deposit in accordance with Article 6; and
(b) The balance of the Purchase Price shall be paid in cash
through the escrow established pursuant to Section 5.1 on the Closing Date.
Section 2.3 Buyer's Review and Seller's Disclaimer.
(a) Prior to the expiration of the Inspection Period, Buyer
shall have the right, at its sole cost and expense, to review whatever documents
and other materials relating to the Property that Buyer desires to review, and
to conduct whatever inspections, studies, tests and investigations Buyer desires
to conduct relating to the Property with respect to the environmental and legal
condition of the Property. Such reviews, inspections, studies, tests and
investigations are collectively referred to herein as the "Inspections". Prior
to expiration of the Inspection Period, Buyer shall complete the Inspections and
notify Seller in writing of its approval or disapproval of the Property. Failure
to timely disapprove the Property in writing shall be deemed to be approval by
Buyer and constitute Buyer's waiver of the condition set forth in Section
3.1(a)(i) below. Buyer shall indemnify, reimburse, protect and defend Seller and
Seller's agents against and hold Seller and Seller's agents harmless from any
and all loss, cost, claim, liability and expense (including reasonable
attorneys' fees) arising out of activities of Buyer and Buyer's agents,
employees and contractors in entering upon or inspecting the Property prior to
the Closing Date, whether such loss, cost, claim, liability or expense arises on
the Property or elsewhere on the property (of which the Property is a part)
commonly referred to as the "Pennsylvania Business Campus" (the "PBC"). Buyer
shall promptly reimburse Seller for the cost of repairing any damage to the
Property or the PBC arising out of such activities of Buyer and Buyer's agents,
employees and contractors. Buyer shall use due care in entering upon the
Property and the PBC and in carrying out the Inspections, and Buyer shall
perform all Inspections in a professional manner and at reasonable times so as
to minimize any disruption of the Property and the PBC. Buyer shall obtain
Seller's approval, which approval shall not be unreasonably withheld, no less
than forty-eight (48) hours in advance of any Inspections, other than
Inspections which Tenant has the right to conduct pursuant to the terms of the
Lease. Seller shall have the right to have a representative present during any
and all Inspections for which Buyer must obtain Seller's prior approval. Except
as expressly set forth to the contrary herein, Seller makes no representations
or warranties, express or implied, as to the accuracy or completeness of any
information given by Seller or its employees or agents to Buyer. Buyer's
obligations under this Section 2.3(a) shall survive the Closing Date or, if the
transaction contemplated by this Agreement is not consummated, the termination
of this Agreement.
(b) Buyer hereby acknowledges and agrees that the waiver or
satisfaction of the conditions set forth in Section 3.1(a)(i) below shall
constitute an
-3-
<PAGE>
acknowledgment that Buyer (a) has concluded whatever studies, tests, and
investigations Buyer desires to conduct relating to the Property including,
without limitation, economic reviews and analyses, soils tests, engineering
analyses, environmental analyses and analysis of any applicable records of the
planning, building, public works or any other governmental or quasi-governmental
entity having or asserting jurisdiction over the Property; (b) has reviewed and
read (or has elected not to do so) and has understood all instruments affecting
the Property and/or its value which Buyer deems relevant, including, without
limiting the generality of the foregoing, all documents referred to in the Title
Report and all leases, operating statements, demographic studies and market
analyses; (c) and its consultants have made all such independent studies,
analyses and investigations as Buyer deems necessary, including, without
limitation, those relating to environmental matters and the leasing, occupancy
and income of the Property; and (d) is relying solely on its own investigations
as to the Property and its value and is assuming the risk that adverse physical,
economic or other conditions (including, without limitation, adverse
environmental conditions (including, without limitation, soils and groundwater
conditions) and status of compliance with the requirements of the Americans With
Disabilities Act of 1990) may not have been revealed by such investigation.
Buyer further acknowledges and agrees that waiver or satisfaction of such
conditions shall constitute an acknowledgment that Seller has given Buyer every
opportunity to consider, inspect and review to its satisfaction the physical,
environmental, economic and legal condition of the Property and all files and
information in Seller's possession which Buyer deems material to the purchase of
the Property.
(c) Except as otherwise expressly provided in Section 4.1
below, Seller disclaims the making of any representations or warranties, express
or implied, regarding the Property or its value or matters affecting the
Property, including, without limitation, the physical condition of the Property,
title to or the boundaries of the Real Property, pest control matters, soil
condition, hazardous waste, toxic substance or other environmental matters,
compliance with the Americans With Disabilities Act of 1990, or other building,
health, safety, land use and zoning laws, regulations and orders, structural and
other engineering characteristics, traffic patterns and all other information
pertaining to the Property. Buyer, moreover, acknowledges (i) that Seller did
not develop or construct the Real Property, (ii) that Buyer has entered into
this Agreement with the intention of relying upon its own investigation of the
physical, environmental, economic and legal condition of the Property and (iii)
that Buyer is not relying upon any representations and warranties, other than
those specifically set forth in Section 4.1 below, made by Seller or anyone
acting or claiming to act on Seller's behalf concerning the Property or its
value. Buyer further acknowledges that it has not received from Seller any
accounting, tax, legal, architectural, engineering, property management or other
advice with respect to this transaction and is relying solely upon the advice of
its own accounting, tax, legal, architectural, engineering, property management
and other advisors. Buyer agrees that,
-4-
<PAGE>
except as otherwise expressly provided in Section 4.1 below, the Property is to
be sold to and accepted by Buyer in its "AS IS" condition and WITH ALL FAULTS on
the Closing Date and assumes the risk that adverse physical, environmental,
economic or legal conditions may not have been revealed by its investigation.
(d) Except with respect to any claims arising out of any
breach of covenants, representations or warranties set forth in Sections 4.1 or
4.2 below, Buyer, for itself and its agents, affiliates, successors and assigns,
hereby releases and forever discharges Seller, its agents, partners, affiliates,
successors and assigns from any and all rights, claims and demands at law or in
equity, whether known or unknown at the time of this Agreement, which Buyer has
or may have in the future, arising out of the physical, environmental, economic
or legal condition of the Property. Notwithstanding the foregoing to the
contrary, in the event the transaction contemplated hereunder fails to close,
Buyer and Seller shall retain all rights and remedies which they may have as
tenant and landlord, respectively, under the Lease. Buyer hereby specifically
acknowledges that Buyer has carefully reviewed this subsection and discussed its
import with legal counsel and that the provisions of this subsection are a
material part of this Agreement.
Buyer's Initials: SN
--
Section 2.4 Condition of Title. Fee simple title to the Property shall
be conveyed to Buyer in good and marketable condition and insurable as such, as
specified pursuant to the terms and provisions of this Agreement, at regular
rates by the Title Company. All exceptions to title shown on Exhibit A-1 hereto
are hereby deemed approved by Buyer, and any exceptions to title disclosed by
the survey and not expressly disapproved by Buyer in writing prior to the
expiration of the Inspection Period shall be deemed approved by Buyer, and Buyer
agrees to purchase the Property subject to such exceptions. All such exceptions
approved by Buyer shall be referred to as the "Exceptions." Seller shall not
intentionally suffer, create or permit any further Exceptions during the
Contract Period, other than those created or permitted by Buyer. Within five (5)
days after any written notice from Title Company to Buyer and Buyer's counsel
identifying the need to amend or add any exception to the Title Report, Buyer
shall notify Seller of any objections Buyer may have to said amendment or
addition; failure to disapprove such amendment or addition shall be deemed to be
approval. Seller shall use reasonable efforts to remove as matters affecting
title any disapproved exceptions prior to the Closing Date, but Seller shall not
be required to institute any litigation or incur any cost in excess of $20,000
in the aggregate to do so; provided, however, that Seller shall be obligated to
remove any such disapproved exceptions intentionally suffered, created or
permitted by Seller, other than those created or permitted by Buyer
(collectively, "Seller Exceptions"). If, prior to the Closing Date, Seller
notifies Buyer that Seller will not, or will not be able to, remove any of the
disapproved exceptions other than Seller Exceptions, then, within five (5) days
-5-
<PAGE>
after the giving of such notice by Seller, or prior to the Closing Date,
whichever is earlier, Buyer shall give Seller and Title Company written notice,
either that Buyer (i) waives its prior disapproval of the disapproved exceptions
and accepts such title as Seller is willing to convey (in which case such
exceptions shall become Exceptions), or (ii) terminates this Agreement. Buyer
acknowledges and agrees that in conjunction with the closing of this
transaction, the parties shall execute and record that certain Declaration of
Covenants and Restrictions in the form attached hereto as Exhibit C (the
"Covenants and Restrictions"), which document contains certain covenants and
restrictions more particularly described therein (collectively, the
"Restrictions"). Buyer shall cause its lender, if any, to consent to the
Covenants and Restrictions and to subordinate the lien of such lender's mortgage
or deed of trust on the Property to the lien of the Covenants and Restrictions,
which consent and subordination shall be in the form attached hereto as Exhibit
D (the "Subordination Agreement"). Buyer further acknowledges and agrees that
the Restrictions and the Subordination Agreement shall be deemed Exceptions, and
that upon acquisition of the Property pursuant to this Agreement, Buyer, as the
owner of the Real Property, shall comply with the Restrictions.
ARTICLE 3.
CONDITIONS PRECEDENT
Section 3.1 Conditions.
(a) Notwithstanding anything in this Agreement to the
contrary, Buyer's obligation to purchase the Property shall be subject to and
contingent upon the satisfaction or waiver by Buyer of the following conditions
precedent:
(i) Buyer's inspection and approval, within the
Inspection Period, of all environmental, legal and title matters
relating to the Property, pursuant to Sections 2.3 and 2.4 above.
(ii) Notwithstanding anything to the contrary
contained in this Agreement, the willingness of Title Company, or some
other reputable title insurer of comparable size and reputation and
with a rate schedule comparable to that of Title Company and approved
by Buyer in Buyer's reasonable discretion (provided, however, that
Buyer hereby approves Commonwealth Land Title Insurance Company), to
issue its standard owner's form policy of title insurance ("Buyer's
Title Policy"), insuring Buyer in the amount of the Purchase Price that
title to the Real Property is vested of record in Buyer, in accordance
with the terms and provisions of this Agreement, on the Closing Date,
subject only to the printed
-6-
<PAGE>
conditions and exceptions of such policy, the Exceptions and the
lien(s) of any financing that Buyer may obtain.
(iii) Buyer's determination, on or before the Closing
Date, that Buyer will be able to obtain financing reasonably acceptable
to Buyer, in an amount not to exceed the Purchase Price, with respect
to Buyer's purchase of the Property.
(b) Notwithstanding anything in this Agreement to the
contrary, Seller's obligation to sell the Property shall be subject to and
contingent upon the satisfaction or waiver by Seller of the following conditions
precedent:
(i) The willingness of Title Company to issue the
Buyer's Title Policy in accordance with the terms and provisions of
this Agreement, except to the extent such unwillingness results from a
Seller Exception.
(ii) Buyer's timely satisfaction or waiver of the
conditions set forth in Section 3.1(a) above.
(iii) Prior to the expiration of the Inspection
Period, the deposit in escrow of the Deposit in accordance with Article
6 below.
(iv) On or before the Closing Date, Buyer's delivery
to Title Company of the items set forth in Section 5.1(a) below.
(v) The absence of any material breach of the Lease
by Buyer during the period prior to the Closing Date.
Section 3.2 Failure or Waiver of Conditions Precedent. In the event any
of the conditions set forth in Section 3.1 are not fulfilled or waived by the
party intended to be benefited thereby, this Agreement shall terminate. Either
party may, at its election, at any time or times on or before the date (and, if
indicated, the time) specified for the satisfaction of the condition, waive in
writing the benefit of any of the conditions set forth in Section 3.1(a) and
3.1(b) above. Buyer's failure to notify Seller in writing of the failure of any
of the conditions set forth in Section 3.1(a) on or before the date specified
for satisfaction shall constitute a waiver of such condition. In any event,
Buyer's consent to the close of escrow pursuant to this Agreement shall waive
any remaining unfulfilled conditions.
-7-
<PAGE>
ARTICLE 4.
COVENANTS, WARRANTIES AND REPRESENTATIONS
Section 4.1 Seller's Warranties and Representations. Seller hereby
represents and warrants to Buyer as follows:
(a) Seller has full power and lawful authority to enter into
and carry out the terms and provisions of this Agreement and to execute and
deliver all documents which are contemplated by this Agreement, all actions of
Seller necessary to confer such power and authority upon the persons executing
this Agreement and all documents which are contemplated by this Agreement on
behalf of Seller have been taken, and this Agreement and all documents which are
contemplated by this Agreement are or will be, subject to bankruptcy, insolvency
and similar laws affecting creditors' rights generally, legal, valid and binding
obligations of Seller, are or will be, subject to bankruptcy, insolvency and
similar laws affecting creditors' rights generally, enforceable in accordance
with their respective terms, and do not and will not on the Closing Date violate
any provisions of any agreement to which Seller is subject;
(b) Guy Tcheau, Tia Miyamoto, Joseph S. Grubb, Jr., Mary Beth
Pierson and T. Sanford Monaghan, the authorized agents of Seller, have no actual
knowledge, as of the date hereof, except as specifically set forth in Exhibit E
attached hereto and incorporated herein by reference, that:
(i) Seller has received any notice from any
governmental authorities that eminent domain proceedings for the
condemnation of the Real Property are pending;
(ii) Seller has received any written notice of any
threatened, or any notice of any pending, litigation against Seller
which would affect the Real Property. As used herein, the term
"threatened" means an expression of intention to initiate a legal
action or the announcement that a legal action may be commenced if a
condition or request is not satisfied;
(iii) Seller has received any written notice from any
governmental authority that the improvements located on the Real
Property are presently in violation of any applicable building codes;
or
(iv) Seller has received any written notice from any
governmental authority, regulatory agency or other authority that
Seller's use of the Real
-8-
<PAGE>
Property is presently in violation of any applicable zoning, land use
or other law, order, directive, ordinance, rule or regulation affecting
the Real Property.
(c) The Personal Property is owned by Seller free and clear of
all liens, encumbrances, claims and demands; and
(d) No tenant, occupant or other person or corporation (other
than Buyer) has any option or other right to purchase the Property or any part
of the Property.
As used in this Section 4.1, "actual knowledge" shall not include implied,
imputed or constructive knowledge, or a duty to inquire or investigate any facts
or information with respect to the Property or the warranties of Seller
contained herein. Notwithstanding any other provision hereof, the
representations and warranties of Seller under this Agreement shall not extend
to, and shall exclude, any information known to Buyer on or prior to the Closing
Date and Seller shall have no liability with respect thereto.
Section 4.2 Seller's Covenants. Seller hereby covenants and agrees
that:
(a) During the Contract Period, Seller will not enter into any
service contracts binding upon Buyer other than in the ordinary course of
business and on terms consistent with then current market conditions without
Buyer's prior approval, which approval shall not be unreasonably withheld and
shall be deemed given if Buyer should fail to approve or disapprove any proposed
contract in writing within five (5) working days following Seller's request for
such action.
(b) Following the expiration of the Inspection Period, Seller
will not enter into any leases for any portion of the Real Property without
Buyer's prior written approval, which approval may be withheld in Buyer's sole
discretion. The cost to landlord of any leasing commissions and/or tenant
improvements payable in connection with the lease of any portion of the Real
Property which becomes effective at any time during the Contract Period shall be
prorated between Buyer and Seller, based on the initial term of the lease, as of
the Closing Date. Buyer shall be responsible for all such costs for any leases
commencing after the Closing Date.
(c) Seller shall not knowingly undertake any activities during
the Contract Period that would violate any applicable laws, ordinances or
regulations or the directives of any lawful public authority with respect to the
physical condition of the Property or the improvements thereon.
(d) Seller shall not convey or encumber the Property or any
interest therein during the Contract Period.
-9-
<PAGE>
Section 4.3 Buyer's Warranties and Representations. Buyer hereby
represents and warrants to Seller that (a) Buyer and any entity to which Buyer
may assign this Agreement pursuant to Section 7.4 below have, and as of the
Closing Date shall have, full power and lawful authority to enter into and carry
out the terms and conditions of this Agreement and to execute and deliver all
documents which are contemplated by this Agreement, (b) all actions necessary to
confer such power and authority upon the persons executing this Agreement and
all documents which are contemplated by this Agreement to be executed on behalf
of Buyer or its assignee have been taken, and (c) this Agreement and all
documents which are contemplated by this Agreement are or will be, subject to
bankruptcy, insolvency and similar laws affecting creditors' right generally,
legal, valid and binding obligations of Buyer, are or will be, subject to
bankruptcy, insolvency and similar laws affecting creditors' rights generally,
enforceable in accordance with their respective terms, and do not and will not
on the Closing Date violate any provisions of any agreement to which Buyer is
subject.
Section 4.4 Limitations. The parties agree that (a) Seller's warranties
and representations contained in this Agreement and in any document (including
any certificate) executed by Seller pursuant to this Agreement shall survive
Buyer's purchase of the Property only for a period of nine (9) months after the
Closing Date (the "Limitation Period"), and (b) Buyer shall provide actual
written notice to Seller of any breach of such warranties or representations and
shall allow Seller thirty (30) days within which to cure such breach, or, if
such breach cannot reasonably be cured within thirty (30) days, an additional
reasonable time period, so long as such cure has been commenced within such
thirty (30) days and diligently pursued, and so long as such breach is
susceptible of cure. If Seller fails to cure such breach after actual written
notice and within such cure period, Buyer's sole remedy shall be an action at
law for damages as a consequence thereof, which must be commenced, if at all,
within the Limitation Period; provided, however, that if within the Limitation
Period Buyer gives Seller written notice of such a breach and Seller commences
to cure and thereafter terminates such cure effort, Buyer shall have an
additional thirty (30) days from the date of such termination within which to
commence an action at law for damages as a consequence of Seller's failure to
cure. The Limitation Period referred to herein shall apply to known as well as
unknown breaches of such warranties or representations.
-10-
<PAGE>
ARTICLE 5.
ESCROW AND CLOSING
Section 5.1 Escrow Arrangements. The parties acknowledge and agree that
an escrow for the purchase and sale contemplated by this Agreement has been
opened with the Title Company. On or before the Closing Date, Seller and Buyer
shall each deliver escrow instructions to the Title Company consistent with this
Article 5 and the parties shall deposit in escrow the funds and documents
described below.
(a) Buyer shall deposit or cause to be deposited:
(i) the balance of the cash portion of the Purchase
Price, plus sufficient cash to pay Buyer's share of all escrow costs,
prorations and closing expenses as set forth in Sections 5.3 and 5.4
below;
(ii) two (2) counterparts of the Covenants and
Restrictions, duly executed and acknowledged by Buyer;
(iii) the Subordination Agreement, duly executed and
acknowledged by Buyer's lender;
(iv) two (2) counterparts of the General Assignment
(as defined in subparagraph (b)(iii) below), duly executed by Buyer;
(v) a duly executed closing certificate in the form
attached to this Agreement as Exhibit F (the "Closing Certificate");
and
(vi) two (2) counterparts of a Lease Termination
Agreement terminating the Lease in the form set forth as Exhibit G
hereto (the "Lease Termination Agreement"), duly executed by Buyer.
(b) Seller shall deposit:
(i) a duly executed and acknowledged special warranty
deed in the form attached to this Agreement as Exhibit H (the "Deed");
(ii) two (2) counterparts of the Covenants and
Restrictions, duly executed and acknowledged by Seller;
-11-
<PAGE>
(iii) two (2) counterparts of an assignment of
Seller's interest in the Intangible Property in the form attached to
this Agreement as Exhibit I (the "General Assignment"), duly executed
by Seller;
(iv) a duly executed bill of sale in the form
attached to this Agreement as Exhibit J (the "Bill of Sale");
(v) a certificate from Seller certifying the
information required by Section 1445 of the Internal Revenue Code and
the regulations issued thereunder to establish, for the purposes of
avoiding Buyer's tax withholding obligations, that Seller is not a
"foreign person" as defined in Internal Revenue Code Section 1445(f)(3)
in the form attached to this Agreement as Exhibit K (the "FIRPTA
Certificate");
(vi) two (2) counterparts of the Lease Termination
Agreement, duly executed by Seller;
(vii) an affidavit required by the Title Company in
the form attached to this Agreement as Exhibit L (the "Affidavit"); and
(viii) if required by the municipality in which the
Property is located, a zoning and/or building compliance certificate.
Section 5.2 Title Company's Duties and Closing. Seller and Buyer shall
instruct Title Company to close escrow on the Closing Date by:
(a) Recording all documents as may be necessary to clear title
in accordance with the requirements of this Agreement;
(b) Recording the Deed, the Covenants and Restrictions and the
Subordination Agreement, in that order, and instructing the Montgomery County
Recorder not to affix the amount of any documentary or transfer taxes to the
Deed but to attach a separate statement to the Deed;
(c) Paying all closing costs and making all prorations in
accordance with Sections 5.3 and 5.4 of this Agreement and a closing statement
of adjustments and prorations prepared by Title Company and approved by Buyer
and Seller prior to the Closing Date (the "Closing Statement");
(d) Delivering to Buyer Buyer's Title Policy; Title Company's
certified Closing Statement; a conformed copy of each of the Deed, the Covenants
and Restrictions
-12-
<PAGE>
and the Subordination Agreement showing recording information, an original of
each of the Bill of Sale, the General Assignment and the FIRPTA Certificate and
copies of all other documents deposited into escrow;
(e) Delivering to Seller the Purchase Price, plus or minus
closing adjustments and prorations, Title Company's certified Closing Statement,
a conformed copy of each of the Deed, the Covenants and Restrictions and the
Subordination Agreement showing recording information, an original of each of
the General Assignment and the Closing Certificate, and copies of all other
documents deposited into escrow; and
(f) recording or delivering to the appropriate parties
documents evidencing the financing, if any, of Buyer's acquisition of the
Property.
Section 5.3 Closing Costs. All realty transfer taxes imposed on or in
connection with this transaction and the escrow fee (if any) shall be shared
equally by Seller and Buyer. Buyer shall pay (a) the cost of Buyer's Title
Policy (including, without limitation, the cost of any and all endorsements and
any related survey costs), and (b) all recording costs other than recording
costs incurred in connection with the Covenants and Restrictions and the
Subordination Agreement, the costs of which Seller shall pay. Each party shall
pay its own attorneys' fees.
Section 5.4 Prorations.
(a) Subject to Buyer's obligations therefor pursuant to the
Lease, real property taxes and assessments, personal property taxes (if any),
rent (whether prepaid or applicable to the current rental period), utilities and
all other items of income and expense with respect to the Property shall be
prorated between Seller and Buyer as of the Closing Date. Seller shall receive a
credit in escrow for any refundable deposits and/or bonds held by any utility,
governmental agency or service contractor with respect to the Property, but only
to the extent that such deposits and/or bonds are assignable and are in fact
assigned to Buyer. Buyer shall receive a credit in escrow in an amount equal to
(i) the security deposit held by Seller pursuant to Section 36 of the Lease
(i.e., $11,648.84), and (ii) the balance of the escrow account established
pursuant to Section 53 of the Lease (the "Escrowed Funds"), provided that the
Escrowed Funds are released to Seller on or before the Closing Date. If either
Buyer or Seller receives any revenues attributable to the period during which it
is not the owner of the Property, said party shall promptly forward such amounts
to the other party (if such revenues are only partially attributable to the
period during which said party is not the owner of the Property, the amount paid
to the other party shall be based upon proration as of the Closing Date as set
forth above).
-13-
<PAGE>
(b) Buyer and Seller shall cooperate to produce on or before
the Closing Date a schedule of prorations which is as complete and accurate as
reasonably possible. All prorations which can be reasonably estimated as of the
Closing Date shall be made in escrow on the Closing Date. All other prorations
and any adjustments to initial estimated prorations, shall be made by Buyer and
Seller within thirty (30) days following the Closing Date or such later time as
may be required, in the exercise of due diligence, to obtain the necessary
information for proration. Any net credit due one party from the other as a
result of such post-closing prorations and adjustments shall be paid to the
other in cash immediately upon the parties' written agreement to a final
schedule of post-closing adjustments and prorations.
Section 5.5 Closing Date. The Closing Date shall occur on a date
mutually agreed upon by Buyer and Seller, which shall be not later than March
24, 1997.
Section 5.6 Insurance. Seller's existing liability and property
insurance pertaining to the Property shall be canceled as of the Closing Date,
and Seller shall receive any premium refund due thereon.
Section 5.7 Delivery of Original Documents. Seller agrees to deliver to
Buyer on or immediately following the Closing Date all unexpired original
leases, unexpired service contracts, plans and specifications, plot plans,
surveys and soils reports in Seller's possession pertaining solely to the
Property.
Section 5.8 Filing of Reports. Title Company shall be solely
responsible for the timely filing of any reports or returns required pursuant to
the provisions of Section 6045(e) of the Internal Revenue Code of 1986 (and any
similar reports or returns required under any state or local laws) in connection
with the closing of the transaction contemplated in this Agreement.
ARTICLE 6.
DEPOSIT
Prior to the expiration of the Inspection Period, Buyer shall deposit
in the escrow established with the Title Company for this transaction cash in
the amount of Two Hundred Thousand and 00/100 Dollars ($200,000.00). The Title
Company shall invest all funds so deposited in an interest-bearing
cash-management account reasonably acceptable to Buyer and Seller. The funds so
deposited and all interest thereon are referred to collectively as the
"Deposit." In the event that (a) the conditions precedent set forth in Section
3.1 above shall have been satisfied or waived, (b) Seller shall have
-14-
<PAGE>
performed fully or tendered performance of its obligations hereunder and (c)
Buyer shall be unable or fail to consummate the purchase of the Property as
contemplated by this Agreement, then the entire amount of the Deposit shall be
retained by Seller.
BUYER AND SELLER HEREBY ACKNOWLEDGE AND AGREE THAT SELLER'S DAMAGES IN
THE EVENT OF SUCH A BREACH OF THIS AGREE MENT BY BUYER WOULD BE DIFFICULT OR
IMPOSSIBLE TO DETERMINE, THAT THE AMOUNT OF THE DEPOSIT IS THE PARTIES' BEST AND
MOST ACCURATE ESTIMATE OF THE DAMAGES SELLER WOULD SUFFER IN THE EVENT THE
TRANSACTION PROVIDED FOR IN THIS AGREEMENT FAILS TO CLOSE, AND THAT SUCH
ESTIMATE IS REASONABLE UNDER THE CIRCUM STANCES EXISTING ON THE DATE OF THIS
AGREEMENT. IN ADDITION, BUYER DESIRES TO HAVE A LIMITATION PUT UPON ITS
POTENTIAL LIA BILITY TO SELLER IN THE EVENT THAT THIS TRANSACTION SHALL SO FAIL
TO CLOSE. BUYER AND SELLER AGREE THAT SELLER'S RIGHT TO RETAIN THE DEPOSIT SHALL
BE THE SOLE REMEDY OF SELLER AT LAW IN THE EVENT BUYER SHALL BE UNABLE OR FAIL
TO CONSUMMATE THE PUR CHASE OF THE PROPERTY AS CONTEMPLATED BY THIS AGREEMENT.
SUCH RETENTION OF THE DEPOSIT IS NOT INTENDED AS A FORFEITURE OR PENALTY, BUT
INSTEAD, IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER. IN THE EVENT OF
SUCH A BREACH OF THIS AGREE MENT BY BUYER, SELLER SHALL HAVE THE RIGHT TO
TERMINATE THIS AGREEMENT FORTHWITH AND WITHOUT FURTHER OBLIGATIONS TO BUYER AND
TO OBTAIN IMMEDIATE DISBURSEMENT OF AND TO RETAIN THE DEPOSIT THEN HELD BY THE
TITLE COMPANY. NOTHING IN THIS ARTICLE 6 SHALL LIMIT OR OTHERWISE AFFECT BUYER'S
LIABILITY FOR ANY BREACH OF THIS AGREEMENT BY BUYER OTHER THAN THE INABILITY OR
FAILURE BY BUYER TO CONSUMMATE THE PURCHASE OF THE PROPERTY AS CONTEMPLATED BY
THIS AGREEMENT.
ACCEPTED AND AGREED TO:
/s/ Guy Tcheau /s/ P. Sherrill Neff
------------------------- ------------------------
Seller Buyer
In the event that this transaction is consummated as contemplated by this
Agreement, then the entire amount of the Deposit shall be credited against the
Purchase Price. In the event that this transaction is not consummated as
contemplated by this Agreement, for any reason other than Buyer's inability or
failure to consummate the purchase of the Property as set forth herein, the
entire amount of the Deposit shall be returned immediately to Buyer.
-15-
<PAGE>
ARTICLE 7.
MISCELLANEOUS
Section 7.1 Damage or Destruction.
(a) Subject to the provisions of subsection (b) below, Buyer
shall be bound to purchase the Property for the Purchase Price as required by
the terms of this Agreement without regard to the occurrence during the Contract
Period of any damage to or destruction of the Property ("Contract Period
Damage"). Buyer shall receive a credit in escrow in the amount of any insurance
proceeds (net of reasonable costs incurred in securing such proceeds) collected
by Seller prior to the Closing Date as a result of any Contract Period Damage
and not expended by Seller on repair, replacement or restoration of the Property
pursuant to subsection (c) below, and Seller shall assign to Buyer all rights to
such insurance proceeds as shall not have been collected by Seller prior to the
Closing Date. Seller shall regularly notify Buyer during the Contract Period
regarding the status of discussions Seller may have with its insurer with
respect to the amount of insurance proceeds to be received in connection with
any Contract Period Damage.
(b) Notwithstanding the foregoing, if the cost of repair,
replacement or restoration of the Property attributable to any Contract Period
Damage exceeds twenty percent (20%) of the Purchase Price, Buyer may elect to
terminate this Agreement by written notice to Seller given not more than ten
(10) days following the event of damage or destruction and not later than one
day prior to the Closing Date; provided, however, that if the event of damage or
destruction occurs within the ten (10) day period immediately preceding the
Closing Date, the Closing Date shall be extended to that date which is eleven
(11) days from the date of the damage or destruction. Upon termination of this
Agreement pursuant to this subsection, Seller and Buyer shall instruct the Title
Company to return the Deposit to Buyer. In the event Buyer does not timely elect
to terminate this Agreement pursuant to this subsection, the provisions of
subsection (a) above shall be applicable.
(c) Upon the occurrence of any Contract Period Damage, Seller
may, but shall not be obligated to, use any insurance proceeds collected with
respect to such Contract Period Damage to repair, replace or restore the
Property to the extent reasonably feasible prior to the Closing Date. Seller's
election to commence the repair, replacement or restoration of the Property
prior to the Closing Date shall in no way imply that Seller has made any
representation or warranty with respect to any work performed in connection with
such repair, replacement or restoration ("Seller's Repairs"). The plans,
materials, choice of contractor and all other material aspects of the
performance of Seller's Repairs shall be subject to Buyer's review and approval
(which shall not be
-16-
<PAGE>
unreasonably withheld) and to the general disclaimer set forth in Section 2.3
above. In the event that Buyer does not approve any aspect of Seller's Repairs
in writing within five (5) days following Seller's request for such approval,
Seller may, at its option, terminate this Agreement by written notice delivered
to Buyer on or before the Closing Date.
(d) Notwithstanding anything in this Agreement to the
contrary, the insurance proceeds to be credited or assigned to Buyer pursuant to
this Section 7.1 shall exclude business interruption or rental loss insurance
proceeds, if any, allocable to the period through the Closing Date, which
proceeds shall be retained by Seller.
(e) In the event of any conflict between the terms of this
Section 7.1 and the terms of the Lease relating to the same subject matter, the
terms of this Section 7.1 shall prevail.
(f) If condemnation proceedings that affect the Property
("Condemnation Proceedings") are commenced against the Property during the
Contract Period, Seller shall promptly give written notice thereof to Buyer,
and, provided that such Condemnation Proceedings adversely affect the operation
of the Property, Buyer may elect to terminate this Agreement by written notice
to Seller given not more than ten (10) days following receipt of Seller's notice
and not later than one (1) day prior to the Closing Date; provided, however,
that if Seller's notice of the Condemnation Proceedings is given within the ten
(10) day period immediately preceding the Closing Date, the Closing Date shall
be extended to that date which is eleven (11) days from the date of Seller's
notice. Upon termination of this Agreement pursuant to this subsection, Seller
and Buyer shall instruct the Title Company to return the Deposit to Buyer. In
the event Buyer does not timely elect to terminate this Agreement pursuant to
this subsection, Buyer shall be bound to purchase the Property for the Purchase
Price as required by the terms of this Agreement without regard to the
occurrence during the Contract Period of any Condemnation Proceedings. Buyer
shall receive a credit in escrow in the amount of any condemnation award (net of
reasonable costs incurred in securing such award) collected and retained by
Seller prior to the Closing Date as a result of any such Condemnation
Proceeding, and Seller shall assign to Buyer all rights to such condemnation
award as shall not have been collected by Seller prior to the Closing Date.
Seller shall regularly notify Buyer during the Contract Period regarding the
status of discussions Seller may have with the condemning authority with respect
to the amount of the award to be received in connection with any Condemnation
Proceeding.
Section 7.2 Sales Brokerage Commissions and Finder's Fees. Each party
to this Agreement warrants to the other that, except for the commission
mentioned below, no person or entity can properly claim a right to a real estate
commission, real estate finder's fee, real estate acquisition fee or other real
estate brokerage-type compensation
-17-
<PAGE>
(collectively, "Real Estate Compensation") based upon the acts of that party
with respect to the transaction contemplated by this Agreement. Each party
hereby agrees to indemnify and defend the other against and to hold the other
harmless from any and all loss, cost, liability or expense (including but not
limited to attorneys' fees and returned commissions) resulting from any claim
for Real Estate Compensation by any person or entity based upon such acts or
from payment of Real Estate Compensation to any person by Buyer or by any entity
affiliated with Buyer, or by Seller or by any entity affiliated with Seller.
Buyer and Seller acknowledge that Seller shall pay Real Estate Compensation in
an amount equal to five percent (5%) of the Purchase Price to CB Commercial Real
Estate Group, Inc. ("Broker") pursuant to an agreement entered into, or to be
entered into, by Seller, Broker and Tower Realty Management Corporation and
acknowledged by Buyer, but only to the extent such Real Estate Compensation is
ultimately due Broker under such agreement. The obligations under this Section
7.2 shall survive the Closing Date.
Section 7.3 Leasing Commissions. Seller shall indemnify, protect,
defend and hold Buyer harmless from and against any leasing commissions payable
in connection with the current terms of the leases (if any) currently
encumbering the Property (specifically excluding therefrom any commission for
option periods, renewal periods, extension periods or waivers of termination
rights or as otherwise provided in Section 4.2(b) above). Buyer shall indemnify
and hold Seller harmless from and against any leasing commissions relating to
the Property subsequent to the Closing Date.
Section 7.4 Successors and Assigns. Buyer shall not assign any of
Buyer's rights or duties hereunder without the prior written consent of Seller,
which consent Seller may grant or withhold in Seller's sole and absolute
discretion. Subject to the foregoing, this Agreement shall inure to the benefit
of and be binding upon the parties hereto and their successors and assigns.
Section 7.5 Notices. All written notices required to be given pursuant
to the terms hereof shall be either (i) personally delivered, (ii) deposited in
the United States mail, registered or certified return receipt requested,
postage prepaid, (iii) sent by Federal Express or similar nationally recognized
overnight courier service, or (iv) transmitted by facsimile with a hard copy
sent within one (1) business day by any of the foregoing means, and addressed as
follows:
-18-
<PAGE>
To Seller: c/o GSIC Realty Corporation
255 Shoreline Drive, Suite 600
Redwood City, California 94065
Attn: P.B.C. Investment Manager
Fax No: (415) 802-1212
Phone No: (415) 593-3100
with a copy to: Tower Realty Management Corporation
120 Gibraltar Road, Suite 210
Horsham, Pennsylvania 19044
Fax No: (215) 441-0573
Phone No: (215) 441-4570
with a copy to: Sheppard, Mullin, Richter & Hampton
Four Embarcadero Center, 17th Floor
San Francisco, California 94111
Attn: Robert A. Thompson, Esq.
Fax No: (415) 434-3947
Phone No: (415) 434-9100
To Buyer: Neose Technologies, Inc.
102 Witmer Road
Horsham, Pennsylvania 19044
Attn: Mr. P. Sherrill Neff
Fax No: (215) 441-5896
Phone No: (215) 441-5890
with a copy to: Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
Attn: Lynn R. Axelroth, Esq.
Fax No: (215) 864-8999
Phone No: (215) 864-8707
The foregoing addresses may be changed from time to time by written notice.
Notices shall be deemed received upon the earlier of actual receipt or delivery
(or refusal to accept delivery) or three (3) working days following sending as
provided above.
Section 7.6 Time. Time is of the essence of every provision contained
in this Agreement.
-19-
<PAGE>
Section 7.7 Possession. Possession of the Property and all keys shall
be delivered to Buyer on the Closing Date.
Section 7.8 Incorporation by Reference. All of the exhibits attached to
this Agreement or referred to herein and all documents in the nature of such
exhibits, when executed, are by this reference incorporated in and made a part
of this Agreement.
Section 7.9 No Deductions or Off-Sets. Except with respect to closing
costs and prorations as set forth above, Buyer acknowledges that the Purchase
Price to be paid for the Property pursuant to this Agreement is a net amount and
shall not be subject to any off-sets or deductions.
Section 7.10 Attorneys' Fees. In the event any dispute between Buyer
and Seller should result in litigation or arbitration, the prevailing party (or,
in the case of a voluntary dismissal or similar proceeding, the party that does
not initiate the dismissal or proceed ing) shall be reimbursed for all
reasonable costs and attorneys' fees incurred in connection with such litigation
or arbitration, including, without limitation, reasonable costs and attorneys'
fees incurred in collecting the judgment(s) or arbitration award(s) resulting
from such litigation or arbitration.
Section 7.11 Construction. The parties acknowledge that each party and
its counsel have reviewed and revised this Agreement and that the normal rule of
construc tion to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments or exhibits hereto.
Section 7.12 No Merger. The provisions of this Agreement shall not
merge with the delivery of the Deed but shall, except as otherwise provided in
this Agreement, survive the close of escrow.
Section 7.13 Governing Law. This Agreement shall be construed and
interpreted in accordance with and shall be governed and enforced in all
respects according to the laws of the Commonwealth of Pennsylvania.
Section 7.14 Claims Against Seller.
(a) If Seller shall be unable or fail to convey the Property
as herein provided, such refusal or failure shall constitute a default of Seller
under this Agreement only if (i) the conditions precedent set forth in Section
3.1 above shall have been satisfied or waived, and (ii) Buyer shall have
performed fully or tendered performance of its obligations hereunder. In the
event of such a default, Buyer's sole remedy therefor shall
-20-
<PAGE>
be the termination of this Agreement, the return of the Deposit, and the payment
by Seller to Buyer of liquidated damages in the amount of Two Hundred Thousand
and 00/100 Dollars ($200,000.00) ("Buyer's Damages"); provided that Seller shall
have no obligation to pay such sum (and Buyer's Damages will be $0.00) unless
Buyer executes and delivers to Seller within two (2) business days of request
therefor a document in recordable form and reasonably acceptable to Seller
releasing any interest Buyer may have in the Property under this Agreement.
BUYER AND SELLER HEREBY ACKNOWLEDGE AND AGREE THAT BUYER'S DAMAGES IN
THE EVENT OF SUCH A BREACH OF THIS AGREEMENT BY SELLER WOULD BE DIFFICULT OR
IMPOSSIBLE TO DETERMINE, THAT THE AMOUNT OF BUYER'S DAMAGES IS THE PARTIES' BEST
AND MOST ACCURATE ESTIMATE OF THE DAMAGES BUYER WOULD SUFFER IN THE EVENT THE
TRANSACTION PROVIDED FOR IN THIS AGREEMENT FAILS TO CLOSE, AND THAT SUCH
ESTIMATE IS REASONABLE UNDER THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS
AGREEMENT. IN ADDITION, SELLER DESIRES TO HAVE A LIMITATION PUT UPON ITS
POTENTIAL LIABILITY TO BUYER IN THE EVENT THAT THIS TRANSACTION SHALL SO FAIL TO
CLOSE. BUYER AND SELLER AGREE THAT BUYER'S RIGHT TO RETAIN BUYER'S DAMAGES SHALL
BE THE SOLE REMEDY OF BUYER IN THE EVENT SELLER SHALL BE UNABLE OR FAIL TO
CONSUMMATE THE SALE OF THE PROPERTY AS CONTEMPLATED BY THIS AGREEMENT. SUCH
PAYMENT OF BUYER'S DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY, BUT
INSTEAD, IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO BUYER.
ACCEPTED AND AGREED TO:
/s/ Guy Tcheau /s/ P. Sherrill Neff
------------------------- ------------------------
Seller Buyer
(b) Buyer specifically waives any right to seek specific
performance of Seller's obligations under this Agreement and acknowledges that
its only remedy in the event of a breach of this Agreement by Seller shall be
the right (as limited by this Section 7.14) to seek money damages at law.
(c) With respect to any claim brought by Buyer against Seller
for default under this Agreement other than inability or failure to convey the
Property as herein provided, any liability of Seller shall be limited to Two
Hundred Thousand and 00/100 Dollars ($200,000.00)].
-21-
<PAGE>
Section 7.15 Termination Without Breach. In the event either party
desires to exercise any right expressly provided in this Agreement to terminate
this Agreement, such party shall give written notice to the other party of such
termination with reference to the Section of this Agreement expressly providing
such right to terminate. Immediately thereafter, (a) all documents deposited
into escrow shall be returned to the party which deposited them, (b) all
documents delivered by Seller to Buyer relating to the Property shall be
returned, (c) to the extent not subject to customary restrictions on
dissemination to third parties, copies of all reports, studies, analyses and
tests prepared by or for Buyer relating to the Property shall immediately be
delivered to Seller, and (d) except in the event of a default by either party
hereunder, (i) all monies deposited in escrow shall be returned to the party
which deposited them, and (ii) after all of the actions described in this
Section 7.15 have taken place, each party will then be released from its
obligations hereunder; provided, however, that nothing herein shall limit the
terms and conditions set forth in Sections 2.3(a) and 7.2 hereof.
Section 7.16 Counterparts. This Agreement may be executed in one or
more counterparts. All counterparts so executed shall constitute one contract,
binding on all parties, even though all parties are not signatory to the same
counterpart.
Section 7.17 Entire Agreement. This Agreement and the attached
exhibits, which are by this reference incorporated herein, and all documents in
the nature of such exhibits, when executed, contain the entire understanding of
the parties and supersede any and all other written or oral understanding,
including, without limitation, any letter of intent entered into by the parties.
Section 7.18 Limited Liability. Neither the shareholders nor the
officers, employees or agents of Seller shall be liable under this Agreement and
Buyer shall look solely to the assets of Seller for the payment of any claim or
the performance of any obligation of Seller. Neither the shareholders nor the
officers, employees or agents of Buyer shall be liable under this Agreement and
Seller shall look solely to the assets of Buyer for the payment of any claim or
the performance of any obligation of Buyer.
Section 7.19 Confidentiality. Buyer agrees on its own behalf and on
behalf of its agents, employees and contractors to hold in confidence (a) the
terms of the proposed sale of the Property, and (b) other than information made
available to the public generally or upon inquiry or to a significant number of
third parties (other than by Buyer, its agents, employees, consultants or
contractors), information obtained by Buyer relating to the Property, the PBC,
Seller or any affiliate of Seller. The information described in clauses (a) and
(b) of the immediately preceding sentence is collectively referred to herein as
the "Information". Buyer further agrees on its own behalf and on behalf of its
agents, employees and contractors not to disclose any Information to any person
or entity without
-22-
<PAGE>
Seller's prior written consent, which consent may be withheld in Seller's sole
discretion, except (i) a person or entity with a right to the Information
pursuant to statutory or common law (including, without limitation, any
disclosures required in connection with Buyer's obligations as a public
company), (ii) Buyer's consultants and attorneys on a need-to-know basis, and
(iii) to the extent required by court order. Buyer shall take all necessary or
desirable steps reasonable to ensure that its agents, employees and contractors
comply with the terms of this Section 7.19. Buyer shall use the Information
solely for the purpose of determining whether or not to purchase the Property.
-23-
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have executed this
Agreement as of the day and year first written above.
SELLER: BUYER:
- ------- ------
PENNSYLVANIA BUSINESS CAMPUS NEOSE TECHNOLOGIES, INC.,
DELAWARE, INC., a Delaware a Delaware corporation
corporation
By: /s/ Guy Tcheau By: /s/ P. Sherrill Neff
------------------------------- -------------------------------
Its: Vice President Its: President and CFO
--------------------------- ----------------------------
By: /s/ Michael Carp By:
------------------------------- --------------------------------
Its: Treasurer Its:
---------------------------- ---------------------------
-24-
Exhibit 4.1
Representation
Pursuant to Item 601(b)(4)(iii)(A)
of
Regulation S-K
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant has not
filed documents relating to the $1,000,000 Variable Rate Demand Revenue Bonds
(Neose Technologies, Inc. Project), Series A of 1997, issued by the Montgomery
County Industrial Development Authority. The Registrant hereby agrees to furnish
supplementally copies of such documents to the Securities and Exchange
Commission upon request.
Exhibit 4.2
===============================================================================
MONTGOMERY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
TO
DAUPHIN DEPOSIT BANK AND TRUST COMPANY, AS TRUSTEE
TRUST INDENTURE
Dated as of
March 1, 1997
Securing
$8,400,000
MONTGOMERY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
Federally Taxable Variable Rate Demand Revenue Bonds
(Neose Technologies, Inc. Project)
Series B of 1997
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
Preambles................................................................... 1
Granting Clauses............................................................ 1
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions............................................... 4
SECTION 1.02. Interpretation; Time of Day...............................12
SECTION 1.03. Captions, Headings and Table of Contents..................12
ARTICLE II
AUTHORIZATION AND TERMS OF BONDS
SECTION 2.01. Amount, Form and Issuance of Bonds........................13
SECTION 2.02. Designation, Denominations, Maturity, Dated Dates,
Interest Accrual and Tender.............................13
SECTION 2.03. Weekly Rate...............................................14
SECTION 2.04. Term Rate.................................................15
SECTION 2.05. Conversion at Option of Borrower..........................16
SECTION 2.06. Execution and Authentication of Bonds.....................17
SECTION 2.07. Source of Payment of Bonds................................17
SECTION 2.08. Payment and Ownership of Bonds............................17
SECTION 2.09. Registration, Transfer and Exchange of Bonds..............18
SECTION 2.10. Mutilated, Lost, Wrongfully Taken or Destroyed Bonds......19
SECTION 2.11. Cancellation of Bonds.....................................20
SECTION 2.12. Special Agreement with Holders............................20
SECTION 2.13. Book Entry System for the Bonds...........................21
ARTICLE III
REDEMPTION OF BONDS
SECTION 3.01. Terms of Redemption.......................................24
SECTION 3.02. Partial Redemption........................................24
SECTION 3.03. Issuer's Election to Redeem...............................25
SECTION 3.04. Notice of Redemption......................................25
SECTION 3.05. Payment of Redeemed Bonds.................................26
- i -
<PAGE>
Page
----
ARTICLE IV
PURCHASE AND REMARKETING OF BONDS
SECTION 4.01. Purchase on Demand of Holder During Weekly Mode...........28
SECTION 4.02. Mandatory Purchase on Conversion Date and at End of Term
Rate Period; upon Expiration of Letter of Credit;
and at Direction of Bank................................30
SECTION 4.03. Remarketing...............................................32
SECTION 4.04. Drawings on Letter of Credit for Purchase of Bonds........33
SECTION 4.05. Bonds Purchased with Proceeds of Letter of Credit.........34
SECTION 4.06. Borrower Bonds............................................35
SECTION 4.07. No Purchases After Acceleration;
Inadequate Funds for Purchases..........................35
ARTICLE V
FUNDS AND LETTER OF CREDIT
SECTION 5.01. Creation of Project Fund..................................37
SECTION 5.02. Disbursements from and Records of Project Fund............37
SECTION 5.03. Disposition of Excess Bond Proceeds.......................37
SECTION 5.04. Bond Fund.................................................37
SECTION 5.05. Investment of Bond Fund and Project Fund..................39
SECTION 5.06. Bond Fund Moneys to be Held in Trust......................41
SECTION 5.07. Nonpresentment of Bonds...................................41
SECTION 5.08. Letter of Credit..........................................41
ARTICLE VI
COVENANTS AND REPRESENTATIONS
OF ISSUER
SECTION 6.01. Corporate Existence; Compliance with Laws.................45
SECTION 6.02. Payment of Bond Service...................................45
SECTION 6.03. No Further Assignment of Revenues.........................45
SECTION 6.04. Filings...................................................45
SECTION 6.05. Rights and Enforcement of Agreement.......................45
SECTION 6.06. Further Assurances........................................46
SECTION 6.07. Observance and Performance Agreements.....................46
SECTION 6.08. Representations and Warranties............................46
- ii -
<PAGE>
Page
----
ARTICLE VII
DEFAULT AND REMEDIES
SECTION 7.01. Defaults; Events of Default...............................47
SECTION 7.02. Notice of Default.........................................48
SECTION 7.03. Acceleration..............................................48
SECTION 7.04. Other Remedies; Rights of Holders.........................50
SECTION 7.05. Right of Holders to Direct Proceedings....................51
SECTION 7.06. Application of Moneys.....................................51
SECTION 7.07. Remedies Vested in Trustee................................53
SECTION 7.08. Rights and Remedies of Holders............................53
SECTION 7.09. Termination of Proceedings................................54
SECTION 7.10. Waivers of Events of Default..............................54
SECTION 7.11. Certain Rights of Issuer..................................54
SECTION 7.12. Trustee's Right to Appointment of Receiver................55
SECTION 7.13. Trustee and Holders Entitled to All Benefits Under Act....55
SECTION 7.14. Trustee's Obligation to Banks Upon Payment of
All Amounts Due Holders................................ 55
ARTICLE VIII
TRUSTEE AND REMARKETING AGENT
SECTION 8.01. Trustee's Acceptance and Responsibilities.................56
SECTION 8.02. Certain Rights and Obligations of Trustee.................57
SECTION 8.03. Fees, Charges and Expenses of Trustee.....................60
SECTION 8.04. Intervention by Trustee...................................60
SECTION 8.05. Successor Trustee.........................................60
SECTION 8.06. Resignation by Trustee....................................61
SECTION 8.07. Removal of Trustee........................................61
SECTION 8.08. Appointment of Successor Trustee..........................61
SECTION 8.09. Adoption of Authentication................................63
SECTION 8.10. Designation and Succession of Authenticating Agent,
Bond Registrar, Transfer Agent, Tender Agent
and Paying Agent....................................... 63
SECTION 8.11. Dealing in Bonds..........................................64
SECTION 8.12. Representations, Agreements and Covenants of Trustee......64
SECTION 8.13. Appointment of Remarketing Agent..........................64
SECTION 8.14. Qualifications of Remarketing Agent.......................65
SECTION 8.15. Compensation and Expenses of Remarketing Agent............65
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS
SECTION 9.01. Supplemental Indentures Not Requiring Consent of Holders..66
SECTION 9.02. Supplemental Indentures Requiring Consent of Holders......67
- iii -
<PAGE>
Page
----
SECTION 9.03. Consent of Borrower and Participating Bank................67
SECTION 9.04. Authorization to Trustee; Effect of Supplement............67
SECTION 9.05. Modification by Unanimous Consent.........................68
SECTION 9.06. Amendment of Loan Agreement...............................68
SECTION 9.07. Amendment of Letter of Credit.............................68
SECTION 9.08. Trustee Authorized to Join in Supplements and
Amendments; Reliance on Counsel.........................68
SECTION 9.09. Bank Consent..............................................68
SECTION 9.10. Notice to Rating Service..................................69
ARTICLE X
DEFEASANCE
SECTION 10.01. Defeasance................................................70
SECTION 10.02. Provision for Payment.....................................70
SECTION 10.03. Deposit of Funds for Payment of Bonds.....................71
SECTION 10.04. Survival of Certain Provisions............................72
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Limitation of Rights; No Personal Recourse................73
SECTION 11.02. Severability..............................................73
SECTION 11.03. Notices...................................................73
SECTION 11.04. Suspension of Mail........................................74
SECTION 11.05. Payments Due on Saturdays, Sundays and Holidays...........75
SECTION 11.06. Instruments of Holders....................................75
SECTION 11.07. Binding Effect............................................75
SECTION 11.08. Counterparts..............................................75
SECTION 11.09. Governing Law.............................................76
Execution...................................................................77
Exhibit A - Bond Form......................................................A-1
Exhibit omitted. The Registrant notes that the Bond has been filed separately as
Exhibit 4.3 to this Quarterly Report on Form 10-Q.
- iv -
<PAGE>
TRUST INDENTURE
THIS TRUST INDENTURE, dated as of March 1, 1997 between MONTGOMERY
COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY (the "Issuer"), a public instrumentality
and body corporate and politic of the Commonwealth of Pennsylvania, and DAUPHIN
DEPOSIT BANK AND TRUST COMPANY, a Pennsylvania banking corporation, as Trustee
(the "Trustee") (the capitalized terms used in the recitals and granting clauses
hereof being used therein as defined in Article I of this Trust Indenture),
WITNESSETH THAT:
A. Pursuant to the Act, the Issuer has authorized and approved the
Project and the financing thereof through the issuance of the Bonds and the loan
of the proceeds thereof to the Borrower pursuant to the Loan Agreement to
finance costs of the Project;
B. The Bonds will be issued under and secured by this Indenture, and
the Issuer is empowered and authorized to execute and deliver this Indenture and
the Loan Agreement and to do or cause to be done all acts provided or required
herein or therein to be performed on its part;
C. All acts and conditions required to happen, exist and be performed
precedent to and in the issuance of the Bonds and the execution and delivery of
this Indenture have happened, exist and have been performed (i) to make the
Bonds, when issued, delivered and authenticated, valid and binding legal
obligations of the Issuer and (ii) to make this Indenture a valid, binding and
legal trust agreement for the security of the Bonds; and
D. The Trustee has accepted the trusts created by this Indenture, and
in evidence thereof has joined in the execution hereof.
NOW, THEREFORE, the Issuer, intending to be legally bound, in
consideration of the acceptance by the Trustee of the trusts hereby created and
of the purchase and acceptance of the Bonds by the Holders, and of the sum of
One Dollar, lawful money of the United States of America, to it duly paid by the
Trustee at or before the execution and delivery of these presents, and for other
good and valuable consideration, the receipt of which is hereby acknowledged, in
order to secure, in the following order of priority, first, the payment of the
principal of, premium, if any, on and interest on the Bonds according to their
tenor and effect and the performance and observance by the Issuer of all the
covenants expressed or implied herein and in the Bonds, second, the payment to
the Bank and performance of the reimbursement and other obligations of the
Participating Bank under the Participating Bank Agreement, and, third, the
payment to the Participating Bank and performance of the reimbursement and other
obligations of the Borrower under the Reimbursement Agreement, does hereby
assign, transfer and pledge to the Trustee and its successors in trust and its
and their assigns forever and grant to the Trustee and its successors in trust
and its and their assigns a security interest in:
<PAGE>
a. All right, title and interest (but not the obligations) of
the Issuer under and pursuant to the terms of the Loan Agreement, all
Loan Payments and all other payments, revenues and receipts receivable
by the Issuer thereunder (except for the Unassigned Issuer's Rights);
and
b. All of the right, title and interest of the Issuer in and
to all Funds and Accounts established under this Indenture and all
moneys and investments now or hereafter held therein and all present
and future Revenues.
TO HAVE AND TO HOLD, the Loan Agreement, Funds, Accounts, Revenues and
the other right, title and interest hereby assigned, transferred and pledged or
agreed or intended so to be (collectively the "Trust Estate") to the Trustee and
its successors in said trust and to its and their assigns forever;
IN TRUST NEVERTHELESS, upon the terms herein set forth, first, for the
equal and proportionate benefit, security and protection of all present and
future Holders of the Bonds issued under and secured by this Indenture without
privilege, priority or distinction as to the lien or otherwise of any of the
Bonds over any other of the Bonds except as provided herein, second, for the
benefit and security of the Bank with respect to the Participating Bank's
obligations under the Participating Bank Agreement, and, third, for the benefit
and security of the Participating Bank with respect to the Borrower's
obligations under the Reimbursement Agreement;
PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall
well and truly pay, or cause to be paid, the principal of the Bonds and the
interest and premium, if any, due or to become due thereon, at the times and in
the manner mentioned in the Bonds according to the true intent and meaning
thereof, or shall provide, as permitted hereby, for the payment thereof by
depositing with the Trustee the entire amount due or to become due thereon, and
shall well and truly keep, perform and observe all the covenants and conditions
pursuant to the terms of this Indenture to be kept, performed and observed by
the Issuer, and shall pay or cause to be paid to the Trustee all sums due or to
become due to it in accordance with the terms and provisions hereof, if the
Participating Bank shall pay and perform or cause to be paid and performed all
of its reimbursement and other obligations under the Participating Bank
Agreement, and if the Borrower shall pay and perform or cause to be paid and
performed all of its reimbursement and other obligations under the Reimbursement
Agreement, then, upon such final payments and subject to the provisions of
Article X, this Indenture and the rights hereby granted shall cease, determine
and be void, and the Trustee shall forthwith release, surrender and otherwise
cancel any interest it may have in the Trust Estate; otherwise this Indenture
shall be and remain in full force and effect.
THIS INDENTURE FURTHER WITNESSETH, and it is expressly declared, that
all Bonds issued and secured hereunder are to be issued, authenticated and
delivered and the Trust Estate, including all said payments, revenues and
receipts hereby pledged, is to be dealt with and disposed of, under, upon and
subject to the terms, conditions, stipulations, covenants, agreements, trusts,
uses and
2
<PAGE>
purposes as hereinafter expressed, and the Issuer has agreed and covenanted, and
does hereby agree and covenant, with the Trustee and with the respective
Holders, from time to time, of the Bonds, or any part thereof, as follows:
(Balance of page intentionally left blank)
3
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. In this Indenture, the following terms shall
have the meanings specified in this Article, unless the context otherwise
requires:
"Act" means the Pennsylvania Economic Development Financing Law (Act
No. 102, approved August 23, 1967, P.L. 251, as amended, including the
amendments effected by Act No. 48, approved July 10, 1987, P.L. 273, and Act No.
74, approved December 17, 1993, P.L. 490). The Act is codified at 73 P.S.
(section) 371 et seq.
"Affiliate" means any Person directly or indirectly controlling,
controlled by or under common control with the Borrower as certified to the
Trustee and the Remarketing Agent by an Authorized Representative of the
Borrower. In addition, the term "Affiliate" shall also include any Person who
has guaranteed the payment of the Borrower's obligations under the Loan
Agreement or the Reimbursement Agreement.
"Alternate Letter of Credit" means an irrevocable letter of credit
authorizing drawings thereunder by the Trustee, issued by a national banking
association, a bank, a trust company or other financial institution, and
satisfying the requirements of Section 5.08.
"Authorized Representative" shall have the meaning assigned to such
term in the Loan Agreement.
"Available Moneys" means (i) proceeds of a drawing under the Letter of
Credit and (ii) any moneys paid to the Trustee and with respect to which the
Trustee has received an opinion of nationally recognized counsel experienced in
bankruptcy matters and acceptable to the Trustee and the Rating Service to the
effect that the use of such moneys to pay principal of, premium (if any) on or
interest on the Bonds, as applicable, will not constitute an avoidable transfer
under Section 547 of the United States Bankruptcy Code in the event of a
bankruptcy case under the United States Bankruptcy Code by the Issuer or by or
against the Borrower or any Affiliate, as debtor; provided that when used with
respect to payment of amounts due in respect of any Pledged Bonds or Borrower
Bonds, "Available Moneys" means any moneys held by the Trustee and available for
such payment pursuant to the terms of this Indenture except for moneys drawn
under the Letter of Credit.
"Bank" means, initially, CoreStates Bank, N.A., a national banking
association, as issuer of the Letter of Credit, and its successors and assigns
in that capacity and, in the event an Alternate Letter of Credit is outstanding,
the issuer of the Alternate Letter of Credit.
"Bond Counsel" shall mean an attorney-at-law or a firm of attorneys of
nationally recognized standing in matters pertaining to bonds issued by states
and their political subdivisions, duly admitted to the practice of law before
the highest court of any state of the United States of America.
"Bond Fund" means the fund so designated and established pursuant to
Section 5.04.
4
<PAGE>
"Bond Pledge Agreement" means the Pledge, Security and Indemnification
Agreement among the Borrower, the Bank and the Participating Bank relating to
the Bonds, as amended or supplemented from time to time.
"Bond Service" means, for any period or payable at any time, the
principal of, premium, if any, on and interest on the Bonds for that period or
payable at that time whether due at maturity or upon acceleration or redemption.
"Bondholder Tender Notice" means a written notice meeting the
requirements of Section 4.01.
"Bonds" means the $8,400,000 Federally Taxable Variable Rate Demand
Revenue Bonds (Neose Technologies, Inc. Project) Series B of 1997 of the Issuer
issued, authenticated and delivered pursuant to Section 2.01.
"Borrower" means Neose Technologies, Inc., a corporation duly organized
and validly existing under the laws of the State of Delaware, and its successors
and assigns.
"Borrower Bonds" means any Bonds of which ownership is registered in
the name of the Borrower or any Affiliate, other than Pledged Bonds.
"Borrower Purchase Account" means the special trust account so
designated and established by the Trustee pursuant to Section 4.04.
"Business Day" means any day other than a Saturday or Sunday or a day
on which banks located in Philadelphia, Pennsylvania, Pittsburgh, Pennsylvania,
New York, New York or any other city in which the principal corporate trust
office of the Trustee or the office of the Bank at which drawing documents are
required to be presented under the Letter of Credit is located are required or
authorized to close or on which The New York Stock Exchange is closed.
"Conversion Date" means any Interest Payment Date on which the Rate
Mode of the Bonds is converted to another Rate Mode pursuant to Section 2.05.
"DTC" means The Depository Trust Company, New York, New York and its
successors and assigns.
"Eligible Investments" means
(i) Government Obligations; the Trustee, in purchasing
Government Obligations, (a) may make any such purchase subject to
agreement with the seller for repurchase by the seller at a later date,
and in such connection may accept the seller's agreement for the
payment of interest in lieu of the right to receive the interest
payable by the issuer of the securities purchased, provided that title
to the Government Obligations so purchased by the Trustee shall vest in
the Trustee, that the Trustee shall have actual or constructive
possession of such Government Obligations, and that the current market
value of such Government Obligations (or of cash or
5
<PAGE>
additional Government Obligations pledged with the Trustee as
collateral for the purpose) is at all times at least equal to the
principal and interest thereafter to become payable by the seller under
said agreement, or (b) may purchase shares of a fund whose sole assets
are of a type described in this clause (i) and such repurchase
agreements thereof;
(ii) obligations issued or guaranteed by any state or
political subdivision thereof and rated in the highest category, if
rated as short-term obligations, or not lower than the third highest
category, if rated as long term obligations, by Moody's Investors
Service, Inc. ("Moody's") or by Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc. ("Standard & Poor's"), or
their successors; the Trustee, in purchasing obligations of the type
described in this clause (ii), may purchase shares of a fund whose sole
assets are such obligations or obligations of the type described in
clause (i) above;
(iii) commercial or finance company paper which is rated in
the highest rating category by either Moody's or Standard & Poor's; and
(iv) deposit accounts, investment agreements, bankers'
acceptances, certificates of deposit or bearer deposit notes in any
bank, trust company or savings and loan association (including without
limitation the Trustee or any bank affiliated with the Trustee)
organized under the laws of the United States of America or any state
thereof having a rating of its unsecured senior long-term debt
obligations within one of the three highest rating categories by either
Moody's or Standard & Poor's.
"Event of Default" means any of the events described as an Event of
Default in Section 7.01.
"Expiration Date" means the stated expiration date of the Letter of
Credit, as such date may be extended from time to time by the Bank.
"Extraordinary Services" and "Extraordinary Expenses" mean all services
rendered and all reasonable expenses properly incurred by the Trustee or any of
its agents under this Indenture, other than Ordinary Services and Ordinary
Expenses.
"General Account" means the account so designated which is established
pursuant to Section 5.04.
"Government Obligations" means direct obligations of, or obligations
the principal of and interest on which are unconditionally guaranteed by, the
United States of America, including obligations issued or held in book-entry
form on the books of the Department of the Treasury of the United States of
America and including a receipt, certificate or any other evidence of an
ownership interest in such obligations or in specified portions thereof (which
may consist of specified portions of interest thereon).
"Holder" means the Person in whose name a Bond is registered on the
Register.
6
<PAGE>
"Indenture" means this Trust Indenture, as amended or supplemented from
time to time.
"Interest Payment Date" means (i) with respect to Weekly Rate interest,
the first Wednesday of each calendar month, or if any such Wednesday is not a
Business Day, the immediately succeeding Business Day, and (ii) with respect to
Term Rate interest, each Semiannual Date.
"Interest Rate for Advances" means the rate per annum which is two
percentage points in excess of that interest rate announced by the Trustee in
its commercial lending capacity as its "prime rate".
"Issuer" means Montgomery County Industrial Development Authority, a
Pennsylvania body corporate and politic organized and existing under the Act.
"Issuer's Fee" means the fee of the Issuer payable pursuant to Section
4.4 of the Loan Agreement.
"Letter of Credit" means the irrevocable letter of credit issued by the
Bank to the Trustee on the date of execution and delivery of this Indenture and
any Alternate Letter of Credit, under which the Trustee is authorized, subject
to the terms and conditions thereof, to draw up to (a) an amount equal to the
principal amount of the outstanding Bonds (i) to enable the Trustee to pay the
principal amount of the Bonds when due at maturity, upon redemption or upon
acceleration and (ii) to enable the Trustee to pay the portion of the purchase
price of Bonds tendered to it and not remarketed corresponding to the principal
amount of such Bonds, plus (b) while the Bonds bear interest at a Weekly Rate,
an amount equal to interest to accrue at the Maximum Rate on the outstanding
Bonds for 46 days and, while the Bonds bear interest at a Term Rate, an amount
equal to interest to accrue at a rate not less than the Term Rate then in effect
on the outstanding Bonds for 195 days (i) to enable the Trustee to pay interest
on the Bonds when due and (ii) to enable the Trustee to pay the portion of the
purchase price of Bonds tendered to it and not remarketed corresponding to the
accrued interest on such Bonds, as the same may be amended, transferred,
reissued or extended in accordance with this Indenture, plus (c) while the Bonds
bear interest at a Term Rate, an amount equal to the premium (if any) which
would become payable on the Bonds upon mandatory redemption if such irrevocable
letter of credit or Alternate Letter of Credit were not extended beyond the
Expiration Date set forth therein.
"Letter of Credit Debt Service Account" means the account so designated
and established pursuant to Section 5.04 in the Bond Fund.
"Letter of Credit Purchase Account" means the special trust account so
designated and established pursuant to Section 4.04.
"Loan" means the loan by the Issuer to the Borrower of the proceeds of
the Bonds pursuant to Section 4.1 of the Loan Agreement in the original
principal amount of $8,400,000.
"Loan Agreement" means the Loan Agreement dated as of the date hereof
between the Issuer and the Borrower, as amended and supplemented from time to
time.
7
<PAGE>
"Loan Payments" means the amounts required to be paid by the Borrower
in repayment of the Loan pursuant to Section 4.2 of the Loan Agreement.
"Maximum Rate" means (i) with respect to Weekly Rate interest, 17% per
annum and (ii) with respect to Term Rate interest, 25% per annum.
"Nominal Term Rate Period" means, with respect to a Term Mode, a period
of two or more consecutive Semiannual Periods (expressed in years and half
years) determined pursuant to Sections 2.04 and 2.05.
"Ordinary Services" and "Ordinary Expenses" mean those services
normally rendered, and those expenses normally incurred, by a trustee under
instruments similar to this Indenture.
"Outstanding Bonds", "Bonds outstanding" or "outstanding" as applied to
Bonds mean, as of the applicable date, all Bonds which have been authenticated
and delivered, or which are being delivered by the Trustee under this Indenture,
except:
(a) Bonds cancelled or required to be cancelled upon surrender,
exchange or transfer, or cancelled or required to be cancelled
because of payment or redemption on or prior to that date
pursuant to Section 2.11;
(b) On or after any purchase date for Bonds to be purchased
pursuant to Article IV, all Undelivered Bonds (or portions of
Bonds) which are purchased on such date, provided that funds
sufficient for such purchase are on deposit with the Trustee;
(c) Bonds which are deemed paid in accordance with Article X; and
(d) Bonds in substitution for which others have been authenticated
and delivered under Section 2.10.
For purposes of approval or consent by the Holders, "outstanding Bonds," "Bonds
outstanding" or "outstanding" as applied to Bonds shall not include Bonds owned
by or on behalf of the Issuer, the Borrower or an Affiliate (unless all of the
outstanding Bonds are so owned), the Bank (unless all of the outstanding Bonds
are so owned), or the Participating Bank (unless all of the outstanding Bonds
are so owned).
"Participating Bank" means the bank, trust company, savings and loan
association or other financial institution which has entered into the
Reimbursement Agreement with the Borrower and the Participating Bank Agreement
with the Bank, and its successors and assigns. The initial Participating Bank is
Jefferson Bank.
"Participating Bank Agreement" means the Participation and
Reimbursement Agreement between the Participating Bank and the Bank relating to
the Letter of Credit and the Bonds, as amended, supplemented or replaced from
time to time.
8
<PAGE>
"Person" or words importing persons means firms, associations,
partnerships (including without limitation general and limited partnerships),
joint ventures, societies, estates, trusts, corporations, public or governmental
bodies, other legal entities and natural persons.
"Pledged Bonds" shall have the meaning assigned to such term in Section
4.05.
"Predecessor Bond" of any particular Bond means every previous Bond
evidencing all or a portion of the same debt as that evidenced by the particular
Bond. For purposes of this definition, any Bond authenticated and delivered
under Section 2.10 in substitution for a lost, wrongfully taken or destroyed
Bond shall, except as otherwise provided in Section 2.10, be deemed to evidence
the same debt as the lost, wrongfully taken or destroyed Bond.
"Project" means the acquisition, improvement and equipment of a
facility which will be used for the development and pilot production of complex
carbohydrates for research and development relating to a variety of healthcare
applications to be owned and operated by the Borrower, and located in Horsham
Township, Montgomery County, Pennsylvania, as more fully described in the Loan
Agreement.
"Project Costs" shall have the meaning assigned to such term in the
Loan Agreement.
"Project Fund" means the fund so designated and established pursuant to
Section 5.01.
"Purchase Date" means (a) with respect to any optional tender for
purchase pursuant to Section 4.01 of Bonds in the Weekly Mode, any Business Day
designated as the date of such purchase pursuant to such Section and (b) with
respect to any mandatory purchase pursuant to Section 4.02 (1) in the case of
Bonds which are to be purchased upon conversion from one Rate Mode to another
Rate Mode, the Conversion Date, or if such Conversion Date is not a Business
Day, the first Business Day succeeding such Conversion Date, (2) in the case of
Bonds which are to be purchased upon expiration of a Term Rate Period, the first
Business Day following the end of such Term Rate Period, (3) in the case of
Bonds to be purchased in anticipation of the expiration of the Letter of Credit,
the Interest Payment Date next preceding the Expiration Date of the Letter of
Credit, and (4) in the case of Bonds to be purchased at the direction of the
Bank or the Participating Bank, the purchase date stipulated by the Bank or the
Participating Bank pursuant to Section 7.03.
"Rate Mode" means the Weekly Mode or a Term Mode.
"Rating Service" means Moody's Investors Service, Inc., if the Bonds
are rated by such at the time, and Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc., if the Bonds are rated by such at
the time, and their successors and assigns, or if either shall be dissolved or
no longer assigning credit ratings to long term debt, then any other nationally
recognized entity assigning credit ratings to long term debt designated by the
Issuer and satisfactory to the Trustee.
"Register" means the books kept and maintained by the Trustee for
registration and transfer of Bonds pursuant to Section 2.08.
9
<PAGE>
"Regular Record Date" means, while the Bonds are in the Weekly Mode,
the close of business on the last Business Day preceding an Interest Payment
Date and, while the Bonds are in the Term Mode, the close of business on the
fifteenth day of the calendar month next preceding an Interest Payment Date.
"Reimbursement Agreement" means the Reimbursement Agreement between the
Borrower and the Participating Bank relating to the Participating Bank Agreement
and the Bonds, as amended, supplemented or replaced from time to time.
"Remarketing Agent" means, initially, CoreStates Capital Markets, a
Division of CoreStates Bank, N.A. and any Person meeting the qualifications of,
and designated from time to time to act as Remarketing Agent under, Section
8.14. "Principal Office" of the Remarketing Agent means the principal office of
the Remarketing Agent at the address of the Remarketing Agent set forth in
Section 11.03, or any other office so designated in writing by the Remarketing
Agent to the Issuer, the Trustee, the Borrower, the Participating Bank and the
Bank.
"Remarketing Agreement" means the Remarketing Agreement between the
Borrower and the Remarketing Agent relating to the Bonds, as amended,
supplemented or replaced from time to time.
"Remarketing Proceeds Purchase Account" means the special trust account
so designated and established pursuant to Section 4.03.
"Revenues" means (a) the Loan Payments, (b) all other moneys received
or to be received by the Issuer or the Trustee in respect of repayment of the
Loan, including without limitation, all moneys and investments in the Bond Fund,
(c) any proceeds of Bonds originally deposited with the Trustee for the payment
of interest accrued on the Bonds or otherwise paid to the Trustee by or on
behalf of the Borrower or the Issuer for deposit in the Bond Fund or any excess
moneys remaining in the Project Fund following completion of the Project, (d)
investment income with respect to any moneys held by the Trustee under the
Indenture, and (e) any moneys paid to the Trustee under the Letter of Credit;
provided that the term "Revenues" does not include any moneys or investments in
the Remarketing Proceeds Purchase Account, the Letter of Credit Purchase Account
or the Borrower Purchase Account.
"Semiannual Date" means each March 1 and each September 1.
"Semiannual Period" means a six month period commencing on a Semiannual
Date and ending on and including the day immediately preceding the next
Semiannual Date.
"Series Issue Date" means the date of original issuance and first
authentication and delivery of the Bonds to the initial purchaser thereof
against payment therefor.
"Special Record Date" means, with respect to any Bond, the date
established by the Trustee in connection with the payment of overdue interest on
that Bond pursuant to Section 2.08.
10
<PAGE>
"Supplemental Indenture" means any indenture supplemental to this
Indenture entered into between the Issuer and the Trustee in accordance with
Article IX.
"Term Mode" means, with respect to the Bonds, the mode of accruing
interest thereon at Term Rates based on a constant Nominal Term Rate Period.
"Term Rate" means the rate of interest borne by the Bonds for a Term
Rate Period determined pursuant to Section 2.04(a).
"Term Rate Calculation Date" means a Business Day not more than 15 days
and not less than one day prior to the first day of the corresponding Term Rate
Period.
"Term Rate Period" means a period of two or more consecutive Semiannual
Periods equal to the applicable Nominal Term Rate Period determined pursuant to
Section 2.05 commencing on the Semiannual Date immediately following the last
day of the immediately preceding Term Rate Period and running through and ending
on the day immediately preceding the Semiannual Date which follows such
commencement date by a period equal to such Nominal Term Rate Period; except
that the first Term Rate Period after conversion from a Weekly Rate to a Term
Rate shall commence on the Conversion Date of such conversion and end on and
include the day immediately preceding the Semiannual Date which follows the
Semiannual Date occurring on or immediately preceding such Conversion Date by a
period equal to such Nominal Term Rate Period.
"Term Rate Period End Interest Payment Date" means the Semiannual Date
immediately following the last day of a Term Rate Period.
"Trustee" means Dauphin Deposit Bank and Trust Company, Harrisburg,
Pennsylvania, until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter, "Trustee" shall mean
the successor Trustee. "Principal Office" of the Trustee means the principal
corporate trust office or other office of the Trustee at the address of the
Trustee set forth in Section 11.03, or any other corporate trust office so
designated in writing by the Trustee to the Issuer, the Remarketing Agent, the
Borrower, the Participating Bank and the Bank. "Delivery Office" of the Trustee
means the office, in addition to its Principal Office, at which Bondholder
Tender Notices may be delivered and where Bonds surrendered for purchase may be
delivered to the Trustee, which office may be the office of an agent of the
Trustee for such purpose and shall be designated in Section 11.03 or in a
separate writing by the Trustee to the Issuer, the Remarketing Agent, the
Borrower, the Participating Bank and the Bank.
"Trust Estate" shall have the meaning assigned to such term in the
foregoing habendum clause of this Indenture.
"Unassigned Issuer's Rights" shall have the meaning assigned to such in
the Loan Agreement.
"Undelivered Bonds" means any Bonds subject to purchase pursuant to
Section 4.01 or 4.02 which the Holder thereof has failed to deliver as described
in such Sections.
11
<PAGE>
"Weekly Mode" means, with respect to the Bonds, the mode of bearing
interest thereon at a Weekly Rate.
"Weekly Rate" means a floating weekly interest rate on the Bonds
established and adjusted in accordance with Section 2.03.
"Weekly Rate Calculation Date" means Wednesday in each calendar week
or, if any Wednesday is not a Business Day, the first Business Day preceding
such Wednesday.
"Weekly Rate Period" means the seven-day period commencing on the first
Wednesday following the corresponding Weekly Rate Calculation Date and running
through Tuesday of the following calendar week; except that (i) the first Weekly
Rate Period shall commence on the Series Issue Date and end on and include the
first Tuesday occurring after the Series Issue Date, (ii) the first Weekly Rate
Period following a conversion from a Term Mode to the Weekly Mode shall commence
on the Conversion Date for such conversion and end on and include the first
Tuesday occurring after such date, and (iii) the last Weekly Rate Period prior
to a conversion from the Weekly Mode to the Term Mode shall end on and include
the last day immediately preceding the Conversion Date for such conversion.
SECTION 1.02. Interpretation; Time of Day. Unless the context indicates
otherwise, words importing the singular number include the plural number, and
vice versa. The terms "hereof", "hereby", "herein", "hereto", "hereunder",
"hereinafter" and similar terms refer to this Indenture; and the term
"hereafter" means after, and the term "heretofore" means before, the Series
Issue Date. Words of any gender include the correlative words of the other
genders, unless the context indicates otherwise.
In this Indenture, unless otherwise indicated, all references to
particular Articles, Sections or Subsections are references to the Articles,
Sections or Subsections of this Indenture.
In this Indenture, all references to any time of the day shall refer to
Eastern standard time or Eastern daylight saving time, as in effect in the City
of Philadelphia, Pennsylvania on such day.
SECTION 1.03. Captions, Headings and Table of Contents. The captions,
headings and table of contents in this Indenture are solely for convenience of
reference and in no way define, limit or describe the scope of any Articles,
Sections, Subsections, paragraphs, subparagraphs or clauses hereof.
(End of Article I)
12
<PAGE>
ARTICLE II
AUTHORIZATION AND TERMS OF BONDS
SECTION 2.01. Amount, Form and Issuance of Bonds. The Bonds shall,
except as provided in Section 2.10, be limited to $8,400,000 in aggregate
principal amount and shall contain substantially the terms recited in the form
of Bonds set forth in Exhibit A to this Indenture. No additional series of Bonds
may be issued under this Indenture. All Bonds shall provide that Bond Service in
respect thereof shall be payable only out of the Revenues. The Issuer may cause
a copy of the text of the opinion of Bond Counsel delivered in connection with
the issuance of the Bonds to be printed on, or attached to, the Bonds, and, upon
request of the Issuer and deposit with the Trustee of an executed counterpart of
such opinion, the Trustee shall certify by manual or facsimile signature that
printed on, or attached to, the Bonds is the complete text of such opinion.
Pursuant to recommendations promulgated by the Committee on Uniform Security
Identification Procedures, "CUSIP" numbers may be printed on the Bonds. The
Bonds may bear such endorsement or legend satisfactory to the Trustee as may be
required to conform to usage or law with respect thereto.
Upon the execution and delivery hereof, the Issuer shall execute the
Bonds in the principal amount of $8,400,000 and deliver them to the Trustee for
authentication. The Trustee shall authenticate the Bonds and deliver them to, or
on the order, of the initial purchaser thereof upon receipt of a written request
and authorization to the Trustee on behalf of the Issuer, signed by an
Authorized Representative of the Issuer, and upon payment to the Trustee of the
amount specified therein, which amount shall be deposited as provided in Section
5.01.
SECTION 2.02. Designation, Denominations, Maturity, Dated Dates,
Interest Accrual and Tender.
(a) The Bonds shall be designated "Montgomery County Industrial
Development Authority Federally Taxable Variable Rate Demand Revenue Bonds
(Neose Technologies, Inc. Project) Series B of 1997" and shall be substantially
in the form attached hereto as Exhibit A.
(b) The Bonds shall be issuable in denominations of $100,000 or any
whole multiple thereof.
(c) The Bonds shall mature, subject to prior redemption as provided in
the form thereof recited in this Indenture, on March 1, 2017.
(d) The Series Issue Date shall be set forth on the face side of all
Bonds authenticated by the Trustee. Each Bond shall bear the date of its
authentication.
(e) The Bonds shall bear interest from the Interest Payment Date to
which interest has been paid next preceding the date of authentication, unless
the date of authentication (i) is an Interest Payment Date to which interest has
been paid, in which event the Bonds shall bear interest from the date of
authentication, or (ii) is prior to the first Interest Payment Date for the
Bonds, in which event such Bonds shall bear interest from the Series Issue Date.
Interest on the Bonds shall be
13
<PAGE>
paid on each Interest Payment Date. Each Bond shall bear interest on overdue
principal at the rates borne by the Bonds during the period such principal is
overdue. So long as the Bonds bear interest at a Weekly Rate, interest on the
Bonds shall be computed on the basis of a year of 365 or 366 days, as
applicable, for the number of days actually elapsed. Interest accruing on the
Bonds at a Term Rate shall be computed on the basis of a 360-day year of twelve
30-day months.
(f) Bonds authenticated and delivered while bearing interest in the
Weekly Mode shall set forth on the face side thereof, in the place provided for
designating the interest rate, the words "Weekly Rate".
(g) Bonds authenticated and delivered while bearing interest in a Term
Mode shall set forth on the face side thereof, in the place provided for
designating the interest rate, the words "__% Term Rate for Term Rate Period
ending __________".
(h) All Bonds shall initially bear interest at a Weekly Rate from the
Series Issue Date determined in accordance with Section 2.03. The Bonds may be
converted from one Rate Mode to another Rate Mode as provided in Section 2.05.
(i) The Bonds shall be subject to optional and mandatory tender for
purchase as provided in Article IV.
SECTION 2.03. Weekly Rate. A Weekly Rate shall be determined for each
Weekly Rate Period as described below. For each Weekly Rate Period and so long
as the Bonds are in the Weekly Mode, the interest rate on the Bonds shall be the
current market rate determined by the Remarketing Agent on the applicable Weekly
Rate Calculation Date, in accordance with this Section. On each Weekly Rate
Calculation Date, the Remarketing Agent shall determine the Weekly Rate as the
rate which if borne by the Bonds would, in the judgment of the Remarketing
Agent, taking into account prevailing financial market conditions, be the lowest
interest rate necessary to enable the Remarketing Agent to arrange for the sale
of all of the outstanding Bonds at a price equal to the principal amount thereof
plus accrued interest thereon. Notice of such Weekly Rate shall be given by the
Remarketing Agent to the Trustee in writing by the close of business on the
Weekly Rate Calculation Date. No notice of Weekly Rates will be given to the
Issuer, the Borrower, the Bank, the Participating Bank or the Holders; however,
the Issuer, the Borrower, the Bank, the Participating Bank and the Holders may
obtain Weekly Rates from the Trustee or the Remarketing Agent upon request
therefor. Anything herein to the contrary notwithstanding, in no event shall the
Weekly Rate borne by the Bonds exceed the Maximum Rate.
In determining each Weekly Rate to be effective pursuant to this
Section, prevailing financial market conditions which the Remarketing Agent
shall take into account shall include (i) existing short-term taxable market
rates and indexes of such short-term rates, (ii) the existing market supply and
demand for short-term taxable securities, (iii) existing yield curves for
short-term taxable securities for obligations of credit quality comparable to
the Bonds, (iv) general economic conditions, (v) industry, economic and
financial conditions that may affect or be relevant to the Bonds, and (vi) such
other facts, circumstances and conditions as the Remarketing Agent, in its sole
discretion, shall determine to be relevant.
14
<PAGE>
If for any reason the Remarketing Agent does not determine a Weekly
Rate for any Weekly Rate Period as aforesaid, or if a court holds a rate for any
Weekly Rate Period to be invalid or unenforceable, the Weekly Rate for that
Weekly Rate Period shall be equal to the Weekly Rate in effect for the
immediately preceding Weekly Rate Period. The Weekly Rate for any consecutive
succeeding Weekly Rate Period for which the Remarketing Agent does not determine
a Weekly Rate, or a court holds a rate to be invalid or unenforceable, shall be
the rate per annum equal to 115% of the interest rate per annum for 30-day
commercial paper having a rate of A-2/P-2 as reported in the Wall Street Journal
on such Weekly Rate Calculation Date.
The determination of the Weekly Rate by the Remarketing Agent pursuant
to this Indenture shall be conclusive and binding upon the Issuer, the Trustee,
the Borrower, the Remarketing Agent, the Bank, the Participating Bank and the
Holders of the Bonds.
SECTION 2.04. Term Rate.
A Term Rate shall be determined for each Term Rate Period as described
below. Upon conversion to a Term Mode, a Nominal Term Rate Period shall be fixed
by the Borrower pursuant to Section 2.05 as a term of two or more consecutive
Semiannual Periods constituting the nominal length of each Term Rate Period
thereafter until the date of a conversion to another Rate Mode. A Term Mode
based on one Nominal Term Rate Period and a Term Mode based on another Nominal
Term Rate Period are different Rate Modes. Each Term Rate shall be determined by
the Remarketing Agent, on the Term Rate Calculation Date, as the lowest rate of
interest that, in the judgment of the Remarketing Agent, taking into account
prevailing financial market conditions, would be necessary to enable the
Remarketing Agent to arrange for the sale of the Bonds in the respective Term
Mode in a secondary market sale at a price equal to the principal amount
thereof, plus accrued interest, on the first Business Day of the respective Term
Rate Period; provided that (1) if the Remarketing Agent fails for any reason to
determine the Term Rate for any Term Rate Period, such Term Rate shall be equal
to 120% of the average of the annual bond equivalent yield evaluations at par as
of the first day of the corresponding Term Rate Period or, if such day is not a
Business Day, the next preceding Business Day of United States Treasury
obligations having a term to maturity similar to such Term Rate Period, and (2)
no Term Rate shall exceed the lesser of (i) the maximum interest rate at which
the Letter of Credit, if any, then in effect provides coverage for at least 195
days interest and (ii) 25% per annum. In determining a Term Rate pursuant to
this Section, prevailing financial market conditions which the Remarketing Agent
shall take into account shall include (i) existing long-term taxable market
rates and indexes of such long-term rates, (ii) the existing market supply and
demand for long-term taxable securities, (iii) existing yield curves for
long-term taxable securities for obligations of credit quality comparable to the
Bonds, (iv) general economic conditions, (v) industry, economic and financial
conditions that may affect or be relevant to the Bonds, and (vi) such other
facts, circumstances and conditions as the Remarketing Agent, in its sole
discretion, shall determine to be relevant. Notice of each Term Rate shall
promptly be given by telephone (promptly confirmed in writing) by the
Remarketing Agent to the Trustee, the Issuer, the Borrower, the Bank and the
Participating Bank. Determinations of Term Rates pursuant to this Section shall
be conclusive and binding upon the Issuer, the Borrower, the Trustee, the Bank,
the Participating Bank and the Holders.
SECTION 2.05. Conversion at Option of Borrower. The Borrower shall have
the option to convert the Bonds from one Rate Mode to another Rate Mode as
herein provided on any
15
<PAGE>
Conversion Date the Borrower shall select; provided that (i) each Conversion
Date shall be an Interest Payment Date and (ii) Bonds in a Term Mode cannot be
converted to another Rate Mode prior to the date on or after which the Bonds may
first be redeemed at a redemption price of par, plus accrued interest, pursuant
to their terms. The Borrower may exercise its option to convert the Bonds
regardless of the number of times the Bonds have previously been converted
pursuant to the exercise of its option to convert. The Borrower shall exercise
such option by giving written notice from an Authorized Representative of the
Borrower to the Issuer, the Trustee, the Remarketing Agent, the Bank and the
Participating Bank, stating its election to convert the Rate Mode of the Bonds
to another Rate Mode specified in such notice and stating the Conversion Date
therefor, not less than 45 days (or such shorter period as shall be acceptable
to the Trustee) prior to such Conversion Date. Upon receipt of such notice by
the Trustee, the Trustee may conclusively assume that the Issuer, the
Remarketing Agent, the Bank and the Participating Bank also received a copy of
such notice and that such condition has been complied with. In connection with
each conversion to a Term Mode, the Nominal Term Rate Period shall be selected
by the Borrower and designated in such notice. Notice of the exercise of an
option to convert shall not be effective unless, within 10 days (or such greater
period as shall be acceptable to the Trustee) of the delivery of such notice,
there shall have been delivered to the Trustee (1) an opinion of Bond Counsel
addressed to the Trustee, the Issuer, the Borrower, the Bank, the Participating
Bank and the Remarketing Agent to the effect that such conversion is authorized
or permitted by this Indenture and the Act, which opinion shall be confirmed by
such Bond Counsel on the Conversion Date, (2) written consent of the Bank and
the Participating Bank to such conversion, (3) in the case of a conversion to a
Term Mode after which a Letter of Credit will be in effect, an amendment to the
Letter of Credit or an Alternate Letter of Credit which provides for (i) an
Expiration Date not earlier than one year after the Conversion Date, (ii) on and
after such Conversion Date, coverage of 195 days accrued interest on the Bonds
at a rate not less than the interest rate at which the then current letter of
credit provides coverage, subject to adjustment on the Conversion Date to the
actual Term Rate as the same shall be fixed on the Conversion Date, and (iii) on
and after such Conversion Date, coverage of premium (if any) on the Bonds in an
amount equal to the optional redemption premium which would become payable on
the Bonds upon mandatory purchase if the Letter of Credit (as amended by such
amendment) or such Alternate Letter of Credit were not extended beyond the
Expiration Date set forth therein, (4) in the case of a conversion from a Term
Mode to the Weekly Mode an amendment to the Letter of Credit or an Alternate
Letter of Credit which provides for (i) an Expiration Date not earlier than one
year after the Conversion Date and (ii) on and after such Conversion Date,
coverage for 46 days accrued interest on the Bonds at a maximum rate of 17% per
annum, and (5) written notice from the Rating Service that such conversion and,
if applicable, the related amendment to the Letter of Credit or delivery of an
Alternate Letter of Credit will not result in a withdrawal or reduction of the
then current rating or ratings on the Bonds or setting forth a new rating or
ratings on the Bonds effective upon such conversion. In the case of a conversion
from one Rate Mode to another Rate Mode, the Trustee shall give notice by first
class mail (postage prepaid) to the Holders not less than 30 days prior to the
proposed Conversion Date stating (i) that, in the case of a conversion to a Term
Mode, the interest rate on the Bonds is scheduled to be converted to a Term Rate
and stating the Nominal Term Rate Period on which such Term Rate will be based,
or in the case of a conversion to the Weekly Mode, the interest rate on the
Bonds is scheduled to be converted to a Weekly Rate, (ii) the proposed
Conversion Date, (iii) that the Borrower, on or before the tenth day prior to
the proposed Conversion Date, may determine not to convert the Bonds in which
case the Trustee shall notify the Holders in writing to such effect, and
(iv) that all outstanding Bonds will be subject to a mandatory purchase on the
Conversion Date, or if such Conversion Date is not a Business Day, the first
Business
16
<PAGE>
Day following such Conversion Date at a price of par plus accrued interest, if
any. The Issuer, the Borrower, the Trustee, the Bank, the Participating Bank and
the Remarketing Agent shall not be liable to any Holders for failure to give any
notice required above or for failure of any Holders to receive any such notice.
Upon each conversion under this Section, the Bonds shall be subject to mandatory
purchase pursuant to Section 4.02 on the Conversion Date or if such Conversion
Date is not a Business Day, the first Business Day following such Conversion
Date.
SECTION 2.06. Execution and Authentication of Bonds. The Bonds shall be
executed by the manual or facsimile signature of the Chairperson or Vice
Chairperson of the Issuer, and the corporate seal of the Issuer or a facsimile
thereof shall be affixed, imprinted, lithographed or reproduced thereon and
attested by the manual or facsimile signature of the Secretary or Assistant
Secretary of the Issuer. In case any officer whose signature or a facsimile of
whose signature shall appear on any Bond shall cease to be that officer before
the authentication of the Bond, the signature of such officer or the facsimile
thereof nevertheless shall be valid and sufficient for all purposes, the same as
if he had remained in office until that time. Any Bond may be executed on behalf
of the Issuer by an officer who, on the date of execution is the proper officer,
although on the date of authentication of the Bond that person was not the
proper officer.
No Bond shall be valid or become obligatory for any purpose or shall be
entitled to any security or benefit under this Indenture unless and until a
certificate of authentication, substantially in the form set forth in Exhibit A
to this Indenture, has been signed by the Trustee. The authentication by the
Trustee upon any Bond shall be conclusive evidence that the Bond so
authenticated has been duly authenticated and delivered hereunder and is
entitled to the security and benefit of this Indenture. The certificate of the
Trustee may be executed by any person authorized by the Trustee, and it shall
not be necessary that the same authorized person sign the certificates of
authentication on all of the Bonds.
SECTION 2.07. Source of Payment of Bonds. To the extent provided in and
except as otherwise permitted by this Indenture, (i) the Bonds shall be limited
obligations of the Issuer and the Bond Service thereon shall be payable equally
and ratably solely from the Revenues and (ii) the payment of Bond Service on the
Bonds shall be secured by the Trust Estate pursuant to the granting clauses of
this Indenture. Neither the general credit nor the taxing power of the County of
Montgomery, the Commonwealth of Pennsylvania or any political subdivision
thereof is pledged to the payment of the Bonds, and the Bonds shall not be or be
deemed obligations of the County of Montgomery, the Commonwealth of Pennsylvania
or any political subdivision thereof. The Issuer has no taxing power.
SECTION 2.08. Payment and Ownership of Bonds. Bond Service shall be
payable in lawful money of the United States of America without deduction for
the services of the Trustee. Subject to the provisions of the second paragraph
of this Section and Sections 2.12 and 2.13, (i) the principal of and any premium
on any Bond shall be payable when due to a Holder upon presentation and
surrender of such Bond at the Principal Office of the Trustee, and (ii) interest
on any Bond shall be paid on each Interest Payment Date by check which the
Trustee shall cause to be mailed on that date to the Person in whose name the
Bond (or one or more Predecessor Bonds) is registered at the close of business
on the Regular Record Date applicable to that Interest Payment Date on the
Register at the address appearing therein. If and to the extent, however, that
the Issuer shall fail to make payment or provision for payment of interest on
any Bond on any Interest Payment Date, that
17
<PAGE>
interest shall cease to be payable to the Person who was the Holder of that Bond
(or of one or more Predecessor Bonds) as of the applicable Regular Record Date.
When moneys become available for payment of that interest, (x) the Trustee
shall, pursuant to Subsection 7.06(d), establish a Special Record Date for the
payment of that interest which shall be not more than 15 nor fewer than 10 days
prior to the date of the proposed payment, and (y) the Trustee shall cause
notice of the proposed payment and of the Special Record Date to be mailed by
first class mail, postage prepaid, to each Holder at its address as it appears
on the Register not fewer than 10 days prior to the Special Record Date and,
thereafter, that interest shall be payable to the Persons who are the Holders of
the Bonds (or their respective Predecessor Bonds) at the close of business on
the Special Record Date.
The interest and the principal or redemption price and purchase price
becoming due with respect to the Bonds shall, at the written request of the
Holder of at least $1,000,000 aggregate principal amount of such Bonds received
by the Trustee at least two Business Days before the corresponding Regular
Record Date or maturity, redemption or purchase date, be paid by wire transfer
within the continental United States in immediately available funds to the bank
account number of such Holder specified in such request and entered by the
Trustee on the Register, but, in the case of principal or redemption price and
purchase price, only upon presentation and surrender of such Bonds at the
Principal Office of the Trustee.
Subject to the foregoing, each Bond delivered under this Indenture upon
transfer thereof, or in exchange for or in replacement of any other Bond, shall
carry the rights to interest accrued and unpaid, and to accrue on that Bond, or
which were carried by that Bond.
Except as provided in this Section and in the first paragraph of
Section 2.10, (i) the Holder of any Bond shall be deemed and regarded as the
absolute owner thereof for all purposes of this Indenture, (ii) payment of or on
account of the Bond Service on any Bond shall be made only to or upon the order
of that Holder or its duly authorized attorney in the manner permitted by this
Indenture, and (iii) neither the Issuer nor the Trustee shall, to the extent
permitted by law, be affected by notice to the contrary. All of those payments
shall be valid and effective to satisfy and discharge the liability upon that
Bond, including without limitation the interest thereon to the extent of the
amount or amounts so paid.
SECTION 2.09. Registration, Transfer and Exchange of Bonds. All Bonds
shall be issued in fully registered form. The Bonds shall be registered upon
original issuance and upon subsequent transfer or exchange as provided in this
Indenture. The Trustee shall act as registrar and transfer agent for the Bonds.
So long as any of the Bonds remain outstanding, the Issuer will cause books for
the registration and transfer of Bonds, as provided in this Indenture, to be
maintained and kept at the Principal Office of the Trustee.
Bonds may be exchanged, at the option of their Holder, for Bonds of any
authorized denomination or denominations in an aggregate principal amount equal
to the unmatured and unredeemed principal amount of, and bearing interest at the
same rate and maturing on the same date or dates as, the Bonds being exchanged.
The exchange shall be made upon presentation and surrender of the Bonds being
exchanged at the Principal Office of the Trustee, together with an assignment
duly executed by the Holder or its duly authorized attorney in form and with
guarantee of signature satisfactory to the Trustee.
18
<PAGE>
Any Bond may be transferred upon the Register, upon presentation and
surrender thereof at the Principal Office of the Trustee, together with an
assignment duly executed by the Holder or its duly authorized attorney in form
and with guarantee of signature satisfactory to the Trustee. Upon transfer of
any Bond, the Issuer shall execute in the name of the transferee, and the
Trustee shall authenticate and deliver, a new Bond or Bonds of any authorized
denomination or denominations in an aggregate principal amount equal to the
unmatured and unredeemed principal amount of, and bearing interest at the same
rate and maturing on the same date or dates as, the Bonds presented and
surrendered for transfer.
In all cases in which Bonds shall be exchanged or transferred
hereunder, the Issuer shall execute, and the Trustee shall authenticate and
deliver, Bonds in accordance with the provisions of this Indenture. The exchange
or transfer shall be made without charge; provided that the Issuer or the
Trustee may make a charge for every exchange or transfer of Bonds sufficient to
reimburse them for any tax or excise required to be paid with respect to the
exchange or transfer. The charge shall be paid before a new Bond is delivered.
All Bonds issued upon any transfer or exchange of Bonds shall be the
valid obligations of the Issuer, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Bonds surrendered upon transfer or
exchange. While the Bonds are in a Term Mode, the Trustee shall not be required
to exchange or transfer (i) any Bond during a period beginning at the opening of
business 15 days before the date of the mailing of a notice of redemption of
Bonds and ending at the close of business on the day of such mailing, (ii) any
Bond selected for redemption in whole or in part, or (iii) any Bond during the
period of 15 days preceding any Interest Payment Date.
In case any Bond is redeemed in part only, on or after the redemption
date and upon presentation and surrender of the Bond, the Issuer, subject to the
provisions of Sections 2.12 and 2.13, shall cause execution of, and the Trustee
shall authenticate and deliver, a new Bond or Bonds in authorized denominations
in an aggregate principal amount equal to the unmatured and unredeemed portion
of, and bearing interest at the same rate and maturing on the same date or dates
as, the Bond redeemed in part.
SECTION 2.10. Mutilated, Lost, Wrongfully Taken or Destroyed Bonds. If
any Bond is mutilated, lost, wrongfully taken or destroyed, in the absence of
written notice to the Issuer or the Trustee that a lost, wrongfully taken or
destroyed Bond has been acquired by a bona fide purchaser, the Issuer shall
execute, and the Trustee shall authenticate and deliver, a new Bond of like
date, maturity and denomination and of the same series as the Bond mutilated,
lost, wrongfully taken or destroyed; provided that (i) in the case of any
mutilated Bond, the mutilated Bond first shall be surrendered to the Trustee,
and (ii) in the case of any lost, wrongfully taken or destroyed Bond, there
first shall be furnished to the Issuer, the Borrower and the Trustee evidence of
the loss, wrongful taking or destruction satisfactory to the Trustee, together
with indemnity satisfactory to it and to the Authorized Representative of the
Issuer. The Issuer and the Trustee may charge the Holder of a mutilated, lost,
wrongfully taken or destroyed Bond their reasonable fees and expenses in
connection with their actions pursuant to this Section.
Notwithstanding the foregoing, the Trustee shall not be required to
authenticate and deliver any substitute Bond for a Bond which has been called
for redemption or which has matured or
19
<PAGE>
is about to mature and, in any such case, the principal or redemption price and
interest then due or becoming due shall be paid by the Trustee in accordance
with the terms of the mutilated, lost, wrongfully taken or destroyed Bond
without substitution therefor.
Every substituted Bond issued pursuant to this Section shall constitute
an additional contractual obligation of the Issuer and shall be entitled to all
the benefits of this Indenture equally and proportionately with any and all
other Bonds duly issued hereunder unless the Bond alleged to have been lost,
wrongfully taken or destroyed shall be at any time enforceable by a bona fide
purchaser for value without notice. In the event the Bond alleged to have been
lost, wrongfully taken or destroyed shall be enforceable by anyone, the Issuer
may recover the substitute Bond from the Bondholder to whom it was issued or
from anyone taking under the Bondholder except a bona fide purchaser for value
without notice.
All Bonds shall be held and owned on the express condition that the
foregoing provisions of this Section are exclusive with respect to the
replacement or payment of mutilated, lost, wrongfully taken or destroyed Bonds
and, to the extent permitted by law, shall preclude any and all other rights and
remedies with respect to the replacement or payment of negotiable instruments or
other investment securities without their surrender, notwithstanding any law or
statute to the contrary now existing or hereafter enacted.
SECTION 2.11. Cancellation of Bonds. Any Bond surrendered pursuant to
this Article for the purpose of payment, redemption, retirement, exchange,
replacement or transfer shall be cancelled upon presentation and surrender
thereof to the Trustee. Bonds purchased pursuant to Section 4.01 or 4.02 shall
not be surrendered Bonds and shall be outstanding Bonds, unless otherwise
specifically provided in this Indenture.
The Borrower may deliver at any time to the Trustee for cancellation
any Bonds previously authenticated and delivered hereunder, which the Borrower
may have purchased pursuant to the provisions of this Indenture. All Bonds so
delivered shall be cancelled promptly by the Trustee. Certification of the
surrender and cancellation of any Bond shall be made to the Issuer by the
Trustee. Cancelled Bonds shall be destroyed by the Trustee by shredding or
incineration immediately after their cancellation. The Trustee shall provide
certificates describing the destruction of cancelled Bonds to the Issuer.
SECTION 2.12. Special Agreement with Holders. Notwithstanding any
provision of this Indenture or of any Bond to the contrary, the Trustee may
enter into an agreement with any Holder providing for making all payments to
that Holder of principal of and interest and any premium on that Bond or any
part thereof at a place and by a method (including wire transfer of federal
funds) other than as provided in this Indenture and in the Bond, without
presentation or surrender of the Bond, upon any conditions which shall be
satisfactory to the Trustee; provided that (i) except as otherwise provided in
Section 2.13, payment of principal shall be made only upon presentation and
surrender of the Bond and (ii) payment in any event shall be made to the Person
in whose name a Bond shall be registered on the Register, with respect to
payment of principal and premium, on the date such principal and premium is due,
and, with respect to the payment of interest, as of the applicable Regular
Record Date, Special Record Date or other date agreed upon, as the case may be.
The Trustee will furnish a copy of each such agreement upon request, to the
Issuer, the Bank, the Participating Bank and
20
<PAGE>
the Borrower. Any payment of principal, premium or interest pursuant to such an
agreement shall constitute payment thereof pursuant to, and for all purposes of,
this Indenture.
SECTION 2.13. Book Entry 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 DTC. Except as provided in
paragraph (g) below, all of the Bonds shall be registered in the Register 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 Issuer 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
Register in connection with discontinuing the book entry system as provided in
paragraph (g) below or otherwise.
(b) So long as any Bonds are registered in the name of DTC or any
nominee thereof, all payments of the principal or redemption price of or
interest on such Bonds shall be made to DTC or its nominee in accordance with
DTC's Operational Arrangements 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 Issuer 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, upon request, 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 Issuer and the Trustee may 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 required to be given to Holders under this Indenture, registering
the transfer of Bonds, obtaining any consent or other action to be taken by
Holders and for all other purposes whatsoever; and neither the Issuer nor the
Trustee shall be affected by any notice to the contrary. Neither the Issuer 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 Register as being a Holder, with respect to (1) the Bonds, (2) the accuracy
of any records maintained by DTC or any such participant, (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, (4) any notice which is permitted or required
to be given to Holders under this Indenture, (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, and (6) any consent given or other action taken by DTC
as Holder.
21
<PAGE>
(d) So long as any Bonds are registered in the name of DTC or any
nominee thereof, all notices required or permitted to be given to the Holders of
such Bonds under this Indenture shall be given to DTC as provided in DTC's
Operational Arrangements.
(e) In connection with any notice or other communication to be provided
to Holders pursuant to this Indenture by the Issuer or the Trustee with respect
to any consent or other action to be taken by Holders, 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 Issuer or the Trustee
may establish a special record date for such consent or other action. The Issuer
or the Trustee shall give DTC notice of such special record date not less than
15 calendar days in advance of such special record date to the extent possible.
(f) The Issuer has executed and delivered to DTC a Blanket Issuer
Letter of Representations pursuant to which the Issuer has agreed to comply with
the requirements stated in DTC's Operational Arrangements. The Trustee has also
agreed to comply with the requirements stated in DTC's Operational Arrangements
and any successor Trustee shall, prior to accepting duties under this Indenture,
agree to comply with the requirements stated in DTC's Operational Arrangements.
(g) The book-entry system for registration of the ownership of the
Bonds may be discontinued at any time if either (1) after notice to the Issuer
and the Trustee, DTC determines to resign as securities depository for the
Bonds, or (2) after notice to DTC and the Trustee, the Issuer determines that
continuation of the system of book-entry transfers through DTC (or through a
successor securities depository) is not in the best interests of the Issuer. In
either of such events (unless in the case described in clause (2) above, the
Issuer 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 by DTC, but without any liability on the
part of the Issuer or the Trustee for the accuracy of such designation. Whenever
DTC requests the Issuer and the Trustee to do so, the Issuer and the Trustee
shall cooperate with DTC in taking appropriate action after reasonable notice to
arrange for another securities depository to maintain custody of certificates
evidencing the Bonds.
(h) Anything herein to the contrary notwithstanding, so long as any
Bonds are registered in the name of DTC or any nominee thereof, in connection
with any optional tender of such Bonds bearing interest at a Weekly Rate, the
beneficial owners of such Bonds are responsible for submitting the Bondholder
Tender Notice to the Remarketing Agent only.
(i) Upon remarketing of Bonds in accordance with Section 4.03 herein,
payment of the purchase price thereof shall be made to DTC and no surrender of
certificates is expected to be required. Such sales shall be made through DTC
participants (which may include the Remarketing Agent) and the new beneficial
owners of such Bonds shall not receive delivery of Bond certificates. DTC shall
transmit payment to DTC participants, and DTC participants shall transmit
payment to beneficial owners whose Bonds were purchased pursuant to a
remarketing. Neither the Issuer, the Trustee nor the Remarketing Agent is
responsible for transfers of payment to DTC participants or beneficial owners.
22
<PAGE>
(j) The provisions of this Section 2.13 are subject to the provisions
of Article IV relating to Pledged Bonds.
(End of Article II)
23
<PAGE>
ARTICLE III
REDEMPTION OF BONDS
SECTION 3.01. Terms of Redemption. The Bonds are subject to redemption
prior to stated maturity as follows:
(a) Extraordinary Optional Redemption. The Bonds are also subject to
redemption prior to maturity by the Issuer in the event of the exercise by the
Borrower of its option to direct that redemption upon occurrence of any of the
events described in Section 6.2 of the Loan Agreement, at any time in whole or
on any Interest Payment Date in part, in the event of damage, destruction or
condemnation of part of the Project, in each case, at a redemption price of 100%
of the principal amount redeemed plus accrued interest to the redemption date.
(b) Optional Redemption During Weekly Mode. While the Bonds are in the
Weekly Mode, the Bonds may be redeemed by the Issuer, at the direction of the
Borrower, in whole at any time or in part on any Interest Payment Date, prior to
maturity at a redemption price equal to 100% of the principal amount thereof
plus accrued interest to the redemption date.
(c) Optional Redemption During Term Mode. While the Bonds are in a Term
Mode, the Bonds shall be subject to optional redemption prior to maturity by the
Issuer, at the direction of the Borrower, on the dates and at the redemption
prices as shall be set forth in a Supplemental Indenture delivered in connection
with the conversion to a Term Mode.
The Issuer may only call Bonds for optional redemption pursuant to this
Subsection which would require a payment of a premium if (i) the Trustee can
draw under the Letter of Credit moneys sufficient to pay such premium with
respect to all Bonds other than any Pledged Bonds or Borrower Bonds and (ii) the
Participating Bank has consented to such optional redemption.
The Trustee shall only call Bonds for optional redemption if (i) it
holds moneys in the Bond Fund available for payment of the Bonds to be redeemed
pursuant to Section 5.04(c) or (ii) the Participating Bank has consented to such
optional redemption.
(d) Use of Certain Funds to Redeem Bonds. The Trustee shall draw on the
Letter of Credit in the manner provided by Section 5.04 to pay the principal of
and premium (if any) and interest on any Bonds called for redemption pursuant to
this Section. Except as otherwise provided in this Section, the Trustee shall
pay the redemption price on all Bonds redeemed under this Section in the manner
and from the sources set forth in Section 5.04 with respect to the payment of
Bond Service.
SECTION 3.02. Partial Redemption. If fewer than all of the Bonds are to
be redeemed, the selection of Bonds to be redeemed, or portions thereof in
amounts of $100,000 or any whole multiple thereof, shall be made by lot or by
such other method as the Trustee deems fair and appropriate; provided that any
Pledged Bonds shall be redeemed first and any Borrower Bonds shall be redeemed
second. In the case of a partial redemption of Bonds when Bonds of denominations
greater than $100,000 are then outstanding, each $100,000 unit of face value of
principal thereof shall be
24
<PAGE>
treated as though it were a separate Bond of the denomination of $100,000. If it
is determined that one or more, but not all, of the $100,000 units of face value
represented by a Bond are to be called for redemption, then upon notice of
redemption of a $100,000 unit or units, the Holder of that Bond shall, subject
to Section 2.12, surrender the Bond to the Trustee (a) for payment of the
redemption price of the $100,000 unit or units of face value called for
redemption (including without limitation the interest accrued to the date fixed
for redemption and any premium) and (b) for issuance, without charge to the
Holder thereof, of a new Bond or Bonds of any authorized denomination or
denominations in an aggregate principal amount equal to the unmatured and
unredeemed portion of, and bearing interest at the same rate and maturing on the
same date as, the Bond surrendered.
SECTION 3.03. Issuer's Election to Redeem. Except in the case of
redemption pursuant to any mandatory redemption provisions of this Indenture,
Bonds shall be redeemed only by written notice from the Borrower on behalf of
the Issuer to the Trustee, the Bank and the Participating Bank. Such notice
shall specify the redemption date and the principal amount of Bonds to be
redeemed, and shall be given at least 45 days prior to the redemption date or
such shorter period as shall be acceptable to the Trustee.
SECTION 3.04. Notice of Redemption.
(a) When required to redeem Bonds under any provision of this
Indenture, or when directed to do so by the Issuer or the Borrower pursuant to
the provisions of this Indenture, the Trustee shall cause notice of the
redemption to be given not more than 60 days and not less than 15 days (30 days
if the Bonds are in a Term Mode) prior to the redemption date, by mailing copies
of such notice of redemption by first class mail, postage prepaid, to all
Holders of Bonds to be redeemed at their registered addresses, but failure to
mail any such notice or defect in the mailing thereof in respect of any Bond
shall not affect the validity of the redemption of any other Bond with respect
to which notice was properly given. Each such notice shall be dated and shall be
given in the name of the Issuer and shall state the following information:
(i) the identification numbers, as established under this
Indenture, and the CUSIP numbers, if any, of the Bonds being redeemed,
provided that any such notice shall state that no representation is
made as to the correctness of CUSIP numbers either as printed on such
Bonds or as contained in the notice of redemption and that reliance may
be placed only on the identification numbers contained in the notice or
printed on such Bonds;
(ii) any other descriptive information needed to identify
accurately the Bonds being redeemed;
(iii) in the case of partial redemption of any Bonds, the
respective principal amounts thereof to be redeemed;
(iv) the redemption date;
(v) the redemption price;
25
<PAGE>
(vi) that on the redemption date the redemption price will
become due and payable upon each such Bond or portion thereof called
for redemption, and that interest thereon shall cease to accrue from
and after said date; and
(vii) the place where such Bonds are to be surrendered for
payment of the redemption price, which place of payment shall be the
Principal Office of the Trustee.
In addition, the Trustee shall at all reasonable times make available to any
interested party complete information as to Bonds which have been redeemed or
called for redemption.
(b) In addition to the foregoing notice, further notice of any
redemption of Bonds hereunder shall be given by the Trustee, at least two
Business Days in advance of the mailed notice to Holders, by registered or
certified mail or overnight delivery service to (i) the Rating Service and to
The Bond Buyer, or their respective successors, if any, and to (ii) Financial
Information, Inc.'s "Daily Called Bond Service", 30 Montgomery Street, 10th
Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information
Services' "Called Bond Service", 55 Bond Street, 28th Floor, New York, New York
10004; Moody's "Municipal and Government", 99 Church Street, 8th Floor, New
York, New York 10007, Attention: Municipal News Report; and Standard and Poor's
"Called Bond Record", 26 Broadway, 3rd Floor, New York, New York 10004; or, in
accordance with then-current guidelines of the Securities and Exchange
Commission, to such other addresses and/or such other services, as the Issuer
may designate with respect to the Bonds, or no such services, as the Issuer may
designate in a certificate of the Issuer delivered to the Trustee. So long as
the Bonds or any portion thereof are held by DTC, the Trustee shall send each
notice of redemption of the Bonds to DTC at 711 Stewart Avenue, Garden City, New
York, 11530, Attention: Call Notification Department (FAX - (516) 227-4039)) or
at such other address as may be provided in writing to the Trustee from time to
time. The foregoing notice of redemption shall be sent to DTC at least 30 days
prior to the redemption date by legible facsimile transmission, certified or
registered mail, overnight delivery service or another secure method which
enables the Trustee subsequently to verify the transmission of such notice. Such
further notice shall contain the information required in Subsection 3.04(a).
Failure to give all or any portion of such further notice shall not in any
manner defeat the effectiveness of a call for redemption if notice thereof is
given to the Holders as prescribed in Subsection 3.04(a).
(c) If at the time of mailing of notice of any optional redemption
there shall not have been deposited moneys in the Bond Fund available for
payment pursuant to Subsection 5.04(c) sufficient to redeem all the Bonds called
for redemption, such notice may state that it is conditional in that it is
subject to the deposit of the redemption moneys in the Bond Fund available for
payment pursuant to Section 5.04 not later than 12:00 noon on the redemption
date, in which case such notice shall be of no effect unless moneys are so
deposited.
SECTION 3.05. Payment of Redeemed Bonds. If (a) unconditional notice of
the redemption has been duly given or duly waived by the Holders of all Bonds
called for redemption or (b) conditional notice of redemption has been so given
or waived and Available Moneys for such redemption have been duly deposited with
the Trustee, then in either such case the Bonds called for redemption shall be
payable on the redemption date at the applicable redemption price. Payment of
the redemption price together with accrued interest shall be made by the
Trustee, out of Revenues or other
26
<PAGE>
funds deposited for such purpose, to or upon the order of the Holders of the
Bonds called for redemption upon surrender of such Bonds, except as otherwise
provided in Section 2.13.
Upon the payment of the redemption price of Bonds being redeemed, each
check or other transfer of funds issued for such purpose shall bear the CUSIP
number identifying, by issue and maturity, the Bonds being redeemed with the
proceeds of such check or other transfer.
All moneys deposited in the Bond Fund and held by the Trustee for the
redemption of particular Bonds shall be held in trust for the account of the
Holders thereof and shall be paid to them, respectively, upon presentation and
surrender of those Bonds, except as otherwise provided in Section 2.13.
(End of Article III)
27
<PAGE>
ARTICLE IV
PURCHASE AND REMARKETING OF BONDS
SECTION 4.01. Purchase on Demand of Holder During Weekly Mode. While
the Bonds are in the Weekly Mode, any Bond (or portion thereof in an authorized
denomination) shall be purchased on the demand of the Holder thereof on any
Business Day designated by such Holder in a Bondholder Tender Notice at a
purchase price equal to 100% of the principal amount thereof plus accrued
interest, if any, to the Purchase Date, if there is delivered to the Trustee at
its Principal Office or Delivery Office, and to the Remarketing Agent at its
Principal Office, a Bondholder Tender Notice which (i) states the principal
amount (or portion thereof) of such Bond and (ii) states the Purchase Date on
which such Bond (or portion thereof) shall be purchased pursuant to this
Section, which date shall be a Business Day not prior to the seventh day next
succeeding the date of the delivery of such notice to the Trustee and the
Remarketing Agent. By delivering the Bondholder Tender Notice, the Holder
irrevocably agrees to deliver such Bond, if not held in book-entry form, duly
endorsed for transfer in blank and with guarantee of signature satisfactory to
the Trustee, to the Principal Office or the Delivery Office of the Trustee or
any other address designated by the Trustee at or prior to 12:00 noon on the
Purchase Date specified in the Bondholder Tender Notice. The determination by
the Trustee of a Holder's compliance with the Bondholder Tender Notice and Bond
delivery requirements of this Section is in the sole discretion of the Trustee
and binding on the Borrower, the Issuer, the Remarketing Agent, the Bank, the
Participating Bank and the Holder of the Bonds. Any Bondholder Tender Notice
which the Trustee determines is not in compliance with this Section shall be of
no force or effect.
So long as the Bonds are registered to, and held in book-entry form by,
DTC or its nominee, the beneficial owner of Bonds is responsible for submitting
the Bondholder Tender Notice and shall be treated as the Holder of such Bonds
for such purpose, and such notice need only be submitted to the Remarketing
Agent.
Any election by a Holder to tender a Bond (or portion thereof) for
purchase on a Business Day in accordance with this Section shall be irrevocable
and shall be binding on the Holder making such election and on any transferee of
such Holder. Each Bondholder Tender Notice shall automatically constitute (i) an
irrevocable offer to sell the Bond (or portion thereof) to which such notice
relates on the Purchase Date at a price equal to the purchase price of such Bond
(or portion thereof), (ii) an irrevocable authorization and instruction to the
Trustee to effect transfer of such Bond (or portion thereof) upon payment of the
purchase price to the Trustee on the Purchase Date, (iii) with respect to a
tender of a portion of a Bond, an irrevocable authorization and instruction to
the Trustee to effect the exchange of such Bond in part for other Bonds in a
principal amount equal to the retained portion so as to facilitate the sale of
the tendered portion of such Bond, and (iv) an acknowledgment that such Holder
will have no further rights with respect to such Bond (or portion thereof) upon
payment of the purchase price thereof to the Trustee on the Purchase Date,
except for the right of such Holder to receive such purchase price upon
surrender of such Bond, if not held in book-entry form, to the Trustee endorsed
for transfer in blank and with guarantee of signature satisfactory to the
Trustee and that after the Purchase Date such Holder will hold such Bond as
agent for the Trustee. If the Bonds are not held in book-entry form and after
delivery to the Trustee and the Remarketing Agent of a
28
<PAGE>
Bondholder Tender Notice in accordance with this Section, the Holder making such
election shall fail to deliver such Bond or Bonds described in the Bondholder
Tender Notice to the Trustee at its Principal Office or Delivery Office on or
before 12:00 noon on the applicable Purchase Date as required by this Section,
then the undelivered Bond or portion thereof (the "Undelivered Bond") described
in such Bondholder Tender Notice shall be deemed to have been tendered for
purchase to the Trustee and, to the extent that there shall be held by the
Trustee on or before the applicable Purchase Date an amount sufficient to pay
the purchase price thereof and available for such purpose pursuant to the terms
of this Section, such Undelivered Bond shall on such Purchase Date cease to bear
interest and no longer shall be considered to be outstanding. Moneys held by the
Trustee for the purchase of the Undelivered Bonds in accordance with the
provisions of this Section shall be held in a special separate trust account for
the Holders of such Undelivered Bonds. Such moneys shall be held by the Trustee
uninvested and without liability for interest pending delivery of such
Undelivered Bonds to the Trustee.
The Trustee shall, as to any Undelivered Bond, promptly place a stop
transfer against an appropriate amount of Bonds registered in the name of the
Holder thereof on the Register. The Trustee shall place such stop transfer
commencing with the lowest serial number Bond registered in the name of such
Holder (until stop transfers have been placed against an appropriate amount of
Bonds) until the appropriate tendered Bonds are delivered to the Trustee. Upon
such delivery, the Trustee shall make any necessary adjustments to the Register.
If the Bonds are not held in book-entry form and if for any reason a
Holder fails to deliver a tendered Bond to the Trustee on the Purchase Date, the
Issuer shall execute and the Trustee shall authenticate and deliver in
accordance with Section 4.03 a new Bond or Bonds in replacement of the
Undelivered Bond. The replacement of any such Undelivered Bond shall not be
deemed to create new indebtedness, but such Bond as is issued in replacement
shall be deemed to evidence the indebtedness previously evidenced by the
Undelivered Bond.
A Holder who gives a Bondholder Tender Notice may repurchase the Bonds
so tendered on the Purchase Date if the Remarketing Agent agrees to remarket
such Bond to such Holder, and if the Remarketing Agent agrees to remarket the
specified Bond to such Holder prior to delivery of such Bonds as set forth
above, the delivery requirement set forth above shall be waived.
Upon surrender of any Bond (which is not held in book-entry form) for
purchase in part only, the Issuer shall execute and the Trustee shall
authenticate and deliver to the Holder thereof a new Bond or Bonds of the same
maturity, of authorized denominations, in an aggregate principal amount equal to
the unpurchased portion of the Bond surrendered.
On the date set for purchase of Bonds to be purchased pursuant to this
Section and upon receipt by the Trustee of 100% of the aggregate purchase price
of such Bonds, the Trustee shall pay the purchase price of such Bonds to the
selling Holders thereof at its Principal Office or Delivery Office at or before
5:00 p.m.; provided that such Bond (if not held in book-entry form) shall have
been surrendered to the Trustee properly endorsed for transfer on such date with
all signatures guaranteed at or prior to 12:00 noon on such Purchase Date. Such
payment shall be made in immediately available funds and shall be made only with
the following funds in the following order of availability:
29
<PAGE>
(1) moneys held in the Remarketing Proceeds Purchase Account
representing proceeds from the remarketing of such Bonds by the
Remarketing Agent to any Person other than the Issuer, the Borrower or
any Affiliate,
(2) moneys constituting Available Moneys held in the Bond Fund
and available to make such payment pursuant to Section 10.02, and
(3) proceeds from a drawing on the Letter of Credit deposited
directly into the Letter of Credit Purchase Account (provided that such
proceeds shall not be applied to purchase Pledged Bonds or Borrower
Bonds).
No purchase of Bonds pursuant to this Section shall be deemed to be a
payment or a redemption of such Bonds or any portion thereof and such purchase
will not operate to extinguish or discharge the indebtedness of such Bonds.
SECTION 4.02. Mandatory Purchase on Conversion Date and at End of Term
Rate Period; upon Expiration of Letter of Credit; and at Direction of Bank. The
Bonds shall be subject to mandatory purchase at a purchase price equal to the
principal amount thereof plus, in the case of purchases on a Purchase Date which
is not an Interest Payment Date, accrued interest thereon, and, in the case of a
mandatory purchase described in clause (b) below, a premium equal to the
optional redemption premium, if any, that would be due if the Bonds were to be
called for optional redemption pursuant to Section 3.01(c) on such purchase
date, as follows:
(a) on each Conversion Date, or if such Conversion Date is not
a Business Day, the first Business Day succeeding such Conversion Date,
and on the first Business Day immediately following the end of each
Term Rate Period;
(b) on the Interest Payment Date next preceding the Expiration
Date of the Letter of Credit unless at least 45 days (or such shorter
period as shall be acceptable to the Trustee) prior to such Interest
Payment Date the Trustee has received notice that the Letter of Credit
has been or will be extended or an Alternate Letter of Credit will be
provided pursuant to Section 5.08; and
(c) while the Bonds are in the Weekly Mode, on the Purchase
Date stipulated by the Bank or the Participating Bank pursuant to
Section 7.03 in the event the Bank or the Participating Bank directs
the Trustee pursuant to Section 7.03 to call the Bonds for mandatory
purchase pursuant to this clause.
In the case of any mandatory purchase of the Bonds pursuant to clause (b) or (c)
above, the Trustee shall cause notice of such mandatory purchase to be given not
more than 45 and not less than 15 days prior to the Purchase Date, by mailing
copies of such notice of mandatory purchase by first class mail, postage
prepaid, to all Holders of Bonds to be purchased at their registered addresses,
but failure to mail any such notice or defect in the mailing thereof in respect
of any Bond shall not affect the validity of the mandatory purchase of any other
Bond with respect to which notice was properly given. Each such notice shall be
dated and shall be given in the name of the Issuer and shall state the following
information: (i) the identification numbers, as established under this
Indenture, and the CUSIP
30
<PAGE>
numbers, if any, of the Bonds being purchased; (ii) any other descriptive
information needed to identify accurately the Bonds; (iii) the Purchase Date;
(iv) the purchase price; (v) that on the Purchase Date the purchase price will
become due and payable upon each Bond; (vi) the place where the Bonds are to be
delivered for payment of the purchase price, which place of payment shall be the
Principal Office or Delivery Office of the Trustee; and (vii) the Holders of
Bonds subject to mandatory purchase shall be required to deliver their Bonds for
purchase to the Trustee at its Principal Office or Delivery Office prior to
12:00 noon on the corresponding Purchase Date, and any Bond not so delivered
prior to 12:00 noon on the applicable Purchase Date (an "Undelivered Bond")
shall be deemed to have been tendered to the Trustee as of such Purchase Date
and, from and after such Purchase Date, shall cease to bear interest and no
longer shall be considered to be outstanding. In the event of a failure by a
Holder to deliver such Holder's Bond on or before the applicable Purchase Date,
such Holder shall not be entitled to any payment (including any interest to
accrue subsequent to such Purchase Date) other than the purchase price for such
Undelivered Bond, such Undelivered Bond shall no longer be entitled to the
benefits of this Indenture, except for the purpose of payment of the purchase
price therefor, and such Holder shall thereafter hold such Undelivered Bond as
agent for the Trustee. If for any reason a Holder fails to deliver to the
Trustee on or before the applicable Purchase Date any Bond remarketed by the
Remarketing Agent pursuant to Section 4.02, the Issuer shall execute and the
Trustee shall authenticate and deliver to the Remarketing Agent for redelivery
to the purchaser a new Bond or Bonds in replacement of the Undelivered Bond. The
replacement of any such Undelivered Bond shall not be deemed to create new
indebtedness, but such Bond as is issued in replacement shall be deemed to
evidence the indebtedness previously evidenced by the Undelivered Bond.
On the date set for purchase of Bonds to be purchased pursuant to this
Section 4.02 and upon receipt by the Trustee of 100% of the aggregate purchase
price of such Bonds, the Trustee shall pay the purchase price of such Bonds to
the selling Holders thereof at its Principal Office or Delivery Office at or
before 5:00 p.m.; provided that such Bonds shall have been surrendered to the
Trustee properly endorsed for transfer on such date with all signatures
guaranteed at or prior to 12:00 noon on such date. Such payment shall be made in
immediately available funds and payment for Bonds purchased pursuant to this
Section shall be made only with the following funds in the following order of
availability:
(1) moneys held in the Remarketing Proceeds Purchase Account
representing proceeds from the remarketing of such Bonds by the
Remarketing Agent to any Person other than the Issuer, the Borrower or
any Affiliate;
(2) moneys constituting Available Moneys held in the Bond Fund
and available to make such payment pursuant to Section 10.02; and
(3) proceeds from a drawing on the Letter of Credit deposited
directly into the Letter of Credit Purchase Account (provided that such
proceeds shall not be applied to purchase Pledged Bonds or Borrower
Bonds).
No purchase of Bonds pursuant to this Section shall be deemed to be a
payment or a redemption of such Bonds or any portion thereof and such purchase
will not operate to extinguish or discharge the indebtedness of such Bonds.
31
<PAGE>
SECTION 4.03. Remarketing. Upon delivery of a Bondholder Tender Notice
to the Trustee and the Remarketing Agent (or to the Remarketing Agent only in
the case of Bonds held in book-entry form) pursuant to Section 4.01 and not
later than the fifth day preceding the Purchase Date for each mandatory purchase
pursuant to Section 4.02, the Remarketing Agent shall use its best efforts to
find purchasers for and arrange for the sale of the Bonds identified in the
Bondholder Tender Notice pursuant to Section 4.01 or all Bonds subject to
mandatory purchase pursuant to Section 4.02 (other than any Bonds purchased in
anticipation of the expiration of the Letter of Credit or at the direction of
the Bank or the Participating Bank) at a price equal to the principal amount
thereof plus, in the case of purchases on a Purchase Date which is not an
Interest Payment Date, accrued interest thereon, for settlement in immediately
available funds at or before 1:00 p.m. on the applicable Purchase Date. Except
as otherwise expressly provided herein, the Remarketing Agent may not remarket
to the Issuer, the Borrower or any Affiliate any Bonds to be purchased pursuant
to Section 4.01 or 4.02. In its capacity as a registered broker-dealer, the
Remarketing Agent may, but is not obligated to, acquire for its own account any
Bonds to be so purchased, but not otherwise remarketed, in which case the
Remarketing Agent shall have remarketed such Bonds to itself. The Remarketing
Agent may purchase and sell Bonds for its own account at any time.
At or before 2:00 p.m. on the Business Day preceding the Purchase Date
of Bonds to be purchased pursuant to Section 4.01 or 4.02 and remarketed
pursuant to this Section (or such other time as to which the Trustee and the
Remarketing Agent may agree), the Remarketing Agent shall give notice by
telegram, telex, telecopy or other similar communication to the Trustee of the
names, addresses and taxpayer identification numbers of the purchasers and the
denominations of Bonds to be delivered to each purchaser and, if available, the
payment instructions for regularly scheduled interest payments.
The Remarketing Agent shall, at or before 10:00 a.m. on the Purchase
Date of Bonds to be purchased pursuant to Section 4.01 or 4.02 and remarketed
pursuant to this Section, give telephonic notice, promptly confirmed in writing,
to the Trustee, the Borrower, the Bank and the Participating Bank specifying the
principal amount of Bonds remarketed and not remarketed, respectively, and the
amount representing the purchase price of Bonds which the Remarketing Agent does
not then hold in trust.
The Remarketing Agent shall cause to be paid to the Trustee in
immediately available funds by 1:00 p.m. on the Purchase Date of Bonds to be
purchased pursuant to Section 4.01 or 4.02 and remarketed pursuant to this
Section, all amounts (if any) then held by the Remarketing Agent representing
proceeds of the remarketing of such Bonds. All such remarketing proceeds
received by the Trustee shall be deposited by the Trustee in the special trust
account designated as the Remarketing Proceeds Purchase Account which the
Trustee shall establish and use as provided in this Article IV and shall not be
commingled with other funds held by the Trustee. All moneys in the Remarketing
Proceeds Purchase Account shall be held in trust, uninvested and without
liability for interest thereon, pending application of such moneys by the
Trustee pursuant to this Article.
On the Purchase Date of Bonds to be purchased pursuant to Sections 4.01
or 4.02, the Trustee shall register (or hold) all Bonds purchased on such date
as follows:
32
<PAGE>
(a) Bonds remarketed by the Remarketing Agent shall be
registered and made available (at the Principal Office or Delivery
Office of the Trustee) to the Remarketing Agent or the purchasers
thereof in accordance with the instructions of the Remarketing Agent
delivered to the Trustee pursuant to this Section 4.03; and
(b) Bonds purchased with proceeds of a drawing on the Letter
of Credit which are Pledged Bonds shall be held as Pledged Bonds in
accordance with Section 4.05.
Any Bond (or portion thereof) with respect to which the Trustee
receives a Bondholder Tender Notice pursuant to Section 4.01 on or after the
date notice of a mandatory purchase pursuant to Section 4.02 or redemption
pursuant to Section 3.04 is given and before the corresponding mandatory
Purchase Date or redemption date, respectively, shall not be remarketed except
to a buyer who receives and acknowledges the binding effect of such notice.
Bonds purchased on or after the date notice of mandatory purchase is given and
before the corresponding mandatory Purchase Date and not remarketed, shall not
be subject to mandatory purchase, but shall remain outstanding. In addition,
Bonds which are deemed paid pursuant to Article X shall not be remarketed but
shall be canceled upon being purchased pursuant to Section 4.01 or 4.02 in
accordance with the Bond cancellation provisions of Section 2.11.
Anything in this Indenture to the contrary notwithstanding, the
Remarketing Agent shall have no obligation (i) to remarket any Bonds which are
not supported by the Letter of Credit or an Alternate Letter of Credit, or (ii)
to determine Term Rates or to find purchasers for and arrange for the sale of
the Bonds on or after a Conversion Date or to make any effort to such end,
except to the extent the Remarketing Agent shall have expressly and specifically
agreed in writing with the Borrower to perform such duties.
SECTION 4.04. Drawings on Letter of Credit for Purchase of Bonds. As
provided by Section 4.03, the Remarketing Agent shall advise the Trustee of the
amounts not held by the Remarketing Agent which shall be drawn under the Letter
of Credit in order for the Trustee to make timely payments of purchase price of
Bonds from remarketing proceeds or moneys drawn under the Letter of Credit. In
the absence of such notice, the Trustee shall be deemed to have received notice
from the Remarketing Agent specifying that no portion of the purchase price of
such Bonds is held by the Remarketing Agent, in which case the Trustee shall
draw the entire amount thereof under the Letter of Credit. Prior to 11:00 a.m.
on each Purchase Date, the Trustee shall take all action necessary to draw on
the Letter of Credit in accordance with its terms, the amounts specified (or
deemed specified) for receipt by the Trustee on such Purchase Date. The Trustee
shall establish a special trust account designated as the Letter of Credit
Purchase Account into which the Trustee shall deposit and hold in trust,
uninvested and without liability for interest thereon, all such amounts (and
only such amounts) received by the Trustee from drawings on the Letter of Credit
for purchases of Bonds pending application of such amounts by the Trustee
pursuant to this Article IV. Any remaining amounts in the Letter of Credit
Purchase Account after any application required by this Article IV shall be paid
over by the Trustee to the Bank as reimbursement for the drawing on the Letter
of Credit from which such amounts were derived; provided that the Letter of
Credit shall be reinstated to the extent of such reimbursement and the Trustee
shall take all necessary action on its part pursuant to the Letter of Credit to
effect such reinstatement. Anything herein to the contrary notwithstanding, no
amounts drawn on the Letter of Credit shall be applied to the purchase of
Pledged Bonds or Borrower Bonds.
33
<PAGE>
Any moneys paid by the Borrower pursuant to Section 4.3 of the Loan
Agreement for purchase of Bonds shall be deposited by the Trustee in a special
trust account designated as the Borrower Purchase Account which the Trustee
shall establish and use to reimburse (i) the Bank for drawings under the Letter
of Credit for such purpose or (ii) the Participating Bank if it has reimbursed
the Bank for moneys so drawn and the Trustee has received written notice from
the Bank of such reimbursement.
SECTION 4.05. Bonds Purchased with Proceeds of Letter of Credit.
(a) Pledged Bonds. Bonds purchased with proceeds of a drawing on the
Letter of Credit pursuant to this Article shall constitute "Pledged Bonds" and
shall be held by the Trustee as agent for the Bank or the Participating Bank as
pledgee pursuant to the Bond Pledge Agreement (and shall be shown as such on the
Register and, if held in book-entry form, in the ownership records maintained by
DTC and any applicable DTC participant) unless and until (1) the Trustee has
confirmation from the Bank to the extent contemplated by the terms of the Letter
of Credit that the Letter of Credit has been reinstated with respect to such
drawing and (2) the Bank or the Participating Bank has notified the Trustee by
telephone (thereafter promptly confirmed in writing) that such Bonds have been
released from the pledge pursuant to the Bond Pledge Agreement and are no longer
Pledged Bonds. Pending reinstatement of the Letter of Credit and release of such
pledge as aforesaid, the Bank (or the Participating Bank, if it has reimbursed
the Bank for the corresponding drawing on the Letter of Credit for the purchase
price and the Trustee has received written notice from the Bank of such
reimbursement) shall be entitled to receive all payments of principal of and
interest on Pledged Bonds as pledgee of the Borrower and such Bonds shall not be
transferable or deliverable to any party (including the Borrower) except the
Bank or the Participating Bank pursuant to the Bond Pledge Agreement.
(b) Remarketing of Pledged Bonds. The Remarketing Agent shall continue
to use its best efforts to arrange for the sale of any Pledged Bonds required to
be remarketed pursuant to Section 4.03, subject to full reinstatement of the
Letter of Credit with respect to the drawings with which such Bonds were
purchased, at a price equal to the principal amount thereof plus accrued
interest.
(c) Notice of Remarketing. At or prior to 2:00 p.m. on the Business Day
preceding each day on which any Pledged Bonds that are successfully remarketed
by the Remarketing Agent are to be purchased, the Remarketing Agent shall give
telephonic notice, promptly confirmed in writing, to the Trustee, the Borrower,
the Bank and the Participating Bank specifying:
(1) the Business Day on which such purchase will take place
and the principal amount of Pledged Bonds successfully remarketed by
the Remarketing Agent, and
(2) to the Trustee only, the names, addresses and tax
identification numbers of the proposed purchasers thereof and the
denominations of Bonds to be delivered to each purchaser and, if
available, the payment instructions for regularly scheduled interest
payments.
34
<PAGE>
(d) Delivery of Remarketed Pledged Bonds and Proceeds Thereof.
Contemporaneously with reinstatement of the Letter of Credit as described in
Subsection 4.05(a) and the sale of Pledged Bonds arranged by the Remarketing
Agent as described in Subsection 4.05(b), (i) such Bonds (if not held in
book-entry form) shall be made available (at the Principal Office or Delivery
Office of the Trustee) to the Remarketing Agent or the purchasers thereof in
accordance with the instructions of the Remarketing Agent and (ii) the proceeds
of such sale shall be delivered to the Bank or the Participating Bank, as
appropriate, for the account of the Borrower to be applied to any unpaid
reimbursement obligation under the Participating Bank Agreement or the
Reimbursement Agreement with respect to the prior drawings made on the Letter of
Credit in respect of the purchase of such Bonds.
SECTION 4.06. Borrower Bonds.
(a) Remarketing of Borrower Bonds. Subject to the provisions and
limitations of the Remarketing Agreement and Section 4.03, the Remarketing Agent
shall, if so directed by the Borrower, use its best efforts to arrange for the
sale of any Borrower Bonds, at a price equal to the principal amount thereof,
plus accrued interest.
(b) Notice of Remarketing. On or prior to each Business Day on which
any Borrower Bonds that are successfully remarketed by the Remarketing Agent
pursuant to Section 4.06(a) are to be purchased, the Remarketing Agent shall
give telephonic notice, promptly confirmed in writing, to the Trustee, the
Borrower, the Bank and the Participating Bank specifying:
(1) the Business Day on which such purchase will take place
and the principal amount of Borrower Bonds successfully remarketed by
the Remarketing Agent, and
(2) to the Trustee only, the names, addresses and tax
identification numbers of the proposed purchasers thereof, the
denominations of Bonds to be delivered to each purchaser and, if
available, the payment instructions for regularly scheduled interest
payments.
(c) Delivery of Remarketed Borrower Bonds and Proceeds Thereof. Upon
the sale of Borrower Bonds arranged by the Remarketing Agent pursuant to Section
4.06(a), (i) such Bonds (if not held in book-entry form) shall be made available
(at the Principal Office or Delivery Office of the Trustee) to the Remarketing
Agent or the purchasers thereof in accordance with the instructions of the
Remarketing Agent and (ii) the proceeds of such sale shall be delivered to the
Borrower.
SECTION 4.07. No Purchases After Acceleration; Inadequate Funds for
Purchases. Anything in this Indenture to the contrary notwithstanding, there
shall be no purchases of Bonds pursuant to this Article if the Bonds have been
declared immediately due and payable pursuant to Section 7.03 and such
declaration has not been annulled, stayed or otherwise suspended.
If the funds available for purchases of Bonds are inadequate for the
purchase of all Bonds tendered on any Purchase Date pursuant to this Article,
the Trustee shall, after any applicable
35
<PAGE>
grace period: (a) return all tendered Bonds to the Holders thereof; and (b)
return all moneys received for the purchase of such Bonds (other than moneys
provided by the Borrower and other than Letter of Credit proceeds, unless the
Letter of Credit is reinstated with respect thereto) to the persons providing
such moneys.
(End of Article IV)
36
<PAGE>
ARTICLE V
FUNDS AND LETTER OF CREDIT
SECTION 5.01. Creation of Project Fund. There is hereby established
with the Trustee a trust fund designated "Project Fund" for the payment of
Project Costs. There shall be deposited in the Project Fund all proceeds of the
sale of the Bonds. The Trustee shall maintain a record of the income on
investments and interest earned on amounts held in the Project Fund and on
proceeds of Bonds held in respect of accrued or capitalized interest held by the
Trustee as Revenues. Such income or interest may be expended at any time or from
time to time to pay the Project Costs in the same manner as the proceeds of
Bonds deposited in the Project Fund are expended.
Pending disbursement pursuant to the Loan Agreement, the moneys and
Eligible Investments to the credit of the Project Fund shall be held as security
for the outstanding Bonds and for the Participating Bank's obligations under the
Participating Bank Agreement and the Borrower's obligations under the
Reimbursement Agreement.
SECTION 5.02. Disbursements from and Records of Project Fund. Moneys in
the Project Fund shall be disbursed in accordance with the provisions of the
Loan Agreement. The Trustee shall cause to be kept and maintained adequate
records pertaining to the Project Fund and all disbursements therefrom. The
Trustee shall make such records available for inspection by, or shall provide
copies thereof to, the Issuer, the Borrower, the Bank and/or the Participating
Bank upon request.
SECTION 5.03. Disposition of Excess Bond Proceeds. The completion of
the Project and payment of all Project Costs payable out of the Project Fund
(except for amounts, if any, retained by the Trustee as provided under the Loan
Agreement for the payment of Project Costs not then due and payable) shall be
evidenced by the filing with the Trustee of the certificate of the Authorized
Representative of the Borrower required by Section 3.6 of the Loan Agreement. As
soon as practicable after the filing with the Trustee of such certificate, any
balance remaining in the Project Fund (other than the amounts retained by the
Trustee as described in the preceding sentence) shall be deposited or applied in
accordance with the direction of the Authorized Representative of the Borrower
pursuant to Section 3.4 of the Loan Agreement.
SECTION 5.04. Bond Fund.
(a) Revenues to be Paid Over to the Trustee. The Issuer has caused the
Revenues to be paid directly to the Trustee. If, notwithstanding these
arrangements, the Issuer receives any payments pursuant to the Loan Agreement
(other than payments to the Issuer in accordance with Section 4.4, 5.10 or 7.4
thereof), the Issuer shall immediately pay over the same to the Trustee to be
held as Revenues or otherwise applied pursuant to this Indenture. Any moneys
received by the Trustee with the written stipulation that they constitute
payments by the Borrower under Section 4.3 of the Loan Agreement corresponding
to payments of purchase price of Bonds shall be identified as such and deposited
and applied pursuant to Article IV. Except as provided in the immediately
preceding sentence and as otherwise specifically directed under the terms of
this Indenture, all Revenues received by the Trustee shall be deposited into the
General Account of the Bond Fund.
37
<PAGE>
(b) Creation of Bond Fund and Accounts. There is hereby established
with the Trustee a trust fund designated as the "Bond Fund", within which there
shall be established a General Account and a Letter of Credit Debt Service
Account. Moneys held by the Trustee in the General Account shall be applied in
accordance with Section 5.04(c)(2) and the other provisions of this Indenture
(i) to reimburse the Bank or the Participating Bank with respect to drawings on
the Letter of Credit to pay the principal of, premium, if any, on or interest on
Bonds or (ii) to make payments of principal of, premium, if any, on and interest
on the Bonds. All moneys (and only those moneys) received by the Trustee from
drawings under the Letter of Credit to pay principal of, premium, if any, on and
interest on the Bonds shall be deposited in the Letter of Credit Debt Service
Account and applied to such purpose.
(c) Application of Bond Fund. Except as otherwise provided in Section
7.06, moneys in the Bond Fund shall be applied as follows:
(1) Moneys in the Letter of Credit Debt Service Account shall
be applied to the payment when due of principal of, premium, if any, on
and interest on the Bonds (other than Pledged Bonds or Borrower Bonds,
for which such moneys shall not be Available Moneys).
(2) Moneys in the General Account shall be applied to the
following in the order of priority indicated:
(A) the reimbursement of (i) the Bank when due for
moneys drawn under the Letter of Credit and deposited in the
Letter of Credit Debt Service Account for payment of principal
of, premium, if any, on and interest on the Bonds (in applying
moneys pursuant to this clause, the Trustee shall transfer
such moneys by wire transfer of immediately available funds)
or (ii) the Participating Bank if it has reimbursed the Bank
for moneys so drawn and the Trustee has received written
notice from the Bank of such reimbursement;
(B) when insufficient moneys have been received under
the Letter of Credit for application pursuant to Subsection
5.04(c)(1), the payment when due of principal of, premium, if
any, on and interest on the Bonds, other than Borrower Bonds
or Pledged Bonds;
(C) the payment when due of principal of, premium, if
any, on and interest on Pledged Bonds; and
(D) the payment when due of principal of, premium, if
any, on and interest on Borrower Bonds, provided that if the
Trustee shall have received written notice from the Bank or
the Participating Bank that any amounts are due and owing to
the Bank or the Participating Bank under the Participating
Bank Agreement or the Reimbursement Agreement, respectively,
such payments shall be made to the Bank or the Participating
Bank for the account of the Participating Bank and/or the
Borrower, as the case may be.
38
<PAGE>
(d) Drawings on Letter of Credit. By 12:00 noon on the Business Day
immediately preceding each Interest Payment Date, each redemption date and the
maturity date of the Bonds, the Trustee shall present the requisite draft and
certificate for a drawing on the Letter of Credit so as to comply with the
provisions of the Letter of Credit for payment to be made in sufficient time for
the Trustee to receive the proceeds of such drawing at or before 10:00 a.m. on
such Interest Payment Date, redemption date or maturity date, as the case may
be, to pay principal of, premium, if any, on and interest on the Bonds due on
such date. In addition, the Trustee shall draw on the Letter of Credit pursuant
to its terms in accordance with and in order to satisfy the requirements of
Section 7.03. By 5:00 p.m. on each date it presents the requisite documents for
a drawing on the Letter of Credit, the Trustee shall give notice to the
Participating Bank and the Borrower by telephone, promptly confirmed in writing,
of the amount so drawn. The Trustee shall promptly notify the Borrower and the
Participating Bank by oral or telephonic communication confirmed in writing if
the Bank fails to transfer funds in accordance with the Letter of Credit upon
the presentment of the requisite draft and certificate. In calculating the
amount to be drawn on the Letter of Credit for the payment of principal of and
interest on the Bonds, whether on an Interest Payment Date, at maturity or upon
redemption or acceleration, the Trustee shall not take into account the
potential receipt of funds from the Borrower under the Loan Agreement on such
Interest Payment Date, or the existence of any other moneys in the Bond Fund,
but shall draw on the Letter of Credit for the full amount of principal and
interest coming due on the Bonds.
(e) Payment in Full. Whenever the amount in the Bond Fund available for
the payment of principal or redemption price and interest in accordance with
Subsection 5.04(c) is sufficient to redeem all of the outstanding Bonds and to
pay interest accrued to the redemption date, the Issuer will, upon request of
the Borrower, cause the Trustee to redeem all such Bonds on the redemption date
specified by the Borrower pursuant to the Bonds and the Indenture. Any amounts
remaining in the Bond Fund after payment in full of the principal of and
premium, if any, and interest on the Bonds (or provision for payment thereof)
and the fees, charges and expenses of the Issuer and the Trustee shall be paid
to the person entitled thereto in accordance with Section 10.01.
(f) Credits. If at any time the Trustee has funds, including funds
received pursuant to the Letter of Credit, which under the provisions of this
Indenture are to be applied to pay the principal of, premium, if any, on or
interest on the Bonds, the Borrower, to the extent that such funds are to be so
applied, shall be entitled to a credit, equal to the amount of such funds,
against payments due from the Borrower under the Loan Agreement; provided that,
with respect to funds received pursuant to one or more drawings on the Letter of
Credit, the Bank and the Participating Bank have been reimbursed therefor.
SECTION 5.05. Investment of Bond Fund and Project Fund. All moneys
received by the Trustee under this Indenture shall be deposited with the
Trustee, until or unless invested or deposited as provided in this Section. All
deposits with the Trustee (whether original deposits or deposits or redeposits
in time accounts) shall be secured as required by applicable law for such trust
deposits.
Moneys in the Bond Fund (except moneys in the Letter of Credit Debt
Service Account and except any moneys representing principal of, or premium, if
any, or interest on, any Bonds which are deemed paid under Section 10.02) and
the Project Fund shall be invested and reinvested by the
39
<PAGE>
Trustee in Eligible Investments at the written direction of an Authorized
Representative of the Borrower. Except as otherwise provided in Section 10.02,
moneys deposited in the Letter of Credit Debt Service Account, the Letter of
Credit Purchase Account or the Remarketing Proceeds Purchase Account shall not
be invested but shall be held in their respective accounts pending application
pursuant to Section 5.04 or Article IV, as applicable. Moneys in the Bond Fund
representing principal of, or premium, if any, or interest on, any Bonds which
are deemed paid under Section 10.02 shall be invested only if and as provided in
Section 10.02.
Investments pursuant to this Section of moneys in the Bond Fund shall
mature or be redeemable at the direction of the Borrower at the times and in the
amounts necessary to provide moneys to make Bond Service payments as they become
due on Interest Payment Dates, at stated maturity or by redemption, or to
reimburse the Bank or the Participating Bank when due with respect to drawings
on the Letter of Credit applied to make Bond Service payments. The Trustee shall
sell or redeem investments credited to the Bond Fund to produce sufficient
moneys available hereunder at the times required for the purpose of paying Bond
Service (or reimbursing the Bank or the Participating Bank with respect to
drawings on the Letter of Credit therefor) when due as aforesaid, and shall do
so without necessity for any order by or on behalf of the Issuer or the Borrower
and without restriction by reason of any order. Each investment of moneys in the
Project Fund shall mature or be redeemable by the Trustee at the direction of
the Borrower at such time as may be foreseeably necessary to make payments from
the Project Fund. Subject to any directions from an Authorized Representative of
the Borrower with respect thereto, the Trustee may, from time to time, sell
investments in the Project Fund or the Bond Fund made pursuant to this Section
and reinvest the proceeds therefrom in Eligible Investments maturing or
redeemable as aforesaid.
Any investment of moneys in any Fund established under this Indenture
may be purchased from or through, or sold to, the Trustee or any affiliate of
the Trustee; and any such investment made through the purchase of shares of a
fund described in clause (i) or (ii) of the definition of Eligible Investments
may be in a fund which is advised or administered by the Trustee or any
affiliate of the Trustee (for which services the Trustee or such affiliate, as
the case may be, may receive a fee).
An investment made from moneys credited to the Bond Fund or the Project
Fund shall constitute part of that respective Fund, and each respective Fund
shall be credited with all proceeds of sale and income from investment of moneys
credited thereto. For purposes of this Indenture, those investments shall be
valued at face amount or market value, whichever is less.
If the Borrower shall not give directions as to investments of moneys
held by the Trustee in the Project Fund or the Bond Fund, or if an Event of
Default has occurred and is continuing hereunder, the Trustee shall make such
investments in Eligible Investments as described in this Section and as
permitted under applicable law as it deems advisable; provided that in no event
shall it invest in securities issued by or obligations of, or guaranteed by, the
Issuer, the Borrower or any Affiliate.
SECTION 5.06. Bond Fund Moneys to be Held in Trust. Revenues and
investments thereof in the Bond Fund shall, until applied as provided in this
Indenture, be held by the Trustee for the benefit of the Holders of all
outstanding Bonds and the Bank and the Participating Bank in the order of
priority set forth in the granting clauses of this Indenture, except that any
portion of the
40
<PAGE>
Revenues representing principal of, and premium, if any, and interest on, any
Bonds which have matured or been called for redemption in accordance with
Article III or which are otherwise deemed paid under Section 10.02, shall be
held for the benefit of the Holders of such Bonds only.
SECTION 5.07. Nonpresentment of Bonds. In the event that any Bond shall
not be presented for payment when the principal thereof becomes due in whole or
in part, either at stated maturity or by redemption, or a check for interest is
uncashed, all liability of the Issuer to that Holder for such Bond or such check
thereupon shall cease and be discharged completely; provided that moneys
sufficient to pay the principal and accrued interest then due of that Bond or
such check shall have been made available to the Trustee for the benefit of its
Holder. Thereupon, it shall be the duty of the Trustee to hold those moneys
subject to the provisions of Section 10.03.
SECTION 5.08. Letter of Credit.
(a) Expiration. The Letter of Credit may provide that it expires upon
the earliest to occur of (i) the Expiration Date, (ii) the date when the Trustee
surrenders the Letter of Credit to the Bank for cancellation, (iii) the date on
which the Bank receives a certificate from the Trustee to the effect that there
are no outstanding Bonds or that the Trustee has accepted an Alternate Letter of
Credit, or (iv) the date on which the final drawing available under the Letter
of Credit is honored by the Bank.
(b) Extension or Replacement in Anticipation of Expiration. At least 45
days (or such shorter period as shall be acceptable to the Trustee) prior to the
Interest Payment Date next preceding the Expiration Date of the current Letter
of Credit, the Borrower may provide for the delivery to the Trustee of (1) an
amendment to the Letter of Credit which extends the Expiration Date to a date
that is not earlier than six months from its then current Expiration Date and
that follows an Interest Payment Date by not less than two Business Days and not
more than 15 calendar days or (2) an Alternate Letter of Credit issued by a
national banking association, a bank, a trust company or other financial
institution or credit provider, which shall have terms which are the same in all
material respects (except Expiration Date and except any changes pursuant to
this Indenture with respect to interest or premium coverage in connection with a
concurrent interest rate reset or conversion) as the current Letter of Credit
and which shall have an Expiration Date that is not earlier than one year from
the Expiration Date of the Letter of Credit then in effect and that follows an
Interest Payment Date by not less than two Business Days and not more than 15
calendar days. The Borrower shall be deemed to have provided for such amendment
extending the Letter of Credit or for such Alternate Letter of Credit if the
Borrower shall have delivered to the Trustee, in form satisfactory to the
Trustee, a commitment from the Bank or the proposed provider of the Alternate
Letter of Credit to deliver such amendment or Alternate Letter of Credit on or
before the Interest Payment Date next preceding the current Expiration Date of
the Letter of Credit; provided that if such amendment or Alternate Letter of
Credit is not delivered to the Trustee on or before such Interest Payment Date,
an Event of Default shall be deemed to have occurred under Subsection 7.01(h).
Any such amended Letter of Credit or Alternate Letter of Credit shall provide
for drawings to pay up to (i) while the Bonds are in the Weekly Mode, an amount
equal to the principal amount of the outstanding Bonds, plus 46 days interest
thereon computed at 17% per annum based on a 365-day year, and (ii) while the
Bonds are in a Term Mode, an amount equal to the principal amount of the
outstanding Bonds, plus 195 days interest thereon at a rate not less than the
applicable Term Rate based on a 360-day year, plus an amount equal to the
premium (if any) which
41
<PAGE>
would become payable on the Bonds upon mandatory purchase if such amended Letter
of Credit or Alternate Letter of Credit were not extended beyond the Expiration
Date set forth therein. The institution issuing the Alternate Letter of Credit
must be such as to maintain a rating on the Bonds equal to or higher than the
then current rating on the Bonds given by the Rating Service, and the Trustee
shall have received, on or before the date of delivery of the Alternate Letter
of Credit, written notice from the Rating Service that the issuance of the
Alternate Letter of Credit and substitution thereof for the then current Letter
of Credit will result in a rating on the Bonds equal to or higher than the then
current rating on the Bonds. The Trustee shall not accept an Alternate Letter of
Credit under this Subsection unless there shall have been delivered to the
Trustee (1) a written notice from the Rating Service as provided in the
immediately preceding sentence and (2) an opinion of counsel to the Bank
satisfactory to the Trustee with respect to the validity, binding effect and
enforceability of such Alternate Letter of Credit. If the Letter of Credit is so
extended or if an Alternate Letter of Credit complying with the requirements of
this Subsection is so provided, the mandatory purchase pursuant to clause (b) of
Section 4.02, shall not occur. Unless all of the conditions of this Subsection
which are required to be met 45 days (or such shorter period as shall be
acceptable to the Trustee) preceding the Interest Payment Date next preceding
the Expiration Date of the Letter of Credit have been satisfied, the Trustee
shall take all action necessary to call the Bonds for mandatory purchase
pursuant to clause (b) of Section 4.02, on the Interest Payment Date next
preceding such Expiration Date; provided that if the Borrower shall have
notified the Trustee in writing that it expects to meet all the conditions for
the delivery of an amendment extending the existing Letter of credit, or the
delivery of an Alternate Letter of Credit from a bank identified in such notice,
meeting all of the requirements of this Subsection on or before the Interest
Payment Date next preceding the Expiration Date of the existing Letter of
Credit, then the notice of mandatory purchase pursuant to clause (b) of Section
4.02, shall state that it is subject to rescission, and the Trustee shall
rescind such notice, if such conditions are so met (in which case such mandatory
purchase shall not occur). The provisions of this Subsection with respect to the
substitution of an Alternate Letter of Credit in the event that the Expiration
Date of the Letter of Credit is not extended shall apply equally to the
substitution of another Alternate Letter of Credit in the event that the
Expiration Date of an existing Alternate Letter of Credit is not extended.
(c) Other Replacement. The delivery of an Alternate Letter of Credit in
anticipation of the expiration of the current Letter of Credit shall be governed
by Subsection 5.08(b). Otherwise, if at any time the Borrower shall provide for
the delivery to the Trustee of (1) an Alternate Letter of Credit which shall
have terms which are the same in all material respects (except as to Expiration
Date and except any changes pursuant to this Indenture with respect to interest
or premium coverage in connection with a concurrent interest rate reset or
conversion) as the current Letter of Credit, which shall have an Expiration Date
that is not less than one year from the date of its delivery and not sooner than
the Expiration Date of the current Letter of Credit then in effect and that
follows an Interest Payment Date by not less than two Business Days and not more
than 15 calendar days and which shall be issued by a national banking
association, a bank, a trust company or other financial institution or credit
provider, and (2) an opinion of counsel to the Bank satisfactory to the Trustee
with respect to the validity, binding effect and enforceability of such
Alternate Letter of Credit, and if the requirements set forth in this Subsection
are met, then the Trustee shall accept such Alternate Letter of Credit and
promptly surrender for cancellation the previously held Letter of Credit to the
issuer thereof in accordance with the terms of such Letter of Credit. Any
Alternate Letter of Credit shall provide for drawings to pay up to (i) while the
Bonds are in the Weekly Mode, an amount equal to the principal amount of the
outstanding Bonds, plus 46 days interest thereon computed at 17% per annum based
on a
42
<PAGE>
365-day year, and (ii) while the Bonds are in a Term Mode, an amount equal to
the principal amount of the outstanding Bonds, plus 195 days interest thereon at
a rate not less than the applicable Term Rate based on a 360-day year, plus an
amount equal to the premium (if any) which would become payable upon the Bonds
upon mandatory purchase if such Alternate Letter of Credit were not extended
beyond the Expiration Date set forth therein. The institution issuing the
Alternate Letter of Credit must be such as to maintain a rating on the Bonds
equal to or higher than the then current rating on the Bonds given by the Rating
Service. The replacement of the Letter of Credit by the Alternate Letter of
Credit must not, by itself, adversely affect the current rating or ratings on
the Bonds, and the absence of such an adverse effect shall be evidenced in
writing by the Rating Service to the Trustee at or prior to such replacement.
(d) Notice to Holders. While the Bonds are in the Weekly Mode, the
Trustee shall give notice to the Holders, in the name of the Issuer, of the
proposed replacement of the current Letter of Credit with an Alternate Letter of
Credit, which notice shall specify (i) the proposed replacement date and (ii)
the last dates prior to such proposed replacement on which Bondholder Tender
Notices must be delivered and Bonds must be delivered (if not held in book-entry
form) for the purchase of Bonds pursuant to Section 4.01 and the places where
such Bondholder Tender Notices and Bonds must be delivered for such purchase.
Such notice shall be given by first class mail, postage prepaid, not less than
30 days prior to the Interest Payment Date next preceding the proposed
replacement date.
(e) Reduction. In each case that Bonds are redeemed or deemed to have
been paid pursuant to Section 10.01, the Trustee shall take such action as may
be permitted under the Letter of Credit to reduce the amount available
thereunder to an amount equal to the principal amount of the outstanding Bonds,
plus (i) while the Bonds are in the Weekly Mode, 46 days interest on such
principal amount computed at 17% per annum based on a 365-day year, and (ii)
while the Bonds are in Term Mode, 195 days interest on such principal amount
computed at a rate not less than the applicable Term Rate based on a 360-day
year; provided that such action by the Trustee shall not be required if the
Letter of Credit so reduces automatically pursuant to its terms.
(f) Substitution by Bank. Upon reduction of the amount available under
the Letter of Credit pursuant to the terms of the Letter of Credit and
Subsection 5.08(e) as a result of redemption of Bonds, the Bank shall have the
right, at its option, to require the Trustee to promptly surrender the
outstanding Letter of Credit to the Bank and to accept in substitution therefor
a substitute Letter of Credit in the same form, dated the date of such
substitution, for an amount equal to the amount available under the Letter of
Credit as so reduced, but otherwise having terms identical to the then
outstanding Letter of Credit.
(g) Replacement of Participating Bank. Subject to the approval and
consent of the Bank and the delivery of a replacement Participating Bank
Agreement and related documentation satisfactory to the Bank, the Borrower shall
have the right to replace the Participating Bank. The Borrower shall give at
least 30 days notice to the Trustee, the Issuer and the Remarketing Agent of the
Borrower's intent to replace the Participating Bank (which notice shall identify
the proposed replacement Participating Bank), and shall provide to the Trustee
and the Issuer, on or before the
43
<PAGE>
effective date of such replacement, complete copies of the replacement
Participating Bank Agreement, the replacement Reimbursement Agreement and such
related documentation as the Trustee or the Issuer may reasonably request. The
Trustee shall give prompt notice of any such replacement to the Holders.
(h) Other Credit Enhancement; No Credit Enhancement. After a mandatory
purchase of the Bonds pursuant to clause (b) or (c) of Section 4.02, nothing in
this Section shall limit the Borrower's right to provide other credit
enhancement (such as a letter of credit not meeting the requirements of this
Section or bond insurance) or no credit enhancement as security for the Bonds;
provided that any such credit enhancement shall have administrative provisions
reasonably satisfactory to the Trustee.
(End of Article V)
44
<PAGE>
ARTICLE VI
COVENANTS AND REPRESENTATIONS
OF ISSUER
SECTION 6.01. Corporate Existence; Compliance with Laws. The Issuer
shall maintain its corporate existence; shall use its best efforts to maintain
and renew all its rights, powers, privileges and franchises; and shall comply
with all valid and applicable laws, rules, regulations, orders, requirements and
directions of any legislative, executive, administrative or judicial body
relating to the Issuer's participation in the Project or the issuance of the
Bonds.
SECTION 6.02. Payment of Bond Service. The Issuer will pay all Bond
Service, or cause it to be paid, solely from the sources provided herein, on the
dates, at the places and in the manner provided in this Indenture.
SECTION 6.03. No Further Assignment of Revenues. The Issuer will not
assign the Revenues or create any debt, lien or charge thereon, other than the
assignment thereof under this Indenture.
SECTION 6.04. Filings. The Issuer shall cause this Indenture or
financing statements relating hereto to be filed, in such manner and at such
places as may be required by law fully to protect the security of the Holders
and the right, title and interest of the Trustee in and to the Trust Estate or
any part thereof, all as may be reasonably requested by the Trustee. From time
to time, the Trustee may, but shall not be required to, obtain an opinion of
counsel setting forth what, if any, actions by the Issuer or Trustee should be
taken to preserve such security. The Issuer shall execute or cause to be
executed any and all further instruments as shall reasonably be requested by the
Trustee for such protection of the interests of the Holders, and shall furnish
satisfactory evidence to the Trustee of filing and refiling of such instruments
and of every additional instrument which shall be necessary to preserve the lien
of this Indenture upon the Trust Estate or any part thereof until the principal
of and interest on the Bonds issued hereunder shall have been paid. The Trustee
shall execute or join in the execution of any such further or additional
instrument and file or join in the filing thereof at such time or times and in
such place or places as it may be advised by an opinion of counsel will preserve
the lien of this Indenture upon the Trust Estate or any part thereof until the
aforesaid principal and interest shall have been paid.
SECTION 6.05. Rights and Enforcement of Agreement. The Trustee may
enforce, in its name or in the name of the Issuer, all rights of the Issuer for
and on behalf of the Holders, except for Unassigned Issuer's Rights, and may
enforce all covenants, agreements and obligations of the Borrower under and
pursuant to the Loan Agreement, regardless of whether the Issuer is in default
in the pursuit or enforcement of those rights, covenants, agreements or
obligations. The Issuer will take all actions within its authority to keep the
Loan Agreement in effect in accordance with the terms thereof. So long as no
Event of Default hereunder shall have occurred and be continuing, the Issuer may
exercise all its rights under the Loan Agreement, including the right to amend
the same pursuant to the provisions thereof and hereof. The Issuer shall give
prompt notice to the Trustee of any default known to the Issuer under the Loan
Agreement.
45
<PAGE>
SECTION 6.06. Further Assurances. Except to the extent otherwise
provided in this Indenture, the Issuer shall not enter into any contract or take
any action by which the rights of the Trustee or the Holders may be impaired and
shall, from time to time, execute and deliver such further instruments and take
such further action as may be required to carry out the purposes of this
Indenture.
SECTION 6.07. Observance and Performance Agreements. The Issuer will
observe and perform faithfully at all times covenants, agreements, authority,
actions, undertakings, stipulations and provisions to be observed or performed
on its part under the Loan Agreement, this Indenture and the Bonds, and under
all proceedings of the Issuer pertaining thereto.
SECTION 6.08. Representations and Warranties. The Issuer represents and
warrants that:
(a) It is duly authorized by the laws of the Commonwealth of
Pennsylvania, including the Act, to issue the Bonds, to execute and
deliver this Indenture and the Loan Agreement and to provide the
security for payment of the Bond Service in the manner and to the
extent set forth in this Indenture.
(b) All actions required on its part to be performed for the
issuance, sale and delivery of the Bonds and for the execution and
delivery of this Indenture and the Loan Agreement have been or will be
taken duly and effectively.
(c) The Bonds will be valid and binding limited obligations of
the Issuer according to their terms.
(End of Article VI)
46
<PAGE>
ARTICLE VII
DEFAULT AND REMEDIES
SECTION 7.01. Defaults; Events of Default. The occurrence of any of the
following events is defined as and declared to be and to constitute an Event of
Default hereunder:
(a) Failure to pay the principal of or any premium on any Bond
when such principal or premium shall become due and payable, whether at
stated maturity, by redemption, by acceleration or otherwise;
(b) Failure to pay any interest on any Bond within three
Business Days of when such interest shall become due and payable;
(c) Failure to pay the purchase price due to the Holder of any
Bond who has tendered such Bond for purchase pursuant to Article IV
within three Business Days of when such purchase price shall have
become due and payable;
(d) Failure by the Issuer to comply with the provisions of the
Act relating to the Bonds or the Project or to observe or perform any
other covenant, agreement or obligation on its part to be observed or
performed and which is contained in this Indenture or in the Bonds,
which failure shall have continued for a period of 90 days after
written notice, by registered or certified mail, to the Issuer, the
Bank, the Participating Bank and the Borrower specifying the failure
and requiring that it be remedied, which notice may be given by the
Trustee in its discretion and shall be given by the Trustee at the
written request of the Holders of not less than 25% in aggregate
principal amount of Bonds outstanding;
(e) The occurrence and continuance of an Event of Default as
defined in Section 7.1 of the Loan Agreement;
(f) Receipt by the Trustee of a written notice from the Bank
stating that an event of default has occurred under the Participating
Bank Agreement, or from the Participating Bank stating that an event of
default has occurred under the Reimbursement Agreement, and directing
the Trustee to call the Bonds for mandatory purchase or to declare the
principal of the outstanding Bonds immediately due and payable (in the
case of conflicting notices from the Bank and the Participating Bank
under this Subsection, the notice from the Bank shall control);
(g) Receipt by the Trustee of a written notice from the Bank,
prior to the third Business Day following payment of a drawing under
the Letter of Credit for interest on Bonds which remain outstanding
after the application of the proceeds of such drawing, stating that the
Letter of Credit will not be reinstated with respect to such interest;
(h) Failure by the Borrower to cause an amendment extending
the Expiration Date of the current Letter of Credit or an Alternate
Letter of Credit to be delivered to the Trustee pursuant to Subsection
5.08(b) on or before the Interest Payment Date next
47
<PAGE>
preceding such Expiration Date, unless the Bonds have been called for
mandatory purchase on such Interest Payment Date pursuant to clause (b)
of Section 4.02;
(i) Wrongful dishonor by the Bank of a proper drawing under
the Letter of Credit; or
(j) A decree or order of a court or agency or supervisory
authority, having jurisdiction in the premises, for the appointment of
a conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings
of or with respect to the Bank, or for the winding-up or liquidation of
its affairs, shall have been entered against the Bank, or the Bank
shall have consented to the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or with respect to the
Bank or all or substantially all of its property.
The term "default" or "failure" as used in this Article means a default
or failure by the Issuer in the observance or performance of any of the
covenants, agreements or obligations on its part to be observed or performed
contained in this Indenture or in the Bonds or a default or failure by the
Borrower under the Loan Agreement, exclusive of any period of grace or notice
required to constitute an Event of Default as provided above or in the Loan
Agreement.
SECTION 7.02. Notice of Default. If an Event of Default shall occur,
the Trustee shall give written notice of the Event of Default, by registered or
certified mail, to the Issuer, the Borrower, the Bank, the Participating Bank
and the Remarketing Agent within five (5) days after the Trustee acquires actual
knowledge of the Event of Default. If an Event of Default occurs of which the
Trustee has notice pursuant to this Indenture, the Trustee shall give written
notice thereof, within 30 days after the Trustee's receipt of notice of its
occurrence, to the Holders of all Bonds outstanding as shown by the Register at
the close of business 15 days prior to the mailing of that notice; provided that
except in the case of a default in the payment of the principal of or any
premium or interest on any Bond, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee or
a trust committee of directors or responsible officers of the Trustee in good
faith determine that the withholding of notice to the Holders is in the best
interests of the Holders.
SECTION 7.03. Acceleration. Upon the occurrence of any Event of Default
under Subsection 7.01(d), (e) or (f), the Trustee shall, upon the written
direction of the Bank or the Participating Bank (or, in the case of an Event of
Default under Subsection 7.01(d), upon the written request of 100% of the
Holders of the outstanding Bonds), declare, by a notice in writing delivered to
the Issuer and the Borrower, the principal of all Bonds outstanding (if not then
already due and payable), together with interest accrued thereon, to be due and
payable immediately; provided that, if the Bonds are in the Weekly Mode and the
Bank has not notified the Trustee that the Letter of Credit will not be
reinstated with respect to an interest drawing thereunder, the Bank or the
Participating Bank may, at its option, but subject to the following sentence,
direct the Trustee in writing to call (in which case the Trustee shall call) the
Bonds for mandatory purchase pursuant to clause (c) of Section 4.02 on a
Business Day stipulated by the Bank or the Participating Bank in such direction,
which Business Day shall not be earlier than 20 days (or such shorter period as
shall be acceptable to the Trustee) after the date the Trustee receives such
direction. Irrespective of whether an Event of Default has occurred
48
<PAGE>
under Section 7.01(f) for which the Bank or the Participating Bank has directed
the Trustee to call the Bonds for mandatory purchase, upon receipt by the
Trustee of notice from the Bank that the Letter of Credit will not be reinstated
with respect to an interest drawing thereunder as described in Subsection
7.01(g) or upon the occurrence of an Event of Default under Subsection 7.01(h),
(i) or (j) the Trustee shall, and upon the occurrence of an Event of Default
under Subsection 7.01(a), (b) or (c) the Trustee may, declare the principal of
all Bonds outstanding (if not then already due and payable), and the interest
accrued thereon, to be due and payable immediately, such declaration to be made
by a notice in writing delivered to the Issuer and the Borrower. Upon any
declaration that the principal of and interest on the Bonds are due and payable
immediately, such principal and interest shall become and be due and payable
immediately, and, in addition, in the case of any such declaration as a result
of an Event of Default under Subsection 7.01(e), (f), (g) or (h) while the Bonds
are in a Term Mode, there shall also become due and payable immediately a
premium equal to the premium which would become payable with respect to the
Bonds if they were purchased pursuant to a mandatory purchase under Subsection
4.02(b) on the Interest Payment Date next preceding the Expiration Date of the
Letter of Credit. The exercise by the Bank or the Participating Bank of the
option to direct a mandatory purchase of the Bonds as described in Section
7.01(f) shall not preclude the Bank from later delivering to the Trustee a
notice of nonreinstatement of the Letter of Credit pursuant to Section 7.01(g).
In the case of conflicting directions from the Bank and the Participating Bank
with respect to the provisions of this Article, the directions from the Bank
shall control.
Written notice of any such declaration shall be given concurrently to
the Bank, the Participating Bank and the Remarketing Agent. The Trustee
immediately upon such declaration shall give notice thereof in the same manner
as provided in Section 3.04 with respect to redemption of the Bonds, except that
there shall be no minimum period of notice prior to the date of payment. Such
notice shall specify the date on which payment of principal and interest shall
be tendered to the Holders of the Bonds.
Upon any such declaration hereunder, the Trustee shall (i) immediately
exercise such rights as it may have under the Loan Agreement to declare all
payments thereunder to be immediately due and payable and (ii) immediately draw
upon the Letter of Credit to the full extent permitted by the terms thereof
(such drawing to provide for payment by the Bank to be due at the earliest time
which the Trustee may require under the Letter of Credit and in no case later
than six days after the date of declaration of acceleration and to include
amounts in respect of interest accruing on the Bonds through the date payment of
such drawing by the Bank is due). Upon receipt by the Trustee of payment of the
full amount drawn on the Letter of Credit and provided sufficient moneys are
available in the Bond Fund to pay pursuant to Section 5.04 all sums due on the
Bonds, (i) interest on the Bonds shall cease to accrue as provided in Section
10.03 and (ii) the Bank (or the Participating Bank if it has reimbursed the Bank
for such drawing and the Trustee has received written notice from the Bank of
such reimbursement) shall succeed to and be subrogated to the right, title and
interest of the Trustee and the Holders in and to the Loan Agreement, all funds
held under this Indenture (except any funds held in the Bond Fund or any account
with respect to Undelivered Bonds which are identified for the payment of the
Bonds or of the purchase price of Undelivered Bonds) and any other security held
for the payment of the Bonds, 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 or the Participating
Bank, as the case may be.
49
<PAGE>
If, after the principal of the Bonds has been so declared to be due and
payable, all arrears of principal of and interest on the Bonds outstanding are
paid, and the Issuer and the Borrower also perform all other things in respect
of which either of them may have been in default hereunder or under the Loan
Agreement and pay the reasonable charges of the Trustee, the Holders and any
trustee appointed under the Act, including reasonable attorney's fees, then, and
in every such case, the Trustee or the Holders of a majority in principal amount
of the Bonds then outstanding, by notice to the Issuer and the Borrower (and to
the Holders or the Trustee, as the case may be), may annul such declaration and
its consequences, and such annulment shall be binding upon the Trustee and all
Holders; provided that there shall be no annulment of any declaration resulting
from (1) any Event of Default specified in Subsection 7.01(f) or (g) without the
prior written consent of the Bank and the Participating Bank (and, in the case
of an Event of Default under Section 7.01(g), a corresponding reinstatement of
the Letter of Credit), (2) any Event of Default specified in Section 7.01(h), or
(3) any Event of Default which has resulted in a drawing under the Letter of
Credit unless the Trustee has received written notice from the Bank that the
Letter of Credit has been reinstated (i) while the Bonds are in the Weekly Mode,
to an amount equal to the principal amount of the Bonds outstanding, plus 46
days interest thereon at the Maximum Rate, and (ii) while the Bonds are in a
Term Mode, to an amount equal to the principal amount of the Bonds outstanding,
plus 195 days interest thereon at a rate not less than the current Term Rate. No
annulment shall extend to or affect any subsequent Event of Default or shall
impair any rights consequent thereon.
SECTION 7.04. Other Remedies; Rights of Holders. With or without taking
action under Section 7.03, upon the occurrence and continuance of an Event of
Default, the Trustee may pursue any available remedy to enforce the payment of
Bond Service or the observance and performance of any other covenant, agreement
or obligation under this Indenture, the Loan Agreement or the Letter of Credit
or any other instrument providing security, directly or indirectly, for the
Bonds; provided that, if the Borrower shall be in breach of Section 5.2 of the
Loan Agreement, the Issuer, upon five (5) days written notice to the Borrower
and the Trustee, in addition to any rights and remedies of the Trustee, may
independently seek specific performance or otherwise enforce the covenants set
forth in such Section; provided further that nothing herein shall be construed
to diminish, impair or otherwise limit the rights of the Trustee to enforce the
Loan Agreement.
If any Event of Default has occurred and is continuing, the Trustee in
its discretion may, and upon the written request of Holders of a majority in
principal amount of all Bonds outstanding and receipt of indemnity to its
satisfaction shall, in its own name:
(a) By mandamus, or other suit, action or proceeding at law or
in equity, enforce all rights of the Holders, including the right to
require the Issuer to enforce any rights under the Loan Agreement and
to require the Issuer to carry out any other provisions of this
Indenture for the benefit of the Holders and to perform its duties
under the Act;
(b) Bring suit upon the Bonds;
(c) By action or suit in equity require the Issuer to account
as if it were the trustee of an express trust for the Holders; and
50
<PAGE>
(d) By action or suit in equity enjoin any acts or things
which may be unlawful or in violation of the rights of the Holders.
If an Event of Default under Subsection 7.01(e) occurs and is continuing, the
Trustee in its discretion may, and upon the written request of Holders of a
majority in principal amount of all Bonds outstanding or of the Bank or the
Participating Bank and receipt of indemnity to its satisfaction shall, enforce
each and every right granted to it as assignee of the Loan Agreement.
No remedy conferred upon or reserved to the Trustee (or to the Holders)
by this Indenture is intended to be exclusive of any other remedy. Each remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or otherwise to the Trustee or to the Holders now or hereafter
existing.
No delay in exercising or omission to exercise any remedy, right or
power accruing upon any default or Event of Default shall impair that remedy,
right or power or shall be construed to be a waiver of any default or Event of
Default or acquiescence therein. Every remedy, right and power may be exercised
from time to time and as often as may be deemed to be expedient.
No waiver of any default or Event of Default hereunder, whether by the
Trustee or by the Holders, shall extend to or shall affect any subsequent
default or Event of Default or shall impair any remedy, right or power
consequent thereon.
As the grantee of a security interest in the Loan Agreement (except for
the Unassigned Issuer's Rights), the Trustee is empowered to enforce each
remedy, right and power granted to the Issuer under the Loan Agreement. In
exercising any remedy, right or power thereunder or hereunder, the Trustee shall
take any action which would best serve the interests of the Holders in the
judgment of the Trustee, applying the standards described in Sections 8.01 and
8.02.
SECTION 7.05. Right of Holders to Direct Proceedings. The Holders of a
majority in aggregate principal amount of Bonds outstanding shall have the right
at any time to direct, by an instrument or document in writing executed and
delivered to the Trustee, the method and place of conducting all remedial
proceedings hereunder; provided that (i) any direction shall be in accordance
with the provisions of law and of this Indenture, (ii) the Trustee shall be
indemnified as provided in Sections 8.01 and 8.02, (iii) the Trustee may take
any other action which it deems to be proper and which is not inconsistent with
the direction, and (iv) if the Letter of Credit is in effect and no Event of
Default has occurred and is continuing under Subsection 7.01(i) or (j), then the
Bank (or, with the written consent of the Bank, the Participating Bank) shall
have the right to give such direction in lieu of such Holders.
SECTION 7.06. Application of Moneys. All moneys received by the Trustee
pursuant to any drawing made upon the Letter of Credit pursuant to Section 7.03
shall be applied by the Trustee to and only to the payment of principal of or
premium, if any, or interest on the Bonds (other than Borrower Bonds and Pledged
Bonds). After payment of any fees, costs, expenses, liabilities and advances
paid, incurred or made by the Trustee in the collection of moneys pursuant to
any right given or action taken under the provisions of this Article or the
provisions of the Loan Agreement or the Letter of Credit (including, without
limitation, reasonable attorneys' fees and
51
<PAGE>
expenses, except as limited by law or judicial order or decision entered in any
action taken under this Article), all moneys so received by the Trustee, shall
be applied as follows, subject to Sections 3.05, 5.06 and 5.07:
(a) Unless the principal of all of the Bonds shall have
become, or shall have been declared to be, due and payable, all of
those moneys shall be deposited in the Bond Fund and shall be applied:
First -- To the payment to the Holders entitled
thereto of all installments of interest then due on the Bonds,
in the order of the dates of maturity of the installments of
that interest, beginning with the earliest date of maturity
and, if the amount available is not sufficient to pay in full
any particular installment, then to the payment thereof
ratably, according to the amounts due on that installment, to
the Holders entitled thereto, without any discrimination or
privilege, except as to any difference in the respective rates
of interest specified in the Bonds; and
Second -- To the payment to the Holders entitled
thereto of the unpaid principal of any of the Bonds which
shall have become due (other than Bonds previously called for
redemption for the payment of which moneys are held pursuant
to the provisions of this Indenture), whether at stated
maturity or by redemption, in the order of their due dates,
beginning with the earliest due date, with interest on those
Bonds from the respective dates upon which they became due at
the rates specified in those Bonds, and if the amount
available is not sufficient to pay in full all Bonds due on
any particular date, together with that interest, then to the
payment thereof ratably, according to the amounts of principal
due on that date, to the Holders entitled thereto, without any
discrimination or privilege.
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 to the Bank under the
Participating Bank Agreement, be paid to the Bank. Any remaining moneys
shall be paid first, to the Participating Bank, to the extent of
amounts owing under the Reimbursement Agreement, and second, to the
Borrower or the person lawfully entitled to receive the same as a court
of competent jurisdiction may direct.
(b) If the principal of all of the Bonds shall have become due
or shall have been declared to be due and payable pursuant to this
Article, all of those moneys shall be deposited into the Bond Fund and
shall be applied to the payment of the principal, premium (if any) and
interest then due and unpaid upon the Bonds, without preference or
priority of principal over interest, of interest over principal, of any
installment of interest over any other installment of interest, or of
any Bond over any other Bond, ratably, according to the amounts due
respectively for principal and interest, to the Holders entitled
thereto, without any discrimination or privilege, except as to any
difference in the respective rates of interest specified in the Bonds.
(c) If the principal of all of the Bonds shall have been
declared to be due and payable pursuant to this Article, and if that
declaration thereafter shall have been rescinded
52
<PAGE>
and annulled under the provisions of Section 7.03 or 7.10, subject to
the provisions of paragraph (b) of this Section in the event that the
principal of all of the Bonds shall become due and payable later, the
moneys shall be deposited in the Bond Fund and shall be applied in
accordance with the provisions of Article V.
(d) Whenever moneys are to be applied pursuant to the
provisions of this Section, those moneys shall be applied at such
times, and from time to time, as the Trustee shall determine, having
due regard to the amount of moneys available for application and the
likelihood of additional moneys becoming available for application in
the future. Whenever the Trustee shall direct the application of those
moneys, it shall fix the date upon which the application is to be made
(and with respect to acceleration such date shall be fixed in
accordance with Section 7.03), and upon that date, interest shall cease
to accrue on the amounts of principal, if any, to be paid on that date,
provided the moneys are available therefor. The Trustee shall give
notice of the deposit with it of any moneys and of the fixing of that
date, all consistent with the requirements of Section 2.08 for the
establishment of, and for giving notice with respect to, a Special
Record Date for the payment of overdue interest. Except as otherwise
provided in Section 2.13, the Trustee shall not be required to make
payment of principal of and any premium on a Bond to the Holder
thereof, until the Bond shall be presented to the Trustee for
appropriate endorsement or for cancellation if it is paid fully.
SECTION 7.07. Remedies Vested in Trustee. All rights of action
(including without limitation, the right to file proof of claims) under this
Indenture or under any of the Bonds may be enforced by the Trustee without the
possession of any of the Bonds or the production thereof in any trial or other
proceeding relating thereto. Any suit or proceeding instituted by the Trustee
shall be brought in its name as Trustee without the necessity of joining any
Holders as plaintiffs or defendants. Any recovery of judgment shall be for the
benefit of the Holders of the outstanding Bonds and the Bank and the
Participating Bank, subject to the provisions of this Indenture.
SECTION 7.08. Rights and Remedies of Holders. A Holder shall not have
any right to institute any suit, action or proceeding for the enforcement of
this Indenture, for the execution of any trust hereof, or for the exercise of
any other remedy hereunder, unless:
(a) there has occurred and is continuing an Event of Default
of which the Trustee has been notified, as provided in Subsection
8.02(f), or of which it is deemed to have notice under that Subsection,
(b) the Holders of at least a majority in aggregate principal
amount of Bonds then outstanding shall have made written request to the
Trustee and shall have afforded the Trustee reasonable opportunity to
proceed to exercise the remedies, rights and powers granted herein or
to institute the suit, action or proceeding in its own name, and shall
have offered indemnity to the Trustee as provided in Sections 8.01 and
8.02, and
(c) the Trustee thereafter shall have failed or refused to
exercise the remedies, rights and powers granted herein or to institute
the suit, action or proceeding in its own name.
53
<PAGE>
At the option of the Trustee, such notification (or notice), request,
opportunity and offer of indemnity are conditions precedent in every case, to
the institution of any suit, action or proceeding described above.
No one or more Holders shall have any right to affect, disturb or
prejudice in any manner whatsoever the security or benefit of this Indenture by
its or their action, or to enforce, except in the manner provided herein, any
remedy, right or power hereunder. Any suit, action or proceedings shall be
instituted, had and maintained in the manner provided herein for the benefit of
the Holders of all Bonds outstanding. Notwithstanding the foregoing provisions
of this Section or any other provision of this Indenture, the obligation of the
Issuer shall be absolute and unconditional to pay hereunder, but solely from the
Revenues and other funds pledged under this Indenture, the principal or
redemption price of, and interest on, the Bonds to the respective Holders
thereof on the respective due dates thereof, and nothing herein shall affect or
impair the right of action, which is absolute and unconditional, of such Holders
to enforce such payment; provided that no Holder shall have a right individually
to draw upon the Letter of Credit.
SECTION 7.09. Termination of Proceedings. In case the Trustee shall
have proceeded to enforce any remedy, right or power under this Indenture in any
suit, action or proceeding, and the suit, action or proceeding shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Trustee, the Issuer, the Trustee, the Bank, the Participating
Bank and the Holders shall be restored to their former positions and rights
hereunder, respectively, and all rights, remedies and powers of the Trustee
shall continue as if no suit, action or proceeding had been taken.
SECTION 7.10. Waivers of Events of Default. Except as hereinafter
provided, at any time, in its discretion, the Trustee, but only with the express
prior consent of the Bank and the Participating Bank, may (and, upon written
request of the Holders of a majority in aggregate principal amount of all Bonds
outstanding, shall) waive any Event of Default hereunder and its consequences
and annul any corresponding acceleration of maturity of principal of the Bonds.
There shall not be so waived, however, any Event of Default described in
Subsection 7.01(a), (b), (c), (f), (g), (h), (i) or (j) nor shall any
acceleration in connection therewith be annulled, except with written consent of
the Bank and the Participating Bank and unless at the time of that waiver or
annulment payments of the amounts and satisfaction of the other conditions
provided in Section 7.03 for annulment have been made or provision has been made
therefor; provided that the written consent of the Bank and the Participating
Bank to any waiver shall not be required if there has occurred an Event of
Default under Subsection 7.01(i) or (j). No waiver shall extend to any
subsequent or other Event of Default or impair any right consequent thereon.
SECTION 7.11. Certain Rights of Issuer. Notwithstanding any other
provision hereof, upon the occurrence of an Event of Default described in
Subsection 7.01(e) hereof resulting from an event of default described in
Subsection 7.1(i) of the Loan Agreement, the Issuer reserves the right to
exercise or refrain from exercising remedies under the Loan Agreement with
respect to such Event of Default and such Event of Default may not be waived or
annulled without the prior written consent of the Issuer.
54
<PAGE>
SECTION 7.12. Trustee's Right to Appointment of Receiver. As provided
by the Act, the Trustee shall be entitled as of right to the appointment of a
receiver; and the Trustee, the Holders and any receiver so appointed shall have
such rights and powers and be subject to such limitations and restrictions as
are contained in the Act.
SECTION 7.13. Trustee and Holders Entitled to All Benefits Under Act.
It is the purpose of this Article to provide such remedies to the Trustee and
the Holders as may be lawfully granted under the provisions of the Act, but
should any remedy herein granted be held unlawful, the Trustee and the Holders
shall nevertheless be entitled to every remedy provided by the Act. It is
further intended that, insofar as lawfully possible, the provisions of this
Article shall apply to and be binding upon any trustee or receiver appointed
under the Act.
SECTION 7.14. Trustee's Obligation to Banks Upon Payment of All Amounts
Due Holders. Once the principal of and premium, if any, and interest on all
Bonds issued hereunder have been paid, or provision has been made pursuant to
Article X for payment of the same and any purchase price of Bonds that is
payable pursuant to Article IV, together with the compensation and expenses of
the Trustee and all other sums payable hereunder by the Issuer or the Borrower,
the Trustee's sole obligation hereunder shall be to assign promptly and turn
over to the Bank (or the Participating Bank if it has reimbursed the Bank for
all drawings under the Letter of Credit and the Trustee has received written
notice from the Bank of such reimbursement), as successor, subrogee or
otherwise, (i) all of the Trustee's right, title and interest under this
Indenture, (ii) all balances held hereunder not required for the payment of the
Bonds and such other obligations and (iii) the Trustee's right, title and
interest in, to and under the Loan Agreement.
(End of Article VII)
55
<PAGE>
ARTICLE VIII
TRUSTEE AND REMARKETING AGENT
SECTION 8.01. Trustee's Acceptance and Responsibilities.
(a) The Trustee accepts the trusts imposed upon it by this Indenture,
and agrees to observe and perform those trusts, but only upon and subject to the
terms and conditions set forth in this Article, to all of which the parties
hereto and the Holders agree. In its capacity as Trustee hereunder, the Trustee
shall authenticate the Bonds and shall act as Bond registrar, transfer agent,
tender agent and paying agent, all as provided herein.
(b) Prior to the occurrence of a default or an Event of Default of
which the Trustee has been notified, as provided in Subsection 8.02(f), or of
which by that Subsection the Trustee is deemed to have notice, and after the
cure or waiver of all defaults or Events of Default which may have occurred,
(i) the Trustee undertakes to perform only those duties and
obligations which are set forth specifically in this Indenture, and no
duties or obligations shall be implied to the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
rely conclusively, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or opinions
which by any provision hereof are required specifically to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this
Indenture.
(c) In case a default or an Event of Default has occurred and is
continuing hereunder (of which the Trustee has been notified, or is deemed to
have notice), the Trustee shall exercise those rights and powers vested in it by
this Indenture and shall use the same degree of care and skill in their exercise
as a prudent Person would exercise or use under the circumstances in the conduct
of its own affairs.
(d) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own grossly negligent action, its own grossly
negligent failure to act, or its own willful misconduct, except that
(i) this Subsection shall not be construed to affect the
limitation of the Trustee's duties and obligations provided in
Subsection 8.01(b)(i) or the Trustee's right to rely on the truth of
statements and the correctness of opinions as provided in Subsection
8.01(b)(ii);
56
<PAGE>
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by any of its officers, unless it shall be
established that the Trustee was grossly negligent in ascertaining the
pertinent facts;
(iii) 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
principal amount of the Bonds then 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; and
(iv) no provision of this Indenture 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 if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it; provided that this clause (iv) shall not relieve the Trustee of its
duties to take actions required to be taken under Section 7.03 and with
respect to drawings to be made under the Letter of Credit and making
payments on the Bonds when due.
(e) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 8.02. Certain Rights and Obligations of Trustee. Except as
otherwise provided in Section 8.01:
(a) The Trustee (i) may execute any of the trusts or powers hereof and
perform any of its duties by or through attorneys, agents, receivers or
employees (but shall be answerable therefor only in accordance with the standard
specified above), (ii) shall be entitled to the advice of counsel concerning all
matters of trusts hereof and duties hereunder, and (iii) may pay reasonable
compensation in all cases to all of those attorneys, agents, receivers and
employees reasonably employed by it in connection with the trusts hereof. The
Trustee may act upon the opinion or advice of any attorney (who may be the
attorney or attorneys for the Issuer or the Borrower) approved by the Trustee in
the exercise of reasonable care. The Trustee shall not be responsible for any
loss or damage resulting from any action taken or omitted to be taken in good
faith in reliance upon that opinion or advice.
(b) Except for its certificate of authentication on the Bonds, the
Trustee shall not be responsible for (i) any recital in this Indenture or in the
Bonds, (ii) the validity, priority, recording, rerecording, filing or refiling
of this Indenture or any Supplemental Indenture, (iii) any instrument or
document of further assurance or collateral assignment, (iv) any financing
statements, amendments thereto or continuation statements, (v) the validity of
the execution by the Issuer of this Indenture, any Supplemental Indenture or
instruments or documents of further assurance, (vi) the sufficiency of the
security for the Bonds issued hereunder or intended to be secured hereby, (vii)
the value of or title to the Project, or insurance of the Project or collection
of insurance moneys, or (viii) the maintenance of the security hereof. The
Trustee shall not be bound to ascertain or inquire as to the observance or
performance of any covenants, agreements or obligations on the part of the
Issuer or the Borrower under the Loan Agreement except as set forth hereinafter;
but the Trustee may require of the Issuer or the Borrower full information and
advice as to the observance or performance of those covenants,
57
<PAGE>
agreements and obligations. Except as otherwise provided in Section 7.04, the
Trustee shall have no obligation to observe or perform any of the duties of the
Issuer under the Loan Agreement.
(c) The Trustee shall not be accountable for the application by the
Borrower or any other Person of the proceeds of any Bonds authenticated or
delivered hereunder.
(d) The Trustee may, in the absence of bad faith on its part, act upon
any notice, request, consent, certificate, order, affidavit, letter, telegram or
other paper or document reasonably believed by it to be genuine and correct and
to have been signed or sent by the proper Person or Persons. Any action taken by
the Trustee pursuant to this Indenture upon the request or authority or consent
of any Person who is the Holder of any Bonds at the time of making the request
or giving the authority or consent, shall be conclusive and binding upon all
future Holders of the same Bond and of Bonds issued in exchange therefor or in
place thereof.
(e) As to the existence or nonexistence of any fact for which the
Issuer, the Bank, the Participating Bank or the Borrower may be responsible or
as to the sufficiency or validity of any instrument, document, report, paper or
proceeding, the Trustee, in the absence of bad faith on its part, shall be
entitled to rely upon a certificate signed on behalf of the Issuer, the Bank,
the Participating Bank or the Borrower by an Authorized Representative or
authorized officer thereof, as applicable, as sufficient evidence of the facts
recited therein. Prior to the occurrence of a default or Event of Default
hereunder of which the Trustee has been notified, as provided in Subsection
8.02(f), or of which by that Subsection the Trustee is deemed to have notice,
the Trustee may accept a similar certificate to the effect that any particular
dealing, transaction or action is necessary or expedient; provided that the
Trustee in its discretion may require and obtain any further evidence which it
deems to be necessary or advisable; and provided further that the Trustee shall
not be bound to secure any further evidence. The Trustee may accept a
certificate of the officer, or an assistant thereto, having charge of the
appropriate records, to the effect that a resolution has been adopted by the
Issuer in the form recited in that certificate, as conclusive evidence that the
resolution has been duly adopted and is in full force and effect.
(f) The Trustee shall not be required to take notice, and shall not be
deemed to have notice, of any default or Event of Default hereunder, except
Events of Default described in Subsections 7.01(a), (b), (c), (f), (g) and (h),
unless the Trustee shall be notified specifically of the default or Event of
Default in a written instrument or document delivered to it by the Issuer, the
Bank, the Participating Bank or by the Holders of at least 10% of the aggregate
principal amount of Bonds outstanding. In the absence of delivery of a notice
satisfying those requirements, the Trustee may assume conclusively that there is
no default or Event of Default, except as noted above.
(g) At any reasonable time, the Trustee and its duly authorized agents,
attorneys, experts, engineers, accountants and representatives (i) may inspect
and copy fully all books, papers and records of the Issuer pertaining to the
Project and the Bonds, and (ii) may make any memoranda from and in regard
thereto as the Trustee may desire.
(h) The Trustee shall not be required to give any bond or surety with
respect to the execution of these trusts and powers or otherwise in respect of
the premises.
58
<PAGE>
(i) Notwithstanding anything contained elsewhere in this Indenture to
the contrary, the Trustee may demand any showings, certificates, reports,
opinions, appraisals and other information, and any corporate action and
evidence thereof, in addition to that required by the terms hereof, as a
condition to the authentication of any Bonds or the taking of any action
whatsoever within the purview of this Indenture, if the Trustee deems it to be
desirable for the purpose of establishing the right of the Issuer to the
authentication of any Bonds or the right of any Person to the taking of any
other action by the Trustee; provided that the Trustee shall not be required to
make any such demand.
(j) Before taking action hereunder pursuant to Section 8.04 or Article
VII (with the exception of any action required to be taken under Section 7.03
and except with respect to drawings made under the Letter of Credit and with
respect to payment on the Bonds when due), the Trustee may require that a
satisfactory indemnity bond be furnished to it for the reimbursement of all
expenses which it may incur and to protect it against all liability by reason of
any action so taken, except liability which is adjudicated to have resulted from
its gross negligence or willful misconduct; provided that no such bond shall be
required from the Issuer. The Trustee may take action without that indemnity,
and in that case, the Issuer shall cause the Borrower to reimburse the Trustee
for all of the Trustee's expenses pursuant to Section 8.03.
(k) Unless otherwise provided herein, all moneys received by the
Trustee under this Indenture shall be held in trust for the purposes for which
those moneys were received, until those moneys are used, applied or invested as
provided herein; provided that those moneys need not be segregated from other
moneys, except to the extent required by this Indenture or by law. The Trustee
shall not have any liability for interest on any moneys received hereunder,
except to the extent expressly provided herein or agreed with the Issuer or the
Borrower.
(l) Any resolution of the Issuer, and any opinions, certificates and
other instruments and documents for which provision is made in this Indenture,
may be accepted by the Trustee, in the absence of bad faith on its part, as
conclusive evidence of the facts and conclusions stated therein and shall be
full warrant, protection and authority to the Trustee for its actions taken
hereunder.
(m) The Trustee may construe any ambiguous or inconsistent provisions
of this Indenture in such manner as it deems reasonable, and any such
construction of such provisions by the Trustee shall be binding upon the Issuer,
the Borrower, the Bank, the Participating Bank and the Holders.
(n) At the written request of any Holder or beneficial owner of the
Bonds, the Trustee shall (i) request the Borrower to provide the Trustee with
copies of such financial statements and reports as the Trustee may be entitled
to receive pursuant to Section 5.5 of the Loan Agreement and (ii) provide to
such Holder or beneficial owner copies of any financial statements and reports
received by the Trustee pursuant to Section 5.5 of the Loan Agreement and/or any
notices of litigation received by the Trustee pursuant to Section 5.9 of the
Loan Agreement.
SECTION 8.03. Fees, Charges and Expenses of Trustee. The Trustee shall
be entitled to payment or reimbursement by the Borrower, as provided in the Loan
Agreement, for reasonable fees for the Ordinary Services of the Trustee and its
agents rendered hereunder and for all
59
<PAGE>
advances, counsel fees and other Ordinary Expenses reasonably and necessarily
paid or incurred by it and its agents in connection with the provision of
Ordinary Services. For purposes hereof, fees for Ordinary Services provided for
by their respective standard fee schedule shall be considered reasonable. In the
event that it should become necessary for any of them to perform Extraordinary
Services, they shall be entitled to reasonable extra compensation therefor and
to reimbursement for reasonable and necessary Extraordinary Expenses incurred in
connection therewith. The Trustee shall not be entitled to compensation or
reimbursement for Extraordinary Services or Extraordinary Expenses occasioned by
its gross negligence or willful misconduct.
The fees for the Trustee's Ordinary Services and Ordinary Expenses and
Extraordinary Services and Extraordinary Expenses shall be entitled to payment
and reimbursement only from (i) the Project Fund, (ii) the Additional Payments
made by the Borrower pursuant to the Loan Agreement, or (iii) from other moneys
available therefor; provided that in no event shall any such fees be paid from
funds drawn on the Letter of Credit. Any amounts payable to the Trustee pursuant
to this Section shall be payable upon demand and shall bear interest from five
Business Days following the date of demand therefor at the Interest Rate for
Advances. The initial or acceptance fees of the Trustee and the fees, charges
and expenses of the Trustee and its agents described above, may be paid by the
Trustee from the Project Fund as and when due to the extent that those fees,
charges and expenses become due during the Construction Period (as defined in
the Loan Agreement).
SECTION 8.04. Intervention by Trustee. The Trustee may intervene on
behalf of the Holders, and shall intervene if requested to do so in writing by
the Holders of at least 25% of the aggregate principal amount of Bonds
outstanding, in any judicial proceeding to which the Issuer or the Borrower is a
party and which in the opinion of the Trustee and its counsel has a substantial
bearing on the interests of Holders of the Bonds. The rights and obligations of
the Trustee under this Section are subject to the approval of that intervention
by a court of competent jurisdiction. The Trustee may require that a
satisfactory indemnity bond be provided to it in accordance with Sections 8.01
and 8.02 before it takes action hereunder.
SECTION 8.05. Successor Trustee. Anything herein to the contrary
notwithstanding,
(a) any corporation or association (i) into which the Trustee
may be converted or merged, (ii) with which the Trustee or any
successor to it may be consolidated, or (iii) to which the Trustee may
sell or transfer its assets and trust business as a whole or
substantially as a whole, or any corporation or association resulting
from any such conversion, merger, consolidation, sale or transfer, ipso
facto, shall be and become successor Trustee hereunder and shall be
vested with all of the title to the whole property or trust estate
hereunder; and
(b) that corporation or association, as successor Trustee,
shall be vested further, as was its predecessor, with each and every
trust, property, remedy, power, right, duty, obligation, discretion,
privilege, claim, demand, cause of action, immunity, estate, title,
interest and lien expressed or intended by this Indenture to be
exercised by, vested in or conveyed to the Trustee, without the
execution or filing of any instrument or document or any further act on
the part of any of the parties hereto.
60
<PAGE>
Any successor Trustee, however, (i) shall be a trust company or a bank having
the powers of a trust company, (ii) shall be in good standing within the
Commonwealth of Pennsylvania, (iii) shall be duly authorized to exercise trust
powers within the Commonwealth of Pennsylvania, and (iv) shall have a reported
capital and surplus of not less than $50,000,000 and a rating assigned to its
long-term unsecured debt by Moody's Investors Service, Inc. at least equal to
"Baa3" (if the Bonds are then rated by Moody's Investors Service, Inc.) and by
Standard & Poor's Ratings Services at least equal to "BBB-" (if the Bonds are
then rated by Standard & Poor's Ratings Services) unless the Issuer receives
written confirmation from the respective Rating Service that the appointment of
a particular successor trustee not meeting such rating requirement will not
result in a reduction or withdrawal of its rating of the Bonds.
SECTION 8.06. Resignation by Trustee. The Trustee may resign at any
time from the trusts created hereby by giving written notice of the resignation
to the Issuer, the Borrower, the Bank, the Participating Bank and the
Remarketing Agent and by mailing written notice of the resignation to the
Holders as their names and addresses appear on the Register at the close of
business 15 days prior to the mailing. The resignation shall take effect only
upon the appointment of a successor Trustee.
SECTION 8.07. Removal of Trustee. The Trustee may be removed at any
time by an instrument or document or concurrent instruments or documents
delivered to the Trustee at least five Business Days prior to the date of
removal, with copies thereof mailed to the Issuer, the Borrower, the Bank, the
Participating Bank and the Remarketing Agent, and signed by or on behalf of the
Holders of not less than a majority in aggregate principal amount of the Bonds
outstanding.
The Trustee also may be removed at any time for any breach of trust or
for acting or proceeding in violation of, or for failing to act or proceed in
accordance with, any provision of this Indenture with respect to the duties and
obligations of the Trustee by any court of competent jurisdiction upon the
application of the Issuer or the Holders of not less than 25% in aggregate
principal amount of the Bonds outstanding.
The removal of the Trustee pursuant to this Section shall take effect
only upon the appointment of a successor Trustee.
SECTION 8.08. Appointment of Successor Trustee. If (i) the Trustee
shall resign, shall be removed, shall be dissolved, or shall become otherwise
incapable of acting hereunder, (ii) the Trustee shall be taken under the control
of any public agency, or (iii) a receiver shall be appointed for the Trustee by
a court, then a successor Trustee shall be appointed by the Issuer, with the
written consent of the Borrower, the Bank and the Participating Bank; provided
that if a successor Trustee is not so appointed within 10 days after (a) a
notice of resignation or an instrument or document of removal is received by the
Issuer, as provided in Sections 8.06 and 8.07, respectively, or (b) the Trustee
is dissolved, taken under control, becomes otherwise incapable of acting or a
receiver is appointed, in each case, as provided above, then, so long as the
Issuer shall not have appointed a successor Trustee, the Holders of a majority
in aggregate principal amount of Bonds outstanding may designate a successor
Trustee by an instrument or document or concurrent instruments or documents in
writing signed by or on behalf of those Holders. If no appointment of a
successor Trustee shall be made pursuant to the foregoing provisions of this
Section, the Holder of any Bond outstanding or any
61
<PAGE>
retiring Trustee may apply to any court of competent jurisdiction to appoint a
successor Trustee. Such court may thereupon, after such notice, if any, as such
court may deem proper and prescribe, appoint a successor Trustee.
Every successor Trustee appointed pursuant to this Section (i) shall be
a trust company or a bank having the powers of a trust company, (ii) shall be in
good standing within the Commonwealth of Pennsylvania, (iii) shall be duly
authorized to exercise trust powers within the Commonwealth of Pennsylvania,
(iv) shall have a reported capital and surplus of not less than $50,000,000 and
a rating assigned to its long-term unsecured debt by Moody's Investors Service,
Inc. at least equal to "Baa3" (if the Bonds are then rated by Moody's Investors
Service, Inc.) and by Standard & Poor's Ratings Services at least equal to
"BBB-" (if the Bonds are then rated by Standard & Poor's Ratings Services)
unless the Issuer receives written confirmation from the Rating Service that the
appointment of a particular successor trustee not meeting such rating
requirement will not result in a reduction or withdrawal of its rating of the
Bonds, and (v) shall be willing to accept the trusteeship under the terms and
conditions of this Indenture.
Every successor Trustee appointed hereunder shall execute and
acknowledge, and shall deliver to its predecessor, the Issuer, the Borrower, the
Bank, the Participating Bank and the Remarketing Agent, an instrument or
document in writing accepting the appointment. Thereupon, without any further
act, the successor shall become vested with all of the trusts, properties,
claims, demands, causes of action, immunities, estates, titles, interests and
liens of its predecessor. Upon the written request of its successor, the Issuer,
the Borrower, the Bank, the Participating Bank or the Remarketing Agent, the
predecessor Trustee (i) shall execute and deliver an instrument or document
transferring to its successor all of the trusts, properties, remedies, powers,
rights, duties, obligations, discretions, privileges, claims, demands, causes of
action, immunities, estates, titles, interests and liens of the predecessor
Trustee hereunder, and (ii) shall take any other action necessary to duly
assign, transfer and deliver to its successor all property (including, without
limitation, all securities and moneys and the Letter of Credit) held by it as
Trustee. Should any instrument or document in writing from the Issuer be
requested by any successor Trustee for vesting and conveying more fully and
certainly in and to that successor the trusts, properties, remedies, powers,
rights, duties, obligations, discretions, privileges, claims, demands, causes of
action, immunities, estates, titles, interests and liens vested or conveyed or
intended to be vested or conveyed hereby in or to the predecessor Trustee, the
Issuer shall execute, acknowledge and deliver that instrument or document.
In the event of a change in the Trustee, the predecessor Trustee shall
cease to be custodian of any moneys which it may hold pursuant to this Indenture
and shall cease to be Bond registrar, transfer agent, tender agent,
authenticating agent and paying agent for the Bonds. The successor Trustee shall
become custodian for moneys held under this Indenture and Bond registrar,
transfer agent, tender agent, authenticating agent and paying agent as and to
the extent provided herein.
SECTION 8.09. Adoption of Authentication. In case any of the Bonds
shall have been authenticated, but shall not have been delivered, any successor
Trustee may adopt the certificate of authentication of any predecessor Trustee
and may deliver those Bonds so authenticated as provided herein. In case any
Bonds shall not have been authenticated, any successor Trustee may authenticate
those Bonds either in the name of any predecessor or in its own name. In all
cases, the
62
<PAGE>
certificate of authentication shall have the same force and effect as provided
in the Bonds or in this Indenture with respect to the certificate of
authentication of the predecessor Trustee.
SECTION 8.10. Designation and Succession of Authenticating Agent, Bond
Registrar, Transfer Agent, Tender Agent and Paying Agent. The Trustee may, with
the consent of the Issuer, appoint an agent or agents, with power to act on the
Trustee's behalf and subject to the Trustee's direction in the authentication,
registration, transfer and exchange and tender of Bonds and payment of Bond
Service under the provisions of this Indenture; provided that any tender agent
or paying agent so appointed shall have and maintain a rating assigned to its
long-term unsecured debt by Moody's Investors Service, Inc. at least equal to
"Baa3" (if the Bonds are then rated by Moody's Investors Service, Inc.) and by
Standard & Poor's Ratings Services at least equal to "BBB-" (if the Bonds are
then rated by Standard & Poor's Ratings Services) unless the Issuer receives
written confirmation from the Rating Service that the appointment of a tender
agent or paying agent not meeting such rating requirement will not result in a
reduction or withdrawal of its rating of the Bonds. For all purposes of this
Indenture, the authentication, registration and delivery of Bonds by any such
agent pursuant to this Section shall be deemed to be authentication,
registration and delivery of those Bonds by the Trustee.
Any corporation or association with or into which any such agent may be
merged or converted or with which it may be consolidated, or any corporation or
association resulting from any merger, consolidation or conversion to which any
such agent shall be a party, or any corporation or association succeeding to the
trust business of any such agent, shall be the successor of that agent
hereunder, if that successor corporation or association is otherwise eligible
hereunder, without the execution or filing of any paper or any further act on
the part of the parties hereto or the such agent or such successor corporation.
Any such agent may at any time resign by giving written notice of
resignation to the Trustee and to the Issuer, the Borrower and the Remarketing
Agent. The Trustee may at any time terminate the agency of any such agent by
giving written notice of termination to such agent and to the Issuer, the
Borrower and the Remarketing Agent. Upon receiving such a notice of resignation
or upon such a termination, or in the case at any time any such agent shall
cease to be eligible under this Section, the Trustee may appoint a successor
agent. The Trustee shall give written notice of appointment of a successor agent
to the Issuer, the Borrower and the Remarketing Agent and shall mail, within 10
days after that appointment, notice thereof to all Holders as their names and
addresses appear on the Register on the date of that appointment.
The Trustee shall pay to any such agent from time to time reasonable
compensation for its services, and the Trustee shall be entitled to be
reimbursed for such payments as Ordinary Expenses, subject to Section 8.03.
The pertinent provisions of Subsections 8.02(b), (c), (d), (h) and (i)
shall be applicable to any such agent.
SECTION 8.11. Dealing in Bonds. The Trustee, the Bank, the
Participating Bank and the Remarketing Agent, their affiliates, and any
directors, officers, employees or agents thereof, in good faith, may become the
owners of Bonds secured hereby with the same rights which it
63
<PAGE>
or they would have hereunder if the Trustee, the Bank, the Participating Bank or
the Remarketing Agent did not serve in those capacities. The Trustee may be, or
be affiliated with, the Remarketing Agent, the Bank or the Participating Bank.
The Trustee may also engage in or be interested in any financial or other
transaction with the Issuer, the Borrower or any related party.
SECTION 8.12. Representations, Agreements and Covenants of Trustee.
Dauphin Deposit Bank and Trust Company hereby represents and covenants that it
is a Pennsylvania banking corporation duly organized and validly existing under
the laws of, and duly authorized to exercise corporate trust powers in, the
Commonwealth of Pennsylvania, that it will take such action, if any, as is
necessary to remain in good standing and duly authorized to exercise corporate
trust powers in the Commonwealth of Pennsylvania, and that it has a rating
assigned to its long-term unsecured debt by Moody's Investors Service, Inc. at
least equal to "Baa3" (if the Bonds are then rated by Moody's Investors Service,
Inc.) and by Standard & Poor's Ratings Services at least equal to "BBB-" (if the
Bonds are then rated by Standard & Poor's Ratings Services).
SECTION 8.13. Appointment of Remarketing Agent. The Issuer shall, with
notice to the Borrower, appoint the Remarketing Agent for the Bonds, subject to
the conditions set forth in Section 8.14. The Remarketing Agent shall designate
to the Trustee its Principal Office and signify its acceptance of the duties and
obligations imposed upon it hereunder by a written instrument of acceptance
delivered to the Issuer, the Borrower and the Trustee under which the
Remarketing Agent will agree, particularly:
(a) to hold all Bonds delivered to it by the Trustee for
delivery to the Holders of such Bonds;
(b) to hold all moneys delivered to it representing the
purchase price of Bonds for the benefit of the Person or entity
entitled to receive the payment of such purchase price;
(c) to determine the Weekly Rate and the Term Rate in
accordance with Sections 2.03 and 2.04 of this Indenture, and to give
notice to the Trustee of the Weekly Rate, and to the Trustee, the
Issuer, the Borrower, the Bank and the Participating Bank of the Term
Rate, on the date of the determination thereof; and
(d) to keep such books and records as shall be consistent with
prudent industry practice and to make such books and records available
for inspection by the Issuer, the Trustee, the Borrower, the Bank and
the Participating Bank at all reasonable times.
In addition, the Remarketing Agent will enter into the Remarketing Agreement
with the Borrower in form and substance mutually satisfactory to them. The
Remarketing Agent shall be entitled to advice of legal counsel on any matter
relating to the Remarketing Agent's obligations hereunder and shall be entitled
to act upon the opinion of such counsel in the exercise of reasonable care in
fulfilling such obligations.
SECTION 8.14. Qualifications of Remarketing Agent. The Remarketing
Agent shall be a national banking association or a bank or trust company or a
member of the National
64
<PAGE>
Association of Securities Dealers, Inc., authorized by law to perform all the
duties imposed upon it by this Indenture, and shall have a rating assigned to
its long-term unsecured debt by Moody's Investors Service, Inc. at least equal
to "Baa3" (if the Bonds are then rated by Moody's Investors Service, Inc.) and
by Standard & Poor's Ratings Services at least equal to "BBB-" (if the Bonds are
then rated by Standard & Poor's Ratings Services) unless the Issuer receives
written confirmation from the Rating Service that the appointment of a
particular Remarketing Agent not meeting such rating requirement will not result
in a reduction or withdrawal of its rating of the Bonds. The Remarketing Agent
may at any time resign and be discharged of the duties and obligations created
by this Indenture by giving at least 30 days' prior written notice by registered
or certified mail to the Trustee, the Issuer, the Borrower, the Bank and the
Participating Bank. The Remarketing Agent may be removed at any time by the
Issuer, with the consent of the Borrower (provided that the Borrower shall be
deemed to have consented to the removal of a Remarketing Agent which has ceased
to meet the foregoing qualifications), upon 30 days' notice which shall be in
writing, signed by the Issuer and delivered to the Remarketing Agent, the
Borrower, the Trustee, the Bank and the Participating Bank.
In the event of the resignation or removal of the Remarketing Agent,
the Issuer, with the consent of the Borrower, the Bank and the Participating
Bank, shall appoint a successor Remarketing Agent meeting the qualifications set
forth in this Section and 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 Trustee as hereinafter provided.
In the event that the Remarketing Agent shall resign or be removed, or
be dissolved, or if the property or affairs of the Remarketing Agent shall be
taken under the control of any state or federal court or administrative body
because of bankruptcy or insolvency, or for any other reason, and the Issuer
shall not have appointed its successor as Remarketing Agent, the Trustee,
notwithstanding the provisions of the first paragraph of this Section, shall
ipso facto be deemed to be the Remarketing Agent for all purposes of this
Indenture until the appointment by the Issuer of the successor Remarketing
Agent; provided that the Trustee, in its capacity as Remarketing Agent, shall
not be required to remarket Bonds nor to establish the Weekly Rate or the Term
Rate.
SECTION 8.15. Compensation and Expenses of Remarketing Agent. Pursuant
to Section 4.4 of the Loan Agreement, the Borrower is obligated to pay directly
reasonable compensation to and the reasonable expenses of the Remarketing Agent.
The terms of such obligation may be set forth in the Remarketing Agreement.
(End of Article VIII)
65
<PAGE>
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS
SECTION 9.01. Supplemental Indentures Not Requiring Consent of Holders.
Without the consent of or notice to any Holders, the Issuer and the Trustee may
enter into indentures supplemental to this Indenture for any one or more of the
following purposes:
(a) To cure any ambiguity, inconsistency or formal defect or
omission in this Indenture;
(b) To grant to or confer upon the Trustee for the benefit of
the Holders any additional rights, remedies, powers or authority;
(c) To confirm any pledge of or lien on the Revenues, to
assign additional revenues under this Indenture or to accept additional
security or instruments of further assurance;
(d) To add to the covenants, agreements and obligations of the
Issuer under this Indenture, other covenants, agreements and
obligations to be observed for the protection of the Holders, or to
surrender or limit any right, power or authority reserved to or
conferred upon the Issuer in this Indenture;
(e) To permit the use of a book entry system to identify the
owner of an interest in an obligation issued by the Issuer under this
Indenture, whether that obligation was formerly, or could be, evidenced
by a tangible security;
(f) To permit the Trustee to comply with any obligations
imposed upon it by law;
(g) To specify further the duties and responsibilities of, and
to define further the relationship among, the Trustee and the
Remarketing Agent;
(h) To achieve compliance of this Indenture with any
applicable federal securities or tax laws;
(i) To evidence the appointment of a new Remarketing Agent;
(j) To provide for an Alternate Letter of Credit any other
credit enhancement, or no credit enhancement, all as permitted by the
terms of this Indenture;
(k) To make any amendments required to secure a rating on the
Bonds from a Rating Service equal to the rating of the Bank's unsecured
indebtedness;
66
<PAGE>
(l) To implement a conversion to a Term Mode Rate; or
(m) To permit any other amendment which is not materially
adverse to the interests of the Trustee or the Holders.
Before the Issuer and the Trustee shall enter into any Supplemental Indenture
pursuant to this Section, there shall have been delivered to the Trustee and the
Issuer an opinion of Bond Counsel to the effect that such Supplemental Indenture
is authorized or permitted by this Indenture and the Act and will, upon the
execution and delivery thereof, be valid and binding upon the Issuer in
accordance with its terms.
SECTION 9.02. Supplemental Indentures Requiring Consent of Holders. In
addition to the Supplemental Indentures permitted by Section 9.01, this
Indenture may be amended or supplemented from time to time by a Supplemental
Indenture consented to by the Borrower and approved by Holders of a majority in
aggregate principal amount of the Bonds then outstanding, except that, other
than as permitted by Section 9.01, this Indenture may not be amended with
respect to (1) the principal or redemption price or interest payable upon any
Bonds, (2) the Interest Payment Dates, the dates of maturity or the redemption
or purchase provisions of any Bonds, and (3) this Article. This Indenture may be
amended with respect to the matters enumerated in clauses (1) to (3) of the
preceding sentence only with the unanimous consent of all Holders. Before the
Issuer and the Trustee may enter into such Supplemental Indenture, there shall
have first been delivered to the Trustee (a) the required consents, in writing,
of Holders and (b) an opinion of Bond Counsel to the effect that such
Supplemental Indenture is authorized or permitted by this Indenture and the Act
and will, upon the execution and delivery thereof, be valid and binding upon the
Issuer in accordance with its terms.
SECTION 9.03. Consent of Borrower and Participating Bank. Anything
contained herein to the contrary notwithstanding, a Supplemental Indenture
executed and delivered in accordance with this Article which affects any rights
of the Borrower or the Participating Bank shall not become effective unless and
until the Borrower or the Participating Bank (as appropriate) shall have
consented in writing to the execution and delivery of that Supplemental
Indenture.
SECTION 9.04. Authorization to Trustee; Effect of Supplement. The
Trustee is authorized to join with the Issuer in the execution and delivery of
any Supplemental Indenture in accordance with this Article and to make the
further agreements and stipulations which may be contained therein. Thereafter,
(a) such Supplemental Indenture shall form a part of this Indenture; (b) all
terms and conditions contained in that Supplemental Indenture as to any
provision authorized to be contained therein shall be deemed to be a part of the
terms and conditions of this Indenture for any and all purposes; (c) this
Indenture shall be deemed to be modified and amended in accordance with the
Supplemental Indenture; and (d) the respective rights, duties and obligations
under this Indenture of the Issuer, the Borrower, the Trustee, the Paying
Agents, the Remarketing Agent, the Bank, the Participating Bank and all Holders
of Bonds outstanding shall be determined, exercised and enforced hereunder in a
manner which is subject in all respects to those modifications and amendments
made by the Supplemental Indenture. The Trustee shall not be required to execute
any Supplemental Indenture containing provisions adverse to the Trustee.
67
<PAGE>
SECTION 9.05. Modification by Unanimous Consent. Notwithstanding
anything contained elsewhere in this Indenture, the rights and obligations of
the Issuer and of the Holders, and the terms and provisions of the Bonds and
this Indenture or any Supplemental Indenture, may be modified or altered in any
respect with the consent of (i) the Issuer, (ii) the Holders of all of the Bonds
outstanding, (iii) the Bank, (iv) the Participating Bank and (v) the Borrower.
SECTION 9.06. Amendment of Loan Agreement. If the Issuer and the
Borrower propose to amend the Loan Agreement, the Trustee may consent thereto;
provided that if such proposal would amend the Loan Agreement in such a way as
would materially adversely affect the interests of the Holders, the Trustee
shall notify Holders of the proposed amendment and may consent thereto with the
consent of Holders of a majority in aggregate principal amount of the Bonds then
outstanding, except that no amendment materially adversely affecting the
interests of the Holders shall be consented to by the Trustee without the
unanimous consent of all Holders if such materially adverse amendment would (1)
decrease the amounts payable under the Loan Agreement constituting Revenues, (2)
change the date of payment or prepayment provisions under the Loan Agreement, or
(3) change any provisions with respect to amendment. Before the Issuer shall
enter into, and the Trustee shall consent to, any modification, alteration,
amendment or supplement to the Loan Agreement pursuant to this Section, there
shall have been delivered to the Issuer and the Trustee an opinion of Bond
Counsel to the effect that such amendment is authorized or permitted by this
Indenture and the Act.
SECTION 9.07. Amendment of Letter of Credit. If the Bank proposes to
amend the Letter of Credit, the Trustee may consent thereto, provided that (a)
if such proposal would amend the Letter of Credit in such a way as would
materially adversely affect the interests of the Holders, the Trustee shall
notify the Holders and the Rating Service (if the Bonds are then rated by a
Rating Service) of the proposed amendment and may consent thereto only with (i)
the prior written consent of Holders of a majority in aggregate principal amount
of the Bonds then outstanding and (ii) the confirmation by such Rating Service
that such amendment will not result in a withdrawal or reduction of its rating
of the Bonds, and (b) the Trustee shall not, without the unanimous consent of
all Holders, consent to any amendment materially adversely affecting the
interests of the Holders which would decrease or delay the amounts payable under
the Letter of Credit in respect of outstanding Bonds on any Interest Payment
Date or on any date of redemption, acceleration, payment at maturity or purchase
of the Bonds, or advance the Expiration Date of the Letter of Credit to an
earlier date. No consent of the Holders shall be required for amendments to the
Letter of Credit which are provided for or contemplated by this Indenture.
SECTION 9.08. Trustee Authorized to Join in Supplements and Amendments;
Reliance on Counsel. The Trustee is authorized to join with the Issuer in the
execution and delivery of any Supplemental Indenture or amendment permitted by
this Article and in so doing shall be fully protected by an opinion of Counsel
that such Supplemental Indenture or amendment is so permitted.
SECTION 9.09. Bank Consent. Notwithstanding anything herein contained,
so long as a Letter of Credit is held by the Trustee, no supplement or amendment
shall be made to the Indenture or the Loan Agreement without the prior written
consent of the Bank.
68
<PAGE>
SECTION 9.10. Notice to Rating Service. The Trustee shall promptly
notify the Rating Service (if the Bonds are then rated by a Rating Service) of
any material supplement or amendment to this Indenture, the Loan Agreement, the
Remarketing Agreement, the Letter of Credit, the Participating Bank Agreement or
the Reimbursement Agreement.
(End of Article IX)
69
<PAGE>
ARTICLE X
DEFEASANCE
SECTION 10.01. Defeasance. When the principal of, and premium (if any)
and interest on, all Bonds issued hereunder have been paid, or provision has
been made for payment of the same and any tender purchase price which may become
payable pursuant to Article IV, together with the compensation and expenses of
the Trustee and all other sums payable hereunder by the Issuer or the Borrower,
the right, title and interest of the Trustee in and to the Trust Estate shall
thereupon cease and the Trustee, on demand of the Issuer or the Borrower, shall
release this Indenture and shall execute such documents to evidence such release
as may be reasonably required by the Issuer or the Borrower and shall turn over
to the Borrower or to such person, body or authority as may be entitled to
receive the same all balances then held by it hereunder not required for the
payment of the Bonds and such other sums and shall surrender the Letter of
Credit to the Bank; provided that (a) any proceeds of the Letter of Credit not
required for payment of the Bonds shall be turned over to the Bank and (b) in
the event there has been a drawing under the Letter of Credit for which the Bank
has not been fully reimbursed pursuant to the Participating Bank Agreement or
any other obligations are then due and owing to the Bank under the Participating
Bank Agreement (or, in the event the Participating Bank has not been fully
reimbursed pursuant to the Reimbursement Agreement or any other obligations are
then due and owing to the Participating Bank under the Reimbursement Agreement),
the Trustee shall assign and turn over to the Bank (or to the Participating Bank
if the Trustee has received notice from the Bank that such obligations owing to
it have been fully paid), as successor, subrogee or otherwise, all of the
Trustee's right, title and interest under this Indenture, all balances held
hereunder not required for the payment of the Bonds and such other sums and the
Trustee's right, title and interest in, to and under the Loan Agreement and any
other property comprising the Trust Estate. If payment or provision therefor is
made with respect to less than all of the Bonds, the particular Bonds (or
portions thereof) for which provision for payment shall have been considered
made shall be selected by lot or by such other method as the Trustee deems fair
and appropriate, and thereupon the Trustee shall take similar action for the
release of this Indenture with respect to such Bonds.
SECTION 10.02. Provision for Payment.
(a) Provision for the payment of Bonds shall be deemed to have been
made when the Trustee holds in the Bond Fund (1) cash in an amount sufficient to
make all payments (including principal, premium, if any, interest and tender
purchase price payments, if any) specified in Section 10.01 with respect to such
Bonds, or (2) noncallable, direct obligations issued by the United States of
America, maturing on or before the date or dates when the payments specified
above shall become due, the principal amount of which and the interest thereon,
when due, is or will be, in the aggregate, sufficient without reinvestment to
make all such payments, or (3) any combination of cash and such obligations the
amounts of which and interest thereon, when due, are or will be, in the
aggregate, sufficient without reinvestment to make all such payments; provided
that (i) such amount on deposit shall be deemed sufficient only if (A) while the
Bonds bear interest at a Weekly Rate, it provides for payment of interest at the
Maximum Rate and the Issuer shall have surrendered any power hereunder to
thereafter change the Maximum Rate, or (B) while the Bonds bear interest at a
Term Rate, it provides for payment of interest at such Term Rate and the Bonds
have been irrevocably called or designated for
70
<PAGE>
redemption in accordance with Subsection 10.02(c) on or before the Term Rate
Period End Interest Payment Date of the Term Period for which such Term Rate has
been set, and (ii) provision for payment of Bonds shall be deemed to be made
only if (A) the Trustee holds in the Bond Fund cash constituting Available
Moneys and/or such obligations purchased with Available Moneys for payment of
such Bonds pursuant to Section 5.04 in amounts sufficient to make all payments
specified above with respect to such Bonds, as verified by an accountant's
certification in form and by an accountant acceptable to the Trustee and the
Rating Service, and (B) in the case of Bonds in the Weekly Mode, the Bonds have
been called for redemption on a date not more than 60 days from the date
provision for payment is being made pursuant to this Section and, in determining
the sufficiency of amounts held to make payments with respect to the Bonds,
there shall be excluded any and all interest expected to be earned on
obligations held by the Trustee.
(b) Neither the moneys nor the obligations deposited with the Trustee
pursuant to this Article shall be withdrawn or used for any purpose other than,
and such obligations and moneys shall be segregated and held in trust for, the
payment of the principal or redemption price of, premium, if any, on and
interest on, the Bonds (or portions thereof), or for the payment of the purchase
price of such Bonds in accordance with Article IV. While the Bonds are in the
Weekly Mode, such moneys, if not then needed for such purpose, shall, but only
to the extent practicable, be invested and reinvested in direct obligations
issued by the United States of America maturing on or prior to the earlier of
(i) the date moneys may be required for the purchase of Bonds pursuant to
Article IV and (ii) the Interest Payment Date next succeeding the date of
investment or reinvestment.
(c) Whenever moneys or obligations shall be deposited with the Trustee
for the payment or redemption of Bonds more than 60 days prior to the date that
such Bonds are to mature or be redeemed, the Trustee shall mail a notice to the
Holders of Bonds for the payment of which such moneys or obligations are being
held at their registered addresses stating that such moneys or obligations have
been deposited. Such notice shall also be sent by the Trustee to the Rating
Service. Notwithstanding the foregoing, no delivery to the Trustee under this
Section shall be deemed a payment of any Bonds which are to be redeemed prior to
their stated maturity until such Bonds shall have been irrevocably called or
designated for redemption on a date thereafter on which such Bonds may be
redeemed in accordance with the provisions of this Indenture and proper notice
of such redemption shall have been given in accordance with Article III or the
Issuer shall have given the Trustee, in form satisfactory to the Trustee,
irrevocable instructions to give, in the manner and at the times prescribed by
Article III, notice of redemption.
SECTION 10.03. Deposit of Funds for Payment of Bonds. If the principal
or tender purchase price of any Bonds becoming due, either at maturity or by
call for redemption or tender or otherwise, together with the premium (if any)
thereon and all interest accruing thereon to the due date, has been paid or
provision therefor made in accordance with Section 10.02, all interest on such
Bonds shall cease to accrue on the due date and all liability of the Issuer with
respect to such Bonds shall likewise cease, except as hereinafter provided.
Thereafter, (a) any surplus balance held by the Trustee with respect to such
Bonds over the principal of, premium (if any) on and actual interest accrued on
such Bonds shall be paid to the Bank as a return of excess funds drawn under the
Letter of Credit (or, if the Rating Service shall have confirmed its rating of
the Bonds in connection with the provision for payment of the Bonds, such
surplus shall be paid as may otherwise be approved by the Rating Service in
connection with such confirmation) and (b) the Holders of such Bonds shall be
71
<PAGE>
restricted exclusively to the funds so deposited for any claim of whatsoever
nature with respect to such Bonds, and the Trustee shall hold such funds in
trust for such Holders uninvested and without liability for interest thereon.
Moneys so deposited with the Trustee which remain unclaimed five years after the
date payment thereof becomes due shall, at the request of the Borrower (or the
Bank or Participating Bank) and if neither the Issuer nor the Borrower is at the
time to the knowledge of the Trustee in default with respect to any covenant
contained in the Indenture, the Bonds or the Loan Agreement, be paid to the
Borrower (or to the Bank or the Participating Bank as provided in Section 10.01
with respect to surplus balances), and the Holders of the Bonds for which the
deposit was made shall thereafter be limited to a claim against the Borrower;
provided that (i) such moneys shall not be remitted to the Borrower unless the
Trustee shall have received an opinion of counsel experienced in matters
pertaining to the United States Bankruptcy Code to the effect that the
contemplated delivery of such moneys to the Borrower will not cause any other
moneys paid to the Holders to be transfers of property voidable under Section
547 of the United States Bankruptcy Code should the Issuer or the Borrower
become a debtor under the United States Bankruptcy Code, and (ii) the Trustee,
before making payment to the Borrower, may, at the expense of the Borrower,
cause a notice to be given to the Holders at their registered addresses, stating
that the moneys remaining unclaimed will be returned to the Borrower after a
specified date.
SECTION 10.04. Survival of Certain Provisions. Notwithstanding the
foregoing, any provisions of this Indenture which relate to the maturity of
Bonds, interest payments and dates thereof, optional and mandatory redemption
provisions, credit against mandatory sinking fund requirements, exchange,
transfer and registration of Bonds, replacement of mutilated, lost, wrongfully
taken or destroyed Bonds, safekeeping and cancellation of Bonds, nonpresentment
of Bonds, holding of moneys in trust, payment of moneys to the Borrower, the
Bank and the Participating Bank, and the duties of the Trustee in connection
with all of the foregoing, shall remain in effect and be binding upon the
Trustee and the Holders notwithstanding the release and discharge of this
Indenture. The provisions of this Article shall survive the release, discharge
and satisfaction of this Indenture.
(End of Article X)
72
<PAGE>
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Limitation of Rights; No Personal Recourse. With the
exception of rights conferred expressly in this Indenture, nothing expressed or
mentioned in or to be implied from this Indenture or the Bonds is intended or
shall be construed to give to any Person other than the parties hereto, the
Borrower, the Remarketing Agent, the Bank, the Participating Bank and the
Holders any legal or equitable right, remedy, power or claim under or with
respect to this Indenture or any covenants, agreements, conditions and
provisions contained herein.
This Indenture does not pledge the general credit nor the taxing power
of the Commonwealth of Pennsylvania or any political subdivision thereof. The
liability of the Issuer hereunder and under the Bonds and the Loan Agreement
shall be limited to its interest in the Trust Estate.
No covenant or agreement contained in this Indenture, the Bonds or the
Loan Agreement shall be deemed to be the covenant or agreement of any member,
director, officer, attorney, agent or employee of the Issuer in an individual
capacity. No recourse shall be had for the payment of any claim based thereon
against any member, director, officer, agent, attorney or employee of the Issuer
past, present or future, or its successors or assigns, as such, either directly
or through the Issuer, or any such successor corporation, whether by virtue of
any constitutional provision, statute or rule of law, or by the enforcement of
any assessment or penalty, or otherwise.
SECTION 11.02. Severability. In case any section or provision of this
Indenture, or any covenant, agreement, stipulation, obligation, act or action,
or part thereof, made, assumed, entered into or taken under this Indenture, or
any application thereof, is held to be illegal or invalid for any reason, or is
inoperable at any time, such illegality, invalidity or inoperability shall not
affect the remainder thereof or any other section or provision of this Indenture
or any other covenant, agreement, stipulation, obligation, act or action, or
part thereof, made, assumed, entered into or taken under this Indenture, all of
which shall be construed and enforced at the time as if the illegal, invalid or
inoperable portion were not contained therein.
SECTION 11.03. Notices. Except as provided in Sections 3.04 and 7.02,
it shall be sufficient service or giving of any notice, request, complaint,
demand or other instrument or document, if it is duly mailed by first class
mail. Notices to the Issuer, the Trustee, the Borrower, the Bank, the
Participating Bank and the Remarketing Agent shall be addressed as follows:
(a) If to the Issuer, at Montgomery County Industrial
Development Authority, 3 Stoney Creek Office Center, 151 West Marshall
Street, Norristown, Pennsylvania 19401, Attention: Gerald Birkelbach,
Executive Director;
(b) If to the Trustee, at Dauphin Deposit Bank and Trust
Company, Trustee, 213 Market Street, Harrisburg, Pennsylvania 17101,
Attention: Corporate Trust Services Department, M/C #001-01-02;
73
<PAGE>
(c) If to the Borrower, at Neose Technologies, Inc., 102
Witmer Road, Horsham, Pennsylvania 19044, Attention: P. Sherrill Neff,
President, with a copy to Ballard Spahr Andrews & Ingersoll, 1735
Market Street, Philadelphia, Pennsylvania 19103, Attention: Lynn
Axelroth, Esquire;
(d) If to the Bank, at CoreStates Bank, N.A., FC1-1-5-22,
Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101,
Attention: Global Financial Institutions;
(e) If to the Participating Bank, at Jefferson Bank, 1607
Walnut Street, Philadelphia, Pennsylvania 19103, Attention: Kenneth R.
Frappier, Senior Vice President; and
(f) If to the Remarketing Agent, at CoreStates Capital
Markets, a Division of CoreStates Bank, N.A., 600 Penn Street, 2nd
Floor, Reading, Pennsylvania 19602.
The foregoing parties may designate, by notice given hereunder, any further or
different addresses to which any subsequent notice, request, demand or other
instrument or document shall be sent. The Trustee shall designate, by notice to
the Issuer, the Borrower, the Bank, the Participating Bank and the Remarketing
Agent addresses to which notices or copies thereof shall be sent to the
Trustee's agents hereunder.
In connection with any notice mailed pursuant to the provisions of this
Indenture, a certificate of the Trustee, the Issuer, the Borrower, the Bank, the
Participating Bank, the Remarketing Agent or the Holders, whichever mailed that
notice, that the notice was so mailed shall be conclusive evidence of the proper
mailing of the notice.
The Trustee hereby agrees to send written notice to the Rating Service
upon the occurrence of any of the following events: (1) any change in the
Trustee or the Remarketing Agent or any tender agent or paying agent; (2) any
amendment to the Indenture, the Loan Agreement, the Participating Bank Agreement
or the Letter of Credit; (3) any termination, expiration or extension of the
Letter of Credit; (4) each conversion of the interest rate on the Bonds; and (5)
payment of all principal, interest and premium, if any, on all of the Bonds.
The Delivery Office of the Trustee is 213 Market Street Harrisburg,
Pennsylvania 17101, Attention: Corporate Trust Services Department, M/C
#001-01-02. Such Delivery Office is subject to change as provided in this
Indenture.
SECTION 11.04. Suspension of Mail. If because of the suspension of
delivery of first class mail or, for any other reason, the Trustee shall be
unable to mail by first class of mail any notice required to be mailed by the
provisions of this Indenture, the Trustee shall give such notice in such other
manner as in the judgment of the Trustee shall most effectively approximate
first class mailing thereof, and the giving of that notice in that manner for
all purposes of this Indenture shall be deemed to be in compliance with the
requirement for the mailing thereof. Except as otherwise provided herein, the
mailing of any notice shall be deemed complete upon deposit of that notice in
the mail and the giving of any notice by any other means of delivery shall be
deemed complete upon receipt of the notice by the delivery service.
74
<PAGE>
SECTION 11.05. Payments Due on Saturdays, Sundays and Holidays. If any
Interest Payment Date, date of maturity of any Bonds or date fixed for
redemption of any Bonds is a Saturday, Sunday or a day on which the Trustee or
any paying agent is required, authorized or not prohibited, by law (including
without limitation executive orders) to close and is closed, then payment of
interest, principal and any redemption premium need not be made by the Trustee
or any paying agent on that date, but that payment may be made on the next
succeeding Business Day on which the Trustee or any paying agent is open for
business with the same force and effect as if that payment were made on the
Interest Payment Date, date of maturity or date fixed for redemption, and no
interest shall accrue for the period after that date; provided that if the
Trustee is open for business on the applicable Interest Payment Date, date of
maturity or date fixed for redemption, it shall make any payment required
hereunder with respect to payment of interest on outstanding Bonds and payment
of principal of and premium on Bonds presented to it for payment, regardless of
whether any paying agent shall be open for business or closed on the applicable
Interest Payment Date, date of maturity or date fixed for redemption.
SECTION 11.06. Instruments of Holders. Any writing, including without
limitation any consent, request, direction, approval, objection or other
instrument or document, required under this Indenture to be executed by any
Holder may be in any number of concurrent writings of similar tenor and may be
executed by that Holder in person or by an agent or attorney appointed in
writing. Proof of (i) the execution of any such writing, (ii) the execution of
any writing appointing any agent or attorney, and (iii) the ownership of Bonds,
shall be sufficient for any of the purposes of this Indenture, if made in the
following manner, and if so made, shall be conclusive in favor of the Trustee
with regard to any action taken thereunder, namely:
(a) The fact and date of the execution by any person of any
writing may be proved by the certificate of any officer in any
jurisdiction, who has power by law to take acknowledgments within that
jurisdiction, that the person signing the writing acknowledged that
execution before that officer, or by affidavit of any witness to that
execution; and
(b) The fact of ownership of Bonds shall be proved by the
Register maintained by the Trustee.
Nothing contained herein shall be construed to limit the Trustee to the
foregoing proof, and the Trustee may accept any other evidence of the matters
stated therein which it deems to be sufficient. Any writing, including without
limitation any consent, request, direction, approval, objection or other
instrument or document, of the Holder of any Bond shall bind every future Holder
of the same Bond, with respect to anything done or suffered to be done by the
Issuer, the Trustee or the Remarketing Agent pursuant to that writing.
SECTION 11.07. Binding Effect. This Indenture shall inure to the
benefit of and shall be binding upon the Issuer and the Trustee and their
respective successors and assigns, subject, however, to the limitations
contained herein.
SECTION 11.08. Counterparts. This Indenture may be executed in any
number of counterparts, each of which shall be regarded as an original and all
of which shall constitute but one and the same instrument.
75
<PAGE>
SECTION 11.09. Governing Law. This Indenture and the Bonds shall be
deemed to be contracts made under the laws of the Commonwealth of Pennsylvania
and for all purposes shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
(End of Article XI)
76
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Indenture to be executed
and delivered on its behalf by one of its duly authorized officers and its
corporate seal to be hereunto affixed and attested by one of its duly authorized
officers and the Trustee has caused this Indenture to be executed and delivered
on its behalf by one of its duly authorized officers and its corporate seal to
be hereunto affixed and attested by one of its duly authorized officers all as
of the day and year first above written.
[SEAL] MONTGOMERY COUNTY INDUSTRIAL
DEVELOPMENT AUTHORITY
Attest /s/ Gerald J. Birkelbach By /s/ Sherry Horowitz
-------------------------- ---------------------------
Assistant Secretary Chairperson
[SEAL] DAUPHIN DEPOSIT BANK AND TRUST
COMPANY, as Trustee
Attest /s/ Rex. F. Hood By /s/ Bernard V. Kelly, Jr.
------------------------- ---------------------------
Authorized Signer Authorized Signer
This execution page is part of the Trust Indenture dated as of March 1,
1997 between Montgomery County Industrial Development Authority and Dauphin
Deposit Bank and Trust Company, as Trustee, providing for the issuance of
Federally Taxable Variable Rate Demand Revenue Bonds (Neose Technologies, Inc.
Project) Series B of 1997.
77
Exhibit 4.3
[COPY]
REGISTERED United States of America REGISTERED
NO. R-1 Commonwealth of Pennsylvania $8,400,000
MONTGOMERY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
Federally Taxable Variable Rate Demand Revenue Bonds
(Neose Technologies, Inc. Project)
Series B of 1997
SERIES ISSUE DATE MATURITY DATE CUSIP
March 20, 1997 March 1, 2017 613609 QH2
INTEREST RATE: WEEKLY RATE
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: EIGHT MILLION FOUR HUNDRED THOUSAND
DOLLARS
The Montgomery County Industrial Development Authority (the "Issuer"),
a public instrumentality and body corporate and politic of the Commonwealth of
Pennsylvania organized and existing under the Pennsylvania Economic Development
Financing Law, as amended (the "Act"), for value received, promises to pay to
the registered owner specified above, or registered assigns, upon surrender
hereof, but solely from the sources and in the manner referred to herein, the
Principal Amount specified above on March 1, 2017, unless this Bond has been
called for earlier redemption and payment of the redemption price shall have
been duly made or provided for, and to pay from those sources interest thereon
from the most recent Interest Payment Date (hereinafter defined) to which
interest has been paid or duly provided for or from the Series Issue Date
specified above if no interest has been paid, at the rates determined as
provided herein, until the Principal Amount is paid or duly provided for,
commencing on the first Interest Payment Date after the Date of Authentication
hereof.
So long as this Bond bears interest at a Weekly Rate (hereinafter
defined) as specified above, this Bond shall be purchased on demand of the
registered owner hereof as hereinafter described.
The principal of and any premium on this Bond are payable upon
presentation and surrender hereof at the principal corporate trust office of
Dauphin Deposit Bank and Trust Company, Harrisburg, Pennsylvania (the
"Trustee"), or at the duly designated office of any duly appointed alternate or
successor trustee. Interest on this Bond is payable on each Interest Payment
Date by check mailed to the registered owner of this Bond (the "Holder") in
whose name ownership of this Bond is registered, at such Holder's address as it
appears on the registration books (the "Register") for this issue maintained by
the Trustee at the close of business on the Regular Record Date which shall be
<PAGE>
(i) while this Bond bears interest at a Weekly Rate, the last Business Day
preceding an Interest Payment Date and (ii) while this Bond bears interest at a
Term Rate (hereinafter defined), the fifteenth day of the calendar month next
preceding the Interest Payment Date (the "Regular Record Date"). Any interest
which is not timely paid or duly provided for shall cease to be payable to the
Holder as of the Regular Record Date, and shall be payable to the Holder in
whose name this Bond is registered at the close of business on a Special Record
Date to be fixed by the Trustee for the payment of such overdue interest. Notice
of the Special Record Date shall be mailed to Holders not less than ten days
prior thereto. The interest and the principal or redemption price and purchase
price becoming due with respect to the Bonds (hereinafter defined) shall, at the
written request of the Holder of at least $1,000,000 aggregate principal amount
of such Bonds, be paid by wire transfer within the continental United States in
immediately available funds to the bank account number of such Holder appearing
on the Register, but, in the case of principal or redemption price and purchase
price, only upon presentation and surrender of such Bonds at the principal
corporate trust office of the Trustee. The principal or purchase price of and
interest and any premium on this Bond are payable in lawful money of the United
States of America.
This Bond is one of a duly authorized issue of Federally Taxable
Variable Rate Demand Revenue Bonds (Neose Technologies, Inc. Project) Series B
of 1997 (the "Bonds"), issued under and secured by a Trust Indenture dated as of
March 1, 1997 (the "Indenture") between the Issuer and the Trustee, in the
aggregate principal amount of $8,400,000. The Issuer has entered into a Loan
Agreement dated as of March 1, 1997 (the "Loan Agreement") with Neose
Technologies, Inc. (the "Borrower") providing for the loan of the proceeds of
the Bonds to finance certain costs of the acquisition, improvement and equipment
of a facility which will be used for the development and pilot production of
complex carbohydrates for research and development relating to a variety of
healthcare applications as more fully described in the Loan Agreement (the
"Project") to be owned and operated by the Borrower, located in Horsham
Township, Montgomery County, Pennsylvania, and providing for loan payments by
the Borrower in amounts sufficient to pay, when due, the principal of, premium,
if any, on and interest on the Bonds. The Bonds have been issued by the Issuer
to aid in the financing of the Project to accomplish the public purposes of the
Act. The Issuer has assigned to the Trustee as security for the Bonds under and
pursuant to the Indenture all of the Issuer's right, title and interest in and
to (i) the Loan Agreement and all amounts payable thereunder (except for
payments with respect to certain expenses, indemnification and excess investment
earnings) and (ii) all moneys and investments held by the Trustee from time to
time in certain funds and accounts established under the Indenture.
THIS BOND IS A LIMITED OBLIGATION OF THE ISSUER AND IS PAYABLE SOLELY
FROM THE SOURCES REFERRED TO HEREIN. NEITHER THE COUNTY OF MONTGOMERY, NOR THE
COMMONWEALTH OF PENNSYLVANIA NOR ANY POLITICAL SUBDIVISION THEREOF IS OR SHALL
BE OBLIGATED TO PAY THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THIS
BOND, AND THIS BOND SHALL NOT BE OR BE DEEMED AN OBLIGATION OF THE COUNTY OF
MONTGOMERY, THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION
THEREOF. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE COUNTY OF
MONTGOMERY, THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION
THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR PREMIUM, IF ANY, OR THE
INTEREST ON THIS BOND. THE ISSUER HAS NO TAXING POWER.
2
<PAGE>
No recourse shall be had for the payment of the principal of or
interest or any premium on this Bond, or for any claim based hereon or on the
Indenture, against any member, director, officer or employee, past, present or
future, of the Issuer or of any successor body, as such, either directly or
through the Issuer or any such 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.
The Bonds are payable solely from payments to be made by the Borrower
to the Trustee pursuant to the Loan Agreement and from any other moneys pledged
to or held by the Trustee under the Indenture for such purpose, and there shall
be no other recourse against the Issuer or any other property now or hereafter
owned by it. Except as otherwise specified in the Indenture, this Bond is
entitled to the benefits of the Indenture equally and ratably as to principal,
premium, if any, and interest with all other Bonds issued under the Indenture.
No additional Bonds may be issued under the Indenture. Reference is made to the
Indenture and the Loan Agreement for a description of the rights of the Holders
of the Bonds; the rights and obligations of the Issuer and the Borrower; the
rights, duties and obligations of the Trustee; and the provisions relating to
amendments and modifications thereof. The acceptance of the terms and conditions
of such documents and the Letter of Credit described below, copies of which are
on file at the principal corporate trust office of the Trustee, is an explicit
and material part of the consideration of the Issuer's issuance hereof, and each
Holder by acceptance of this Bond accepts and assents to all such terms and
conditions as if fully set forth herein. The Holder shall have no right to
enforce the provisions of the Indenture, the Loan Agreement or the Letter of
Credit or the rights and remedies thereunder, except as provided in the
Indenture. Capitalized terms used in this Bond which are not defined herein but
which are defined in the Indenture shall have the respective meanings set forth
in the Indenture.
The Borrower has caused to be issued and delivered to the Trustee by
CoreStates Bank, N.A., Philadelphia, Pennsylvania, an irrevocable letter of
credit pursuant to which the Trustee is authorized, subject to the terms and
conditions thereof, to draw up to (a) an amount equal to the principal amount of
the Bonds (i) to enable the Trustee to pay the principal amount of the Bonds
when due at maturity or upon redemption or acceleration and (ii) to enable the
Trustee to pay the portion of the purchase price of Bonds tendered to it and not
remarketed corresponding to the principal amount of such Bonds, plus (b) an
amount equal to 46 days accrued interest on the outstanding Bonds at 17% per
annum while the Bonds bear interest at the Weekly Rate (i) to enable the Trustee
to pay interest on the Bonds when due and (ii) to enable the Trustee to pay the
portion of the purchase price of Bonds tendered to it and not remarketed
corresponding to the accrued interest on such Bonds. Such irrevocable letter of
credit or any alternate letter of credit delivered to the Trustee in accordance
with the terms of the Indenture is herein called the "Letter of Credit". The
Indenture provides that, if a Letter of Credit is to be in effect while the
Bonds bear interest at a Term Rate, such Letter of Credit must provide for (i)
195 days accrued interest on the outstanding Bonds at a rate not less than the
applicable Term Rate and (ii) coverage of premium in an amount equal to the
premium (if any) which would become payable on the Bonds upon mandatory purchase
if such Letter of Credit were not extended beyond the Expiration Date set forth
therein. As used herein, the term "Bank" shall mean CoreStates Bank, N.A., as
issuer of the Letter of Credit or the bank issuing any Alternate Letter of
Credit. The Letter of Credit expires on March 20, 2002, unless terminated
earlier pursuant to its terms or extended. Subject to the provisions of the
Indenture, the Issuer may, but is not required to, cause the Letter of Credit to
be extended or replaced with an Alternate Letter of Credit having substantially
the same terms. The Bank is under no obligation to extend the Letter of Credit.
Unless the Letter of
3
<PAGE>
Credit is extended or replaced in accordance with the terms of the Indenture,
this Bond will become subject to mandatory redemption, as described below. The
Letter of Credit is being issued pursuant to a Participation and Reimbursement
Agreement (as the same may be amended or replaced, the "Participating Bank
Agreement") between the Bank and Jefferson Bank (including any replacement bank
in such capacity, the "Participating Bank"). Pursuant to the Participating Bank
Agreement, the Participating Bank is obligated to reimburse the Bank for all
drawings made under the Letter of Credit. The Borrower and the Participating
Bank have entered into a reimbursement agreement (as the same may be amended or
replaced, the "Reimbursement Agreement") under which the Borrower is obligated,
among other things, to reimburse the Participating Bank for all payments made by
it to the Bank under the Participating Bank Agreement.
INTEREST ON BONDS
General. This Bond shall bear interest at a Weekly Rate or a Term Rate,
as specified above and described below. The Bonds shall initially bear interest
at a Weekly Rate, subject to conversion to a Term Rate, as described herein. A
"Weekly Rate" is an interest rate for a Weekly Rate Period determined and
adjusted weekly as described below. A "Term Rate" is an interest rate for a Term
Rate Period determined as described below. The Bonds are in the "Weekly Mode" if
they bear interest at a Weekly Rate and a "Term Mode" if they bear interest at a
Term Rate. The Weekly Mode and each Term Mode are each a "Rate Mode". All
computations of interest at a Weekly Rate shall be based on a year of 365 or 366
days, as appropriate; and all computations of interest at a Term Rate shall be
based on a 360-day year of twelve 30-day months. As used in this Bond, the term
"Interest Payment Date" means (i) with respect to Weekly Rate Interest, the
first Wednesday of each calendar month commencing April 2, 1997, or if any such
Wednesday is not a Business Day, the immediately succeeding Business Day, and
(ii) with respect to Term Rate Interest, each March 1 and September 1.
Weekly Rate. A Weekly Rate shall be determined for each Weekly Rate
Period as described below. On each Weekly Rate Calculation Date, the Remarketing
Agent under the Indenture (the "Remarketing Agent"), initially CoreStates
Capital Markets, a Division of CoreStates Bank, N.A., shall determine the Weekly
Rate (for the Weekly Rate Period commencing on such Weekly Rate Calculation
Date) as the rate which if borne by the Bonds would, in the judgment of the
Remarketing Agent, taking into account prevailing financial market conditions,
be the lowest interest rate necessary to enable the Remarketing Agent to arrange
for the sale of all of the outstanding Bonds at a price equal to the principal
amount thereof plus accrued interest thereon. Anything herein to the contrary
notwithstanding, in no event shall any Weekly Rate exceed 17% per annum. As used
in this Bond, "Weekly Rate Calculation Date" means Wednesday in each calendar
week or, if any Wednesday is not a Business Day, the first Business Day
preceding such Wednesday , and "Weekly Rate Period" means the seven-day period
commencing on the Weekly Rate Calculation Date and running through Tuesday of
the following calendar week, except that (i) the first Weekly Rate Period shall
commence on the Series Issue Date and end on and include the first Tuesday
occurring after the Series Issue Date, (ii) the first Weekly Rate Period
following a conversion from a Term Mode to the Weekly Mode shall commence on the
date of such conversion and end on and include the first Tuesday occurring after
such conversion date and (iii) the last Weekly Rate Period prior to a conversion
from the Weekly Mode to a Term Mode shall end on and include the last day
immediately preceding the date of such conversion.
4
<PAGE>
If for any reason the Remarketing Agent does not determine a Weekly
Rate for any Weekly Rate Period as aforesaid, or if a court holds a rate for any
Weekly Rate Period to be invalid or unenforceable, the Weekly Rate for that
Weekly Rate Period shall be equal to the Weekly Rate in effect for the
immediately preceding Weekly Rate Period. The Weekly Rate for any consecutive
Weekly Rate Period for which the Remarketing Agent does not determine a Weekly
Rate, or a court holds a rate to be invalid or unenforceable, shall be the rate
per annum equal to 115% 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 such
Weekly Rate Calculation Date.
No notice of Weekly Rates will be given to the Holders of the Bonds;
however, the Holders may obtain Weekly Rates from the Trustee or the Remarketing
Agent. The determination of the Weekly Rate by the Remarketing Agent shall be
conclusive and binding upon the Issuer, the Trustee, the Borrower, the
Remarketing Agent, the Bank, the Participating Bank and the Holders.
Term Rate. A Term Rate shall be determined for each Term Rate Period as
described below. Upon conversion to a Term Mode, a Nominal Term Rate Period
shall be fixed by the Borrower as a term of two or more consecutive Semiannual
Periods constituting the nominal length of each Term Rate Period thereafter
until the date of a conversion to another Rate Mode. A Term Mode based on one
Nominal Term Rate Period and a Term Mode based on another Nominal Term Rate
Period are different Term Modes. Each Term Rate shall be determined by the
Remarketing Agent, on the Term Rate Calculation Date, as the lowest rate of
interest that, in the judgment of the Remarketing Agent taking into account
prevailing financial market conditions, would be necessary to enable the
Remarketing Agent to arrange for the sale of the Bonds in the respective Term
Mode in a secondary market sale at a price equal to the principal amount thereof
on the first Business Day of the respective Term Rate Period; provided that (1)
if the Remarketing Agent fails for any reason to determine the Term Rate for any
Term Rate Period, such Term Rate shall be equal to 120% of the average of the
annual bond equivalent yield evaluations at par as of the first day of the
corresponding Term Rate Period or, if such day is not a Business Day, the next
preceding Business Day of United States Treasury obligations having a term to
maturity similar to such Term Rate Period, and (2) no Term Rate shall exceed the
lesser of (i) the maximum interest rate at which the Letter of Credit then in
effect, if any, provides coverage for at least 195 days interest and (ii) 25%
per annum. Determinations of Term Rates shall be conclusive and binding upon the
Issuer, the Borrower, the Trustee, the Bank, the Participating Bank and the
Holders. As used in this Bond, "Nominal Term Rate Period" means, with respect to
a Term Mode, a period of two or more consecutive Semiannual Periods (expressed
in years and half years); "Semiannual Date" means each March 1 and each
September 1; "Semiannual Period" means a six month period commencing on a
Semiannual Date and ending on and including the day immediately preceding the
next Semiannual Date; "Term Rate Calculation Date" means a Business Day not more
than 15 days and not less than one day prior to the first day of the
corresponding Term Rate Period; "Term Rate Period" means a period of two or more
consecutive Semiannual Periods equal to the applicable Nominal Term Rate Period
commencing on the Semiannual Date immediately following the last day of the
immediately preceding Term Rate Period and running through and ending on the day
immediately preceding the Semiannual Date which follows such commencement date
by a period equal to such Nominal Term Rate Period, except that the first Term
Rate Period after conversion from a Weekly Rate to a Term Rate shall commence on
the date of conversion and end on and include the day immediately preceding the
Semiannual Date which follows the Semiannual Date occurring on or immediately
preceding such conversion date by a period equal to such Nominal Term Rate
Period.
5
<PAGE>
Conversion. The Indenture provides that the Borrower shall have the
option to convert the Bonds from the Weekly Mode to a Term Mode, from a Term
Mode to the Weekly Mode and from one Term Mode to another Term Mode on any
Conversion Date the Borrower shall select; provided that (i) each Conversion
Date shall be an Interest Payment Date and (ii) Bonds in a Term Mode cannot be
converted to another Rate Mode prior to the date on or after which the Bonds may
first be redeemed at a redemption price of par pursuant to their terms. The
Borrower may exercise such option by giving written notice to the Issuer, the
Trustee, the Remarketing Agent, the Bank and the Participating Bank, stating its
election to convert the Rate Mode of the Bonds to another Rate Mode specified in
such notice and stating the Conversion Date therefor, not less than 45 days (or
such shorter period as shall be acceptable to the Trustee) prior to such
Conversion Date. In connection with each conversion to a Term Mode, the Nominal
Term Rate Period shall be selected by the Borrower and designated in such
notice. Notice of the exercise of an option to convert from one Rate Mode to
another Rate Mode shall not be effective unless certain conditions set forth in
the Indenture are satisfied with respect to such conversion. In the case of a
conversion from one Rate Mode to another Rate Mode, the Trustee shall give
notice by first class mail to the Holders of the Bonds not less than 30 days
prior to the proposed Conversion Date stating (i) that, in the case of a
conversion to a Term Mode, the interest rate on the Bonds is scheduled to be
converted to a Term Rate and the Nominal Term Rate Period on which such Term
Rate will be based, or in the case of a conversion to the Weekly Mode, the
interest rate on the Bonds is scheduled to be converted to a Weekly Rate, (ii)
the proposed Conversion Date, (iii) that the Borrower may determine not to
convert the Bonds in which case the Trustee shall notify the Holders in writing
to such effect, and (iv) that all outstanding Bonds will be subject to a
mandatory purchase on the Conversion Date, or if such Conversion Date is not a
Business Day, the first Business Day immediately following such Conversion Date,
at a price of par plus accrued interest. Upon each conversion the Bonds shall be
subject to mandatory purchase on the Conversion Date, or if such Conversion Date
is not a Business Day, the first Business Day immediately following such
Conversion Date. As used in this Bond, "Conversion Date" means any Interest
Payment Date on which the Rate Mode of the Bonds is converted to another Rate
Mode.
OPTIONAL AND MANDATORY TENDER
Optional Tender for Purchase in Weekly Mode. While the Bonds bear
interest at a Weekly Rate, any Bond shall be purchased on the demand of the
Holder thereof on any Business Day designated by such Holder in a Bondholder
Tender Notice (hereinafter defined) at a purchase price equal to 100% of the
principal amount thereof plus accrued interest, if any, to the date of purchase,
if there is delivered to the Trustee at its Principal Office or Delivery Office,
and to the Remarketing Agent at its Principal Office, a written notice (the
"Bondholder Tender Notice") which (i) states the principal amount (or portion
thereof) of such Bond and (ii) states the date on which such Bond (or portion
thereof) shall be purchased, which date shall be a Business Day not prior to the
seventh day next succeeding the date of the delivery of such notice to the
Trustee and the Remarketing Agent. By delivering the Bondholder Tender Notice,
the Holder irrevocably agrees to deliver such Bond, if held in certificated
form, duly endorsed for transfer in blank and with guarantee of signature
satisfactory to the Trustee, to the Principal Office or the Delivery Office of
the Trustee or any other address designated by the Trustee at or prior to 12:00
noon eastern time on the Business Day specified in the Bondholder Tender Notice.
The determination by the Trustee of a Holder's compliance with such Bondholder
Tender Notice and Bonds delivery requirements is in the sole discretion of the
Trustee and
6
<PAGE>
binding on the Borrower, the Issuer, the Remarketing Agent, the Bank, the
Participating Bank and the Holder. Any Bondholder Tender Notice which the
Trustee determines is not in compliance with the provisions of this paragraph
shall be of no force or effect.
Any election by a Holder to tender a Bond (or portion thereof) for
purchase on a Business Day shall be irrevocable and shall be binding on the
Holder making such election and on any transferee of such Holder. Each
Bondholder Tender Notice shall automatically constitute (i) an irrevocable offer
to sell the Bond (or portion thereof) to which such notice relates on the
purchase date at a price equal to the purchase price of such Bond (or portion
thereof) described above, (ii) an irrevocable authorization and instruction to
the Trustee to effect transfer of such Bond (or portion thereof) upon payment of
the purchase price to the Trustee on the purchase date, (iii) with respect to a
tender of a portion of a Bond, an irrevocable authorization and instruction to
the Trustee to effect the exchange of such Bond in part for other Bonds in a
principal amount equal to the retained portion so as to facilitate the sale of
the tendered portion of such Bond, and (iv) an acknowledgment that such Holder
will have no further rights with respect to such Bond (or portion thereof) upon
payment of the purchase price thereof to the Trustee on the purchase date,
except for the right of such Holder to receive such purchase price upon
surrender of such Bond, if held in certificated form, to the Trustee endorsed
for transfer in blank and with guarantee of signature satisfactory to the
Trustee and that after the purchase date such Holder will hold such Bond as
agent for the Trustee. If the Bonds are not held in book-entry form and, after
delivery to the Trustee and the Remarketing Agent of such Bondholder Tender
Notice, the Holder making such election shall fail to deliver such Bond or Bonds
described in the Bondholder Tender Notice to the Trustee on or before 12:00 noon
eastern time on the applicable purchase date as described herein, then the
undelivered Bond or portion thereof (the "Undelivered Bond") described in such
Bondholder Tender Notice shall be deemed to have been tendered for purchase to
the Trustee and, to the extent that there shall be held by the Trustee on or
before the applicable purchase date an amount sufficient to pay the purchase
price thereof and available for such purpose pursuant to the Indenture, such
Undelivered Bond (or portion thereof) shall on such purchase date cease to bear
interest and no longer shall be considered to be outstanding under the
Indenture. Moneys held by the Trustee for the purchase of the Undelivered Bonds
in accordance with the foregoing shall be held in a special separate trust
account for the Holders of such Undelivered Bonds. Such moneys shall be held by
the Trustee uninvested and without liability for interest pending delivery of
such Undelivered Bonds to the Trustee.
Mandatory Tender. This Bond is subject to mandatory tender for
purchase, at a price equal to the principal amount hereof plus accrued interest,
and, in the case of a mandatory purchase described in clause (b) below, a
premium equal to the optional redemption premium, if any, that would be due if
the Bonds were to be optionally redeemed on the purchase date, on (a) each
Conversion Date, or if such Conversion Date is not a Business Day, the first
Business Day immediately following such Conversion Date, in the event of a
conversion of the Bonds from one Rate Mode to another Rate Mode, and the first
Business Day immediately following the end of each Term Rate Period; (b) on the
Interest Payment Date next preceding the Expiration Date of the Letter of Credit
unless at least 45 days (or such shorter period as shall be acceptable to the
Trustee) prior to such Interest Payment Date the Trustee has received notice
that the Letter of Credit has been or will be extended or an Alternate Letter of
Credit will be provided pursuant to the Indenture; and (c) while the Bonds are
in the Weekly Mode, on the Purchase Date stipulated by the Bank or the
Participating Bank pursuant to the Indenture in the event the Bank or the
Participating Bank directs the Trustee pursuant to the Indenture to call the
Bonds for mandatory purchase. Any Bond which is not delivered for purchase prior
to 12:00 noon eastern
7
<PAGE>
time on the applicable purchase date shall be deemed to have been tendered to
the Trustee as of such purchase date and interest on such Undelivered Bond shall
cease to accrue on such purchase date. Thereafter, the Holder of such
Undelivered Bond shall not be entitled to any payment other than the purchase
price for such Undelivered Bond upon surrender thereof to the Trustee endorsed
for transfer in blank and with guaranty of signature satisfactory to the
Trustee. Except for payment of such purchase price from moneys held by the
Trustee for such purpose, such Undelivered Bond shall no longer be outstanding
and entitled to the benefits of the Indenture.
BY ACCEPTANCE OF THIS BOND, THE HOLDER HEREOF AGREES THAT THIS BOND
WILL BE PURCHASED, WHETHER OR NOT SURRENDERED, ON ANY DATE SPECIFIED BY THE
HOLDER HEREOF IN THE EXERCISE OF THE OPTIONAL TENDER FOR PURCHASE DESCRIBED
ABOVE AND ON THE PURCHASE DATE IN CONNECTION WITH ANY MANDATORY TENDER FOR
PURCHASE. IN SUCH EVENT, THE HOLDER OF THIS BOND SHALL NOT BE ENTITLED TO
RECEIVE FURTHER INTEREST HEREON, SHALL HAVE NO FURTHER RIGHTS UNDER THIS BOND OR
THE INDENTURE EXCEPT FOR PAYMENT OF THE PURCHASE PRICE HELD THEREFOR, AND, IF
THIS BOND IS NOT SURRENDERED ON SUCH DATE, SHALL THEREAFTER HOLD THIS BOND AS
AGENT FOR THE TRUSTEE.
OPTIONAL REDEMPTIONS
Weekly Rate Bonds. While the Bonds bear interest at a Weekly Rate, the
Bonds are subject to redemption prior to maturity at the option of the Issuer,
at the direction of the Borrower, in whole at any time or in part on any
Interest Payment Date, at a redemption price equal to 100% of the principal
amount thereof plus accrued interest to the redemption date.
Extraordinary Optional Redemption. The Bonds are subject to
extraordinary optional redemption by the Issuer, at the Borrower's option, upon
the occurrence of certain events as provided in Section 6.2 of the Loan
Agreement at any time in whole or on any Interest Payment Date in part, upon
damage, destruction or condemnation of part of the Project, in each case, at a
redemption price of 100% of the principal amount redeemed plus accrued interest
to the redemption date.
GENERAL PROVISIONS
If less than all Bonds are to be redeemed at one time, the selection of
the Bonds to be redeemed shall be made by lot or by such other method as the
Trustee deems fair and appropriate; provided that any Bonds pledged to the Bank
and Participating Bank shall be redeemed first and any Bonds owned by the
Borrower shall be redeemed second.
If Bonds or portions thereof are called for redemption and if on the
redemption date moneys for the redemption thereof are held by the Trustee,
thereafter those Bonds or portions thereof to be redeemed shall cease to bear
interest, and shall cease to be secured by, and shall not be deemed to be
outstanding under, the Indenture.
8
<PAGE>
Any notice of redemption shall be given at least 15 days (30 days if
the Bonds are in a Term Mode) prior to the date fixed for redemption, by mailing
a copy of the redemption notice by first class mail, postage prepaid, to the
Holder of each Bond to be redeemed in whole or in part at the address shown on
the Register. Notice of optional redemption may be conditioned upon the deposit
of moneys in the Bond Fund established under the Indenture, in an amount
sufficient for such redemption not later than the close of business on the
Business Day prior to the date fixed for redemption and such notice shall be of
no effect and the redemption shall be deemed cancelled unless such moneys are so
deposited.
If an Event of Default as defined in the Indenture occurs, the
principal of all Bonds issued under the Indenture may be declared due and
payable upon the conditions and in the manner and with the effect provided in
the Indenture.
If at any time the Trustee holds moneys or securities as described in
the Indenture sufficient to pay at redemption or maturity the principal or
redemption price of and premium, if any, and interest on all Bonds outstanding
under the Indenture and any purchase price payable pursuant to the Indenture in
respect thereof, and if all other sums then payable by the Issuer under the
Indenture have been paid, then subject to the provisions of the Indenture the
lien of the Indenture and other security held by the Trustee for the benefit of
the Holders will be discharged. After such discharge, Holders must look only to
the deposited moneys and securities for payment.
The Indenture permits certain amendments or supplements to the Loan
Agreement and the Indenture not materially prejudicial to the Holders to be made
without the consent of or notice to the Holders, and other amendments or
supplements thereto to be made with the consent of the Holders of not less than
a majority in aggregate principal amount of the Bonds outstanding.
The Holder of each Bond has only those remedies provided in the
Indenture.
The Bonds are issuable only as fully registered bonds in the
denominations of $100,000 and any integral multiple thereof and are exchangeable
for Bonds of other authorized denominations in equal aggregate principal amounts
at the Principal Office of the Trustee, but only in the manner and subject to
the limitations provided in the Indenture. This Bond is transferable at the
Principal Office of the Trustee, by the Holder in person or by his attorney,
duly authorized in writing, upon presentation and surrender hereof to the
Trustee. While the Bonds bear interest at a Term Rate, the Trustee is not
required to transfer or exchange (i) any Bond during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of Bonds and ending at the close of business on the day of such
mailing, (ii) any Bonds selected for redemption in whole or in part, or
(iii) any Bond during the period of 15 days preceding any Interest Payment Date.
This Bond shall not be entitled to any security or benefit under the
Indenture or be valid or become obligatory for any purpose until the Certificate
of Authentication hereon shall have been signed.
Unless this Bond is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Trustee or its
agent for registration of transfer, exchange or payment, and any bond issued is
registered in the name of Cede & Co. or in such other
9
<PAGE>
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
10
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed in
its name by the manual or facsimile signature of its Chairperson or Vice
Chairperson and its corporate seal or a facsimile thereof to be affixed,
imprinted, lithographed or reproduced hereon and attested by the manual or
facsimile signature of its Secretary or Assistant Secretary.
MONTGOMERY COUNTY INDUSTRIAL
[Seal] DEVELOPMENT AUTHORITY
Attest
/s/ Gerald J. Birkelbach By /s/ Sherry F. Horowitz
- -------------------------------- -----------------------------
Assistant Secretary Chairperson
[COPY] [COPY]
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the within-mentioned
Indenture. Attached hereto is the complete text of the opinion of Ballard Spahr
Andrews & Ingersoll, Philadelphia, Pennsylvania, Bond Counsel, dated the date of
initial delivery of and payment for the Bonds, a signed original of which is on
file with the Trustee.
Date of Authentication: DAUPHIN DEPOSIT BANK AND TRUST
COMPANY, as Trustee
3/20/97 By /s/ Bernard V. Kelly, Jr.
---------------------------------
Authorized Signer
[COPY]
11
<PAGE>
[FORM OF ASSIGNMENT]
Assignment
For value received, the undersigned sells, assigns and transfers unto
____________________ the within Bond and irrevocably constitutes and appoints
____________________ attorney to transfer that Bond on the books kept for
registration thereof, with full power of substitution in the premises.
Assignor's Signature: ________________________________________________
Dated: ________________________________________________
Signature Guaranteed: ________________________________________________
Social Security
Number or Other
Identifying Number
of Assignee: ________________________________________________
Notice: The assignor's 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 any change whatever.
[FORM OF ABBREVIATIONS]
The following abbreviations, when used in the inscription on the face
of the within Bond, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with the right of
survivorship and not as tenants in common
UNIFORM TRANS MIN ACT - _____________________ Custodian _______________________
(Cust) (Minor)
under Uniform Transfers to Minors Act
_____________________________________
(State)
Additional abbreviations may also be used though not in the above list.
12
Exhibit 10.1
================================================================================
LOAN AGREEMENT
between
MONTGOMERY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
and
NEOSE TECHNOLOGIES, INC.
Dated
as of
March 1, 1997
--------------------------------
$8,400,000 Montgomery County Industrial Development Authority
Federally Taxable Variable Rate Demand Revenue Bonds
(Neose Technologies, Inc. Project)
Series B of 1997
--------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Preambles.......................................................................................... 1
ARTICLE I
DEFINITIONS
Section 1.1. Use of Terms Defined in Indenture.................................................... 2
Section 1.2. Definitions.......................................................................... 2
Section 1.3. Interpretation....................................................................... 4
Section 1.4. Captions, Headings and Table of Contents............................................. 4
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations and Findings of Issuer............................................... 5
Section 2.2. Representations of Borrower.......................................................... 5
ARTICLE III
ACQUISITION OF PROJECT;
ISSUANCE OF BONDS; PROJECT FUND
Section 3.1. Acquisition of Project............................................................... 7
Section 3.2. Additions and Changes to Project..................................................... 7
Section 3.3. Issuance of Bonds; Application of Proceeds........................................... 7
Section 3.4. Disbursements from Project Fund...................................................... 8
Section 3.5. Borrower Required to Pay Costs in Event Project Fund Insufficient.................... 8
Section 3.6. Completion........................................................................... 8
Section 3.7. Investment and Use of Fund Moneys.................................................... 9
ARTICLE IV
LOAN BY ISSUER; LOAN PAYMENTS;
OTHER PAYMENTS
Section 4.1. Loan by Issuer....................................................................... 10
Section 4.2. Loan Payments........................................................................ 10
Section 4.3. Purchase Payments.................................................................... 11
Section 4.4. Additional Payments.................................................................. 11
Section 4.5. Obligations Unconditional............................................................ 11
Section 4.6. Assignment of Issuer's Rights........................................................ 11
Section 4.7. Letter of Credit..................................................................... 11
</TABLE>
(i)
<PAGE>
ARTICLE V
ADDITIONAL COVENANTS OF BORROWER
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 5.1. Maintenance of Existence............................................................. 13
Section 5.2. Compliance with Laws; Commencement and Continuation of Operations at
Project; No Sale, Removal or Demolition of Project................................... 13
Section 5.3. Right of Inspection.................................................................. 13
Section 5.4. Lease by Borrower.................................................................... 13
Section 5.5. Financial Statements; Books and Records.............................................. 14
Section 5.6. Taxes, Other Governmental Charges and Utility Charges................................ 14
Section 5.7. Insurance............................................................................ 14
Section 5.8. Damage to or Condemnation of Project................................................. 14
Section 5.9. Litigation Notice.................................................................... 15
Section 5.10. Indemnification...................................................................... 15
Section 5.11. Nondiscrimination.................................................................... 16
ARTICLE VI
REDEMPTION OF BONDS
Section 6.1. Optional Redemption................................................................... 17
Section 6.2. Extraordinary Optional Redemption..................................................... 17
Section 6.3. Actions by Issuer..................................................................... 18
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default..................................................................... 19
Section 7.2. Remedies on Default................................................................... 20
Section 7.3. Remedies Not Exclusive................................................................ 21
Section 7.4. Payment of Legal Fees and Expenses.................................................... 21
Section 7.5. No Waiver............................................................................. 21
Section 7.6. Notice of Default..................................................................... 22
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Term of Agreement..................................................................... 23
Section 8.2. Notices............................................................................... 23
Section 8.3. Limitation of Liability; No Personal Liability........................................ 24
Section 8.4. Binding Effect........................................................................ 24
Section 8.5. Amendments............................................................................ 25
Section 8.6. Counterparts.......................................................................... 25
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 8.7. Severability......................................................................... 25
Section 8.8. Governing Law........................................................................ 25
Section 8.9. Assignment........................................................................... 25
Section 8.10. Receipt of Indenture................................................................. 25
Execution.......................................................................................... 26
Exhibit A - PROJECT SITE.........................................................................A-1
Exhibit B - PROJECT DESCRIPTION..................................................................B-1
Exhibit C - FORM OF DISBURSEMENT REQUEST.........................................................C-1
Exhibit D - NONDISCRIMINATION CLAUSE.............................................................D-1
</TABLE>
All exhibits omitted. The Registrant hereby agrees to furnish supplementally a
copy of any omitted exhibit to the Securities and Exchange Commission upon
request.
(iii)
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT dated as of March 1, 1997 between
MONTGOMERY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY (the "Issuer"), a public
instrumentality and body corporate and politic of the Commonwealth of
Pennsylvania organized and existing under the Pennsylvania Economic Development
Financing Law, as amended, and NEOSE TECHNOLOGIES, INC. (the "Borrower"), a
corporation duly organized and validly existing under the laws of the State of
Delaware (the capitalized terms not defined in the recitals being used therein
as defined or otherwise described in Article I of this Agreement),
WITNESSETH THAT:
A. The Issuer is a public instrumentality of the Commonwealth
of Pennsylvania and a body corporate and politic organized and existing under
the Act. Under the Act, the Issuer is authorized to enter into agreements
providing for the financing of industrial facilities, commercial facilities,
pollution control facilities, public facilities and other facilities and
activities which promote any of the public purposes set forth in the Act.
B. The Issuer has undertaken the financing of certain costs
involving the acquisition, improvement and equipment of a facility located on
certain real property more fully described in Exhibit A attached hereto (the
"Project Site"). The Project Site and such facilities are herein collectively
called the "Project". The Project is owned and operated by the Borrower. A more
complete description of the Project and the estimated costs thereof is set forth
in Exhibit B attached hereto.
C. In order to finance the Project, the Issuer has duly
authorized the issuance and sale of its Federally Taxable Variable Rate Demand
Revenue Bonds (Neose Technologies, Inc. Project) Series B of 1997 (the "Bonds")
to be issued under the terms of a Trust Indenture dated as of the date hereof
(as the same may hereafter be amended or supplemented from time to time, the
"Indenture") by and between the Issuer and Dauphin Deposit Bank and Trust
Company, Harrisburg, Pennsylvania, as Trustee.
D. The Issuer has entered into this Agreement with the
Borrower for the purposes of providing for (i) the loan of the proceeds of the
Bonds to the Borrower in order to finance the Project and (ii) the repayment of
such loan by the Borrower in amounts sufficient to pay, when due, the principal
of, premium, if any, on and interest on the Bonds.
NOW, THEREFORE, intending to be legally bound, the Issuer and
the Borrower hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1. Use of Terms Defined in Indenture. Terms used in
this Agreement which are defined in the Indenture and are not otherwise defined
in this Agreement shall have the meanings set forth in the Indenture unless the
context or use clearly indicates another meaning or intent.
Section 1.2. Definitions. In addition to the terms defined in
the recital clauses of this Agreement, as used herein:
"Additional Payments" means the amounts required to be paid by
the Borrower pursuant to Section 4.4.
"Agreement" means this Loan Agreement, as amended or
supplemented from time to time.
"Authorized Representative" means, with respect to the Issuer,
the Chairperson, Vice Chairperson or any other person at the time designated to
act on behalf of the Issuer by written certificate furnished to the Trustee
containing the specimen signature of such person and signed on behalf of the
Issuer by its Chairperson or Vice Chairperson, and, with respect to the
Borrower, the Chief Executive Officer, the President or any other person at the
time designated to act on behalf of the Borrower by written certificate
furnished to the Trustee containing the specimen signature of such person and
signed on behalf of the Borrower by its Chief Executive Officer or President.
"Bond Service" means, for any period or payable at any time,
the principal of, premium, if any, on and interest on the Bonds for that period
or payable at the time whether due on an Interest Payment Date, at maturity or
upon acceleration or redemption.
"Borrower's Agreements" means this Agreement, the Placement
Agreement, the Remarketing Agreement, the Reimbursement Agreement and the Bond
Pledge Agreement.
"Completion Date" means the date of completion of the Project
evidenced in accordance with the requirements of Section 3.6.
"Event of Default" means any of the events described as an
Event of Default in Section 7.1.
"Issuer's Fee" means the amount of $21,000.
"Loan" means the loan by the Issuer to the Borrower of the
proceeds of the Bonds pursuant to Section 4.1 in the original principal amount
of $8,400,000.
"Loan Payments" means the amounts required to be paid by the
Borrower in repayment of the Loan pursuant to Section 4.2.
2
<PAGE>
"Participating Bank" means the commercial bank, trust company
or other financial institution which has entered into the Participating Bank
Agreement with the Bank and the Reimbursement Agreement with the Borrower, and
its successors and assigns. The initial Participating Bank is Jefferson Bank.
"Participating Bank Agreement" means the Participation and
Reimbursement Agreement between the Participating Bank and the Bank relating to
the Bonds, as amended, supplemented or replaced from time to time.
"Placement Agreement" means the Placement Agreement among the
Issuer, the Borrower and CoreStates Capital Markets, a Division of CoreStates
Bank, N.A., as the Placement Agent, relating to the Bonds.
"Project Costs" means costs of the Project permitted under the
Act, including, but not limited to, the following:
(a) Costs incurred in acquisition, construction,
installation, equipment or improvement of the Project, including costs
incurred in respect of the Project for preliminary planning and
studies; architectural, engineering, accounting, consulting, legal and
other professional fees and expenses; labor, services and materials;
(b) Fees, charges and expenses incurred in connection
with the authorization, sale, issuance and delivery of the Bonds,
including without limitation bond discount, printing expense, title
insurance, recording fees and the initial fees and expenses of the
Trustee, Issuer, Remarketing Agent, Bank and Participating Bank;
(c) Payment of interest on the Bonds and fees of the
Bank, Participating Bank, Trustee and Remarketing Agent accruing during
the period of acquisition, construction and/or equipping of the
Project; and
(d) Any other costs, expenses, fees and charges
properly chargeable to the cost of acquisition, construction,
installation, equipment or improvement of the Project.
"Purchase Payments" means the amounts required to be paid by
the Borrower pursuant to Section 4.3.
"Reimbursement Agreement" means the Reimbursement Agreement
between the Participating Bank and the Borrower relating to the Letter of Credit
and the Bonds, as amended, supplemented or replaced from time to time.
"Remarketing Agreement" means the Remarketing Agreement
between the Borrower and the Remarketing Agent relating to the Bonds, as
amended, supplemented or replaced from time to time.
"Resolutions" means the resolution or resolutions of the
Issuer approving and authorizing the Bonds, the Indenture and this Agreement.
3
<PAGE>
"Unassigned Issuer's Rights" means all of the rights of the
Issuer to receive Additional Payments under Section 4.4, to be held harmless and
indemnified under Section 5.10, to be reimbursed for attorney's fees and
expenses under Section 7.4, and to give or withhold consent to or approval of
amendments, modifications, termination or assignment of this Agreement, or sale,
transfer, assignment, lease (or assignment of lease) or other disposal of the
Project, under Sections 5.1, 5.2, 5.4, 8.5 and 8.9.
Section 1.3. Interpretation. In this Agreement, unless the
context indicates otherwise, words importing the singular number include the
plural number, and vice versa, the terms "hereof", "hereby", "herein", "hereto",
"hereunder" and similar terms refer to this Agreement, and the term "hereafter"
means after and the term "heretofore" means before the Series Issue Date, and
words of any gender include the correlative words of the other genders. In this
Agreement, unless otherwise indicated, all references to particular Articles,
Sections, Subsections or paragraphs are references to the Articles, Sections,
Subsections or paragraphs of this Agreement.
Section 1.4. Captions, Headings and Table of Contents. The
captions, headings and table of contents in this Agreement are solely for
convenience of reference and in no way define, limit or describe the scope or
intent of any Articles, Sections, Subsections or paragraphs hereof.
(End of Article I)
4
<PAGE>
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations and Findings of Issuer. The
Issuer hereby confirms its findings and represents that:
(a) The Issuer is a public body corporate and politic
established in the Commonwealth of Pennsylvania pursuant to the laws of
the Commonwealth of Pennsylvania (including the Act). Under the Act,
the Issuer has the power to enter into the Indenture, the Placement
Agreement and this Agreement and to carry out its obligations
thereunder and to issue the Bonds to finance the Project.
(b) By adoption of the Resolutions at one or more
duly convened meetings of the Issuer at which a quorum was present and
acting throughout, the Issuer has duly authorized the execution and
delivery of the Indenture, the Placement Agreement and this Agreement
and performance of its obligations thereunder and the issuance of the
Bonds. Simultaneously with the execution and delivery of this
Agreement, the Issuer has duly executed and delivered the Indenture and
issued and sold the Bonds.
(c) Based on representations and information
furnished to the Issuer by or on behalf of the Borrower, the Issuer has
found that the Borrower is qualified to be a beneficiary of financing
provided by the Issuer pursuant to the Act.
(d) Based on representations and information
furnished to the Issuer by or on behalf of the Borrower, the Issuer has
found that the Project (i) will promote the public purposes of the Act,
(ii) is located within the boundaries of the Commonwealth of
Pennsylvania and within the boundaries of the county, city, town,
borough or township which organized the Issuer, and (iii) will
constitute a project within the meaning of the Act.
(e) The Project has been approved (1) by the
Pennsylvania Secretary of Commerce, as required by the Act, and (2) by
the Issuer by adoption of the Resolutions, as required by the Act.
(f) The Issuer has not and will not pledge the income
and revenues derived from this Agreement other than pursuant to and as
set forth in the Indenture.
Section 2.2. Representations of Borrower. The Borrower hereby
represents that:
(a) The Borrower is a corporation duly organized and
validly existing under the laws of the State of Delaware, qualified to
do business in the Commonwealth of Pennsylvania, and has full power and
authority to execute, deliver and perform its obligations under the
Borrower's Agreements and to enter into and carry out the transactions
contemplated thereby.
5
<PAGE>
(b) The Borrower's Agreements have been duly
authorized, executed and delivered by the Borrower and constitute valid
and binding obligations of the Borrower. The execution, delivery and
performance of the Borrower's Agreements by the Borrower do not violate
the Borrower's articles of incorporation or bylaws or, to the knowledge
of the Borrower, any provision of law applicable to the Borrower or any
agreement or instrument to which the Borrower is a party or by which it
or any of its properties is bound.
(c) The Project will promote the public purposes of
the Act and will not cause, directly or indirectly, the removal, either
in whole or in part, of a plant, facility or establishment from one
area of the Commonwealth of Pennsylvania to another. The Project is
located within the boundaries of the county, city, town, borough or
township which organized the Issuer.
(d) The Borrower has acquired or will acquire before
they are needed all permits and licenses, and has satisfied or will
satisfy other requirements necessary, for the acquisition,
construction, installation and/or operation of the Project. The Project
is a project within the meaning of the Act and will be operated as
such.
(e) The Borrower presently intends to use or operate
the Project in a manner consistent with the Act until the date on which
the Bonds have been fully paid and knows of no reason why the Project
will not be so used or operated.
(f) The proceeds of the Bonds will not exceed the
Project Costs.
(End of Article II)
6
<PAGE>
ARTICLE III
ACQUISITION OF PROJECT;
ISSUANCE OF BONDS; PROJECT FUND
Section 3.1. Acquisition of Project. The Borrower (a) has
acquired or shall acquire the Project Site and shall construct, install, equip
and/or improve the Project on the Project Site with all reasonable dispatch and
in accordance with the description thereof in Exhibit B attached hereto and
applicable law, (b) shall procure or cause to be procured all permits and
licenses necessary for the prosecution of any and all work on the Project, and
(c) shall pay when due all costs and expenses incurred in connection with such
acquisition, construction, installation, equipment and improvement from funds
made available therefor in accordance with this Agreement or otherwise. It is
understood that the Project is the property of the Borrower and that any
contracts made by the Borrower with respect thereto and any work to be done by
the Borrower on the Project are made or done by the Borrower in its own behalf
and not as agent or contractor for the Issuer. The Borrower may cause legal
title to the Project Site and buildings thereon to be conveyed to an industrial
development corporation for the purpose of obtaining financing for the benefit
of the Borrower through the Pennsylvania Industrial Development Authority of
costs of the Project Site and buildings thereon not financed with proceeds of
the Bonds.
Section 3.2. Additions and Changes to Project. The Borrower
may, at its option and at its own cost and expense, at any time and from time to
time, revise the description of the Project in Exhibit B attached hereto and/or
make such additions and changes to the Project as it may deem to be desirable
for its uses and purposes, provided that (i) such additions and changes shall
constitute part of the Project, (ii) the Borrower shall supplement the
information contained in Exhibit B attached hereto by filing with the Issuer and
the Trustee such supplemental information as is necessary to reflect such
additions and changes so that the Issuer and the Trustee will be able to
ascertain the nature and cost of the facilities included in the Project and
covered by this Agreement and (iii) if an addition or change is substantial in
relation to the Bonds, the Borrower shall have first obtained and filed with the
Issuer and the Trustee an opinion of Bond Counsel to the effect that such
addition or change is authorized or permitted under the Act. In any case, the
Borrower shall obtain the Issuer's approval of the addition to the Project of
any proposed facilities or any other changes not generally described in Exhibit
B attached hereto on the date of delivery of this Agreement.
Section 3.3. Issuance of Bonds; Application of Proceeds. To
provide funds to make the Loan for purposes of paying Project Costs in
accordance with Exhibit B attached hereto, the Issuer will issue the Bonds in
the aggregate principal amount of $8,400,000. The Bonds will be issued pursuant
to the Indenture and will bear interest, mature and be subject to redemption all
as set forth therein. The Borrower hereby approves the terms and conditions of
the Indenture and the Bonds, and the terms and conditions under which the Bonds
will be issued, sold and delivered.
The proceeds from the sale of the Bonds (including any bond
discount) shall be loaned to the Borrower pursuant to Section 4.1 and such
proceeds (net of any bond discount) shall be paid over to the Trustee for
deposit in the Project Fund. Pending disbursement pursuant to Section 3.4, the
proceeds of the Bonds so deposited in the Project Fund, together with any
investment earnings thereon, shall constitute a part of the Trust Estate and
shall be subject to the lien of the Indenture pursuant to the granting clauses
therein as security for the obligations described in such granting clauses, and
to such
7
<PAGE>
end the Borrower hereby grants to the Trustee as security for such obligations a
security interest in all of the Borrower's right, title and interest in and to
the Project Fund.
Section 3.4. Disbursements from Project Fund. Subject to the
provisions below, disbursements from the Project Fund shall be made to reimburse
or pay the Borrower, or any person designated by the Borrower, for Project
Costs. The Borrower agrees that the sums so disbursed from the Project Fund will
be used only for the payment of Project Costs, and will not be used for any
other purpose.
Any disbursements from the Project Fund for the payment of the
Project Costs shall be made by the Trustee only upon the written order of an
Authorized Representative of the Borrower, with the written approval of the
Participating Bank, delivered to the Trustee; provided that disbursements made
for costs described in clause (b) of the definition of Project Costs may be made
by the Trustee upon delivery to the Trustee of a closing statement signed by the
respective Authorized Representatives of the Issuer and the Borrower and
approved by the Participating Bank. Each such written order shall be
substantially in the form of the disbursement request attached hereto as Exhibit
C and shall be consecutively numbered and accompanied by invoices or other
appropriate documentation supporting the payments or reimbursements requested.
In case any contract provides for the retention by the Borrower of a portion of
the contract price, there shall be paid from the Project Fund only the net
amount remaining after deduction of any such portion, and only when that
retained amount is due and payable, may it be paid from the Project Fund.
Any moneys in the Project Fund (including the earnings from
investments therein) remaining after the Completion Date and payment, or
provision for payment, in full of the Project Costs shall, at the direction of
an Authorized Representative of the Borrower, be transferred to the General
Account of the Bond Fund and applied as provided in Subsection 5.04(c) of the
Indenture.
Section 3.5. Borrower Required to Pay Costs in Event Project
Fund Insufficient. If moneys in the Project Fund are not sufficient to pay all
Project Costs, the Borrower nonetheless shall complete the Project in accordance
with Exhibit B attached hereto and shall pay all such additional Project Costs.
The Borrower shall not be entitled to any reimbursement for any such payments
from the Issuer, the Trustee, the Bank, the Participating Bank or any Holder;
nor shall it be entitled to any abatement, diminution or postponement of the
Loan Payments.
Section 3.6. Completion. Except to the extent otherwise
approved by the Issuer, within three years of the date of original delivery and
payment for the Bonds, the Borrower shall have completed the Project and caused
all of the proceeds of the Bonds to be expended for Project Costs in accordance
with Exhibit B attached hereto or otherwise applied as described in Section 3.4.
The Borrower shall notify the Issuer and the Trustee of the Completion Date by a
certificate signed by an Authorized Representative of the Borrower stating
(a) the date on which the Project was substantially
completed,
(b) that all other facilities necessary in connection
with the Project have been acquired, constructed, installed, equipped
and/or improved,
(c) that the acquisition, construction, installation,
equipment and/or improvement of the Project and such other facilities
have been accomplished in such a manner
8
<PAGE>
as to conform with all applicable zoning, planning, building,
environmental and other similar governmental regulations,
(d) that except as provided in clause (e) below,
all costs of the Project then or theretofore due and payable have been
paid, and
(e) the amounts which the Trustee shall retain in the
Project Fund for the payment of Project Costs not yet due or for
liabilities which the Borrower is contesting or which otherwise should
be so retained and the reasons therefor.
Such certificate may state that it is given without prejudice to any rights
against third parties which then exist or subsequently may come into being. The
Authorized Representative of the Borrower shall include with such certificate a
statement specifically describing all items of personal property comprising a
part of the Project. The certificate shall be delivered as promptly as
practicable after the Borrower is in a position to certify as to the matters
referred to in clauses (a) through (e) above.
Section 3.7. Investment and Use of Fund Moneys. At the oral or
written request of an Authorized Representative of the Borrower, any moneys held
as part of the Bond Fund (except moneys in the Letter of Credit Debt Service
Account created under Section 5.04 of the Indenture and except any moneys
representing principal of, or premium, if any, or interest on, any Bonds which
are deemed paid under Section 10.02 of the Indenture) or the Project Fund shall
be invested or reinvested by the Trustee in Eligible Investments.
(End of Article III)
9
<PAGE>
ARTICLE IV
LOAN BY ISSUER; LOAN PAYMENTS;
OTHER PAYMENTS
Section 4.1. Loan by Issuer. Upon the terms and conditions of
this Agreement, the Issuer will make the Loan to the Borrower on the Series
Issue Date in a principal amount equal to the aggregate principal amount of the
Bonds. The Loan shall be deemed fully advanced upon deposit of the proceeds of
the Bonds (net of any bond discount) in the Project Fund pursuant to Section
3.3.
Section 4.2. Loan Payments. In consideration of and in
repayment of the Loan, the Borrower shall make, as Loan Payments, payments which
correspond, as to amounts and due dates, to the Bond Service on the Bonds;
provided that, except to the extent that the Participating Bank shall otherwise
stipulate by written notice delivered to the Issuer, the Trustee and the Bank,
such payments shall be made in advance as set forth below in this Section.
Amounts received upon a drawing by the Trustee under the Letter of Credit for
the payment of Bond Service shall be credited against the Loan Payments
otherwise payable by the Borrower corresponding to such Bond Service; provided
that the Bank and, if applicable, the Participating Bank have been fully
reimbursed for such drawing by the Borrower.
To provide funds to pay the Bond Service as and when due as
specified above, the Borrower shall make the Loan Payments on or before the
Business Day next preceding the first Business Day of each month in an amount
equal to the interest due on the Bonds on the Interest Payment Date for such
month, while the Bonds bear interest at a Weekly Rate, or in an amount equal to
1/6 of the interest due on the Bonds on the next Interest Payment Date while the
Bonds bear interest at a Term Rate, taking into account funds held in the
General Account of the Bond Fund under the Indenture which would be available
for such purposes. In addition, to provide funds to pay the principal of and
premium, if any, and interest on the Bonds as and when due at any other time,
the Borrower hereby agrees to make and shall make Loan Payments at least one
Business Day (or earlier if required by the Indenture) prior to the date when
such principal, premium, if any, and interest is due and payable. The foregoing
requirement to make Loan Payments in advance of the corresponding dates for
payment of the principal of and interest on the Bonds may be waived if and to
the extent stipulated by the Participating Bank by written notice delivered to
the Issuer, the Trustee and the Bank; provided that in no event shall Loan
Payments be made later than such corresponding dates.
It is the intention of the Issuer and the Borrower that,
notwithstanding any other provision of this Agreement, the Trustee, as assignee
of the Issuer, shall receive funds from or on behalf of the Borrower (taking
into account such credits for amounts drawn on the Letter of Credit) in such
amounts and at such times as will enable the Issuer to pay when due all of its
Bond Service on the Bonds and any obligations arising under Section 4.3 and any
such obligations surviving the payment of the Bonds.
All Loan Payments shall be payable in lawful money of the
United States of America and shall be made by, or on behalf of the Borrower, to
the Trustee at its Principal Office for the account of the Issuer and deposited
in the General Account of the Bond Fund created by the Indenture.
Such Loan Payments shall be applied as provided in the Indenture.
10
<PAGE>
The Borrower shall be entitled to credits against the Loan
Payments as and to the extent provided in Subsection 5.04(f) of the Indenture.
Section 4.3. Purchase Payments. To the extent that moneys on
deposit in the Remarketing Proceeds Purchase Account or the Letter of Credit
Purchase Account established under the Indenture are insufficient to pay the
full purchase price of Bonds payable pursuant to Sections 4.01 and 4.02 of the
Indenture on the applicable Purchase Date, the Borrower shall also pay to the
Trustee as Purchase Payments for deposit in the Borrower Purchase Account
established under the Indenture amounts sufficient to cover the shortfalls.
Section 4.4. Additional Payments. The Borrower shall pay as
Additional Payments hereunder: (a) to the Issuer, the Issuer's Fee on the Series
Issue Date and any and all costs and expenses (including reasonable legal fees
and expenses) incurred or to be paid by the Issuer in connection with the
issuance and delivery of the Bonds or otherwise related to actions taken by the
Issuer under this Agreement or the Indenture or any amendment thereof,
supplement thereto or consent or waiver thereunder, including without limitation
the Borrower's pro rata share of any annual charge made by a Rating Service to
maintain a rating on the Bonds; (b) to the Remarketing Agent, the fees and
expenses of the Remarketing Agent under the Indenture and the Remarketing
Agreement for services rendered in connection with the Bonds; and (c) to the
Trustee, the reasonable fees, charges and expenses of the Trustee and its agents
for acting as such under the Indenture.
Section 4.5. Obligations Unconditional. The obligations of the
Borrower to make Loan Payments, Purchase Payments and Additional Payments shall
be absolute and unconditional, and the Borrower shall make such payments without
abatement, diminution or deduction regardless of any cause or circumstances
whatsoever including without limitation any defense, set-off, recoupment or
counterclaim which the Borrower may have or assert against the Issuer, the
Trustee, the Remarketing Agent, the Bank, the Participating Bank or any other
person, 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. Loan Payments and Purchase
Payments required to be paid by or on behalf of the Borrower hereunder shall be
received by the Issuer or the Trustee as net sums and the Borrower agrees to pay
or cause to be paid all charges against or which might diminish such net sums.
Section 4.6. Assignment of Issuer's Rights. To secure the
payment of, first, the Bond Service, second, the Participating Bank's
obligations under the Participating Bank Agreement, and third, the Borrower's
obligations under the Reimbursement Agreement, the Issuer shall pledge and
assign to the Trustee all the Issuer's rights in, to and under this Agreement
(except for the Unassigned Issuer's Rights), the Revenues and the other property
comprising the Trust Estate. The Borrower consents to such pledge and assignment
and agrees to make or cause to be made Loan Payments and Purchase Payments
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 Issuer hereunder, the Borrower shall also obtain the
consent of the Trustee; provided that, except as otherwise expressly stipulated
herein or in the Indenture, the Borrower shall not be required to obtain the
Trustee's consent with respect to the Unassigned Issuer's Rights.
Section 4.7. Letter of Credit. Concurrently with the initial
delivery of the Bonds pursuant to Section 2.01 of the Indenture, the Borrower
shall cause the initial Letter of Credit to be issued by the Bank pursuant to
the Participating Bank Agreement, which Letter of Credit (1) shall be
substantially in the same form as the exhibit attached to the Participating Bank
Agreement; (2) shall be
11
<PAGE>
dated the date of delivery of the Bonds; (3) shall authorize the Trustee to draw
on the Bank, subject to the terms and conditions thereof, up to (a) an amount
equal to the principal amount of the Bonds (i) to enable the Trustee to pay the
principal amount of the Bonds when due at maturity or upon redemption or
acceleration and (ii) to enable the Trustee to pay the portion of the purchase
price of Bonds tendered to it for purchase and not remarketed corresponding to
the principal amount of such Bonds, plus (b) an amount equal to the 46 days
interest on the Bonds at the Maximum Rate with respect to the Weekly Rate (i) to
enable the Trustee to pay interest on the Bonds when due and (ii) to enable the
Trustee to pay the portion of the purchase price of Bonds tendered to it for
purchase and not remarketed corresponding to the accrued interest on such Bonds.
The Letter of Credit may be extended, amended or replaced by an Alternate Letter
of Credit complying with the provisions of Sections 2.05 and 5.08 of the
Indenture. The Participating Bank, the Participating Bank Agreement and the
Reimbursement Agreement may be replaced by complying with the provisions of
Section 5.08(g) of the Indenture.
Subject to the provisions of Section 5.09(h) of the Indenture,
it is anticipated that all payments of principal of and interest on the Bonds,
and all payments of purchase price of the Bonds payable upon optional or
mandatory tender for purchase for the payment of which remarketing proceeds are
not available pursuant to Article IV of the Indenture, will be funded from draws
on the Letter of Credit.
The Borrower shall take whatever action may be necessary to
maintain the Letter of Credit in full force and effect during the period
required by the Indenture, including the payment of any transfer fees required
by the Bank upon any transfer of the Letter of Credit to any successor Trustee.
(End of Article IV)
12
<PAGE>
ARTICLE V
ADDITIONAL COVENANTS OF BORROWER
Section 5.1. Maintenance of Existence. The Borrower shall do
all things necessary to preserve and keep in full force and effect its
existence, rights, franchises and qualification to do business in Pennsylvania
and shall not (a) dissolve or otherwise sell, transfer or dispose of all, or
substantially all, of its assets or (b) consolidate with or merge into any other
entity; provided that the preceding restrictions shall not apply if the
transferee or the surviving or resulting entity, if other than the Borrower, by
written instrument satisfactory to the Trustee, assumes and agrees to perform
and observe the agreements and obligations of the Borrower under this Agreement
and the provisions of Section 8.9 are satisfied.
Section 5.2. Compliance with Laws; Commencement and
Continuation of Operations at Project; No Sale, Removal or Demolition of
Project. The Borrower will acquire, construct, install, operate and maintain the
Project in such manner as to comply with the Act and all applicable requirements
of federal, state and local laws and the regulations, rules and orders of any
federal, state or local agency, board, commission or court having jurisdiction
over the Project or the operation thereof, including without limitation
applicable zoning, planning, building and environmental laws, regulations, rules
and orders; provided that the Borrower shall be deemed in compliance with this
Section so long as it is contesting in good faith any such requirement by
appropriate legal proceedings. The Borrower (or its lessee) shall commence
operations at the Project within three years from the Series Issue Date and
shall continue such operations throughout the term of this Agreement. The
Borrower shall not sell, assign or otherwise dispose of (whether in one
transaction or in a series of transactions) its interest in the Project or any
material portion thereof (other than as permitted by Section 5.1 and other than
leases permitted under Section 5.4) or undertake or permit the demolition or
removal of the Project or any material portion thereof without the prior written
consent of the Issuer; provided that the Borrower shall be permitted (i) to
sell, transfer, assign or otherwise dispose of or remove any portion of the
Project which is retired or replaced in the ordinary course of business and (ii)
to convey legal title to the Project Site and buildings thereon to an industrial
development corporation for the purpose of obtaining financing for the benefit
of the Borrower through the Pennsylvania Industrial Development Authority of
costs of the Project Site and buildings thereon not financed with proceeds of
the Bonds.
Section 5.3. Right of Inspection. Subject to reasonable
security and safety regulations and upon reasonable notice, the Issuer and the
Trustee, and their respective agents, shall have the right during normal
business hours to inspect the Project.
Section 5.4. Lease by Borrower. The Borrower may lease the
Project, in whole or in part, to one or more other Persons, provided that:
(a) No such lease shall relieve the Borrower from its
obligations under this Agreement, the Reimbursement Agreement,
the Bond Pledge Agreement or the Remarketing Agreement;
(b) In connection with any such lease the Borrower
shall retain such rights and interests as will permit it to
comply with its obligations under this Agreement, the
13
<PAGE>
Reimbursement Agreement, the Bond Pledge Agreement and the
Remarketing Agreement;
(c) No such lease shall impair materially the
accomplishment of the purposes of the Act to be accomplished
by operation of the Project as herein provided;
(d) Any such lease shall require the lessee to
operate the Project as a "project" under the Act as long as
the Bonds are outstanding; and
(e) In the case of a lease to a new lessee or an
assignment of an existing lease to a new lessee of
substantially all of the Project, such new lessee shall have
been approved by the Issuer (such approval not to be
unreasonably withheld).
Section 5.5. Financial Statements; Books and Records. The
Borrower shall prepare or have prepared such financial statements and reports in
such form as are required by the Participating Bank, and shall keep true and
proper books of records and accounts in which full and correct entries are made
of all its business transactions. Copies of such financial statements and
reports shall be provided to the Issuer and the Trustee promptly upon request,
and such books of records and accounts shall be made available for inspection
during normal business hours upon request by the Issuer or the Trustee or their
respective agents.
Section 5.6. Taxes, Other Governmental Charges and Utility
Charges. The Borrower shall pay, or cause to be paid before the same become
delinquent, all taxes, assessments, whether general or special, and governmental
charges of any kind whatsoever that may at any time be lawfully assessed or
levied against or with respect to the Project, including any equipment or
related property installed or brought by the Borrower therein or thereon, and
all utility and other charges incurred in the operation, maintenance, use,
occupancy and upkeep of the Project. With respect to special assessments or
other governmental charges that lawfully may be paid in installments over a
period of years, the Borrower shall be obligated to pay only such installments
as are required to be paid during the term hereof. The Borrower may, at its
expense, in good faith contest any such taxes, assessments and other charges
and, in the event of any such contest, may permit the taxes, assessments or
other charges so contested to remain unpaid during the period of such contest
and any appeal therefrom, unless the Issuer or the Trustee shall notify the
Borrower that, in the opinion of counsel selected by the Issuer or the Trustee,
by nonpayment of any such items the Project or any part thereof will be subject
to loss or forfeiture, in which event such taxes, assessments or charges shall
be paid promptly. The Borrower shall also comply at its own cost and expense
with all notices received from public authorities with respect to the Project.
Section 5.7. Insurance. The Borrower shall at its own cost and
expense obtain or cause to be obtained insurance policies against such risks,
and in such amounts, as are customarily insured against by entities owning
facilities of like size and type to the Project, paying, as the same become due
and payable, all premiums in respect thereof.
Section 5.8. Damage to or Condemnation of Project. In the
event of damage, destruction or condemnation of part or all of the Project, the
Borrower shall, subject to the provisions of the Reimbursement Agreement,
either: (i) restore the Project or (ii) if permitted by the terms of the Bonds,
direct the Issuer to call the Bonds for redemption as set forth in Section 6.2.
Damage to, destruction of or condemnation of all or a portion of the Project
shall not terminate this Agreement or
14
<PAGE>
cause any abatement of or reduction in the payments to be made by the Borrower
under this Agreement.
Section 5.9. Litigation Notice. The Borrower shall give the
Trustee, the Participating Bank, the Remarketing Agent and the Bank prompt
notice of any action, suit or proceeding pending or threatened against it at law
or in equity, or before any governmental instrumentality or agency, which, if
adversely determined, would materially impair the right of the Borrower to carry
on the business which is contemplated in connection with the Project or would
materially and adversely affect its business, operations, properties, assets or
condition.
Section 5.10. Indemnification. The Borrower will indemnify and
hold harmless the Issuer and each member, director, officer, employee, attorney
and agent of the Issuer for and against any and all claims, losses, damages or
liabilities (including the costs and expenses of defending against any such
claims) to which the Issuer or any member, director, officer, employee or agent
of the Issuer may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise directly or indirectly out of
(a) any loss or damage to property or injury to or death of or loss by any
person that may be occasioned by any cause whatsoever pertaining to the
construction, maintenance, operation and use of the Project; (b) any breach or
default on the part of the Borrower in the performance of any covenant or
agreement of the Borrower under any of the Borrower's Agreements or any related
document, or arising from any act or failure to act by the Borrower or any of
its agents, contractors, servants, employees or licensees; (c) the
authorization, issuance and sale of the Bonds; (d) any failure by the Borrower
to comply with the provisions of the Act; and (e) any claim, action or
proceeding brought with respect to any matter set forth in clause (a), (b), (c)
or (d) above.
The Borrower will indemnify and hold harmless the Trustee and
the Remarketing Agent for and against all liabilities, claims, costs and
expenses incurred without negligence or bad faith on the part of the Trustee or
the Remarketing Agent on account of any action taken or omitted to be taken by
the Trustee or the Remarketing Agent in accordance with the terms of this
Agreement, the Bonds, the Bond Pledge Agreement, the Letter of Credit, the
Remarketing Agreement or the Indenture or any action taken at the request of or
with the consent of the Borrower, including the costs and expenses incurred by
the Trustee and the Remarketing Agent in defending themselves against any such
claims.
In case any action or proceeding is brought against the
Issuer, the Remarketing Agent or the Trustee in respect of which indemnity may
be sought hereunder, the party seeking indemnity promptly shall give notice of
that action or proceeding to the Borrower, and the Borrower upon receipt of that
notice shall have the obligation and the right to assume the defense of the
action or proceeding; provided that failure of a party to give that notice shall
not relieve the Borrower from any of its obligations under this Section unless
(and then only to the extent) that failure prejudices the defense of the action
or proceeding by the Borrower. At its own expense, an indemnified party may
employ separate counsel and participate in the defense. The Borrower shall not
be liable for any settlement made without its consent, which shall not be
unreasonably withheld.
The indemnification set forth above is intended to and shall
(i) include the indemnification of all affected directors, officers, agents and
employees of the Issuer, the Remarketing Agent and the Trustee, respectively,
and (ii) be enforceable by the Issuer, the Remarketing Agent and the Trustee,
respectively, to the full extent permitted by law.
15
<PAGE>
Section 5.11. Nondiscrimination. The Borrower hereby accepts
and agrees to be bound by the nondiscrimination clause set forth in Exhibit D
attached hereto.
(End of Article V)
16
<PAGE>
ARTICLE VI
REDEMPTION OF BONDS
Section 6.1. Optional Redemption. Provided no Event of Default
shall have occurred and be subsisting, at any time and from time to time, the
Borrower may deliver or cause to be delivered Loan Payments to the Trustee in
addition to the scheduled Loan Payments required to be made under Section 4.2
and direct the Trustee to use the Loan Payments so delivered for the purpose of
calling Bonds for optional redemption in accordance with the applicable
provisions of the Indenture and redeeming such Bonds at the redemption price
stated in the Indenture. Such Loan Payments shall be held and applied as
provided in Section 5.04 of the Indenture and delivery thereof shall not operate
to abate or postpone Loan Payments otherwise becoming due or to alter or suspend
any other obligations of the Borrower under this Agreement. Whenever the Bonds
are subject to optional redemption pursuant to the Indenture, the Issuer will,
but only upon direction of the Borrower, direct the Trustee to call the same for
redemption as provided in the Indenture.
Section 6.2. Extraordinary Optional Redemption. The Borrower
shall have, subject to the conditions hereinafter imposed, the option to direct
the redemption of the Bonds in accordance with the applicable provisions of the
Indenture upon the occurrence of any of the following events:
(a) The Project shall have been damaged or destroyed
to such an extent that (1) it cannot reasonably be expected by
the Borrower to be restored, within a period of six months, to
the condition thereof immediately preceding such damage or
destruction or (2) its normal use and operation is reasonably
expected by the Borrower to be prevented for a period of six
consecutive months.
(b) Title to, or the temporary use of, all or a
significant part of the Project shall have been taken under
the exercise of the power of eminent domain (1) to such extent
that the Project cannot reasonably be expected by the Borrower
to be restored within a period of six months to a condition of
usefulness comparable to that existing prior to the taking or
(2) as a result of the taking, normal use and operation of the
Project is reasonably expected by the Borrower to be prevented
for a period of six consecutive months.
(c) As a result of any changes in state or federal
laws or as a result 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 Issuer or
the Borrower in good faith, this Agreement shall have become
void or unenforceable or impossible of performance in
accordance with the intent and purpose of the parties as
expressed in this Agreement, or if unreasonable burden or
excessive liability shall have been imposed with respect to
the Project or the operation thereof, including without
limitation federal, state or other ad valorem, property,
income or other taxes not being imposed on the date of this
Agreement other than ad valorem taxes presently generally
levied upon privately owned property used for the same general
purpose as the Project.
(d) Changes in the economic availability of raw
materials, operating supplies, energy sources or supplies, or
facilities (including, but not limited to, facilities
17
<PAGE>
in connection with the disposal of industrial wastes)
necessary for the operation of the Project shall have occurred
or technological or other changes shall have occurred which
the Borrower cannot reasonably overcome or control and which
in the Borrower's reasonable judgment render the Project
uneconomic.
To exercise such option, the Borrower shall, within 90 days
following the event giving rise to the exercise of that option, or at any time
during the continuation of the condition referred to in clause (d) above, give
notice to the Issuer and the Trustee specifying the date on which the Borrower
will deliver the funds required for such redemption, which date shall be not
more than 90 days from the date such notice is mailed and shall make
arrangements satisfactory to the Trustee for the giving of the required notice
of redemption.
The amount payable by the Borrower in the event of its
exercise of the option granted in this Section shall be the sum of (i) an amount
of money which, when added to the moneys and investments held to the credit of
the Bond Fund, will be sufficient pursuant to Section 5.04 and Article X of the
Indenture to pay, or provide for the payment of, the redemption price of Bonds
on the redemption date and to fully reimburse the Bank and the Participating
Bank with respect to all drawings on the Letter of Credit, such amount to be
paid to the Trustee, plus (ii) an amount of money equal to the Additional
Payments accrued and to accrue until actual final payment and redemption of the
Bonds, such amount or applicable portions thereof to be paid to the Trustee or
to the Persons to whom those Additional Payments are or will be due. The
requirement of clause (ii) above with respect to Additional Payments to accrue
may be met if provisions satisfactory to the Trustee and the Issuer are made for
paying those amounts as they accrue.
Section 6.3. Actions by Issuer. At the request of the Borrower
or the Trustee, the Issuer shall take all steps required of it under the
applicable provisions of the Indenture or the Bonds to effect the redemption of
all or a portion of the Bonds pursuant to this Article.
(End of Article VI)
18
<PAGE>
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default. Each of the following shall
(unless waived by the Trustee) be an Event of Default:
(a) Failure by the Borrower to make or cause to be
made any Loan Payment or Purchase Payment on or prior to the
date on which such payment is due and payable;
(b) Failure by the Borrower to observe and perform
any other agreement, term or condition contained in this
Agreement and continuation of such failure for a period of 30
days after notice thereof shall have been given to the
Borrower by the Issuer or the Trustee, or for such longer
period as the Issuer and the Trustee may agree to in writing;
provided that if the failure is other than the payment of
money and is of such nature that it can be corrected but not
within the applicable period, such failure shall not
constitute an Event of Default so long as the Borrower
institutes curative action within the applicable period and
diligently pursues such action to completion;
(c) The Borrower shall (i) apply for or consent to
the appointment of a receiver, trustee, liquidator or
custodian or the like of itself or of its property, or (ii)
admit in writing its inability to pay its debts generally as
they become due, or (iii) make a general assignment for the
benefit of creditors, or (iv) be adjudicated a bankrupt or
insolvent, or (v) commence a voluntary case under the United
States Bankruptcy Code, or file a voluntary petition or answer
seeking reorganization, an arrangement with creditors or an
order for relief, or seeking to take advantage of any
insolvency law or file an answer admitting the material
allegations of a petition filed against it in any bankruptcy,
reorganization, or insolvency proceeding, or action shall be
taken by it for the purpose of effecting any of the foregoing,
or (vi) have instituted against it, without the application,
approval or consent of the Borrower, a proceeding in any court
of competent jurisdiction, under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors,
seeking in respect of the Borrower an order for relief or an
adjudication in bankruptcy, reorganization, dissolution,
winding up, liquidation, a composition or arrangement with
creditors, a readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or the like of the
Borrower or of all or any substantial part of its assets, or
other like relief in respect thereof under any bankruptcy or
insolvency law, and, if such proceeding is being contested by
the Borrower in good faith, the same shall (A) result in the
entry of an order for relief or any such adjudication or
appointment or (B) remain unvacated, undismissed and
undischarged for a period of 60 days;
(d) Any representation or warranty made by the
Borrower herein or any statement in any report, certificate,
financial statement or other instrument furnished in
connection with this Agreement or with the purchase of the
Bonds shall at any time prove to have been false or misleading
in any material respect when made or given;
(e) For any reason the Bonds are declared due and
payable by acceleration in accordance with Section 7.03 of
the Indenture;
19
<PAGE>
(f) The Trustee receives notice from the
Participating Bank (i) stating that an Event of Default as
defined in the Reimbursement Agreement has occurred and is
continuing and (ii) directing the Trustee to call the Bonds
for mandatory purchase or to declare the principal of the
outstanding Bonds immediately due and payable;
(g) The Trustee receives notice from the Bank (i)
stating that an Event of Default as defined in the
Participating Bank Agreement has occurred and is continuing
and (ii) directing the Trustee to call the Bonds for mandatory
purchase or to declare the principal of the outstanding Bonds
immediately due and payable; or
(h) The Trustee receives notice from the Bank prior
to the third Business Day following payment of a drawing under
the Letter of Credit for interest on Bonds which remain
outstanding after the application of the proceeds of such
drawing, stating that the Letter of Credit will not be
reinstated with respect to such interest.
The declaration of an Event of Default under paragraph (c)
above, and the exercise of remedies upon any such declaration, shall be subject
to any applicable limitations of federal bankruptcy law affecting or precluding
that declaration or exercise during the pendency of or immediately following any
bankruptcy, liquidation or reorganization proceedings.
Section 7.2. Remedies on Default.
(a) Whenever an Event of Default shall have happened and be
subsisting, any one or more of the following remedial steps may be
taken:
(1) If acceleration of the principal amount of the
Bonds has been declared pursuant to Section 7.03 of the
Indenture, the Trustee shall declare all Loan Payments to be
immediately due and payable, whereupon the same shall become
immediately due and payable; and
(2) The Issuer or the Trustee may pursue any and all
remedies now or hereafter existing at law or in equity to
collect all amounts then due and thereafter to become due
under this Agreement or the Letter of Credit or to enforce the
performance and observance of any other obligation or
agreement of the Borrower under this Agreement.
(b) The Borrower covenants that, in case it shall fail to pay
or cause to be paid any Loan Payments or Purchase Payments as and when
the same shall become due and payable whether at maturity or by
acceleration or otherwise, then, upon demand of the Trustee, the
Borrower will pay to the Trustee the whole amount that then shall have
become due and payable hereunder; and, in addition thereto, such
further amounts as shall be sufficient to cover the costs and expenses
of collection, including a reasonable compensation to the Trustee, its
agents and counsel, and any expenses or liabilities incurred by the
Issuer or the Trustee. In case the Borrower shall fail forthwith to pay
such amounts upon such demand, the Trustee 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.
(c) In case there shall be pending proceedings for the
bankruptcy or reorganization of the Borrower under the federal
bankruptcy laws or any other applicable law, or in case a
20
<PAGE>
receiver or trustee shall have been appointed for the benefit of the
creditors or the property of the Borrower, the Trustee shall be
entitled and empowered, by intervention in such proceedings or
otherwise, to file and prove a claim or claims for the whole amount due
hereunder, 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 Trustee allowed in such judicial proceedings
relative to the Borrower, its creditors or its property, 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. Any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized to make such payments to the
Issuer or the Trustee, and to pay to the Issuer or the Trustee any
amount due it for compensation and expenses, including counsel fees
incurred by it up to the date of such distribution.
Notwithstanding the foregoing, the Trustee shall not be
obligated to take any step which in its opinion will or might cause it to expend
money or otherwise incur liability unless and until a satisfactory indemnity
bond has been furnished to the Trustee at no cost or expense to the Trustee. Any
amounts collected as Loan Payments or applicable to Loan Payments and any other
amounts which would be applicable to payment of Bond Service collected pursuant
to action taken under this Section shall be paid into the Bond Fund and applied
in accordance with the provisions of the Indenture or, if the outstanding Bonds
have been paid and discharged in accordance with the provisions of the
Indenture, shall be paid as provided in Article X of the Indenture for transfers
of remaining amounts in the Bond Fund.
The provisions of this Section are subject to the further
limitation that the annulment by the Trustee of its declaration that all of the
Bonds are immediately due and payable also shall constitute an annulment of any
corresponding declaration made pursuant to Subsection 7.2(a)(1); provided that
no such waiver or rescission shall extend to or affect any subsequent or other
default or impair any right consequent thereon.
Section 7.3. Remedies Not Exclusive. No remedy conferred upon
or reserved to the Issuer or the Trustee 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 the Letter of Credit, or now or hereafter existing at
law or in equity. No delay or omission to exercise any right or power accruing
upon any default shall impair that 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. In order to entitle the Issuer or the
Trustee to exercise any remedy reserved to it in this Article, it shall not be
necessary to give any notice, other than any notice required by law or for which
express provision is made herein.
Section 7.4. Payment of Legal Fees and Expenses. If an Event
of Default should occur and the Issuer or the Trustee should incur expenses,
including attorneys' fees, in connection with the enforcement of this Agreement
or the Letter of Credit or the collection of sums due thereunder, the Borrower
shall reimburse the Issuer and the Trustee, as applicable, for the expenses so
incurred, upon demand.
Section 7.5. No Waiver. No failure by the Issuer or the
Trustee to insist upon the strict performance by the Borrower of any provision
hereof shall constitute a waiver of their right to strict performance and no
express waiver shall be deemed to apply to any other existing or subsequent
right to remedy the failure by the Borrower to observe or comply with any
provision hereof.
21
<PAGE>
The Issuer and the Trustee may waive any Event of Default
hereunder only with the prior written consent of the Bank and the Participating
Bank.
Section 7.6. Notice of Default. The Borrower shall notify the
Trustee, the Issuer, the Participating Bank and the Bank immediately if it
becomes aware of the occurrence of any Event of Default hereunder or of any
fact, condition or event which, with the giving of notice or passage of time or
both, would become an Event of Default.
(End of Article VII)
22
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Term of Agreement. This Agreement shall be and
remain in full force and effect from the Series Issue Date until such time as
all of the Bonds shall have been fully paid (or provision made for such payment)
pursuant to the Indenture, the Indenture shall have been released pursuant to
Section 10.01 thereof, and all other sums payable by the Borrower under this
Agreement and the Reimbursement Agreement shall have been paid, except for
obligations of the Borrower under Section 5.10, which shall survive any
termination of this Agreement.
Section 8.2. Notices. All notices, certificates, requests or
other communications hereunder shall be in writing and shall be deemed to be
sufficiently given when mailed by registered or certified mail, postage prepaid,
and addressed as follows:
If to the Borrower: Neose Technologies, Inc.
102 Witmer Road
Horsham, PA 19044
Attention: P. Sherrill Neff, President
with a copy to: Ballard Spahr Andrews & Ingersoll
1735 Market Street
Philadelphia, PA 19103
Attention: Lynn Axelroth, Esquire
If to the Issuer: Montgomery County Industrial
Development Authority
3 Stoney Creek Office Center
151 West Marshall Street
Norristown, PA 19401
Attention: Gerald Birkelbach,
Executive Director
If to the Trustee: Dauphin Deposit Bank and Trust Company, Trustee
213 Market Street
Harrisburg, PA 17101
Attention: Corporate Trust Services Department,
M/C #001-01-02
If to the Remarketing Agent: CoreStates Capital Markets,
a Division of CoreStates Bank, N.A.
600 Penn Street, 2nd Floor
Reading, PA 19602
Attention: Ms. Angel Helm
Senior Vice President
23
<PAGE>
If to the Bank: CoreStates Bank, N.A.
FC1-1-5-22
Broad & Chestnut Streets
Philadelphia, PA 19107
Attention: Global Financial Institutions
If to the Participating Bank: Jefferson Bank
1607 Walnut Street
Philadelphia, PA 19103
Attention: _____________________
The Borrower, the Issuer, the Trustee, the Bank, the Participating Bank and the
Remarketing Agent, by notice given hereunder to the Persons listed above, may
designate any further or different addresses to which subsequent notices,
certificates, requests or other communications shall be sent.
Section 8.3. Limitation of Liability; No Personal Liability.
In the exercise of the powers of the Issuer, the Trustee or the Remarketing
Agent hereunder or under the Indenture, including without limitation the
application of moneys and the investment of funds, neither the Issuer, the
Trustee, the Remarketing Agent nor their members, directors, officers, employees
or agents shall be accountable for any action taken or omitted by any of them in
good faith and with the belief that it is authorized or within the discretion or
rights or powers conferred. The Issuer, the Trustee, the Remarketing Agent and
their members, directors, officers, employees and agents shall be protected in
acting upon any paper or document believed to be genuine, and any of them may
conclusively rely upon the advice of counsel and may (but need not) require
further evidence of any fact or matter before taking any action. In the event of
any default by the Issuer hereunder, the liability of the Issuer shall be
enforceable only out of the Issuer's interest under this Agreement and there
shall be no other recourse for damages against the Issuer, its members,
directors, officers, attorneys, agents and employees, or any of the property now
or hereafter owned by it or them. All covenants, obligations and agreements of
the Issuer contained in this Agreement or the Indenture shall be effective to
the extent authorized and permitted by applicable law. No such covenant,
obligation or agreement shall be deemed to be a covenant, obligation or
agreement of any present or future member, director, officer, agent or employee
of the Issuer, and no official executing the Bonds shall be liable personally on
the Bonds or be subject to any personal liability or accountability by reason of
the issuance thereof or by reason of the covenants, obligations or agreements of
the Issuer contained in this Agreement or the Indenture.
Section 8.4. Binding Effect. This Agreement shall inure to the
benefit of and shall be binding in accordance with its terms upon the Issuer,
the Borrower and their respective successors and assigns; provided that this
Agreement may not be assigned by the Borrower (except in connection with a sale
or transfer of assets pursuant to Section 5.1 or in compliance with Section 8.9)
and may not be assigned by the Issuer except to the Trustee pursuant to the
Indenture or as otherwise may be necessary to enforce or secure payment of Bond
Service. This Agreement may be enforced only by the parties, their assignees and
others who may, by law, stand in their respective places. In addition, the
Remarketing Agent, the Bank and Participating Bank are hereby explicitly
recognized as third party beneficiaries of this Agreement.
Section 8.5. Amendments. Except as otherwise expressly
provided in this Agreement or the Indenture, subsequent to the issuance of the
Bonds and unless and until all conditions provided
24
<PAGE>
for in the Indenture for release of the Indenture having been met, this
Agreement may not be effectively amended, modified or terminated except by an
instrument in writing signed by the Borrower and the Issuer, consented to by the
Trustee, and in accordance with the provisions of Article IX of the Indenture,
as applicable.
Section 8.6. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be regarded as an original and
all of which shall constitute one and the same instrument.
Section 8.7. Severability. If any provision of this Agreement
is determined by a court to be invalid or unenforceable, such determination
shall not affect any other provision hereof, each of which shall be construed
and enforced as if the invalid or unenforceable portion were not contained
herein. Such invalidity or unenforceability shall not affect any valid and
enforceable application thereof, and each such provision shall be deemed to be
effective, operative and entered into in the manner and to the full extent
permitted by applicable law.
Section 8.8. Governing Law. This Agreement shall be deemed to
be a contract made under the laws of the Commonwealth of Pennsylvania and for
all purposes shall be governed by and construed in accordance with the laws of
the Commonwealth of Pennsylvania.
Section 8.9. Assignment. The Borrower shall not assign this
Agreement or any interest of the Borrower herein, either in whole or in part,
without the prior written consent of the Trustee, which consent shall be given
if the following conditions are fulfilled: (i) the assignee assumes in writing
all of the obligations of the Borrower hereunder; (ii) neither the validity nor
the enforceability of this Agreement shall be adversely affected by such
assignment; (iii) the Project shall continue in the opinion of Bond Counsel to
be a "project" as such term is defined in the Act after such assignment; and
(iv) consent by the Issuer, which consent shall not be unreasonably withheld.
For purposes of this Section, no foreclosure by the Participating Bank, or
conveyance in lieu thereof, or other transfer to the Participating Bank or an
affiliate of Participating Bank, shall, of itself, be deemed an assignment for
purposes of this Section or a sale, transfer, assignment or other disposition
for purposes of Section 5.2. Subject to the foregoing, the terms "Issuer",
"Borrower", "Trustee" and "Remarketing Agent" shall, where the context requires,
include the respective successors and assigns of such persons. No assignment
pursuant to this Section shall release the Borrower from its obligations under
this Agreement, unless the Participating Bank has consented to such release.
Section 8.10. Receipt of Indenture. The Borrower hereby
acknowledges that it has received an executed copy of the Indenture and is
familiar with its provisions, and agrees that it is subject to and bound by the
terms thereof and 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 and
of the Holders and the Bank and the Participating Bank thereunder and that it
will not take any action which would cause a default thereunder. Any redemption
of Bonds prior to maturity shall be effected as provided in the Indenture.
(End of Article VIII)
25
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Borrower, intending to
be legally bound, have caused this Agreement to be duly executed in their
respective names, all as of the date first above written.
[SEAL] MONTGOMERY COUNTY INDUSTRIAL
DEVELOPMENT AUTHORITY
Attest /s/ Gerald J. Birkelbach By /s/ Sherry Horowitz
--------------------------------- ----------------------------------
Secretary Chairperson
[SEAL] NEOSE TECHNOLOGIES, INC.
Attest /s/ A. Brian Davis By /s/ P. Sherrill Neff
--------------------------------- ----------------------------------
Secretary President
This execution page is part of the Loan Agreement dated as of
March 1, 1997 between Montgomery County Industrial Development Authority and
Neose Technologies, Inc.
26
Exhibit 10.2
===============================================================================
PARTICIPATION AND REIMBURSEMENT AGREEMENT
Between
JEFFERSON BANK
and
CORESTATES BANK, N.A.
Dated as of
March 1, 1997
Montgomery County Industrial Development Authority
Federally Taxable Variable Rate Demand Revenue Bonds
(Neose Technologies, Inc. Project)
Series B of 1997
===============================================================================
-1-
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINITIONS..................................................... 2
Section 1.1. Definitions.......................................... 2
Section 1.2. Accounting Terms..................................... 4
Section 1.3. Interpretation....................................... 4
ARTICLE II - THE LETTER OF CREDIT........................................... 4
Section 2.1. Amount and Term of Letter of Credit.................. 4
Section 2.2. Reimbursement of Drawings............................ 4
Section 2.3. Interest............................................. 4
Section 2.4. Commitment Fees...................................... 5
Section 2.5. Charges and Expenses................................. 5
Section 2.6. Reduction of Letter of Credit Amount;
Reinstatement of Letter of Credit
Amount for Interest on the Bonds..................... 5
ARTICLE III - CONDITIONS PRECEDENT.......................................... 5
Section 3.1. Documentation........................................ 5
Section 3.2. Statements........................................... 6
Section 3.3. Related Documents; Issuance of Bonds................. 6
ARTICLE IV - PAYMENT PROVISIONS............................................. 7
Section 4.1. Place and Manner of Payment.......................... 7
Section 4.2. Computation of Interest and Fees..................... 7
Section 4.3. Evidence of Debt..................................... 7
Section 4.4. Increased Costs...................................... 7
Section 4.5. Overdue Payments..................................... 8
ARTICLE V - REPRESENTATIONS AND WARRANTIES.................................. 8
Section 5.1. Existence and Power.................................. 8
Section 5.2. Corporate and Governmental Authorization;
No Contravention..................................... 8
Section 5.3. Binding Effect....................................... 9
Section 5.4. Governmental and Other Approvals..................... 9
Section 5.5. Financial Information................................ 9
Section 5.6. Litigation........................................... 9
Section 5.7. Taxes................................................10
ARTICLE VI - COVENANTS......................................................10
Section 6.1. Information..........................................10
Section 6.2. Consolidations, Mergers, Sales of Assets.............10
Section 6.3. Conduct of Business and Maintenance of Existence.....11
Section 6.4. Compliance with Laws.................................11
-i-
<PAGE>
Page
----
Section 6.5. Books and Records....................................11
Section 6.6. Payment of Obligations...............................11
Section 6.7. Notices..............................................11
Section 6.8. Related Documents....................................11
ARTICLE VII - DEFAULT AND REMEDIES..........................................12
Section 7.1. Events of Default....................................12
Section 7.2. Remedies.............................................13
ARTICLE VIII - CHARACTER OF OBLIGATIONS.....................................13
Section 8.1. Obligations Absolute.................................13
Section 8.2. Continuing Obligation................................13
Section 8.3. Limited Liability of the Bank........................14
Section 8.4. Indemnification......................................14
ARTICLE IX - MISCELLANEOUS..................................................15
Section 9.1. Benefit, Security and Subrogation....................15
Section 9.2. Set-Off..............................................15
Section 9.3. Costs, Expenses and Taxes............................16
Section 9.4. Notices..............................................16
Section 9.5. Amendment and Waivers................................16
Section 9.7. Severability.........................................17
Section 9.8. Headings.............................................17
Section 9.9. Satisfaction Required................................17
Section 9.10. Survival of Covenants................................17
Section 9.11. Counterparts.........................................17
Section 9.12. WAIVER OF JURY TRIAL.................................18
EXHIBIT A - Form of Letter of Credit
EXHIBIT B - Form of Pledge, Security and Indemnification Agreement
All exhibits omitted. The Registrant notes that the Letter of Credit and Pledge,
Security and Indemnification Agreement have been filed as Exhibits 4.6 and 4.7
to this Quarterly Report on Form 10-Q.
-ii-
<PAGE>
PARTICIPATION AND REIMBURSEMENT AGREEMENT
THIS PARTICIPATION AND REIMBURSEMENT AGREEMENT ("this Agreement"),
dated as of March 1, 1997, is made between JEFFERSON BANK, a Pennsylvania state
bank (the "Participating Bank"), and CORESTATES BANK, N.A., a national banking
association (the "Bank").
RECITALS:
A. The Montgomery County Industrial Development Authority (the
"Issuer") proposes to issue federally taxable variable rate demand revenue bonds
(the "Bonds") in an aggregate principal amount of $8,400,000 for the benefit of
Neose Technologies, Inc. (the "Borrower") pursuant to a Trust Indenture dated as
of March 1, 1997 (the "Indenture") between the Issuer and Dauphin Deposit Bank
and Trust Company, as Trustee (the "Trustee"), and to lend the proceeds of the
sale of the Bonds to the Borrower pursuant to a Loan Agreement between Borrower
and the Issuer dated as of March 1, 1997 (the "Loan Agreement") to provide funds
to finance all or a portion of the costs of acquiring, constructing, installing
and/or rehabilitating certain facilities, or to refund prior bonds issued for
such purpose, as more fully described in the Loan Agreement (the "Project").
B. The Bonds are expected to be sold at substantially the same time as
are certain other federally taxable variable demand revenue bonds of the Issuer
being issued for the benefit of the Borrower.
C. To support certain payments with respect to the Bonds, the Borrower
has requested the Participating Bank to enter into this Agreement with the Bank
in order to induce the Bank to issue its direct pay letter of credit, in favor
of the Trustee, in the form of Exhibit A hereto (the "Letter of Credit") in the
Letter of Credit Amount (as defined in the Letter of Credit) for the account of
the Participating Bank.
D. The Participating Bank will be responsible for amounts drawn under
the Letter of Credit on behalf of the Participating Bank and for fees and other
amounts due with respect to the Letter of Credit.
NOW, THEREFORE, in consideration of the foregoing and the
undertakings herein set forth and intending to be legally bound, the
Participating Bank and the Bank hereby agree as follows:
-1-
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Terms defined in the introductory paragraph
and the recitals to this Agreement have the respective meanings assigned to
those terms in such paragraph and recitals. The following terms are used in this
Agreement with the following respective meanings, unless the Bank and the
Participating Bank otherwise agree in writing:
"Audited Financial Statements" has the meaning set forth in
Section 5.5.
"Bond Pledge Agreement" means a Pledge, Security and Indemnification
Agreement dated as of March 1, 1997 to be executed by the Borrower, the
Participating Bank and the Bank, substantially in the form attached hereto as
Exhibit B.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banks in Philadelphia, Pennsylvania or in any other city in which the
principal corporate trust office of the Trustee or the principal office of the
Participating Bank or the office of the Bank at which drawing documents are
required to be presented under the Letter of Credit is located are authorized or
required by law to close or a day on which the New York Stock Exchange is
closed.
"Call Report" means the report of condition of financial institutions
as required by The Depository Institutions Deregulation and Monetary Control Act
of 1980, as amended, and in the form and prepared as required by the Federal
Financial Institutions Examination Council and by the federal agency regulating
the Participating Bank.
"Date of Issuance" means the date on which the Letter of Credit is
issued upon request of the Participating Bank pursuant to Section 2.1.
"Default" means any event or condition which, with the giving of
notice, the lapse of time or both, would become an Event of Default.
"Drawing" has the meaning assigned to that term in the Letter of
Credit.
"Drawing Date" means the date on which the Bank has honored a Drawing.
"Drawing Payment Date" has the meaning set forth in Section 2.2.
"Event of Default" means any of the events specified in Section 7.1.
"Expiration Date" has the meaning assigned to that term in the Letter
of Credit.
"GAAP" means generally accepted accounting principles consistently
applied.
-2-
<PAGE>
"Interest Drawing" has the meaning assigned to it in the Letter of
Credit.
"Letter of Credit Amount" has the meaning assigned to that term in the
Letter of Credit.
"Liquidity Drawing" has the meaning assigned to that term in the Letter
of Credit.
"Person" means an individual, a corporation, a partnership, an
association, a trust, a government, a political subdivision, a governmental
agency or instrumentality or any other entity or organization.
"Placement Memorandum" means the final Placement Memorandum of the
Issuer relating to the Bonds.
"Pledged Bonds" means any Bonds delivered to or for the account of the
Bank in connection with a Liquidity Drawing under the Letter of Credit.
"Preliminary Placement Memorandum" means the Preliminary Placement
Memorandum dated March 10, 1997 of the Issuer relating to the Bonds.
"Prime Rate" means the rate of interest announced from time to time by
the Bank as its Prime Rate. Such Prime Rate shall change as and when such
announced Prime Rate changes effective as of the opening of business on the day
announced. Such Prime Rate is determined by the Bank on the basis of a variety
of economic and business factors as are in the judgment of the Bank relevant to
that determination, and loans made by the Bank may bear rates below, at or above
such Prime Rate. The Prime Rate is not intended to be the lowest rate of
interest charged by the Bank in connection with extensions of credit to debtors.
"Principal Drawing" has the meaning assigned to it in the Letter of
Credit.
"Reimbursement Agreement" means the Reimbursement Agreement, of even
date herewith, between the Participating Bank and the Borrower with respect to
the Bonds.
"Related Documents" means the Bonds, the Indenture, the Loan Agreement,
the Reimbursement Agreement, the Security Agreement between Borrower and
Participating Bank in connection with the Bonds, the Mortgage, Assignment of
Leases and Security Agreement of Borrower in favor of Participating Bank in
connection with the Bonds and the Custodial and Collateral Security Agreement
among Borrower, Participating Bank and Offitbank in connection with the Bonds.
"Scheduled Expiration Date" has the meaning assigned to that term in
the Letter of Credit.
"State" means the Commonwealth of Pennsylvania.
-3-
<PAGE>
Section 1.2. Accounting Terms. Unless otherwise specified in this
Agreement, all accounting terms used in this Agreement shall be interpreted, all
accounting determinations under this Agreement shall be made and all financial
statements required to be delivered under this Agreement shall be prepared in
accordance with GAAP, on a basis consistent with the most recent consolidated
financial statements of the Participating Bank delivered to the Bank.
Section 1.3. Interpretation. In this Agreement, unless the Bank and the
Participating Bank otherwise agree in writing, the singular includes the plural
and the plural the singular; words importing any gender include the other
genders, references to statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute referred to;
references to "writing" include printing, typing, lithography and other means of
reproducing words in a tangible visible form; the words "including", "includes"
and "include,, shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement unless otherwise indicated; references to agreements
and other contractual instruments shall be deemed to include all subsequent
amendments and other modifications to such instruments, but only to the extent
such amendments and other modifications are not prohibited by the terms of this
Agreement; and references to Persons includes their respective permitted
successors and assigns.
ARTICLE II
THE LETTER OF CREDIT
Section 2.1. Amount and Term of Letter of Credit. The Participating
Bank hereby requests the Bank to issue the Letter of Credit to the Trustee.
Subject to satisfaction of the conditions precedent set forth in Article III,
the Bank shall issue the Letter of Credit, in favor of the Trustee, in the
Letter of Credit Amount, effective on the Date of Issuance and expiring on the
Expiration Date. On or prior to the Scheduled Expiration Date and on each
anniversary date thereafter, the Bank may, upon the written request of the
Participating Bank given to the Bank not more than one (1) year nor less than
ninety (90) days prior to such anniversary date, elect, at its sole option, to
extend the Scheduled Expiration Date with respect to the Letter of Credit for
one additional year, it being understood that the Bank shall have no obligation
to grant any such extension. Any such extension shall be subject to the mutual
agreement of the Participating Bank and the Bank as to any fees to be applicable
to the period of extension.
Section 2.2. Reimbursement of Drawings. Immediately after the Drawing
Date for each Drawing (the "Drawing Payment Date"), the Participating Bank shall
reimburse the Bank for all amounts advanced by the Bank in respect of such
Drawing or shall cause such reimbursement to be paid by the Trustee to the Bank
pursuant to the Indenture. The Bank agrees to give telephonic notice to the
Participating Bank on the day that the Bank receives notice from the Trustee for
each Drawing.
Section 2.3. Interest. The Participating Bank agrees to pay interest
on all Drawings advanced by the Bank from the relevant Drawing Payment Date
until repaid in full, at a rate per annum equal to the Prime Rate plus
one percent (1%).
-4-
<PAGE>
Section 2.4. Commitment Fees. On the Date of Issuance and quarterly on
each June 1, September 1, December 1 and March 1 thereafter, so long as any
credit remains available to the Trustee under the Letter of Credit, the
Participating Bank shall pay to the Bank a Letter of Credit commitment fee
computed at the rate of one quarter of one percent (.25%) per annum (i.e., one
sixteenth of one percent per quarter) on the Letter of Credit Amount on such
date; provided that for purposes of computing such Letter of Credit Amount the
Letter of Credit Amount shall be treated as having been reinstated with respect
to each Interest Drawing and Liquidity Drawing on the day the Bank receives
reimbursement therefor, unless the Bank has given written notice to the Trustee
pursuant to paragraph 5 of the Letter of Credit that such reinstatement shall
not occur. Computations of commitment fees to be paid to the Bank hereunder
shall be for the actual number of days in the applicable period, based on a
360-day year. Except as set forth below, there shall be no reduction or refund
of any portion of any such commitment fee in the event the Letter of Credit
expires or is drawn upon, reduced (automatically or otherwise) or otherwise
modified during the quarterly period in respect of which a commitment fee is
computed. The Bank agrees to reimburse the Participating Bank a pro rata portion
of the commitment fees paid by or on behalf of the Participating Bank in advance
if, subsequent to any such quarterly payment but in the period for which the
payment was made, the Letter of Credit is terminated by delivery of a notice in
the form of Annex 7 to the Letter of Credit.
Section 2.5. Charges and Expenses. The Participating Bank shall pay to
the Bank within five (5) Business Days of submission to the Participating Bank
of the Bank's bill therefor, any and all customary and reasonable administrative
charges and expenses (including, for instance, an issuance fee of $100 and an
amendment fee of $50) which the Bank may pay or incur relative to the Letter of
Credit. The Participating Bank shall pay to the Bank upon each transfer of the
Letter of Credit in accordance with its terms a transfer fee equal to the
greater of $250,000 or one-eighth of one percent (1/8%) of the then outstanding
Letter of Credit Amount, together with any and all costs and expenses of the
Bank incurred in connection with such transfer.
Section 2.6. Reduction of Letter of Credit Amount; Reinstatement of
Letter of Credit Amount for Interest on the Bonds. The Letter of Credit Amount
shall be reduced and reinstated as specified in the Letter of Credit; provided,
however, the Bank shall not reinstate the Letter of Credit pursuant to paragraph
5(c) thereof without the prior written consent of the Participating Bank or if
there exists an event of default under the Reimbursement Agreement and notice of
such default is given to the Bank by the Participating Bank at least three (3)
Business Days prior to the date reinstatement would otherwise occur under the
Letter of Credit.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1. Documentation. As conditions precedent to the Bank's
issuance of the Letter of Credit, the Bank shall have received each of the
following, dated the Date of Issuance, in form and substance satisfactory to
the Bank:
-5-
<PAGE>
(a) an executed copy of this Agreement, each of the Related
Documents (other than the Bonds) and the Bond Pledge Agreement;
(b) a certificate of an authorized officer of the Borrower as
to the authority, incumbency and specimen signatures of all officers of the
Borrower who have signed the Bond Pledge Agreement and who will be authorized to
represent the Borrower in connection with the Bond Pledge Agreement, upon which
the Bank may rely until it receives a new such certificate, as applicable;
(c) a certified copy of the resolutions of the Board of the
Directors of the Participating Bank authorizing the execution and delivery of,
the performance under, and evidencing the authority of each person who has
signed, or who will sign this Agreement and the Bond Pledge Agreement;
(d) an incumbency certificate signed by an authorized officer
of the Participating Bank certifying the names and the signatures of the
officers of the Participating Bank authorized to sign this Agreement and the
Bond Pledge Agreement;
(e) opinions of (i) counsel to the Borrower acceptable to the
Bank, (ii) Ballard Spahr Andrews & Ingersoll, as bond counsel, and (iii) counsel
to the Participating Bank acceptable to the Bank, all dated the Date of
Issuance, in form and substance satisfactory to the Bank, covering such matters
as the Bank may reasonably request; and
(f) such other documents, instruments or opinions as the Bank
may reasonably request.
Section 3.2. Statements. The following statements shall be correct on
the Date of Issuance:
(a) the representations and warranties contained in this
Agreement or in any instrument delivered to the Bank pursuant to or in
connection with this Agreement are correct on and as of the Date of Issuance
(and after giving effect to the issuance of the Letter of Credit) as though made
on and as of such date;
(b) no Event of Default or Default has occurred and is
continuing or would result from the issuance of the Letter of Credit; and
(c) the issuance of the Letter of Credit for the account of
the Participating Bank will not materially adversely change the Participating
Bank's operations or conditions (financial or otherwise).
Section 3.3. Related Documents; Issuance of Bonds. On or before the
Date of Issuance, all of the Related Documents shall have been duly authorized,
executed and delivered by the parties thereto, all conditions precedent to the
issuance of the Bonds shall have been satisfied, and the Bonds shall have been
duly issued.
-6-
<PAGE>
ARTICLE IV
PAYMENT PROVISIONS
Section 4.1. Place and Manner of Payment. All payments by or on behalf
of the Participating Bank to the Bank under this Agreement shall be made in
lawful currency of the United States and in immediately available funds on the
date due at the Bank's office at 530 Walnut Street, Seventh Floor, F.C. 1-9-7-1,
Philadelphia, Pennsylvania 19106, or to an account maintained by the Bank and
designated in a notice by the Bank to the Participating Bank. Any payment
received after 3:15 P.M., Philadelphia time on the date due at the Bank's office
will be deemed received on the next succeeding Business Day. Whenever any
payment under this Agreement shall be due on a day which is not a Business Day,
the date for payment shall be extended to the next succeeding Business Day, and
any interest payable on such payment shall be payable for such extended time at
the applicable rate.
Section 4.2. Computation of Interest and Fees. Interest at the Prime
Rate shall be computed on the basis of a year of 365 or 366 days (as the case
may be). The commitment fee shall be computed on the basis of a year of 360 days
and the actual number of days elapsed.
Section 4.3. Evidence of Debt. The books and records of the Bank shall
be conclusive evidence, absent demonstrable error, of all amounts of principal,
interest, fees and other charges advanced, due, outstanding or paid pursuant to
this Agreement. The Bank agrees to provide statements of such amounts to the
Participating Bank; provided, however, that, in the event of any conflict
between such statement and the Bank's books and records, the latter shall be
controlling.
Section 4.4. Increased Costs.
(a) If any enactment, promulgation or adoption of any
applicable law, regulation or rule or in the interpretation or administration
thereof by any court, administrative or governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by the Bank with any guidelines, request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency, shall either (i) impose, modify or deem applicable any reserve, special
deposit or similar requirement (including without limitation 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 the result of any event referred to
in clause (i), (ii) or (iii) of this sentence shall be to increase the direct or
indirect cost to the Bank of issuing or maintaining the Letter of Credit or the
Bank's obligations under this Agreement or to reduce the amounts receivable by
the Bank hereunder (which increase in costs 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 10
Business Days after demand by the Bank, the Participating
-7-
<PAGE>
Bank shall pay to the Bank, from time to time as specified by the Bank,
additional amounts that in the aggregate shall be sufficient to compensate the
Bank for such increased cost or reduction in amounts receivable. A certificate
as to such increased cost or reduction in amounts receivable by the Bank as a
result of any event mentioned in clause (i), (ii) or (iii) of the immediately
preceding sentence submitted by the Bank to the Participating Bank, shall in
absence of manifest error, be conclusive and binding for all purposes.
(b) If the Bank shall have determined that any enactment,
promulgation or adoption of any applicable law, regulation, rule or guideline
regarding capital adequacy, or in the interpretation or administration thereof,
by any administrative or governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Bank (or any controlling affiliate or entity) with any guideline, request
or directive regarding capital adequacy (whether or not having the force of law
and whether or not failure to comply thereunder would be unlawful) of any such
authority, central bank or comparable agency, affects or would affect the amount
of capital required or expected to be maintained by the Bank (or any controlling
affiliate or entity) and the Bank determines, on the basis of reasonable
allocations, that the amount of such capital is increased by or is based on its
issuance or maintenance of the Letter of Credit or the Bank's obligations under
this Agreement, then, within 10 Business Days after demand by the Bank, the
Participating Bank shall pay to the Bank, from time to time as specified by the
Bank, additional amounts sufficient to compensate the Bank therefor. A
certificate as to such additional amounts submitted to the Participating Bank by
the Bank shall, in the absence of manifest error, be conclusive and binding for
all purposes.
Section 4.5. Overdue Payments. Overdue principal of, and (to the extent
permitted by law) overdue interest in respect of, payments due under Section 2.2
and overdue payments of the commitment fee and amounts due under Articles IV,
VIII and IX shall bear interest, payable on demand, at a rate per annum equal to
the Prime Rate plus two percent (2%) until paid in full.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Participating Bank represents and warrants as follows:
Section 5.1. Existence and Power. The Participating Bank is a state
chartered banking corporation duly incorporated, validly existing and in good
standing under the laws of the State, is qualified to do business in the State,
and has all powers, corporate or otherwise, as applicable, and all material
governmental licenses, authorizations, consents and approvals required to
perform all of its obligations under this Agreement and, to the best of its
knowledge, to carry on its business as now conducted.
Section 5.2. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Participating Bank
of this Agreement, the Bond
-8-
<PAGE>
Pledge Agreement and the Related Documents to which it is a party are within the
Participating Bank's corporate power, have been duly authorized by all necessary
corporate action, do not and will not require any consent or approval of the
members of the Board of Directors of the Participating Bank which has not been
obtained, and do not contravene, or constitute a default under, any material
provision of applicable law or regulation or of the articles of incorporation or
association or by-laws, of the Participating Bank or of any agreement, judgment,
injunction, order, decree, or other instrument binding upon the Participating
Bank.
Section 5.3. Binding Effect. This Agreement and the Related Documents
to which the Participating Bank is or is to be a party have been or will be duly
executed and delivered and are, or upon execution will be, valid and binding
obligations of the Participating Bank, enforceable against the Participating
Bank in accordance with their respective terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws or equitable principles relating to or limiting creditor's rights generally
or the availability of equitable remedies.
Section 5.4. Governmental and Other Approvals. No approval, consent or
authorization of, notice to or filing or registration with, any governmental
authority or body is required for the due execution, delivery or performance by
the Participating Bank of this Agreement or, to the best of its knowledge, any
Related Document to which it is or is to be a party, except as have been
obtained and are in full force and effect.
Section 5.5. Financial Information. The Call Reports of the
Participating Bank, and the annual financial statements of the Participating
Bank, or the consolidated annual financial statements of the Participating Bank
and any controlling entity thereof, reported on by independent certified public
accountants (the "Audited Financial Statements"), each for the previous two most
recent fiscal years of the Participating Bank, copies of which have been
furnished to the Bank, fairly present the financial position of the
Participating Bank and any controlling entity thereof as of the date thereof and
the results of operations of the Participating Bank and any controlling entity
thereof for the periods reflected therein, all in accordance with the rules and
regulations of the Federal Financial Institutions Examination Council with
respect to Call Reports, and GAAP with respect to Audited Financial Statements,
respectively, and governmental agencies, whether state or federal, having
regulatory or supervisory authority over the Participating Bank. Since the date
of the most recent Call Report or Audited Financial Statements, as the case may
be, to the best of Participating Bank's knowledge, there has been no material
adverse change in the business, financial position, results of operations or
prospects of the Participating Bank and any controlling entity thereof.
Section 5.6. Litigation. Except as disclosed to the Bank in writing,
there is no action, suit or proceeding pending, or to the knowledge of the
Participating Bank threatened, against or affecting the Participating Bank
before any court or arbitrator or any governmental body, agency or official in
which there is a reasonable possibility of an adverse decision which (a) could
materially adversely affect the Participating Bank or the business, financial
position or results of operations of the Participating Bank or (b) question the
validity of this Agreement or any of the Related Documents to which it is or is
to be a party.
-9-
<PAGE>
Section 5.7. Taxes. The Participating Bank has filed all federal income
tax returns and all other material tax returns which are required to be filed by
it and has paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Participating Bank, except for those which the
Participating Bank is contesting in good faith. The charges, accruals and
reserves on the books of the Participating Bank in respect of taxes or other
governmental charges are, in the opinion of the Participating Bank, adequate.
ARTICLE VI
COVENANTS
So long as the Expiration Date has not occurred or any amount is due or
owing to the Bank under this Agreement, the Participating Bank agrees as
follows:
Section 6.1. Information. The Participating Bank will deliver to the
Bank:
(a) as soon as available and in any event within one hundred
twenty (120) days after the end of each fiscal year of the Participating Bank,
the Audited Financial Statements reported on by certified public accountants of
nationally recognized standing for such fiscal year, setting forth in each case
in comparative form the figures for the previous fiscal year;
(b) as soon as available, Participating Bank's interim
financial statements which are made available to any governmental agency having
regulatory or supervisory authority over the Participating Bank, or to any other
Person;
(c) as soon as available, and in no event later than
forty-five (45) days after the end of each quarter-annual period of each fiscal
year of the Participating Bank, the Call Report for the quarter then ended;
(d) simultaneously with the delivery of each set of documents
referred to in clause (a) above, a certificate of a senior officer of the
Participating Bank stating whether there exists on the date of such certificate
any Default and, if any Default then exists, setting forth the details of such
Default and the action which the Participating Bank is taking or proposes to
take with respect to such Default; and
(e) from time to time such additional information regarding
the financial position of the Participating Bank as the Bank may reasonably
request.
Section 6.2. Consolidations, Mergers, Sales of Assets. Except by
operation of law, the Participating Bank will not (a) consolidate with or merge
into any other Person or (b) sell, lease or otherwise transfer all or
substantially all of its assets to any other Person, unless, (i) the
Participating Bank notifies the Bank in writing of such consolidation or merger
and confirming the surviving or transferee entity's assumption of all of the
Participating Bank's obligations hereunder and (ii) at the request of the Bank,
immediately following such
-10-
<PAGE>
consolidation or merger the surviving or transferee entity shall expressly
assume all obligations of the Participating Bank hereunder.
Section 6.3. Conduct of Business and Maintenance of Existence. The
Participating Bank will preserve, renew and keep in full force and effect its
corporate existence, and the material rights, privileges and franchises
necessary or desirable in the normal conduct of business as a state banking
corporation or nationally chartered banking association, as the case may be.
Section 6.4. Compliance with Laws. The Participating Bank will comply
in all material respects with all material laws, ordinances, rules, regulations
and requirements of governmental authorities the noncompliance with which would
materially and adversely affect the Participating Bank's ability to perform its
obligations hereunder, except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings.
Section 6.5. Books and Records. The Participating Bank will keep proper
books of record and Account in which true and correct entries in conformity with
GAAP shall be made of all dealings and transactions in relation to its business
and activities.
Section 6.6. Payment of Obligations. The Participating Bank will pay
and discharge, at or before maturity, all its material obligations and
liabilities, including, without limitation, tax liabilities, except where the
same may be contested in good faith by appropriate proceedings, and will
maintain, in accordance with GAAP, appropriate reserves for the accrual of any
of the same.
Section 6.7. Notices. The Participating Bank will promptly give written
notice to the Bank of the occurrence of any Default or Event of Default signed
by a senior officer of the Participating Bank, setting forth the details of, and
the actions which the Participating Bank proposes to take with respect to, such
Default or Event of Default. The Participating Bank will also promptly give
notice to the Bank of any pending or threatened action, suit or proceeding
against the Participating Bank, an adverse decision in which could materially
and adversely affect the operations or the conditions (financial or otherwise)
of the Participating Bank or the ability of the Participating Bank to repay its
obligations under this Agreement or which questions the validity of this
Agreement, the Bond Pledge Agreement or any Related Document to which it is or
is to be a party.
Section 6.8. Related Documents. Neither the Participating Bank nor the
Bank will amend, modify or terminate or agree to or consent to amend, modify or
terminate any Related Documents to which it is or is to be a party without the
prior written consent of the other party; provided, however, that the
Participating Bank may amend the Reimbursement Agreement so long as such
amendment shall not alter, in any manner, the rights and obligations of the
parties hereto or otherwise conflict with the terms of this Agreement.
-11-
<PAGE>
ARTICLE VII
DEFAULT AND REMEDIES
Section 7.1. Events of Default. The occurrence of any one or more of
the following events shall constitute an Event of Default:
(a) the Participating Bank shall fail to pay within three (3)
Business Days when due any amount payable under any provision of this Agreement;
(b) any materially adverse change in the financial condition
of the Participating Bank shall occur;
(c) the Participating Bank shall fail to observe or perform
any material covenant or agreement contained in this Agreement or (other than
those specified by clauses (a) and (b) above) for thirty (30) days after written
notice of such failure has been given to the Participating Bank by the Bank;
(d) any material representation or warranty made by the
Participating Bank in this Agreement or in any instrument delivered pursuant to
or in connection with this Agreement shall prove to have been incorrect or
misleading in any material respect at the time made or deemed made;
(e) any event of default, however defined, shall occur and be
continuing under the Indenture or the Loan Agreement;
(f) any material provision of this Agreement or any Related
Document to which Participating Bank is party at any time for any reason shall
cease to be valid and binding on the Participating Bank or shall be declared to
be null and void, the validity or enforceability of any such provision shall be
contested by the Participating Bank or the Participating Bank shall deny that it
has any further liability or obligation under any such provision;
(g) the Participating Bank shall (i) commence a voluntary case
or other proceeding seeking receivership, liquidation, reorganization or other
relief with respect to itself of its debts under any receivership, bankruptcy,
insolvency or other similar law now or in the future in effect, (ii) seek the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, (iii) make a general
assignment for the benefit of creditors, (iv) fail generally to pay its debts as
they become due or (v) take any action to authorize any of the foregoing; or
(h) an involuntary case or other proceeding shall be commenced
against the Participating Bank seeking receivership, liquidation, reorganization
or other relief with respect to it or its debts under any receivership,
bankruptcy, insolvency or other similar law now or in the future in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian of other
similar official of it or any substantial part of its property, and such
-12-
<PAGE>
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of sixty (60) days; or an order for relief shall be entered against the
Participating Bank under the federal or state receivership, bankruptcy or
insolvency laws.
Section 7.2. Remedies. Upon the occurrence of an Event of Default
pursuant to Section 7.1(g) or (h) all amounts then due and payable by the
Participating Bank under this Agreement shall become due and payable,
automatically and immediately without any presentment, demand, protest or other
notice or formality of any kind (all of which are expressly waived). Upon the
occurrence of an Event of Default (other than pursuant to Section 7.1(g) or
(h)), the Bank may, after thirty (30) days written notice to the Participating
Bank (unless the Event of Default is cured in such 30-day period), declare all
amounts then due and payable by the Participating Bank under this Agreement to
be immediately due and payable (and the same shall upon such notice become
immediately due and payable), in each case without any presentment, demand,
protest or other notice or formality of any kind. Upon any such occurrence, the
Bank may, in addition, (a) require the Participating Bank to provide the Bank
additional collateral in form and amount acceptable to the Bank, (b) exercise
all of its rights and remedies under this Agreement, any security agreement
delivered pursuant to this Agreement or otherwise, the Bond Pledge Agreement, or
any Related Document, (c) give written notice to the Trustee of such occurrence,
with the effects contemplated by Section 7.01 of the Indenture, (d) require the
Trustee to accelerate payment of all Bonds and interest accrued thereon as
provided in Section 7.03 of the Indenture, (e) draw on the standby letter of
credit, if any, delivered to the Bank pursuant to this Agreement or otherwise,
(f) exercise any and all remedies available to the Bank at law or in equity, or
(g) exercise all or any combination of the remedies provided for in this
Section 7.2.
ARTICLE VIII
CHARACTER OF OBLIGATIONS
Section 8.1. Obligations Absolute. The obligations of the Participating
Bank under this Agreement shall be absolute, unconditional and irrevocable and
shall be performed strictly in accordance with the terms of this Agreement under
all circumstances whatsoever. If at any time all or any part of any payment
previously applied by the Bank to any payment obligations hereunder of the
Participating Bank or the proceeds of any enforcement of any security interest
of the Bank or any exercise of the right of set-off by the Bank is invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by, or, is or must be rescinded or returned by the Bank for any reason
whatsoever (including, without limitation, the insolvency, bankruptcy or
reorganization of the Participating Bank) such obligations shall be deemed to
have continued in existence for the purpose of this Agreement, and to the extent
that such payment is or must be rescinded or returned, this Agreement shall
continue in force or be reinstated, as the case may be, as though such
application by the Bank had not been made.
Section 8.2. Continuing Obligation. The obligations of the
Participating Bank and the Bank under this Agreement shall (a) continue until
the latter of (i) the Expiration Date or (ii) the date upon which all amounts
due and owing to the Bank under this Agreement shall have
-13-
<PAGE>
been paid in full, (b) be binding upon and inure to the benefit of, and be
enforceable by, the Bank, the Participating Bank, and their respective
successors, transferees and assigns; provided, however, that neither party may
assign all or any part of this Agreement without the prior written consent of
the other party. The Bank may not assign its obligations under the Letter of
Credit without the prior written confirmation of the rating of the Bonds by the
agency rating the Bonds.
Section 8.3. Limited Liability of the Bank. The Participating Bank
assumes all risks of the acts or omissions of the Trustee or any beneficiary of
the Letter of Credit with respect to the use of the Letter of Credit or its
proceeds. Neither the Bank nor any of its officers, directors, employees, or
agents shall be liable or responsible for: (a) the use which may be made of the
Letter of Credit or any acts or omissions of the Trustee or any beneficiary of
the Letter of Credit in connection with the Letter of Credit; (b) the validity,
sufficiency or genuineness of documents submitted in connection with the Letter
of Credit or of any endorsement on such documents, even if such documents should
in fact prove to be in any or all respects invalid, insufficient, fraudulent or
forged; (c) payment by the Bank against presentation of documents which do not
comply with the terms of the Letter of Credit; or (d) any other circumstances
whatsoever in making, delaying to make or failing to make payment under the
Letter of Credit; provided, however, that the Participating Bank shall have a
claim against the Bank, and the Bank shall be liable to the Participating Bank,
to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Participating Bank which the
Participating Bank proves were proximately caused by (i) the Bank's willful
misconduct or gross negligence in determining whether documents presented under
the Letter of Credit comply with the terms of the Letter of Credit or (ii) the
Bank's willful failure 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. 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.
Section 8.4. Indemnification. In consideration for the Bank's issuance
of the Letter of Credit, to the fullest extent permitted by law, the
Participating Bank indemnifies and holds harmless the Bank and its officers,
directors, employees and agents from and against any and all claims, damages,
losses, liabilities, costs or expenses whatsoever which such indemnified party
may incur (or which may be claimed against such indemnified party by any Person)
by reason of (a) the issuance, sale or delivery of the Bonds; (b) the use of the
proceeds of the Bonds or any Drawing; or (c) or in connection with the execution
and delivery or transfer of, or payment or failure to pay under, the Letter of
Credit; provided, however, that the Participating Bank 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, (i) caused by the willful
misconduct or gross negligence of the Bank in performing its obligations under
this Agreement and the Letter of Credit or (ii) incurred by reason of any untrue
or misleading statement contained, or any failure to state any material fact, in
the Placement Memorandum or Preliminary Placement Memorandum. The Participating
Bank, upon demand by any party indemnified or intended to be indemnified
pursuant to this Section 8.4 at any time, shall reimburse such party for any
reasonable legal or other expenses incurred in connection with investigating or
defending against any of the foregoing. If any action, suit or proceeding
arising from any of the foregoing is
-14-
<PAGE>
brought against any party indemnified or intended to be indemnified pursuant to
this Section 8.4, the Participating Bank, to the extent determined by such party
as necessary or advisable in order to protect the rights of such party in
connection with such action, suit or proceeding, will resist and defend such
action, suit or proceeding or cause the same to be resisted and defended by
counsel designated by the Participating Bank (which counsel shall be
satisfactory to such party); provided, however, that the Participating Bank
shall not be required to settle any such action without its consent, which
consent shall not be unreasonably withheld. Nothing in this Section 8.4 is
intended to limit the Participating Bank's payment obligations under this
Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Benefit, Security and Subrogation. The Participating Bank
and the Bank intend and agree that (a) the Bank shall have the benefit and
security of the Reimbursement Agreement and the Security Documents (as defined
in the Reimbursement Agreement) with respect to the amounts payable by the
Borrower under the Reimbursement Agreement corresponding to the amounts payable
by the Participating Bank to the Bank under this Agreement and (b) in the event
of a draw under the Letter of Credit and failure of the Participating Bank to
reimburse the Bank, with interest, in accordance with this Agreement, the Bank
will be subrogated and succeed to the rights of the Participating Bank in, to
and under the Reimbursement Agreement and the Security Documents with respect
thereto, provided that the Bank will not exercise any such rights against the
Borrower unless the Participating Bank is in default of this Agreement and the
Bonds have been called for mandatory purchase or accelerated pursuant to the
Indenture. The Participating Bank will execute and deliver to the Bank such
further instruments and take such further actions as the Bank may require from
time to time to confirm and effect such benefit, security and rights of
subrogation and succession. In furtherance of the foregoing, the Participating
Bank has caused the Borrower to agree in the Reimbursement Agreement that (i)
the Bank shall have such benefit, security and rights of subrogation and
succession, provided that the Participating Bank is not exercising its rights
against the Borrower concurrently with the Bank and (ii) the Borrower will
execute and deliver such instruments and take such further actions as the Bank
may request from time to time to confirm and effect the same.
Section 9.2. Set-Off. Upon the occurrence and during the continuance of
any Event of Default, the Bank is hereby authorized at any time and from time to
time without notice to the Participating Bank (any such notice being expressly
waived by the Participating Bank) and, to the fullest extent permitted by law,
to set off and to apply any and all balances, credits, deposits (general or
special, time or demand, provisional or final), accounts or monies at any time
held and other indebtedness at any time owing by the Bank to or for the account
of the Participating Bank against any and all of the obligations of the
Participating Bank now or hereafter existing under this Agreement or any other
agreement or instrument delivered by the Participating Bank to the Bank in
connection therewith, whether or not the Bank shall have made any demand
hereunder or thereunder and although such obligations may be contingent or
unmatured. Subject to the foregoing provision of this Section, the rights of the
Bank under this
-15-
<PAGE>
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Bank may have.
Section 9.3. Costs, Expenses and Taxes. The Participating Bank agrees
to pay within five (5) Business Days of the submission of the Bank's bill
therefor, all reasonable costs and expenses (including fees and expenses of
counsel to the Bank) incurred by the Bank in connection with the enforcement of
this Agreement.
Section 9.4. Notices. All notices, requests and other communications to
any party hereunder shall be in writing, unless otherwise specified, and shall
be given to such party, addressed to it, at its address or facsimile number set
forth below or such other address or facsimile number as such party may in the
future specify for such purpose by notice to the other party. The Bank will send
copies to the Borrower of all notices the Bank sends to the Participating Bank
concerning Defaults or Events of Default hereunder. Each such notice, request or
communication shall be effective (a) if given by facsimile, when such facsimile
is transmitted to the facsimile number specified below, (b) if given by mail
five (5) days after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid, or (c) if given by any other
means, when delivered at the address specified below:
Party Address
Bank: CoreStates Bank, N.A.
1345 Chestnut Street
PNB Building, 5th Floor
F.C. 1-1-5-22
Philadelphia, PA 19101
Attn: Global Financial Institutions
Facsimile: 215-973-8432
Participating Bank: Jefferson Bank
1607 Walnut Street
Philadelphia, PA 19103
Attn: Kenneth R. Frappier, Senior Vice President
Facsimile: 215-564-6820
Borrower: Neose Technologies, Inc.
102 Witner Road
Horsham, PA 19044
Attn: P. Sherrill Neff, President
Facsimile: 215-444-5896
Section 9.5. Amendment and Waivers. No amendments to any provision of
this Agreement or the Letter of Credit shall in any event be effective unless
the same shall be in writing and signed by the Bank and the Participating Bank.
No waiver of any provision of this Agreement, nor consent to any departure by
the Participating Bank of any such provision, shall
-16-
<PAGE>
in any event be effective unless the same shall be in writing and signed by the
Bank. Any such waiver or consent shall be effective only in the specific
instance and posed for the specific purpose for which given. The Bank hereby
agrees to not agree to any amendment to, or consent to any action taken under,
any of the Related Documents without the prior written consent of the
Participating Bank.
Section 9.6. No Waiver; Remedies. No failure on the part of the Bank or
the Participating Bank to exercise, and no delay in exercising, any right under
this Agreement shall operate as a waiver of such right nor shall any single or
partial exercise of any right under this Agreement preclude any other further
exercise of such right or the exercise of any other right. The remedies provided
in this Agreement are cumulative and not exclusive of any remedies provided by
law.
Section 9.7. Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions of this Agreement or affecting the validity, enforceability or
authorization of such provision in any other jurisdiction.
Section 9.8. Headings. Section headings in this Agreement are included
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
Section 9.9. Satisfaction Required. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to the Bank, the determination of such
satisfaction shall be made by the Bank in its reasonable discretion.
Section 9.10. Survival of Covenants. All covenants made herein and in
any documents delivered pursuant hereto shall survive the execution and delivery
of this Agreement and the Letter of Credit.
Section 9.11. Counterparts. This Agreement may be signed in any number
of counterpart copies, but all such copies shall constitute one and the same
instrument.
Section 9.12 Governing Law and Jurisdiction. This Agreement has been
delivered to and accepted by the Bank and will be deemed to be made in the
State. This Agreement will be interpreted and the rights and liabilities of the
parties hereto determined in accordance with the laws of the State, excluding
its conflict of laws rules. The Participating Bank hereby agrees to the
jurisdiction of any state or federal court located within the county where the
Bank's office indicated above is situated, or such other venue as the Bank
chooses, and consents that all service of process be sent by nationally
recognized overnight courier service directed to the Participating Bank at the
Participating Bank's address set forth herein for notices and service so made
will be deemed to be completed on the Business Day after deposit with such
courier; provided that nothing contained in this Agreement will prevent the Bank
from bringing
-17-
<PAGE>
any action or exercising any rights against any security or against the
Participating Bank individually, or against any property of the Participating
Bank within any other state or nation to enforce any award or judgment obtained
in the venue provided above, or such other venue as the Bank chooses. The
Participating Bank waives any objection to venue and any objection based on a
more convenient forum in any action instituted under this Agreement.
Section 9.12. WAIVER OF JURY TRIAL. THE PARTICIPATING BANK IRREVOCABLY
WAIVES ANY AND ALL RIGHT THE PARTICIPATING BANK MAY HAVE TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY
DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED IN ANY OF SUCH DOCUMENTS OR OTHERWISE AND THE PARTICIPATING BANK
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
WITNESS the due execution hereof on the day and year first above
written.
JEFFERSON BANK CORESTATES BANK, N.A.
By /s/ Kenneth R. Frappier By /s/ Wade Johnson
------------------------------- ---------------------------------
Print Name: Kenneth R. Frappier Print Name: Wade Johnson
- ---------------------------------- ------------------------------------
Title Senior Vice President Title Vice President
- ---------------------------------- ------------------------------------
-18-
Exhibit 10.3
FORM OF CORESTATES BANK, N.A.
IRREVOCABLE LETTER OF CREDIT
March 20, 1997
Dauphin Deposit Bank and Trust Company
213 Market Street
Harrisburg, PA 17101
Attn: Corporate Trust Group
Mail Code No. 001-01-02
Re: $8,400,000 Montgomery County Industrial Development
Authority Federally Taxable Variable Rate Demand Revenue
Bonds, Series B of 1997 (Neose Technologies, Inc. Project)
(the "Bonds")
Ladies and Gentlemen:
1. At the request and for the account of Jefferson Bank (the
"Participating Bank"), we (the "Bank") establish in your favor as Trustee under
the Trust Indenture dated as of March 1, 1997 (as the same has been and may from
time to time be supplemented or amended, the "Indenture") between the Montgomery
County Industrial Development Authority (the "Issuer") and you pursuant to which
the Bonds are being issued for the benefit of Neose Technologies, Inc. (the
"Borrower"), this irrevocable letter of credit ("this Letter of Credit") in the
aggregate amount of $8,579,967.12 (as from time to time reduced and reinstated
as provided in this Letter of Credit, the "Letter of Credit Amount"). Such
Letter of Credit Amount shall be available for drawing by you as set forth below
in amounts not to exceed (a) $8,400,000 (as from time to time reduced and
reinstated as provided in this Letter of Credit, the "Principal Component") with
respect to unpaid principal of the Bonds and (b) $179,967.12 (as from time to
time reduced and reinstated as provided in this Letter of Credit, the "Interest
Component") with respect to accrued interest on the Bonds (but no more than the
actual interest accrued on the Bonds up to 46 days through the date payment is
due under this Letter of Credit).
2. This Letter of Credit shall expire at 5:00 p.m. local time
in Philadelphia, Pennsylvania, on the date (the "Expiration Date") which is the
earliest of: (a) March 20, 2002 unless extended by us (the "Scheduled Expiration
Date") (it being understood that we shall be under no obligation herein to grant
any such extension), (b) the date of payment of a Final Payment Drawing (as
defined below), (c) the date on which we receive a certificate from you on the
form of Annex 7 attached hereto, appropriately completed and executed, to the
effect that there are no Bonds outstanding (as defined in the Indenture) other
than Bonds secured by an Alternate Letter of Credit (as defined in the
Indenture) or (d) the date when you surrender this Letter of Credit to the Bank
for cancellation. You agree to surrender this Letter of Credit to us, and not to
make any Drawing, after the Expiration Date.
-1-
<PAGE>
3. Subject to the provisions of this Letter of Credit, demands
for payment under this Letter of Credit may be made by you from time to time
prior to the Expiration Date by presentation of your certificate in the form of
(a) Annex 1 hereto, appropriately completed and executed, in the case of a
drawing for interest on the Bonds under Section 5.04 of the Indenture (an
"Interest Drawing"), (b) Annex 2 hereto, appropriately completed and executed,
in the case of a drawing for principal of the Bonds under Section 5.04 (if less
than all of the Outstanding Bonds are being redeemed) of the Indenture (a
"Principal Drawing"), (c) Annex 3 hereto, appropriately completed and executed,
in the case of a drawing for the purchase price of any Bonds under Section 4.04
of the Indenture (a "Liquidity Drawing"), and (d) Annex 4 hereto, appropriately
completed and executed, in the case of a final drawing for principal of or
interest on all outstanding Bonds due upon purchase or redemption under Sections
4.04 or 5.04 (if all of the Outstanding Bonds are being purchased or redeemed)
of the Indenture or upon acceleration of the Outstanding Bonds under Section
7.03 of the Indenture (the "Final Payment Drawing") (each such demand and
presentation, a "Drawing"). Payment against conforming documents presented under
this Letter of Credit prior to 12:00 noon on any Business Day shall be made by
us at or before 10:00 a.m. on the next succeeding Business Day or, in the case
of presentation after 12:00 noon, at or before 3:00 p.m. on the next succeeding
Business Day; provided, however, that with respect to a Liquidity Drawing,
payment against conforming documents presented under this Letter of Credit prior
to 11:00 a.m. on any Business Day shall be made by us at or before 3:00 p.m. on
the same Business Day. If requested by you, payment under this Letter of Credit
may be made by deposit of immediately available funds into a designated account
that you maintain with us, a wire transfer of immediately available funds or by
our check, all in accordance with your instructions. Partial drawings are
permitted under this Letter of Credit. All payments by us under this Letter of
Credit will be made with our own funds.
4. As used in this Letter of Credit "Business Day" means on
any day other than a Saturday, Sunday or a day on which banks in Philadelphia,
Pennsylvania, New York, New York or the city in which your principal corporate
trust office is located are authorized or required by law to close or a day on
which the New York Stock Exchange is closed. References to any time of day shall
refer to Eastern standard time or Eastern daylight savings time, as in effect in
Philadelphia, Pennsylvania on such day.
5. Each Drawing honored by us under this Letter of Credit
shall immediately reduce the Principal Component or the Interest Component (as
the case may be) by the amount of such payment, and the Letter of Credit Amount
available hereunder shall also be correspondingly reduced. Upon such honor, our
obligations in respect of such Drawing shall be discharged, and we shall have no
further obligation in respect of such Drawing. The Principal Component and the
Interest Component (and correspondingly the Letter of Credit Amount) so reduced
shall be reinstated only as follows:
a. In the case of a reduction resulting from payment
against an Interest Drawing, the Interest Component
shall be reinstated automatically as of our opening of
business in Philadelphia, Pennsylvania on the third
(3rd) Business Day following the date of such payment by
an amount equal to the amount of such Interest
-2-
<PAGE>
Drawing, unless you shall have received notice from us
by tested telex or in writing not later than the close
of business on the second (2nd) Business Day following
the date of such payment that such reinstatement shall
not occur because either (i) an Event of Default has
occurred under the Participation and Reimbursement
Agreement dated as of March 1, 1997 between the
Participating Bank and us, or (ii) we have received
notice that an Event of Default has occurred under the
Reimbursement Agreement dated as of March 1, 1997
between the Borrower and the Participating Bank, and in
either case you shall declare the principal of the
outstanding Bonds (as defined in the Indenture) due and
payable.
b. In the case of a reduction resulting from payment
against a Liquidity Drawing with regard to any Bonds,
the Principal Component and, if applicable, the Interest
Component with respect to such Bonds shall be reinstated
(i) automatically when and to the extent that both (A)
we have received reimbursement for such drawing in
immediately available funds and the Participating Bank
has notified us that it has received reimbursement from
the Borrower therefor (or you have received immediately
available funds which, pursuant to Section 4.05 of the
Indenture, you will immediately remit to us as
reimbursement for such drawing, such funds to be
remitted to the attention of our Letter of Credit
Department stating that they are repayments for
Liquidity Drawings drawn under CoreStates Bank, N.A.
Irrevocable Letter of Credit No. LC#_______) and (B) you
have delivered to us a certificate in respect of such
reinstatement in the form of Annex 5 attached hereto,
appropriately completed and executed, or (ii) when
and to the extent that we, at our option, upon the
Participating Bank's request, otherwise advise you in
writing that such reinstatement shall occur, it being
understood that we shall have no obligation to grant any
such reinstatement except as provided in clause (i) of
this sentence. We will give telephonic confirmation (to
be further confirmed in writing) to you of each
reinstatement pursuant to clause (i) of the preceding
sentence.
c. The Principal Component and the Interest Component shall
otherwise be reinstated as we may from time to time
notify you in writing.
6. The Letter of Credit Amount and the respective Principal
and Interest Components thereof shall be reduced automatically, without notice
to you, upon our receipt from you of a certificate in the form of Annex 6
attached hereto appropriately completed and executed, each such reduction to be
(a) in the amounts necessary to reduce the Letter of Credit Amount and
-3-
<PAGE>
the Principal and Interest Components thereof to the respective amounts
specified by you in such certificate and (b) effective on the Business Day on
which we receive such certificate from you.
7. All documents presented to us in connection with any
Drawing, and all other communications and notices to us with respect to this
Letter of Credit, shall be in writing, dated the date of presentation and
delivered to us at the address set forth on the letterhead of this Letter of
Credit and shall specifically refer to "CoreStates Bank, N.A. Irrevocable Letter
of Credit No. LC#________." Any such documents, communications and indices may
be made by tested telex at the number indicated above or by facsimile at
215-973-6352 (with transmission confirmed by call to telephone number
215-973-8157) stating that the originals of such documents, communications and
notices have been mailed or delivered to us.
8. No person other than you as Trustee or a successor Trustee
under the Indenture may make any demand for payment under this Letter of Credit.
This Letter of Credit is transferable in its entirety only to any transferee who
has succeeded you as Trustee under the Indenture and may successfully be
transferred to any subsequent successor Trustee under the Indenture, in each
case upon presentation to us of the original of this Letter of Credit.
9. This Letter of Credit sets forth in full the terms of our
undertaking, and this undertaking shall not in any way be modified, amended,
amplified or limited by reference to any document, instrument or agreement
referred to herein or in which this Letter of Credit is referred to or to which
this Letter of Credit relates, except only the certificates referred to herein;
and any such reference shall not be deemed to incorporate herein by reference
any document, instrument or agreement, except such certificates. All
certificates referred to herein that are presented to us from time to time shall
become an integral part of this Letter of Credit and shall be binding on any
transferee permitted by the terms of this Letter of Credit.
10. This Letter of Credit is subject to the provisions of the
Uniform Customs and Practice for Documentary Credits, 1993, Revision,
International Chamber of Commerce Publication No. 500 (the "UCP") other than
Article 48(g) thereof. This Letter of Credit shall be deemed a contract made
under the laws of the Commonwealth of Pennsylvania and shall, as to matters not
governed by the UCP, be governed and construed in accordance with the laws
thereof, without regard to principles of conflicts of law.
Very truly yours,
CORESTATES BANK, N.A.
By /s/ Cheryl Morton
----------------------------------
Authorized Officer
-4-
<PAGE>
ANNEX 1 to CoreStates Bank, N.A.
Irrevocable Letter of Credit No. LC# ______
CoreStates Bank, N.A.
530 Walnut Street, Seventh Floor
Find Code 1-9-7-1
Philadelphia, PA 19106
Attention: Letter of Credit Department
Certificate for Interest Drawing of Accrued Interest on
Montgomery County Industrial Development Authority Federally
Taxable Variable Rate Demand Revenue Bonds, Series B of 1997
(Neose Technologies, Inc. Project)
The undersigned, a duly authorized officer of Dauphin Deposit Bank and Trust
Company, as Trustee (the "Trustee") under the Trust Indenture dated as of March
1, 1997 between the Issuer and the Trustee (the "Indenture") under which the
Bonds have been issued, hereby certifies, with reference to Irrevocable Letter
of Credit No. LC#_______ (the "Letter of Credit") issued by CoreStates Bank,
N.A. (the "Bank") in favor of the Trustee (the capitalized terms used herein and
not defined herein shall have the meanings ascribed to them in the Letter of
Credit), that:
1. The Trustee is the Trustee under the Indenture securing the
Bonds and is entitled to present this certificate.
2. Pursuant to Section 5.04 of the Indenture, the Trustee is
drawing on you in the amount of $_______. Such amount represents ______ days
accrued interest on the Bonds. Such amount does not include any amount accrued
on Pledged Bonds (as defined in the Indenture) or Bonds registered in the name
of the Borrower, was computed in accordance with the terms and conditions of the
Indenture and does not exceed the amount available to be drawn under the Letter
of Credit in respect of interest on the Bonds.
3. The Trustee demands payment of the amount specified in
Paragraph 2 above.
IN WITNESS WHEREOF, the Trustee has executed and delivered
this Certificate as of the ___ day of ___________, ____.
DAUPHIN DEPOSIT BANK AND TRUST
COMPANY, as Trustee
By
------------------------------------
Name
---------------------------------
Title
---------------------------------
-5-
<PAGE>
ANNEX 2 to CoreStates Bank, N.A.
Irrevocable Letter of Credit No. LC#______
CoreStates Bank, N.A.
530 Walnut Street, Seventh Floor
Find Code 1-9-7-1
Philadelphia, PA 19106
Attention: Letter of Credit Department
Certificate for Principal Drawing in Respect of Principal of
on Montgomery County Industrial Development Authority
Federally Taxable Variable Rate Demand Revenue Bonds, Series B
of 1997 (Neose Technologies, Inc. Project)
The undersigned, a duly authorized officer of Dauphin Deposit Bank and Trust
Company, as Trustee (the "Trustee") under the Trust Indenture dated as of March
1, 1997 between the Issuer and the Trustee (the "Indenture") under which the
Bonds have been issued, hereby certifies, with reference to Irrevocable Letter
of Credit No. LC#________ (the "Letter of Credit") issued by CoreStates Bank,
N.A. (the "Bank") in favor of the Trustee (the capitalized terms used herein and
not defined herein shall have the meanings ascribed to them in the Letter of
Credit), that:
1. The Trustee is the Trustee under the Indenture securing the
Bonds and is entitled to present this certificate.
2. Pursuant to Section 5.04 of the Indenture, the Trustee is
drawing on you in the amount of $________. Such amount represents payments of
principal due with respect to the Bonds on _________, under Section _________ of
the Indenture. Such amount does not include any amount in respect of Pledged
Bonds (as defined in the Indenture) or any Bonds registered in the name of the
Borrower, is equal to the amount of principal due on the Bonds on such date in
accordance with the terms and conditions of the Indenture and does not exceed
the amount available to be drawn under the Letter of Credit in respect of
principal of the Bonds.
3. The Trustee demands payment of the amount specified in
Paragraph 2 above.
IN WITNESS WHEREOF, the Trustee has executed and delivered
this certificate this ____ day of _________, ____.
DAUPHIN DEPOSIT BANK AND TRUST
COMPANY, as Trustee
By
------------------------------------
Name
---------------------------------
Title
---------------------------------
-6-
<PAGE>
ANNEX 3 to CoreStates Bank, N.A.
Irrevocable Letter of Credit No. LC#______
CoreStates Bank, N.A.
530 Walnut Street, Seventh Floor
Find Code 1-9-7-1
Philadelphia, PA 19106
Attention: Letter of Credit Department
Certificate for Liquidity Drawing in Respect of Principal and
Accrued Interest on Montgomery County Industrial Development
Authority Federally Taxable Variable Rate Demand Revenue
Bonds, Series B of 1997 (Neose Technologies, Inc. Project)
The undersigned, a duly authorized officer of Dauphin Deposit Bank and Trust
Company, as Trustee (the "Trustee") under the Trust Indenture dated as of March
1, 1997 between the Issuer and the Trustee (the "Indenture") under which the
Bonds have been issued, hereby certifies, with reference to Irrevocable Letter
of Credit No. LC#_______ (the "Letter of Credit") issued by CoreStates Bank,
N.A. (the "Bank") in favor of the Trustee (the capitalized terms used herein and
not defined herein shall have the meanings ascribed to them in the Letter of
Credit), that:
1. The Trustee is the Trustee under the Indenture securing the
Bonds and is entitled to present this certificate.
2. Pursuant to Section 4.04 of the Indenture, the Trustee is
drawing on you in the amount of $_______. Such amount represents the principal
portion in the amount of $________ and the accrued interest portion in the
amount of $________ of the purchase price of Bonds, tendered to the Trustee and
not successfully remarketed by the Remarketing Agent (as defined in the
Indenture) with the purchase price therefor having been received by the Trustee
before 10:00 A.M. Such amount does not include any amount in respect of Pledged
Bonds (as defined in the Indenture) or any Bonds registered in the name of the
Borrower, was computed in accordance with the terms and conditions of the
Indenture and does not exceed the amount available to be drawn under the Letter
of Credit in respect of principal of, and interest on, such Bonds.
3. The Trustee is holding as agent for the Bank under the
terms of the Pledge, Security and Indemnification Agreement dated as of March 1,
1997 among the Borrower, the Participating Bank and the Bank, Bonds in the
principal amount of $_________ which amount represents the amount of the
principal portion of the Bonds in respect of which a draw is being made on the
Letter of Credit pursuant to this certificate.
-7-
<PAGE>
4. The Trustee demands payment of the amount specified in
Paragraph 2 above.
IN WITNESS WHEREOF, the Trustee has executed and delivered
this Certificate this ____ day of _________, ____.
DAUPHIN DEPOSIT BANK AND TRUST
COMPANY, as Trustee
By
------------------------------------
Name
---------------------------------
Title
---------------------------------
-8-
<PAGE>
ANNEX 4 to CoreStates Bank, N.A.
Irrevocable Letter of Credit No. LC#______
CoreStates Bank, N.A.
530 Walnut Street, Seventh Floor
Find Code 1-9-7-1
Philadelphia, PA 19106
Attention: Letter of Credit Department
Certificate for Final Payment Drawing in Respect of Principal
and Accrued Interest on Montgomery County Industrial
Development Authority Federally Taxable Variable Rate Demand
Revenue Bonds, Series B of 1997 (Neose Technologies, Inc.
Project)
The undersigned, a duly authorized officer of Dauphin Deposit Bank and Trust
Company, as Trustee (the "Trustee") under the Trust Indenture dated as of March
1, 1997, between the Issuer and the Trustee (the "Indenture") under which the
Bonds have been issued, hereby certifies, with reference to Irrevocable Letter
of Credit No. LC#________ (the "Letter of Credit") issued by CoreStates Bank,
N.A. (the "Bank") in favor of the Trustee (the capitalized terms used herein and
not defined herein shall have the meanings ascribed to them in the Letter of
Credit), that:
1. The Trustee is the Trustee under the Indenture securing the
Bonds and is entitled to present this certificate.
2. Pursuant to Section 4.4 or 5.4 of the Indenture, the
Trustee is drawing on you in the amount of $________. Such amount represents an
unpaid principal amount of $_________ and/or ____ days, accrued interest in the
amount of $_______ due upon purchase (pursuant to a mandatory tender) or
redemption or payment at maturity under Section ____ of the Indenture or upon
acceleration of the Bonds under Section 7.03 of the Indenture. Such amount does
not include any amount in respect of Pledged Bonds (,as defined in the
Indenture) or any Bonds registered in the name of the Borrower, was computed in
accordance with the terms and conditions of the Indenture and does not exceed
the amount available to be drawn under the Letter of Credit in respect of
principal of, and interest on, the Bonds.
3. The Trustee demands payment of the amount specified in
Paragraph 2 above.
-9-
<PAGE>
4. The Letter of Credit is concurrently being surrendered.
IN WITNESS WHEREOF, the Trustee has executed and delivered
this Certificate this ____ day of _________, ____.
DAUPHIN DEPOSIT BANK AND TRUST
COMPANY, as Trustee
By
------------------------------------
Name
---------------------------------
Title
---------------------------------
-10-
<PAGE>
ANNEX 5 to CoreStates Bank, N.A.
Irrevocable Letter of Credit No. LC#______
CoreStates Bank, N.A.
530 Walnut Street, Seventh Floor
Find Code 1-9-7-1
Philadelphia, PA 19106
Attention: Letter of Credit Department
Liquidity Drawing Reinstatement Certificate for CoreStates
Bank, N.A.(the "Bank") Irrevocable Letter of Credit No.
LC#______ (the "Letter of Credit") Supporting Montgomery
County Industrial Development Authority Federally Taxable
Variable Rate Demand Revenue Bonds, Series B of 1997 (Neose
Technologies, Inc. Project)
The undersigned, a duly authorized officer of Dauphin Deposit Bank and Trust
Company, as Trustee (the "Trustee") under the Trust Indenture dated as of March
1, 1997 between the Issuer and the Trustee (the "Indenture") under which the
Bonds have been issued, hereby certifies, with reference to the Letter of Credit
issued by the Bank in favor of the Trustee (the capitalized terms used herein
and not defined herein shall have the meanings ascribed to them in the Letter of
Credit), that:
1. The Trustee is the Trustee under the Indenture securing the
Bonds and is entitled to present this Certificate.
2. On the date of this Certificate $_______ aggregate
principal amount of Bonds are being purchased upon a remarketing thereof by the
Remarketing Agent (as defined in the Indenture). All of such Bonds were
heretofore purchased (or anticipated to be purchased) with the proceeds of one
or more Liquidity Drawings in the total drawing amount, with respect to such
Bonds, of $_______ of which proceeds $_______ was drawn in respect of principal
of such Bonds and $ was drawn in respect of accrued interest on such Bonds.
Prior to the date of this Certificate there has been no reinstatement of the
Letter of Credit Amount with respect to amounts drawn by such Liquidity Drawings
to purchase such Bonds.
3. The Trustee has received for immediate payment (or
repayment) to the Bank in respect of the Bonds described in Paragraph 2 of this
Certificate the total amount of $________ consisting of $________ from the
Remarketing Agent (as defined in the Indenture), $_______ from the Borrower and
$_______ from the Bank. Such total amount is being paid to the Bank with
reference to this Letter of Credit pursuant to Section 4.04 or 4.05 of the
Indenture, as reimbursement for amounts drawn under the Letter of Credit by the
Liquidity Drawings described in Paragraph 2 of this Certificate; provided that,
unless such reimbursement is being made on the same day that payment of such
Liquidity Drawings was received by the Trustee from the Bank, the Bonds
described in Paragraph 2 of this Certificate will be released for remarketing
-11-
<PAGE>
and such payment to the Bank will be made only upon receipt of telephonic
confirmation by the Bank of the reinstatement described in Paragraph 6 below to
the Trustee at (215) ___-____ (which confirmation shall thereafter be sent in
writing to the Trustee at its address on file with you).
4. If the total amount referred to in Paragraph 3 of this
Certificate, $_______ represents the aggregate principal amount of Bonds
described in Paragraph 2 of this Certificate and $_______ represents accrued
interest on such Bonds.
5. Payment of the total amount referred to in Paragraph 3 of
this Certificate, together with other amounts heretofore paid to the Bank by or
on behalf of the Participating Bank, represents reimbursement for the entire
outstanding balance of all amounts drawn in respect of the Bonds described in
Paragraph 2 of this Certificate. The foregoing certification is made in reliance
upon representations by the Borrower, the Participating Bank or the Bank to the
Trustee that, upon payment of such amounts, the Bank will be fully reimbursed
for all Liquidity Drawings (or allocable portions thereof) made to purchase such
Bonds. No certification is made by the Trustee as to the payment of interest
accrued pursuant to the Participation and Reimbursement Agreement described in
the Letter of Credit on the amounts drawn by such Liquidity Drawings.
6. Pursuant to Paragraph 5(b) of the Letter of Credit, the
Letter of Credit Amount shall be automatically reinstated by an amount equal to
$______ (which does not exceed the aggregate amount of the Liquidity Drawings,
or allocable portions thereof, paid by the Bank to purchase such Bonds), of
which $________ (which does not exceed the aggregate amount of such Liquidity
Drawings, or allocable portions thereof, drawn against the Principal Component)
shall be applied to the Principal Component and $________ (which does not exceed
the aggregate amount of such Liquidity Drawings, or allocable portions thereof,
drawn against the Interest Component) shall be applied to the Interest
Component.
IN WITNESS WHEREOF, the Trustee has executed and delivered
this Certificate this ____ day of ___________, ____.
DAUPHIN DEPOSIT BANK AND TRUST
COMPANY, as Trustee
By
------------------------------------
Name
---------------------------------
Title
---------------------------------
-12-
<PAGE>
ANNEX 6 to CoreStates Bank, N.A.
Irrevocable Letter of Credit No. LC#______
CoreStates Bank, N.A.
530 Walnut Street, Seventh Floor
Find Code 1-9-7-1
Philadelphia, PA 19106
Attention: Letter of Credit Department
Certificate for Reducing CoreStates Bank, N.A. (the "Bank")
irrevocable Letter of Credit No. LC#______ (the "Letter of
Credit") Supporting Montgomery County Industrial Development
Authority Federally Taxable Variable Rate Demand Revenue
Bonds, Series B of 1997 (Neose Technologies, Inc. Project)
The undersigned, a duly authorized officer of Dauphin Deposit Bank and Trust
Company, as Trustee (the "Trustee") under the Trust Indenture dated as of March
1, 1997, between the Issuer and the Trustee (the "Indenture") under which the
Bonds have been issued, hereby certifies (the capitalized terms used herein and
not defined herein shall have the meanings ascribed to them in the Letter of
Credit), that:
1. The Trustee is the Trustee under the Indenture securing the
Bonds and is entitled to present this certificate.
2. The Trustee hereby notifies you that on or prior to the
date of this certificate, $________ in principal amount of the Bonds have been
redeemed, defeased or otherwise are no longer Outstanding pursuant to the
Indenture.
3. Pursuant to the terms of the Letter of Credit, the Bank is
hereby directed to reduce the Letter of Credit Amount and the Principal and
Interest Components thereof, effective on the Business Day on which you receive
this certificate, so that after such reduction, the Letter of Credit Amount
shall be $_______ of which $_________ shall be the Principal Component and
$_______ shall be the Interest Component, (calculated on the basis of 45 days
accrued interest at a rate of 17% per annum), less the amount, if any, drawn
with Liquidity Drawings to purchase Outstanding Bonds in respect of which the
Letter of Credit has not been reinstated.
-13-
<PAGE>
4. The foregoing amounts were computed in accordance with the
terms and conditions of the Indenture.
IN WITNESS WHEREOF, the Trustee has executed and delivered
this Certificate this ___ day of __________, ____.
DAUPHIN DEPOSIT BANK AND TRUST
COMPANY, as Trustee
By
------------------------------------
Name
---------------------------------
Title
---------------------------------
-14-
<PAGE>
ANNEX 7 to CoreStates Bank, N.A.
Irrevocable Letter of Credit No. LC#______
CoreStates Bank, N.A.
530 Walnut Street, Seventh Floor
Find Code 1-9-7-1
Philadelphia, PA 19106
Attention: Letter of Credit Department
Certificate for Terminating CoreStates Bank, N.A. (the "Bank")
Irrevocable Letter of Credit No. LC#_______ (the "Letter of
Credit") Supporting Montgomery County Industrial Development
Authority Federally Taxable Variable Rate Demand Revenue
Bonds, Series B of 1997 (Neose Technologies, Inc. Project)
The undersigned, a duly authorized officer of Dauphin Deposit Bank and Trust
Company, as Trustee (the "Trustee") under the Trust Indenture dated as of March
1, 1997 between the Issuer and the Trustee (the "Indenture") under which the
Bonds have been issued, hereby certifies (the capitalized terms used herein and
not defined herein shall have the meanings ascribed to them in the Letter of
Credit) that:
1. The Trustee is the Trustee under the Indenture for the
holders of the Bonds.
2. Pursuant to the Indenture and the Letter of Credit, the
Letter of Credit shall be terminated on the date the Bank receives this
Certificate, and the Trustee is herewith surrendering the Letter of Credit for
cancellation, because no Bonds remain outstanding other than Bonds secured by an
Alternate Letter of Credit.
IN WITNESS WHEREOF, the Trustee has executed and delivered
this Certificate this ____ day of _________, ____.
DAUPHIN DEPOSIT BANK AND TRUST
COMPANY, as Trustee
By
------------------------------------
Name
---------------------------------
Title
---------------------------------
-15-
<PAGE>
ANNEX 8 to CoreStates Bank, N.A.
Irrevocable Letter of Credit No. LC#______
CoreStates Bank, N.A.
530 Walnut Street, Seventh Floor
Find Code 1-9-7-1
Philadelphia, PA 19106
Attention: Letter of Credit Department
Re: CoreStates Bank, N.A. Irrevocable Letter of
Credit No. LC#______
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby
irrevocably transfers to:
(Name of Transferee)
(Address)
all rights of the undersigned beneficiary to draw under the above Letter of
Credit in its entirety. Said transferee has succeeded to the undersigned as
Trustee under the Trust Indenture dated as of March 1, 1997 between the
Montgomery County Industrial Development Authority and Dauphin Deposit Bank and
Trust Company, as Trustee.
By this transfer, all rights of the undersigned beneficiary in
such Letter of Credit are transferred to the transferee and the transferee shall
have the sole rights as beneficiary thereof, including sole rights relating to
any amendments whether increases or extensions or other amendments and whether
now existing or hereafter made. All amendments are to be advised direct to the
transferee without necessity of any consent of or notice to the undersigned
beneficiary.
The original of such Letter of Credit is returned herewith,
and in accordance therewith we ask you to transfer the Letter of Credit to the
transferee and forward it directly to the transferee with your customary notice
of transfer, or that, at your option, you issue a new irrevocable letter of
credit in favor of the transferee with provisions consistent with the Letter of
Credit.
Very truly yours,
SIGNATURE AUTHENTICATED DAUPHIN DEPOSIT BANK AND TRUST
COMPANY, as Trustee
By
- -------------------------------------- ------------------------------------
(Authorized Signature) Title
-16-
Exhibit 10.4
PLEDGE, SECURITY AND INDEMNIFICATION AGREEMENT
THIS PLEDGE, SECURITY AND INDEMNIFICATION AGREEMENT ("this
Agreement"), dated as of March 1, 1997, is made by and among NEOSE TECHNOLOGIES,
INC. (the Borrower), CORESTATES BANK, N.A. (the "Bank"), and JEFFERSON BANK (the
"Participating Bank").
RECITALS
A. The Borrower has requested the Participating Bank to enter into a
Participation and Reimbursement Agreement with the Bank, dated as of March 1,
1997 (the "Participating Bank Agreement"), pursuant to which the Bank has agreed
to issue the Letter of Credit (as defined in the Participating Bank Agreement)
to Dauphin Deposit Bank and Trust Company, as Trustee, for the account of the
Participating Bank and for the benefit of the Borrower in order to support
certain payments with respect to the Bonds described in the Participating Bank
Agreement issued for the benefit of the Borrower (the "Bonds").
B. It is a condition precedent under the Participating Bank Agreement
to the obligation of the Bank to issue the Letter of Credit and for the
Participating Bank to enter into the Participating Bank Agreement that the
Borrower shall have executed and delivered this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce
the Bank to issue the Letter of Credit and to induce the Participating Bank to
enter into the Participating Bank Agreement and for other good and valuable
consideration, receipt of which is acknowledged, the parties hereto agree as
follows:
Section 1. Defined Terms. Terms defined in the Participating
Bank Agreement shall have the same meanings when used in this Agreement, and the
rules of interpretation set forth in Sections 1.1 and 1.3 of the Participating
Bank Agreement shall apply to this Agreement.
Section 2. Pledge. The Borrower pledges, assigns, transfers,
hypothecates and delivers to the Bank and the Participating Bank, as their
interests appear herein, all its right, title and interest in and to the Pledged
Bonds and grants to the Bank a first priority lien upon and security interest
in, and to the Participating Bank a second priority lien upon and security
interest in, the Pledged Bonds as the same may be from time to time delivered to
the Trustee as agent for the Bank and/or the Participating Bank and in all
proceeds of such Pledged Bonds and, subject to the prior rights of the holders
of the Bonds, all of the Borrower's rights, title and interest in and to all
funds and investments thereof and all other property now or hereafter held by
the Trustee under the Indenture (collectively, the "Collateral"), all as
collateral security for the prompt and complete payment when due of all amounts
due from the Participating Bank to the Bank under or in respect of the
Participating Bank Agreement, and from the Borrower to the Participating Bank
under the Reimbursement Agreement (collectively, the "Obligations"). The
Borrower hereby consents to the Trustee acting as the agent of the Bank and/or
the Participating Bank for the
-1-
<PAGE>
purpose of perfecting the lien and security interest of this Agreement and of
holding the Collateral for the benefit of the Bank and the Participating Bank
pursuant to the Indenture.
Section 3. Payments on the Bonds. If, while this Agreement is
in effect, the Borrower shall become entitled to receive or shall receive any
interest or other payment in respect of the Pledged Bonds, the Trustee will hold
the same in trust on behalf of the Bank and the Participating Bank and deliver
the same forthwith to the Bank or, upon notice from the Bank, which notice the
Bank agrees to give so long as no event of default exists under the
Participating Bank Agreement, to the Participating Bank. The Borrower hereby
authorizes the Trustee to hold and receive on the Bank's and/or Participating
Bank's behalf and to deliver forthwith to the Bank or upon such notice from the
Bank, to the Participating Bank, any payment received by it in respect of the
Pledged Bonds (including the proceeds of any remarketing of the Pledged Bonds).
All such payments in respect of the Pledged Bonds which are paid to the Bank or
the Participating Bank shall be credited against the Obligations in accordance
with the terms of the Participating Bank Agreement and the Reimbursement
Agreement.
Section 4. Release of Pledged Bonds. Neither the Bank nor the
Participating Bank, as the case may be, shall release from the lien and security
interest of this Agreement any Pledged Bonds that are being remarketed pursuant
to Section 4.05 of the Indenture or that are to be delivered to the Trustee,
unless the Bank or the Participating Bank, as the case may be, by wire transfer,
has been or is being reimbursed in respect of the principal and, if applicable,
interest amounts of the Liquidity Drawing related to the purchase of such
Pledged Bonds in a manner which will permit the reinstatement of the Principal
Component and Interest Component in respect of such Pledged Bonds in accordance
with the terms of the Letter of Credit.
Section 5. Representations and Warranties. The Borrower
represents and warrants that: (a) on the date of delivery of the Pledged Bonds
to the Bank, no other Person (other than the Participating Bank which has a
subordinated lien on the Pledged Bonds) shall have any right, title or interest
in and to the Pledged Bonds, other than as securities depository or trustee; (b)
the Borrower has, and on the date of delivery of any of the Pledged Bonds
hereunder 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) in connection with the delivery of Pledged Bonds hereunder,
Borrower shall take all steps reasonably required by Bank to ensure that the
pledge, assignment and delivery of the Pledged Bonds pursuant to this Agreement
will create a valid first lien and security interest on, and a first perfected
security interest in, all right, title and interest of the Borrower in and to
the Pledged Bonds and the proceeds thereof, subject to no prior lien and
security interest on the property or assets of the Borrower which would include
the Pledged Bonds; and (d) the Borrower makes each of the representations and
warranties in the Loan Agreement and Related Documents to and for the benefit of
the Bank and the Participating Bank as if the same were set forth in full
herein. Unless the Borrower shall have previously advised the Bank and the
Participating Bank in writing that one or more of the above statements is no
longer true in all material respects, the Borrower shall be deemed to have
represented and
-2-
<PAGE>
warranted to the Bank and the Participating Bank on each Drawing Date that the
statements contained herein are true and correct in all material respects.
Section 6. Rights of the Bank and the Participating Bank.
Neither the Bank nor the Participating Bank (in its capacity as pledgee
hereunder) shall be liable for any failure to collect or realize upon all or any
part of the Obligations or any collateral security (including the Collateral) or
guarantee for the Obligations, or for any delay in so doing nor shall either the
Bank or the Participating Bank be under any obligation to take any action
whatsoever with regard to the Obligations or any such collateral security or
guarantee. If an Event of Default has occurred and is continuing, the Bank may,
or following payment to the Bank of all of the obligations due to the Bank under
the Participating Bank Agreement the Participating Bank may, without notice,
exercise all rights, privileges or options pertaining to any Pledged Bonds as if
it were the absolute owner of such Pledged Bonds (except, however, sell Pledged
Bonds if either (a) the Principal Component and the Interest Component of the
Letter of Credit have not been reinstated in accordance with its terms, or (b)
it has not secured an acknowledgment from the purchaser of such Pledged Bonds
that such Pledged Bonds are not secured by the Letter of Credit), upon such
terms and conditions as it may determine, all without liability except to
account for property actually received by it, but neither the Bank nor the
Participating Bank shall have any duty to exercise any of those rights,
privileges or options nor shall they be responsible for any failure to do so or
delay in so doing.
Section 7. Remedies. In addition to their other rights and
remedies under this Agreement, the Participating Bank Agreement, the
Reimbursement Agreement and the Related Documents, the Bank and the
Participating Bank shall have all of the rights and remedies of a secured party
under the Pennsylvania Uniform Commercial Code or other applicable law with
respect to the security interests created by this Agreement.
Section 8. Further Assurances. The Borrower agrees that at any
time and from time to time upon the written request of the Bank or the
Participating Bank, the Borrower will execute and deliver such further documents
and do such further acts and things as the Bank and/or the Participating Bank
may reasonably request in order to effect the purposes of this Agreement.
Section 9. Indemnification. In consideration for the Bank's
issuance of the Letter of Credit and the Participating Bank's entering into the
Participating Bank Agreement, to the fullest extent permitted by law, the
Borrower agrees to indemnify and hold harmless the Bank and the Participating
Bank and their respective officers, directors, employees and agents from and
against any and all claims, damages, losses, liabilities, costs or expenses
whatsoever which such indemnified party may incur (or which may be claimed
against such indemnified party by any Person) by reason of (a) any untrue
statement or alleged untrue statement of any material fact contained or
incorporated by reference in the Placement Memorandum or the Preliminary
Placement Memorandum or the omission or alleged omission to state in the
Placement Memorandum or the Preliminary Placement Memorandum a material fact
necessary to make
-3-
<PAGE>
such statements, with respect to information furnished in writing by the
Borrower expressly for use in the Placement Memorandum or the Preliminary
Placement Memorandum, all in the light of the circumstances under which they are
or were made, not misleading with respect to the Bonds, the Preliminary
Placement Memorandum or the Placement Memorandum; (b) the issuance, sale or
delivery of the Bonds; (c) the use of the proceeds of the Bonds or any Drawing;
or (d) in connection with the execution and delivery or transfer of, or payment
or failure to pay under, the Letter of Credit; provided, however, that the
Borrower shall not be required to indemnify the Bank or the Participating Bank
for any claims, damages, losses, liabilities, costs, or expenses to the extent,
but only to the extent, (i) caused by the willful misconduct or gross negligence
of the Bank or the Participating Bank in performing their respective obligations
under this Agreement and the Letter of Credit or (ii) incurred by reason of any
untrue or misleading statement contained, or any omission to state any material
fact, in information furnished in writing by the Bank expressly for use in the
Placement Memorandum or Preliminary Placement Memorandum. The Borrower, upon
demand by any party indemnified or intended to be indemnified pursuant to this
Section 9 at any time, shall reimburse such party for any reasonable legal or
other expenses incurred in connection with investigating or defending against
any of the foregoing. If any action, suit or proceeding arising from any of the
foregoing is brought against any party indemnified or intended to be indemnified
pursuant to this Section 9, the Borrower, to the extent determined by such party
as necessary or advisable in order to protect the rights of such party in
connection with such action, suit or proceeding, will resist and defend such
action, suit or proceeding or cause the same to be resisted and defended by
counsel designated by the Borrower (which counsel shall be satisfactory to such
party); provided, however, that the Borrower shall not be required to settle any
such action without its consent, which consent shall not be unreasonably
withheld.
Section 10. Notices. All notices, requests and other
communications to any party hereunder shall be in writing, unless otherwise
specified, and shall be given to such party, addressed to it, at its address or
facsimile number set forth below or such other address or facsimile number as
such party may specify for the purpose by notice to the other parties. Each such
notice, request or communication shall be effective (a) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified below, (b)
if given by mail five (5) days after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid or (c) if given
by any other means, when delivered at the address specified below:
Party Address
----- --------
Bank: CoreStates Bank, N.A.
1345 Chestnut Street
PNB Building, 5th Floor
F.C. 1-1-5-22
Philadelphia, PA 19101
Attn: Global Financial Institutions
Facsimile: 215-973-8432
-4-
<PAGE>
Participating Bank: Jefferson Bank
1607 Walnut Street
Philadelphia, PA 19103
Attn: Kenneth R. Frappier, Senior Vice President
Facsimile: 215-564-6820
Borrower: Neose Technologies, Inc.
102 Witner Road
Horsham, PA 19044
Attn: P. Sherrill Neff, President
Facsimile: 215-444-5896
with copies to: Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attn: Lynn Axelroth, Esquire
Facsimile: 215-864-8999
Trustee: Dauphin Deposit Bank and Trust Company
213 Market Street
Harrisburg, PA 17107
Attn: Corporate Trust Group,
Mail Code No. 001-01-02
Facsimile: 717-231-2615
Section 11. Amendments and Waivers. No amendment or waiver of
any provision of this Agreement nor consent to any departure by the Borrower
from any such provision shall in any event be effective unless the same shall be
in writing and signed by the Bank and the Participating Bank. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
Section 12. No Waiver; Remedies. No failure on the part of the
Bank or the Participating Bank to exercise, and no delay in exercising, any
right under this Agreement shall operate as a waiver of such right nor shall any
single or partial exercise of any right under this Agreement preclude any other
further exercise of such right or the exercise of any other right. The remedies
provided in this Agreement are cumulative and not exclusive of any remedies
provided by law or available in equity.
-5-
<PAGE>
Section 13. Severability. Any provision of this Agreement
which is prohibited, unenforceable or not authorized in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions of this Agreement or affecting any validity, enforceability or
legality of such provision in any other jurisdiction.
Section 14. Headings. Section headings in this Agreement
are included for convenience of reference only and shall not constitute a part
of this Agreement for any other purpose.
Section 15. Counterparts. This Agreement may be signed by
any number of counterpart copies, but all such copies shall constitute one and
the same instrument.
Section 16. Governing Law and Jurisdiction. This Agreement has
been delivered to and accepted by the Bank and will be deemed to be made in the
State. This Agreement will be interpreted and the rights and liabilities of the
parties hereto determined in accordance with the laws of the State, excluding
its conflict of laws rules. The Borrower hereby agrees to the jurisdiction of
any state or federal court located within the county where the Bank's office
indicated above is situated, or such other venue as the Bank chooses, and
consents that all service of process be sent by nationally recognized overnight
courier service directed to the Borrower at the Borrower's address set forth
herein for notices and service so made will be deemed to be completed on the
Business Day after deposit with such courier; provided that nothing contained in
this Agreement will prevent the Bank from bringing any action or exercising any
rights against any security or against the Borrower individually, or against any
property of the Borrower within any other state or nation to enforce any award
or judgment obtained in the venue provided above, or such other venue as the
Bank chooses. The Borrower waives any objection to venue and any objection based
on a more convenient forum in any action instituted under this Agreement.
Section 17. WAIVER OF JURY TRIAL. THE BORROWER IRREVOCABLY
WAIVES ANY AND ALL RIGHT THE BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS
EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN
ANY SUCH DOCUMENTS OR OTHERWISE AND THE BORROWER ACKNOWLEDGES THAT THE FOREGOING
WAIVER IS KNOWING AND VOLUNTARY.
-6-
<PAGE>
WITNESS the due execution hereof on the day and year first
above written intending to be legally bound.
ATTEST: NEOSE TECHNOLOGIES, INC.
By /s/ Brian Davis By /s/ P. Sherrill Neff
-------------------------------- ---------------------------------
Title Secretary Title President and CFO
----------------------------- ------------------------------
JEFFERSON BANK CORESTATES BANK, N.A.
By Kenneth R. Frappier By /s/ Wade Johnson
-------------------------------- ---------------------------------
Title Senior VP Title Vice President
----------------------------- ------------------------------
-7-
Exhibit 10.5
REIMBURSEMENT AGREEMENT
Dated as of March 1, 1997
Between
NEOSE TECHNOLOGIES, INC.
and
JEFFERSON BANK
Entered into with regard to Montgomery County
Industrial Development Authority's
$8,400,000 Federally Taxable Variable Rate Demand Revenue Bonds (Neose
Technologies, Inc. Project), Series B of 1997
<PAGE>
TABLE OF CONTENTS
Page
Recitals.................................................................... 1
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.................................................. 2
Section 1.02. Accounting and Commercial Terms.............................. 7
Section 1.03. Rules of Construction; Time of Day.......................... 7
Section 1.04 Security Agreement........................................... 7
ARTICLE II
CREDIT AND REIMBURSEMENT
Section 2.01. Credit....................................................... 8
Section 2.02. Reimbursement and Other Payments to Bank..................... 8
Section 2.03. Payments Under Loan Agreement............................... 12
Section 2.04. Obligations Absolute........................................ 13
Section 2.05. Indemnification............................................. 13
Section 2.06. Liability of Bank........................................... 14
ARTICLE III
SECURITY
Section 3.01. Security and Subrogation under Indenture.................... 15
Section 3.02. Pledge of Rights to Certain Funds and Investments........... 15
Section 3.03. Pledged Bonds............................................... 15
Section 3.04. Mortgage; Security Agreement................................ 16
Section 3.05. Financing Statements........................................ 16
Section 3.06. Custodial Bank Agreement.................................... 16
Section 3.07. Benefit, Security and Subrogation Rights
of Letter of Credit Bank....................... 16
<PAGE>
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01. Closing Fee................................................. 17
Section 4.02. Documentation............................................... 17
Section 4.03. Issuance of Bonds........................................... 19
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01. Existence................................................... 20
Section 5.02. Power, Authorization and No Conflicts....................... 20
Section 5.03. Governmental Authorizations; Permits,
Licenses and Other Approvals................... 20
Section 5.04. Validity and Binding Effect................................. 21
Section 5.05. No Litigation............................................... 21
Section 5.06. No Violations............................................... 21
Section 5.07. Project Compliance.......................................... 21
Section 5.08. No Liens.................................................... 22
Section 5.09. Utilities and Access........................................ 22
Section 5.10. Financial Information....................................... 22
Section 5.11. Taxes....................................................... 23
Section 5.12. ERISA Representations....................................... 23
Section 5.13. Environmental Representations............................... 24
Section 5.14. Representations in Other Documents.......................... 25
ARTICLE VI
GENERAL COVENANTS
Section 6.01. Maintenance of Existence; Mergers........................... 25
Section 6.02. Compliance with Laws........................................ 25
Section 6.03. Maintenance of Governmental Authorizations.................. 25
Section 6.04. Maintenance of Insurance.................................... 26
Section 6.05. Compliance with Bond Documents and Other
Contracts...................................... 26
Section 6.06. Maintenance of Properties................................... 26
Section 6.07. Visitation Rights........................................... 26
Section 6.08. Keeping of Books............................................ 26
Section 6.09. Reporting Requirements...................................... 27
Section 6.10. Payment of Debt............................................. 28
Section 6.11. Payment of Taxes............................................ 28
<PAGE>
Section 6.12. Consents Under Bond Documents............................... 28
Section 6.13. Amendments to Bond Documents................................ 28
Section 6.14. Limitation on Conversion to Term Rate....................... 28
Section 6.15. Limitation on Optional Calls................................ 28
Section 6.16. Leases...................................................... 29
Section 6.17. ERISA....................................................... 29
Section 6.18. Environmental Covenants..................................... 30
Section 6.19. Further Assurances.......................................... 31
Section 6.20. Financial Covenants......................................... 31
Section 6.21. Principal Prepayments....................................... 33
Section 6.22. Working Capital..............................................33
Section 6.23 Deposit Relationship.........................................33
ARTICLE VII
PROJECT FUND AND CONSTRUCTION COVENANTS
Section 7.01. Project Cost Schedule; Application of
Project Fund....................................33
Section 7.02. Requisition Approvals........................................35
Section 7.03. Construction; Completion Date................................35
Section 7.04. Certain Contracts Prohibited.................................36
Section 7.05. Certain Notices..............................................36
Section 7.06. Releases.....................................................36
Section 7.07. Change Orders................................................36
Section 7.08. Builder's Risk, Liability and Workers'
Compensation Insurance..........................37
ARTICLE VII
DEFAULTS AND REMEDIES
Section 8.01. Defaults.................................................... 37
Section 8.02. Remedies.................................................... 40
Section 8.03. Waivers; Consents........................................... 41
Section 8.04. No Waiver; Remedies Cumulative.............................. 42
ARTICLE IX
MISCELLANEOUS
Section 9.01. Notices..................................................... 42
Section 9.02. Successors and Assigns...................................... 43
Section 9.03. Survival of Representations, Warranties and
Covenants.......................................43
<PAGE>
Section 9.04. Counterparts................................................ 44
Section 9.05. Costs, Expenses and Taxes................................... 44
Section 9.06. Amendments...................................................44
Section 9.07. Severability.................................................44
Section 9.08. Conflicts....................................................44
Section 9.09. Complete Agreement...........................................45
Section 9.10. Governing Law................................................45
Section 9.11. Table of Contents and Headings...............................45
Section 9.12. Participation................................................45
Section 9.13. Judicial Proceedings.........................................46
EXECUTION...................................................................46
EXHIBIT A - Form of Note
EXHIBIT B - Project Description and Cost Schedule
EXHIBIT C - Environmental Matters
EXHIBIT D - Optional Prepayment Schedule
<PAGE>
REIMBURSEMENT AGREEMENT
THIS AGREEMENT, made as of March 1, 1997 between NEOSE
TECHNOLOGIES, INC. (the "Borrower"), a corporation organized and existing under
the laws of the State of Delaware, and JEFFERSON BANK (the "Bank"), a banking
institution organized and existing under the laws of the Commonwealth of
Pennsylvania,
W I T N E S S E T H :
A. Montgomery County Industrial Development Authority (the
"Issuer") has issued its Federally Taxable Variable Rate Demand Revenue Bonds
(Neose Technologies, Inc. Project) Series B of 1997, in the aggregate principal
amount of $8,400,000 (the "Bonds") under a Trust Indenture, dated as of March 1,
1997 (the "Indenture") between the Issuer and Dauphin Deposit Bank and Trust
Company, as Trustee (including any successor trustee, the "Trustee").
B. Pursuant to a Loan Agreement, dated as of March 1, 1997
between the Issuer and the Borrower (the "Loan Agreement"), the proceeds of the
Bonds are being applied to finance the acquisition, improvement and equipping of
a facility which will be used for the development of complex carbohydrates for
research and development relating to a variety of health care applications. The
facility consists of a one-story, 45,000 square foot building situated on
approximately 4.0 acres of land, located at 102 Witmer Road, Horsham, Montgomery
County, Pennsylvania (collectively, the "Project"), to be owned by the Borrower.
Under the Loan Agreement, the Borrower is obligated to make loan payments to the
Trustee in amounts and at times corresponding to the principal and interest debt
service required in respect of the Bonds.
C. In order to facilitate the issuance and sale of the Bonds
and to enhance the marketability of the Bonds, the Issuer has asked CoreStates
Bank, N.A. to issue its Irrevocable Letter of Credit (together with any
amendment thereto and any substitute letter of credit issued by the Letter of
Credit Bank therefor, the "Letter of Credit") to the Trustee authorizing the
Trustee to make one or more draws on CoreStates Bank, N.A., the issuer of the
Letter of Credit or on the issuer of any letter of credit issued in substitution
therefor (the "Letter of Credit Bank") up to an aggregate of $8,579,967.12 (as
reduced and reinstated from time to time in accordance with the provisions of
the Letter of Credit, the "Letter of Credit Amount"), of which originally (i)
$8,400,000 shall be in respect of principal of the Bonds and (ii) $179,967.12
shall be in respect of accrued interest on the Bonds. The purpose of the Letter
of Credit is to provide funds for the payment of principal of and interest on
the Bonds and purchase price of Bonds which have been tendered for purchase
pursuant to the tender option provisions thereof and of the Indenture to the
extent remarketing proceeds or other funds are not available therefor in
accordance with the provisions of the Indenture.
-1-
<PAGE>
D. The Letter of Credit Bank will only issue the Letter of
Credit for the account of a banking institution acceptable to the Letter of
Credit Bank. To such end and in order to achieve interest cost savings and other
savings for the Borrower, the Borrower has asked the Bank to enter into a
Participation and Reimbursement Agreement, dated as of March 1, 1997 with the
Letter of Credit Bank (the "Participating Bank Agreement") under which the Bank
will become primarily and unconditionally obligated to reimburse the Letter of
Credit Bank for all drawings under the Letter of Credit and to make certain
other payments to the Letter of Credit Bank.
E. The Bank is willing to enter into the Participating Bank
Agreement for the account of the Borrower upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the
undertakings herein set forth and intending to be legally bound, the Borrower
and the Bank hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The following terms shall have the
meanings specified in the foregoing recitals:
Bank Letter of Credit Amount
Bonds Letter of Credit Bank
Borrower Loan Agreement
Indenture Participating Bank Agreement
Issuer Project
Letter of Credit Trustee
In addition, the following terms shall have the meanings specified in this
Article, unless the context otherwise requires:
"Base Rate" means the rate of interest designated and
established by the Bank, from time to time, with changes effective immediately.
The Base Rate is determined from time to time by the Bank as a means of pricing
some loans to its borrowers and is neither tied to any external rate of interest
or index, nor necessarily reflects the lowest rate of interest actually charged
by the Bank to any particular class or category of customers.
"Bond Documents" means the Bonds, the Indenture, the Loan
Agreement, the Remarketing Agreement and any other agreements or instruments
relating thereto.
-2-
<PAGE>
"Bond Pledge Agreement" means the Pledge, Security and
Indemnification Agreement, dated as of March 1, 1997 among the Borrower, the
Letter of Credit Bank and the Bank with respect to Pledged Bonds.
"Business Day" means any day other than a Saturday or Sunday
or a day on which banks located in Philadelphia, Pennsylvania, or any other city
in which the principal corporate trust office of the Trustee or the principal
office of the Bank or the office of the Letter of Credit Bank at which drawing
documents are required to be presented under the Letter of Credit is located are
required or authorized to close or a day on which The New York Stock Exchange is
closed.
"Change Order" shall have the meaning ascribed to such term in
Section 7.07.
"Closing Date" means the date of execution and delivery of
this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder, including any amendments and successor
provisions thereto.
"Completion Date" shall have the meaning ascribed to such term
in Section 7.03.
"Contamination" means the presence of Hazardous Substances at
the Premises, or arising from the Premises or activities at the Premises, which
may require remediation under any applicable law.
"Custodial Bank" shall have the meaning ascribed to such
phrase in Section 3.06 hereof.
"Custodial Bank Agreement" shall have the meaning ascribed to
such phrase in Section 3.06 hereof.
"Debt" of any Person means: (a) all obligations of such Person
for borrowed money; (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments; (c) all obligations of such Person
upon which interest charges are customarily paid; (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person; (e) all obligations of such Person
issued or assumed as deferred construction price for completed work or deferred
purchase price of property or services (other than trade payables incurred in
the ordinary course of business but only if and so long as the same are payable
on customary trade terms); (f) all Guarantees by such Person of Debt of others;
(g) all capital lease obligations of such Person; (h) all obligations for
unfunded pension liabilities to the extent that the projected benefit
obligations of all employee pension plans maintained by such Person or any ERISA
Affiliate exceeds the fair value of the plan assets of such plans, as determined
in accordance with GAAP; and (i) all reimbursement obligations of such Person in
respect of letters of credit and similar instruments.
-3-
<PAGE>
"Default" means an event which, with the giving of notice or
lapse of time or both, would constitute an Event of Default.
"Environmental Laws" means all statutes, ordinances,
regulations, orders, permits and requirements of common law concerning
environmental matters and relating to: (i) activities at the Premises; (ii)
repairs or construction of any improvements at the Premises; (iii) handling of
any materials at the Premises; (iv) discharges to the air, soil, surface water
or ground water from any facilities at the Premises; and (v) storage, treatment
or disposal (on-site or off-site) of any waste at or connected with any activity
at the Premises.
"ERISA" shall have the meaning ascribed to such term in
Section 5.12.
"ERISA Affiliate" shall have the meaning ascribed to such term
in Section 5.12.
"Event of Default" shall have the meaning ascribed to such
term in Section 8.01.
"Expiration Date" shall have the meaning ascribed to such term
in the Letter of Credit.
"Final Payment Drawing" shall have the meaning ascribed to
such term in the Letter of Credit.
"Fiscal Year" means the annual accounting year of the
Borrower, which currently begins on January 1 in each calendar year.
"GAAP" means generally accepted accounting principles
consistently applied.
"General Contract" means the construction contract between the
Borrower and the General Contractor for the construction of the Improvements.
"General Contractor" means Irwin & Leighton, Inc., the general
contractor for the construction of the Improvements pursuant to the General
Contract.
"Guarantee" of or by any Person shall mean any obligation,
contingent or otherwise, of such Person guaranteeing or becoming surety for or
having the economic effect of guaranteeing or becoming surety for any Debt of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including without limitation: (a) any obligation of such Person,
direct or indirect: (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or to purchase (or to advance or supply funds
for the purchase of) any security for the payment of such Debt; (ii) to lease or
purchase property or purchase services for the purpose of assuring the owner of
such Debt of the payment of such Debt; or (iii) to maintain working capital,
equity capital or other financial statement condition or liquidity of the
primary obligor so as to enable the primary obligor to pay such Debt; and (b)
any Lien (or existing right to be secured by a Lien) on property of such Person
to secure Debt
-4-
<PAGE>
of others, whether or not such Debt has been assumed by such Person; provided
that the term Guarantee shall not include endorsements for collection or
deposit, in either case, in the ordinary course of business. For purposes of
this Agreement, the amount of a Guarantee shall be the amount of the Debt
guaranteed thereby.
"Hazardous Substances" means: (a) "hazardous substances" as
defined in or pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. (section)9601(14)), as amended from time to time,
and the regulations promulgated thereunder; (b) "regulated substances" within
the meaning of subtitle I of the Resource Conservation and Recovery Act (42 U.S.
C. (section)6991(2)), as amended from time to time, and the regulations
promulgated thereunder; (c) "contaminants" or "hazardous substances" as defined
in or pursuant to the Pennsylvania Hazardous Sites Cleanup Act (35 P.S.
(section)6020.101 et seq.), as amended from time to time, and the regulations
promulgated thereunder; (d) "hazardous wastes" as defined pursuant to the
Pennsylvania Solid Waste Management Act (35 P.S. (section)6018.101 et seq.), as
amended from time to time, and the regulations promulgated thereunder; (e) any
other substances which may be the subject of liability pursuant to Sections 316
or 401 of the Pennsylvania Clean Streams Law (35 P.S. (section)691.1 et seq.),
as amended from time to time, and the regulations promulgated thereunder; (f)
any "hazardous substances", "hazardous wastes", "hazardous materials", "medical
wastes" or other substances as defined in or prohibited by or regulated pursuant
to any federal, state or local law relating to environmental matters, as amended
from time to time, and regulations promulgated thereunder; (g) any substance the
presence of which on the applicable property is prohibited by or regulated
pursuant to law similar to those set forth in this definition; and (h) any other
substance which by law requires special handling in its collection, storage,
treatment or disposal.
"Improvements" means the building and the renovations and
improvements thereto included in the Project.
"Interest Component" shall have the meaning ascribed to such
term in the Letter of Credit.
"Interest Drawing" shall have the meaning ascribed to such
term in the Letter of Credit.
"Lien" means any lien (statutory or otherwise), security
interest, mortgage, deed of trust, pledge, hypothecation, assignment (for the
purpose of providing security), deposit arrangement, encumbrance, preference,
priority or other security or preferential arrangement of any kind or nature
whatsoever (including without limitation any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction).
-5-
<PAGE>
"Liquidity Drawing" shall have the meaning ascribed to such
term in the Letter of Credit.
"Mortgage" shall have the meaning ascribed to such term in
Section 3.04.
"Note" shall have the meaning ascribed to such term in Section
2.01(b).
"Participating Banks" shall have the meaning ascribed to such
term in Section 9.12.
"PBGC" shall have the meaning ascribed to such term in Section
5.12.
"Permitted Liens" shall have the meaning ascribed to such term
in Section 5.08.
"Person" means any individual, for-profit or nonprofit
corporation, partnership, joint venture, association, joint-stock company,
estate, trust, unincorporated organization, governmental body or any agency or
political subdivision thereof, or other legal entity.
"Plans" means the plans, drawings and specifications prepared
for the General Contractor for the Improvements delivered to the Bank pursuant
to Section 7.01(a), as modified by Change Orders effected in accordance with
Section 7.07.
"Pledged Bonds" shall have the meaning ascribed to such term
in Section 3.03.
"Premises" means the real estate located at 102 Witmer Road,
Horsham, Pennsylvania, together with all improvements located thereon, now or in
the future, all of which is more fully described in the Mortgage.
"Principal Drawing" shall have the meaning ascribed to such
term in the Letter of Credit.
"Project Cost Schedule" shall have the meaning ascribed to
such term in Section 7.01.
"Project Fund" shall have the meaning ascribed to such term in
the Indenture.
"Remarketing Agent" means CoreStates Capital Markets, a
division of CoreStates Bank, N.A. and its successors and assigns as Remarketing
Agent under the Indenture.
"Remarketing Agreement" means the Remarketing Agreement, dated
as of March 1, 1997 between the Remarketing Agent and the Borrower relating to
the Remarketing Agent's duties under the Indenture.
"Security Agreement" shall have the meaning ascribed to such
term in Section 3.04.
-6-
<PAGE>
"Security Documents" means the Bond Pledge Agreement, the
Mortgage, the Security Agreement, the financing statements and continuation
statements delivered pursuant to Section 3.05, the Custodial Bank Agreement and
any other instruments delivered to the Bank from time to time to guarantee
and/or secure obligations of the Borrower under this Agreement or the Note.
"Series A Bonds" shall have the meaning ascribed to such
phrase in Section 6.20.
"Series A Reimbursement Agreement" shall have the meaning
ascribed to such phrase in Section 6.20.
"Standby Letter of Credit", "Standby Bank" and "Standby
Reimbursement Agreement" shall have the meanings ascribed to such terms in
Section 2.02(d).
"Term Rate" shall have the meaning ascribed to such term in
the Indenture.
"Unremarketed Tendered Bonds" means Bonds which: (a) have been
tendered for purchase pursuant to the tender option provisions of the Bonds and
the Indenture; and (b) have not been successfully remarketed by the Remarketing
Agent prior to 10:00 a.m. on the date of purchase thereof pursuant to such
tender.
Section 1.02. Accounting and Commercial Terms. All accounting
terms used but not otherwise defined herein, shall have the respective meanings
generally accorded to them under GAAP. All terms used but not otherwise defined
herein which are defined in the Uniform Commercial Code of any applicable state
relating to secured transactions shall have the respective meanings assigned to
them therein.
Section 1.03. Rules of Construction; Time of Day. In this
Agreement, unless otherwise indicated: (i) defined terms may be used in the
singular or the plural and the use of any gender includes all genders; (ii) the
words "hereof", "herein", "hereto", "hereby" and "hereunder" refer to this
entire Agreement (including all Schedules and Exhibits hereto); and (iii) all
references to particular Articles, Sections, Schedules or Exhibits are
references to the Articles, Sections, Schedules or Exhibits of this Agreement
unless otherwise specified. References to any time of the day in this Agreement
shall, unless otherwise specified, refer to eastern standard time or eastern
daylight saving time, as in effect in Philadelphia, Pennsylvania on such day.
Section 1.04. Security Agreement. The Borrower agrees that
with respect to personal property constituting security in this Agreement,
including, but not limited to the personal property described in Sections 6.20
and 6.21 hereof, the Bank shall have all of the rights and remedies of a secured
party under the Pennsylvania Uniform Commercial Code.
-7-
<PAGE>
ARTICLE II
CREDIT AND REIMBURSEMENT
Section 2.01. Credit.
(a) Participating Bank Agreement. The Borrower hereby
requests the Bank to enter into the Participating Bank Agreement with the Letter
of Credit Bank. At the request and for the account of the Borrower and subject
to the conditions precedent hereinafter set forth, the Bank will enter into the
Participating Bank Agreement with the Letter of Credit Bank on the Closing Date.
The Borrower hereby acknowledges and agrees that: (i) the Borrower has received
copies of the Participating Bank Agreement and the Letter of Credit and is
familiar with their terms; (ii) the Borrower will be obligated under this
Agreement to promptly reimburse the Bank for all advances made by the Bank to
the Letter of Credit Bank under the Participating Bank Agreement in accordance
with the terms of this Agreement; (iii) the Borrower will take all action
required on its part to comply with the terms of the Participating Bank
Agreement; and (iv) the Bank agrees not to consent to any amendments to the
Participating Bank Agreement to the material detriment of the Borrower without
the Borrower's prior written consent.
(b) Note. Each drawing under the Letter of Credit for which
the Bank is obligated to reimburse the Letter of Credit Bank shall constitute a
principal loan advance in the amount of such drawing (regardless of the purpose
of such drawing) by the Bank to the Borrower evidenced by this Agreement and by
the Borrower's Note, dated as of the Closing Date in the stated principal amount
of $8,579,967.12 (the "Note"), which the Borrower shall execute and deliver to
the Bank in the form of Exhibit A. Each such loan advance shall be payable by
the Borrower to the Bank, with interest, as described in Section 2.02(a). The
principal of the Note may be advanced, repaid and readvanced on a revolving
basis in accordance with this Agreement. The Note shall be retained by the Bank
until such time as no further credit is available to the Trustee under the
Letter of Credit and all amounts payable hereunder and under the Note have been
paid in full with interest.
Section 2.02. Reimbursement and Other Payments to Bank.
(a) Reimbursement Payments and Interest. The Borrower
hereby agrees to pay or cause to be paid to the Bank:
(1) a sum equal to each commitment fee payable by the
Bank to the Letter of Credit Bank under Section 2.5 of the
Participating Bank Agreement, on the earlier of: (i) the day such
commitment fee becomes due and payable by the Bank; or (ii) the day
such commitment fee is actually paid by the Bank;
(2) a sum equal to each amount drawn under the Letter of
Credit by an Interest Drawing, a Principal Drawing or a Final
Payment Drawing, on the
-8-
<PAGE>
earlier of: (i) the day reimbursement for such amount becomes due
and payable by the Bank to the Letter of Credit Bank under Section
2.2 of the Participating Bank Agreement or any other provision of
the Participating Bank Agreement; or (ii) the day reimbursement for
such amount is actually made by or on behalf of the Bank to the
Letter of Credit Bank;
(3) a sum equal to each amount drawn against the
Interest Component of the Letter of Credit Amount by a Liquidity
Drawing: (A) in the case of any such amount drawn on an Interest
Payment Date (as defined in the Indenture) of the Bonds being
purchased with the proceeds of such Liquidity Drawing, on the same
Business Day that such amount is so drawn; and (B) in all other
cases, on the first to occur of: (i) the first Business Day of the
first calendar month following the calendar month in which said
amount is so drawn; (ii) the date on which the Bonds purchased with
the proceeds of such Liquidity Drawing are remarketed by the
Remarketing Agent and the proceeds thereof delivered to the Trustee;
(iii) the date on which the Bonds purchased with the proceeds of
such Liquidity Drawing are redeemed or otherwise paid in full; or
(iv) the Expiration Date;
(4) a sum equal to each amount drawn against the
Principal Component of the Letter of Credit Amount by a Liquidity
Drawing, on the first to occur of: (i) the date on which the Bonds
purchased with the proceeds of such Liquidity Drawing are remarketed
by the Remarketing Agent and the proceeds thereof are delivered to
the Trustee; (ii) the date on which the Bonds purchased with the
proceeds of such Liquidity Drawing are redeemed or otherwise paid in
full; or (iii) the Expiration Date;
(5) a sum equal to each drawing fee and each transfer
fee payable by the Bank to Letter of Credit Bank under Section 2.6
of the Participating Bank Agreement, on the day that such drawing
fee or transfer fee becomes due and payable by the Bank;
(6) a sum equal to each amount of costs, fees or
expenses incurred by or imposed on the Letter of Credit Bank and
payable by the Bank to the Letter of Credit Bank under Section 9.3
of the Participating Bank Agreement, on the day that such amount
becomes due and payable by the Bank;
(7) a sum equal to each other amount payable by the Bank
to the Letter of Credit Bank under Section 4.4 or 8.4 or any other
Section of the Participating Bank Agreement, on the day that such
amount becomes due and payable by the Bank; and
(8) a sum equal to each amount of interest payable by
the Bank to the Letter of Credit Bank under Section 2.3 or 4.5 of
the Participating Bank Agreement, on the earlier of: (i) the day
such interest becomes due and payable by the Bank; or (ii) the day
such interest is actually paid by the Bank.
-9-
<PAGE>
Each sum payable to the Bank under this Section 2.02(a) shall bear interest, in
the case of any sum payable under Section 2.02(a)(2), (3) or (4) from the date
the corresponding amount is drawn under the Letter of Credit until such sum is
paid in full and in the case of any sum payable under Section 2.02(a)(1), (5),
(6), (7) or (8) from the date such sum is due until such sum is paid in full (it
being understood and agreed that any sum paid after 3:00 p.m. on a Business Day
shall bear interest as if it was paid at 9:00 a.m. on the next following
Business Day), at a fluctuating rate per annum (computed for the actual number
of days elapsed, based on a 360-day year) equal to one percent (1.0%) per annum
above the Base Rate; provided that if any such sum or interest thereon or any
other amount payable by the Borrower under this Agreement or the Note is not
paid within 10 days of the date such sum, interest or other amount is due and
payable to the Bank under this Agreement or the Note, after written notice has
been sent by the Bank to the Borrower, then such sum shall thereafter bear
interest at a fluctuating rate per annum (computed for the actual number of days
elapsed, based on a 360-day year) equal to five percent (5.0%) per annum above
the Base Rate until such sum or interest and all other amounts due and payable
under this Agreement have been paid in full. All interest accruing on amounts
payable under Section 2.02(a)(2) shall be payable on the date the respective
amount is paid and otherwise on demand. All interest accruing on amounts payable
under Section 2.02(a)(3) shall be payable on the first Business Day of each
calendar month after the date of the corresponding drawing is honored under the
Letter of Credit and on the date the respective amount is paid. All other
interest accruing pursuant to this Section 2.02(a) shall be due and payable on
demand. All payments under this Section 2.02(a) shall be applied first to the
payment of interest due and payable under this Section 2.02(a) and then to the
reduction of the principal balance of sums due and payable under this Section
2.02(a).
(b) Intentionally Omitted.
(c) Commitment Fees. On the Closing Date and quarterly on
each June 1, September 1, December 1 and March 1 thereafter so long as any
credit remains available to the Trustee under the Letter of Credit, the Borrower
shall pay to the Bank a commitment fee computed in advance at the rate of one
percent (1.0%) per annum (i.e. one quarter of one percent (.25%) per quarter) of
the sum of: (i) the Letter of Credit Amount as of the first day of such period;
plus (ii) the aggregate amount of any drawings theretofore honored by the Letter
of Credit Bank in respect of which the Letter of Credit Bank may thereafter be
required to reinstate the Letter of Credit pursuant to the terms thereof.
Computations of commitment fees to be paid to the Bank under this Section shall
be for the actual number of days in the applicable period, based on a 360-day
year. There shall be no reduction or refund of any portion of any such
commitment fee in the event the Letter of Credit expires or is drawn upon,
reduced (automatically or otherwise), or otherwise modified during the quarterly
period in respect of which a commitment fee is computed.
-10-
<PAGE>
On the Closing Date and quarterly on each June 1,
September 1, December 1 and March 1 thereafter so long as any credit remains
available to the Trustee under the Letter of Credit, the Borrower shall pay to
the Bank for the benefit of the Letter of Credit Bank a commitment fee computed
in advance at the rate of one quarter percent (.25%) per annum (i.e. one
sixteenth of one percent (1/16%) per quarter) of the sum of: (i) the Letter of
Credit Amount as of the first day of such period; plus (ii) the aggregate amount
of any drawings theretofore honored by the Letter of Credit Bank in respect of
which the Letter of Credit Bank may thereafter be required to reinstate the
Letter of Credit pursuant to the terms thereof. Computations of commitment fees
to be paid to the Letter of Credit Bank under this Section shall be for the
actual number of days in the applicable period, based on a 360-day year. Except
as set forth below, there shall be no reduction or refund of any portion of any
such commitment fee in the event the Letter of Credit expires or is drawn upon,
reduced (automatically or otherwise) or otherwise modified during the quarterly
period in respect of which a commitment fee is computed.
The Bank and the Letter of Credit Bank agree to
reimburse a pro rata portion of Commitment Fees paid by the Borrower in advance,
if subsequent to any such quarterly payments, but in the period for which the
payments were made, the Letter of Credit is terminated by deliverying of a
notice in the form of Annex 7 to the Letter of Credit.
(d) Standby Letter of Credit Costs. In the event that the
Bank is required to cause a standby letter of credit (a "Standby Letter of
Credit") of another bank (the "Standby Bank") to be delivered to the Letter of
Credit Bank pursuant to Section 6.09 of the Participating Bank Agreement to
secure the Bank's obligations thereunder, the Borrower shall reimburse the Bank
on demand, from time to time, for any and all reimbursement payments, interest
payments, commitment fees, charges and other costs (including reasonable fees
and expenses of counsel for the Standby Bank) paid or incurred by the Bank under
the related reimbursement agreement between the Bank and the Standby Bank (the
"Standby Reimbursement Agreement") or otherwise in connection with the issuance
or maintenance of or any drawing on the Standby Letter of Credit.
(e) Increased Costs. If after the Closing Date any
enactment, promulgation or adoption of or change in any applicable foreign or
domestic law, regulation or rule or in the interpretation or administration
thereof by any court, administrative or governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by the Bank (or any controlling affiliate) with any guideline,
request or directive issued after the date hereof (whether or not having the
force of law) of any such authority, central bank or comparable agency, shall
either: (i) impose, modify or deem applicable any reserve, special deposit,
insurance assessment or similar requirement (including without limitation a
guideline, request or directive which affects the manner in which the Bank
allocates capital resources to its commitments and/or risks, including its
obligations and/or risks under the Participating Bank Agreement, this Agreement
or the Note); (ii) affect the amount of capital required or expected to be
maintained the Bank (or any controlling affiliate); (iii) subject the Bank to
any tax, levy, impost, duty, deduction, withholding or other
-11-
<PAGE>
charge or change the basis of taxation of the Bank (other than a change in a
rate of tax based on income of the Bank); or (iv) impose on the Bank any other
condition regarding this Agreement, the Note or the Security Documents and the
result of any event referred to in clause (i), (ii), (iii) or (iv) of this
sentence shall be to increase the direct or indirect cost to the Bank of
entering into or maintaining the Participating Bank Agreement, of agreeing to
make, making or maintaining the loans evidenced by the Note or of funding or
maintaining the obligations and/or risks of the Bank under this Agreement or the
Note or to reduce the amounts receivable by the Bank hereunder or under the Note
or to reduce the rate of return on the capital of the Bank (or any controlling
affiliate) in connection with the Participating Bank Agreement, this Agreement
or the Note (which increase in cost, reduction in amounts receivable or
reduction in rate of return shall be determined by the Bank's reasonable
allocation of such cost increase, reduction in amounts receivable or reduction
in rate of return resulting from such event), then within 15 Business Days after
demand by the Bank accompanied by the related certificate described in the last
sentence of this Section, 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 to compensate the Bank for such increased cost, reduction in amounts
receivable or reduction in rate of return. A certificate as to such increased
cost, reduction in amounts receivable or reduction in rate of return submitted
by the Bank to the Borrower containing an explanation of such increased cost,
reduction in amounts receivable or reduction in rate of return and the manner of
calculation thereof shall, in absence of manifest error, be conclusive and
binding for all purposes.
(f) General Interest Accrual. Except as otherwise provided
in Section 2.02(a), all payments to the Bank under this Agreement (including
without limitation all payments becoming due under Sections 2.02(c), 2.02(d) and
2.02(e)) shall be accompanied by interest thereon, from the date such payments
become due until they are paid in full, at a fluctuating rate per annum
(computed for the actual number of days elapsed, based on a 360-day year) equal
to one percent (1.0%) per annum above the Base Rate; provided that if any amount
that is not paid within 10 days of the date such amount is due and payable to
the Bank under this Agreement after written notice has been sent by the Bank to
the Borrower, then (except as otherwise provided in Section 2.02(a)) all amounts
payable pursuant to this Agreement shall thereafter bear interest at a
fluctuating rate per annum (computed for the actual number of days elapsed,
based on a 360-day year) equal to five percent (5.0%) per annum above the Base
Rate, until all amounts due and payable pursuant to this Agreement have been
paid in full.
(g) Place of Payment. All payments by the Borrower to the
Bank under this Agreement shall be made in lawful currency of the United States
at the Bank's office at 2 Jefferson Bank Center, Downingtown, Pennsylvania
19335-0901, Attention: Donald F. McGraw, or at such other address and to the
attention of such other person as the Bank may stipulate by written notice to
the Borrower.
Section 2.03. Payments Under Loan Agreement. The Borrower
shall make all Loan Payments, Purchase Payments and Additional Payments (as
defined in the Loan Agreement) as and when due under the Loan Agreement. In
furtherance of the foregoing, the Borrower shall make all Loan Payments to the
Bank at least one Business Day prior to the corresponding due dates thereof
under the Loan Agreement.
-12-
<PAGE>
Section 2.04. Obligations Absolute. The obligations of the
Borrower under this Article shall be absolute, unconditional and irrevocable,
and shall be performed strictly in accordance with the terms of this Agreement,
under all circumstances whatsoever, including without limitation the following
circumstances: (i) any lack of validity or enforceability of the Letter of
Credit, the Participating Bank Agreement, the Standby Letter of Credit, the
Standby Reimbursement Agreement, the Bond Documents or any other agreement or
document relating thereto; (ii) any amendment or waiver of or any consent to or
departure from the Letter of Credit, the Participating Bank Agreement, the
Standby Letter of Credit, the Standby Reimbursement Agreement, the Bond
Documents or any document relating thereto; (iii) the existence of any claim,
set-off, defense or other right which the Borrower may have at any time against
the Letter of Credit Bank or the Trustee (or any persons or entities for whom
the Letter of Credit Bank or the Trustee may be acting), the Remarketing Agent,
the Bank or any other person or entity, whether in connection with this
Agreement, the transactions described herein or any unrelated transaction; or
(iv) any of the circumstances contemplated in clauses (1) through (7),
inclusive, of Section 2.06(a). The Borrower understands and agrees that no
payment by it under any other agreement (whether voluntary or otherwise) shall
constitute a defense to its obligations hereunder, except to the extent that the
Bank has been indefeasibly paid in full or indefeasibly credited for such
payment.
Section 2.05. Indemnification. In addition to any and all
rights of the Bank to reimbursement, indemnification or subrogation or any other
rights of the Bank at law or in equity, to the extent permitted by applicable
law, the Borrower hereby indemnifies and holds harmless the Bank (and its
directors, officers, employees and agents) from and against any and all claims,
damages, losses, liabilities, costs or expenses (including interest, penalties
and reasonable attorneys' fees for counsel of the Bank's choice) whatsoever
which the Bank may incur (or which may be claimed against the Bank by any Person
whatsoever) by reason of or in connection with: (a) the issuance or a transfer
of, or payment or failure to pay under, the Letter of Credit; (b) the entering
into, or payment or failure to pay under, the Participating Bank Agreement or
the Standby Reimbursement Agreement; (c) any breach by the Borrower or the
Issuer of any representation, warranty, covenant, term or condition in, or the
occurrence of any default under, this Agreement, the Security Documents or the
Bond Documents, including all reasonable fees or expenses resulting from the
settlement or defense of any 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 Bank's entering into this Agreement, the Participating Bank
Agreement, the Standby Reimbursement Agreement or any other event or transaction
contemplated by any of the foregoing; provided 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 by the willful
misconduct or negligence of the Bank. Nothing in this Section is intended to
limit the Borrower's reimbursement and interest payment obligations contained in
Section 2.02(a). The obligations of the Borrower under this Section shall
survive the termination of this Agreement.
-13-
<PAGE>
Section 2.06. Liability of Bank.
(a) As between the Borrower and the Bank, the Borrower
assumes all risks of the acts or omissions of the Trustee, the Letter of Credit
Bank or the Standby Bank with respect to the Letter of Credit, the Participating
Bank Agreement or the Standby Reimbursement Agreement. Neither the Bank nor any
of its officers or directors shall be liable or responsible for: (1) the use
which may be made of the Letter of Credit or the Standby Letter of Credit or for
any acts or omissions of the Trustee or the Letter of Credit Bank in connection
therewith or with the Participating Bank Agreement; (2) the form, validity,
sufficiency, accuracy or genuineness of any documents (including without
limitation any documents presented under the Letter of Credit, the Participating
Bank Agreement or the Standby Letter of Credit), or of any statement therein or
endorsement thereon, 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 Letter of
Credit Bank, the Bank or the Standby Bank against presentation of documents
which do not comply with the terms of the Letter of Credit, the Participating
Bank Agreement or the Standby Letter of Credit, including failure of any
documents to bear any reference or adequate reference to the Letter of Credit,
the Participating Bank Agreement or the Standby Letter of Credit, or any other
failure by the Trustee, the Letter of Credit Bank or the Standby Bank to comply
fully with conditions required in order to effect or honor a drawing under the
Letter of Credit or the Standby Letter of Credit or in order to entitle the
Letter of Credit Bank or the Standby Bank to payment under the Participating
Bank Agreement or the Standby Reimbursement Agreement; (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 thereunder or
proceeds thereof, 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 effect a drawing under
the Letter of Credit or the Standby Letter of Credit or in order to entitle the
Letter of Credit Bank or the Standby Bank to payment under the Participating
Bank Agreement or the Standby Reimbursement Agreement; or (7) any other
circumstances whatsoever in making or failing to make payment under the Letter
of Credit, the Participating Bank Agreement, the Standby Letter of Credit or the
Standby Reimbursement Agreement; 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 by: (i)
the Bank's willful misconduct or gross negligence; or (ii) the Bank's willful
failure to pay under the Participating Bank Agreement or the Standby
Reimbursement Agreement after written demand by the Letter of Credit Bank or the
Standby Bank to the Bank for payment of an amount due and payable under the
Participating Bank Agreement or the Standby Reimbursement Agreement, unless the
Bank in good faith believes that it is prohibited by law or other legal
authority from making such payment.
(b) Except for the Bank's payment obligations under the
Participating Bank Agreement and the Standby Reimbursement Agreement, the Bank
shall have no liability
-14-
<PAGE>
to the Borrower or any other person as a result of any reduction of the credit
rating of the Bank or any deterioration in the Bank's financial condition. No
reduction of the credit rating of the Bank or any deterioration in the Bank's
financial condition shall reduce or in any way diminish the obligations of the
Borrower to the Bank under this Agreement, including without limitation the
Borrower's obligation to pay commitment fees to the Bank and to reimburse the
Bank for any amounts paid to the Letter of Credit Bank or the Standby Bank.
ARTICLE III
SECURITY
Section 3.01. Security and Subrogation under Indenture. The
Borrower and the Bank intend that: (i) the Bank will have the security and
benefit of the Bond Documents as provided in the Indenture; and (ii) in the
event of reimbursement of the Letter of Credit Bank by the Bank for one or more
draws under the Letter of Credit and the application thereof to the payment of
Bonds, the Bank will be subrogated pro tanto to the rights of the Trustee and
the holders of such Bonds and the Letter of Credit Bank in and to all funds and
security held by the Trustee under the Indenture for the payment of the
principal of and interest on such Bonds, including, without limitation, all
project funds, debt service funds and other funds and securities and other
instruments comprising investments thereof. In addition, the Bank shall have any
and all other subrogation rights available to the Bank at law or in equity.
Section 3.02. Pledge of Rights to Certain Funds and
Investments. To secure the Borrower's obligations to the Bank under this
Agreement and the Note, the Borrower hereby pledges to the Bank, and grants to
the Bank a security interest in, all of the Borrower's right, title and interest
in and to all funds and investments thereof now or hereafter held by the Trustee
under the Indenture as security for the payment of the Bonds, including without
limitation any and all project funds, debt service funds and other funds and
securities and other instruments comprising investments thereof and interest and
other income derived therefrom held as security for the payment of the Bonds,
such pledge, assignment and grant being under and subject only to the rights of
the Trustee and the Letter of Credit Bank under the Indenture. The Borrower
covenants and agrees that it will defend the Bank's rights and security
interests created by this Section against the claims and demands of all persons.
In addition to its other rights and remedies under this Agreement and the Bond
Documents, the Bank shall have all the rights and remedies of a secured party
under the Pennsylvania Uniform Commercial Code or other applicable law with
respect to the security interests created by this Section. The Bank's rights
under this Section are in addition to, and not in lieu of, its rights described
in Section 3.01.
Section 3.03. Pledged Bonds. To secure the Bank's
reimbursement and interest payment obligations to the Letter of Credit Bank with
respect to drawings on the Letter of Credit to purchase Bonds pursuant to the
Indenture and to secure the Borrower's obligations to the Bank under this
Agreement and the Note to reimburse the Bank therefor with interest, the
Borrower shall enter into the Bond Pledge Agreement by which it pledges and
assigns to the Letter of
-15-
<PAGE>
Credit Bank and the Bank, and grants to the Letter of Credit Bank and the Bank a
security interest in, all of the Borrower's right, title and interest, now owned
or hereafter acquired, in and to any and all Unremarketed Tendered Bonds
(together with all income therefrom and proceeds thereof) purchased pursuant to
the Indenture with funds derived in whole or in part from a drawing under the
Letter of Credit. Unremarketed Tendered Bonds shall be pledged to the Letter of
Credit Bank and the Bank and delivered to and held by the Trustee as agent for
the Letter of Credit Bank and the Bank under the Bond Pledge Agreement.
Unremarketed Tendered Bonds which are so held by the Trustee as agent for the
Letter of Credit Bank and the Bank are herein referred to as "Pledged Bonds".
Any principal of, premium on and interest on Pledged Bonds which becomes due and
payable shall be paid to the Letter of Credit Bank as provided in the Bond
Pledge Agreement. All sums of money so paid to the Letter of Credit Bank in
respect of Pledged Bonds shall be credited against the Bank's obligation to
reimburse the Letter of Credit Bank and the Borrower's obligation to reimburse
the Bank, with interest, in respect of the amount drawn to fund the purchase of
such Pledged Bonds pursuant to the Indenture.
Section 3.04. Mortgage; Security Agreement. To further secure
the Borrower's obligations to the Bank under this Agreement and the Note, the
Borrower shall execute and deliver to the Bank: (a) a Mortgage, Assignment of
Lease and Security Agreement, dated March 20, 1997 covering the Premises (the
"Mortgage"); and (b) a Security Agreement, dated as of March 1, 1997 covering
the fixtures and equipment included in the Project (the "Security Agreement").
Section 3.05. Financing Statements. The Borrower will execute
and deliver such financing statements and continuation statements under the
Pennsylvania Uniform Commercial Code or other applicable law as the Bank may
specify in order to perfect and maintain perfection of the Bank's security
interests under this Agreement, and the Mortgage and the Security Agreement, and
will pay the costs of filing the same in such public offices as the Bank may
designate.
Section 3.06. Custodial Bank Agreement. To further secure the
Borrower's obligations to the Bank under this Agreement and the Note, the
Borrower shall execute and deliver to the Bank a Custodial and Collateral
Security Agreement, dated March 20, 1997 (the "Custodial Bank Agreement"). The
Custodial Bank Agreement shall be entered into with a financial institution
acceptable to the Bank in its sole discretion (the "Custodial Bank").
Section 3.07. Benefit, Security and Subrogation Rights of
Letter of Credit Bank. The Bank and the Borrower hereby agree for the benefit of
the Letter of Credit Bank that: (a) the Letter of Credit Bank shall have the
benefit and security of this Agreement and the Security Documents with respect
to the amounts payable by the Borrower under this Agreement corresponding to the
amounts payable by the Bank to the Letter of Credit Bank under the Participating
Bank Agreement, as if this Agreement and the Security Documents expressly named
the Letter of Credit Bank as an obligee, grantee, secured party and/or other
beneficiary hereunder and thereunder with respect to such amounts; and (b) in
the event of a draw under the Letter of Credit and failure of the Bank to
reimburse the Letter of Credit Bank, with interest,
-16-
<PAGE>
in accordance with the Participating Bank Agreement, the Letter of Credit Bank
will be subrogated and succeed to the rights of the Bank in, to and under this
Agreement and the Security Documents with respect thereto; provided that in the
Participating Bank Agreement, the Letter of Credit Bank has agreed not to
exercise any such rights against the Borrower unless the Bank is in default of
the Participating Bank Agreement and the Bonds have been called for mandatory
purchase or accelerated pursuant to the Indenture. In furtherance of the
foregoing, the Borrower agrees for the benefit of the Letter of Credit Bank to
execute and deliver to the Letter of Credit Bank from time to time as requested
by the Letter of Credit Bank such instruments and take such further actions as
the Letter of Credit Bank may request from time to time to confirm and effect
such benefit, security and rights of subrogation and succession.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01. Intentionally Omitted.
Section 4.02. Documentation. As conditions precedent to the
Bank's entering into the Bank Participation Agreement, the Bank shall have
received each of the following in form and substance satisfactory to the Bank:
(a) Executed copies of this Agreement, the Note, the
Mortgage, the Bond Pledge Agreement, the Security Agreement and the Custodial
Bank Agreement, and true and correct copies of the Bond Documents and all
documentation delivered in connection therewith;
(b) Such financing statements as the Bank may require
pursuant to Section 3.05;
(c) Certified copies of the articles of incorporation, the
bylaws and authorizing resolutions of the Borrower;
(d) A certificate of an officer of the Borrower as of the
Closing Date stating that: (i) the representations and warranties contained in
Article V are true and correct; and (ii) no Default or Event of Default has
occurred and is continuing;
(e) An opinion of Ballard Spahr Andrews & Ingersoll,
counsel to the Borrower to the effect that: (1) the Borrower is a duly organized
and validly existing corporation in good standing under the laws of the State of
Delaware with all requisite power and authority to execute, deliver and perform
its obligations under this Agreement, the Note, the Security Documents to which
the Borrower is a party, the Loan Agreement and the Remarketing Agreement and to
acquire, construct and/or equip the Project as contemplated by the Bond
Documents and this Agreement; (2) the Borrower has obtained from the
governmental
-17-
<PAGE>
authorities, boards, agencies, courts, officers or commissions having
jurisdiction over the Borrower all approvals, consents, authorizations,
certifications, reviews and other orders that are necessary for the execution,
delivery and performance by the Borrower of its obligations under this
Agreement, the Note, the Security Documents to which the Borrower is a party,
the Loan Agreement and the Remarketing Agreement and the acquisition,
construction and/or equipping of the Project; (3) the form, terms, execution and
delivery of this Agreement, the Note, Security Documents to which the Borrower
is a party, the Loan Agreement and the Remarketing Agreement have been duly
authorized, and all conditions precedent to the execution and delivery of this
Agreement, the Note, the Security Documents to which the Borrower is a party,
the Loan Agreement and the Remarketing Agreement by the Borrower have been
fulfilled; (4) this Agreement, the Note, the Security Documents to which the
Borrower is a party, the Loan Agreement and the Remarketing Agreement constitute
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency or
other laws affecting the rights of creditors generally and by the application of
general principles of equity; (5) the execution and delivery of and the
performance by the Borrower of its obligations under, this Agreement, the Note,
the Security Documents to which the Borrower is a party, the Loan Agreement and
the Remarketing Agreement will not violate, conflict with or constitute a
default under any provision of the Borrower's articles of incorporation or
bylaws or any law, rule, regulation, order or judgment applicable to the
Borrower or, to the best knowledge of such counsel, any agreement, indenture or
other instrument to which the Borrower is a party or by which it or any of its
properties may be bound; and (6) there is no pending or, to the best knowledge
of such counsel, threatened action, suit, proceeding, inquiry or investigation
before or by any court, governmental agency or arbitrator against or involving
the Borrower which, in any case, might materially and adversely affect the
financial condition or operations of the Borrower, the validity or
enforceability of this Agreement, the Note, the Security Documents or the Bond
Documents or the construction, acquisition or equipping of the Project as
contemplated by the Bond Documents and this Agreement;
(f) Intentionally Omitted;
(g) Intentionally Omitted;
(h) Audited financial statements of the Borrower for the
Fiscal Year ended December 31, 1995;
(i) A prepaid title insurance policy issued by a reputable
carrier satisfactory to the Bank, insuring the Mortgage in an amount acceptable
to the Bank, subject only to such liens and encumbrances as the Bank may
approve, such policy to be on the American Land Title Association Standard Loan
Policy - Revised Coverage, 1992 Form, without a pending disbursements clause,
containing (i) an endorsement against unrecorded easements, discrepancies or
conflicts in boundary lines, shortage in area and encroachments which an
accurate and complete survey would disclose and against loss or damage by reason
of encroachment other than by party walls and (ii) copies of any restrictions or
easements affecting
-18-
<PAGE>
the Premises and, with respect to any restrictions, an endorsement that they
have not been violated and that future violation would not work a forfeiture or
reversion of title to the Premises;
(j) Evidence of the insurance required under Section 6.04
hereof and the Security Documents, including certificates of insurance,
mortgagee or lender loss payee endorsements in favor of the Bank, and certified
copies of insurance policies (if and as requested by the Bank); and evidence
that the Premises is not located in a Special Flood Hazard area as defined by
the United States Department of Housing and Urban Development;
(k) A certified legal description and survey of the land
included in the Premises by a surveyor approved by the Bank showing proposed
locations of all present and contemplated improvements, driveways, easements and
any encroachments;
(l) A "Phase I" environmental audit of the Premises, which
shall reveal no violations of any Environmental Laws and no other conditions
which are unacceptable to the Bank in its sole discretion. The Phase I
Environmental Site Audit, dated January 8, 1997, prepared by D.C.R.
Environmental Securities, Inc. is acceptable to the Bank;
(m) An appraisal in compliance with federal and state laws
applicable to the Bank, valuing the Project in an amount satisfactory to the
Bank in its sole discretion;
(n) Intentionally Omitted;
(o) Intentionally Omitted;
(p) Intentionally Omitted;
(q) Such other documents, certificates, approvals,
assurances and opinions as are listed in the closing memorandum filed with the
Trustee in connection with the issuance of the Bonds or as the Bank may
reasonably request.
Section 4.03. Issuance of Bonds. On the Closing Date all
conditions precedent to the issuance and original sale of the Bonds shall have
been satisfied, and the Bonds shall have been duly issued and delivered.
-19-
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
Section 5.01. Existence. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business in the Commonwealth of Pennsylvania.
Section 5.02. Power, Authorization and No Conflicts. The
Borrower has the power and authority and the legal right to own and operate its
properties, to lease the properties it operates under lease, and to carry on its
business as it is now being conducted, and is duly qualified to transact
business as a foreign corporation (or partnership) in good standing under the
laws of each state where its ownership, lease or operation of property or the
conduct of its business requires such qualification, except to the extent that
failure to qualify to transact business would not have a material adverse affect
on the financial condition or operations of the Borrower and would not
materially adversely affect the Borrower's ability to perform its obligations
under this Agreement and the Note and the Security Documents and Bond Documents
to which it is a party. The execution, delivery and performance by the Borrower
of this Agreement and the Note and the Security Documents and the Bond Documents
to which it is a party: (i) are within its power and authority; (ii) have been
duly authorized by all necessary action of the Borrower, and (iii) do not
conflict with, violate or constitute a default under the articles of
incorporation or the bylaws of the Borrower or any law, rule, regulation,
decree, order or judgment applicable to the Borrower or any indenture, mortgage,
agreement, instrument, contract or other restriction binding on or affecting the
Borrower or any of its properties, or result in the creation of any mortgage,
pledge, lien or encumbrance upon any of its properties other than as provided by
the terms thereof.
Section 5.03. Governmental Authorizations; Permits, Licenses
and Other Approvals. To the best of its knowledge, the Borrower has all
licenses, permits, approvals, qualifications, consents and other authorizations
necessary for the lawful conduct of its business and operations wherever now
conducted, pursuant to all applicable statutes, laws, ordinances, rules and
regulations of all governmental authorities having, asserting or claiming
jurisdiction over the Borrower or over any part of its operations, except to the
extent that failure to have the same would not have a material adverse effect on
the financial condition or operations of the Borrower. Copies of all such
licenses, permits, approvals, qualifications, consents and other authorizations
shall be provided to the Bank, upon request. The Borrower is not in default
under any of such license, permit, approval, consent, qualification or
authorization and no event has occurred, and no condition exists, which, with
the giving of notice or the passage of time or both, would constitute a default
thereunder or would result in the suspension, revocation, impairment, forfeiture
or non-renewal of any such license, permit, approval, qualification, consent or
authorization, except to the extent that the same would not have a material
adverse
-20-
<PAGE>
effect on the financial condition or operations of the Borrower. The
continuation, validity and effectiveness of all such licenses, permits,
approvals, consents, qualifications and authorizations will not be adversely
affected by the transactions contemplated in this Agreement. No authorization,
approval or other action by, and no notice to or filing with, any governmental
authority, regulatory body or court is required for the due execution, delivery
and performance by the Borrower of this Agreement, the Note and the Security
Documents and the Bond Documents to which the Borrower is a party, except such
as have been obtained.
Section 5.04. Validity and Binding Effect. To the best of the
knowledge of the Borrower, this Agreement, the Note, the Security Documents and
the Bond Documents to which the Borrower is a party are the legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their 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 law affecting creditors' rights generally.
Section 5.05. No Litigation. Except as disclosed to the Bank
in writing prior to the Closing Date, there is no pending action or proceeding
before any court, governmental agency or arbitrator against or involving the
Borrower and, to the best knowledge of the Borrower, there is no threatened
action or proceeding affecting the Borrower before any court, governmental
agency or arbitrator which, in any case, might materially and adversely affect
the financial condition or operations of the Borrower, or the validity or
enforceability of this Agreement, the Note, the Security Documents or the Bond
Documents, or the construction, acquisition, equipping or operation of the
Project.
Section 5.06. No Violations. To the best of the knowledge of
the Borrower, the Borrower is not in any material way in breach of or in default
under: (a) any applicable law, rule or regulation of any local government, the
Commonwealth of Pennsylvania or the United States or any applicable judgment or
decree; or (b) any material loan agreement, indenture, lease, sublease, bond,
note, resolution, agreement or other instrument to which it is a party or
otherwise subject, and no event has occurred and is continuing which, with the
passage of time or the giving of notice or both, would constitute a material
event of default under any such instrument, except for violations, if any, which
the Borrower has disclosed to the Bank in writing and is proceeding in good
faith to remove or correct. The Borrower has no knowledge of any violation, nor
has it received any notice or other record of any violation, of any zoning,
subdivision, environmental, building, fire, safety, health or other statute,
ordinance, regulation, restrictive covenant or other restriction applicable to
the Premises, except for violations, if any, which the Borrower has disclosed to
the Bank in writing and is proceeding in good faith to remove or correct.
Section 5.07. Project Compliance. To the best of the knowledge
of the Borrower, the acquisition, construction and/or equipping of the Project
as contemplated by this Agreement, the use of the Project for the purpose
contemplated hereby and the operation of the Project do and shall, in all
material respects, comply with, and are lawful, permitted and conforming uses
under, all applicable building, fire, safety, subdivision, zoning, sewer,
-21-
<PAGE>
environmental, securities, health, insurance and other laws, ordinances, rules,
regulations and plan approval conditions of any governmental or public body or
authority, and the Borrower has obtained, or will obtain prior to commencement
of acquisition, construction and/or equipping of the Project, all permits,
licenses or approvals from such governmental or public bodies or authorities
which are a necessary precondition to the acquisition, construction and/or
equipping of the Project.
Section 5.08. No Liens. There exist no recorded Liens against
the Premises (including statutory and other liens of mechanics, workmen,
contractors, subcontractors, suppliers, taxing authorities and others), except
the Mortgage, the Security Agreement and those additional liens, encumbrances
and charges disclosed in the Bank's title insurance policy insuring the Lien of
the Mortgage and that certain Declaration of Covenants and Restrictions, dated
March 20, 1997, between Pennsylvania Business Campus Delaware, Inc. and the
Borrower (the "Permitted Liens"); and the Borrower has not made a contract or
arrangement of any kind, the performance of which by the other party thereto
could give rise to a Lien on the Premises by operation of law or otherwise
except such as are adequately and fully covered by the Bank's title insurance
insuring the lien of the Mortgage. The Borrower has no knowledge of any
unrecorded Liens.
Section 5.09. Utilities and Access. All utility services
necessary for construction and/or operation of the Project, including water
supply, storm and sanitary sewer facilities, gas, electricity and telephone
facilities are, or prior to the Completion Date will be, available within the
boundaries of the Premises; and all roads necessary for the full utilization of
the Project for its intended purposes either have been completed or the
necessary rights-of-way therefor have been acquired by the appropriate
governmental authority or others or have been or will, prior to the Completion
Date, be dedicated to public use and accepted by such governmental authority,
and all necessary steps have been taken by the Borrower and all such
governmental authority or others to assure complete construction and
installation thereof by the Completion Date.
Section 5.10. Financial Information.
(a) The balance sheet of the Borrower as of December 31,
1995 and the related statements of income and changes in financial position of
the Borrower for the Fiscal Year then ended: (i) have been prepared in
accordance with GAAP; (ii) have been examined by Arthur Andersen, LLP, Certified
Public Accountants; (iii) are true and complete and present fairly the financial
condition and results of operations of the Borrower as of December 31, 1995 for
the period covered thereby; and (iv) said balance sheet, together with the notes
thereto, accurately reflects all liabilities, including contingent liabilities,
of the Borrower as of the date thereof.
(b) Intentionally Omitted.
-22-
<PAGE>
(c) Since December 31, 1995 the Borrower has conducted its
operations in the ordinary course, and there has been no material adverse change
in the financial condition or operations of the Borrower.
Section 5.11. Taxes. The Borrower has filed all tax returns
which were required to be filed in any jurisdiction, and has paid all taxes
shown thereon to be due or otherwise due upon the Borrower or any of its
properties, income or franchises, including interest, assessments, fees and
penalties, or has provided adequate reserves for the payment thereof. To the
best knowledge of the Borrower, no claims are threatened, pending or being
asserted with respect to, or in connection with, any return referred to in this
Section, which, if adversely determined, would have a material adverse effect on
the financial condition or operations of the Borrower, or would affect the
Borrower's ability to perform its obligations under this Agreement, the Note,
the Security Documents and the Bond Documents.
Section 5.12. ERISA Representations. The fair value of the
plan assets of all employee pension plans maintained by the Borrower or its
ERISA Affiliates exceed the projected benefit obligations of such plans for
service rendered to the close of the most recent complete plan year of such
plans, as determined in accordance with GAAP. No employee pension plan
maintained by the Borrower or any ERISA Affiliate which is subject to Part 3 of
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") has an accumulated funding deficiency (as defined in Section 302(a) of
ERISA), no reportable event (as defined in Section 4043 of ERISA) has occurred
with respect to any employee pension plan maintained for employees of the
Borrower or any ERISA Affiliate and covered by Title IV of ERISA, no liability
has been asserted against the Borrower or any ERISA Affiliate by the Pension
Benefit Guaranty Corporation ("PBGC") or by a trustee appointed pursuant to
Section 4042(b) or (c) of ERISA, and no lien has been attached and no Person has
threatened to attach a lien to any of the Borrower's or any ERISA Affiliate's
property as a result of failure to comply with ERISA or as a result of the
termination of any employee pension plan covered by Title IV of ERISA. Each
employee pension plan (as defined in Section 3(2) of ERISA) maintained for
employees of the Borrower or any ERISA Affiliate which is intended to be
qualified under Section 401(a) of the Code, including all amendments to such
plan or to any trust agreement, group annuity or insurance contract or other
governing instrument, is the subject of a favorable determination by the
Internal Revenue Service with respect to its qualification under Section 401(a)
of the Code or, as to those amendments not yet subject to such a determination,
such amendments meet the requirements of Section 401(a) of the Code in all
material respects or, if they do not, the Borrower will take all necessary
action to conform such nonconforming amendments to the requirements of Section
401(a) of the Code and the Borrower will exercise its best efforts to obtain
such a favorable determination letter within a reasonable period of time. With
respect to any multiemployer pension plan (as defined in Section 3(37) of ERISA)
to which the Borrower or any ERISA Affiliate is or has been required to
contribute subsequent to September 25, 1980: (i) no material withdrawal
liability (within the meaning of Section 4201 of ERISA) has been incurred by the
Borrower or any ERISA Affiliate; (ii) no material withdrawal liability has been
asserted against the Borrower or any ERISA Affiliate by a sponsor or an agent of
a sponsor of any such multiemployer plan; (iii) no such multiemployer pension
plan is in
-23-
<PAGE>
reorganization (as defined in Section 4241(a) of ERISA); and (iv) neither the
Borrower nor any ERISA Affiliate has any unfilled obligation to contribute to
any such multiemployer pension plan. As used in this Agreement, "ERISA
Affiliate" means: (i) any corporation included with the Borrower in a controlled
group of corporations within the meaning of Section 414(b) of the Code; (ii) any
trade or business (whether or not incorporated or for-profit) which is under
common control with the Borrower within the meaning of Section 414(c) of the
Code; (iii) any member of an affiliated service group of which the Borrower is a
member within the meaning of Section 414(m) of the Code, and (iv) any other
entity treated as being under common control with the Borrower under Section
414(o) of the Code.
Section 5.13. Environmental Representations. The Borrower has
conducted the inquiries described in Exhibit C, which is attached hereto and
made a part hereof, and, except as set forth in Exhibit C, the Borrower has no
knowledge of: (a) any activity at Premises, or any storage, treatment or
disposal of any Hazardous Substance or solid waste connected with any activity
at the Premises, which has been conducted, or is being conducted, in violation
of any Environmental Law; (b) any of the following present at the Premises which
could give rise to material liabilities, material costs for remediation or a
material adverse change in the financial condition or operations of the
Borrower: (i) Contamination; (ii) polychlorinated biphenyls; (iii) asbestos or
materials containing asbestos; (iv) urea formaldehyde foam insulation; or (v)
tanks presently or formerly used for the storage of any liquid or gas; (c) any
investigation or findings pertaining to the Premises regarding the presence of
radon gas or radioactive decay products of radon at the site of the Premises in
a concentration materially in excess of either the concentrations disclosed in
any investigation or the "acceptable level" as defined in Section 6.18; or (d)
any tanks presently or formerly used for the storage of any liquid or gas below
ground at the Premises. The Borrower has commissioned an expert in site
contamination acceptable to the Bank to conduct a Phase I investigation for site
contamination prior to the Closing Date, the scope of which, in the expert's
professional opinion, would be reasonably likely to discover Contamination of
sufficient severity to warrant inclusion of the Premises on the National
Priorities List or contamination of parallel severity by a substance which does
not constitute a "Hazardous Substance" for purposes of the Comprehensive
Environmental Response, Compensation and Liability Act, and has provided a
report of that investigation to the Bank. Except as set forth in Exhibit C: (1)
all notices, permits, licenses or similar authorizations, if any, required to be
obtained or filed by the Borrower relating to Hazardous Substances or solid
waste in connection with the Premises, including without limitation past or
present treatment, storage, disposal or release of any Hazardous Substances or
solid waste into the environment, have been obtained or filed; (2) all Hazardous
Substances and solid waste generated by the Borrower have in the past been, to
the best of the Borrower's knowledge, transported, treated and disposed of only
by carriers maintaining valid permits under all applicable Environmental Laws
and only at treatment, storage and disposal facilities maintaining valid permits
under applicable Environmental Laws, which carriers and facilities have been and
are, to the best of the Borrower's knowledge, operating in compliance with such
permits; and (3) the Borrower has no material contingent liability in connection
with any release of any Hazardous Substance or solid waste into the environment.
-24-
<PAGE>
Section 5.14. Representations in Other Documents. The Borrower
hereby makes to and for the benefit of the Bank each of the representations and
warranties of the Borrower contained in the Bond Documents and the other
documents delivered by the Borrower in connection therewith.
ARTICLE VI
GENERAL COVENANTS
So long as any amount is available under the Letter of Credit
or any amount is due and owing to the Letter of Credit Bank under the
Participating Bank Agreement or to the Standby Bank under the Standby
Reimbursement Agreement or any amount is due and owing to the Bank hereunder,
the Borrower covenants that, except to the extent the Bank shall otherwise
consent in writing, each of the following covenants shall be performed and
complied with by the Borrower as indicated:
Section 6.01. Maintenance of Existence; Mergers. The Borrower
will maintain its existence, rights and privileges and its qualification to do
business in the Commonwealth of Pennsylvania, will not dissolve or otherwise
dispose of all or substantially all of its assets and will not consolidate with
or merge into another entity or permit one or more other entities to consolidate
with or merge into it; except that the Borrower may consolidate with or merge
into another corporation or permit another corporation to consolidate with or
merge into it, provided that (a) the resulting or surviving corporation is
qualified to do business in the Commonwealth of Pennsylvania and the resulting
or surviving corporation, if other than the Borrower, delivers to the Bank at
the time of such consolidation or merger a written instrument by which it
assumes all of the obligations of the Borrower under this Agreement, the Note
and the Security Documents to which the Borrower is a party and agrees to be
bound by all of the terms hereof and (b) such consolidation or merger shall not
result in an immediate or projected violation of any other provision of this
Agreement, the Security Documents or the Bond Documents.
Section 6.02. Compliance with Laws. The Borrower will comply
in all material respects with all applicable laws, rules, regulations and orders
of any governmental authority the noncompliance with which could materially and
adversely affect its operations or financial condition, except for any such
laws, rules, regulations and orders which the Borrower is contesting in good
faith by appropriate proceedings and the noncompliance with which during such
contest would not materially and adversely affect the Borrower's operations or
financial condition if the result of such contest were adverse to the Borrower.
Section 6.03. Maintenance of Governmental Authorizations. The
Borrower will obtain and maintain in full force and effect all governmental and
other authorizations, approvals, consents, permits, licenses, certifications and
qualifications necessary for the ownership and operation of the Project.
-25-
<PAGE>
Section 6.04. Maintenance of Insurance. The Borrower will
maintain or cause to be maintained with respect to the Project: (i) hazard
insurance (including builder's risk insurance with respect to the original
construction of the Project and any other construction), with fire and extended
coverage, vandalism and malicious mischief coverage; (ii) business interruption
insurance; (iii) comprehensive general liability insurance and motor vehicle
insurance for bodily injury and property damage; and (iv) worker's compensation
insurance. Each of the policies described in the preceding sentence shall be in
form, amounts and substance and with insurance companies reasonably satisfactory
to the Bank, containing 30-day notification of cancellation or material change
in coverage clauses in favor of the Bank. The Borrower will maintain such other
insurance with responsible and reputable insurance companies in such amounts and
covering such risks as are customarily maintained by entities similar to the
Borrower or as the Bank may reasonably require by written notice to the
Borrower. The Borrower shall furnish to the Bank, upon written request: (a) full
information as to all insurance carried by it; (b) mortgagee or lender loss
payee endorsements in favor of the Bank; and (c) certified copies of such
insurance policies.
Section 6.05. Compliance with Bond Documents and Other
Contracts. The Borrower will comply with all of its covenants and agreements
under the Bond Documents, in all material respects, as the same may hereafter be
amended or supplemented from time to time, and comply with, or cause to be
complied with, all material requirements and conditions of all contracts and
insurance policies which relate to the Borrower or the Project.
Section 6.06. Maintenance of Properties. The Borrower will
maintain and preserve all of its properties (including the Premises) in good
working order and condition, ordinary wear and tear excepted; not permit, commit
or suffer any waste of any of its properties; not use or permit the use of any
of its properties for any unlawful purpose or permit any nuisance to exist
thereon; and not sell, lease, transfer or otherwise dispose of any substantial
part of its properties, except in the ordinary course of its operations.
Section 6.07. Visitation Rights. The Borrower will, at any
reasonable time and from time to time, after its receipt of reasonable advance
notice from the Bank, permit the Bank or its agents or representatives to
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Borrower, and to discuss the affairs,
finances and accounts of the Borrower with the officers and accountants of the
Borrower. The Bank agrees to comply with the Borrower's rules and regulations
during any such visits.
Section 6.08. Keeping of Books. The Borrower will keep proper
books of record and account, in which full and correct entries shall be made of
financial transactions and the assets and operations of the Borrower in
accordance with GAAP, and have a complete audit of such books of record and
account made by certified public accountants reasonably acceptable to the Bank
for each Fiscal Year.
-26-
<PAGE>
Section 6.09. Reporting Requirements. The Borrower will
furnish or cause to be furnished to the Bank the following (in such number of
copies as the Bank may reasonably request for itself and the Participating
Banks):
(a) As soon as available and in any event within 45 days
after the close of each fiscal quarter of each Fiscal Year of the Borrower,
unaudited financial statements for the Borrower, including a balance sheet and
related statement of income as of the end of such fiscal quarter and for such
fiscal quarter and the current Fiscal Year to the end of such fiscal quarter,
which shall be internally prepared and presented on a consistent basis and in
accordance with GAAP (subject to normal year-end adjustments);
(b) As soon as available and in any event within 90 days
after the close of each Fiscal Year of the Borrower:
(1) financial statements for the Borrower, including a
balance sheet and related statements of income and changes in
financial position as of the end of such Fiscal Year and for such
Fiscal Year, which shall be prepared and reported on without
qualification by independent certified public accountants reasonably
acceptable to the Bank in accordance with GAAP, and shall fairly
present the financial condition of the Borrower as at the end of
such Fiscal Year; and
(2) a certificate signed by an officer of the Borrower
stating that to the best of its knowledge: (i) during such Fiscal
Year the Borrower has observed and performed all of its covenants
and agreements set forth in this Agreement, the Security Documents
and the Bond Documents, except as disclosed in such certificate; and
(ii) no Default or Event of Default has occurred and is continuing,
except as disclosed in such certificate;
(c) Upon receipt thereof by the Borrower, copies of any
letter or report with respect to the management, operations or properties of the
Borrower submitted to the Borrower by its accountants in connection with any
annual audit of the Borrower's accounts, and a copy of any written response of
the Borrower to any such letter or report;
(d) As soon as possible and in any event within 30 days
after receipt of notice thereof: (1) notice of any pending or threatened
litigation, investigation or other proceeding involving the Premises or the
Borrower: (i) which could have a material adverse effect on the Project or the
operations or financial condition of the Borrower; or (ii) wherein the potential
damages, in the reasonable judgment of the Borrower based upon the advice of
counsel experienced in such matters, are not fully covered by the insurance
policies maintained by the Borrower (except for the deductible amounts
applicable to such policies); and (2) any and all information with respect to
such litigation, investigation or proceeding as the Bank may reasonably request;
-27-
<PAGE>
(e) As soon as possible, notice of any material adverse
change in the operations, financial condition or prospects of the Borrower;
(f) As soon as possible and in any event within 15 days
after the Borrower has knowledge of a Default and upon the occurrence of each
Event of Default, a statement of an officer of the Borrower setting forth the
details of such Default or Event of Default and the action which the Borrower
proposes to take with respect thereto;
(g) Concurrently with any filing made to the Securities
Exchange Commission, by the Borrower, a copy of all such filings, including but
not limited to the Borrower's Quarterly Reports on Form 10Q and Annual Reports
on Form 10K, Current Reports on Form 8K, as well as proxy statements and other
information.
(h) Such other information respecting the operations and
properties, financial or otherwise, of the Borrower as the Bank may from time to
time reasonably request.
Section 6.10. Payment of Debt. The Borrower will make full and
timely payment of the principal of and interest on each outstanding Debt of the
Borrower, whether now existing or hereafter arising, and comply in all material
respects with all covenants and agreements set forth in instruments evidencing,
securing or governing such Debt.
Section 6.11. Payment of Taxes. The Borrower will file all
required tax returns. The Borrower will pay before the same shall become
delinquent and before penalties have accrued thereon, all taxes, assessments and
governmental charges or levies imposed on the income, profits, franchises,
property or business of the Borrower, as the case may be, except to the extent
and so long as: (a) the same are being contested in good faith by appropriate
proceedings; and (b) adequate reserves in conformity with GAAP with respect
thereto have been provided on the books of the Borrower. Upon request, the
Borrower will provide to the Bank copies of such returns and receipts for
payment of such taxes.
Section 6.12. Consents Under Bond Documents. The Borrower will
obtain the consent of the Bank whenever the consent of the Issuer or the Trustee
is required to be obtained under the Bond Documents.
Section 6.13. Amendments to Bond Documents. The Borrower will
not consent to or enter into any amendment of or supplement to the Bond
Documents other than as may be required by law or as may be mandated by the
terms thereof.
Section 6.14. Limitation on Conversion to Term Rate. The
Borrower will not exercise its rights under the Bond Documents to request the
Issuer to establish a Term Rate for the Bonds.
Section 6.15. Limitation on Optional Calls. The Borrower will
not exercise its rights under the Bond Documents to direct the Issuer to call
the Bonds for any optional
-28-
<PAGE>
redemption thereof, unless the Borrower first demonstrates to the reasonable
satisfaction of the Bank that at the time of such optional redemption the Letter
of Credit Bank and the Bank will be fully reimbursed with respect to all
drawings on the Letter of Credit in connection with such optional redemption.
Section 6.16. Leases. The Borrower hereby represents that
there are no leases or agreements to lease all or any part of the Premises now
in effect except those leases, if any, approved in writing by the Bank. The
Borrower agrees not to enter into any leases or agreements to lease all or any
part of the Premises, unless: (i) the Borrower shall have obtained the prior
written approval thereof and of the respective tenant by the Bank; and (ii) the
Borrower shall have fully complied with the provisions of the Loan Agreement
with respect thereto. Each such lease shall be on a form of lease approved by
the Bank. All leases shall be net leases and shall include subordination and
attornment provisions satisfactory to the Bank in its sole discretion.
Section 6.17. ERISA. The Borrower will at all times maintain
the fair value of the plan assets of all employee pension plans and life,
accident and health plans maintained by the Borrower or any ERISA Affiliate at a
level equal to or greater than the projected benefit obligations of such plans
for service rendered to the close of the most recent complete plan year of such
plans, as determined in accordance with GAAP. Neither the Borrower nor any ERISA
Affiliate will: (i) voluntarily terminate any employee pension plan covered by
Title IV of ERISA, so as to cause material liability of the Borrower to PBGC or
to a trustee appointed pursuant to Section 4042(b) or (c) of ERISA; (ii) permit
to exist any Prohibited Transaction (as defined in Section 4975 of the Code or
in Section 406 of ERISA) involving an employee benefit plan within the meaning
of Section 3(3) of ERISA for which there is no statutory or administrative
exemption and which may result directly or indirectly in material liability of
the Borrower to the Internal Revenue Service or the United States Department of
Labor; (iii) cause the occurrence of any Reportable Event (as defined in Title
IV of ERISA) which may result in material liability of the Borrower to the
Internal Revenue Service or the United States Department of Labor; (iv) permit
the occurrence of any event or the existence of any condition which may result
in material withdrawal liability (within the meaning of Section 4201 of ERISA)
of the Borrower or any ERISA Affiliate to any multiemployer pension plan (as
defined in Section 3(37) of ERISA); or (v) allow or suffer to exist any other
event or condition known to the Borrower or any ERISA Affiliate with respect to
an employee benefit plan within the meaning of Section 3(3) of ERISA which may
result in material liability of the Borrower to PBGC, the Internal Revenue
Service or the United States Department of Labor. Upon obtaining direct
knowledge of the occurrence of any event described in (1), (2) or (3) below, the
Borrower will give prompt written notice to the Bank of: (1) each failure to
comply with the provisions of this Section; (2) any notification of assessment
of withdrawal liability (within the meaning of Section 4201 of ERISA) received
by the Borrower or any ERISA Affiliate from any multiemployer pension plan (as
defined in Section 3(37) of ERISA); and (3) any lien arising under Section
302(f) of ERISA in favor of any employee pension plan maintained for employees
of the Borrower or any ERISA Affiliate which is subject to Part 3 of Title I of
ERISA.
-29-
<PAGE>
Section 6.18. Environmental Covenants.
(a) The Borrower will cause all activities at the Premises,
and all storage, transportation, treatment and disposal of any Hazardous
Substances or solid waste connected with any activity at the Project, to be
conducted in compliance with all Environmental Laws. The Borrower will cause all
permits, licenses or approvals to be obtained, and will cause all notifications
to be made, with respect to the Premises as required by Environmental Laws, and
will, at all times, cause compliance with the terms and conditions of any such
approvals or notifications. If requested by the Bank, the Borrower will provide
to the Bank with respect to the Premises copies of: (i) applications or other
materials submitted to any governmental agency in compliance with Environmental
Laws; (ii) any notifications submitted to any Person pursuant to Environmental
Laws; (iii) any permit, license, approval, amendment or modification thereto
granted pursuant to Environmental Laws; (iv) any record or manifest required to
be maintained pursuant to Environmental Laws; and (v) any correspondence, notice
of violation, summons, order, complaint or other document received by the
Borrower, its lessees, sublessees or assigns, pertaining to compliance with any
Environmental Laws.
(b) The Borrower will not cause, contribute to or permit
any Contamination during the term of this Agreement. The Borrower will, at all
times during the term of this Agreement, cause Hazardous Substances created,
used or otherwise present at the Premises to be handled in a manner which will
not cause an undue risk of Contamination.
(c) The Borrower will cause all construction of new
structures at the Premises during the term of this Agreement to use design
features which safeguard against or mitigate the accumulation of radon or radon
products in concentrations exceeding an acceptable level in any such new
structure. At the earliest feasible time during or after construction of any new
structure at the Premises, the Borrower will commission an investigation of such
new structure for the presence of radon or radon products and shall provide a
report of such investigation to the Bank. The presence of radon or radon
products in any existing structure at the Premises in a concentration materially
in excess of concentrations disclosed pursuant to Section 5.13 or in any new
structure in excess of the acceptable level shall constitute a default
hereunder. For purposes of this paragraph, "acceptable level" shall mean the
lowest applicable maximum concentration established by any governmental agency
with jurisdiction over the Premises. In the absence of a legally binding maximum
concentration, the "acceptable level" shall be an air concentration of 4
picocuries per liter average annual concentration.
(d) Upon the occurrence of an Event of Default, the Bank
may, at its discretion, commission an investigation at the Borrower's expense
of: (i) compliance at the site of the Premises with Environmental Laws; (ii) the
presence of Hazardous Substances or Contamination at the Premises; (iii) the
presence at the Premises of materials which are described in clause (b) of
Section 5.13; (iv) the presence at the Premises of environmentally sensitive
areas; (v) the presence at the Premises of radon products; or (vi) the presence
at the Premises of tanks of the type described in clause (d) of Section 5.13. In
connection with any investigation pursuant to this paragraph, the Borrower, and
its lessees, sublessees and assigns,
-30-
<PAGE>
will comply with any reasonable request for information made by the Bank or its
agents in connection with any such investigation. Any response to any such
request for information will be full and complete. The Borrower will assist the
Bank and its agents to obtain any records pertaining to the Project or the
Premises or to the Borrower and the lessees, sublessees or assigns of the
Borrower in connection with an investigation pursuant to this paragraph. The
Borrower will accord the Bank and its agents access to all areas of the Premises
at reasonable times and in reasonable manners in connection with any
investigation pursuant to this paragraph. No investigation commissioned pursuant
to this paragraph shall relieve the Borrower from any responsibility for its
representations and warranties under Section 5.13.
(e) The Borrower hereby agrees to indemnify and to hold
harmless the Bank of, from and against any and all expense, loss or liability
suffered by the Bank by reason of the Borrower's breach of any of the provisions
of Section 5.13 or this Section including, but not limited to: (1) any and all
expenses that the Bank may incur in complying with any Environmental Laws; (2)
any and all costs that the Bank may incur in studying or remedying any
Contamination; (3) any and all fines, penalties or other sanctions (including a
voiding of any transfer of the Project) assessed upon the Bank by reason of a
failure of the Borrower to have complied with Environmental Laws; (4) any and
all loss of value of the Project by reason of: (i) failure to comply with
Environmental Laws; (ii) the presence at the Premises of any Hazardous
Substances; (iii) the presence at the Premises of any materials which are
described in clause (b) of Section 5.13; (iv) the presence at the Premises of
any environmentally sensitive areas; (v) the presence at the Premises of radon
or radon products in concentrations not disclosed pursuant to Section 5.12; or
(vi) the presence at the Premises of any tank below ground undisclosed pursuant
to Section 5.13; and (5) any and all reasonable legal and professional fees and
costs incurred by the Bank in connection with the foregoing.
Section 6.19. Further Assurances. The Borrower will execute
and deliver from time to time such further instruments and take such further
actions as may be required to carry out the purposes and provisions of this
Agreement and to assure the Bank of the subrogation and security rights in favor
of the Bank contemplated by Article III and by the Indenture.
Section 6.20. Financial Covenants. (a) The Borrower shall
maintain all of its investment accounts, up to a maximum aggregate amount of
$50,000,000, with the Custodial Bank. The Borrower shall maintain in such
investment accounts created with the Custodial Bank a combined total of its
unencumbered cash and liquid short term investments (investments with a
remaining maturity of less than three years) ("Unrestricted Cash") in an amount
which shall have a fair market value equal to at least $20,000,000. If the value
of the Unrestricted Cash held by the Custodial Bank, from time to time, shall
fall below a fair market value equal to $20,000,000 (but not less than
$15,000,000) the Custodial Bank, shall, in accordance with the Custodial Bank
Agreement, immediately transfer an amount of the Unrestricted Cash, with a fair
market value equal to fifty percent (50%) of the Letter of Credit Amount at that
time, to the Bank, for deposit into the "Bank's Pledge Account B" which is
hereby created. If the total fair market value of the Unrestricted Cash,
together with the funds held in the Bank's Pledge Account B shall, from time to
time, be valued at a fair market value equal to less than
-31-
<PAGE>
$15,000,000, the Custodial Bank shall, in accordance with the Custodial Bank
Agreement, immediately transfer an amount of Unrestricted Cash to the Bank for
deposit into the Bank's Pledge Account B, so that the value of the total amount
held in the Bank's Pledge Account B shall have a fair market value equal to one
hundred percent (100%) of the Letter of Credit Amount at that time.
(b) If, from time to time, after the transfer or transfers of
Unrestricted Cash to the Bank's Pledge Account B described in (a) above, the
Borrower is able to provide additional Unrestricted Cash to the Custodial Bank
in: (i) an amount so that the fair market value of the Unrestricted Cash held by
the Custodial Bank together with the funds held in the Bank's Pledge Account B
shall have a fair market value equal to at least $15,000,000, but less than
$20,000,000, the Bank shall transfer an amount of the funds held in the Bank's
Pledge Account B to the Custodial Bank, in order that the funds remaining in the
Bank's Pledge Account B shall have a fair market value equal to fifty percent
(50%) of the Letter of Credit Amount at that time; or (ii) an amount so that the
fair market value of the Unrestricted Cash held by the Custodial Bank together
with the funds held in the Bank's Pledge Account B shall have a fair market
value equal to at least $20,000,000, the Bank shall transfer the entire amount
of funds held in the Bank's Pledge Account B to the Custodial Bank.
(c) The Bank shall satisfy the lien of the Mortgage and
release other collateral securing the Borrower's obligations hereunder, if
Unrestricted Cash, with a fair market value equal to one hundred percent (100%)
of the Letter of Credit Amount is held by the Bank in the Bank's Pledge Account
B, and the Borrower delivers a written request to the Bank: (i) stating that the
Borrower desires to continually maintain Unrestricted Cash in the Bank's Pledge
Account B with a fair market value equal at all times to the Letter of Credit
Amount for as long as any credit remains available to the Trustee under the
Letter of Credit; (ii) requesting the Bank to satisfy the lien of the Mortgage
and to release any other collateral securing the Borrower's obligations
hereunder upon the deposit of the Unrestricted Cash in the Bank's Pledge Account
B; and (iii) acknowledging that the Unrestricted Cash held in the Bank's Pledge
Account B shall remain in the Bank's Pledge Account B for so long as any credit
remains available to the Trustee under the Letter of Credit and notwithstanding
the value of any funds held, if any, by the Custodial Bank pursuant to the
Custodial Bank Agreement.
(d) Upon the occurrence of an Event of Default hereunder, or
upon the occurrence of an "Event of Default" under the Reimbursement Agreement,
dated as of March 1, 1997 (the "Series A Reimbursement Agreement"), between the
Borrower and the Bank, executed in connection with the issuance by the Issuer of
its Variable Rate Demand Revenue Bonds (Neose Technologies, Inc. Project),
Series A of 1997 (the "Series A Bonds"), the Custodial Bank shall, in accordance
with the terms of the Custodial Bank Agreement, immediately and automatically
transfer an amount of the investment securities held by the Custodial Bank for
the Borrower into the Bank's Pledge Account B, so that the total amount held in
the Bank's Pledge Account B shall be equal to the Letter of Credit Amount. Upon
the occurrence of any such Event of Default and the funding of the Bank's Pledge
Account B as set forth above, the Borrower will cooperate with the Bank and
execute any and all documentation
-32-
<PAGE>
necessary to provide the Bank with a perfected first lien security interest in
the investment securities held in the Bank's Pledge Account B in accordance with
the laws of the Commonwealth of Pennsylvania.
Section 6.21. Principal Prepayments. The Borrower agrees to
optionally redeem the Bonds in the amounts, on the dates and in accordance with
the optional prepayment schedule set forth on Exhibit D which is attached hereto
and made a part hereof. On April 15, 1997, and on the fifteenth day of each
calendar month thereafter so long as any Bonds are outstanding under the
Indenture, the Borrower shall pay to the Bank, for deposit by the Bank into the
"Bond Prepayment Fund B" which is hereby created, an amount equal to 1/12 of the
amount of the Bonds to be optionally redeemed by the Borrower on the following
April 1. Funds held in the Bond Prepayment Fund B shall be immediately and
automatically transferred to the Bank to reimburse the Letter of Credit Bank for
draws made by the Trustee in accordance with the Letter of Credit to optionally
redeem the principal of the Bonds on such dates. The Borrower agrees to take all
steps necessary and required by the Indenture to require the Trustee to make the
optional redemptions of the Bonds on such dates, in accordance with the terms
and provisions of the Indenture.
Section 6.22. Working Capital. The Borrower will at all times
maintain a "working capital position", as defined in accordance with GAAP, of
$20,000,000. Unrestricted Cash plus amounts held in the Bank's Pledge Account B
may be included by the Borrower and its accountants in determining the
Borrower's "working capital position". If the Borrower decides to comply with
the provisions of Section 6.20(c) hereof, upon the Borrower's compliance thereof
to the satisfaction of the Bank, this covenant shall no longer be operative.
Section 6.23. Deposit Relationship. The Bank shall be the
Borrower's primary bank of non-investment accounts. The Borrower agrees to
consider using the Bank's asset management affiliates as investment managers for
all short term investments, provided such affiliates deliver proposals which are
competitive with those of non-affiliated asset managers. Any cash or investments
held by the Bank (other than funds held in the Bank's Pledge Account B and in
the Bond Prepayment Fund B) shall not be considered collateral for the
Borrower's Obligations hereunder and under the Note, any more than if they were
being held or managed by entities not affiliated with the Bank.
-33-
<PAGE>
ARTICLE VII
PROJECT FUND AND CONSTRUCTION COVENANTS
Section 7.01. Project Cost Schedule; Application of Project
Fund. The Project Costs and Sources of Funds Schedule (the "Project Cost
Schedule") set forth in Exhibit B is an estimate of the capital requirements for
the Project. The Borrower shall not submit any requisition to the Trustee for
disbursement of funds from the Project Fund for Project costs which are
materially inconsistent with the Project Cost Schedule, and the Borrower shall
not apply any Bond proceeds in a manner materially inconsistent with the
requisition therefor submitted to the Trustee. Any Project costs incurred in
excess of the budgeted amounts set forth in the Project Cost Schedule will be
paid for by the Borrower upon demand of the Bank. Notwithstanding the foregoing
provisions, if the whole amount allocated to any component of Project cost as
set forth in the Project Cost Schedule is not, or in the Bank's judgment will
not be, expended for such component, then, with the Bank's approval, the
Borrower may cause such excess to be reallocated and used for any other
component of Project cost set forth on the Project Cost Schedule. The Borrower
shall not submit to the Trustee under the Loan Agreement or the Indenture any
requisition for hard construction costs with respect to the Improvements unless
the Bank shall have first received each of the following in form and substance
satisfactory to the Bank:
(a) Copies of the Plans for the Improvements, approved by
the General Contractor, the Borrower and any governmental authorities whose
approvals of the Plans are required under applicable law;
(b) Intentionally Omitted;
(c) A certified copy of the General Contract, which shall
provide for: (i) a fixed price or guaranteed maximum cost satisfactory to the
Bank; (ii) advance requests to be on a form satisfactory to the Bank, supported
by invoices for work completed; and (iii) 5% holdback until completion of all
work thereunder of payments for the work under the General Contract;
(d) Intentionally Omitted;
(e) To the extent and at the time or times permitted by
applicable law, general waivers or stipulations against mechanic's and
materialman's liens by the General Contractor for the Project;
(f) Copies of all building permits, licenses and special
ordinances required for or relating to the construction and equipping of the
Project;
(g) Intentionally Omitted;
-34-
<PAGE>
(h) An assignment by the Borrower to the Bank of the
General Contract, with the consent of the General Contractor together with a
letter from the General Contractor agreeing to perform the General Contract for
the Bank's account if requested by the Bank upon the occurrence of an Event of
Default;
(i) Intentionally Omitted;
(j) Intentionally Omitted; and
(k) Evidence of the insurance required by Section 7.08.
Section 7.02. Requisition Approvals. The Borrower shall submit
to the Bank, for its approval prior to disbursement thereon, each requisition
and related supporting materials required by the Loan Agreement or the
Indenture, together with: (a) an itemization of the funds requisitioned against
the Project Cost Schedule; (b) in the case of hard construction costs, a
construction advance request on a form satisfactory to the Bank and an approval
by the Bank's construction inspector (the fees and expenses of which
construction inspector shall be paid by the Borrower); (c) supporting invoices;
(d) if requested by the Bank, a title bringdown search showing no additional
liens; (e) such other supporting documentation as the Bank may reasonably
request; and (f) a request to the Bank for approval of such requisition
certifying, among other things, that: (i) the funds to be advanced against the
requisition will be fully applied in accordance with the Project Cost Schedule;
(ii) the construction of the Improvements to date has been performed in a good
and workmanlike manner; (iii) no Default or Event of Default has occurred and is
continuing; (iv) the undisbursed balance of the Bond proceeds is sufficient to
complete Project; and (v) reaffirming the representations and warranties of the
Borrower in this Agreement. The Borrower will withdraw any requisition which the
Bank does not approve. The Bank's review and approval of the requisitions and
the acquisition, construction and/or equipping of the Project is solely for the
protection of the Bank's interests under this Agreement, and the Bank shall not
be deemed, by virtue of its inspection of the Project or approval of any
requisition, to have made any representation to any person with respect to the
acquisition, construction and/or equipping of the Project, the validity of any
costs thereof, or the satisfaction of any conditions under the Loan Agreement or
the Indenture with respect to the funding of requisitions (other than the Bank's
consent thereto). All conditions to the obligation of the Bank to approve
requisitions hereunder are imposed solely and exclusively for the benefit of the
Bank and its assigns, and no other person shall have standing to require
satisfaction of such conditions in accordance with their terms or be entitled to
assume that the Bank will approve or not approve advances in the absence of
strict compliance with any or all thereof, and no other person shall, under any
circumstances, be deemed to be a beneficiary of such conditions, any or all of
which may be freely waived in whole or in part by the Bank at any time if, in
its sole discretion, it deems it advisable to do so. The Bank shall not in any
way or for any purpose be deemed to be or to become a partner of or a joint
venturer or a member of a joint enterprise with the Borrower in connection with
the acquisition, construction and/or installation of the Improvements or the
ownership, development or operation of the Project.
-35-
<PAGE>
Section 7.03. Construction; Completion Date. The Borrower will
proceed diligently to acquire, construct and/or and equip the Project, in
accordance with the Project Cost Schedule and the Plans, without delay. The
Project shall be completed on or before September 30, 1997 (the "Completion
Date"), absent the occurrence of an unanticipated event or events which are
beyond the control of the Borrower or the General Contractor and at completion
the Premises shall be free of any and all private or governmental charges or
claims (filed or not) of any nature, except for the Permitted Liens. The
Borrower will deliver to the Bank certified copies of all use, occupancy or
completion certificates in connection with the Project, immediately upon
issuance. As used in this Agreement the terms "complete", "completed" and
"completion" mean, with respect to the Project, that: (i) the Improvements are
substantially physically complete in accordance with the Plans and equipped;
(ii) the Borrower has received all permits, approvals and certificates required
by law prior to the use and occupancy thereof and has furnished true copies of
such permits, approvals and certificates to the Bank; (iii) the Bank has
received from the Bank's inspector certificates of substantial completion of the
Project in accordance with the Plans; (iv) the Premises is free of any and all
private or governmental charges, claims or liens (filed or not) of any nature
except the Permitted Liens; and (iv) the Borrower has obtained all general
releases of mechanic's and materialman's liens required by Section 7.06 and
delivered true copies thereof to the Bank.
Section 7.04. Certain Contracts Prohibited. The Borrower will
not, without first notifying the Bank: (i) execute any contract or purchase
order or permit any subcontract or purchase order to be executed by any person
or persons with whom it has contracted in connection with the Improvements
(except for such contracts, subcontracts or purchase orders that have been
executed prior to the Closing Date and that have been approved by the Bank),
unless the amounts thereof are within the amounts budgeted therefor in the
Project Cost Schedule and are Project Costs (as defined in the Loan Agreement);
(ii) execute any material amendment or modification to any of the Plans, the
General Contract or any other contract the effect of which would be either to
increase or decrease the amount to be paid by or on behalf of the Borrower under
any contract except as permitted by Section 7.07; or (iii) contract for any
services, work or materials for the Project if such are not required by the
Plans or if payment therefor is required to be made regardless of the
nondelivery or nonfurnishing of such materials, services or work.
Section 7.05. Certain Notices. The Borrower will forward to
the Bank promptly after receipt, copies of all notices, permits or other
documents (excepting only notices for nondelinquent taxes due) received by the
Borrower from any governmental authority relating to the Improvements or from
any person claiming a mechanic's or materialmen's lien against the Improvements
or any other property of the Borrower.
Section 7.06. Releases. Prior to making final payment under
any contract relating to construction of the Improvements, the Borrower will,
upon the Bank's written request and to the extent permitted by applicable law,
make a good faith effort to require the contractor thereon to deliver to the
Borrower, from such contractor and all of such contractor's subcontractors or
materialmen, a general unconditional release of mechanic's and materialman's
liens, and the Borrower will promptly deliver or cause to be delivered to the
Bank true and correct copies of all such releases so obtained.
-36-
<PAGE>
Section 7.07. Change Orders. The Borrower will not permit,
without the prior written notice being sent to the Bank, the performance of any
work pursuant to any amendment or modification of any of the Plans, the General
Contract or any subcontract or purchase order (any such amendment or
modification being herein called a "Change Order") which: (a) would result in an
increase or decrease in excess of $100,000 of the contract prices for the
construction of the Improvements as shown on the Project Cost Schedule; or (b)
when aggregated with other Change Orders theretofore effected, would result in
an increase or decrease in excess of $500,000 in the aggregate of the contract
prices for the construction of the Improvements as shown in the Project Cost
Schedule.
Section 7.08. Builder's Risk, Liability and Workers'
Compensation Insurance. The Borrower will maintain, or cause to be maintained,
builders' risk (or equivalent coverage) insurance upon any work done or
materials furnished under the General Contract and any construction
subcontracts, except excavations, foundations and any other structures not
customarily covered by such insurance. The policies for such insurance shall be
issued by companies satisfactory to the Bank and shall be written in completed
value form for 100% of the insurable value of the contract in the names of the
Borrower and the General Contractor as their interests may appear and shall name
the Bank as a loss payee as its interest may appear. The Borrower will also
maintain, or cause to be maintained, workers' compensation insurance covering
all employees of the General Contractor and all subcontractors in amounts
required by law, and public liability and property damage insurance in such
amounts as are customarily insured against by entities of like size similarly
situated.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 8.01. Defaults. Each of the following, at the option
of the Bank, shall constitute an event of default hereunder ("Event of
Default"):
(a) Failure by the Borrower to pay or cause to be paid when
due any amount under Section 2.02(a)(2), Section 2.02(a)(3), Section 2.02(a)(4)
or Section 2.02(a)(5) hereof or a failure of the Borrower or the Custodial Bank
to comply with Section 6.20 hereof or of the Custodial Bank Agreement;
(b) Failure by the Borrower to make any other payment
within 10 days of the date when it is due under this Agreement or the Note after
the receipt of written notice from the Bank to make such payment;
-37-
<PAGE>
(c) Failure by the Borrower to perform or comply with any
of the terms or conditions contained in Section 6.01 or 6.17 or 6.18 within 15
days of the receipt of written notice from the Bank to perform or comply with
such terms or conditions;
(d) Failure by the Borrower to perform or comply with any
of the other terms or conditions contained in this Agreement, the Note or any
Security Document and continuance of such failure for 30 days after written
notice from the Bank to the Borrower, or such longer period to which Bank may
agree in the case of a default not curable by the exercise of due diligence
within such 30 day period, provided that the Borrower shall have commenced
to cure such default within such 30 day period and shall complete such cure as
quickly as reasonably possible with the exercise of due diligence;
(e) Any of the representations, warranties or covenants of
the Borrower set forth in this Agreement, the Note, the Security Documents, the
Bond Documents or any other document furnished to the Bank pursuant to the terms
hereof is false or misleading in any material respect and such false or
misleading representation, warranty or covenant is not cured within 15 days of
the receipt of written notice by the Borrower from the Bank;
(f) Any material provision of this Agreement, the Note or
the Security Documents to which the Borrower is a party shall at any time for
any reason cease to be valid and binding on the Borrower, or shall be declared
to be null and void, or shall be violative of any applicable law relating to a
maximum amount of interest permitted to be contracted for, charged or received,
or the validity or enforceability thereof shall be contested by the Borrower or
any governmental agency, court or authority, or the Borrower shall deny that it
has any or further liability or obligation under this Agreement, the Note or the
Security Documents to which the Borrower is a party and any such occurrence or
event is not cured by the Borrower within 3 days of the receipt by the Borrower
of written notice from the Bank;
(g) The occurrence of an Event of Default as defined in the
Indenture, the Loan Agreement or any of the Security Documents;
(h) The Borrower shall: (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or the like of the
Borrower or of property of the Borrower; or (ii) admit in writing the inability
of the Borrower to pay its debts generally as they become due; or (iii) make a
general assignment for the benefit of creditors; or (iv) be adjudicated a
bankrupt or insolvent; or (v) commence a voluntary case under the United States
Bankruptcy Code or file a voluntary petition or answer seeking reorganization,
an arrangement with creditors or an order for relief or seeking to take
advantage of any insolvency law or file an answer admitting the material
allegations of a petition filed against the Borrower in any bankruptcy,
reorganization or insolvency proceeding, or action of the Borrower shall be
taken for the purpose of effecting any of the foregoing; or (vi) have instituted
against it, without the application, approval or consent of the Borrower, a
proceeding in any court of competent jurisdiction, under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking in respect
of the Borrower an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up or liquidation, a composition or
-38-
<PAGE>
arrangement with creditors, a readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or the like of the Borrower or of all
or any substantial part of the assets of the Borrower or other like relief in
respect thereof under any bankruptcy or insolvency law, and, if such proceeding
is being contested by the Borrower in good faith, the same shall: (A) result in
the entry of an order for relief or any such adjudication or appointment; or (B)
remain undismissed and undischarged for a period of 60 days;
(i) The Premises or any material portion thereof is
subjected to a material condemnation proceeding and such a material condemnation
proceeding is not terminated by the condemnor within 10 days of the receipt by
the Borrower of written notice from the Bank;
(j) The Borrower fails to maintain in full force and effect
the hazard or other insurance required pursuant to this Agreement and
continuance of such failure for 10 days after the receipt of written notice from
the Bank to the Borrower;
(k) The Premises suffers a material loss by fire or other
casualty and such loss is not fully insured and any deficiency in the amount of
insurance proceeds paid with respect to such loss is not posted with the Trustee
or the Bank within 10 days of the determination of such deficiency;
(l) Any litigation or administrative proceeding ensues, and
is not dismissed within 30 days, involving the Borrower or any instrument,
contract or document delivered to the Bank in compliance with this Agreement,
and the adverse result of such litigation or proceeding would have in the Bank's
reasonable opinion, a materially adverse effect on the Borrower's ability to pay
its obligations and comply with the covenants under this Agreement, the Security
Documents or the Bond Documents; provided, however, that if such litigation or
administrative proceeding by its nature cannot be dismissed within such 30 day
period, no Event of Default shall be deemed to have occurred so long as the
Borrower provides written notice to the Bank and diligently and continuously
proceeds to have such litigation or administrative proceeding dismissed.
(m) Any one or more judgments or orders are entered against
the Borrower and either: (1) continue unsatisfied and unstayed for 30 days; or
(2) a judgment lien on any property of the Borrower is recorded in respect
thereof and is not stayed pending appeal by a bond or other arrangement given or
obtained by the Borrower on terms which do not violate any of the Borrower's
covenants under this Agreement;
(n) Failure by the Borrower in respect of any Debt or Debts
to make any payment or payments when due (after the lapse of any applicable
grace period) that results in the acceleration of such Debt or Debts or enables
the holder or holders of such Debt or Debts or any person acting on behalf of
such holder or holders to accelerate the maturity of such Debt or Debts;
-39-
<PAGE>
(o) The occurrence of an "Event of Default" under the
Series A Reimbursement Agreement or with respect to the Series A Bonds; or
(p) The occurrence of a default or an event of default
(after the lapse of any applicable grace period) with respect to any other
credit arrangement under which the Borrower is indebted to the Bank that results
in the acceleration of the Borrower's obligations under such credit arrangement.
Section 8.02. Remedies. If an Event of Default has occurred
and is continuing uncured, the Bank may:
(a) Notify the Trustee and the Letter of Credit Bank of
such Event of Default, direct the Trustee to declare an Event of Default, as
defined in the Indenture, to call the Bonds for mandatory purchase or declare
the principal of the Bonds immediately due and payable and to draw on the Letter
of Credit, and direct the Trustee to exercise remedies under the Bond Documents;
(b) Declare the Borrower's obligations hereunder and under
the Note to be, whereupon the same shall become, immediately due and payable;
and
(c) Decline to approve any further disbursement of the Bond
proceeds from the Project Fund to or for the benefit of the Borrower or any
other person;
(d) Order construction of the Improvements stopped;
(e) Subject to the provisions of the Bond Documents: (i)
enter upon or take possession of the Premises and call upon or employ
contractors, subcontractors, materialmen, suppliers, agents, managers,
maintenance personnel, security guards, architects, engineers and inspectors to
complete, manage or operate the Premises or to protect the Premises from injury;
(ii) make such additions, changes or corrections in the Plans as the Bank shall
deem necessary or desirable; (iii) direct the Trustee to disburse moneys from
the Project Fund, and pay out additional sums of the Bank (which sums shall be
immediately due and payable by the Borrower to the Bank, shall bear interest
from the date of payment by the Bank until the date of repayment at the rate
specified in Section 2.02(f) for sums more than 10 days overdue, and shall be
secured by the Security Documents) and use any property of the Borrower
associated with the Project, or any property of the Borrower in which the Bank
has or obtains an interest, including any funds which have not been disbursed
from the Project Fund and any funds which may be transferred by the Trustee to
the Bank (which funds the Borrower hereby assigns and quitclaims to the Bank),
for application to or as a reserve for payment of any or all of the following
with respect to the completion, protection, management, operation or maintenance
of the Project or the protection of the Bank's interest therein, and in such
connection deliver or disburse the same to such entities in such amounts and
with such preferences and priorities as the Bank in its sole discretion shall
determine, either with or without vouchers or orders executed by the Borrower:
(A) all sums due from the Borrower to the Bank; (B) premiums and costs of title
-40-
<PAGE>
and any other insurance; (C) leasing fees and brokerage or sales commissions;
(D) fees, costs and expenses of the Bank and its counsel in connection with the
preparation, enforcement, performance and filing of this Agreement, the Security
Documents and the other documents contemplated hereby; (E) any taxes (including
federal, state and local taxes) or other governmental charges; (F) any sums
required to indemnify and hold the Bank harmless from any act or omission of the
Bank (except such as are grossly negligent or due to its willful misconduct)
under this Agreement or any other document; (G) architectural and engineering
costs; (H) any sums due to contractors, subcontractors, mechanics or materialmen
for work or services actually furnished on or for the Premises; (I) federal or
state claims for any required withholding of taxes on wages; and (J) other costs
and expenses which are required to complete, manage or operate the Project or to
protect the Premises from injury or maintain the Bank's security position prior
to the rights of all others; (iv) place additional encumbrances upon the
Premises; (v) with the Borrower's consent, convey the Premises, subject to the
Bank's rights, to any nominee of the Bank; and (vi) employ leasing and sales
agents and negotiate and execute leases, sales contracts and financing
undertakings in connection with all or any part of the Premises; and
(f) Exercise, or cause to be exercised, any and all such
remedies as it may have under this Agreement, the Note, the Security Documents
or any other document or at law or in equity, including, but not limited to, the
right to liquidate all investment securities held in the Bank's Pledge Account B
created under Section 6.20 hereof and use such funds to reimburse itself for any
amounts owed to the Bank by the Borrower.
Section 8.03. Confession of Judgment. IF THE BORROWER OR THE
CUSTODIAL BANK FAIL TO FULFILL OR CANNOT FULFILL ITS OBLIGATIONS UNDER THE
CUSTODIAL BANK AGREEMENT AS SET FORTH IN SECTIONS 6.20(a), (b) OR (d) HEREOF,
AND THE BORROWER OR THE CUSTODIAL BANK DO NOT CURE ANY SUCH UNFULFILLED
OBLIGATIONS WITHIN ONE (1) BUSINESS DAY AFTER RECEIPT BY THE BORROWER OF WRITTEN
NOTICE FROM THE BANK TO DO SO, THE BORROWER HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS THE BANK, BY ITS ATTORNEY, OR THE PROTHONOTARY OR THE CLERK OF ANY
COURT OF RECORD IN THE COMMONWEALTH OR IN ANY JURISDICTION WHERE PERMITTED BY
LAW, UPON THE OCCURRENCE OF AN EVENT OF DEFAULT AS DEFINED IN THIS AGREEMENT OR
AT ANY TIME THEREAFTER, TO APPEAR FOR THE BORROWER AND CONFESS AND ENTER
JUDGMENT AGAINST IT IN FAVOR OF THE BANK IN ANY JURISDICTION IN WHICH THE
BORROWER OR ANY OF ITS PROPERTY IS LOCATED FOR THE AMOUNT OF ALL OBLIGATIONS,
TOGETHER WITH COSTS OF SUIT AND WITH ACTUAL COLLECTION COSTS (INCLUDING
REASONABLE ATTORNEYS' FEES), WITH OR WITHOUT DECLARATION, AND WITHOUT STAY OF
EXECUTION, AND WITH RELEASE OF ERRORS AND THE RIGHT TO ISSUE EXECUTION
FORTHWITH, AND FOR DOING SO THIS AGREEMENT OR A COPY VERIFIED BY AFFIDAVIT SHALL
-41-
<PAGE>
BE A SUFFICIENT WARRANT. THE BORROWER HEREBY WAIVES AND RELEASES ALL RELIEF FROM
ANY AND ALL APPRAISEMENT, STAY OR EXEMPTION LAW OF ANY STATE NOW IN FORCE OR
HEREAFTER ENACTED. THIS AUTHORITY AND POWER SHALL NOT BE EXHAUSTED BY THE
EXERCISE THEREOF AND SHALL CONTINUE UNTIL THE OBLIGATIONS ARE FULLY PAID,
PERFORMED, DISCHARGED AND SATISFIED.
BEING FULLY AWARE OF ITS RIGHTS TO PRIOR NOTICE AND HEARING ON
THE VALIDITY OF ANY CLAIMS THAT MAY BE ASSERTED AGAINST IT BY THE BANK UNDER
THIS AGREEMENT BEFORE JUDGMENT CAN BE ENTERED AND BEFORE ASSETS OF THE BORROWER
CAN BE GARNISHED AND ATTACHED, THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THESE RIGHTS AND EXPRESSLY AGREES AND CONSENTS TO THE BANK,
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, OR AT ANY TIME THEREAFTER, ENTERING
JUDGMENT AGAINST THE BORROWER BY CONFESSION AND ATTACHING AND GARNISHING THE
BANK ACCOUNTS AND OTHER ASSETS OF THE BORROWER, WITHOUT PRIOR NOTICE OR
OPPORTUNITY FOR A HEARING. THE BORROWER ACKNOWLEDGES THAT IT HAS HAD THE
ASSISTANCE OF COUNSEL IN THE REVIEW AND EXECUTION OF THIS AGREEMENT AND FURTHER
ACKNOWLEDGES THAT THE MEANING AND EFFECT OF THE FOREGOING PROVISIONS CONCERNING
CONFESSION OF JUDGMENT HAVE BEEN FULLY EXPLAINED TO THE BORROWER BY SUCH
COUNSEL.
Section 8.04. Waivers; Consents. No waiver of, or consent with
respect to, any provision of this Agreement or the Note or the Security
Documents shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was given.
Section 8.05. No Waiver; Remedies Cumulative. No failure on
the part of the Bank to exercise, and no delay in exercising, any right
hereunder or under the Note or the Security Documents shall operate as a waiver
thereof; and no single or partial exercise of any right hereunder shall preclude
any other or further exercise thereof or the exercise of any other right. To the
extent permitted by applicable law, the remedies herein and in the Note, the
Security Documents and the Bond Documents provided are cumulative and not
exclusive of any remedies available under any other document or at law or in
equity.
ARTICLE IX
MISCELLANEOUS
-42-
<PAGE>
Section 9.01. Notices. All notices and other communications
provided for hereunder shall be in writing and sent by United States certified
or registered mail, return receipt requested, or by telegraph, telex, telecopier
or private delivery service, addressed as follows:
If to the Bank:
Jefferson Bank
1607 Walnut Street
Philadelphia, PA 19103
Attention: Kenneth R. Frappier, Senior Vice President
If to the Borrower:
Neose Technologies, Inc.
102 Witmer Road
Horsham, PA 19044
Attention: P. Sherrill Neff, President
With a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street
Philadelphia, PA 19103
Attention: Lynn Axelroth, Esquire
If to the Trustee:
Dauphin Deposit Bank and Trust Company
213 Market Street
Harrisburg, PA 17101
Attention: Corporate Trust Department
Either party hereto and the Trustee may change the address to which notices to
it are to be sent by written notice given to the other persons listed in this
Section. All notices shall, when mailed as aforesaid, be effective on the date
indicated on the return receipt, and all notices given by other means shall be
effective when received.
-43-
<PAGE>
Section 9.02. Successors and Assigns. This Agreement shall
inure to the benefit of and shall be binding upon the parties hereto and their
respective successors and assigns, including without limitation the
Participating Banks. The Borrower may not assign its rights under this Agreement
without the prior written consent of the Bank. The Borrower and the Bank intend
that no other person shall have any claim or interest under this Agreement or
right of action hereon or hereunder, except as provided with respect to the
Letter of Credit Bank in Section 3.07.
Section 9.03. Survival of Representations, Warranties and
Covenants. All representations, warranties and covenants made by the Borrower
herein and in any document delivered pursuant hereto shall survive the delivery
of this Agreement and the Participating Bank Agreement and any advances under
the Participating Bank Agreement.
Section 9.04. Counterparts. The execution hereof by each party
hereto shall constitute a contract between them for the uses and purposes herein
set forth, and this Agreement may be executed in any number of counterparts,
with each executed counterpart constituting an original and all counterparts
together constituting one agreement.
Section 9.05. Costs, Expenses and Taxes. The Borrower agrees
to pay on demand all reasonable costs and expenses of the Bank in connection
with the preparation, execution and delivery of this Agreement, the
Participating Bank Agreement, the Note, the Security Documents, the Standby
Letter of Credit, the Standby Reimbursement Agreement, the Bond Documents and
any other documents that may be delivered in connection with this Agreement, the
Participating Bank Agreement, the Note, the Security Documents, the Standby
Letter of Credit, the Standby Reimbursement Agreement or the Bond Documents or
any amendments thereto, including, without limitation, the reasonable fees and
expenses of counsel for the Bank with respect thereto and with respect to
advising the Bank and/or any one or more Participating Banks as to their rights
and responsibilities under this Agreement, the Participating Bank Agreement, the
Note, the Security Documents, the Standby Reimbursement Agreement, the Bond
Documents and such other documents, and all costs and expenses, if any,
including without limitation reasonable counsel fees and expenses of the Bank,
in connection with the enforcement of this Agreement, the Participating Bank
Agreement, the Note, the Security Documents, the Bond Documents and such other
documents. In addition, the Borrower shall pay any and all stamp and other taxes
and fees payable or determined to be payable in connection with the execution
and delivery of this Agreement, the Participating Bank Agreement, the Note, the
Security Documents and such other documents and agrees to indemnify and to hold
the Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees;
provided the Bank promptly notifies the Borrower of any such taxes and fees.
Section 9.06. Amendments. This Agreement may be amended by an
instrument in writing executed and delivered by the Borrower and the Bank.
Section 9.07. Severability. If any provision hereof or of the
Note is found by a court of competent jurisdiction to be prohibited or
unenforceable in any jurisdiction, it shall be ineffective as to such
-44-
<PAGE>
jurisdiction only to the extent of such prohibition or unenforceability, and
such prohibition or unenforceability shall not invalidate the balance of such
provision as to such jurisdiction to the extent it is not prohibited or
unenforceable, nor invalidate such provision in any other jurisdiction, nor
invalidate the other provisions hereof, all of which shall be liberally
construed in favor of the Bank in order to effect the provisions of this
Agreement and the Note.
Section 9.08. Conflicts. Insofar as possible the provisions of
this Agreement shall be deemed complementary to the terms of the Note and the
Security Documents, but in the event of conflict the terms hereof shall control
to the extent such are enforceable under applicable law.
Section 9.09. Complete Agreement. Taken together with the
Note, the Security Documents and the other instruments and documents delivered
in compliance herewith, this Agreement is a complete memorandum of the agreement
of the Borrower and the Bank. Waivers or modifications of any provision hereof
must be in writing signed by the party to be charged with the effect thereof.
Section 9.10. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the Commonwealth of
Pennsylvania without reference to its principles of conflicts of law.
Section 9.11. Table of Contents and Headings. The table of
contents and section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
Section 9.12. Participation. Notwithstanding any other
provision of this Agreement, the Borrower understands that the Bank is or may be
entering into a participation agreement with other banks and may at any time
enter into other participation agreements with one or more additional
participating banks ("Participating Banks") whereby the Bank will allocate to
the Participating Banks certain percentages of the payment obligations of the
Borrower under this Agreement and the Note and the funding obligations of the
Bank under the Participating Bank Agreement. The Borrower acknowledges, that,
for the convenience of all parties, this Agreement is being entered into with,
and the Note and Security Documents are being delivered to, the Bank only and
that the Borrower's obligations under this Agreement, the Note and the Security
Documents are and will be undertaken for the benefit of, and as an inducement
to, the Participating Banks as well as the Bank. Without limiting the foregoing,
the Borrower acknowledges that Sections 2.02(e) and 2.05 and the indemnity of
the Bank under Section 9.05 are also for the benefit of the Participating Banks
as if such sections specifically referred to the Participating Banks and their
participations in the payment obligations of the Borrower and the funding
obligations of the Bank, and the Borrower agrees to make any payments required
by such provisions for the account of any one or more Participating Banks to the
Bank on demand of the Bank and, in the case of such payments under Section
2.02(e), submission by the Bank to the Borrower of the respective Participating
Bank's certificate contemplated by such Section.
The Bank agrees that it shall be the agent for the
Participating Banks and that if any legal actions or claims are instituted by or
to be instituted by a Participating Bank against the Borrower, the Bank shall
act as agent to said Participating Bank with regard to any such legal actions or
claims.
Section 9.13. Judicial Proceedings. Each party to this
Agreement agrees that any suit, action or proceeding, whether claim or
counterclaim, brought or instituted by any party hereto or any successor or
assign of any party, on or with respect to this Agreement or any of the other
documents or the dealings of the parties with respect hereto, or thereto, shall
be tried only by a court and not by a jury. EACH PARTY HEREBY KNOWINGLY,
-45-
<PAGE>
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH
SUIT, ACTION OR PROCEEDING. Further, each party waives any right it may have to
claim or recover, in any such suit, action or proceeding, any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages. THE BORROWER ACKNOWLEDGES AND AGREES THAT THIS
SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND THAT THE BANK
WOULD NOT EXTEND CREDIT TO THE BORROWER IF THE WAIVERS SET FORTH IN THIS SECTION
WERE NOT A PART OF THIS AGREEMENT.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Agreement to be duly executed and delivered as of the date first above written.
[Corporate Seal] NEOSE TECHNOLOGIES, INC.
Attest: /s/ A. Brian Davis By: /s/ P. Sherrill Neff
------------------------------- ------------------------------
Secretary (Vice) President
[Corporate Seal] JEFFERSON BANK
Attest: /s/ Daniel O'Brien By: /s/ Kenneth R. Frappier
------------------------------- -------------------------------
(Assistant) Secretary Senior Vice President
-46-
<PAGE>
EXHIBIT A
NOTE
March 20, 1997
$8,579,967.12 Philadelphia, Pennsylvania
For value received and intending to be legally bound, NEOSE
TECHNOLOGIES, INC. ("Maker"), a Delaware corporation promises to the order of
JEFFERSON BANK ("Payee"), a Pennsylvania banking corporation at its offices at
1607 Walnut Street, Philadelphia, Pennsylvania 19103 or at such other place as
Payee may designate in writing, on demand subject to the provisions of Section
2.02(a) of the Agreement described below, the principal sum of Eight Million
Five Hundred Seventy Nine Thousand Nine Hundred Sixty-Seven Dollars and Twelve
Cents ($8,579,967.12) lawful money of the United States of America, or so much
thereof as may be outstanding from time to time, together with interest on the
outstanding balance thereof at a fluctuating rate per annum (computed for the
actual number of days elapsed, based on a 360-day year) equal to one percent
(1.0%) per annum above the Base Rate (as such phrase is defined below); provided
that if any portion of such sum or any other amount payable under the Agreement
(defined below) or interest thereon is not paid within 10 days of the date such
sum, amount or interest is due and payable to Payee under this Note or the
Agreement, after written notice has been sent by the Payee to the Maker, then
such sum shall thereafter bear interest at a fluctuating rate per annum
(computed for the actual number of days elapsed, based on a 360-day year) equal
to five percent (5.0%) per annum above the Base Rate until such sum, amount or
interest and all other amounts due and payable under this Note or the Agreement
have been paid in full. "Base Rate" means the rate of interest so designated and
established by the Bank, from time to time, with changes effective immediately.
The Base Rate of the Payee is determined from time to time by Payee as a means
of pricing some loans to its borrowers and neither is tied to any external rate
of interest or index, nor necessarily reflects the lowest rate of interest
actually charged by Payee to any particular class or category of customers.
The indebtedness evidenced by this Note represents advances to
be made by Payee pursuant to and as described in a Reimbursement Agreement,
dated as of March 1, 1997 (the "Agreement") between Maker and Payee. Terms and
phrases used herein and not defined herein shall have the meanings ascribed to
them in the Agreement. Each advance against this Note shall be due and payable,
with interest, on the date required in Section 2.02(a) of the Agreement, on
which date demand for such payment shall be deemed to have been made under this
Note. Interest accruing pursuant to this Note shall be payable on demand and as
otherwise provided in Section 2.02(a) of the Agreement.
A-1
<PAGE>
The principal of this Note may be advanced, repaid and
readvanced on a revolving basis in accordance with the Agreement. This Note
shall be retained by Payee until such time as no further advances are available
under the terms of the Agreement and all principal due and payable under this
Note and all other amounts payable under the Agreement have been paid in full
with interest, and until such time, Payee shall not be required to produce this
Note to Maker in connection with any demand hereon.
Payment of this Note is secured as described in the Agreement.
Such security includes, among other things, the Mortgage on the Premises.
Should any default be made in the payment of any principal or
interest due and payable under this Note, then payment of the same may be
enforced and recovered in whole or in part at any time by one or more of the
remedies provided to or for the benefit of Payee in this Note, the Agreement or
the Security Documents or in any other instrument delivered to or for the
benefit of Payee or otherwise available at law or in equity; and in such case
Payee may also recover all costs of suit and other expenses in connection
therewith, including reasonable attorneys' fees and expenses.
SUBJECT TO THE PRECONDITIONS SET FORTH IN SECTION 8.03 OF THE
AGREEMENT, THE MAKER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS THE PAYEE, BY
ITS ATTORNEY, OR THE PROTHONOTARY OR THE CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON THE OCCURRENCE
OF A DEFAULT IN PAYMENT HEREUNDER, OR AT ANY TIME THEREAFTER, TO APPEAR FOR THE
MAKER AND CONFESS AND ENTER JUDGMENT AGAINST IT IN FAVOR OF THE PAYEE IN ANY
JURISDICTION IN WHICH THE MAKER OR ANY OF ITS PROPERTY IS LOCATED FOR THE AMOUNT
OF ALL OBLIGATIONS DUE HEREUNDER, TOGETHER WITH COSTS OF SUIT AND WITH ACTUAL
COLLECTION COSTS (INCLUDING REASONABLE ATTORNEYS' FEES), WITH OR WITHOUT
DECLARATION, AND WITHOUT STAY OF EXECUTION, AND WITH RELEASE OF ERRORS AND THE
RIGHT TO ISSUE EXECUTION FORTHWITH, AND FOR DOING SO THIS NOTE OR A COPY
VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT. THE MAKER HEREBY WAIVES AND
RELEASES ALL RELIEF FROM ANY AND ALL APPRAISEMENT, STAY OR EXEMPTION LAW OF ANY
STATE NOW IN FORCE OR HEREAFTER ENACTED. THIS AUTHORITY AND POWER SHALL NOT BE
EXHAUSTED BY THE EXERCISE THEREOF AND SHALL CONTINUE UNTIL THE OBLIGATIONS ARE
FULLY PAID, PERFORMED, DISCHARGED AND SATISFIED.
BEING FULLY AWARE OF ITS RIGHTS TO PRIOR NOTICE AND HEARING ON
THE VALIDITY OF ANY CLAIMS THAT MAY BE ASSERTED AGAINST IT BY THE PAYEE UNDER
THIS NOTE BEFORE JUDGMENT CAN BE ENTERED AND BEFORE ASSETS OF THE MAKER CAN BE
GARNISHED AND ATTACHED, THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND
A-2
<PAGE>
INTENTIONALLY WAIVES THESE RIGHTS AND EXPRESSLY AGREES AND CONSENTS TO THE
PAYEE, UPON THE OCCURRENCE OF A DEFAULT IN PAYMENT HEREUNDER, OR AT ANY TIME
THEREAFTER, ENTERING JUDGMENT AGAINST THE MAKER BY CONFESSION AND ATTACHING AND
GARNISHING THE PAYEE ACCOUNTS AND OTHER ASSETS OF THE MAKER, WITHOUT PRIOR
NOTICE OR OPPORTUNITY FOR A HEARING. THE MAKER ACKNOWLEDGES THAT IT HAS HAD THE
ASSISTANCE OF COUNSEL IN THE REVIEW AND EXECUTION OF THIS NOTE AND FURTHER
ACKNOWLEDGES THAT THE MEANING AND EFFECT OF THE FOREGOING PROVISIONS CONCERNING
CONFESSION OF JUDGMENT HAVE BEEN FULLY EXPLAINED TO THE MAKER BY SUCH COUNSEL.
The remedies of Payee as provided herein or in the Agreement
or the Security Documents shall be cumulative and concurrent and may be pursued
singly, successively or together against Maker and/or any other obligor under
the Security Documents and/or against the property covered by the Security
Documents and/or any other property mortgaged, pledged or assigned to Payee as
security for this Note, at the sole discretion of Payee, and such remedies shall
not be exhausted by any exercise thereof but may be exercised as often as
occasion therefor shall occur.
Payee shall not by any act of omission or commission be deemed
to have waived any of its rights or remedies hereunder or under the Agreement or
the Security Documents unless such waiver be in writing and signed by Payee, and
then only to the extent specifically set forth therein; a waiver on one event
shall not be construed as continuing or as a bar to or waiver of such right or
remedy on a subsequent event.
Maker hereby waives and releases all errors, defects and
imperfections in any proceedings instituted by Payee under the terms of this
Note, or of the Agreement or the Security Documents, as well as all benefit that
might accrue to Maker by virtue of any present or future laws exempting any of
the property covered by the Security Documents or any other property, real or
personal, or any part of the proceeds arising from any sale of such property,
from attachment, levy or sale under execution, or providing for any stay of
execution, exemption from civil process or extension of time for payment, as
well as the right of inquisition on any real estate that may be levied upon
under a judgment obtained by virtue hereof, and Maker hereby voluntarily
condemns the same and authorizes the entry of such voluntary condemnation on any
writ of execution issued thereon, and agrees that such real estate may be sold
upon any such writ in whole or in part in any order desired by Payee.
Maker hereby waives presentment for payment, notice of
nonpayment, notice of protest and protest of this Note, and all other notices in
connection with the delivery, acceptance, performance, default or enforcement of
the payment of this Note, and agrees that the liability of Maker shall be
unconditional without regard to the liability of any other party and shall not
be in any manner affected by any indulgence, extensions of time, renewal, waiver
or modification granted or consented to by Payee; and Maker hereby consents to
any and all
A-3
<PAGE>
extensions of time, renewals, waivers or modifications that may be granted by
Payee with respect to the payment or other provisions of this Note, and to the
release of the Security Documents, or any part thereof, with or without
substitution, and agrees that makers, indorsers, guarantors or sureties may
become parties hereto without notice to Maker or affecting Maker's liability
hereunder.
Maker shall pay the cost of any revenue, tax or other stamps
now or hereafter required by law at any time to be affixed to this Note or the
Mortgage or any other Security Document; and if any taxes be imposed with
respect to debts secured by mortgages, or with respect to notes evidencing debts
so secured, Maker agrees to pay to the holders hereof upon demand the amount of
such taxes, and hereby waives any contrary provisions of any laws or rules of
court now or hereafter in effect.
If any provision hereof is found by a court of competent
jurisdiction to be prohibited or unenforceable, it shall be ineffective only to
the extent of such prohibition or unenforceability, and such prohibition or
unenforceability shall not invalidate the balance of such provision to the
extent it is not prohibited or unenforceable, nor invalidate the other
provisions hereof, all of which shall be liberally construed in favor of Payee
in order to effect the provisions of this Note.
As used herein, the words "Payee" and "Maker" shall be deemed
and construed to include the respective successors and assigns of Payee and
Maker. This Note shall be construed according to and governed by the laws of the
Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, Maker has duly executed this Note under
seal as of the day and year first above written.
[Corporate Seal] NEOSE TECHNOLOGIES, INC.
Attest: By:
-------------------------------- --------------------------------
Secretary (Vice) President
A-4
<PAGE>
EXHIBIT B
PROJECT DESCRIPTION
AND
COST SCHEDULE
Project Description
The Project to be undertaken by the Borrower includes the
acquisition, improvement and equipping of a facility located at 102 Witmer Road,
Horsham, Pennsylvania, which will be used for the development and pilot
production of complex carbohydrates for research and development relating to a
variety of healthcare applications, to be owned and operated by the Borrower.
Cost Schedule
(TO FOLLOW)
B-1
<PAGE>
EXHIBIT C
INQUIRIES CONDUCTED BY THE BORROWER WITH RESPECT TO
ENVIRONMENTAL MATTERS
1) A Phase I Environmental Site Audit, dated January 8, 1997, prepared by
D.C.R. Environmental Securities, Inc.
2) The subsurface soil investigation performed by Pennoni Associates Inc.,
the results of which were set forth in a letter report dated February
5, 1997 (including soil sample analytical results) from Richard C.
Werner, C.P.G. to Robert L. Fleming, of the Borrower.
C-1
<PAGE>
EXHIBIT D
OPTIONAL PREPAYMENT SCHEDULE
Date of Optional Redemption Amount of Bonds to be
- --------------------------- Optionally Redeemed
-------------------
April 1, 1998 $ 500,000
April 1, 1999 600,000
April 1, 2000 1,000,000
April 1, 2001 1,100,000
April 1, 2002 1,100,000
April 1, 2003 1,200,000
April 1, 2004 1,200,000
April 1, 2005 100,000
April 1, 2006 200,000
April 1, 2007 100,000
April 1, 2008 200,000
April 1, 2009 200,000
April 1, 2010 200,000
April 1, 2011 200,000
April 1, 2012 300,000
April 1, 2013 200,000
April 1, 2014 0
April 1, 2015 0
April 1, 2016 0
April 1, 2017 0
----------
$8,400,000
==========
D-1
Exhibit 10.6
NOTE
[SPECIMEN]
March 20, 1997
$8,579,967.12 Philadelphia, Pennsylvania
For value received and intending to be legally bound, NEOSE
TECHNOLOGIES, INC. ("Maker"), a Delaware corporation promises to the order of
JEFFERSON BANK ("Payee"), a Pennsylvania banking corporation at its offices at
1607 Walnut Street, Philadelphia, Pennsylvania 19103 or at such other place as
Payee may designate in writing, on demand subject to the provisions of Section
2.02(a) of the Agreement described below, the principal sum of Eight Million
Five Hundred Seventy Nine Thousand Nine Hundred Sixty-Seven Dollars and Twelve
Cents ($8,579,967.12) lawful money of the United States of America, or so much
thereof as may be outstanding from time to time, together with interest on the
outstanding balance thereof at a fluctuating rate per annum (computed for the
actual number of days elapsed, based on a 360-day year) equal to one percent
(1.0%) per annum above the Base Rate (as such phrase is defined below); provided
that if any portion of such sum or any other amount payable under the Agreement
(defined below) or interest thereon is not paid within 10 days of the date such
sum, amount or interest is due and payable to Payee under this Note or the
Agreement, after written notice has been sent by the Payee to the Maker, then
such sum shall thereafter bear interest at a fluctuating rate per annum
(computed for the actual number of days elapsed, based on a 360-day year) equal
to five percent (5.0%) per annum above the Base Rate until such sum, amount or
interest and all other amounts due and payable under this Note or the Agreement
have been paid in full. "Base Rate" means the rate of interest so designated and
established by the Bank, from time to time, with changes effective immediately.
The Base Rate of the Payee is determined from time to time by Payee as a means
of pricing some loans to its borrowers and neither is tied to any external rate
of interest or index, nor necessarily reflects the lowest rate of interest
actually charged by Payee to any particular class or category of customers.
The indebtedness evidenced by this Note represents advances to
be made by Payee pursuant to and as described in a Reimbursement Agreement,
dated as of March 1, 1997 (the "Agreement") between Maker and Payee. Terms and
phrases used herein and not defined herein shall have the meanings ascribed to
them in the Agreement. Each advance against this Note shall be due and payable,
with interest, on the date required in Section 2.02(a) of the Agreement, on
which date demand for such payment shall be deemed to have been made under this
Note. Interest accruing pursuant to this Note shall be payable on demand and as
otherwise provided in Section 2.02(a) of the Agreement.
The principal of this Note may be advanced, repaid and
readvanced on a revolving basis in accordance with the Agreement. This Note
shall be retained by Payee until such time as no further advances are available
under the terms of the Agreement and all principal due and
-1-
<PAGE>
payable under this Note and all other amounts payable under the Agreement have
been paid in full with interest, and until such time, Payee shall not be
required to produce this Note to Maker in connection with any demand hereon.
Payment of this Note is secured as described in the Agreement.
Such security includes, among other things, the Mortgage on the Premises.
Should any default be made in the payment of any principal or
interest due and payable under this Note, then payment of the same may be
enforced and recovered in whole or in part at any time by one or more of the
remedies provided to or for the benefit of Payee in this Note, the Agreement or
the Security Documents or in any other instrument delivered to or for the
benefit of Payee or otherwise available at law or in equity; and in such case
Payee may also recover all costs of suit and other expenses in connection
therewith, including reasonable attorneys' fees and expenses.
SUBJECT TO THE PRECONDITIONS SET FORTH IN SECTION 8.03 OF THE
AGREEMENT, THE MAKER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS THE PAYEE, BY
ITS ATTORNEY, OR THE PROTHONOTARY OR THE CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OR IN ANY JURISDICTION WHERE PERMITTED BY LAW, UPON THE OCCURRENCE
OF A DEFAULT IN PAYMENT HEREUNDER, OR AT ANY TIME THEREAFTER, TO APPEAR FOR THE
MAKER AND CONFESS AND ENTER JUDGMENT AGAINST IT IN FAVOR OF THE PAYEE IN ANY
JURISDICTION IN WHICH THE MAKER OR ANY OF ITS PROPERTY IS LOCATED FOR THE AMOUNT
OF ALL OBLIGATIONS DUE HEREUNDER, TOGETHER WITH COSTS OF SUIT AND WITH ACTUAL
COLLECTION COSTS (INCLUDING REASONABLE ATTORNEYS' FEES), WITH OR WITHOUT
DECLARATION, AND WITHOUT STAY OF EXECUTION, AND WITH RELEASE OF ERRORS AND THE
RIGHT TO ISSUE EXECUTION FORTHWITH, AND FOR DOING SO THIS NOTE OR A COPY
VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT. THE MAKER HEREBY WAIVES AND
RELEASES ALL RELIEF FROM ANY AND ALL APPRAISEMENT, STAY OR EXEMPTION LAW OF ANY
STATE NOW IN FORCE OR HEREAFTER ENACTED. THIS AUTHORITY AND POWER SHALL NOT BE
EXHAUSTED BY THE EXERCISE THEREOF AND SHALL CONTINUE UNTIL THE OBLIGATIONS ARE
FULLY PAID, PERFORMED, DISCHARGED AND SATISFIED.
BEING FULLY AWARE OF ITS RIGHTS TO PRIOR NOTICE AND HEARING ON
THE VALIDITY OF ANY CLAIMS THAT MAY BE ASSERTED AGAINST IT BY THE PAYEE UNDER
THIS NOTE BEFORE JUDGMENT CAN BE ENTERED AND BEFORE ASSETS OF THE MAKER CAN BE
GARNISHED AND ATTACHED, THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THESE RIGHTS AND EXPRESSLY AGREES AND CONSENTS TO THE
PAYEE, UPON THE OCCURRENCE OF A DEFAULT IN PAYMENT HEREUNDER, OR AT ANY TIME
THEREAFTER, ENTERING JUDGMENT
-2-
<PAGE>
AGAINST THE MAKER BY CONFESSION AND ATTACHING AND GARNISHING THE PAYEE ACCOUNTS
AND OTHER ASSETS OF THE MAKER, WITHOUT PRIOR NOTICE OR OPPORTUNITY FOR A
HEARING. THE MAKER ACKNOWLEDGES THAT IT HAS HAD THE ASSISTANCE OF COUNSEL IN THE
REVIEW AND EXECUTION OF THIS NOTE AND FURTHER ACKNOWLEDGES THAT THE MEANING AND
EFFECT OF THE FOREGOING PROVISIONS CONCERNING CONFESSION OF JUDGMENT HAVE BEEN
FULLY EXPLAINED TO THE MAKER BY SUCH COUNSEL.
The remedies of Payee as provided herein or in the Agreement
or the Security Documents shall be cumulative and concurrent and may be pursued
singly, successively or together against Maker and/or any other obligor under
the Security Documents and/or against the property covered by the Security
Documents and/or any other property mortgaged, pledged or assigned to Payee as
security for this Note, at the sole discretion of Payee, and such remedies shall
not be exhausted by any exercise thereof but may be exercised as often as
occasion therefor shall occur.
Payee shall not by any act of omission or commission be deemed
to have waived any of its rights or remedies hereunder or under the Agreement or
the Security Documents unless such waiver be in writing and signed by Payee, and
then only to the extent specifically set forth therein; a waiver on one event
shall not be construed as continuing or as a bar to or waiver of such right or
remedy on a subsequent event.
Maker hereby waives and releases all errors, defects and
imperfections in any proceedings instituted by Payee under the terms of this
Note, or of the Agreement or the Security Documents, as well as all benefit that
might accrue to Maker by virtue of any present or future laws exempting any of
the property covered by the Security Documents or any other property, real or
personal, or any part of the proceeds arising from any sale of such property,
from attachment, levy or sale under execution, or providing for any stay of
execution, exemption from civil process or extension of time for payment, as
well as the right of inquisition on any real estate that may be levied upon
under a judgment obtained by virtue hereof, and Maker hereby voluntarily
condemns the same and authorizes the entry of such voluntary condemnation on any
writ of execution issued thereon, and agrees that such real estate may be sold
upon any such writ in whole or in part in any order desired by Payee.
Maker hereby waives presentment for payment, notice of
nonpayment, notice of protest and protest of this Note, and all other notices in
connection with the delivery, acceptance, performance, default or enforcement of
the payment of this Note, and agrees that the liability of Maker shall be
unconditional without regard to the liability of any other party and shall not
be in any manner affected by any indulgence, extensions of time, renewal, waiver
or modification granted or consented to by Payee; and Maker hereby consents to
any and all extensions of time, renewals, waivers or modifications that may be
granted by Payee with respect to the payment or other provisions of this Note,
and to the release of the Security Documents, or any part thereof,
-3-
<PAGE>
with or without substitution, and agrees that makers, indorsers, guarantors or
sureties may become parties hereto without notice to Maker or affecting Maker's
liability hereunder.
Maker shall pay the cost of any revenue, tax or other stamps
now or hereafter required by law at any time to be affixed to this Note or the
Mortgage or any other Security Document; and if any taxes be imposed with
respect to debts secured by mortgages, or with respect to notes evidencing debts
so secured, Maker agrees to pay to the holders hereof upon demand the amount of
such taxes, and hereby waives any contrary provisions of any laws or rules of
court now or hereafter in effect.
If any provision hereof is found by a court of competent
jurisdiction to be prohibited or unenforceable, it shall be ineffective only to
the extent of such prohibition or unenforceability, and such prohibition or
unenforceability shall not invalidate the balance of such provision to the
extent it is not prohibited or unenforceable, nor invalidate the other
provisions hereof, all of which shall be liberally construed in favor of Payee
in order to effect the provisions of this Note.
As used herein, the words "Payee" and "Maker" shall be deemed
and construed to include the respective successors and assigns of Payee and
Maker. This Note shall be construed according to and governed by the laws of the
Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, Maker has duly executed this Note under
seal as of the day and year first above written.
[Corporate Seal] NEOSE TECHNOLOGIES, INC.
Attest: /s/ Brian Davis By: /s/ P. Sherrill Neff
--------------------------------- ------------------------------
Secretary (Vice) President
[SPECIMEN]
-4-
Exhibit 10.7
THIS IS AN OPEN-END MORTGAGE
SECURING FUTURE ADVANCES UP TO
A MAXIMUM PRINCIPAL AMOUNT OF
EIGHT MILLION FIVE HUNDRED SEVENTY-NINE THOUSAND
NINE HUNDRED SIXTY-SEVEN DOLLARS AND TWELVE CENTS
PLUS ACCRUED INTEREST AND OTHER INDEBTEDNESS
AS DESCRIBED IN 42 PA.C.S.A. (section) 8143
MORTGAGE, ASSIGNMENT OF LEASES AND SECURITY AGREEMENT
THIS MORTGAGE, ASSIGNMENT OF LEASES AND SECURITY AGREEMENT (this
"Mortgage") dated March 20, 1997 is made by NEOSE TECHNOLOGIES, INC., a Delaware
corporation, with an address of 102 Witmer Road, Horsham, Pennsylvania 19044
(the "Mortgagor"), in favor of JEFFERSON BANK, with an address of 1607 Walnut
Street, Philadelphia, Pennsylvania 19103 (the "Mortgagee").
W I T N E S S E T H :
A. Montgomery County Industrial Development Authority (the "Issuer")
has issued its Federally Taxable Variable Rate Demand Revenue Bonds (Neose
Technologies, Inc. Project), Series B of 1997, in the aggregate principal amount
of $8,400,000 (the "Bonds") under a Trust Indenture, dated as of March 1, 1997
(the "Indenture") between the Issuer and Dauphin Deposit Bank and Trust Company,
as trustee (including any successor trustee, the "Trustee").
B. Pursuant to a Loan Agreement, dated as of March 1, 1997 between the
Issuer and the Mortgagor (the "Loan Agreement"), the proceeds of the Bonds are
being applied to finance a project more fully described therein. Under the Loan
Agreement, the Mortgagor is obligated to make loan payments to the Trustee in
amounts and at times corresponding to the principal of and interest due in
respect of the Bonds.
C. In order to facilitate the issuance and sale of the Bonds and to
enhance the marketability of the Bonds, the Issuer and the Borrower have asked
CoreStates Bank, N.A. (the "Letter of Credit Bank") to issue its Irrevocable
Letter of Credit (together with any amendment thereto and any substitute letter
of credit issued by the Letter of Credit Bank therefor, the "Letter of Credit")
to the Trustee authorizing the Trustee to make one or more draws on the Letter
of Credit Bank up to an aggregate of $8,579,967.12 (as reduced and reinstated
from time to time in accordance with the provisions of the Letter of Credit, the
"Letter of Credit Amount"), of which originally: (i) $8,400,000 shall be in
respect of principal of the Bonds; and (ii) $179,967.12 shall be in respect of
accrued interest on the Bonds. The purpose of the Letter of Credit is to provide
funds for the payment of principal of and interest on the Bonds and purchase
price of Bonds which have been tendered for purchase pursuant to the tender
option provisions thereof and of the Indenture to the extent remarketing
proceeds or other funds are not available therefor in accordance with the
provisions of the Indenture.
-1-
<PAGE>
D. The Letter of Credit Bank will only issue the Letter of Credit if it
will be reimbursed pursuant to the terms of an agreement to be entered into with
another banking institution acceptable to the Letter of Credit Bank. To such end
and in order to achieve interest cost savings and other savings for the
Mortgagor, the Mortgagor has asked the Mortgagee to enter into a Participation
and Reimbursement Agreement, dated as of March 1, 1997, with the Letter of
Credit Bank (the "Participating Bank Agreement") under which the Mortgagee will
become primarily and unconditionally obligated to reimburse the Letter of Credit
Bank for all drawings under the Letter of Credit and to make certain other
payments to the Letter of Credit Bank.
E. The Mortgagee is willing to enter into the Participating Bank
Agreement for the account of the Mortgagee upon the terms and conditions set
forth in the Reimbursement Agreement, dated as of March 1, 1997, (the
"Reimbursement Agreement"), between the Mortgagee and the Mortgagor.
ARTICLE I
OBLIGATIONS; SECURITY
1.1 Obligations; Loan Documents. This Mortgage is executed,
acknowledged and delivered by the Mortgagor to secure and enforce the following
obligations and liabilities (collectively, the "Obligations"):
(a) The payment of: (i) the principal sum of Eight Million
Five Hundred Seventy-Nine Thousand Nine Hundred Sixty-Seven Dollars and Twelve
Cents ($8,579,967.12) in the aggregate to be paid with interest thereon, as the
same may fluctuate, pursuant to the provisions of the Reimbursement Agreement,
including all advances now or hereafter made by the Mortgagee pursuant to the
Participating Bank Agreement, together with interest thereon, as more fully
described in the Reimbursement Agreement; (ii) all sums now or in the future
advanced or coming due or required to be paid under the Loan Documents
(hereinafter defined) whether for principal, interest, fees, costs, charges,
expenses, or other amounts owing under reimbursement or indemnification
obligations under the Loan Documents, whether such advances are voluntary or
obligatory, whether such obligations presently exist or come into existence at
some future time, and whether such advances, costs and expenses were made or
incurred at the request of the Mortgagor or any other obligor or guarantor under
the Loan Documents or Mortgagee; (iii) any increases in the Letter of Credit
Amount whether by amendment of the Reimbursement Agreement, the Participating
Bank Agreement, replacement of the Letter of Credit or otherwise; and (iv) all
sums which may hereafter be lent to the Mortgagor by the Mortgagee when
evidenced by a promissory note or other obligation reciting that said note or
obligation is intended to be secured by this Mortgage; and
(b) The performance of all of the terms, covenants,
conditions, agreements, obligations and liabilities of the Mortgagor or any
other obligor or guarantor under:
-2-
<PAGE>
(i) the Reimbursement Agreement, this Mortgage, all documents referred to as
"Security Documents" in the Reimbursement Agreement and any other document now
or hereafter given to evidence, secure or facilitate the payment and performance
of any of the Obligations; (ii) all extensions, renewals, replacements or
modifications of, or amendments or additions to any of the foregoing; and
(iii) any note, document or instrument now or hereafter evidencing an obligation
of the Mortgagor or to the Mortgagee which recites that it is intended to be
secured by this Mortgage (all of the foregoing being collectively referred to in
this Mortgage as the "Loan Documents"). The Mortgagor shall pay and perform the
Obligations required in accordance with the provisions of the Loan Documents.
1.2 Grant of Mortgage; Mortgaged Property. For the purpose of securing
payment and performance of all Obligations, the Mortgagor has granted, conveyed,
bargained, sold, alienated, enfeoffed, released, confirmed, assigned to, granted
a security interest in and mortgaged, and by these presents does hereby grant,
convey, bargain, sell, alien, enfeoff, release, confirm, assign to, grant a
security interest in and mortgage unto the Mortgagee all of the Mortgagor's
right, title and interest in and to the following whether presently in existence
or to come into existence at some future time (collectively, the "Mortgaged
Property"):
(a) The parcel of land situated generally at 102 Witmer Road,
Horsham, located in the Township of Horsham, Montgomery County, Pennsylvania and
more fully described in Exhibit "A" attached hereto and made a part hereof (the
"Land");
(b) All buildings, structures and improvements of every kind
erected on, under or over the Land (the "Improvements") (the Land and the
Improvements being hereinafter referred to as, collectively, the "Real Estate");
(c) All building materials, fixtures, building machinery and
building equipment delivered on site to the Real Estate during the course of, or
in connection with, the construction of, or reconstruction of, or remodeling of,
any of the Real Estate from time to time during the term hereof;
(d) Subject to subparagraph (h) hereof, all fixtures,
machinery, equipment and other articles of real, personal or mixed property
attached to, situate or installed in or upon, or used in the operation or
maintenance of, the Real Estate or any plant or business situated thereon,
whether or not such real, personal or mixed property is or shall be affixed to
the same, and all replacements, substitutions, accretions and proceeds of the
foregoing (collectively, "Fixtures") including all building service fixtures,
machinery and equipment of any kind whatsoever; all lighting, heating,
ventilating, air conditioning, refrigerating, sprinkling, plumbing, security,
cleaning, incinerating, waste disposal, communications, alarm, fire prevention
and extinguishing systems, fixtures, apparatus, machinery and equipment; all
elevators, escalators, lifts, cranes, hoists and platforms; all pipes, conduits,
pumps, boilers, tanks, motors, engines, furnaces and compressors; all dynamos,
transformers, generators; all parts, fittings, accessories, accessions,
substitutions and replacements thereof; all floor and window coverings; all
storm and screen windows, shutters and doors; and all trees and other plantings;
-3-
<PAGE>
(e) All leases, licenses, occupancy agreements or agreements
to lease all or any part of the Real Estate and all extensions, renewals,
amendments, and modifications thereof, and any options, rights of first refusal,
or guarantees relating thereto (collectively, "Leases"); all rents, income,
receipts, revenues, security deposits, escrow accounts, reserves, issues,
profits, awards, and payments of any kind payable under the Leases or otherwise
arising from the Real Estate (collectively, the "Income"); all contract rights,
accounts receivable and general intangibles relating to the Real Estate or the
use, occupancy, maintenance, construction or repair thereof; all management
agreements, franchise agreements, utility agreements and deposits, building
service contracts, maintenance contracts, construction contracts, architect's
agreements; all maps, plans, surveys and specifications; all warranties and
guaranties; all permits, licenses and approvals; all insurance policies, books
of account and other documents, of whatever kind or character, relating to the
use, construction upon, occupancy, leasing, sale or operation of the Real
Estate;
(f) All estates, rights, tenements, hereditaments, privileges,
easements, and appurtenances of any kind benefitting the Real Estate; all means
of access to and from the Real Estate, whether public or private; all water and
mineral rights; all rights of the Mortgagor as declarant or unit owner under any
declaration of condominium or association applicable to the Real Estate; and all
other claims or demands of the Mortgagor, either at law or in equity, in
possession or expectancy, of, in, or to the Real Estate;
(g) All "Proceeds" of any of the above-described property,
which term shall have the meaning given to it in the Uniform Commercial Code of
the state in which the Real Estate is located and shall additionally include
whatever is received upon the use, lease, sale, exchange, collection, or other
utilization or any disposition of any of the above-described property, voluntary
or involuntary, whether cash or non-cash, including proceeds of insurance and
condemnation awards, rental or lease payments, accounts, chattel paper,
instruments, documents, contract rights, general intangibles, equipment and
inventory; and
(h) Notwithstanding anything to the contrary in the foregoing,
the lien and security interest of the Mortgagee in and to the Fixtures is
subject and subordinate to those liens and encumbrances in the Fixtures
described in Exhibit "B", which is attached hereto and made a part hereof. The
Mortgagee agrees to release its lien and security interest in the Fixtures
described in Exhibit "B" upon the reasonable request of the Corporation, but
only if such lien and security interest causes the Mortgagor to be in default
under any of its Fixture financing agreements. The Mortgagor shall be permitted
to finance any Fixtures it acquires in the future and in connection therewith to
grant a lien and security interest in and to such Fixtures to a third party. The
Mortgagee agrees that its lien and security interest in and to such Fixtures
shall be subject and subordinate to the lien and security interest granted to
such third party. The Mortgagee agrees to release the lien and security interest
in any such future acquired Fixtures upon the reasonable request of the
Mortgagor, but only if such lien and security interest causes the Mortgagor to
be in default under any of such Fixture financing agreements.
TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee to and
for the use of the Mortgagee forever.
-4-
<PAGE>
PROVIDED, HOWEVER, that at such time as all Obligations have been fully
satisfied, this Mortgage and the estate hereby granted shall terminate.
1.3 Security Agreement. This Mortgage is also a security agreement
under the Uniform Commercial Code of the state in which the Real Estate is
located. The Mortgagor grants, and the Mortgagee shall have and may enforce, a
security interest in all those property interests included in the Mortgaged
Property which may be "personal property" to secure payment and performance of
all Obligations. This Mortgage is intended to be an industrial plant mortgage
within the broadest interpretation of the "industrial plant mortgage doctrine"
under the laws of the Commonwealth of Pennsylvania. The Mortgagor shall execute,
deliver, file and refile any financing statements, continuation statements, or
other security agreements the Mortgagee may require to confirm the lien of this
Mortgage with respect to such property. The Mortgagor irrevocably appoints the
Mortgagee attorney-in-fact for the Mortgagor to execute, deliver and file such
instruments.
1.4 Assignment of Leases and Income.
(a) This Mortgage is also an absolute and unconditional
assignment to the Mortgagee of all Leases and Income, whether now in existence
or hereafter arising, for the purpose of vesting in the Mortgagee a first
priority, perfected security interest in the Leases and the Income. The
Mortgagor hereby assigns, transfers and sets over to the Mortgagee all Leases,
all Income and all rights of the Mortgagor to enforce the Leases and collect the
Income. This assignment includes any award received or receivable by the
Mortgagor in any legal proceeding involving any tenant under a Lease whether
under the Bankruptcy Code or otherwise.
(b) The Mortgagor irrevocably appoints the Mortgagee the
attorney-in-fact of the Mortgagor to enforce the Leases and demand, receive and
collect the Income and the sole and exclusive agent of the Mortgagor to agree to
any modifications of the Leases. This power is coupled with an interest and is
therefore irrevocable. The Mortgagor shall notify any person which the Mortgagee
may from time to time specify that the Income should be paid directly to the
Mortgagee and that any modification of the Leases must be approved by the
Mortgagee.
(c) So long as no event of default has occurred and is
continuing under any of the Loan Documents, the Mortgagor shall have a license,
revocable at the will of the Mortgagee, to enforce the Leases and collect the
Income subject to any applicable provisions contained in the Loan Documents.
Upon request of the Mortgagee, the Mortgagor shall execute and deliver to the
Mortgagee: (i) a specific assignment, in recordable form, of any Lease now or
hereafter affecting the Mortgaged Property or any portion thereof to further
evidence the assignment hereby made; and (ii) such other instruments as the
Mortgagee may deem necessary, convenient or appropriate in connection with the
payment and delivery directly to the Mortgagee of all of the Income.
(d) All security deposits, prepaid rent permitted to be
collected by the Mortgagor,
-5-
<PAGE>
if any (other than prepaid rent for the next succeeding calendar month), and
similar payments under any Lease shall be deposited in a separate escrow account
with an escrowee satisfactory to the Mortgagee which, if the Mortgagee is
permitted to hold such accounts under applicable law, shall, at the Mortgagee's
election, be the Mortgagee. The Mortgagor shall notify the Mortgagee of the
identification of the escrow account. Such sums shall be disbursed only upon the
prior written consent of the Mortgagee except such consent shall not be required
when by law or by the terms of the Lease, the Mortgagor is required to, and
does, return such sums to the party entitled to same under the Lease.
(e) The Mortgagor shall not accept or permit the payment of
rent in any medium other than lawful money of the United States of America, or
anticipate, discount, compromise, forgive, encumber or further assign the Leases
or the Income or any part thereof or any interest therein without the prior
written consent of the Mortgagee.
(f) The Mortgagor hereby authorizes and directs that upon the
occurrence of an Event of Default under this Mortgage or the other Loan
Documents all other parties now or hereafter owing or paying Income under any
Lease or now or hereafter having in their possession or control any Income from
or allocated to the Mortgaged Property, or any part thereof, or the Proceeds
therefrom, shall, upon the request of the Mortgagee and until the Mortgagee
directs otherwise, pay and deliver such Income directly to the Mortgagee at the
Mortgagee's address set forth in the introduction to this Mortgage, or in such
other manner as the Mortgagee may direct such parties in writing and this
authorization shall continue until this Mortgage is released of record. No payor
making payments to the Mortgagee at its request under the assignment contained
in this Mortgage shall have any responsibility to see to the application of any
of such funds, and any party paying or delivering Income to the Mortgagee under
such assignment shall be released thereby from any and all liability to the
Mortgagor to the full extent and amount of all such Income so delivered. The
Mortgagor agrees to indemnify and hold harmless any and all parties making
payments to the Mortgagee, at the Mortgagee's request under the assignment
contained in this Mortgage, against any and all liabilities, actions, claims,
judgments, costs, charges and attorneys' fees resulting from the delivery of
such payments to the Mortgagee.
(g) Notwithstanding any legal presumption to the contrary, the
Mortgagee shall not be obligated by reason of its acceptance of this assignment
to perform any obligation of the Mortgagor as lessor under any Lease. Neither
the acceptance of this assignment nor the collection of Income under the Leases
shall constitute a waiver of any rights of the Mortgagee under the Loan
Documents or constitute a cure of any default by the Mortgagor thereunder.
1.5 Open-End Mortgage. This is an Open-End Mortgage and shall be
entitled to all benefits as such under 42 Pa.C.S.A. (section) 8143 (the
"Open-End Mortgage Statute").
(a) If the Mortgagee receives written notice pursuant to
Section 8143(b) of the Open-End Mortgage Statute from a holder of a lien or
encumbrance on the Mortgaged Property which is subordinate to the lien of the
Mortgage, then and notwithstanding any provision to the
-6-
<PAGE>
contrary contained in any Loan Document, the Mortgagor agrees that the Mortgagee
shall not be responsible to make any further advances to the Mortgagor (and the
Mortgagee is released from all liability for failure to make such advances) if
the Mortgagee determines in its sole discretion that any such advance requested
by the Mortgagor could be construed to be an unobligated advance under Section
8143(b) of the Open-End Mortgage Statute.
(b) If the Mortgagee receives written notice pursuant to
Section 8143(b) of the Open-End Mortgage Statute from a holder of a mechanic's
lien for labor performed or to be performed or materials furnished or to be
furnished for the erection, construction, alteration or repair of any part of
the Mortgaged Property, then and notwithstanding any provision to the contrary
contained in any Loan Document, the Mortgagor agrees that the Mortgagee shall
have the right to suspend (until such time as the lien is fully released) any
further advances to the Mortgagor (and the Mortgagee is released from all
liability for failure to make such advances) except advances which the Mortgagee
determines in its sole discretion are for the purpose of paying toward all or
part of the cost of completing any erection, construction, alteration or repair
of any part of the Mortgaged Property the financing of which, in whole or in
part, the Mortgage was given to secure.
(c) If the Mortgagor should at any time elect to limit the
Obligations secured by this Mortgage pursuant to Section 8143(c) of the Open-End
Mortgage Statute, the Mortgagor agrees that notice of such election shall: (i)
not be effective unless and until it is served upon the Mortgagee in accordance
with the requirements of Section 8143(d) of the Open-End Mortgage Statute and
fully complies with the requirements for the giving of notices under any Loan
Document; (ii) release the Mortgagee from all obligation to make any further
advances under the Loan Documents notwithstanding anything to the contrary
contained in such notice or the Loan Documents; (iii) constitute, at the
election of the Mortgagee, an Event of Default under the Loan Documents; and
(iv) not be effective to limit the Mortgagor's liability for payment and
performance of all Obligations for which the Mortgagor is responsible under this
Mortgage or the other Loan Documents (including all reimbursement and
indemnification agreements) whether such Obligations arise prior or subsequent
to the date of such notice.
ARTICLE II
TITLE MATTERS
2.1 Warranty of Title. Until the Obligations are fully satisfied, the
Mortgagor represents, warrants and covenants that:
(a) Mortgagor has good and marketable fee simple absolute
title to the Mortgaged Property subject only to those exceptions to title more
particularly described in marked-up title commitment no. 96-7934-M issued by
Lawyers Title Insurance Corporation in connection with this transaction and that
certain Declaration of Covenants and Restrictions, dated March 20, 1997, between
Pennsylvania Business Campus Delaware, Inc. and the Mortgagor (the "Permitted
Encumbrances") and the Mortgagor shall defend the validity, priority and
enforceability of the lien
-7-
<PAGE>
of this Mortgage against the claims of all persons excepting only those claiming
under Permitted Encumbrances;
(b) To the best of its knowledge, the Mortgagor has full power
and lawful authority to subject the Mortgaged Property to the lien of this
Mortgage;
(c) To the best of its knowledge, the execution, delivery and
performance of this Mortgage and the other Loan Documents will not contravene
any Legal Requirements (hereinafter defined) presently in effect or any
agreement, document or instrument to which the Mortgagor is a party or by which
the Mortgagor or the Mortgaged Property is bound;
(d) The Mortgagor shall make, execute, acknowledge and deliver
all such further or other deeds, documents, instruments or assurances and cause
to be done all such further acts and things as may at any time be reasonably
required by the Mortgagee to confirm and fully protect the lien and priority of
this Mortgage; and
(e) The Mortgagor shall make such payments, all before the
same shall become delinquent, and perform all obligations as are required under
any Permitted Encumbrances affecting the Mortgaged Property.
2.2 No Transfer. Without the prior written consent of the Mortgagee in
each instance, which consent may be given or withheld in the Mortgagee's sole
discretion, the Mortgagor will abstain from, and will not cause or permit, any
transfer of the Mortgaged Property or any portion thereof, whether voluntary,
involuntary, by operation of law, or otherwise, nor shall the Mortgagor enter
into any agreement or transaction to transfer, or accomplish in form or
substance a transfer, of the Mortgaged Property.
(a) A "transfer" of the Mortgaged Property includes: (i) the
direct or indirect sale, agreement to sell, transfer or conveyance of the
Mortgaged Property or any portion thereof or interest therein; (ii) the
execution of any installment land sale contract or similar instrument affecting
all or a portion of the Mortgaged Property; and, unless and only to the extent
the Mortgagee has expressly consented to the following transfers in this
Mortgage or the other Loan Documents, (iii) the lease or sublease of all or a
portion of the Mortgaged Property; and (iv) the transfer of any stock,
partnership or other ownership interests in the Mortgagor (if the Mortgagor is a
partnership, joint venture or corporation) other than as may be permitted by the
Reimbursement Agreement.
(b) Consent to any such transfer shall not be deemed to be a
waiver of the right to require consent to future or successive transfers. If
consent should be given to a transfer and if this Mortgage is not released to
the extent of the transferred portion of the Mortgaged Property by a writing
executed by the Mortgagee and recorded in the appropriate office of public
record, then any such transfer shall be subject to this Mortgage and any such
transferee shall be deemed, by acceptance of the deed or other instrument of
transfer, to have assumed all Obligations under this Mortgage and to have agreed
to be bound by all provisions contained herein. Any such assumption
-8-
<PAGE>
shall not, however, release the Mortgagor or any other obligor or guarantor of
the Obligations from any liability under the Loan Documents.
2.3 No Other Financing or Liens. Without the prior written consent of
the Mortgagee in each instance, which consent may be given or withheld in
Mortgagee's sole discretion, the Mortgagor shall not create or cause or permit
to exist any lien on the Mortgaged Property whether superior to or subject to
the lien of this Mortgage except the Permitted Encumbrances and such other liens
or security interests as are expressly and specifically agreed to be permitted
upon the Mortgaged Property by the Mortgagee under the Loan Documents.
2.4 Leases. The Mortgagor represents and warrants that there are no
Leases affecting the Mortgaged Property. The Mortgagor shall not enter into any
Leases without the prior written consent of the Mortgagee being obtained in each
instance.
ARTICLE III
OBLIGATIONS REGARDING MORTGAGED PROPERTY
3.1 Legal Requirements Generally. The Mortgagor represents and warrants
to the Mortgagee that the Mortgaged Property is in substantial compliance with
the material Legal Requirements (hereinafter defined). The Mortgagor shall
promptly comply with, and cause the Mortgaged Property to be kept in substantial
compliance with, all present and future laws, statutes, codes, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, restrictions and
requirements (collectively the "Legal Requirements") of the United States of
America, the state in which the Real Estate is located and any political
subdivision thereof or any town, city, county or municipality in which the Real
Estate is located or any agency, department, bureau, board, commission or
instrumentality of any of the foregoing now existing or hereafter created
(individually, a "Governmental Authority" and, collectively, the "Governmental
Authorities") having jurisdiction over the Mortgagor or the Mortgaged Property
or the construction, use, occupancy, operation, maintenance, or improvement of
the Mortgaged Property, whether foreseen or unforeseen, ordinary or
extraordinary.
3.2 Land Use Approvals. The Mortgagor represents and warrants to the
Mortgagee that the Land is and shall remain one or more zoning lots separate and
apart from all other premises. The Mortgagor shall not, by any act or omission,
impair the integrity of the Land as such separate zoning lot or lots. The
Mortgagor shall not, without the prior written consent of the Mortgagee, submit
or cause to be submitted to any Governmental Authority an application for
zoning, subdivision or development approval affecting the Real Estate if any of
the following would result from such proposed zoning change, subdivision or
development:
(a) the separate transfer, use and ownership of the Real
Estate is not permitted as a matter of right under applicable Legal
Requirements; (b) the use of the Real Estate as of the date of this Mortgage is
no longer permitted as a matter of right under applicable Legal Requirements; or
(c) any portion of the Real Estate is used to fulfill a Legal Requirement of
other property not subject to the lien of this Mortgage.
-9-
<PAGE>
3.3 Environmental Matters.
(a) The Mortgagor represents and warrants that neither the
Mortgagor nor, to the best of its knowledge, any other person has: (i) used,
installed or disposed of any Hazardous Materials (hereinafter defined) on, from,
or affecting the Mortgaged Property except in material compliance with
Applicable Environmental Laws (hereinafter defined); or (ii) received any notice
from any Governmental Authority with regard to Hazardous Materials on, from or
affecting the Mortgaged Property.
(b) The Mortgagor shall not use the Mortgaged Property, nor
allow it to be used, to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process Hazardous Materials except in
material compliance with Applicable Environmental Laws. The Mortgagor shall not
cause or permit, as a result of any intentional or unintentional act or omission
on the part of the Mortgagor or any other person, a release of Hazardous
Materials onto, from or affecting the Mortgaged Property or any other use,
installation, or disposition of Hazardous Materials in violation of Applicable
Environmental Laws. The Mortgagor shall comply, and enforce compliance by all
tenants and subtenants, with all Applicable Environmental Laws and shall keep
the Mortgaged Property free and clear of any liens imposed pursuant to any
Applicable Environmental Laws.
(c) If the Mortgagor receives any notice from any Governmental
Authority with regard to Hazardous Materials on, from or affecting the Mortgaged
Property, or any notice of violation of Applicable Environmental Laws, the
Mortgagor shall promptly notify the Mortgagee. The Mortgagor 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
Materials on, from or affecting the Mortgaged Property in accordance with all
Applicable Environmental Laws and to the satisfaction of the Mortgagee.
(d) The term "Applicable Environmental Laws" shall mean,
without limitation, all of the Legal Requirements of any Governmental Authority
pertaining to the preservation or enhancement of the quality of the environment
or regulating or restricting the use, transfer, storage or remediation of
Hazardous Materials including the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et
seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C.
Sections 1801, et seq.), the Resource Conservation and Recovery Act, as amended
(42 U.S.C. Sections 6901, et seq.), the Pennsylvania Hazardous Sites Cleanup Act
(35 Pa.C.S.A. Sections 6020.101, et seq.), and the rules, regulations adopted
and publications promulgated pursuant thereto at any time. The term "Hazardous
Materials" shall mean, without limitation, any flammable explosives, radioactive
materials, hazardous materials, hazardous wastes, hazardous or toxic substances,
or related materials, asbestos or any material containing asbestos, or any other
substance or material regulated under any Applicable Environmental Laws.
-10-
<PAGE>
3.4 General Obligations. Until the Obligations are fully satisfied, the
Mortgagor shall:
(a) Perform all maintenance, repair, restoration and
rebuilding required to keep the Mortgaged Property in good repair, order and
condition in full compliance with the requirements of the Loan Documents, any
Leases affecting the Mortgaged Property and all Legal Requirements;
(b) Pay all charges for water, sewer, gas, electric and other
utility services provided to the Mortgaged Property promptly as and when due;
(c) Complete any improvements to the Mortgaged Property
required under the Loan Documents, any Leases affecting the Mortgaged Property,
or required by any Governmental Authority or insurer insuring the Mortgaged
Property, in a good and workmanlike manner and free of mechanics' liens;
(d) Permit, and cause any lessee or occupant of the Mortgaged
Property to permit, the Mortgagee and its agents and representatives, to enter
upon the Mortgaged Property at any reasonable time after reasonable advance
notice to appraise and photograph the Mortgaged Property and to inspect for
compliance with Legal Requirements (including subsurface investigations to
determine compliance with Applicable Environmental Laws), insurance
requirements, and the Obligations of the Mortgagor under this Mortgage and the
other Loan Documents (the Mortgagee agrees to abide by all regulations of the
Corporation when making any such entries upon the Mortgaged Property);
(e) Make the books and accounts relating to the Mortgaged
Property available for inspection by the Mortgagee, or its representatives, upon
request at any reasonable time; and
(f) If the Mortgaged Property is, as of the date of this
Mortgage or at any time hereafter, subject to Leases, deliver to the Mortgagee
within ninety (90) days after the end of each fiscal year of the Mortgagor, or
on a more frequent basis if requested by the Mortgagee, a schedule of Leases and
Income as of the end of the preceding year, an income and expense statement for
the Mortgaged Property as of the end of the preceding year, and a projected
income and expense statement for the Mortgaged Property for the then-current
fiscal year.
3.5 General Restrictions. Until the Obligations are fully satisfied,
the Mortgagor shall not, without the prior written consent of the Mortgagee
being obtained in each instance:
(a) Abandon the Mortgaged Property or any portion thereof or
allow the same to become vacant;
(b) Commit or suffer waste with respect to the Mortgaged
Property;
(c) Impair or diminish the value or integrity of the Mortgaged
Property or the priority or security of the lien of this Mortgage;
-11-
<PAGE>
(d) Remove, demolish or materially alter any of the Mortgaged
Property without the prior written consent of the Mortgagee in each instance,
except that the Mortgagor shall have the right to remove and dispose of, free of
the lien of this Mortgage, such Fixtures as may, from time to time, become worn
out or obsolete, provided that, simultaneously with or prior to such removal,
any such Fixtures shall be replaced with other Fixtures which shall have a value
and utility at least equal to that of the replaced Fixtures and, by such removal
and replacement, the Mortgagor shall be deemed to have subjected such
replacement Fixtures to the lien and priority of this Mortgage;
(e) Make, install or permit to be made or installed, any
additions or improvements to the Mortgaged Property except in a good and
workmanlike manner, free of mechanic's liens, in compliance with Legal
Requirements, and in accordance with plans and specifications approved by
Mortgagee; or
(f) Make, suffer or permit any nuisance to exist on the
Mortgaged Property or any portion thereof.
3.6 Required Notices. The Mortgagor shall notify the Mortgagee promptly
after the Mortgagor becomes aware of the occurrence of any of the following:
(a) A fire or other casualty causing damage to the Mortgaged
Property;
(b) A pending or threatened condemnation of the Mortgaged
Property;
(c) A violation of a Legal Requirement or other notice from or
to a Governmental Authority relating to the Mortgaged Property;
(d) Receipt or giving of any notice of default or cancellation
under any Lease of all or a material portion of the Mortgaged Property;
(e) Commencement of any litigation affecting the Mortgaged
Property;
(f) Discovery, discharge or release of any Hazardous Material
for which the Mortgagor is or may be responsible under any Applicable
Environmental Laws;
(g) The existence of any event or condition which presents a
risk of creating material liability in the Mortgagor under ERISA (Public Law
93-406, as amended); or
(h) The occurrence of a default under, or the receipt or
giving of any notice under, any Permitted Encumbrance.
-12-
<PAGE>
ARTICLE IV
TAXES AND INSURANCE
4.1 Real Estate Taxes and Assessments.
(a) The Mortgagor shall pay when due and before interest or
penalties commence to accrue thereon, all taxes, assessments, water and sewer
rents, levies, encumbrances and all other charges or claims of any nature and
kind, whether public or private, which may be assessed, levied, imposed,
suffered, placed or filed at any time against the Mortgaged Property or any part
thereof or which by any present or future law may have priority (either in lien
or in distribution out of the proceeds of any sale) over the lien of this
Mortgage (individually, an "Imposition" and, collectively, "Impositions").
(b) The Mortgagor shall produce to the Mortgagee, not later
than the last date any such Imposition is due and payable without interest or
penalty, official receipts evidencing payment of such Imposition. If the
Mortgagor is not in default under this Mortgage or any Loan Document and in good
faith and by appropriate legal action shall contest the validity or amount of
any Imposition and shall have established a reserve for the payment thereof in
such form and amount as the Mortgagee may require (including any interest and
penalties which may be payable in connection therewith), then the Mortgagor
shall not be required to pay the Imposition or to produce the receipts while the
reserve is maintained and so long as the contest operates to prevent collection,
is maintained and prosecuted with diligence, and shall not have been terminated
or discontinued adversely to the Mortgagor.
4.2 Taxes on Mortgagee. If any Governmental Authority shall levy,
assess or charge any tax, assessment or imposition upon this Mortgage or any
other Loan Document (including any requirement to have affixed to this Mortgage
any revenue, documentary or similar stamps) or upon the interest of the
Mortgagee in the Mortgaged Property by reason of this Mortgage or any other Loan
Document, the Mortgagor shall pay the same directly to such Governmental
Authority as an Imposition. If the Mortgagor is not legally permitted to pay
such Imposition or to reimburse Mortgagee for amounts advanced on account of
such payment, then the Mortgagee may declare the entire amount of the
Obligations immediately due and payable on demand.
4.3 Corporate or Partnership Mortgagor. If the Mortgagor (or any
successor or transferee of Mortgagor) is a corporation or partnership, the
Mortgagor shall at all times until the Obligations are satisfied in full:
(a) Keep in effect and in good standing its existence and
rights as a corporation or partnership, as the case may be, under the laws of
the state of its incorporation or constitution and its right to own property and
transact business in the state in which the Real Estate is situated; and
(b) File returns for all federal, state and local taxes with
the proper Governmental Authorities, and pay, when due and payable and before
interest or penalties are due thereon, all taxes owing by the Mortgagor to any
Governmental Authorities.
-13-
<PAGE>
4.4 Insurance Coverages. Until the Obligations are fully satisfied, the
Mortgagor shall maintain and keep in force the following policies of insurance
with respect to the Mortgaged Property:
(a) Insurance against loss or damage to the Mortgaged Property
by fire and any of the risks covered by insurance of the type commonly known as
"all-risk coverage," in an amount not less than the full replacement value
(evidenced by a "Replacement Cost Endorsement") of the Mortgaged Property;
provided, however, that the amount of such "all-risk coverage" shall never be
less than the amount of the Obligations;
(b) During the course of any construction or repair of any
improvements on the Mortgaged Property, builder's completed value risk insurance
against "all risks of physical loss," including collapse and transit coverage,
during construction of such improvements, in non-reporting form;
(c) Boiler and machinery insurance (to the extent the
Mortgaged Property includes items covered by such insurance), in such amounts as
are reasonably satisfactory to the Mortgagee;
(d) Coverage against sprinkler leakage;
(e) Vandalism and malicious mischief insurance;
(f) Commercial general liability insurance on an "occurrence
basis" against claims for personal injury including bodily injury, death or
property damage occurring on or about the Mortgaged Property and the adjoining
streets, sidewalks and passageways, with minimum protection to a limit of not
less than $2,000,000 (or such higher amounts as are required under any other
Loan Document) with respect to personal injury or death to any one or more
persons or damage to property;
(g) Worker's compensation insurance (including employer's
liability insurance) for all employees of the Mortgagor engaged on or with
respect to the Mortgaged Property in such amount as is reasonably satisfactory
to the Mortgagee, or, if such limits are established by law, in such amounts;
(h) Flood insurance, in accordance with the National Flood
Insurance Act of 1968, as amended by the Flood Disaster Protection Act of 1973,
if any portion of the Real Estate lies within a flood hazard area designated by
the Department of Housing and Urban Development, Federal Insurance
Administration as a "Flood Hazard Area";
-14-
<PAGE>
(i) Business interruption and/or rental loss coverage for a
period equal to the reasonable period of time required to rebuild and restore
the Mortgaged Property upon the occurrence of a substantial destruction; and
(j) Such other insurance, and in such amounts, as may from
time to time be reasonably required by the Mortgagee.
4.5 Policy Requirements. The insurance coverages required above shall
be insured under policies: (a) in form reasonably satisfactory to the Mortgagee;
(b) issued by companies reasonably satisfactory to the Mortgagee; (c) endorsed
with a standard mortgagee clause in favor of the Mortgagee providing not less
than thirty days' notice to the Mortgagee of any cancellation or change in
coverage; (d) endorsed to name the Mortgagee as additional insured and, subject
only to Permitted Encumbrances (if any), as loss payee; and (e) not subject to
contribution or co-insurance. Certificates of insurance, addressed to the
Mortgagee, evidencing such insurance coverage, may be delivered to the Mortgagee
in lieu of the policies therefor, but only if the Mortgagor provides to the
Mortgagee copies of such policies. Certificates shall be delivered to the
Mortgagee on or before the date of this Mortgage and, thereafter, at least
thirty (30) days before expiration of the existing policies. If any insurance
required under this Mortgage is canceled, expires, becomes void or voidable or
otherwise becomes unsatisfactory to the Mortgagee pursuant to the terms hereof,
the Mortgagor shall place or cause to be placed new insurance on the Mortgaged
Property reasonably satisfactory to the Mortgagee. In the event of any loss,
Mortgagee may make proof of loss if not made promptly by the Mortgagor. Each
insurance company concerned is hereby authorized and directed to make payment
under such insurance including return of unearned premiums, directly to the
Mortgagee instead of to the Mortgagor and the Mortgagee jointly, and the
Mortgagor appoints the Mortgagee, irrevocably, as the Mortgagor's
attorney-in-fact to endorse any draft therefor.
4.6 Installments for Insurance, Taxes and Other Charges. Without
limiting the effect of the other provisions of this Article, the Mortgagee
reserves the right to require the Mortgagor to pay to the Mortgagee, monthly, an
amount equal to one-twelfth (1/12) of the annual amount of all Impositions and
premiums for insurance policies required under this Article plus any additional
sums necessary to pay, or establish adequate reserves for the payment of, such
premiums and Impositions as and when due. The amounts so paid shall be security
for the premiums and Impositions and shall be used in payment thereof if the
Mortgagor is not otherwise in default under this or any other Loan Document. No
amount so paid shall be deemed to be trust funds but may be commingled with
general funds of the Mortgagee and no interest shall be payable thereon. Upon
the occurrence of an Event of Default under this Mortgage or any Loan Document,
the Mortgagee shall have the right, at its election, to apply any amount so held
against the Obligations. At the Mortgagee's option, the Mortgagee from time to
time may waive, and after any such waiver may reinstate, the provisions of this
section requiring installment payments. During the time periods when the
Mortgagee has not required the Mortgagor to make such payments, the Mortgagor
shall annually furnish evidence to the Mortgagee that all such annual
Impositions have been paid by the Mortgagor.
-15-
<PAGE>
ARTICLE V
CASUALTY; CONDEMNATION
5.1 Casualty. If the Mortgaged Property is damaged by fire or other
casualty, the Mortgagor shall promptly repair and restore the same to its
condition prior to the damage. If, and only for so long as, the following terms
and conditions are fully satisfied by the Mortgagor, the Mortgagee shall release
insurance proceeds for repair and restoration of the Mortgaged Property;
otherwise the Mortgagee shall have the right to apply the proceeds toward
reduction of the Obligations, or if the Letter of Credit remains outstanding,
shall be held as cash collateral for the Obligations under the provisions of
Section 6.11 of this Mortgage; provided that Mortgagor shall be entitled to any
amount in excess of the proceeds that would have been required for the repair
and restoration of the Mortgaged Property:
(a) No default under this or any other Loan Document shall
have occurred and be continuing uncured;
(b) The Mortgagor shall have delivered evidence satisfactory
to the Mortgagee that: (i) the Mortgaged Property can be fully repaired and
restored within a period of time during which all payments coming due under the
Obligations are fully covered by the proceeds of business interruption or rental
loss insurance applicable to the loss or damage to the Mortgaged Property or
otherwise; and (ii) and that after the Mortgaged Property is fully repaired and
restored, the Mortgagor will have the ongoing ability to meet all payments
coming due on the Obligations;
(c) No holder of a Permitted Encumbrance has a right to apply
insurance proceeds to the obligations secured by such Permitted Encumbrance or,
if it does, the holder has waived in writing its right to do so;
(d) Intentionally omitted;
(e) The work is performed by a reputable general contractor
satisfactory to the Mortgagee under a fixed price or guaranteed maximum price
contract satisfactory to the Mortgagee, in accordance with plans and
specifications satisfactory to the Mortgagee and in compliance with all Legal
Requirements, and no work shall commence until waivers of mechanics' liens have
been filed by the general contractor and all those claiming by, through, or
under the general contractor;
(f) The Mortgagor shall have deposited with the Mortgagee for
disbursement in connection with the restoration the greater of: (i) the
applicable deductible under the insurance policies covering the loss; or (ii)
the amount by which the cost of restoration is reasonably estimated by the
Mortgagor and the Mortgagee to exceed the insurance proceeds available for
restoration (the "Excess Amount"). In the event that the Mortgagor and the
Mortgagee cannot agree upon Excess Amount, they shall choose an independent
contractor licensed in the Commonwealth of Pennsylvania (the "Contractor") to
determine the Excess Amount. The determination of the Contractor shall be final.
If the Mortgagor and the Mortgagee cannot agree upon the identity of the
-16-
<PAGE>
Contractor, then each of them shall choose a contractor licensed in the
Commonwealth of Pennsylvania who shall chose a third contractor licensed in the
Commonwealth of Pennsylvania who shall be the Contractor hereunder;
(g) The insurance proceeds are held by the Mortgagee (or an
escrowee satisfactory to the Mortgagee) for disbursement periodically as the
work progresses in amounts not exceeding 90% of the value of labor and materials
incorporated into the restoration. The remaining 10% will be released upon
substantial completion of the work in accordance with the aforesaid plans and
specifications, and upon a receipt of a release of liens from all contractors
engaged in the restoration subject to receipt of final payment; and
(h) The Mortgagor has paid as and when due all of the
Mortgagee's reasonable costs and expenses incurred in connection with the
collection of insurance proceeds, approval of plans, charges of the Mortgagee's
inspection representative and such reasonable fee as may be charged by the
Mortgagee to monitor the restoration and disburse the insurance proceeds.
5.2 Condemnation.
(a) In the event of any condemnation or taking of any part of
the Mortgaged Property by eminent domain, alteration of the grade of any street,
or other injury to or decrease in the value of the Mortgaged Property by any
public or quasi-public authority or corporation (a "Taking"), which Taking
diminishes the value of the Mortgaged Property to a point below the Threshold
Level (as hereinafter defined), then all Proceeds (including the award or agreed
compensation for the damages sustained) allocable to the Mortgagor, after
deducting therefrom all reasonable costs and expenses (regardless of the
particular nature thereof and whether incurred with or without suit) including
reasonable attorney's fees incurred by the Mortgagee in connection with the
collection of such Proceeds, shall be paid to the Mortgagee and applied, at the
Mortgagee's election: (i) toward restoration of the Mortgaged Property (in which
case the terms and conditions applicable to restoration in the case of casualty
shall apply); or (ii) to the Obligations.
In the event a Taking does not diminish the value of the
Mortgaged Property to a point below the Threshold Level, then all Proceeds shall
be applied to the restoration of the Mortgaged Property (in which case the terms
and conditions applicable to restoration in the case of a Casualty shall apply).
No settlement for damages sustained because of a Taking shall
be made by the Mortgagor without the Mortgagee's prior written approval. As used
herein, the "Threshold Level" shall mean one hundred and ten percent (110%) of
the then outstanding unsecured Obligations. In the event of a Taking, the
Mortgagor and the Mortgagee shall choose an MAI appraiser (the "Appraiser") to
determine whether the Taking has diminished the value of the Mortgaged Property
to a point below the Threshold Level. The determination of such Appraiser shall
be final. In the event that the Mortgagor and the Mortgagee cannot agree on the
Appraiser, then each shall choose an MAI appraiser and the two appraisers so
chosen shall choose a third MAI appraiser who shall be the Appraiser hereunder.
-17-
<PAGE>
(b) If prior to the receipt of the Proceeds by the Mortgagee,
the Mortgaged Property shall have been sold on foreclosure of this Mortgage, the
Mortgagee shall have the right to receive the Proceeds to the extent of:
(i) the full amount of all such Proceeds if the
Mortgagee is the successful purchaser at the foreclosure sale, or
(ii) if anyone other than the Mortgagee is the
successful purchaser at the foreclosure sale, in addition to the net sale
proceeds to be received by the Mortgagee in connection with the sale, any
deficiency (as hereinafter defined) due to the Mortgagee in connection with the
foreclosure sale, with legal interest thereon, and reasonable counsel fees,
costs and disbursements incurred by the Mortgagee in connection with collection
of such Proceeds of condemnation and the establishment of such deficiency. For
purposes of this section, the word "deficiency" shall be deemed to mean the
difference between: (A) the aggregate amount of all sums which the Mortgagee is
entitled to collect under the Loan Documents; and (B) the net sale proceeds
actually received by the Mortgagee as a result of such foreclosure sale less any
costs and expenses incurred by the Mortgagee in connection with enforcement of
its rights under the Loan Documents.
(c) The Mortgagee shall have the right to prosecute to final
determination, or settlement, an appeal or other appropriate proceedings in the
name of the Mortgagee or the Mortgagor, for which the Mortgagee will then be
appointed as attorney-in-fact for the Mortgagor, which appointment, being for
security, is irrevocable. In that event, the expenses of the proceedings,
including reasonable counsel fees, shall be paid first out of the Proceeds, and
only the excess, if any, paid to the Mortgagee shall be applied to the
Obligations, or if the Letter of Credit remains outstanding, shall be held as
cash collateral for the Obligations under the provisions of Section 6.11 of this
Mortgage.
(d) Nothing herein shall limit the rights otherwise available
to the Mortgagee, at law or in equity, including the right to intervene as a
party to any condemnation proceeding.
ARTICLE VI
DEFAULTS; REMEDIES
6.1 Right to Make Advances. If the Mortgagor should fail to
pay or perform any of its Obligations with respect to the Mortgaged Property as
required under Article III and Article IV of this Mortgage, or otherwise fails
to pay or perform any of its other Obligations under this or any other Loan
Document, then the Mortgagee, at its election, shall have the right, but not the
obligation, to make any payment or expenditure and to take any action which the
Mortgagor should have made or taken or which the Mortgagee deems advisable to
protect the security of this Mortgage or the Mortgaged Property. Such action
shall be without prejudice to any of the Mortgagee's rights or
-18-
<PAGE>
remedies available under this Mortgage or the other Loan Documents or otherwise
at law or in equity. All such sums, as well as costs and expenses reasonably
advanced by the Mortgagee shall be due immediately from the Mortgagor to the
Mortgagee, shall become part of the Obligations secured by this Mortgage and the
other Loan Documents, and shall bear interest (including any judgment obtained
on account of any of the Obligations) at the applicable "post default rate of
interest" provided in Section 10.1 of the Reimbursement Agreement in effect
after maturity or default (the "Default Rate") until repayment in full to the
Mortgagee.
6.2 Events of Default. The occurrence of any one or more of the
following events shall, at the election of the Mortgagee, constitute an Event of
Default under this Mortgage:
(a) Any event of default under the Reimbursement Agreement;
(b) Failure to pay any sum required to be paid under this
Mortgage as and when due within ten (10) days of the receipt by the Mortgagor of
written notice from the Mortgagee;
(c) Any material breach of warranty or other material
violation of any provision contained in Article II of this Mortgage and such is
not cured within fifteen (15) days of the receipt by the Mortgagor of written
notice from the Mortgagee; or
(d) Material nonperformance of, or material noncompliance
with, any of the agreements, covenants, conditions, warranties, representations
or other provisions contained in this Mortgage (if and only to the extent not
included in any of the occurrences listed above), which nonperformance or
noncompliance is not cured and remedied within fifteen (15) days after notice
thereof is given to the Mortgagor, or such longer period if such nonperformance
or noncompliance is of such a nature that it cannot reasonably be cured within
such fifteen (15) day period so long as the Mortgagor shall commence curative
actions within such fifteen (15) day period and shall diligently and
continuously proceed to full compliance.
6.3 Remedies; Execution. Upon the occurrence of an Event of Default,
and at all times thereafter, the Mortgagee shall have the right to accelerate
all Obligations (including interest thereon at the Default Rate) pursuant to the
terms of the Loan Documents and to enforce its rights under this Mortgage and
the other Loan Documents by exercising such remedies as are available to the
Mortgagee under applicable law, either by suit in equity or action at law, or
both, whether for specific performance of any provision contained in this
Mortgage or any of the other Loan Documents or in aid of the exercise of any
power granted in this Mortgage or the other Loan Documents.
(a) The Mortgagee shall have the right to obtain judgment for
the Obligations (including all amounts advanced or to be advanced by the
Mortgagee under Section 6.1 above, all costs and expenses of collection and
suit, including any bankruptcy or insolvency proceeding affecting the Mortgagor,
and reasonable attorneys' fees incurred in connection with any of the foregoing)
together with interest on such judgment at the Default Rate until payment in
full is
-19-
<PAGE>
received by the Mortgagee and the Mortgagee shall have the right to obtain
execution upon the Mortgaged Property on account of such judgment.
(b) The Mortgagee shall have the right to institute an action
of mortgage foreclosure against the Mortgaged Property or take such other action
for realization on the security intended to be provided under Article I of this
Mortgage as applicable law or the provisions of the Loan Documents may allow.
6.4 Remedies; Collection of Income. Upon the occurrence of an Event of
Default and at all times thereafter, the Mortgagee may, at any time without
notice, either in person, by agent or by a receiver appointed by a court, and
without regard to the adequacy of any security for the Obligations, enter upon
the Mortgaged Property and, with or without taking possession of the Mortgaged
Property, and with or without legal action, collect all Income (which term shall
also include amounts determined by the Mortgagee as fair rental value for use
and occupation of the Mortgaged Property by any person, including the Mortgagor)
and, after deducting all costs of collection and administration expense
including attorneys' fees and reasonable reserves, apply the net Income to any
of the Obligations in such order and amounts as the Mortgagee in its sole
discretion may determine, or any of the following in such order and amounts as
the Mortgagee in its sole discretion may elect: the payment of any sums due, or
accumulation of necessary reserves for, payment of all costs and expenses
arising from or incurred in connection with (a) the preservation and protection
of the validity and priority of the lien of this Mortgage; (b) the preservation
and protection of the Mortgaged Property; (c) compliance with the Legal
Requirements; and (d) fulfilling any obligations of the Mortgagor or any other
obligor or guarantor under the Permitted Encumbrances, the Leases, this Mortgage
or the Loan Documents. The Mortgagee shall not be accountable for more monies
than it actually receives from the Mortgaged Property nor shall it be liable for
failure to collect the Income. The Mortgagee shall have the right to determine
the method of collection and the extent to which enforcement of collection of
Income shall be prosecuted and the Mortgagee's judgment shall be deemed
conclusive and reasonable.
6.5 Remedies; Possession. Upon the occurrence of an Event of Default
and at all times thereafter, the Mortgagee may, with or without legal action,
take possession and control of the Mortgaged Property to the exclusion of the
Mortgagor and all others excepting only those claiming under Permitted
Encumbrances. The Mortgagee shall have the authority while so in possession to
insure (at the Mortgagor's expense) against all risks by reason of having taken
such possession and the Mortgagor will transfer and deliver to the Mortgagee all
policies of insurance upon the Mortgaged Property not theretofore transferred
and delivered to the Mortgagee. SUBJECT TO THE PRECONDITIONS SET FORTH IN
SECTION 8.03 OF THE REIMBURSEMENT AGREEMENT, FOR THE PURPOSE OF OBTAINING
POSSESSION OF THE MORTGAGED PROPERTY UPON THE OCCURRENCE OF ANY EVENT OF
DEFAULT, THE MORTGAGOR HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT
OF RECORD IN THE STATE IN WHICH THE REAL ESTATE IS LOCATED OR ELSEWHERE AS
ATTORNEY FOR THE MORTGAGOR AND ALL PERSONS CLAIMING UNDER OR THROUGH THE
MORTGAGOR, TO CONFESS JUDGMENT IN EJECTMENT AND CONFESS JUDGMENT
-20-
<PAGE>
FOR RECOVERY OF POSSESSION OF THE MORTGAGED PROPERTY AND TO APPEAR FOR AND
CONFESS JUDGMENT AGAINST THE MORTGAGOR, AND ALL PERSONS CLAIMING UNDER OR
THROUGH THE MORTGAGOR IN FAVOR OF THE MORTGAGEE FOR RECOVERY BY THE MORTGAGEE OF
POSSESSION THEREOF, FOR WHICH THIS MORTGAGE, OR A COPY THEREOF VERIFIED BY
AFFIDAVIT, SHALL BE SUFFICIENT WARRANT; AND THEREUPON A WRIT OF POSSESSION MAY
IMMEDIATELY ISSUE FOR POSSESSION OF THE MORTGAGED PROPERTY, WITHOUT ANY PRIOR
WRIT OR PROCEEDING WHATSOEVER AND WITHOUT ANY STAY OF EXECUTION. IF FOR ANY
REASON AFTER SUCH ACTION HAS BEEN COMMENCED IT SHALL BE DISCONTINUED, OR
POSSESSION OF THE MORTGAGED PROPERTY SHALL REMAIN IN OR BE RESTORED TO THE
MORTGAGOR, THE MORTGAGEE SHALL HAVE THE RIGHT FOR THE SAME DEFAULT OR ANY
SUBSEQUENT DEFAULT TO BRING ONE OR MORE FURTHER ACTIONS TO CONFESS JUDGMENT IN
EJECTMENT AND CONFESS JUDGMENT FOR RECOVERY OF POSSESSION OF THE MORTGAGED
PROPERTY. THE MORTGAGEE MAY BRING AN ACTION TO CONFESS JUDGMENT IN EJECTMENT AND
TO CONFESS JUDGMENT FOR RECOVERY OF POSSESSION OF THE MORTGAGED PROPERTY BEFORE
OR AFTER THE INSTITUTION OF PROCEEDINGS TO FORECLOSE THIS MORTGAGE OR TO ENFORCE
ANY LOAN DOCUMENT, OR AFTER ENTRY OF JUDGMENT THEREON OR ON ANY LOAN DOCUMENT,
OR AFTER A SHERIFF'S SALE OF THE MORTGAGED PROPERTY IN WHICH THE MORTGAGEE IS
THE SUCCESSFUL BIDDER, IT BEING THE UNDERSTANDING OF THE PARTIES THAT THE
AUTHORIZATION TO PURSUE SUCH PROCEEDINGS FOR OBTAINING POSSESSION IS AN
ESSENTIAL PART OF THE REMEDIES FOR ENFORCEMENT OF THIS MORTGAGE AND THE OTHER
LOAN DOCUMENTS, AND SHALL SURVIVE ANY EXECUTION SALE TO THE MORTGAGEE.
BY AGREEING THAT THE MORTGAGEE MAY CONFESS JUDGMENT HEREUNDER THE
MORTGAGOR, FOR ITSELF AND ANY OTHER PERSONS OR ENTITIES NOW OR HEREAFTER IN
POSSESSION OF ALL OR ANY PART OF THE MORTGAGED PROPERTY, WAIVES THE RIGHT TO
NOTICE IN A PRIOR JUDICIAL PROCEEDING TO DETERMINE THEIR RIGHTS AND LIABILITIES
AND THE OPPORTUNITY TO RAISE ANY DEFENSE, SET OFF, COUNTERCLAIM OR OTHER CLAIM
AGAINST SUCH ACTION BY THE MORTGAGEE.
6.6 Remedies; Repossession. Upon the occurrence of an Event of Default
and at all times thereafter, the Mortgagee shall have the right to take
possession of any portion of the Mortgaged Property constituting fixtures or
other personal property which is security for the Mortgagee's Obligations
subject to the Uniform Commercial Code of the state in which the Real Estate is
located, and any records pertaining thereto. The Mortgagee shall have the right
to use, operate, manage, lease or otherwise control the Mortgaged Property in
any lawful manner and, in its sole discretion but without any obligation to do
so, insure, maintain, repair, renovate, alter or remove such Mortgaged Property;
sell or otherwise dispose of all or any of such Mortgaged Property at any public
or private sale at any time or times without advertisement or demand upon or
notice
-21-
<PAGE>
to the Mortgagor, all of which are expressly waived to the extent permitted by
law, with the right of the Mortgagee or its nominee to become purchaser at any
sale (unless prohibited by statute) free from any equity of redemption and from
all other claims, and after deducting all legal and other expenses for
maintaining or selling such Mortgaged Property, and all attorneys' fees, legal
or other expenses for collection, sale and delivery, apply the remaining
proceeds of any sale to pay (or hold as a reserve against) the Obligations and
exercise all rights and remedies of a secured party under the Uniform Commercial
Code of the state in which the Real Estate is located or any other applicable
law.
6.7 Remedies; Appointment of Receiver. Upon the occurrence of an Event
of Default and at all times thereafter, the Mortgagee may obtain appointment of
a receiver for the Mortgaged Property without regard to the adequacy of any
security for the Obligations.
6.8 Remedies; Actions Prior to Acceleration. The Mortgagee shall have
the right, from time to time, to bring an appropriate action or actions to
recover any sums required to be paid by the Mortgagor under the terms of this
Mortgage, as they become due, without regard to whether or not the Obligations
shall be due and payable in full, and without prejudice to the right of the
Mortgagee thereafter to bring an action of mortgage foreclosure, or any other
action, for any default by the Mortgagor existing at the time the earlier action
was commenced.
6.9 No Marshalling. Any of the Mortgaged Property sold pursuant to any
writ of execution issued on a judgment obtained on the Obligations or pursuant
to any other judicial proceedings relating to the Loan Documents or this
Mortgage, may be sold in one parcel, as an entirety, or in such parcels, and in
such manner or order as the Mortgagee, in its sole discretion, may elect.
6.10 Rights and Remedies Cumulative.
(a) All rights and remedies of the Mortgagee as provided in
this Mortgage and the other Loan Documents shall be cumulative and concurrent,
may be pursued separately, successively or together against the Mortgagor or the
Mortgaged Property, or both, at the sole discretion of the Mortgagee and may be
exercised as often as occasion therefor shall arise. The failure to exercise any
such right or remedy shall in no event be construed as a waiver or release
thereof.
(b) Any failure by the Mortgagee to insist upon strict
performance by the Mortgagor of any of the terms and provisions of this Mortgage
or the other Loan Documents shall not be deemed to be a waiver of any of the
terms or provisions of this Mortgage or the other Loan Documents and the
Mortgagee shall have the right thereafter to insist upon strict performance by
Mortgagor of any and all of them.
6.11 Receipt of Proceeds Prior to Expiration of Letter of Credit. If,
and for so long as, the Letter of Credit remains outstanding and the Bonds (as
that term is defined in the Reimbursement
-22-
<PAGE>
Agreement) have not been paid in full, and: (i) an Event of Default occurs; or
(ii) Proceeds of the Mortgaged Property are received by the Mortgagee pursuant
to other provisions of this Mortgage directing the Mortgagee to hold and
disburse same under this Section, then any cash Proceeds of the Mortgaged
Property received by the Mortgagee upon exercise of its remedies under this
Article VI or otherwise deposited with the Mortgagee pursuant to applicable
provisions of this Mortgage, shall, after deduction of all advances and
disbursements made or to be made by the Mortgagee pursuant to Section 6.1 hereof
and all of the Mortgagee's costs and expenses described in Section 7.1 hereof,
be held by the Mortgagee, pursuant to such documentation as the Mortgagee shall
request, as cash collateral for payment and performance of the Obligations to
the Mortgagee.
ARTICLE VII
MISCELLANEOUS
7.1 Costs and Expenses. If the Mortgagee becomes a party to any suit or
proceeding affecting the Mortgaged Property, title thereto, the lien created by
this Mortgage or the Mortgagee's interest therein, or in the event of the
commencement of any bankruptcy or insolvency proceedings involving the
Mortgagor, or if the Mortgagee engages counsel to collect or to enforce
performance of the Obligations, or if the Mortgagee incurs any other costs and
expenses in perfecting, protecting or enforcing its rights hereunder or in
responding to any request of the Mortgagor for any consent, waiver, approval,
modification or release in connection with this Mortgage or the Mortgaged
Property, the Mortgagee's reasonable counsel fees, and all other costs and
expenses paid or incurred by the Mortgagee, including reasonable fees of
appraisers, accountants, consultants, and other professionals, title premiums,
title report and work charges, filing fees, and mortgage, mortgage registration,
transfer, stamp and other excise taxes, whether or not an Event of Default shall
have occurred, shall be paid to the Mortgagee by the Mortgagor, on demand, with
interest at the Default Rate and until paid they shall be deemed to be part of
the Obligations secured by this Mortgage.
7.2 Indemnity. The Mortgagor shall indemnify, defend and hold the
Mortgagee harmless from and against any claims, expenses, demands, losses,
costs, fines or liabilities of any kind (including those involving death,
personal injury or property damage and including reasonable attorneys' fees and
costs) arising from or in any way related to the failure of the Mortgagor to
comply with, or the failure of the Mortgaged Property to be kept in material
compliance with, the Legal Requirements, Applicable Environmental Laws, the
Leases and the Permitted Encumbrances. The indemnification of the Mortgagor
under this section shall survive the release or termination of this Mortgage and
shall remain effective notwithstanding any foreclosure of this Mortgage or other
execution against the Mortgaged Property or acceptance of a deed in lieu of
foreclosure. The indemnification agreement of the Mortgagor under this section
is specifically excepted from any limitation of liability provision contained in
this or any other Loan Document.
7.3 Intentionally omitted.
-23-
<PAGE>
7.4 Communications. All notices required under this Mortgage shall be
in writing and shall be delivered in accordance with the applicable provisions
contained in the Reimbursement Agreement. A party may change its address by
giving written notice to the other party as specified therein.
7.5 Covenant Running with the Land. Any act or agreement specified
herein to be done or performed by the Mortgagor shall be construed as a covenant
running with the land and shall be binding upon the Mortgagor and its successors
and assigns as if each had personally made such agreement.
7.6 Amendment. Any amendment, modification, consent or waiver which may
be hereafter requested by the Mortgagor or otherwise required must be in writing
and signed by both the Mortgagor and the Mortgagee.
7.7 Applicable Law. This Mortgage shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania. Nothing contained
in this Mortgage or in any other Loan Document shall require the Mortgagor to
pay, or the Mortgagee to accept, interest in an amount which would subject the
Mortgagee to penalty under applicable law.
7.8 Construction. Whenever used in this Mortgage, unless the context
clearly indicates a contrary intent:
(a) The word "Mortgagor" shall mean the persons who execute
this Mortgage and any subsequent fee owner of the Mortgaged Property and his
respective heirs, executors, administrators, personal representatives,
successors and assigns;
(b) The word "Mortgagee" shall mean, collectively, all of the
entities listed as Mortgagee hereinabove or any subsequent holder of this
Mortgage or participant in the loan secured hereby;
(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) The word "including" shall mean "including but not limited
to" or "including without limitation" as the context may require.
7.9 Joint and Several Liability. If the Mortgagor, or any successor or
grantee of the Mortgagor, shall be more than one person, all Obligations of the
Mortgagor under this Mortgage shall be joint and several and shall bind and
affect all persons who are defined as "Mortgagor"
-24-
<PAGE>
as fully as though all of them were specifically named herein wherever the word
"Mortgagor" is used.
7.10 Headings. The headings of sections have been included in this
Mortgage for convenience of reference only and shall not be considered in
interpreting this Mortgage.
7.11 Severability. If any provision of this Mortgage shall be held for
any reason to be invalid, illegal or unenforceable, such impairment shall not
affect any other provision of this Mortgage.
7.12 Receipt of Copy. The Mortgagor acknowledges receipt of conformed
copies of the Loan Documents and this Mortgage.
7.13 Nonforeign Entity.
(a) The Mortgagor hereby certifies, under penalty of perjury,
that: (i) the Mortgagor is not a foreign corporation, foreign partnership,
foreign trust or foreign estate, as those terms are defined in the Internal
Revenue Code of 1986, as amended and regulations promulgated thereunder; (ii)
the Mortgagor's U.S. employer identification number is 13-3549286; and (iii) the
Mortgagor's principal place of business is set forth in the introduction
paragraph of this Mortgage.
(b) The Mortgagor warrants that withholding of tax will not be
required in the event of any disposition of the Mortgaged Property, or any
portion thereof, pursuant to the terms of this Mortgage. The Mortgagor covenants
and agrees to execute such further certificates, which shall be signed under
penalty of perjury, as the Mortgagee shall require. The provisions of this
section shall survive the foreclosure or other execution upon the lien of this
Mortgage or acceptance of a deed in lieu of foreclosure.
IN WITNESS WHEREOF, the Mortgagor, intending to be legally bound
hereby, has duly executed this Mortgage, under seal, as of the day and year
first above written.
NEOSE TECHNOLOGIES, INC.
(Seal)
Attest: /s/ A. Brian Davis By: /s/ P. Sherrill Neff
--------------------------- -------------------------------
Secretary President
I hereby certify that the address of the Mortgagee is:
Jefferson Bank
1607 Walnut Street
Philadelphia, PA 19103
/s/ Kenneth R. Frappier SVP
- ----------------------------------
On behalf of the Mortgagee
-25-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
SS.
COUNTY OF PHILADELPHIA :
On the 20th day of March, 1997, before me, a Notary Public in and for
the State and County aforesaid, personally appeared P. SHERRILL NEFF, who
acknowledged himself/herself to be the (Vice) President of NEOSE TECHNOLOGIES,
INC., a Delaware corporation, 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 the corporation by himself/herself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Notary Public
My Commission expires:
Notarial Seal
Michael S. Baurer, Notary Public
Philadelphia, Philadelphia County
My Commission Expires January 16, 2000
Member, Pennsylvania Association of Notaries
All exhibits omitted.
Exhibit "A" - Legal Description of Mortgaged Property
Exhibit "B" - Existing Liens and Encumbrances in the Fixtures
The Registrant hereby agrees to furnish supplementally a copy of any
omitted Exhibit to the Securities and Exchange Commission upon request.
-26-
Exhibit 10.8
SECURITY AGREEMENT
This SECURITY AGREEMENT is made and entered into as of March 1, 1997,
by and between NEOSE TECHNOLOGIES, INC., a Delaware corporation (the
"Corporation"), and JEFFERSON BANK, a Pennsylvania banking corporation organized
and existing under the laws of the Commonwealth of Pennsylvania (the "Secured
Party").
W I T N E S S E T H :
WHEREAS, the Corporation has requested the Montgomery County Industrial
Development Authority (the "Issuer") to issue its Federally Taxable Variable
Rate Demand Revenue Bonds (Neose Technologies, Inc. Project), Series B of 1997
(the "Bonds") in the amount of $8,400,000 pursuant to a Trust Indenture, dated
as of March 1, 1997 (the "Indenture"), by and between the Issuer and Dauphin
Deposit Bank and Trust Company, as trustee (the "Trustee") in order to, among
other things, finance the Project;
WHEREAS, as security for the payment of the Bonds, the Corporation has
requested the Secured Party to provide a credit accommodation to the
Corporation, so that CoreStates Bank, N.A. (the "Bank") will issue a letter of
credit as security for the Bonds;
WHEREAS, the Corporation and the Secured Party shall enter into a
Reimbursement Agreement, dated as of March 1, 1997 (the "Reimbursement
Agreement"), pursuant to which the Corporation shall agree to, among other
things, reimburse the Secured Party for any and all payments that the Secured
Party is required to make to the Bank; and
WHEREAS, all capitalized terms and phrases used herein without being
defined herein shall have the meanings ascribed to them in the Reimbursement
Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
Section 1. Creation of Security Interest. Subject to subparagraph (d)
below, the Corporation hereby grants to the Secured Party a lien and security
interest in and to the property hereinafter described, whether now owned or
hereafter acquired or arising and wherever located ("Collateral"):
(a) all machinery, equipment, furniture, fixtures, tools,
motor vehicles, and all accessories, parts and equipment now or hereafter
attached thereto or used in connection therewith, whether or not the same shall
be deemed affixed to real property ("Equipment");
(b) all additions, replacements, attachments, accretions,
accessions, components and substitutions to or for any Equipment;
-1-
<PAGE>
(c) all proceeds, which term shall have the meaning given to
it in the Uniform Commercial Code and shall additionally include but not be
limited to, whatever is received upon the use, lease, sale, exchange, collection
or other utilization or any disposition of any of the collateral described in
subparagraphs (a) and (b) above, whether cash or noncash, and including without
limitation, rental or lease payments, accounts, chattel paper, instruments,
documents, contract rights, general intangibles, equipment, inventory and
insurance proceeds; and all such proceeds of the foregoing ("Proceeds"); and
(d) Notwithstanding anything to the contrary in the foregoing,
the lien and security interest of the Secured Party in and to the Equipment is
subject and subordinate to those liens and encumbrances in the Equipment
described in Exhibit B, which is attached hereto and made a part hereof. The
Secured Party agrees to release its lien and security interest in the Equipment
described in Exhibit B upon the reasonable request of the Corporation, but only
if such lien and security interest causes the Corporation to be in default under
any of its Equipment financing agreements. The Corporation shall be permitted to
finance any Equipment it acquires in the future, and in connection therewith to
grant a lien and security interest in and to such Equipment to a third party.
The Secured Party agrees that its lien and security interest in and to such
Equipment shall be subject and subordinate to the lien and security interest
granted to such third party. The Secured Party agrees to release its lien and
security interest in any such future acquired Equipment upon the reasonable
request of the Corporation, but only if such lien and security interest causes
the Corporation to be in default under any of such Equipment financing
agreement.
Section 2. Secured Obligations. This Security Agreement is executed,
delivered and given by the Corporation as security for the prompt payment,
performance, satisfaction and discharge of the following obligations of the
Corporation ("Obligations"):
(a) The payment of: (i) the "Letter of Credit Amount" as
defined in the Reimbursement Agreement, including all advances now or hereafter
made by the Secured Party to the Bank, pursuant to the Participating Bank
Agreement, dated as of March 1, 1997, between the Bank and the Secured Party
(the "Participating Bank Agreement") comprised of a principal component of up to
Eight Million Four Hundred Thousand Dollars ($8,400,000) and an interest
component of up to One Hundred Seventy-Nine Thousand Nine Hundred Sixty-Seven
Dollars and Twelve Cents ($179,967.12), together with all interest accruing on
such Letter of Credit Amount as more fully described in the Reimbursement
Agreement; (ii) any increase in the Letter of Credit Amount under the
Reimbursement Agreement whether by amendment of the Reimbursement Agreement or
otherwise by mutual agreement of the parties; and (iii) all sums now or in the
future advanced or coming due or required to be paid under the Security
Documents (hereafter defined) whether for principal, interest, fees, costs,
charges, expenses, or other amounts owing under reimbursement or indemnification
obligations under the Security Documents; whether such advances are voluntary or
obligatory; whether such obligations presently exist or come into existence at
-2-
<PAGE>
some future time; and whether such advances, costs and expenses were made or
incurred at the request of the Corporation, any other obligor or guarantor under
the Security Documents, or the Secured Party; and
(b) The performance of all of the terms, covenants,
conditions, agreements, obligations and liabilities of the Corporation under:
(i) the Reimbursement Agreement, this Security Agreement, the Mortgage,
Assignment of Leases and Security Agreement, dated as of March 1, 1997, between
the Corporation and the Secured Party, as mortgagee, and all other documents
referred to as "Security Documents" in the Reimbursement Agreement and any other
document now or hereafter given to evidence, secure or facilitate the payment
and performance of any of the Obligations; and (ii) all extensions, renewals,
replacements or modifications of, or amendments or additions to any of the
foregoing (all of the foregoing being collectively referred to in this the
Security Agreement as the "Security Documents"). The Corporation shall pay and
perform the Obligations required in accordance with the provisions of the
Security Documents; and
(c) To reimburse the Secured Party, on demand, for all of the
Secured Party's expenses and costs, including the reasonable fees and expenses
of its counsel, in connection with the negotiation, preparation, administration,
amendment, modification, or enforcement of any of the Security Documents.
Section 3. Representations and Warranties. The Corporation, as of the
date hereof and until all the Obligations have been fully paid and the Security
Documents have been canceled, represents and warrants as follows:
3.01 Good Title to Collateral. The Corporation has good and
marketable title to the Collateral free and clear of all liens and encumbrances
other than the security interests granted to the Secured Party hereunder and
those liens and encumbrances in the Collateral set forth in Exhibit B which is
attached hereto and made a part hereof.
3.02 Location of Books and Records. The locations of the
offices where the Corporation maintains its books and records concerning the
Collateral are as set forth in Exhibit A or at the location(s) hereafter
disclosed to the Secured Party pursuant to Section 5.05 hereof.
3.03 Chief Executive Office. The chief executive offices of
the Corporation are at the address set forth in Exhibit A or at the location(s)
hereafter disclosed to the Secured Party pursuant to Section 5.05 hereof.
3.04 Location of Equipment. All Equipment of the Corporation
is located at one or more of the addresses set forth in Exhibit A or at the
location(s) hereafter disclosed to the Secured Party pursuant to Section 5.05
hereof.
3.05 Other Representations. Each representation, warranty or
other statement by the Corporation in, or in connection with, any of the
Security Documents is true and correct and states all material facts necessary
to make it not misleading.
-3-
<PAGE>
Section 4. Use of Collateral. So long as there has been no default
hereunder, the Corporation shall be permitted to use its Equipment in the
ordinary course of its business. No sale, lease or other disposition of any item
of equipment shall be permitted, except as set forth in the Reimbursement
Agreement.
Section 5. Covenants and Agreements of the Corporation.
5.01 Maintenance and Inspection of Books and Records. The
Corporation shall maintain complete and accurate books and records and shall
make all necessary entries therein to reflect the costs, values and locations of
its Equipment and all adjustments thereto. The Corporation shall keep the
Secured Party fully informed as to the location of all such books and records
and shall permit the Secured Party and its authorized agents to have full,
complete and unrestricted access thereto at any reasonable time and to inspect,
audit and make copies of all books and records, data storage and processing
media, software, printouts, journals, orders, receipts, invoices, correspondence
and other documents and written or printed matter related to any of the
Collateral. The Secured Party's rights hereunder shall be enforceable at law or
in equity, and the Corporation consents to the entry of judicial orders or
injunctions enforcing specific performance of such obligations hereunder.
5.02 Physical Inspection of Equipment. The Corporation shall
permit the Secured Party and its authorized agents to inspect any or all of the
Corporation's Equipment at all reasonable times upon reasonable advance notice
from the Secured Party. The Secured Party agrees to abide by all regulations of
the Corporation when making any such inspections.
5.03 Notice of the Secured Party's Interests. If requested by
the Secured Party, the Corporation shall give notice of the Secured Party's
security interests in the Collateral to any third person with whom the
Corporation has any actual or prospective contractual relationship or other
business dealings.
5.04 Insurance of Collateral. The Corporation shall keep the
Collateral insured against such perils, in such amounts and with such insurance
companies as set forth in the Reimbursement Agreement.
5.05 New Locations of Collateral and Books and Records. The
Corporation shall immediately notify the Secured Party of any change in the
location of its chief executive office, of any new or additional address where
its books and records concerning the Collateral are located and of any new
locations of Equipment not specified in Sections 3.02, 3.03 or 3.04 of this
Security Agreement, and if any such location is on leased or mortgaged premises,
promptly furnish the Secured Party with landlord's or mortgagee's waivers in
form and substance satisfactory to the Secured Party.
-4-
<PAGE>
5.06 Perfection of the Secured Party's Interests. The
Corporation agrees to cooperate and join, at its expense, with the Secured Party
in taking such steps as are necessary, in the Secured Party's judgment, to
perfect or continue the perfected status of the security interests granted
hereunder, including, without limitation, the execution and delivery of any
financing statements, amendments thereto and continuation statements, the
delivery of chattel paper, documents or instruments to the Secured Party, the
obtaining of landlords' and mortgagees' waivers required by the Secured Party,
the notation of encumbrances in favor of the Secured Party on certificates of
title, and the execution and filing of any collateral assignments and any other
instruments requested by the Secured Party to perfect its security interest in
any and all of the Corporation's patents, trademarks, service marks, tradenames,
copyrights and other general intangibles. The Secured Party is expressly
authorized to file financing statements without the Corporation's signature.
5.07 Maintenance of Equipment. The Corporation shall care for
and preserve the Equipment in good condition and repair, and will pay the cost
of all replacement parts, repairs to and maintenance of the Equipment. The
Corporation will keep complete and accurate maintenance records with respect to
its Equipment.
5.08 Notification of Adverse Change in Collateral. The
Corporation agrees immediately to notify the Secured Party if any event occurs
or is discovered which would cause any material diminution in the value of any
significant item or type of Collateral.
5.09 Reimbursement and Indemnification. The Corporation agrees
to reimburse the Secured Party on demand for reasonable out-of-pocket expenses
incurred in connection with the Secured Party's exercise of its rights under
this Security Agreement. The Corporation agrees to indemnify the Secured Party
and hold it harmless against any costs, expenses, losses, damages and
liabilities (including reasonable attorney's fees) incurred in connection with
this Security Agreement, other than as a direct result of the Secured Party's
gross negligence or willful misconduct.
Section 6. Power of Attorney. The Corporation hereby appoints the
Secured Party as its lawful attorney-in-fact to do, at the Secured Party's
option, and at the Corporation's expense and liability, all acts and things
which the Secured Party may deem necessary or desirable to effectuate its rights
under this Security Agreement, including without limitation: (a) file financing
statements and otherwise perfect any security interest granted hereby; (b)
correspond and negotiate directly with insurance carriers; (c) upon the
occurrence of a Default hereunder, receive, open and dispose of in any
reasonable manner all mail addressed to the Corporation and notify Postal
Service authorities to change the address for mail addressed to the Corporation
to an address designated by the Secured Party; (d) upon the occurrence of a
Default hereunder, communicate with account debtors and other third parties for
the purpose of protecting or preserving the Collateral; and (e) upon the
occurrence of a Default hereunder, in the Corporation's or the Secured Party's
name, to demand, collect, receive, and receipt for, compound, compromise, settle
and give acquittance for, and prosecute and discontinue or dismiss, with or
without prejudice, any suit or proceeding respecting any of the Collateral.
-5-
<PAGE>
Section 7. Default. The occurrence of any one or more of the following
shall be a default ("Default") hereunder:
7.01 Default Under Security Documents. The occurrence of an
Event of Default under the Reimbursement Agreement or any of the Security
Documents.
7.02 Failure to Observe Covenants. The failure of the
Corporation to keep, observe or perform any material provisions of this Security
Agreement, which failure is not cured and remedied within ten (10) days after
notice thereof is given to the Corporation; provided, however, that if such
observance or performance is of such a nature that it cannot reasonably be done,
taken or remedied, as appropriate, within such ten (10) day period, no Default
shall be deemed to have occurred or to exist if, and so long as, the Corporation
shall commence such observance or performance within such ten (10) day period
and shall diligently and continuously proceed to full observance or performance
of the such provision.
7.03 Representations, Warranties. If any representation,
warranty or certificate furnished by the Corporation under or in connection with
this Security Agreement shall, at any time, be materially false or incorrect.
Section 8. Secured Party's Rights Upon Default. Upon the occurrence of
a Default hereunder, or at any time thereafter, the Secured Party may
immediately and without notice do any or all of the following, which rights and
remedies are cumulative, may be exercised from time to time, and are in addition
to any rights and remedies available to the Secured Party under the
Reimbursement Agreement or any other Security Document:
8.01 Uniform Commercial Code Rights. Exercise any and all of
the rights and remedies of a secured party under the Uniform Commercial Code,
including the right to require the Corporation to assemble the Collateral and
make it available to the Secured Party at a place reasonably convenient to the
parties.
8.02 Operation of Collateral. Operate, utilize, recondition
and/or refurbish (at the Secured Party's sole option and discretion and in any
manner) any of the Collateral which is Equipment, for the purpose of enhancing
or preserving the value thereof or the value of any other Collateral.
8.03 Sale of Collateral. Upon five (5) calendar days' prior
written notice to the Corporation, which the Corporation hereby acknowledges to
be sufficient, commercially reasonable and proper, sell, lease or otherwise
dispose of any or all of the Collateral at any time and from time to time at
public or private sale, with or without advertisement thereof and apply the
proceeds of any such sale first to the Secured Party's expenses in preparing the
Collateral for sale (including reasonable attorneys' fees) and second to the
complete satisfaction of the Obligations. The Corporation waives the benefit of
any marshalling doctrine with respect to the Secured Party's exercise of its
rights hereunder.
-6-
<PAGE>
Section 9. Notices. Every notice and communication under this Security
Agreement shall be in writing and shall be given as set forth in Section 9.01 of
the Reimbursement Agreement.
Section 10. Miscellaneous.
10.01 No Waiver. No delay or omission by the Secured Party in
exercising any right or remedy hereunder shall operate as a waiver thereof or of
any other right or remedy, and no single or partial exercise thereof shall
preclude any further exercise thereof or the exercise of any other right or
remedy.
10.02 Successors. The provisions of this Security Agreement
shall inure to the benefit of and be binding upon the Secured Party and the
Corporation and their respective successors and assigns, provided that the
Corporation's obligations hereunder may not be assigned without the written
consent of the Secured Party.
10.03 Amendments. No modification, rescission, waiver, release
or amendment of any provisions of this Security Agreement shall be effective
unless set forth in a written agreement signed by the Corporation and an
authorized officer of the Secured Party.
10.04 Governing Law. This Security Agreement shall be
construed under the internal laws of the Commonwealth of Pennsylvania without
reference to conflict of laws principles.
10.05 Severability. If any provision of this Security
Agreement shall be held invalid or unenforceable under applicable law in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of such provision in any other jurisdiction or the validity or
enforceability of any other provision of this Security Agreement that can be
given effect without such invalid or unenforceable provision.
10.06 Judicial Proceedings. Each party to this Agreement
agrees that any suit, action or proceeding, whether claim or counterclaim,
brought or instituted by any party hereto or any successor or assign of any
party, on or with respect to this Agreement or the dealings of the parties with
respect hereto, shall be tried only by a court and not by a jury. EACH PARTY
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. Further, each party waives any
right it may have to claim or recover, in any such suit, action or proceeding,
any special, exemplary, punitive or consequential damages or any damages other
than, or in addition to, actual damages. THE CORPORATION ACKNOWLEDGES AND AGREES
THAT THIS PARAGRAPH IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND THAT
THE SECURED PARTY WOULD NOT EXTEND CREDIT TO THE CORPORATION IF THE WAIVERS SET
FORTH IN THIS PARAGRAPH WERE NOT A PART OF THIS AGREEMENT.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed and delivered by their authorized officers the day and
year first above written.
NEOSE TECHNOLOGIES, INC.
By: /s/ P. Sherrill Neff
-------------------------------
(Vice) President
(Seal)
Attest: /s/ A. Brian Davis
---------------------------
Secretary
JEFFERSON BANK,
as Secured Party
Attest: /s/ Daniel O'Brien By: /s/ Kenneth R. Frappier
-------------------------- -------------------------------
Secretary Senior Vice President
-8-
<PAGE>
EXHIBIT A
Location of books and records: 102 Witmer Road, Horsham, PA 19044
Location of chief executive office: 102 Witmer Road, Horsham, PA 19044
Location of Equipment: 102 Witmer Road, Horsham, PA 19044
A-1
<PAGE>
EXHIBIT B
Existing Liens and Encumbrances in the Collateral
Equipment covered by the following Agreements:
1. Master Equipment Lease Agreement dated as of June 14, 1995
between Financing for Science International, Inc. and Neose Technologies, Inc.;
2. Security Agreement dated August 12, 1994 between Neose
Pharmaceuticals, Inc. and Montgomery County Development Corporation; and
3. Master Lease Agreement dated June 28, 1993 between Aberlyn
Capital Management Limited Partnership and Neose Pharmaceuticals, Inc.
B-1
Exhibit 10.9
ASSIGNMENT OF CONTRACT
THIS ASSIGNMENT OF CONTRACTS (this "Assignment"), dated as of March 20,
1997, made by NEOSE TECHNOLOGIES, INC., a Delaware corporation having an office
at 102 Witmer Road, Horsham, Pennsylvania ("Assignor"), to JEFFERSON BANK,
having an office at 1607 Walnut Street, Philadelphia, Pennsylvania ("Assignee").
WITNESSETH:
WHEREAS, pursuant to two Reimbursement Agreements of even date herewith
between Assignor and Assignee (as the same may be amended, modified or
supplemented from time to time, the "Reimbursement Agreements"), Assignee has
enabled Assignor to receive funds (the "Loan") to defray the cost of
constructing certain improvements for the Project (capitalized terms used herein
and not otherwise defined herein having the meanings assigned to them in the
Reimbursement Agreements); and
WHEREAS, Assignor has entered into a Construction Contract, dated
August 30, 1996 (as the same may be amended, modified or supplemented from time
to time in compliance with the provisions of the Reimbursement Agreement, the
"General Construction Contract") between Assignor and Irwin & Leighton, Inc.
(the "General Contractor"), for the design, planning and construction of the
improvements; and
WHEREAS, the General Contractor has caused an architect to prepare
certain plans and specifications for the construction of the improvements (said
plans and specifications, including all working drawings, models and samples
related thereto, as amended, modified or supplemented from time to time in
compliance with the provisions of the Reimbursement Agreement, being hereinafter
called the "Plans"); and
WHEREAS, the execution and delivery of this Assignment by Assignor is a
condition to Assignees's obligation to make the Loan.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, Assignor
hereby assigns and transfers to Assignee, and hereby creates in favor of
Assignee a security interest under the Uniform Commercial Code in and to, all
right, title and interest of Assignor in, to and under the General Contract and
all proceeds thereof,
AND, Assignor hereby agrees with Assignee as follows:
1. Representations and Warranties. Assignor hereby represents and
warrants to Assignee that (a) Assignor has not assigned, transferred, mortgaged,
pledged or otherwise encumbered any of its right, title and interest in, to and
under the General Contract and the Plans,
<PAGE>
except in favor of Assignee, (b) the General Contract has not been amended,
modified or supplemented and (c) Assignor has paid all sums required to be paid
by it prior to the date hereof under the terms of the general Contract.
2. Negative Covenants. Assignor hereby covenants with Assignee that
Assignor shall not assign, transfer, mortgage, pledge or otherwise encumber, or
permit to accrue or suffer to exist any lien or other encumbrance on or in, any
of the right, title and interest of Assignor in, to and under the General
Contract and the Plans, except in favor of Assignee, or as otherwise expressly
permitted in the Reimbursement Agreement.
3. Assignee Not Liable. Anything contained herein to the contrary
notwithstanding, unless and until Assignee expressly assumes the obligations
under the General Contract (a) Assignor shall at all times remain solely liable
under the General Contract to perform the obligations of Assignor thereunder to
the same extent as if this Assignment had not been executed, (b) Assignee shall
not have any obligation or liability under the General Contract by reason of or
arising out of this Assignment, nor shall Assignee be required or obligated in
any manner to make any payment or perform any other obligation of Assignor under
or pursuant to the General Contract.
4. Further Assurances. From time to time upon the request of Assignee,
Assignor shall promptly and duly execute, acknowledge and deliver any and all
such further instruments and documents as Assignee reasonably determines to be
necessary to carry out the purpose and intent of this Assignment.
5. Amendments, Waivers, Etc. This Assignment cannot be amended,
modified, waived, changed, discharged or terminated except by an instrument in
writing signed by the party against whom enforcement of such amendment,
modification, waiver, change, discharge or termination is sought.
6. Termination; Survival. Upon payment and performance in full of the
indebtedness and obligations secured hereby and termination of the Reimbursement
Agreement, this Assignment shall terminate.
7. Severability. If any term or provision of this Assignment or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Assignment, or the application of such
term or provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Assignment shall be valid and enforceable to the fullest
extent permitted by law.
8. Governing Law. This Assignment shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Pennsylvania.
2
<PAGE>
9. Successors and Assigns. This Assignment shall bind Assignor and its
successors and assigns, and shall inure to the benefit of Assignee and its
successors and assigns.
IN WITNESS WHEREOF, Assignor has duly executed and delivered this
Assignment as of the date first above written.
(SEAL) NEOSE TECHNOLOGIES, INC.
Witness: By: /s/ P. Sherrill Neff
----------------------
President
/s/ A. Brian Davis
- ------------------
Secretary
3
Exhibit 10.10
CUSTODIAL AND COLLATERAL SECURITY AGREEMENT
THIS CUSTODIAL AND COLLATERAL SECURITY AGREEMENT (the "Agreement"),
dated as of March 20, 1997, is by and among OFFITBANK, a New York banking
corporation ("Custodian"), JEFFERSON BANK, a Pennsylvania-chartered banking
institution ("Bank") and NEOSE TECHNOLOGIES, INC., a Delaware corporation
("Borrower").
BACKGROUND
In connection with the issuance by the Montgomery County Industrial
Development Authority of its $8,400,000 Federally Taxable Variable Rate Demand
Revenue Bonds (Neose Technologies, Inc. Project), Series B of 1997 (the "Series
B Bonds"), Borrower and Bank entered into a Reimbursement Agreement dated as of
March 1, 1997 (the "Borrower Reimbursement Agreement") and Borrower executed
various other related documents, including, inter alia, a note (the "Note") to
evidence its obligations to Bank (all such agreements and documents,
collectively the "Loan Documents"). The term "Loan Documents" does not include
the Series A Bonds or the documents executed in connection therewith. Borrower's
obligations to Bank are secured by, inter alia, a mortgage, assignment of leases
and security agreement (the "Mortgage") covering certain real property,
equipment, fixtures, and improvements situate at 102 Witmer Road, Horsham,
Pennsylvania.
Pursuant to the terms of the Loan Documents, Borrower has agreed to
certain financial covenants, including a requirement to maintain specific
minimum levels of liquid investments in an Investment Account (defined below)
and a Collateral Account (defined and set forth below) with a financial
institution acceptable to Bank. In consideration of Borrower's opening and
maintaining the Investment Account with Custodian, Custodian hereby agrees to
provide certain other services, as described herein, to Borrower and Bank to
facilitate the monitoring of the financial covenants between Borrower and Bank
and to ensure proper control and funding of the Collateral Account pursuant to
the terms of this Agreement.
NOW THEREFORE, to ensure that Borrower remains in compliance with the
aforementioned financial covenants and other requirements of the Loan Documents,
the parties, intending to be legally bound, hereby agree as follows:
1) Investment Account
Borrower hereby agrees to open and maintain an investment account (the
"Investment Account") with Custodian, comprised of, inter alia, the Securities
hereafter described. The term "Securities" means unencumbered cash (including
money market funds and the like) any obligation of the United States Treasury,
Federal Agency Securities and other investment grade securities and repurchase
transactions of any of the foregoing types of Securities having a combined fair
market value of at least $20,000,000, and includes Securities now owned and/or
hereafter acquired by Borrower (and maintained in the Investment Account and/or
the
<PAGE>
Collateral Account), as well as any and all proceeds of the foregoing. The
Investment Account is identified in detail on Schedule "A" attached hereto and
made a part hereof.
2) Collateral Account
Borrower also agrees to establish with Custodian, a Collateral Account
to be titled, "Jefferson Bank Collateral Account Re: Neose Technologies, Inc."
(the "Collateral Account"). Borrower hereby assigns and pledges to Bank, and
grants to Bank a first priority security interest in, all of Borrower's right,
title and interest in, the Collateral Account and all Securities therein,
whether now owned or hereafter acquired, and any and all proceeds thereof. Bank
shall possess all right, title and interest in the Collateral Account and any
and all Securities transferred or deposited therein, from time to time, and Bank
shall be the "entitlement holder" (as such term is defined in ss.8102 of the
Pennsylvania Uniform Commercial Code). Custodian shall: (i) transfer Borrower's
position with respect to the Collateral Account to Bank on Custodian's books
(such entry shall satisfy both ss.8106(d)(1) of the Pennsylvania Uniform
Commercial Code and ss.8313(1)(d) of the Uniform Commercial Code in effect in
the State of New York); (ii) comply with entitlement orders from Bank without
the further consent of Borrower; and (iii) send Bank confirmation of all
purchases of Securities placed in the Collateral Account. Custodian shall be
Bank's agent for the purpose of holding any and all Securities in the Collateral
Account and their proceeds.
The Collateral Account is and shall be under the sole dominion and
control of Bank, and neither Borrower, nor any person or entity claiming by,
through or under Borrower, shall have any control over the use of, or any right
to withdraw any amount of the Securities from the Collateral Account. The
Collateral Account is identified in detail on Schedule "B" attached hereto and
made a part hereof. The Collateral Account shall also constitute the "Bank's
Pledge Account B", described in the Borrower Reimbursement Agreement.
Notwithstanding anything to the contrary herein, Borrower may enforce the
obligations of Custodian as set forth in paragraph 3(c) below, and may direct
investments in the Collateral Account so long as no "Event of Default" exists
and is continuing under the Note or any other Loan Document, as set forth in
paragraph 4(a) below.
3) Securities
For ease in facilitating the instructions set forth herein, the
"$4,200,000" and "$8,400,000" amounts referenced below assume that Borrower's
obligations to Bank pursuant to the Loan Documents are $8,400,000. If, at the
close of any business day, Borrower's obligations under the Loan Documents are
greater or less than $8,400,000, Bank will instruct Custodian, as needed, to
transfer a proportionate share of Securities either from or to the Investment
Account, to ensure that the remaining value of the Securities in the Collateral
Account remains consistent with the amounts required pursuant to the Loan
Documents.
(a) Borrower shall maintain in the Investment Account and/or the
Collateral Account, as applicable, Securities which shall have an aggregate fair
market value not less than $20,000,000. If at any time the aggregate fair market
value of the Securities in the Investment Account (based solely on Custodian's
fair market valuation) falls below a fair market value of
2
<PAGE>
$20,000,000 (but not less than $15,000,000), Custodian shall immediately and
automatically, but in no event later than the next business day, transfer from
the Investment Account to the Collateral Account, an amount of Securities such
that the aggregate fair market value of the Securities in the Collateral Account
is not less than $4,200,000. If, at any time, the sum of the aggregate fair
market value of the Securities in the Investment Account and the aggregate fair
market value of the Securities in the Collateral Account is less than
$15,000,000, Custodian shall immediately and automatically transfer from the
Investment Account to the Collateral Account, an amount of Securities such that
the aggregate fair market value of the Securities in the Collateral Account is
not less than $8,400,000. Bank hereby authorizes Custodian to accept
instructions from Borrower with respect to the purchase, sale and distribution
of Securities in the Investment Account, so long as the instructions from
Borrower are not inconsistent with the terms and conditions of this Agreement.
Failure of Custodian to transfer Securities from the Investment Account to the
Collateral Account as set forth in this Agreement, within two (2) business days,
shall constitute an event of default under this Agreement and the Loan Documents
and shall result in Bank's option to make immediate demand for payment in full
of all sums due under the Loan Documents, or to exercise any remedies available
to Bank thereunder, or under any other Loan Document related thereto.
(b) If, from time to time, after Custodian transfers Securities from
the Investment Account to the Collateral Account as set forth in section 3(a)
above, Borrower is able to provide additional Securities to Custodian in:
(i) an amount so that the fair market value of the Securities in the
Investment Account, together with the fair market value of the
Securities in the Collateral Account shall have a fair market value
equal to at least $15,000,000, but less than $20,000,000, Custodian
shall transfer Securities from the Collateral Account to the Investment
Account, in an amount such that the remaining fair market value of the
Securities in the Collateral Account shall not be less than $4,200,000;
or
(ii) an amount so that the fair market value of the Securities in the
Investment Account, together with the fair market value of the
Securities in the Collateral Account shall have a fair market value
equal to at least $20,000,000, Custodian shall transfer the entire
balance of Securities in the Collateral Account to the Investment
Account (unless Bank receives written notice from Borrower as set forth
in section 5 below).
(c) In the event Borrower's obligations pursuant to the Loan Documents
are less than $8,400,000 and Bank fails to give the instruction to Custodian
within three (3) days thereafter as provided for herein, Borrower may give such
notice and Custodian shall be entitled to rely thereon, upon approval of the
Bank.
4) Borrower's Ability to Trade: Notice of Event of Default
(a) Bank hereby authorizes Custodian to accept instructions from
Borrower with respect to the Collateral Account (so long as consistent with this
Agreement) unless and until
3
<PAGE>
Bank notifies Custodian that an "Event of Default" has occurred under the Note,
or under any other Loan Document and is continuing (each, an "Event of
Default"), and that Bank has curtailed such authority (such notice, a "Notice of
Default"). The Notice of Default may be either written or oral from a duly
authorized agent of Bank, however, if oral, such oral notice must be followed up
in writing from a duly authorized agent of Bank. Upon receipt of a Notice of
Default from Bank, with respect to the Collateral Account, Custodian shall rely
only on instructions given to it by Bank. Prior to receiving a Notice of
Default, Custodian may provide all services to Borrower upon which Borrower and
Custodian may from time to time agree, so long as the provisions of paragraph 3
above and paragraph 6 below are met.
(b) Upon receiving a Notice of Default from Bank, Custodian shall
immediately and automatically, but in no event later than the next business day,
transfer Securities from the Investment Account to the Collateral Account, such
that the Securities in the Collateral Account shall have a fair market value
(based solely on Custodian's fair market valuation) equal to $8,400,000. Upon
the occurrence of an Event of Default and the funding of the Collateral Account
as hereinbefore set forth, if necessary, Borrower shall cooperate with Bank and
execute any and all additional documentation which may be necessary to ensure
Bank has a first perfected lien security interest in the Securities in the
Collateral Account, in accordance with the laws of the Commonwealth of
Pennsylvania (and/or any other jurisdiction, if necessary). If Borrower cures,
to Bank's reasonable satisfaction, all outstanding Events of Default, including
without limitation the Event of Default which triggered Bank to send Custodian
the Notice of Default, Custodian shall, after receipt of written notice from
Bank to such effect, transfer Securities back to the Investment Account so that
the fair market value of Securities in the Collateral Account remains consistent
with the amounts required to be held therein in accordance with the terms
hereof.
5) Requirements for Release of Other Collateral
Upon written request from Borrower, Bank shall satisfy the lien of the
Mortgage and release other collateral securing the Note if, and only if:
(a) the Securities in the Collateral Account have a fair market value
equal to or greater than $8,400,000; and
(b) the Bank receives Borrower's written request to Bank for the
release of the other collateral stating:
"In consideration of Bank's agreement to release the lien of its
Mortgage, Assignment of Leases and Security Agreement dated March 1,
1997, which was executed by Borrower in connection with, inter alia,
the issuance of the Montgomery County Industrial Development Authority
Federally Taxable Variable Rate Demand Revenue Bonds (Neose
Technologies, Inc. Project) Series B of 1997, Borrower confirms that it
currently has and will maintain Securities with a fair market value of
$8,400,000.00 in the Collateral Account, for as long as Borrower has
any obligations to Bank pursuant to the Loan Documents."
4
<PAGE>
6) Duties of Custodian
(a) The sum of the Securities in the Investment Account and the
Collateral Account must at all times have a fair market value of at least
$20,000,000. In addition, all Securities in the Investment Account must at all
times consist of unencumbered cash (including money market funds and the
like),any obligation of the United States Treasury, Federal Agency Securities
and other investment grade securities and repurchase transactions of any of the
foregoing types of Securities with a remaining maturity of less than three (3)
years). Custodian agrees that any new Securities purchased from proceeds of the
Collateral Account shall automatically be placed into the Collateral Account and
become subject to this Agreement.
(b) Custodian shall monitor the fair market value of the Securities on
each business day that Custodian is open for business, so that Custodian may
immediately and automatically transfer funds from the Investment Account to the
Collateral Account if necessary, as set forth in section 3(a) above.
(c) Custodian shall send Bank confirmation of all purchases of
Securities into the Collateral Account or transfers from the Investment Account
to the Collateral Account. Custodian shall also provide Bank and Borrower with
copies of all ongoing regular reports and statements issued with respect to the
Investment Account and Collateral Account, and such further information as Bank
may reasonably request from time to time.
(d) Custodian shall provide Bank and Borrower with immediate notice of
any event which would create a requirement to transfer funds into or out of the
Collateral Account.
(e) Custodian shall cooperate with Bank and execute all documents
required to perfect Bank's first lien security interest in the Collateral
Account.
(f) Custodian shall mark its records to show Bank's perfected first
lien security interest in all Securities held in the Collateral Account.
7) Indemnity
Borrower hereby agrees to pay, indemnify and hold Custodian harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever (including, without limitation, legal fees) with
respect to the performance of this Agreement by Custodian or any of Custodian's
directors, officers, agents or employees, unless arising from its or their own
gross negligence or willful misconduct.
8) Fees and Expenses
(a) Borrower hereby agrees to pay any additional incremental fees and
expenses of Custodian which are caused by reasonable instructions given to
Custodian by Bank hereunder.
5
<PAGE>
(b) Custodian will advise Bank and Borrower should Custodian believe
that Borrower has failed to pay any fees and expenses assessed against Borrower
hereunder. Failure to pay such fees or expenses shall not effect the validity or
enforceability of this Agreement or terminate or modify Custodian's duties
hereunder.
9) Limitations on Liability of Custodian
Notwithstanding any other provision of this Agreement, it is agreed by
the parties hereto that Custodian shall not be liable for any action taken by it
or any of its directors, officers, agents or employees in accordance with this
Agreement except for its or their own gross negligence or willful misconduct.
10) Irrevocable Instructions
Borrower acknowledges that the agreements made by it and the
authorizations granted by it herein are irrevocable and self-operative unless
otherwise specifically agreed to in writing by Bank and that the authorizations
granted in this Agreement are powers coupled with an interest.
11) Waiver of Right of Set-Off and Liens
With respect to the Investment Account and the Collateral Account only,
Custodian waives with respect to the Securities, for its own account and as
agent for any Third Party Subcustodian (defined below), with respect to all of
its existing and future claims against Borrower or any affiliate thereof, all
existing and future rights of set-off and liens against the Collateral Account,
the Investment Account and any proceeds therefrom, including but not limited to
those rights granted to Custodian in Section 10 of the "U.S. Securities Custody
Agreement" entered into between Borrower and Custodian and the "U.S. Securities
Custody Agreement" entered into between Borrower and Custodian to establish the
Collateral Account. This waiver is in effect for so long as Borrower is indebted
to Bank pursuant to the Loan Documents; provided, however, that Custodian shall
retain the right to charge the Investment Account for all compensation and
expenses with respect to the Collateral Account and the Investment Account. At
the time Borrower is no longer indebted to Bank pursuant to the Loan Documents,
Bank will promptly notify Custodian.
12) Negative Pledge
(a) Borrower shall not borrow any funds from Custodian or any person or
entity performing subcustodial, safekeeping, clearing, settlement or other
services or transactions in connection with the Collateral Account and/or the
Investment Account, including without limitation, a branch of any United States
bank or any entity that may be affiliated with a United States Bank (each, a
"Third Party Subcustodian").
(b) Neither Borrower nor Custodian shall not enter into a control
agreement with respect to the Securities, the Collateral Account or the
Investment Account with any person or entity other than Bank.
6
<PAGE>
13) Remedies
(a) Upon the occurrence and continuance of an Event of Default under
any Loan Document, in addition to any other remedies set forth herein, Bank may,
at its option, exercise any or all rights and remedies available to Bank under
the Pennsylvania Uniform Commercial Code or otherwise available to it. All costs
and expenses including, without limitation, reasonable attorney's fees, agency
fees and registration fees incurred or paid by Bank in exercising any right,
remedy or power conferred hereunder and in the enforcement hereof, shall be paid
by Borrower.
(b) After the occurrence and during the continuation of an Event of
Default, the proceeds of any Securities in the Collateral Account disposed of by
Bank at any time, may be applied to or on account of payment of the Note and in
such order as Bank may elect. In addition, Bank may, at its discretion, apply
any such proceeds to or on account of the payment of any costs and expenses
(including reasonable attorney's fees, legal expenses and registration costs)
incurred by Bank in the custody, preservation, use, operation, preparation for
sale, or in the enforcement of the Loan Documents or of the pledge and security
interest created hereby. Borrower waives and releases any right to require Bank
to collect any sums due under the Note from any other collateral securing the
Note under any theory of marshalling of assets, or otherwise, and specifically
authorizes Bank to apply any collateral against the Note in any manner Bank may
determine.
14) Effectiveness; Integrations; Amendments
This Agreement shall be effective as of the date first above written.
This Agreement constitutes the entire agreement with respect to the subject
hereof and is binding upon the parties hereto and their respective successors
and assigns and shall inure to their benefit. Neither this Agreement nor any
provision hereof may be changed, amended, modified or waived orally, but only by
an instrument in writing signed by the parties hereto. Any provision of this
Agreement which may prove unenforceable under any law or regulation shall not
affect the validity of any other provision hereof. If any terms, conditions or
provisions of any other agreement between Custodian and Borrower are
inconsistent with the terms, conditions or provisions of this Agreement, the
terms, conditions and provisions of this Agreement shall apply.
15) Termination
This Agreement shall automatically terminate on the date on which the
all sums due under the Loan Documents have been paid in full by the Borrower to
the Bank and all commitments of Bank with respect thereto have been terminated
and the Loan Documents have been released or canceled. Custodian shall be
entitled to rely on a written certificate of Bank to such effect (which Bank
will provide promptly upon termination of the Loan Documents), and upon receipt
of such written certification of Bank, Custodian shall rely on instructions from
Borrower as to the disposition of the Investment Account and the Collateral
Account.
7
<PAGE>
16) Notices
With respect to this Agreement (unless otherwise specified herein), all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by telecopy or nationally recognized
courier service), and shall be deemed to have been duly made or given when
delivered by hand, or, in the case of telecopy notice, when sent, or, in the
case of a nationally recognized courier service, one business day after delivery
to such courier service, addressed as follows, or to such other address as may
be hereafter notified by the respective parties hereto:
Bank: Jefferson Bank
1607 Walnut Street
Philadelphia, PA 19103
Attn: Kenneth R. Frappier, Senior Vice President
With a Copy to: Kassab, Archbold & O'Brien, L.L.P.
214 North Jackson Street
P.O. Box 626
Media, Pa. 19063
Attn: Marc S. Stein, Esq.
Custodian: OFFITBANK
520 Madison Avenue
New York, NY 10022-4213
Attn: James C. Campbell, Director of Operations
Borrower: Neose Technologies, Inc.
102 Witmer Road
Horsham, PA 19044
Attn: P. Sherrill Neff, President
With a Copy to: Ballard, Spahr, Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pa. 19103-7599
Attn: Lynn R. Axelroth, Esq.
17) Governing Law
This Agreement shall be governed by, and interpreted in accordance
with, the laws of the Commonwealth of Pennsylvania. The parties hereby
irrevocably submit to the jurisdiction of, and agree to submit any claim or
dispute to the adjudication of a State or Federal Court sitting in the County of
Montgomery or the County of Philadelphia, Pennsylvania. Notwithstanding any
provision of any other Agreement between Custodian and Bank and/or Custodian and
Borrower (including without limitation, the "U.S. Securities Custody Agreements"
executed in conjunction with establishing the Collateral Account and the
8
<PAGE>
Investment Account) the laws of the Commonwealth of Pennsylvania shall apply to
attachment and perfection of Bank's security interest in the Collateral Account
and the Securities therein.
18) Counterparts
This Agreement may be executed in any number of counterparts which
together shall constitute one and the same instrument.
19) Borrower's Right to Substitute Custodian
Upon request of Borrower and after written consent and approval of
Bank, in its sole and absolute discretion, Borrower may substitute the financial
institution serving as Custodian under this Agreement. The substitute Custodian
must be willing to execute an agreement similar to this Agreement and to except
the same responsibilities and duties as this Custodian.
20) Attachment and Perfection
The parties hereto intend that this Agreement constitute "control"
under Divisions 8 and 9 of the Pennsylvania Commercial Code and cause Bank to
have a first perfected security interest in the Collateral Account and the
Securities therein. The parties also intend that this Agreement constitute a
valid transfer of a security interest under ss.8-313 of the Uniform Commercial
Code in effect in the State of New York.
9
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto, intending to be legally
bound, has caused this Agreement to be executed and delivered on the date first
set forth above.
CUSTODIAN: BANK:
OFFITBANK JEFFERSON BANK
By: /s/ Jack D. Burks (Seal) By: /s/ Kenneth R. Frappier
------------------------------ -------------------------
Senior Vice President
Attest: /s/ Mary Bell Attest: /s/ Daniel O'Brien
------------------------- ---------------------
Assistant Secretary
BORROWER:
Neose Technologies, Inc.
By: /s/ P. Sherrill Neff
---------------------
President
(Seal)
Attest: /s/ A. Brian Davis
------------------
Secretary
10
<PAGE>
All Exhibits have been omitted.
Exhibit A - Investment Account
Exhibit B - Collateral Account
The Registrant hereby agrees to furnish supplmentally a copy of any omitted
exhibit to the Securities and Exchange Commission upon request.
11
<PAGE>
NEOSE TECHNOLOGIES, INC.
102 Witmer Road
Horsham, Pennsylvania 19044
March 20, 1997
Jefferson Bank
1607 Walnut Street
Philadelphia, PA 19103
Attention: Mr. Kenneth R. Frappier
Senior Vice President
OFFITBANK
520 Madison Avenue
New York, NY 10022-4213
Attention: Mr. James C. Campbell
Director of Operations
Re: $8,400,000 Federally Taxable Variable Rate Demand
Revenue Bonds (Neose Technologies, Inc. Project),
Series B of 1997
Gentlemen:
This will confirm that, notwithstanding any provisions to the
contrary in Section 6.20 of the Reimbursement Agreement between Jefferson Bank
("Bank") and Neose Technologies, Inc. ("Borrower") dated as of March 1, 1997,
and the Custodial and Collateral Security Agreement among OFFITBANK, Bank and
Borrower, dated March 20, 1997 (the "Custodial Agreement"), Borrower shall have
until 4:00 p.m. eastern standard time on April 8, 1997 (the "Funding Date") to
fund the amount required to be funded in the Investment Account. Borrower shall
not be in default of any of its obligations under the Reimbursement Agreement
and Custodial Agreement with respect to funding the Investment Account, nor
shall OFFITBANK be required to provide Bank with any notices or to transfer any
Securities into the Collateral Account, so long as Borrower funds its required
contribution into the Investment Account on or before the Funding Date.
In the event Borrower fails to fund the Investment Account in
accordance with the terms of the Reimbursement Agreement, the Custodial
Agreement and this letter, on or before the Funding Date, then, without any
notice or opportunity to
12
<PAGE>
cure, such failure shall be deemed an Event of Default under the Reimbursement
Agreement (as defined therein) and the Custodial Agreement, and Bank shall be
entitled to exercise any and all remedies provided for in the Reimbursement
Agreement and the Custodial Agreement. (Capitalized terms and phrases not
defined in this letter shall have the meanings given to them in the Custodial
Agreement.)
Please indicate your agreement by executing the enclosed extra copy of
this letter in the space provided and returning it to me.
Sincerely,
NEOSE TECHNOLOGIES, INC.
/s/ P. Sherrill Neff
--------------------------
P. Sherrill Neff
President
AGREED TO AND ACCEPTED by an authorized officer of:
JEFFERSON BANK
By: /s/ Kenneth R. Frappier
Name: Kenneth R. Frappier
Title: Senior Vice President
Date: March 20, 1997
OFFITBANK
By: /s/ Jack D. Burks
-----------------
Name:______________________
Title: _______________________
Date: March 20, 1997
13
Exhibit 10.11
PLACEMENT AGREEMENT
THIS PLACEMENT AGREEMENT dated March 20, 1997 among MONTGOMERY
COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY (the "Issuer"), NEOSE TECHNOLOGIES, INC.
(the "Borrower") and CORESTATES CAPITAL MARKETS, A DIVISION OF CORESTATES BANK,
N.A., as Placement Agent (the "Placement Agent").
A. The Issuer is issuing its Federally Taxable Variable Rate
Demand Revenue Bonds (Neose Technologies, Inc. Project) Series B of 1997 in the
aggregate principal amount of $8,400,000 (the "Bonds") pursuant to a Trust
Indenture, dated as of March 1, 1997 (the "Indenture") between the Issuer and
Dauphin Deposit Bank and Trust Company, as trustee (the "Trustee").
B. Pursuant to a Loan Agreement, dated as of March 1, 1997
between the Issuer and the Borrower (the "Loan Agreement"), the proceeds of the
Bonds, together with other funds available for the purpose, are being applied to
finance the costs of: (i) the acquisition, improvement and equipping of a
facility which will be used for the development and pilot production of complex
carbohydrates for research and development relating to a variety of health care
applications located at 102 Witmer Road, Horsham, Pennsylvania; and (ii) payment
of a portion of the costs of issuance of the Bonds (the "Project") to be owned
by the Borrower. Under the Loan Agreement, the Borrower is obligated to make
payments to the Trustee in amounts and at the times sufficient to pay, when due,
the principal of, premium, if any, on and interest on the Bonds.
C. The Bonds will initially be issued in the Weekly Mode and
bear interest at a Weekly Rate as provided in the Indenture (such terms being
used herein as defined in the Indenture). Subject to and upon compliance with
the terms of the Bonds and the Indenture, the Bonds may be tendered for purchase
upon demand of the owners thereof. The Bonds will also be subject to mandatory
tender for purchase under certain circumstances as provided in the Indenture.
The Issuer has appointed CoreStates Capital Markets, a division of CoreStates
Bank, N.A. as remarketing agent (including any successor in such capacity, the
"Remarketing Agent") under the Indenture for the purpose of remarketing Bonds
which have been optionally tendered for purchase pursuant to the terms and
conditions set forth in the Indenture. In connection with such appointment, the
Borrower and the Remarketing Agent have entered into a Remarketing Agreement,
dated as of March 1, 1997 (the "Remarketing Agreement").
D. The Bonds are being issued pursuant to one or more
resolutions adopted by the Issuer on March 5, 1997 (the "Resolution") and are
secured by an assignment by the Issuer under the Indenture of: (i) the Issuer's
rights under the Loan Agreement to receive loan payments corresponding in time
and amounts to the payments of principal of, premium, if any, on and interest on
the Bonds; and (ii) the Issuer's rights to all moneys and investments held from
time to time in the Project Fund and the Bond Fund created under the Indenture.
<PAGE>
E. In order to facilitate the placement of the Bonds, the
Borrower will cause to be delivered to the Trustee an Irrevocable Letter of
Credit (the "Letter of Credit") issued by CoreStates Bank, N.A. (as issuer of
the Letter of Credit, the "Bank") under which the Trustee will be authorized to
draw up to: (1) an amount equal to the principal of the Bonds outstanding: (i)
to pay the principal of the Bonds when due at maturity or upon redemption or
acceleration; or (ii) to pay the portion of the purchase price of Bonds tendered
for purchase pursuant to the Indenture corresponding to the principal of such
Bonds to the extent remarketing proceeds are not available for such purpose;
plus (2) an amount equal to 46 days accrued interest on the Bonds at a maximum
rate of 15% per annum: (i) to pay interest on the Bonds when due; or (ii) to pay
the portion of the purchase price of Bonds tendered for purchase pursuant to the
Indenture corresponding to the accrued interest, if any, on such Bonds to the
extent remarketing proceeds are not available for such purpose. The Letter of
Credit is being issued pursuant to a Participation and Reimbursement Agreement,
dated as of March 1, 1997 (the "Participating Bank Agreement") between the Bank
and Jefferson Bank (the "Participating Bank"), pursuant to which the Bank will
be entitled, among other things, to reimbursement, with interest, for all draws
under the Letter of Credit.
F. To provide for the execution of the Participating Bank
Agreement, the Borrower will enter into a Reimbursement Agreement, dated as of
March 1, 1997 (the "Reimbursement Agreement") with the Participating Bank
pursuant to which the Borrower will be obligated to reimburse the Participating
Bank, with interest for all draws under the Letter of Credit and/or all advances
made by the Participating Bank to the Bank under the Participating Bank
Agreement. The Borrower's obligations to the Participating Bank under the
Reimbursement Agreement will be evidenced by a Note, dated as of March 1, 1997
delivered by the Borrower to the Participating Bank (the "Note") and secured by:
(i) a mortgage, assignment of leases and security agreement delivered by the
Borrower to the Participating Bank covering the Project; (ii) an assignment of
leases by the Borrower to the Participating Bank with respect to all leases of
the Project; and (iii) a security agreement between the Borrower and the
Participating Bank creating a first lien security interest in, among other
things, the assets of the Borrower and the equipment included in the Project.
The Participating Bank's obligations under the Participating Bank Agreement and
the Borrower's obligations under the Reimbursement Agreement are secured by a
Pledge, Security and Indemnification Agreement, dated as of March 1, 1997 (the
"Pledge Agreement") between the Borrower, the Participating Bank and the Bank.
G. The Bonds are limited obligations of the Issuer and are
payable solely from payments made by the Borrower under the Loan Agreement, from
drawings under the Letter of Credit and from other moneys available for such
purpose under and in accordance with the Indenture. Neither the general credit
nor the taxing power of the Issuer, the Commonwealth of Pennsylvania, the County
of Montgomery, Pennsylvania or any political subdivision thereof is pledged to
the payment of the Bonds, and the Bonds shall not be or be deemed to be a
general obligation of the Issuer or an obligation of the Commonwealth of
Pennsylvania, the County of Montgomery, Pennsylvania or any political
subdivision thereof. The Issuer has no taxing power.
-2-
<PAGE>
H. It is intended that, in reliance on the support of the
Bonds by the Letter of Credit issued by the Bank, the Placement Agent may
arrange for the placement and sale of the Bonds without registration under the
Securities Act of 1933, as amended (the "Securities Act").
I. The Borrower acknowledges that the Issuer is selling the
Bonds and the Placement Agent is arranging for the placement and sale of the
Bonds to certain purchasers (the "Purchasers") in reliance on the
representations, covenants and indemnities set forth herein. A Preliminary
Placement Memorandum, dated March 10, 1997 (including the Appendices thereto,
the "Preliminary Placement Memorandum") has been prepared for use in such
placement and has been delivered to the parties to this Placement Agreement. The
Preliminary Placement Memorandum as it may be amended or supplemented as of the
Closing Date (hereinafter defined) is herein referred to as the "Final Placement
Memorandum", and the Preliminary Placement Memorandum and the Final Placement
Memorandum are herein referred to collectively as the "Placement Memorandum".
J. The professional advisors referred to in this Placement
Agreement are:
Bond Counsel: Ballard Spahr Andrews & Ingersoll
Philadelphia, Pennsylvania
Issuer Counsel: McGrory Wentz Fernandez & O'Hara
Norristown, Pennsylvania
Borrower Ballard Spahr Andrews & Ingersoll
Counsel: Philadelphia, Pennsylvania
Bank Counsel: Pepper, Hamilton & Scheetz LLP
Philadelphia, Pennsylvania
Participating Kassab Archbold & O'Brien, L.L.P.
Bank Counsel: Media, Pennsylvania 19063
Placement Kassab Archbold & O'Brien, L.L.P.
Agent Counsel: Media, Pennsylvania 19063
K. The Issuer and the Borrower desire the Placement Agent to
arrange for the sale of the Bonds to the Purchasers or other initial purchasers,
according to the terms and subject to the conditions set forth or described
herein.
NOW, THEREFORE, in consideration of the covenants herein
contained and intending to be legally bound, the Issuer, the Borrower and the
Placement Agent hereby agree as follows:
-3-
<PAGE>
Section 1. Definitions. Capitalized terms and phrases used and
defined herein shall have the meanings set forth herein. Capitalized terms and
phrases used and not defined herein shall have the respective meanings ascribed
to such terms in the Indenture, unless different meanings clearly appear from
the context.
Section 2. Placement of Bonds. The Placement Agent will use
its best efforts to arrange for the placement of the Bonds with the Purchasers,
at a purchase price of 100% of the principal amount of the Bonds, payable in
immediately available funds on the date (the "Closing Date") of closing
("Closing") of the original issuance and initial authentication of the Bonds.
The Closing Date shall be March 20, 1997 or such other date as is mutually
agreed upon by the Issuer, the Borrower, the Bank, the Participating Bank and
the Placement Agent.
Section 3. Fees. The Borrower shall pay to the Placement Agent
on the Closing Date a fee equal to one percent (1.0%) of the principal amount of
Bonds placed by it with the Purchasers, plus to or for the account of the
Placement Agent any and all reasonable expenses of the Placement Agent.
Section 4. Representations of Issuer. In consideration of the
foregoing and to induce the Placement Agent to privately place the Bonds, the
Issuer hereby represents to the Placement Agent and for the benefit of the
Purchasers that:
(a) The Issuer is a public instrumentality and a body
corporate and politic of the Commonwealth of Pennsylvania organized and
existing under the Pennsylvania Economic Development Financing Law, Act
of August 23, 1967, P.L. 251, as amended and supplemented (the "Act").
Under the Act and by the Resolution, the Issuer has full power and
authority to undertake the financing of the Project, to execute,
deliver and perform its obligations under the Indenture, the Loan
Agreement and this Placement Agreement, and to issue and deliver the
Bonds.
(b) The Issuer has duly adopted the Resolution and
authorized the Indenture, the Loan Agreement and this Placement
Agreement, the issuance of the Bonds, and all actions necessary or
appropriate to carry out the same, and each such document, when
executed and delivered by the Issuer, will constitute the legal, valid
and binding obligation of the Issuer, enforceable against the Issuer in
accordance with its terms, except to the extent that the enforceability
thereof may be limited by bankruptcy, insolvency or other similar laws
or equitable principles affecting the enforcement of creditors' rights
generally.
(c) The execution, delivery and performance by the
Issuer of the Indenture, the Loan Agreement and this Placement
Agreement, and the issuance and delivery of the Bonds, will not violate
or conflict with any provision of the Constitution of the Commonwealth
of Pennsylvania or any applicable statute (including the Act), or any
rule, order, regulation, judgment or decree of any court, agency or
other governmental or administrative board or body to which the Issuer
is subject, or conflict with or constitute a
-4-
<PAGE>
breach of or a default under any indenture, mortgage, deed of trust,
agreement or other instrument to which the Issuer is a party or by
which it is bound.
(d) No additional or further approval, consent or
authorization of any governmental or public body or agency not already
obtained prior to the issuance of the Bonds is required to be obtained
by the Issuer in connection with the entering into and performing of
its obligations under the Indenture, the Loan Agreement and this
Placement Agreement and the issuance and delivery of the Bonds.
(e) There is no action, suit, proceeding,
investigation or inquiry by or before any court, agency or other
governmental or administrative board or body pending or, to the
knowledge of the Issuer, threatened challenging or contesting the
powers of the Issuer, the authorization of any members, directors or
officers of the Issuer to act in their respective capacities, the
issuance of the Bonds, the validity or enforceability of the Indenture,
the Loan Agreement or this Placement Agreement, or the performance by
the Issuer of any of its obligations thereunder.
(f) The information under the caption "THE ISSUER" in
the Placement Memorandum is correct and complete, and the Issuer has
approved and authorized the use of the Placement Memorandum by the
Placement Agent.
The foregoing representations shall survive Closing.
Section 5. Representations of Borrower. In consideration of
the foregoing, to induce the Issuer to issue the Bonds and to induce the
Placement Agent to arrange for the private placement of the Bonds, the Borrower
hereby represents and warrants to the Issuer and the Placement Agent and for the
benefit of the Purchasers that:
(a) The Borrower is a corporation duly organized and
validly existing under the laws of the State of Delaware, qualified to
do business in the Commonwealth of Pennsylvania, with full power and
authority to undertake the financing of the Project as contemplated by
this Placement Agreement and the Placement Memorandum, to execute and
deliver the Loan Agreement, the Reimbursement Agreement, the Note, the
Pledge Agreement, the Remarketing Agreement, this Placement Agreement
and all other documents delivered by the Borrower in connection with
the financing of the Project and to perform its obligations thereunder.
(b) The Borrower has duly executed and delivered the
Loan Agreement, the Reimbursement Agreement, the Note, the Pledge
Agreement, the Remarketing Agreement, this Placement Agreement and all
other documents delivered by the Borrower in connection with the
financing of the Project, and to the best of the Borrower's knowledge,
no approval or other action by any governmental or administrative board
or body is required
-5-
<PAGE>
in connection with the execution, delivery or performance by the
Borrower of the same, except such as have been obtained.
(c) The execution and delivery by the Borrower of the
Loan Agreement, the Reimbursement Agreement, the Note, the Pledge
Agreement, the Remarketing Agreement, this Placement Agreement and all
other documents delivered by the Borrower in connection with the
financing of the Project, have been duly authorized by the Borrower,
and each such document, when executed and delivered by the Borrower, to
the best of the Borrower's knowledge, will constitute the legal, valid
and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms, except to the extent that the
enforceability thereof may be limited by bankruptcy, insolvency or
other similar laws or equitable principles affecting the enforcement of
creditors' rights generally and rights to indemnity may be limited by
applicable law.
(d) To the best of the Borrower's knowledge, neither
the entering into nor the performance by the Borrower of the Loan
Agreement, the Reimbursement Agreement, the Note, the Pledge Agreement,
the Remarketing Agreement, this Placement Agreement or any other
document delivered by the Borrower in connection with the financing of
the Project will violate or conflict with any provision of any statute
or any rule, order, regulation, judgment or decree of any court, agency
or other governmental or administrative board or body to which the
Borrower is subject, or violate, conflict with or constitute a breach
of or default under any provision of any indenture, mortgage, deed of
trust, agreement or other instrument to which the Borrower is a party
or by which the Borrower or any of its properties is bound.
(e) To the best of the Borrower's knowledge, all
licenses, consents, approvals or authorizations of any federal, state
or local governmental agency required on the part of the Borrower to be
obtained in connection with the execution and delivery of the Loan
Agreement, the Reimbursement Agreement, the Note, the Pledge Agreement,
the Remarketing Agreement and this Placement Agreement, the performance
by the Borrower of its obligations thereunder and the Borrower's
consummation of the transactions contemplated thereby and by the
Placement Memorandum, have been duly obtained, and the Borrower has
complied with all applicable provisions of law requiring any
designation, declaration, filing, registration or qualification with
any governmental authority in connection therewith; it being understood
that the Borrower has obtained, or prior to the commencement of
acquisition, construction and/or equipping of each component of the
Project will obtain, all licenses, consents, approvals and
authorizations of any and all federal, state or local governmental
authorities required on the part of the Borrower to be obtained in
connection with the acquisition, construction and/or equipping of such
component of the Project, and that the Borrower has no reason to
believe that it will not be able to obtain, when required, all further
governmental licenses, consents, approvals and authorizations necessary
for the acquisition, construction, equipping and/or operation of the
Project as contemplated
-6-
<PAGE>
by the Loan Agreement and any and all other documents delivered by the
Borrower in connection with the financing of the Project.
(f) There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public
board or body, pending or, to the knowledge of the Borrower, threatened
against the Borrower wherein an unfavorable decision, ruling or finding
would have a material adverse effect on the financial condition of the
Borrower, the acquisition, construction and/or equipping of the
Project, the transactions contemplated by this Placement Agreement and
the Placement Memorandum, the validity or enforceability of the Loan
Agreement, the Reimbursement Agreement, the Note, the Pledge Agreement,
the Remarketing Agreement, this Placement Agreement or any other
document delivered by the Borrower in connection with the financing of
the Project or the existence or powers of the Borrower. There is no
existing violation by the Borrower of any applicable statute, rule,
order or regulation of any governmental body which could materially and
adversely affect the financial condition or operations of the Borrower
or the Project.
(g) The Preliminary Placement Memorandum is final as
of its date except for the omission of the ratings, the placement fee
and the issuance and delivery dates for the Bonds. The information set
forth in the Placement Memorandum under the caption "THE BORROWER" does
not contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made not misleading. Furthermore,
nothing has come to the Borrower's attention that leads it to believe
that the Placement Memorandum (other than the information contained
therein under the caption "THE ISSUER" and in Appendix A thereto with
respect to which no representation is made) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Borrower hereby
approves and authorizes the use of the Preliminary Placement Memorandum
and the Placement Memorandum by the Placement Agent.
The foregoing representations and warranties shall survive Closing.
Section 6. Covenants of Issuer. The Issuer covenants that:
(a) The Issuer will cooperate with the Placement
Agent in the qualification of the Bonds (and, if necessary, any other
security contemplated by this Placement Agreement and the Placement
Memorandum) for offering and sale in, and the determination of their
eligibility for investment under the laws of, such jurisdictions as the
Placement Agent shall designate, provided that the Issuer shall not be
required to qualify to do business or consent to service of process in
any state or jurisdiction other than the Commonwealth of Pennsylvania
and the Issuer's out-of-pocket costs shall be paid out of the Bond
proceeds or otherwise provided for.
-7-
<PAGE>
(b) The Issuer will refrain from taking any action,
with regard to which it may exercise control, that would result in the
loss of the exclusion of the interest on the Bonds from gross income
for federal income tax purposes.
Section 7. Covenants of Borrower. The Borrower covenants
that:
(a) The Borrower will provide to the Placement Agent
not later than March 20, 1997 the Final Placement Memorandum in such
quantity as the Placement Agent may reasonably request, and will use
its best efforts to amend the Final Placement Memorandum if and as
necessary so that it will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(b) The Borrower will promptly notify the Placement
Agent of any material adverse change with respect to the financing of
the Project as contemplated by this Placement Agreement and the
Placement Memorandum or with respect to its business, properties or
financial condition, occurring before Closing which would require a
change in the Placement Memorandum in order to make the information
contained therein not misleading in connection with the placement of
the Bonds.
(c) The Borrower will cooperate with the Placement
Agent in the qualification of the Bonds (and, if necessary, any other
security contemplated by this Placement Agreement or the Placement
Memorandum) for offering and sale in, and the determination of their
eligibility for investment under the laws of, such jurisdictions as the
Placement Agent shall designate; provided that the Borrower shall not
be required to qualify to do business under the laws of any
jurisdiction where it is not now so qualified or to file any general
consent to service of process where it is not now so subject.
(d) The Borrower will refrain from taking any action,
or voluntarily permitting any action to be taken, that results in the
loss of the exclusion of the interest on the Bonds from gross income
for federal income tax purposes.
(e) To the extent permitted by applicable law, the
Borrower will indemnify, hold harmless, protect and defend the Issuer
and its members, directors, officers and employees, past, present and
future, and the Placement Agent and its directors, officers 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 (hereinafter collectively called the "Indemnified
Parties"), against any and all losses, claims, damages, liabilities or
expenses whatsoever arising out of or based upon: (i) any untrue
statement or alleged untrue statement of a material fact contained in
the Placement Memorandum under the caption "THE BORROWER" or in the
second paragraph under the caption "LITIGATION" or any omission or
alleged omission to state therein a material fact necessary to make the
statements made therein, in light of the circumstances under which they
were made, not misleading; or
-8-
<PAGE>
(ii) an allegation or determination that registration under the
Securities Act was required in connection with the issuance, placement
or sale of the Bonds or that the Indenture should have been qualified
under the Trust Indenture Act of 1939, as amended. In case any action
or claim shall be brought or asserted against one or more of the
Indemnified Parties with respect to the matters subject to the
indemnity provided by this Section, the Indemnified Party or Parties
shall promptly notify the Borrower in writing, and the Borrower shall
promptly assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party or Parties
and the payment of all expenses. Any one or more of the Indemnified
Parties shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified
Party or Parties unless: (i) the employment thereof has been
specifically authorized by the Borrower in writing; (ii) the Borrower
has failed to assume promptly the defense and employ counsel reasonably
satisfactory to such Indemnified Party or Parties; or (iii) the named
parties to any such action (including any impleaded parties) include
both such Indemnified Party or Parties and the Borrower, and such
Indemnified Party or Parties shall have been advised by counsel that
there may be one or more legal defenses available to it which are
different from or additional to those available to the Borrower (in
which case the Borrower shall not have the right to assume the defense
of such action on behalf of such Indemnified Party or Parties), in any
of which events such fees and expenses shall be borne by the Borrower.
The Borrower shall not be liable for any settlement of such action
effected without its consent (such consent not to be unreasonably
withheld), but if settled with the consent of the Borrower, or if there
is final judgement for the plaintiff in any such action with or without
consent, the Borrower agrees to indemnify and hold harmless the
Indemnified Party or Parties from and against any loss or liability by
reason of settlement or judgement. The indemnity provided in this
Section includes reimbursement for expenses incurred by the Indemnified
Parties in investigating the claim and in defending it in accordance
with the terms of this Section. The indemnity provided in this Section
shall survive Closing.
(f) In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for
in paragraph (e) of this Section is due in accordance with its terms
but is for any reason unavailable or insufficient, the Borrower shall
contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection
with investigating or defending the same) to which the Placement Agent
may be subject in such proportion so that the Borrower bears them in a
portion that considers the benefits received by the Borrower from the
placement of the Bonds, the Borrower's knowledge and access to
information concerning the matter with respect to which the claim was
asserted, the opportunity to correct or prevent any statement or
omission and any other equitable considerations appropriate under the
circumstances; and no person (including the Placement Agent) guilty of
fraudulent misrepresentation within the meaning of Section 11(f) of the
Securities Act shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of
this Section, each person who controls the Placement Agent within the
-9-
<PAGE>
meaning of Section 15 of the Securities Act shall have the same rights
as the Placement Agent. Any party entitled to contribution shall,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for
contribution may be made against the Borrower under this paragraph,
notify the Borrower, but the omission so to notify the Borrower shall
not relieve the Borrower from any other obligation it may have
hereunder or otherwise under this paragraph.
Section 8. Conditions of Closing. The placement of the Bonds
with the initial purchasers thereof is subject to fulfillment of the following
conditions at or before Closing:
(a) The Issuer's and the Borrower's representations
hereunder shall be true on and as of the Closing Date and shall be
confirmed by certificates at Closing.
(b) Neither the Issuer nor the Borrower shall have
defaulted in any of their covenants hereunder.
(c) The Placement Agent shall have received:
(i) original executed copies (or photocopies
thereof) of the Indenture, the Loan Agreement, the Letter of
Credit, the Participating Bank Agreement, the Reimbursement
Agreement, the Pledge Agreement, the Remarketing Agreement and
all other documents executed in connection therewith or
delivered at Closing;
(ii) opinions of Bond Counsel dated the Closing
Date with respect to the matters set forth in Exhibits A, B
and C attached hereto;
(iii) an opinion of Issuer Counsel dated the
Closing Date with respect to the matters set forth in Exhibit
D attached hereto;
(iv) an opinion or opinions of Borrower Counsel
dated the Closing Date with respect to the matters set forth
in Exhibit E attached hereto;
(v) an opinion of Bank Counsel dated the Closing
Date with respect to the matters set forth in Exhibit F
attached hereto;
(vi) a certificate of the Bank dated the Closing
Date in the form set forth in Exhibit G attached hereto; and
(vii) a certificate of the Borrower dated the
Closing Date with respect to the matters set forth in Exhibit
H attached hereto; and
(viii) a certificate of the Issuer dated the
Closing Date with respect to the matters set forth in Exhibit
I attached hereto.
-10-
<PAGE>
(d) At Closing there shall not have been any adverse
change with respect to the Project or the financing thereof as
contemplated by the Placement Memorandum and this Placement Agreement
or in the business, property or financial condition of the Borrower,
except as set forth in or contemplated by the Placement Memorandum,
which, in the judgment of the Placement Agent, is material and makes it
inadvisable to proceed with the placement and sale of the Bonds; and
the Placement Agent shall have received certificates that no material
adverse change has occurred or, if such a change has occurred, full
information with respect thereto.
(e) The Placement Agent shall receive such
documentation as it may reasonably request to evidence that the
Borrower has received all necessary state and local licenses and
approvals from applicable state and local governmental authorities
required on the part of the Borrower to be obtained in connection with
the execution and delivery of the Loan Agreement and this Placement
Agreement and the Borrower's consummation of the transactions
contemplated thereby and by the Placement Memorandum.
(f) The Placement Agent shall receive such additional
documentation as it may reasonably request to evidence compliance with
applicable law, the validity of the Resolutions, the Bonds, the
Indenture, the Loan Agreement, the Letter of Credit, the Participating
Bank Agreement, the Reimbursement Agreement, the Pledge Agreement, the
Remarketing Agreement, this Placement Agreement and all other documents
delivered by the Borrower in connection with the financing of the
Project and to demonstrate the status of the offering of the Bonds
under the Securities Act.
(g) The Bonds shall have been rated at least "Aa3" by
Moody's Investors Service.
Section 9. Events Permitting Placement Agent to Terminate. The
Placement Agent may terminate its obligation to arrange for the placement of the
Bonds at any time before Closing if any of the following occur:
(a) Legislative, executive or regulatory action or a
court decision which, in the judgment of the Placement Agent, casts
sufficient doubt on the legality of obligations such as the Bonds, or
the exclusion of interest on obligations such as the Bonds from gross
income for federal income tax purposes, so as to impair materially the
marketability thereof;
(b) Any action by the Securities and Exchange
Commission or a court which would require any registration under the
Securities Act, in connection with the issuance, placement or sale of
the Bonds, or qualification of the Indenture under the Trust Indenture
Act of 1939, as amended;
(c) Any general suspension of trading in securities
on the New York Stock Exchange or the establishment by the New York
Stock Exchange, by the Securities
-11-
<PAGE>
and Exchange Commission, by any federal or state agency or by the
decision of any court, of any limitation on prices for such trading, or
any outbreak of hostilities or occurrence of any other national or
international calamity or crisis, the effect of which on the financial
markets of the United States shall be such as to make it impracticable
for the Placement Agent to proceed with the placement of the Bonds; or
(d) Any event or condition which, in the judgment of
the Placement Agent, renders untrue or incorrect, in any material
respect as of the time to which the same purports to relate, the
information contained in the Placement Memorandum, or which requires
that information not reflected in the Placement Memorandum should be
reflected therein in order to make the statements and information
contained therein not misleading in any material respect as of such
time.
If the Placement Agent terminates its obligations to place the Bonds because any
of the conditions specified in Section 8 or 9 shall not have been fulfilled or
shall have occurred at or before the Closing, such termination shall not result
in any liability on the part of the Issuer or the Placement Agent.
Section 10. Notices and Other Actions. All notices, demands
and formal actions hereunder shall be in writing mailed, telegraphed or
delivered to:
The Issuer:
Montgomery County Industrial
Development Authority
#3 Stony Creek Office Center
Suite 320
151 West Marshall Street
Norristown, PA 19401
Attention: Executive Director
-12-
<PAGE>
The Borrower:
Neose Technologies, Inc.
102 Witmer Road
Horsham, PA 19044
Attention: President
With a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attention: Lynn Axelroth, Esquire
The Placement Agent:
CoreStates Capital Markets, a division of
CoreStates Bank, N.A.
600 Penn Street, Second Floor
Reading, PA 19602
Attention: Ms. Angel Helm
Senior Vice President
Section 11. Governing Law. This Placement Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.
Section 12. Assignment; Successors and Assigns. The rights and
obligations of the Borrower and the Issuer hereunder shall not be assignable
without the prior written consent of the Placement Agent. This Placement
Agreement will inure to the benefit of and be binding upon the parties hereto
and their successors and assigns, and will not confer any rights upon any other
persons except that the Purchasers shall be beneficiaries of the representations
in Sections 4 and 5 hereof.
Section 13. Counterparts. This Placement Agreement may be
executed in any number of counterparts, all of which taken together shall be one
and the same instrument, and any parties hereto may execute this Placement
Agreement by signing any such counterpart.
Section 14. Expenses. Whether or not the Bonds are sold by the
Issuer, the Placement Agent shall be under no obligation to pay any fees or
expenses incident to the performance of the obligations of the Issuer. All fees,
expenses and costs to effect the authorization, preparation, issuance, delivery,
placement and sale of the Bonds (including without limitation the Issuer's fees
and legal and other expenses), the fees and disbursements of Bond Counsel, the
placement fee and expenses (including legal, travel and newspaper "tombstone"
advertisement expenses) of the Placement Agent and the expenses and costs for
the preparation, printing,
-13-
<PAGE>
photocopying, execution and delivery of the Placement Memorandum, the Bonds, the
Indenture, the Loan Agreement, the Letter of Credit, the Participating Bank
Agreement, the Reimbursement Agreement, the Pledge Agreement, the Remarketing
Agreement, this Placement Agreement and all other documents contemplated hereby
and/or delivered at Closing, shall be paid by the Borrower or by the Trustee
from moneys deposited in the Project Fund established under the Indenture
pursuant to appropriate closing statements and/or requisitions signed and
delivered by the Borrower.
-14-
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Borrower and the Placement
Agent have caused their duly authorized representatives to execute and deliver
this Placement Agreement as of the date first written above.
[SEAL] MONTGOMERY COUNTY INDUSTRIAL
DEVELOPMENT AUTHORITY
Attest: /s/ Gerald J. Birkelbach By: /s/ Sherry L. Horowitz
------------------------------- -------------------------------
(Assistant) Secretary Chairperson or Vice Chairman
[SEAL] NEOSE TECHNOLOGIES, INC.
Attest: /s/ A. Brian Davis By: /s/ P. Sherrill Neff
--------------------------------- -------------------------------
Secretary President
[SEAL]
CORESTATES CAPITAL MARKETS, A
DIVISION OF CORESTATES BANK, N.A.
By: /s/ Wade Johnson
--------------------------------
Senior Vice President
This execution page is part of the Placement Agreement, dated March 20, 1997
among Montgomery County Industrial Development Authority, Neose Technologies,
Inc. and CoreStates Capital Markets, a division of CoreStates Bank, N.A..
-15-
<PAGE>
LIST OF EXHIBITS OMITTED
EXHIBIT A - Points to Be Covered in Opinion of Bond Counsel
EXHIBIT B - Points to be Covered in Supplemental Opinion of Bond Counsel
EXHIBIT C - Points to be Covered in Preference Opinion of Bond Counsel
EXHIBIT D - Points to be Covered in Opinion of Issuer Counsel
EXHIBIT E - Points to be Covered in Opinion of Borrower Counsel
EXHIBIT F - Points to be Covered in Opinion of Bank Counsel
EXHIBIT G - CERTIFICATE OF BANK
EXHIBIT H - Certificate of Borrower
EXHIBIT I - Certificate of Issuer
The Registrant hereby agrees to furnish supplementally a copy of any omitted
exhibit to the Securities and Exchange Commission upon request.
Exhibit 10.12
$8,400,000
MONTGOMERY COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
FEDERALLY TAXABLE VARIABLE RATE DEMAND REVENUE BONDS
(NEOSE TECHNOLOGIES, INC. PROJECT), SERIES B OF 1997
REMARKETING AGREEMENT
Neose Technologies, Inc.
102 Witmer Road
Horsham, PA 19044
Attention: P. Sherrill Neff, President
Dear Sirs:
This confirms the agreement between CORESTATES CAPITAL
MARKETS, A DIVISION OF CORESTATES BANK, N.A., (the "Remarketing Agent") and
NEOSE TECHNOLOGIES, INC., a Delaware corporation (the "Borrower"), for the
undersigned to act as exclusive remarketing agent for the above-captioned Bonds
(the "Bonds"). This Agreement is dated as of March 1, 1997, but effective on the
date of issuance of the Bonds.
The Bonds are being issued pursuant to a Trust Indenture,
dated as of March 1, 1997 (the "Indenture") between Montgomery County Industrial
Development Authority (the "Issuer") and Dauphin Deposit Bank and Trust Company,
as trustee (the "Trustee") and are supported by an irrevocable Letter of Credit
issued by CoreStates Bank, N.A. (as issuer of the Letter of Credit, the "Bank")
to the Trustee. All capitalized terms and phrases used herein and not defined
herein shall have the meanings specified in the Indenture.
1. Acceptance of Appointment of Remarketing Agent;
Responsibilities of Remarketing Agent.
(a) Subject to the terms and conditions herein contained,
CoreStates Capital Markets, a division of CoreStates Bank, N.A. hereby accepts
its appointment as Remarketing Agent under the Indenture in connection with the
placement and sale of Bonds, from time to time, subsequent to the initial
placement, issuance and sale of the Bonds and hereby accepts all of the duties
and obligations imposed on it under the Indenture as Remarketing Agent,
including, without limitation, the Remarketing Agent's obligations under the
Indenture to:
(i) hold all Bonds delivered to it by the Trustee under
the Indenture for delivery to the Holders thereof;
-1-
<PAGE>
(ii) hold all moneys representing the purchase price of
Bonds for delivery to the Trustee pursuant to the Indenture for the
benefit of the persons entitled to receive the payment of such
purchase price (such moneys to be held uninvested); and
(iii) keep such books and records as shall be consistent
with prudent industry practice and make such books and records
available for inspection by the Issuer, the Trustee and the Borrower
at all reasonable times.
(b) Subject to the terms and conditions herein contained,
the Remarketing Agent, upon timely receipt of appropriate notice pursuant to the
Indenture with respect to any Bonds, shall exercise its best efforts to arrange
for the sale of such Bonds in the principal amount described in such notice, at
a purchase price equal to the principal amount thereof plus accrued interest
thereon, if any, on the purchase date in respect of which such notice is given.
(c) It is understood and agreed that no assurance can be
given that any such purchases will be consummated on any purchase date, and it
is further understood and agreed that the Remarketing Agent shall in no respect
be deemed to be warranting that any such purchases will be consummated on the
purchase date or to be assuming any liability or undertaking any obligation of
any nature in the event any such purchases shall not be consummated on the
purchase date.
(d) The Remarketing Agent agrees that its duties hereunder
will include the determination of interest rates to be borne by the Bonds as set
forth in the Indenture.
(e) The Remarketing Agent may cease its efforts to arrange
for the sale of the Bonds with immediate effect if it determines that for any
reason, including without limitation: (i) a pending or proposed change in
applicable tax laws; (ii) a material adverse change in the financial condition
of the Borrower or the Bank; (iii) a banking moratorium; (iv) hostilities
adversely affecting the market conditions generally or for municipal
obligations; (v) a down-rating of the Bonds; (vi) an imposition of material
restrictions on the Bonds or similar obligations; or (vii) a material
misstatement or omission in the Disclosure Materials (as such phrase is defined
in Section 2 hereof), it is not advisable to attempt to remarket the Bonds.
(f) The Remarketing Agent shall have the right to suspend
or cancel forthwith its obligations under this Agreement and the Indenture (it
being agreed that any such suspension or cancellation shall not constitute a
default hereunder or under the Indenture on the part of the Remarketing Agent)
by notifying the Borrower, the Trustee, the Issuer, Jefferson Bank (the
"Participating Bank") and the Bank of its election to do so, if at any time any
of the following events occurs:
(i) An Event of Default under the Indenture, the
Participating Bank Agreement or the Reimbursement Agreement or an
event which with the giving of notice or lapse of time or both would
be an Event of Default under the Indenture, the
-2-
<PAGE>
Participating Bank Agreement or the Reimbursement Agreement has
occurred, whether or not the Bank or the Participating Bank has
notified the Trustee to draw on the Letter of Credit; or
(ii) A Rating Service shall revise, withdraw or
otherwise change its rating (or one of its ratings) of the Bonds in
a manner that adversely affects the market for the Bonds; or
(iii) Intentionally Omitted; or
(iv) Legislation shall have been enacted by the Congress
of the United States of America or by the Commonwealth of
Pennsylvania, or a decision shall have been rendered by a court of
the United States of America or the Commonwealth of Pennsylvania, or
a regulation or ruling shall have been issued by a federal authority
or an authority of the Commonwealth of Pennsylvania, which has the
effect, either directly or indirectly, of materially adversely
affecting the Remarketing Agent's ability to remarket the Bonds; or
(v) Any fee of the Remarketing Agent under this
Agreement remains unpaid for a period of 30 days after such fee
becomes due and payable.
(g) Anything herein or in the Indenture to the contrary
notwithstanding: (i) the Remarketing Agent's duties and obligations accepted
under this Agreement shall terminate on the date of conversion to a Term Mode;
(ii) the Remarketing Agent shall have no obligation under this Agreement to
determine the Term Rate in connection with the conversion of the interest rate
thereon to a Term Rate; and (iii) the Remarketing Agent shall have no obligation
under this Agreement to remarket Bonds upon a mandatory tender for purchase
pursuant to the Indenture.
(h) The Remarketing Agent represents as of the date hereof
that: (i) it is authorized by law to perform its duties and obligations as
Remarketing Agent under this Agreement and the Indenture; (ii) it routinely
engages in the remarketing of municipal securities such as the Bonds; and (iii)
it will settle all transactions pursuant to industry practice within five days
of execution.
(i) Executed copies of this Agreement shall be delivered to
the Issuer and the Trustee for the purpose of evidencing the Remarketing Agent's
acceptance of its duties and obligations under the Indenture as required by
Section 8.13 thereof.
(j) Except as otherwise provided in the Indenture, the
Remarketing Agent agrees that it will not remarket to the Issuer, the Borrower
or any Affiliate, any Bonds to be purchased pursuant to Section 4.01 or 4.02 of
the Indenture.
-3-
<PAGE>
2. Furnishings of Disclosure Materials.
(a) The Borrower agrees to furnish the Remarketing Agent
with as many copies as the Remarketing Agent may reasonably request of the final
Placement Memorandum, dated March 20, 1997 (the "Placement Memorandum"),
relating to the Bonds.
(b) If the Remarketing Agent reasonably determines that it
is necessary to use any other disclosure materials in connection with its
remarketing of Bonds, the Remarketing Agent will so notify the Borrower, and the
Remarketing Agent shall not be obligated to remarket Bonds until it has been
provided (and the Borrower will use its best efforts so to provide) such
disclosure materials reasonably satisfactory to the Remarketing Agent and its
counsel for the remarketing of the Bonds. The Placement Memorandum and any such
disclosure materials, together with any amendments and supplements thereto and
any other information provided to the Remarketing Agent pursuant to this Section
2, are herein referred to as the "Disclosure Materials". The Borrower will
supply the Remarketing Agent, at no expense to the Remarketing Agent, with as
many copies as the Remarketing Agent may reasonably request, of all Disclosure
Materials, and will use its best efforts to amend such materials (and any
documents that may be incorporated by reference therein) so that such materials
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. In connection with any
Disclosure Materials, the Borrower will use its best efforts to provide the
Remarketing Agent with such certificates, opinions of counsel (including bond
counsel) and other support for the information contained therein as the
Remarketing Agent and its counsel may reasonably request. All fees and expenses
reasonably incurred by the Remarketing Agent in connection with such revisions
and updating, including without limitation the costs of printing and the fees
and expenses of counsel to the Remarketing Agent and of bond counsel, shall be
paid by the Borrower.
(c) If, at any time during the term of this Agreement, any
event known to the Borrower relating to or affecting the Borrower, the Project
or the Bonds shall occur which materially affects the adequacy of the disclosure
set forth in the Disclosure Materials, including the correctness of any fact
contained in or the propriety of omitting any fact from any Disclosure
Materials, the Borrower will promptly notify the Remarketing Agent in writing of
the circumstances and details of such event.
3. Representations, Warranties, Covenants and Agreements of
the Borrower. The Borrower represents, warrants, covenants and agrees with the
Remarketing Agent as follows:
(a) This Agreement has been duly authorized, executed and
delivered by the Borrower and performance by the Borrower hereunder will not
conflict with, or result in a breach of any of the provisions of, or constitute
a default (or an event which with the giving of notice or the lapse of time or
both would constitute a default) under, any agreement or
-4-
<PAGE>
instrument by which the Borrower is bound or violate any law, administrative
regulation or court order to which the Borrower is subject.
(b) The Borrower will diligently cooperate with the
Remarketing Agent to qualify the Bonds to be remarketed by the Remarketing Agent
pursuant to this Agreement under the securities or "Blue Sky" laws of such
jurisdictions as the Remarketing Agent may request; provided that in doing so
the Borrower shall not be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or take any action which would
subject it to the general service of process in any jurisdiction where it is not
now so subject.
(c) The information set forth in the Disclosure Materials
under the caption "THE BORROWER" does not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made not
misleading. Furthermore, nothing has come to the Borrower's attention that leads
it to believe the Disclosure Materials contain and (after being amended or
supplemented, if appropriate) will contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that no representation is made with respect to the information set forth
under the caption "THE ISSUER" (relating to the Issuer) and in Appendix A
thereto (relating to the Bank).
(d) There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, agency, department,
board or body or before any arbitrator, pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower: (i) which would be
required to be disclosed in any Disclosure Materials in order that they not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they are made, not misleading and which is not disclosed in such
Disclosure Materials; or (ii) wherein an unfavorable decision, ruling or finding
would, in any way, materially adversely affect the transactions contemplated
hereby or the validity or enforceability of this Agreement, the Bonds, the
Indenture, the Loan Agreement or the Letter of Credit.
(e) All required consents, rulings and approvals of
governmental authorities (other than registration or filing requirements of
"Blue Sky" authorities, as to which no representation is made) required in
connection with the execution and delivery by the Borrower of this Agreement and
the performance by the Borrower of its obligations hereunder have been obtained
and are in full force and effect.
4. Term of Agreement; Termination. This Agreement shall become
effective upon execution and delivery by the Remarketing Agent and the Borrower
and shall continue in full force and effect to and including the date final
payment on the Bonds is made or the date the Bonds are required to be purchased
pursuant to a mandatory tender for purchase pursuant to the Indenture, subject
to the right of the Remarketing Agent to resign and the right of the Borrower to
request the Remarketing Agent to resign as set forth in this Section 4. The
-5-
<PAGE>
Remarketing Agent may be removed by the Issuer, with the written consent of the
Borrower, at any time on 30 days written notice, by an instrument, signed by the
Issuer delivered to the Remarketing Agent, the Trustee, the Participating Bank
and the Bank. The Remarketing Agent may resign at any time on 30 days written
notice to the Borrower, the Issuer, the Trustee, the Participating Bank and the
Bank. Following termination of this Agreement, the provisions of Sections 7 and
9 of this Agreement will continue in effect as to transactions prior to the date
of such termination, and each party will pay the other any amounts owing at the
time of such termination.
5. Payment of Fees and Expenses.
(a) The Borrower shall pay to the Remarketing Agent, as
compensation for the Remarketing Agent's services hereunder: (1) on the date of
execution and delivery of this Agreement, a fee equal to $8,400; and (2) on each
March 1 thereafter a fee equal to one tenth of one percent (.10%) of the
aggregate principal amount of the Bonds outstanding on such March 1. Such fees
are payable at the Remarketing Agent's address set forth in Section 8 hereof,
are nonrefundable in the event Bonds are thereafter redeemed or paid, and are
subject to change upon 90 days written notice by the Remarketing Agent to the
Borrower.
(b) Expenses of the Remarketing Agent payable by the
Borrower shall include, without limitation, any costs of funds incurred by the
Remarketing Agent in connection with the payment of the purchase price of Bonds
prior to the receipt of funds drawn under the Letter of Credit or the receipt of
remarketing proceeds as provided in the Indenture. Nothing herein shall be
construed as obligating CoreStates Capital Markets, a division of CoreStates
Bank, N.A. in its capacity as Remarketing Agent to pay the purchase price of any
Bond from any of its own funds. The Remarketing Agent will not be entitled to
compensation accruing after this Agreement shall have been terminated.
6. Conditions to Remarketing Agent's Obligations. The
obligations of the Remarketing Agent under this Agreement shall be subject, at
the option of the Remarketing Agent, to the satisfaction of each of the
following conditions:
(i) to the extent that any Disclosure Materials shall
have been provided to the Remarketing Agent in connection with the
remarketing of the Bonds to be purchased on any date, the
Remarketing Agent shall have received such certificates, opinions of
counsel (including bond counsel) and other support for the
information contained in such Disclosure Materials as the
Remarketing Agent or its counsel shall have reasonably requested
pursuant to Section 2(b) hereof; and
(ii) the representations and warranties of the Borrower
contained herein shall be true and correct in all material respects
on and as if made on any date on which the Bonds are to be
remarketed.
-6-
<PAGE>
7. Indemnification; Contribution.
(a) To the extent permitted by applicable law, the Borrower
will indemnify and hold harmless the Remarketing Agent and each director,
officer and employee of the Remarketing Agent and each person who controls the
Remarketing Agent within the meaning of Section 15 of the Securities Act of
1933, as amended (such Act being herein called the "Securities Act", and any
such person being herein sometimes called an "Indemnified Party"), against any
and all losses, claims, damages or liabilities, joint or several, to which such
Indemnified Party may become subject under any statute or at law or in equity or
otherwise, and shall reimburse any such Indemnified Party for any legal or other
expenses incurred by it in connection with investigating any claims against it
and defending any actions, but only to the extent that such losses, claims,
damages, liabilities or actions arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact contained under the
caption "THE BORROWER" or describing the operation and affairs of the Borrower
in any Disclosure Materials or any omission or alleged omission to state therein
a material fact necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading; or (ii) an allegation
or determination that registration under the Securities Act was required in
connection with the offering or sale of the Bonds or the Indenture should have
been qualified under the Trust Indenture Act of 1939, as amended.
(b) If any action or claim shall be brought or asserted
against an Indemnified Party in respect of which indemnity may be sought from
the Borrower, such Indemnified Party shall promptly notify the Borrower in
writing, and the Borrower shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party and the
payment of all expenses. Such Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless: (i) the employment thereof has been specifically
authorized by the Borrower in writing; (ii) the Borrower has failed to assume
promptly the defense and employ counsel reasonably satisfactory to such
Indemnified Party; or (iii) the named parties to any such action (including any
impleaded parties) include such Indemnified Party and the Borrower, and such
Indemnified Party shall have been advised by counsel that there may be one or
more legal defenses available to it which are different from or additional to
those available to the Borrower (in which case the Borrower shall not have the
right to assume the defense of such action on behalf of such Indemnified Party),
in any of which events the fees and expenses of such counsel shall be borne by
the Borrower. The Borrower shall not be liable for any settlement of any such
action or claim effected without its consent (which consent shall not be
unreasonably withheld), but if settled with its consent or if there is a final
judgment for the plaintiff in any such action, the Borrower will indemnify and
hold harmless each Indemnified Party from and against any loss or liability by
reason of such settlement or judgment. The indemnity provided in this Section
includes reimbursement for expenses incurred by the Indemnified Party in
investigating the claim and in defending it in accordance with this Section.
-7-
<PAGE>
(c) In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in paragraphs (a) and
(b) of this Section is due in accordance with its terms but is for any reason
unavailable or insufficient, the Borrower shall contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending the same) to
which the Remarketing Agent may be subject in such proportion so that the
Borrower bears them in a portion that considers the benefits received from the
remarketing of the Bonds, the Borrower's knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct or prevent any statement or omission and any other
equitable considerations appropriate under the circumstances; and no person
(including the Remarketing Agent) guilty of fraudulent misrepresentation within
the meaning of Section 11(f) of the Securities Act shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section, each person who controls the
Remarketing Agent within the meaning of Section 15 of the Securities Act shall
have the same rights as the Remarketing Agent. Any party entitled to
contribution shall, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this paragraph
(c), notify the Borrower, but the omission so to notify the Borrower shall not
relieve the Borrower from any other obligation it may have hereunder.
(d) The agreements contained in this Section 7 shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Indemnified Party or delivery of the Bonds.
8. Notices. All notices under this Agreement shall be in
writing and mailed, delivered or transmitted to:
The Remarketing Agent:
CoreStates Capital Markets, a division of
CoreStates Bank, N.A.
600 Penn Street, Second Floor
Reading, PA 19602
Attention: Municipal Syndicate Desk
Telecopier No.: (610) 655-0934
-8-
<PAGE>
The Borrower:
Neose Technologies, Inc.
102 Witmer Road
Horsham, PA 19044
Attention: President
Telecopier: (215) 441-5896
With a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street
Philadelphia, PA 19103
Attention: Lynn Axelroth, Esquire
Telecopier: (215) 864-8999
Any party may, by notice given under this Agreement, designate another address
to which notices hereunder shall be directed. The Remarketing Agent shall accept
delivery of Bonds from the Trustee at the notice address.
9. Remarketing Agent's Liabilities. The Remarketing Agent
shall incur no liability to the Borrower, the Issuer or any other party by its
actions as Remarketing Agent, except for gross negligence, willful misconduct or
breach of the terms of this Agreement.
10. Ownership of Bonds by Remarketing Agent. CoreStates
Capital Markets, a division of CoreStates Bank, N.A., in its individual
capacity, either as principal or agent, may buy, sell, own and hold the Bonds,
and may join in any action which any Holder may be entitled to take with like
effect as if it did not act as Remarketing Agent hereunder. CoreStates Capital
Markets, a division of CoreStates Bank, N.A. or any entity with which it is
affiliated, in its individual capacity, either as principal or agent, may also
engage in or be interested in any financial or other transaction with the
Borrower and may also act as Trustee, the Participating Bank and/or issuer of
the Letter of Credit as freely as if CoreStates Capital Markets, a division of
CoreStates Bank, N.A., did not act as Remarketing Agent hereunder.
11. Intention of Parties. It is the express intention of the
parties hereto that no purchase, sale or transfer of any Bonds, as herein
provided, shall constitute or be construed to be the extinguishment of any Bond
or the indebtedness represented thereby or the reissuance of any Bond or the
refunding of any indebtedness represented thereby.
12. Miscellaneous.
(a) The rights and obligations of the respective parties
hereto may not be assigned or delegated to any other person without the consent
of the other parties hereto,
-9-
<PAGE>
except that the Remarketing Agent may assign its rights and obligations
hereunder to an affiliate of the Remarketing Agent. This Agreement will inure to
the benefit of and be binding upon the Borrower and the Remarketing Agent and
their respective successors and assigns, and, except as expressly set forth
herein, will not confer any rights upon any other person.
(b) All of the representations, warranties, covenants and
agreements of the Borrower and the Remarketing Agent in this Agreement shall
remain operative and in full force and effect, regardless of: (i) any
investigation made by or on behalf of the Remarketing Agent or the Borrower; or
(ii) delivery of and payment for any Bonds hereunder.
(c) Section headings have been inserted in this Agreement
as a matter of convenience of reference only, are not a part of this Agreement
and shall not be used in the interpretation of any provisions of this Agreement.
(d) If any provision of this Agreement 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 jurisdictions, or in all
jurisdictions, because it conflicts with any provision of any constitution,
statute or rule of public policy or for any other reason, 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.
(e) This Agreement may be executed in several counterparts
each of which shall be regarded as an original and all of which shall constitute
one and the same document.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
(g) By executing this Agreement in the respective places
provided below, the Remarketing Agent and the Borrower agree to be legally bound
by the provisions of this Agreement.
-10-
<PAGE>
Very truly yours,
CORESTATES CAPITAL MARKETS, A
DIVISION OF CORESTATES BANK, N.A.,
By: /s/ Angel Helm
-------------------------------
Senior Vice President
Accepted and agreed to as of the date first above written:
NEOSE TECHNOLOGIES, INC.
By: /s/ P. Sherrill Neff
---------------------------------
P. Sherrill Neff, President
Attest: /s/ A. Brian Davis
-----------------------------
Secretary
(SEAL)
-11-
NEOSE TECHNOLOGIES, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(Amended and Restated as of March 16, 1996
and as of April 23, 1997)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1995 Stock Option/Stock Issuance Plan (the "Plan") is
intended to promote the interests of Neose Technologies, Inc., a Delaware
corporation (the "Corporation"), by providing eligible individuals with the
opportunity to obtain an equity interest, or otherwise increase their equity
interest, in the Corporation. This Plan shall serve as the successor equity
incentive program to the Corporation's 1992 Stock Option Plan and 1991 Stock
Option Plan.
B. The Discretionary Option Grant and Stock Issuance Programs
of the Plan became effective immediately upon the adoption of the Plan by the
Corporation's Board of Directors. Such date is hereby designated the "Plan
Effective Date." The Automatic Option Grant Program became effective upon the
execution and final pricing of the Underwriting Agreement for the initial public
offering of the Corporation's Common Stock. The execution date of such
Underwriting Agreement is hereby designated as the Automatic Option Program
Effective Date. The Director Fee Option Grant Program became effective on March
16, 1996.
II. DEFINITIONS
A. For the purposes of this Plan, the following definitions
shall be in effect:
Board: the Corporation's Board of Directors.
Change in Control: a change in ownership or control of the
Corporation effected through either of the following transactions:
-- the direct or indirect acquisition by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's shareholders which
the Board does not recommend such shareholders to accept, or
-- a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board members ceases,
by reason of one or more contested elections for Board membership, to be
comprised of individuals who either (a) have been Board members continuously
since the beginning of such period or (b) have been elected or nominated for
election as Board members during such period by at least a majority of the Board
members described in clause (a) who were still in office at the time such
election or nomination was approved by the Board.
Code: the Internal Revenue Code of 1986, as amended.
Committee: the committee of two (2) or more non-employee
Board members appointed by the Board to administer the Plan.
Common Stock: shares of the Corporation's common stock.
<PAGE>
Corporate Transaction: either of the following shareholder-
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which
securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons holding
those securities immediately prior to such transaction, or
(ii) the sale, transfer or other
disposition of all or substantially all of the Corporation's assets in
complete liquidation or dissolution of the Corporation.
Employee: an individual who performs services while in the
employ of the Corporation or one or more parent or subsidiary corporations,
subject to the control and direction of the employer entity not only as to the
work to be performed but also as to the manner and method of performance.
Exercise Date: the date on which the Corporation shall have
written notice of the option exercise.
Fair Market Value: the Fair Market Value per share of Common
Stock determined in accordance with the following provisions:
-- If the Common Stock is at the time traded on the Nasdaq
National Market, the Fair Market Value shall be the closing selling price per
share on the date in question, as such price is reported by the National
Association of Securities Dealers on the Nasdaq National Market or any successor
system. If there is no reported closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
-- If the Common Stock is at the time listed or admitted to
trading on any national securities exchange, then the Fair Market Value shall be
the closing selling price per share on the date in question on the exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of transactions
on such exchange. If there is no reported sale of Common Stock on such exchange
on the date in question, then the Fair Market Value shall be the closing selling
price on the exchange on the last preceding date for which such quotation
exists.
-- If the Common Stock is on the date in question neither
listed nor admitted to trading on any national securities exchange nor traded on
the Nasdaq National Market, then the Fair Market Value of the Common Stock on
such date shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
Hostile Take-Over: a change in ownership of the Corporation
effected through the following transaction:
-- the direct or indirect acquisition by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's shareholder's which
the Board does not recommend such shareholders to accept, and
-- the acceptance of more than fifty percent (50%) of the
securities so acquired in such tender or exchange offer from holders other than
the officers and directors of the Corporation subject to the short-swing profit
restrictions of Section 16 of the 1934 Act.
Incentive Option: a stock option which satisfies the
requirements of Code Section 422.
2
<PAGE>
Involuntary Termination: the termination of the Service of any
Optionee or Participant which occurs by reason of:
-- such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces his
or her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and any non-discretionary
and objective-standard incentive payment or bonus award) by more than ten
percent (10%) in the aggregate or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without the individual's
consent.
Misconduct: the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such individual of confidential information or trade secrets of the
Corporation or its parent or subsidiary corporations, any failure to perform
specific lawful direction of the Corporation's Board or officers of the
Corporation, any refusal or neglect to perform such individual's duties, any
conviction of, or entering of a plea of nolo contendere to, a crime which
constitutes a felony or any other Misconduct by such individual adversely
affecting the business or affairs of the Corporation. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation or any parent or subsidiary may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other individual in the
Service of the Corporation.
1934 Act: the Securities Exchange Act of 1934, as amended.
Non-Statutory Option: a stock option not intended to meet the
requirements of Code Section 422.
Optionee: a person to whom an option is granted under the
Discretionary Option Grant Program, the Automatic Option Grant Program or the
Director Fee Option Grant Program.
Participant: a person who is issued Common Stock under the
Stock Issuance Program.
Permanent Disability: the inability of an individual to engage
in any substantial gainful activity, by reason of any medically determinable
physical or mental impairment which is expected to result in death or which has
lasted or can be expected to last for a period of not less than twelve (12)
months.
Plan Administrator: either the Board or the Committee, to the
extent the Committee is at the time responsible for the administration of the
Plan in accordance with Section IV of Article One.
Predecessor Plans: the Corporation's 1992 Stock Option Plan
and 1991 Stock Option Plan.
Service: the performance of services on a periodic basis for
the Corporation (or any parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the board of directors or an independent
consultant, except to the extent otherwise specifically provided in the
applicable stock option or stock issuance agreement.
Section 12(g) Registration Date: the date on which the initial
registration of the Common Stock under Section 12(g) of the 1934 Act became
effective.
Take-Over Price: the greater of (a) the Fair Market Value per
share of Common Stock on the date the particular option to purchase such stock
is surrendered to the Corporation in connection with a Hostile Take-Over or (b)
the highest reported price per share of Common Stock paid by the tender offeror
in effecting such Hostile Take-Over. However, if the canceled option is an
Incentive Option, then the Take-Over Price shall not exceed the clause (a) price
per share.
10% Shareholder: the owner of stock (as determined under Code
Section 424(d)) possessing ten (10%) percent or more of the total combined
voting power of all classes of stock of the Corporation or any parent or
subsidiary corporation.
3
<PAGE>
B. The following provisions shall be applicable in determining
the parent and subsidiary corporations of the Corporation:
Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation
shall be considered to be a parent of the Corporation,
provided each such corporation in the unbroken chain (other
than the Corporation) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total
combined voting power of all classes or stock in one of the
other corporations in such chain.
Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation
shall be considered to be a subsidiary of the Corporation,
provided each such corporation (other than the last
corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one
of the other corporations in such chain.
III. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate components:
the Discretionary Option Grant Program specified in Article Two, the Stock
Issuance Program specified in Article Three, the Automatic Option Grant Program
specified in Article Four and the Director Fee Option Grant Program specified in
Article Five. Under the Discretionary Option Grant Program, eligible individuals
may at the discretion of the Plan Administrator be granted options to purchase
shares of Common Stock in accordance with the provisions of Article Two at a
price not less than eighty-five percent (85%) of the Fair Market Value of such
shares on the grant date. Under the Stock Issuance Program, eligible individuals
may be issued shares of Common Stock directly, either through the immediate
purchase of the shares (at Fair Market Value or at discounts of up to 15%) or as
a bonus tied to the individual's performance of services or the Corporation's
attainment of prescribed milestones. Under the Automatic Option Grant Program,
each individual serving as a non-employee Board member on the Automatic Option
Grant Program Effective Date and each individual who first joins the Board as a
non-employee director at any time after such Effective Date shall at periodic
intervals receive option grants to purchase shares of Common Stock in accordance
with the provisions of Article Four, with the first such grants to be made on
such Effective Date. Under the Director Fee Option Grant Program, each
non-employee Board member may elect to apply all or a portion of his or her
annual retainer fee otherwise payable in cash to a special below market option
grant.
B. Unless the context clearly indicates otherwise, the
provisions of Articles One and Six shall apply to all equity programs under the
Plan and shall accordingly govern the interests of all individuals under the
Plan.
IV. ADMINISTRATION OF THE PLAN
A. The Discretionary Option Grant and Stock Issuance Programs
shall be administered solely and exclusively by the Committee, subject to such
conditions and limitations as the Board may decide, to the extent permissible
under applicable securities and tax laws requirements. No non-employee Board
member shall be eligible to serve on the Committee if such individual has,
within the relevant period designated below received an option grant or direct
stock issuance under this Plan or any other stock plan of the Corporation (or
any parent or subsidiary corporation), other than pursuant to the Automatic
Option Grant or Director Fee Option Grant Program:
--- for each of the initial members of the Committee, the
period commencing with the Section 12(g) Registration Date and ending
with the date of his or her appointment to the Committee, or
--- for any successor or substitute member, the twelve (12)
month period immediately preceding the date of his or her appointment
to the Committee or (if shorter) the period commencing with the Section
12(g) Registration Date and ending with the date of his or her
appointment to the Committee.
B. Members of the Committee shall serve for such period of
time as the Board may determine and shall be subject to removal by the Board at
any time.
4
<PAGE>
C. The Plan Administrator shall have full power and authority
(subject to the express provisions of the Plan) to establish rules and
regulations for the proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding option
grants or stock issuances thereunder as it may deem necessary or advisable.
Decisions of the Plan Administrator shall be final and binding on all parties
who have an interest in the Discretionary Option Grant or Stock Issuance Program
or any outstanding option grant or share issuance thereunder.
D. Administration of the Automatic Option Grant and Director
Fee Option Grant Programs shall be self-executing in accordance with the express
terms and conditions of those programs, and the Plan Administrator shall
exercise no discretionary functions with respect to option grants made pursuant
to those programs.
V. OPTION GRANTS AND STOCK ISSUANCES
A. The persons eligible to participate in the Discretionary
Option Grant Program under Article Two and the Stock Issuance Program under
Article Three shall be limited to the following
(i) officers and other employees of the
Corporation (or any parent or subsidiary corporation);
(ii) non-employee members of the Board or
the non-employee members of the board of directors of any parent or subsidiary
corporation; and
(iii) consultants who provide valuable
services to the Corporation (or any parent or subsidiary corporation).
B. The non-employee Board members serving as Plan
Administrator shall not, during their period of service from and after the
Section 12(g) Registration Date, be eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs or in any other stock option, stock
purchase, stock bonus or other stock plan of the Corporation (or its parent or
subsidiary corporations). Such individuals shall, however, be eligible to
receive automatic option grants pursuant to Article Four and to participate in
the Director Fee Option Grant Program pursuant to Article Five.
C. The Plan Administrator shall have full authority to
determine, (i) with respect to the option grants made under the Discretionary
Option Grant Program, which eligible individuals are to receive option grants,
the time or times when such grants are to be made, the number of shares to be
covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times at which each
granted option is to become exercisable and the maximum term for which the
option may remain outstanding, and (ii) with respect to stock issuances under
the Stock Issuance Program, the number of shares to be issued to each
Participant, the vesting schedule (if any) to be applicable to the issued
shares, and the consideration to be paid by the Participant for such shares.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance
under the Plan and shall be drawn from either the Corporation's authorized but
unissued shares of Common Stock or from reacquired shares of Common Stock,
including shares repurchased by the Corporation on the open market. The maximum
number of shares of Common Stock which may be issued over the term of the Plan
shall not exceed 1,878,706* shares, subject to adjustment from time to time in
accordance with the provisions of this Section VI. Such authorized share reserve
is comprised of (i) the number of shares which remained for issuance, as of the
Plan Effective Date, under the Predecessor Plans as last approved by the
Corporation's shareholders, including the shares subject to the outstanding
options incorporated into this Plan and any
- --------
* Reflects the 1-for-3 stock split that was effected immediately prior to the
consummation of the initial public offering of the Common Stock.
5
<PAGE>
other shares which would have been available for future option grant under the
Predecessor Plans as last approved by the shareholders, plus (ii) an additional
increase of 333,333* shares authorized by the Board on the Plan Effective Date,
(iii) an additional increase of 600,000* shares authorized by the Board on
December 6, 1995, and (iv) an additional increase of 500,000 shares authorized
by the Board on March 19, 1997. As one or more outstanding options under the
Plan are exercised, the number of shares issued with respect to each such option
shall reduce, on a share-for-share basis, the number of shares available for
issuance under this Plan.
B. In no event shall the aggregate number of shares of Common
Stock for which any one individual participating in the Plan may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances for any given year exceed fifty percent (50%) of the total number of
shares for which stock options, separately exercisable stock appreciation rights
and direct stock issuances may be granted over the term of the Plan.
C. Should one or more outstanding options under this Plan
(including options incorporated from the Predecessor Plans) expire or terminate
for any reason prior to exercise in full (including any option canceled in
accordance with the cancellation-regrant provisions of Section IV of Article Two
of the Plan), then the shares subject to the portion of each option not so
exercised shall be available for subsequent issuance under the Plan. Shares
subject to any stock appreciation rights exercised under the Plan and all share
issuances under the Plan, whether or not the shares are subsequently repurchased
by the Corporation pursuant to its repurchase rights under the Plan, shall
reduce on a share-for-share basis the number of shares of Common Stock available
for subsequent issuance under the Plan. In addition, should the exercise price
of an outstanding option under the Plan be paid with shares of Common Stock or
should shares of Common Stock otherwise issuable under the Plan be withheld by
the Corporation in satisfaction of the withholding taxes incurred in connection
with the exercise of an outstanding option under the Plan or the vesting of a
direct share issuance made under the Plan, then the number of shares of Common
Stock available for issuance under the Plan shall be reduced by the gross number
of shares for which the option is exercised or which vest under the share
issuance, and not by the net number of shares of Common Stock actually issued to
the holder of such option or share issuance.
D. Should any change be made to the Common Stock issuable
under the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan, (ii) the maximum
amount and/or class of securities for which any one individual participating in
the Plan may be granted stock options, separately exercisable stock appreciation
rights and direct stock issuances for any given year under the Plan, (iii) the
number and/or class of securities for which automatic option grants are to be
subsequently made per eligible non-employee Board member under the Automatic
Option Grant Program, (iv) the number and/or class of securities and price per
share in effect under each option outstanding under the Discretionary Option
Grant, Automatic Option Grant or Director Fee Option Grant Program and (v) the
number and/or class of securities and price per share in effect under each
outstanding option incorporated into this Plan from the Predecessor Plans. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant
Program shall be authorized by action of the Plan Administrator and may, at the
Plan Administrator's discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees of the Corporation or its parent or
subsidiary corporations may only be granted Non-Statutory Options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each such instrument shall comply
with the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
6
<PAGE>
A. Exercise Price.
1. The exercise price per share shall be fixed by
the Plan Administrator in accordance with the following provisions:
(i) The exercise price per share of Common
Stock subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the Fair Market Value of such Common Stock on the grant date.
(ii) The exercise price per share of Common
Stock subject to a Non-Statutory Option shall in no event be less than
eighty-five percent (85%) of the Fair Market Value of such Common Stock on the
grant date.
(iii) If any individual to whom an
Incentive Option is granted is a 10% Shareholder, then the exercise price per
share shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the grant date.
2. The exercise price shall become immediately
due upon exercise of the option and shall, subject to the provisions of Section
I of Article Six, be payable in one or more of the forms specified below:
(i) cash or check made payable to the
Corporation,
(ii) in shares of Common Stock held by the
Optionee for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date, or
(iii) to the extent the option is exercised
for vested shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written instructions
(a) to a Corporation-designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such purchase and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale transaction.
3. Except to the extent such sale and
remittance procedure is utilized, payment of the exercise price for the
purchased shares must be made on the Exercise Date.
B. Term and Exercise of Options. Each option granted under
this Plan shall be exercisable at such time or times and during such period as
is determined by the Plan Administrator and set forth in the instrument
evidencing the grant. No such option, however, shall have a maximum term in
excess of ten (10) years measured from the grant date. During the lifetime of
the Optionee, the option, together with any related stock appreciation right,
shall be exercisable only by the Optionee and shall not be assignable or
transferable by the Optionee, except for a transfer of the option by will or by
the laws of descent and distribution following the Optionee's death.
C. Termination of Service.
1. Except to the extent otherwise provided
pursuant to subsection C.2 below, the following provisions shall govern the
exercise period applicable to any options held by the Optionee at the time of
cessation of Service or death:
(i) Should the Optionee cease to remain in
Service for any reason other than death, Permanent Disability or Misconduct,
then the period during which each outstanding option held by such Optionee is to
remain exercisable shall be limited to the three (3)-month period following the
date of such
7
<PAGE>
cessation of Service.
(ii) Should the Optionee's Service
terminate by reason of Permanent Disability, then the period during which each
outstanding option held by the Optionee is to remain exercisable shall be
limited to the twelve (12)-month period following the date of such cessation of
Service.
(iii) Should the Optionee die while holding
one or more outstanding options, then the period during which each such option
is to remain exercisable shall be limited to the twelve (12)-month period
following the date of the Optionee's death. During such limited period, the
option may be exercised by the personal representative of the Optionee's estate
or by the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution.
(iv) Should the Optionee's Service be
terminated for Misconduct, then all outstanding options held by the Optionee
shall terminate immediately and cease to be outstanding.
(v) Under no circumstances, however, shall
any such option be exercisable after the specified expiration date of the option
term.
(vi) During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the date of
the Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be exercisable for any vested shares for
which the option has not been exercised. However, the option shall, immediately
upon the Optionee's cessation of Service, terminate and cease to be outstanding
with respect to any option shares for which the option is not at that time
exercisable or in which the Optionee is not otherwise at that time vested.
2. The Plan Administrator shall have complete
discretion, exercisable either at the time the option is granted or at any time
while the option remains outstanding,
- to extend the period of time for which the option
is to remain exercisable following the Optionee's cessation of
Service or death from the limited period in effect under
subsection C.1 of this Section I of Article Two to such
greater period of time as the Plan Administrator shall deem
appropriate; provided that in no event shall such option be
exercisable after the specified expiration date of the option
term; and/or
- to permit one or more options held by the Optionee
under this Article Two to be exercised, during the limited
post-Service exercise period applicable under this paragraph
C, not only with respect to the number of vested shares of
Common Stock for which each such option is exercisable at the
time of the Optionee's cessation of Service but also with
respect to one or more subsequent installments for which the
option would otherwise have become exercisable had such
cessation of Service not occurred.
D. Shareholder Rights. An Optionee shall have no
shareholder rights with respect to any shares covered by the option until such
individual shall have exercised the option and paid the exercise price for the
purchased shares.
E. Unvested Shares. The Plan Administrator shall have the
discretion to authorize the issuance of unvested shares of Common Stock under
the Plan. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares. The terms and conditions upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
agreement evidencing such repurchase right. All outstanding repurchase rights
under the Plan shall terminate automatically upon the occurrence of any
Corporate Transaction, except to the extent the repurchase rights are expressly
assigned to the successor corporation (or parent thereof) in connection with the
Corporate
8
<PAGE>
Transaction.
F. First Refusal Rights. Until such time as the Corporation's
outstanding shares of Common Stock are first registered under Section 12(g) of
the 1934 Act, the Corporation shall have the right of first refusal with respect
to any proposed sale or other disposition by the Optionee (or any successor in
interest by reason of purchase, gift or other transfer) of any shares of Common
Stock issued under the Plan. Such right of first refusal shall be exercisable in
accordance with the terms and conditions established by the Plan Administrator
and set forth in the agreement evidencing such right.
II. INCENTIVE OPTIONS
Incentive Options may only be granted to individuals who are
Employees, and the terms and conditions specified below shall be applicable to
all Incentive Options granted under the Plan. Except as modified by the
provisions of this Section II, all the provisions of Articles One, Two and Six
of the Plan shall be applicable to all Incentive Options granted hereunder. Any
Options specifically designated as Non-Statutory shall not be subject to the
terms and conditions of this Section II.
A. Dollar Limitation. The aggregate Fair Market Value
(determined as of the respective date or dates of grant) of the Common Stock for
which one or more options granted to any Employee under this Plan (or any other
option plan of the Corporation or its parent or subsidiary corporations) may for
the first time become exercisable as incentive stock options under the Federal
tax laws during any one calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more
such options which become exercisable for the first time in the same calendar
year, the foregoing limitation on the exercisability of such options as
incentive stock options under the Federal tax laws shall be applied on the basis
of the order in which such options are granted. Should the number of shares of
Common Stock for which any Incentive Option first becomes exercisable in any
calendar year exceed the applicable One Hundred Thousand Dollar ($100,000)
limitation, then that option may nevertheless be exercised in that calendar year
for the excess number of shares as a Non-Statutory Option under the Federal tax
laws.
B. 10% Shareholder. If any individual to whom an
Incentive Option is granted is a 10% Shareholder, then the option term shall not
exceed five (5) years measured from the grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each option
which is at the time outstanding under this Article Two shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for such Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares as
fully-vested shares. However, an outstanding option under this Article Two shall
not so accelerate if and to the extent: (i) such option is, in connection with
such Corporate Transaction, either to be assumed by the successor corporation or
parent thereof or to be replaced with a comparable option to purchase shares of
the capital stock of the successor corporation or parent thereof, (ii) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the option spread existing at the time of such
Corporate Transaction and provides for subsequent payout in accordance with the
same vesting schedule applicable to such option, (iii) such option is to be
replaced by another incentive program which the Plan Administrator determines is
reasonably equivalent in value to the program contemplated by either clause (i)
or (ii) above, or (iv) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
However, upon an Optionee's cessation of Service by reason of an Involuntary
Termination (other than for Misconduct) within eighteen (18) months after a
Corporate Transaction in which his or her outstanding options are assumed or
replaced pursuant to clause (i), (ii) or (iii) above, each such option under
clause (i) shall automatically accelerate and become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares as
fully-vested shares, the cash incentive program under clause (ii) shall become
fully vested and the benefits under a clause (iii) replacement program shall
become fully vested. The option as so accelerated shall remain exercisable until
the earlier of (i) the expiration of the option term or (ii) the expiration of a
ninety (90)-day period measured from the date of such Involuntary Termination.
The determination of option comparability under clause (i) or program
comparability under clause (iii) above shall be made by the Plan
9
<PAGE>
Administrator, and its determination shall be final, binding and conclusive.
B. Immediately following the consummation of a Corporate
Transaction, all outstanding options under this Article Two shall terminate and
cease to remain outstanding, except to the extent assumed by the successor
corporation or its parent company.
C. Each outstanding option under this Article Two that is
assumed in connection with a Corporate Transaction shall be appropriately
adjusted, immediately after such Corporate Transaction, to apply and pertain to
the number and class of securities which would have been issued to the option
holder in consummation of such Corporate Transaction. had such person exercised
the option immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the exercise price payable per share, provided
the aggregate exercise price payable for such securities shall remain the same.
In addition, the class and number of securities available for issuance under the
Plan on both an aggregate and participant basis following the consummation of
such Corporate Transaction shall be appropriately adjusted.
D. The Plan Administrator shall have the discretionary
authority, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to provide for the automatic acceleration
of one or more outstanding options under this Article Two (and the termination
of one or more of the Corporation's outstanding repurchase rights under this
Article Two) upon the occurrence of a Change in Control. The Plan Administrator
shall also have full power and authority to condition any such option
acceleration (and the termination of any outstanding repurchase rights) upon the
Optionee's cessation of Service by reason of an Involuntary Termination (other
than for Misconduct) within a specified period following such Change in Control.
E. Any options accelerated in connection with a Change in
Control shall remain fully exercisable until the expiration or sooner
termination of the option term or the surrender of such option in accordance
with Section V of this Article Two.
F. The grant of options under this Article Two shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
G. The portion of any Incentive Option accelerated under this
Section III in connection with a Corporate Transaction or Change in Control
shall remain exercisable as an incentive stock option under the Federal tax laws
only to the extent the dollar limitation of Section II of this Article Two is
not exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a non-statutory option under the
Federal tax laws.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected Optionees, the
cancellation of any, or all outstanding options under this Article Two
(including outstanding options under the Predecessor Plans incorporated into
this Plan) and to grant in substitution new options under the Plan covering the
same or different numbers of shares of Common Stock but with an exercise price
per share not less than (i) one hundred percent (100%) of the Fair Market Value
on the new grant date in the case of a grant of an Incentive Option, (ii) one
hundred ten percent (110%) of such Fair Market Value in the case of an Incentive
Option grant to a 10% Shareholder or (iii) eighty-five percent (85%) of such
Fair Market Value in the case of all other grants.
V. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in
its discretion to implement the stock appreciation right provisions of this
Section V, one or more Optionees may be granted the right, exercisable upon such
terms and conditions as the Plan Administrator may establish, to surrender all
or part of an unexercised option under this Article Two in exchange for a
distribution from the Corporation in an amount equal to the excess of (i) the
Fair Market Value (on the option surrender date) of the number of shares in
which the Optionee is at the time vested under the
10
<PAGE>
surrendered option (or surrendered portion thereof) over (ii) the aggregate
exercise price payable for such vested shares.
B. No surrender of an option shall be effective hereunder
unless it is approved by the Plan Administrator. If the surrender is so
approved, then the distribution to which the Optionee shall accordingly become
entitled under this Section V may be made in shares of Common Stock valued at
Fair Market Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the date of the option grant.
D. One or more officers of the Corporation subject to the
short-swing profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights in
tandem with their outstanding options under this Article Two. Upon the
occurrence of a Hostile Take-Over at a time when the Corporation's outstanding
Common Stock is registered under Section 12(g) of the 1934 Act, each such
officer holding one or more options with such a limited stock appreciation right
in effect for at least six (6) months shall have the unconditional right
(exercisable for a thirty (30)-day period following such Hostile Take-Over) to
surrender each such option to the Corporation, to the extent the option is at
the time exercisable for fully vested shares of Common Stock. The officer shall
in return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the vested shares of Common
Stock at the time subject to each surrendered option (or surrendered portion of
such option) over (ii) the aggregate exercise price payable for such vested
shares. Such cash distribution shall be made within five (5) days following the
option surrender date. Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option surrender
and cash distribution. Any unsurrendered portion of the option shall continue to
remain outstanding and become exercisable in accordance with the terms of the
instrument evidencing such grant.
E. The shares of Common Stock subject to any option
surrendered for an appreciation distribution pursuant to this Section V shall
not be available for subsequent issuance under the Plan.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate purchases without any intervening stock
option grants. The issued shares shall be evidenced by a Stock Issuance
Agreement ("Issuance Agreement") that complies with the terms and conditions of
this Article Three.
A. Consideration.
1. Shares of Common Stock may be issued under
the Stock Issuance Program for one or more of the following items of
consideration which the Plan Administrator may deem appropriate in each
individual instance:
(i) full payment in cash or check made
payable to the Corporation's order;
(ii) a promissory note payable to the
Corporation's order in one or more installments; or
11
<PAGE>
(iii) past services rendered to the
Corporation or any parent or subsidiary corporation.
2. The shares may, in the absolute discretion
of the Plan Administrator, be issued for consideration with a value less than
one hundred percent (100%) of the Fair Market Value of such shares at the time
of issuance, but in no event less than eighty-five percent (85%) of such Fair
Market Value.
B. Vesting Provisions.
1. Shares of Common Stock issued under the
Stock Issuance Program may, in the absolute discretion of the Plan
Administrator, be fully and immediately vested upon issuance (as a bonus for
past services) or may vest in one or more installments over the Participant's
period of Service or the Corporation's attainment of performance milestones. The
elements of the vesting schedule applicable to any unvested shares of Common
Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed
by the Participant or the performance objectives to be achieved by the
Corporation,
(ii) the number of installments in which
the shares are to vest,
(iii) the interval or intervals (if any)
which are to lapse between installments, and
(iv) the effect which death, Permanent
Disability or other event designated by the Plan Administrator is to
have upon the vesting schedule, shall be determined by the Plan
Administrator and incorporated into the Issuance Agreement executed by
the Corporation and the Participant at the time such unvested shares
are issued.
2. The Participant shall have full shareholder rights
with respect to any shares of Common Stock issued to him or her under the Plan,
whether or not his or her interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares. Any new, additional or different shares of
stock or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
his or her unvested shares by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration or by reason of any Corporate Transaction, shall be
issued subject to (i) the same vesting requirements applicable to his or her
unvested shares and (ii) such escrow arrangements as the Plan Administrator
shall deem appropriate.
3. Should the Participant cease to remain in Service
while holding one or more unvested shares of Common Stock under the Stock
Issuance Program, then the Corporation shall have the right to require the
Participant to surrender those shares immediately to the Corporation for
cancellation, and the Participant shall cease to have any further shareholder
rights with respect to the surrendered shares. To the extent the surrendered
shares were previously issued to the Participant for consideration paid in cash
or cash equivalent (including the Participant's purchase-money promissory
note), the Corporation shall repay to the Participant the cash consideration
paid for the surrendered shares and shall cancel the unpaid principal balance of
any outstanding purchase-money note of the Participant attributable to such
surrendered shares.
4. The Plan Administrator may in its discretion elect
to waive the surrender and cancellation of one or more unvested shares of Common
Stock (or other assets attributable thereto) which would otherwise occur upon
the non-completion of the vesting schedule applicable to such shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
C. First Refusal Rights. Until such time as the
Corporation's outstanding shares of Common Stock
12
<PAGE>
are first registered under Section 12(g) of the 1934 Act, the Corporation shall
have a right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest by reason of purchase, gift or other
transfer) of any shares of Common Stock issued under this Article Three. Such
right of first refusal shall be exercisable in accordance with the terms and
conditions established by the Plan Administrator and set forth in the agreement
evidencing such right.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights
under this Article Three shall automatically terminate upon the occurrence of a
Corporate Transaction, except to the extent the Corporation's outstanding
repurchase rights are expressly assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction. However, any assigned
repurchase rights covering the unvested shares held by a Participant under this
Article Three shall immediately terminate should there occur an Involuntary
Termination of that Participant's Service (other than for Misconduct) within
eighteen (18) months after such Corporate Transaction.
B. The Plan Administrator shall have the discretionary
authority, exercisable either at the time the shares are issued under this
Article Three or at any time while those shares remain outstanding, to provide
for the automatic termination of the Corporation's repurchase rights with
respect to those shares should there occur a Change in Control. The Plan
Administrator shall also have full power and authority to condition the
termination of those repurchase rights upon the Participant's cessation of
Service by reason of an Involuntary Termination (other than for Misconduct)
within a specified period following such Change in Control.
III. SHARE ESCROW/TRANSFER RESTRICTIONS
A. Unvested shares may, in the Plan Administrator's
discretion, be held in escrow by the Corporation until the Participant's
interest in such shares vests or may be issued directly to the Participant with
restrictive legends on the certificates evidencing such unvested shares. To the
extent an escrow arrangement is utilized, the unvested shares and any securities
or other assets distributed with respect to such shares (other than regular cash
dividends) shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such (or the distributed securities or assets) vests.
B. The Participant shall have no right to transfer any
unvested shares of Common Stock issued to him or her under the Stock Issuance
Program. For purposes of this restriction, the term "transfer" shall include
(without limitation) any sale, pledge, assignment, encumbrance, gift or other
disposition of such shares, whether voluntary or involuntary. Upon any such
attempted transfer, the unvested shares shall immediately be canceled in
accordance with substantially the same procedure in effect under Section I.B.3
of this Article Three, and neither the Participant nor the proposed transferee
shall have any rights with respect to such canceled shares. However, the
Participant shall have the right to make a gift of unvested shares acquired
under the Stock Issuance Program to his or her spouse or issue, including
adopted children, or to a trust established for such spouse or issue, provided
the transferee of such shares delivers to the Corporation a written agreement to
be bound by all the provisions of the Stock Issuance Program and the Issuance
Agreement applicable to the gifted shares.
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
The individuals eligible to receive automatic option grants
pursuant to the provisions of this Article Four program shall be limited to (i)
those individuals who are serving as non-employee Board members on the Automatic
Option Grant Program Effective Date, (ii) those individuals who are first
elected or appointed as non-employee Board members on or after such Effective
Date, whether through appointment by the Board or election by the Corporation's
shareholders, and (iii) those individuals who are re-elected to serve as
non-employee Board members at one or more Annual Shareholders Meetings held
after the Section 12(g) Registration Date. In no event, however, shall a
non-employee Board member be eligible to receive an automatic option grant
pursuant to clause (i) or (ii) above if such individual has
13
<PAGE>
at any time been in the prior employ of the Corporation (or any parent or
subsidiary corporation), but such individual shall be eligible to receive one or
more automatic option grants pursuant to clause (iii). Each non-employee Board
member eligible to receive one or more automatic option grants pursuant to the
foregoing criteria shall be designated an Eligible Director for purposes of the
Plan.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION
A. Grant Dates. Option grants shall be made under this
Article Four on the dates specified below:
1. Initial Grant. Each Eligible Director who is first
elected or appointed as a non-employee Board member after the Automatic Option
Grant Program Effective Date shall automatically be granted, on the date of such
initial election or appointment (as the case may be), a Non-Statutory Option to
purchase 16,666 shares of Common Stock upon terms and conditions of this Article
Four.
2. Annual Grant. On the date of each Annual
Shareholders Meeting, beginning with the first Annual Meeting held after the
Section 12(g) Registration Date, each individual who will continue to serve as
an Eligible Director shall automatically be granted, whether or not such
individual is standing for re-election as a Board member at that Annual Meeting,
a Non-Statutory Option to purchase an additional 3,333 shares of Common Stock
upon the terms and conditions of this Article Four, provided he or she has
served as a non-employee Board member for at least six (6) months prior to the
date of such Annual Meeting.
3. No Limitation. There shall be no limit on the
number of shares for which any one Eligible Director may be granted stock
options under this Article Four over his or her period of Board service.
B. Exercise Price. The exercise price per share of Common
Stock subject to each automatic option grant made under this Article Four shall
be equal to one hundred percent (100%) of the Fair Market Value per share of
Common Stock, on the automatic grant date.
C. Payment. The exercise price shall be payable in one of the
alternative forms specified below. To the extent the option is exercised for any
unvested shares, the Optionee must execute and deliver to the Corporation a
stock purchase agreement for those unvested shares which provides the
Corporation with the right to repurchase, at the exercise price paid per share,
any unvested shares held by the Optionee at the time of cessation of Board
service and which precludes the sale, transfer or other disposition of the
purchased shares at any time while those shares remain subject to the
Corporation's repurchase right.
(i) full payment in cash or check drawn
to the Corporation's order;
(ii) full payment in shares of Common Stock
held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at
Fair Market Value on the Exercise Date;
(iii) full payment in a combination of
shares of Common Stock held for the requisite period necessary to
avoid a charge to the Corporation's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date and cash
or check drawn to the Corporation's order; or
(iv) to the extent the option is exercised
for vested shares, full payment through a sale and remittance
procedure pursuant to which the Optionee shall provide irrevocable
written instructions to (a) a Corporation designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale transaction.
Except to the extent the sale and remittance
procedure specified above is used for the exercise of the option for vested
shares, payment of the exercise price for the purchased shares must accompany
the exercise
14
<PAGE>
notice.
D. Option Term. Each automatic grant under this Article
Four shall have a maximum term of ten (10) years measured from the automatic
grant date.
E. Exercisability/Vesting. Each automatic grant shall be
immediately exercisable for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares in accordance with the applicable
schedule below:
Initial Grant. Each initial 16,666-share automatic grant shall
vest, and the Corporation's repurchase right shall lapse, in a series
of four successive and equal annual installments over the Optionee's
period of continued service as a Board member, with the first such
installment to vest upon Optionee's completion of one (1) year of Board
service measured from the automatic grant date.
Annual Grant. Each additional 3,333-share automatic grant
shall vest, and the Corporation's repurchase right shall lapse, upon
the Optionee's completion of one (1) year of Board service measured
from the automatic grant date.
Vesting of the option shares shall be subject to acceleration,
as provided in Section II.G.3 and Section III of this Article Four. In no event
shall any additional option shares vest after the Optionee's cessation of Board
service, except as otherwise provided in Section II.G.3 of this Article Four.
F. Non-Transferability. During the lifetime of the Optionee,
each automatic option grant, together with the limited stock appreciation right
pertaining to that option, shall be exercisable only by the Optionee and shall
not be assignable or transferable by the Optionee, except for a transfer of the
option by will or by the laws of descent and distribution following Optionee's
death.
G. Effect of Termination of Board Service.
1. Should the Optionee cease to serve as a Board
member for any reason (other than death or Permanent Disability) while holding
one or more automatic option grants under this Article Four, then such
individual shall have a six (6)-month period following the date of such
cessation of Board service in which to exercise each such option for any or all
of the shares of Common Stock in which the Optionee is vested at the time of
such cessation of Board service. However, each such option shall immediately
terminate and cease to be outstanding at the time of such cessation of Board
service, with respect to any shares in which the Optionee is not otherwise at
that time vested under that option.
2. Should the Optionee die within six (6) months
after cessation of Board service, then any automatic option grant held by the
Optionee at the time of death may subsequently be exercised. for any or all of
the shares of Common Stock in which the Optionee is vested at the time of his or
her cessation of Board service (less any option shares subsequently purchased by
the Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and distribution.
The right to exercise such option shall lapse upon the expiration of a twelve
(12)- month period measured from the date of the Optionee's death.
3. Should the Optionee die or become Permanently
Disabled while serving as a Board member, then the shares of Common Stock at the
time subject to each automatic option grant held by such Optionee under this
Article Four which are vested may be purchased by the Optionee (or the
representative of the Optionee's estate or the person or persons to whom the
option is transferred upon the Optionee's death) pursuant to the option for a
twelve (12)-month period following the date of the Optionee's cessation of
Board service.
4. In no event shall any automatic grant under this
Article Four remain exercisable after the expiration date of the ten (10)-year
option term. Upon the expiration of the applicable post-service exercise period
15
<PAGE>
under subparagraphs 1 through 3 above or (if earlier) upon the expiration of the
ten (10)-year option term, the automatic grant shall terminate and cease to be
outstanding for any option shares in which the Optionee was vested at the time
of his or her cessation of Board service but for which such option was not
subsequently exercised.
H. Shareholder Rights. The holder of an automatic option grant
under this Article Four shall have none of the rights of a shareholder with
respect to any shares subject to such option until such individual shall have
exercised the option and paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each
automatic option grant shall be as set forth in the form of Automatic Stock
Option Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option under this Article
Four but not otherwise vested shall automatically vest in full so that each such
option shall, immediately prior to the specified effective date for the
Corporate Transaction, become fully exercisable for all of the shares of Common
Stock at the time subject to that option and may be exercised for all or any
portion of those shares as fully-vested shares. Immediately following the
consummation of the Corporate Transaction, all automatic option grants under
this Article Four shall terminate and cease to be outstanding, except to the
extent one or more of those grants are assumed by the acquiring entity or its
parent corporation.
B. In connection with any Change in Control of the
Corporation, the shares of Common Stock at the time subject to each outstanding
option under this Article Four but not otherwise vested shall automatically vest
in full so that each such option shall, immediately prior to the specified
effective date for the Change in Control, become fully exercisable for all of
the shares of Common Stock at the time subject to that option and may be
exercised for all or any portion of those shares as fully-vested shares. Each
such option shall remain so exercisable for all the option shares following the
Change in Control, until the expiration or sooner termination of the option
term.
C. Should a Hostile Take-Over occur at any time following the
Section 12(g) Registration Date, then the Optionee shall have a thirty (30)-day
period in which to surrender to the Corporation each option held by him or her
under this Article Four for a period of at least six (6) months. The optionee
shall in return be entitled to a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the shares of Common
Stock at the time subject to the surrendered option (whether or not those shares
are otherwise at the time fully vested) over (ii) the aggregate exercise price
payable for such shares. The cash distribution shall be paid within five (5)
days following the surrender of the option to the Corporation. Neither the
approval of the Plan Administrator nor the consent of the Board shall be
required in connection with such option surrender and cash distribution. The
shares of Common Stock subject to each option surrendered in connection with the
Hostile Take-Over shall not be available for subsequent issuance under the Plan.
D. The automatic option grants outstanding under this Article
Four shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
The provisions of this Automatic Option Grant Program,
together with the automatic option grants outstanding under this Article Four,
may not be amended at intervals more frequently than once every six (6) months,
other than to the extent necessary to comply with applicable Federal income tax
laws and regulations.
16
<PAGE>
ARTICLE FIVE
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
Each non-employee Board member may elect to apply all or any
portion of the annual retainer fee otherwise payable in cash for his or her
service on the Board to the acquisition of a special option grant under this
Director Fee Option Grant Program. Such election must be filed with the
Corporation's Chief Financial Officer prior to first day of July in the calendar
year immediately preceding the calendar year for which the annual retainer fee
which is the subject of that election is otherwise payable. Each non-employee
Board member who files such a timely election shall automatically be granted an
option under this Director Fee Option Grant Program on the first trading day in
January in the calendar year for which the annual retainer fee which is the
subject of that election would otherwise be payable.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the
terms and conditions specified below.
A. Exercise Price.
1. The exercise price per share shall be
thirty-three and one-third percent (33-1/3%) of the Fair Market Value per share
of Common Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedures specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. Number of Option Shares: The number of shares of Common
Stock subject to the option shall be determined pursuant to the following
formula (rounded down to the nearest whole number):
X = A / (B x 66-2/3 %), where
X is the number of option shares,
A is the portion of the annual retainer fee subject
to the non-employee Board member's election, and
B is the Fair Market Value per share of Common Stock
on the option grant date.
C. Exercise and Term of Options. The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Board service in the
calendar year for which the annual retainer fee which is the subject of his or
her election under this Article Five would otherwise be payable. Each option
shall have a maximum term of ten (10) years measured from the option grant date.
D. Effect of Termination of Service. Should the Optionee cease
Board service for any reason (other than death or Permanent Disability) while
holding one or more options under this Article Five, then each such option shall
remain exercisable, for any or all of the shares for which the option is
exercisable at the time of such cessation of Board service, until the earlier of
(i) the expiration of the ten (10)-year option term or (ii) the expiration of
the three (3)-year period measured from the date of such cessation of Board
service. However, each option held by the Optionee under this Article Five at
the time of his or her cessation of Board service shall immediately terminate
and cease to remain outstanding with respect to any and all shares of Common
Stock for which the option is not otherwise at that time exercisable.
17
<PAGE>
E. Death or Permanent Disability. Should the Optionee's
service as a Board member cease by reason of death or Permanent Disability, then
each option held by such Optionee under this Article Five shall immediately
become exercisable for all the shares of Common Stock at the time subject to
that option, and the option may, during the three (3)-year period following such
cessation of Board service, be exercised for any or all of those shares as
fully-vested shares.
Should the Optionee die while holding one or more options
under this Article Five, then each such option may be exercised, for any or all
of the shares for which the option is exercisable at the time of the Optionee's
cessation of Board service (less any shares subsequently purchased by Optionee
prior to death), by the personal representative of the Optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution. Such
right of exercise shall lapse, and the option shall terminate, upon the earlier
of (i) the expiration of the ten (10)-year option term or (ii) the three
(3)-year period measured from the date of the Optionee's cessation of Board
service.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the
Optionee remains a Board member, each outstanding option held by such Optionee
under this Director Fee Option Grant Program shall automatically accelerate so
that each such option shall, immediately prior to the effective date of the
Corporate Transaction, become fully exercisable with respect to the total number
of shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
Each such outstanding option shall be assumed by the successor corporation (or
parent thereof) in the Corporate Transaction and shall remain exercisable for
the fully-vested shares until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Board service.
B. In the event of a Change in Control while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall immediately become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
The option shall remain so exercisable until the earlier or (i) the expiration
of the ten (10)-year option term or (ii) the expiration of the three (3)-year
period measured from the date of the Optionee's cessation of Service.
C. The grant of options under the Director Fee Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director
Fee Option Grant Program shall be the same as the terms in effect for option
grants made under the Discretionary Option Grant Program.
ARTICLE SIX
MISCELLANEOUS
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any
Optionee or Participant (including an Optionee or Participant who is an officer
of the Corporation) in the exercise of one or more options granted to such
Optionee under the Discretionary Option Grant and Automatic Option Grant
Programs or the purchase of one or more shares issued to such Participant under
the Stock Issuance Program, including the satisfaction of any Federal, state and
local income and employment tax obligations arising therefrom, by:
(i) authorizing the extension of a loan
from the Corporation to such Optionee
18
<PAGE>
or Participant, or
(ii) permitting the Optionee or
Participant to pay the exercise price or purchase price for the
purchased Common Stock in installments over a period of years.
B. The terms of any loan or installment method of payment
(including the interest rate and terms of repayment) shall be upon such terms as
the Plan Administrator specifies in the applicable option or issuance agreement
or otherwise deems appropriate at the time such exercise price or purchase price
becomes due and payable. Loans or installment payments may be authorized with or
without security or collateral. In all events, the maximum credit available to
the Optionee or Participant may not exceed the option or purchase price of the
acquired shares (less the par value of such shares) plus any Federal, state and
local income and employment tax liability incurred by the Optionee or
Participant in connection with the acquisition of such shares.
C. The Plan Administrator may, in its absolute discretion,
determine that one or more loans extended under this Section I shall be subject
to forgiveness by the Corporation in whole or in part upon such terms and
conditions as the Plan Administrator may in its discretion deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to
amend or modify the Plan (or any component thereof) in any or all respects
whatsoever. However, (i) no such amendment or modification shall adversely
affect rights and obligations with respect to options at the time outstanding
under the Plan, nor adversely affect the rights of any Participant with respect
to Common Stock issued under the Stock Issuance Program prior to such action,
unless the Optionee or Participant consents to such amendment. In addition, the
Board may not, without the approval of the Corporation's shareholders, amend the
Plan to (i) increase the maximum number of shares issuable under the Plan or the
maximum amount of shares for which any one individual participating in the Plan
may be granted stock options, separately exercisable stock appreciation rights
and direct stock issuances for any given year under the Plan, except for
permissible adjustments under Article One, (ii) materially modify the
eligibility requirements for Plan participation, or (iii) otherwise materially
increase the benefits accruing to Plan participants.
B. (i) Options to purchase shares of Common Stock may be
granted under the Discretionary Option Grant Program and (ii) shares of Common
Stock may be issued under the Stock Issuance Program, which are in both
instances in excess of the number of shares then available for issuance under
the Plan, provided any excess shares actually issued under the Discretionary
Option Grant or the Stock Issuance Programs are held in escrow until shareholder
approval is obtained for a sufficient increase in the number of shares available
for issuance under the Plan. If such shareholder approval is not obtained within
twelve (12) months after the date the first such excess option grants or excess
share issuances are made, then (i) any unexercised excess options shall
terminate and cease to be exercisable and (ii) the Corporation shall promptly
refund the purchase price paid for any excess shares actually issued under the
Plan and held in escrow, together with interest (at the applicable Short Term
Federal Rate) for the period the shares were held in escrow.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of any stock options granted under Article Two or upon
the issuance of any shares under Article Three shall be subject to the
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements.
B. The Plan Administrator may, in its discretion and in
accordance with the provisions of this Section III of Article Six and such
supplemental rules as the Plan Administrator may from time to time adopt
(including the applicable safe-harbor provisions of Rule 16b-3 of the Securities
and Exchange Commission), provide any or all holders of Non-Statutory Options or
unvested shares under the Plan with the right to use shares of Common Stock in
satisfaction of all or part of the Federal, state and local income and
employment tax liabilities incurred by such holders in connection with the
exercise of their options or the vesting of their shares (the "Taxes"). Such
right may be provided to any such holder in either or both of the following
formats:
19
<PAGE>
-- The holder of the Non-Statutory Option or unvested shares
may be provided with the election to have the Corporation withhold,
from the shares of Common Stock otherwise issuable upon the exercise of
such Non-Statutory Option or the vesting of such shares, a portion of
those shares with an aggregate Fair Market Value equal to the
percentage of the applicable Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
-- The Plan Administrator may, in its discretion, provide
the holder of the Non-Statutory Option or the unvested shares with the
election to deliver to the Corporation, at the time the Non-Statutory
Option is exercised or the shares vest, one or more shares of Common
Stock previously acquired by such individual (other than in connection
with the option exercise or share vesting triggering the Taxes) with an
aggregate Fair Market Value equal to the percentage of the Taxes
incurred in connection with such option exercise or share vesting (not
to exceed one hundred percent (100%)) designated by the holder.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. The Discretionary Option Grant and Stock Issuance Programs
of this Plan became effective immediately upon adoption of the Plan by the Board
on March 23, 1995 (the "Plan Effective Date"). The Plan was approved by the
Corporation's shareholders on April 12, 1995. On December 9, 1995, the Board
approved an increase of 600,000 shares (which number reflects the 1-for-3
reverse stock split that was effected immediately prior to the consummation of
the initial public offering of the Common Stock) in the aggregate number of
shares issuable under the Plan; such increase was approved by the Corporation's
shareholders on December 19, 1995. The Automatic Option Grant Program of this
Plan became effective on the Automatic Option Grant Program Effective Date. On
March 19, 1997, the Board approved an increase of 500,000 shares in the
aggregate number of shares issuable under the Plan, and on April 23, 1997, the
Board approved a change in the aggregate number of shares of Common Stock for
which any one individual participating in the Plan may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances,
from a limitation of 250,000 shares over the term of the Plan, to an annual
limitation not in excess of 50% of the total number of shares for which stock
options, separately exercisable stock appreciation rights and direct stock
issuances may be granted over the term of the Plan. Both of such amendments
became effective on April 23, 1997, and are subject to the approval of
stockholders at the 1997 Annual Stockholders Meeting.
B. The Plan was amended by the Board on March 16, 1996 to
implement the Director Fee Option Grant Program, subject to approval of the
amendment at the 1996 Annual Stockholders Meeting. If such stockholder approval
is not obtained, then the Director Fee Option Grant Program will terminate.
C. Each stock option grant outstanding under the Predecessor
Plans immediately prior to the Plan Effective Date shall be incorporated into
this Plan and treated as an outstanding option under this Plan, but each such
option shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant, and nothing in this Plan shall be deemed to
affect or otherwise modify the rights or obligations of the holders of such
options with respect to their acquisition of shares of Common Stock thereunder.
However, the Plan Administrator shall have complete discretion to extend, under
such circumstances as it may deem appropriate, one or more provisions of this
Plan to any or all of the stock options which are incorporated into this Plan
from the Predecessor Plans but which do not otherwise contain such provisions.
D. No further option grants or stock issuances shall be
made under the Predecessor Plans from and after the Plan Effective Date.
E. The Plan shall terminate upon the earlier of (i) February
28, 2005 or (ii) the date on which all shares available for issuance under the
Plan shall have been issued pursuant to the exercise of the options or stock
appreciation rights granted under the Plan or the issuance of shares (whether
vested or unvested) under the Stock Issuance Program. If the date of termination
is determined under clause (i) above, then all option grants and unvested share
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing such
option grants or share issuances.
20
<PAGE>
V. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the
Plan, nor any action taken by the Plan Administrator hereunder, nor any
provision of the Plan shall be construed so as to grant any individual the right
to remain in the employ or service of the Corporation (or any parent or
subsidiary corporation) for any period of specific duration, and the Corporation
(or any parent or subsidiary corporation retaining the services of such
individual) may terminate such individual's employment or service at any time
and for any reason, with or without cause.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to option grants or share issuances under the Plan shall be used
for general corporate purposes.
VII. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option
under the Plan, the issuance of any shares under the Stock Issuance Program, and
the issuance of Common Stock upon the exercise or surrender of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
VIII. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the
Plan may not be assigned, encumbered or otherwise transferred by any Optionee
or Participant.
B. The provisions of the Plan relating to the exercise of
options and the vesting of shares shall be governed by the laws of the
Commonwealth of Pennsylvania as such laws are applied to contracts entered into
and performed in such Commonwealth.
C. The provisions of the Plan shall inure to the benefit of,
and be binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
21
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 51,378,170
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 54,951,742
<PP&E> 11,911,273
<DEPRECIATION> 1,723,300
<TOTAL-ASSETS> 65,143,115
<CURRENT-LIABILITIES> 1,495,970
<BONDS> 0
0
0
<COMMON> 94,953
<OTHER-SE> 53,715,102
<TOTAL-LIABILITY-AND-EQUITY> 65,143,115
<SALES> 0
<TOTAL-REVENUES> 312,500
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,682,306
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,071
<INCOME-PRETAX> (1,828,475)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,828,475)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,828,475)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
