UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
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 0-24860
PIERCING PAGODA, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 23-1894725
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
3910 Adler Place
Bethlehem, PA 18017
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (610) 691-0437
N/A
(Former Name, Former Address and Former
Fiscal Year, if Changed Since Last Report.)
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 [ ]
The number of shares outstanding of the registrant's common stock is 9,133,901
(as of February 12, 1999)
<PAGE>
PIERCING PAGODA, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Consolidated balance sheets as of
December 31, 1998 (unaudited) and March 31, 1998 3
Consolidated statements of operations for
the three months ended December 31, 1998
and 1997 (unaudited) and nine months ended
December 31, 1998 and 1997 (unaudited) 4
Consolidated statements of cash flows for the nine
months ended December 31, 1998 and 1997(unaudited) 5
Notes to consolidated financial statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PIERCING PAGODA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
------------ ----------
Assets (Unaudited)
Current assets
<S> <C> <C>
Cash $ 2,733 $ 2,699
Accounts receivable 412 1,454
Inventory 56,657 53,149
Deposits for inventory purchases 531 546
Prepaid expenses and other current assets 336 1,058
Prepaid income taxes - 215
Deferred tax assets 2,262 1,972
------------ ----------
Total current assets 62,931 61,093
Property, fixtures and equipment, net 33,439 27,215
Goodwill, net 19,993 6,296
Other assets 2,280 1,495
============ ==========
$ 118,643 $ 96,099
============ ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable 10,127 3,232
Current installments of long-term debt 373 247
Income taxes payable 4,347 889
Accrued expenses and other current liabilities 19,670 12,423
------------ ----------
Total current liabilities 34,517 16,791
Long-term debt, less current installments 4,655 9,742
Deferred tax liabilities 3,209 2,535
Other liabilities 993 703
------------ ----------
Total liabilities 43,374 29,771
Commitments and contingencies
Stockholders' equity
Preferred stock, par value $.01 per share,
authorized 3,000,000 shares. None issued. - -
Common stock, par value $.01 per share, authorized
15,000,000 shares. Issued 9,123,533 shares and
9,087,616 at December 31, 1998 and
March 31, 1998, respectively. 91 91
Additional paid-in capital 40,821 40,387
Retained earnings 34,357 25,850
------------ ----------
Total stockholders' equity 75,269 66,328
------------ ----------
$ 118,643 $ 96,099
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PIERCING PAGODA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
--------------------- ------------------
1998 1997 1998 1997
---------- --------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 101,985 $89,915 $199,673 $175,665
Cost of goods sold and occupancy
expenses, (excluding depreciation on
kiosks) 51,919 44,684 106,172 93,549
---------- --------- --------- --------
Gross profit 50,066 45,231 93,501 82,116
Selling, general and administrative
expenses, (including depreciation on
kiosks) 32,356 26,672 77,283 62,971
---------- --------- -------- ---------
Income from operations 17,710 18,559 16,218 19,145
Interest and other income 47 165 232 373
Interest expense 1,130 897 2,530 2,422
---------- --------- -------- ---------
Income before income taxes 16,627 17,827 13,920 17,096
Income tax expense 6,458 6,651 5,413 6,370
========== ========= ======== ========
Net Income $10,169 $11,176 $8,507 $10,726
========== ========= ======== ========
Basic earnings per share $ 1.12 $ 1.23 $ 0.93 $ 1.23
========== ========= ======== ========
Diluted earnings per share $ 1.10 $ 1.20 $ 0.91 $ 1.20
========== ========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PIERCING PAGODA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
December 31,
-------------------------
1998 1997
------------ -----------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 8,507 $ 10,726
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,101 3,927
Loss on disposal of property, fixtures and
equipment 242 48
Other changes in other assets 107 (21)
Deferred income taxes 384 809
Changes in operating assets and liabilities
net of effects of acquisitions:
Accounts receivable 574 556
Inventory (1,698) (17,656)
Deposits for inventory purchases 15 199
Prepaid expenses and other current assets 724 366
Prepaid income taxes 215 1,494
Accounts payable 6,895 8,814
Accrued expenses and other current liabilities 7,047 7,551
Income taxes payable 3,551 5,048
Other liabilities (210) (129)
------------ -----------
Net cash provided by operating activities 31,454 21,732
Cash flows from investing activities:
Additions to property, fixtures and equipment (10,141) (6,070)
Payments for purchase of businesses (14,867) (7,950)
Proceeds from disposal of property, fixtures and
equipment - 68
Noncurrent deposits, net (400) (44)
------------ -----------
Net cash used in investing activities (25,408) (13,996)
Cash flows from financing activities:
Repayments of long-term debt (26) (26)
Revolving line of credit, net (8,742) (24,200)
Loan fees paid (150) (19)
Proceeds from issuance of long-term debt 2,565 -
Net proceeds from issuance of common stock under
employee share plans 341 336
Proceeds from issuance of common stock, net - 17,189
------------ -----------
Net cash used in financing activities (6,012) (6,720)
------------ -----------
Net increase in cash 34 1,016
Cash at beginning of period 2,699 4,119
============ ===========
Cash at end of period $ 2,733 $ 5,135
============ ===========
</TABLE>
<PAGE>
PIERCING PAGODA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
December 31,
-------------------------
1998 1997
------------ -----------
Supplemental disclosures of cash flow information:
Cash paid (received) during
the period for:
<S> <C> <C>
Interest $ 2,448 $ 2,147
============ ===========
Income taxes, net $ 1,356 $ (981)
============ ===========
</TABLE>
Supplemental disclosure of non-cash operating and investing activities:
During the periods ended December 31, 1998 and 1997, the Company entered into
non-competition agreements for $500,000 and $300,000, respectively.
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
The accompanying consolidated financial statements of Piercing Pagoda, Inc.
and subsidiaries (the "Company") have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These consolidated financial statements include the
results of operations for Piercing Pagoda, Inc. and its wholly owned
subsidiaries. All intercompany transactions have been eliminated in
consolidation. These consolidated financial statements should be read in
conjunction with the Company's consolidated financial statements and notes
thereto for the year ended March 31, 1998. The financial information included
herein is unaudited; however, the information reflects all adjustments
(consisting solely of normal recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of the financial position, results
of operations and cash flows for the interim periods.
In June 1998, the Company's Board of Directors authorized a three-for-two
stock split effected in the form of a stock dividend payable to shareholders of
record on July 31, 1998, payable on August 13, 1998. Stockholders' equity has
been restated to give retroactive recognition to the stock split for all periods
presented by reclassifying from additional paid-in capital to common stock the
par value of the additional shares arising from the split. In addition, all
share and per share amounts have been restated to reflect the stock split.
Operating results for the three-month and nine-month periods ended December
31, 1998 are not necessarily indicative of the results that may be expected for
the entire fiscal year.
Note 2 Per Share Amounts
The following weighted average number of shares of common stock were used
in the calculations for earnings per share.
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
Quarter YTD Quarter YTD
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic 9,103,868 9,099,043 9,066,751 8,689,783
Dilutive effect of
outstanding stock
options, using the
treasury stock
method 138,280 277,388 270,516 271,673
========= ========= ========= =========
Diluted 9,242,148 9,376,431 9,337,267 8,961,456
========= ========= ========= =========
</TABLE>
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted earnings per share is computed by dividing income available
to
<PAGE>
common stockholders by the weighted average number of common shares outstanding
during the period increased to include the number of additional common shares
that would have been outstanding if the dilutive potential common shares had
been issued.
Note 3 Property, Fixtures and Equipment
A summary of major classes of property, fixtures and equipment follows (in
thousands):
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
-------------- -----------
<S> <C> <C>
Land $ 688 $ 688
Furniture and fixtures 4,809 3,881
Kiosks 29,643 24,043
Buildings and improvements 7,281 5,413
Computer equipment, software and other
equipment 10,828 9,326
-------------- -----------
53,249 43,351
Less accumulated depreciation and
amortization 19,810 16,136
============== ===========
$ 33,439 $ 27,215
============== ===========
</TABLE>
Note 4 Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
-------------- -----------
<S> <C> <C>
Accrued payroll, vacation and related
taxes $ 7,521 $ 5,230
Sales tax payable 3,593 794
Accrued rents payable 2,062 938
Liability under jewelry club program 1,133 1,109
Liability under lifetime guarantee
program 1,571 1,411
Other accrued expenses 3,790 2,941
============== ===========
$ 19,670 $ 12,423
============== ===========
</TABLE>
Note 5 Purchase of Businesses
In July 1998, the Company purchased approximately 104 of the retail outlets
of Sedgwick Sales, Inc., an independent kiosk retailer operating primarily under
the name Golden Chain Gang ("GCG"). The Company paid $3.0 million for these
kiosk locations, leases and store fixtures. No inventory was acquired. The cost
in excess of the fair value of the net assets acquired over their fair value of
approximately $2.7 million has been recorded as goodwill and is being amortized
over 15 years. After a review of the initial sales results and future sales
potential of the 104 locations acquired from GCG, management announced on
September 28, 1998 that it would close between 20 and 30 of these locations by
March 31, 1999. At December 31, 1998, the Company had closed 18 of these
locations.
<PAGE>
On August 31, 1998, the Company purchased all of the outstanding common
stock of Piercing Pagoda of Florida, Inc. ("PPF"), the Company's sole licensee
and operator of 22 locations under the Company's Piercing Pagoda and Plumb Gold
trade names. The Company paid approximately $11.5 million, subject to certain
post closing adjustments, for all of the outstanding common stock of PPF. The
Company is obligated to pay $100,000 per year for five years under the terms of
a non-competition agreement with the former shareholder of PPF. Additionally,
the former shareholder of PPF entered into an employment agreement with the
Company as a corporate vice president at an annual salary of $125,000. The cost
in excess of the fair value of the net assets acquired over their fair value of
approximately $11.4 million has been recorded as goodwill and is being amortized
over 15 years. The acquisition was accounted for as a purchase and the net
assets acquired and operations of these kiosks are included in the Company's
consolidated financial statements from the date of acquisition.
The following unaudited pro forma financial information presents the
combined results of operations of the Company and PPF as if the acquisition had
occurred as of the beginning of fiscal 1998 and 1999, after giving effect to
certain adjustments, including amortization of goodwill, increased interest
expense on debt related to the acquisition and related income tax effects. The
pro forma financial information does not necessarily reflect the results of
operations that would have occurred had the Company and the PPF constituted a
single entity during such periods.
<TABLE>
<CAPTION>
Nine months ended
December 31,
---------------------------
1998 1997
------------ -------------
(In thousands, except per
share data)
<S> <C> <C>
Net sales $ 201,680 $ 178,691
============ =============
Net income $ 7,829 $ 10,318
============ =============
Basic and Diluted earnings
per share $ 0.85 $ 1.15
============ =============
</TABLE>
Note 6 Litigation
On October 19, 1998, a lawsuit was filed, purportedly as a class action,
against the Company and certain of its executive officers in the U.S. District
Court of the Eastern District of Pennsylvania. The lawsuit alleges, among other
things, that the Company and certain of its officers made materially false and
misleading statements and/or failed to disclose material information regarding
the Company's business performance and prospects. The Company believes that the
lawsuit has no merit, and intends to vigorously defend the action. Although the
ultimate outcome of the lawsuit cannot be determined, management does not
believe the outcome of the lawsuit will have a material adverse effect on the
financial position, results of operations or cash flows of the Company. However,
there can be no assurance as to the ultimate resolution of this matter.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Background
The Company's consolidated net sales are comprised primarily of sales
generated by the Company's stores and, to a much lesser extent, wholesale sales
primarily to an independent store operator in Florida to which the Company
licensed the use of its store name and concept (the "Florida Licensee"). On
August 31, 1998, the Company acquired all of the outstanding common stock of the
Florida Licensee and now operates all the stores previously owned by the Florida
Licensee. Beginning on September 1, 1998 net sales consist entirely of sales
generated by the Company's retail stores. Cost of goods sold and occupancy
expenses include the cost of merchandise, rent and occupancy, and the cost of
preparing merchandise for sale. Selling, general and administrative expenses
include store and supervisory payroll, corporate overhead and non-occupancy
store expenses including depreciation of kiosks.
Results of Operations
Three Months Ended December 31, 1998 and 1997
Consolidated net sales increased $12.1 million, or 13% from $89.9 million
for the three months ended December 31, 1997 to $102.0 million for the three
months ended December 31, 1998. This increase was due primarily to net sales
generated by new stores opened or acquired by the Company. Comparable store
sales decreased $2.6 million, or 3.1% in the quarter. The Company cannot
determine if the decline in comparable store sales will continue. However, the
Company is taking steps to address this issue through a combination of store
closures, changes in merchandise selection and improved staff training. There
can be no assurance that the Company will be successful in reversing this trend.
There were a total of 957 stores open at December 31, 1998 compared to 783
at December 31, 1997, an increase of 22%. A significant portion of the increase
in the total number of stores was due to the acquisition on July 1, 1998 of
approximately 104 stores from Sedgwick Sales, Inc., an independent kiosk
retailer, previously operated under the name Golden Chain Gang ("GCG") and the
acquisition of 22 stores previously operated by the Florida Licensee. On August
31, 1998, the Company acquired all of the outstanding common stock of the
Florida Licensee. Accordingly, there were no wholesale sales to the Florida
Licensee for the three months ended December 31, 1998 compared to sales of $1.9
million in the three months ended December 31, 1997.
The average jewelry units sold per comparable store decreased to
approximately 4,300 for the three months ended December 31, 1998 from 4,400 for
the three
<PAGE>
months ended December 31, 1997. The average price per jewelry unit sold was
relatively unchanged at $25.54 for the three months ended December 31, 1998
compared to $25.59 for the three months ended December 31, 1997.ecember 31, 1998
compared to $25.59 for the three months ended December 31, 1997.
Gross profit increased $4.9 million, or 11%, from $45.2 million for the
three months ended December 31, 1997 to $50.1 million for the three months ended
December 31, 1998. The Company's gross profit margin decreased from 50.3% for
the three months December 31, 1997 to 49.1% for the three months ended December
31, 1998. This decrease primarily reflects the combination of lower gross margin
on merchandise sold, higher rent and occupancy costs as a percentage of sales
due to lower comparable stores sales and the lower sales volumes exhibited by
locations acquired in the Golden Chain Gang acquisition as well as new locations
opened by the Company. These decreases were partially offset by increased margin
on merchandise sold through the 22 locations acquired from the Florida Licensee.
The conversion of these sales from wholesale sales to retail sales resulted in
increased gross profit dollars and margin to the Company. Previously, wholesale
sales to the Florida Licensee produced a significantly lower gross margin than
the Company's own retail net sales
Selling, general and administrative expenses increased $5.7 million, or
21%, from $26.7 million for the three months ended December 31, 1997 to $32.4
million for the three months ended December 31, 1998. As a percentage of net
sales, selling, general and administrative expenses increased from 29.7% for the
three months ended December 31, 1997 to 31.7% for the three months ended
December 31, 1998. The increase in selling, general and administrative expenses
and their increase as a percentage of sales is attributable to the increase in
the number of stores operated by the Company in the period and the additional
costs incurred to support the greater number of stores, compounded by the lower
level of comparable store sales and the lower sales volumes generated by many of
the new and acquired stores operated by the Company during the period. Also
contributing to the increase in selling, general and administrative costs for
the quarter are amounts recorded for the Company's estimated lease obligations
on closed stores and a full quarter of amortization of goodwill recognized on
the Company's acquisitions of the Florida Licensee and GCG.
Many of the stores which experienced lower sales volumes were locations
acquired in the GCG acquisition. Management previously announced that it would
close between 20 and 30 of these locations by March 31, 1999 and work to improve
operations at the remaining stores. At December 31, 1998, the Company had closed
18 of these acquired locations with another 10 locations scheduled to be closed
during the fourth quarter. In addition to the closure of the 28 GCG locations,
the Company closed 22 non-GCG locations between April 1, 1998 and December 31,
1998 and anticipates closing 20 to 30 additional non-GCG locations by March 31,
1999. The accounting for any related charges will be included in fourth quarter
results. For the upcoming fiscal year, the Company anticipates opening 40 to 60
new locations, but may close 40 to 60 other locations. There can be no assurance
as to the exact number of stores the Company will open or close in a particular
period.
<PAGE>
Depreciation and amortization expense increased 36% to $1.9 million in the
three months ended December 31, 1998 from $1.4 million in the three months ended
December 31, 1997 due primarily to capital expenditures for new and acquired
stores, increased amortization of goodwill from acquisitions, the upgrading of
kiosks in existing locations and the completion of a new warehouse and
distribution facility adjacent to the Company's corporate headquarters.
Interest expense increased $233,000, or 26%, from $897,000 for the three
months ended December 31, 1997 to $1.1 million for the three months ended
December 31, 1998, and as a percentage of net sales increased from 1.0% for the
three months ended December 31, 1997 to 1.1% for the three months ended December
31, 1998. The increase in interest expense reflects higher average balances on
the Company's revolving line of credit agreement and an increase in the number
of ounces consigned under the Company's gold consignment arrangements.
Additionally, the Company completed a secondary offering of its common stock in
June of 1997, the proceeds of which were used primarily to reduce indebtedness
incurred in the prior fiscal year.
As a result of the foregoing, the Company's net income decreased from $11.2
million for the three months ended December 31, 1997 to $10.2 million for the
three months ended December 31, 1998.
Nine Months Ended December 31, 1998 and 1997
Consolidated net sales increased $24.0 million, or 14%, from $175.7 million
for the nine months ended December 31, 1997 to $199.7 million for the nine
months ended December 31, 1998. This increase was primarily due to an increase
in the average number of stores open for the nine months ended December 31,
1998, as compared to the nine months ended December 31, 1997. Comparable store
sales were approximately flat with the previous year. There were a total of 957
stores open at December 31, 1998 compared to 783 at December 31, 1997, an
increase of 22%. The average jewelry units sold per comparable store decreased
2% to 6,100 for the nine months ended December 31, 1998 compared to 6,200 for
the nine months ended December 31, 1997. The average price per jewelry unit sold
increased 1% to $24.69 for the nine months ended December 31, 1998 compared to
$24.50 for the nine months ended December 31, 1997.
Gross profit increased $11.4 million, or 14%, from $82.1 million for the
nine months ended December 31, 1997 to $93.5 million for the nine months ended
December 31, 1998. The Company's gross profit margin was relatively unchanged at
46.8% for the nine months ended December 31, 1998 versus 46.7% for the nine
months ended December 31, 1997. The increase in gross profit dollars was
attributable to the
<PAGE>
Company's increase in net sales. The change in gross profit margin reflects
lower gross profit margin on merchandise sold offset by increased gross profit
margin on sales through the 22 locations acquired from the Florida Licensee. The
conversion of these sales after August 31, 1998 from wholesale sales in the
previous year to retail sales resulted in increased gross profit dollars and
margin to the Company. Previously, wholesale sales to the Florida Licensee
produced a significantly lower gross margin than the Company's own retail net
sales
Selling, general and administrative expenses increased $14.3 million, or
23%, from $63.0 million for the nine months ended December 31, 1997 to $77.3
million for the nine months ended December 31, 1998. As a percentage of net
sales, selling, general and administrative expenses increased from 35.8% for the
nine months ended December 31, 1997 to 38.7% for the nine months ended December
31, 1998. The increase in selling, general and administrative expenses as well
as the increase in these expenses as a percentage of net sales reflect the
negative impact of the significant number of new and acquired stores opened by
the Company during the period, primarily stores added during the quarter ended
September 30, 1998. During the three months ended September 30, 1998, the
Company opened 150 new and acquired stores, the largest number of new stores it
has ever opened in a single three month period. The combined effect of
non-recurring pre-opening costs and lower than expected sales results at many of
the acquired locations resulted in a significant increase in both selling,
general and administrative expenses and their relationship to net sales during
that period. The generally lower sales volume of these locations continued to
affect the relationship of selling, general and administrative expenses into the
third quarter ended December 31, 1998.
Depreciation and amortization expense increased 31% to $5.1 million in the
nine months ended December 31, 1998 from $3.9 million in the nine months ended
December 31, 1997 due primarily to capital expenditures for new and acquired
stores, increased amortization of goodwill from acquisitions, the upgrading of
kiosks in existing locations and the completion of a new warehouse and
distribution facility adjacent to the Company's corporate headquarters.
Interest expense increased $100,000, or 4%, from $2.4 million for the nine
months ended December 31, 1997 to $2.5 million for the nine months ended
December 31, 1998, and as a percentage of net sales decreased from 1.4% for the
nine months ended December 31, 1997 to 1.3% for the nine months ended December
31, 1998. The increase in interest expense was due primarily to higher average
balances on the Company's revolving line of credit and an increase in ounces
consigned under the Company's gold consignment arrangements.
As a result of the foregoing, the Company's net income decreased from $10.7
million for the nine months ended December 31, 1997 to net income of $8.5
million for the nine months ended December 31, 1998.
<PAGE>
Liquidity and Capital Resources
The Company's primary ongoing short-term capital requirements have been to
fund an increase in inventory and to fund capital expenditures and working
capital (mostly inventory) for new and acquired stores. The Company's long-term
liquidity requirements relate principally to the maturity of its long-term debt
in July of 2000, operating lease commitments and store expansion. The Company's
primary sources of liquidity have been funds provided from operations, a gold
consignment program, bank borrowings and, in June 1997, an offering of the
Company's common stock. The Company's working capital decreased to $28.4 million
at December 31, 1998 from $44.3 million at December 31, 1997. At December 31,
1998, the Company had no outstanding balance under its revolving line of credit
and $5.0 million of long-term debt outstanding, including $373,000 classified as
a current liability. In addition, the Company had consigned 150,289 ounces of
gold under its gold consignment program valued at approximately $43.3 million.
Net cash provided by operating activities was $31.5 million for the nine
months ended December 31, 1998 compared to $21.7 million for the same period in
the prior year. Net cash provided by operating activities primarily reflects the
results of the year-end holiday shopping season, non-cash charges for
depreciation and amortization as well as increases in current liabilities. These
were partially offset by increases in inventory to support newly opened stores.
Net cash used in investing activities was $25.4 million during the nine
months ended December 31, 1998 compared to $14.0 million during the nine months
ended December 31, 1997. Net cash used in investing activities primarily
reflects the acquisition of 104 former GCG locations in July of 1998, the
acquisition of the Florida Licensee in August of 1998 and the addition of
property, fixtures and equipment in connection with the opening of new stores
and the renovation of existing stores.
Net cash used in financing activities was $6.0 million for the nine months
ended December 31, 1998 versus $6.7 million during the nine months ended
December 31, 1997. Net cash used in financing activities during the nine months
ended December 31, 1998 primarily reflects a reduction in borrowings under the
Company's revolving line of credit partially offset by the proceeds of $2.6
million in long term financing.
During September 1998 and again in October 1998, the Company's revolving
credit facility was amended to provide additional funds for the operation and
expansion of its business. The Company's current, amended credit facility
provides for maximum borrowings of $105.0 million through a combination of cash
advances (which may not exceed $65.0 million) and letters of credit (which may
not exceed $70.0 million) to support the Company's gold consignment program. At
December 31, 1998, the Company had $58.4 million available to be borrowed under
its then existing revolving credit facility and was in compliance with covenants
contained in that agreement. The
<PAGE>
Company believes that the expected cash flows from operations, its gold
consignment program and bank borrowings will be sufficient to fund the Company's
currently anticipated capital and liquidity needs.
Year 2000 Compliance & Year 2000 Readiness Disclosures
The information set forth in this section is a Year 2000 Readiness
Disclosure as defined in the Year 2000 Information Readiness and Disclosure Act.
The Company is aware of "Year 2000" issues existing in the programming code
of some information technology ("IT") and non-IT systems. The Year 2000 issue
may arise because many hardware and software systems only use two digits to
represent the year. As a result, these systems may not be able to process dates
beyond 1999, which may cause errors or failures in IT or non-IT systems.
The Company relies significantly on both IT and non-IT systems in its
retail outlets as well as at its corporate headquarters and distribution center.
These systems include hardware and software that the Company uses to conduct its
operations, analyze business performance and safeguard assets. The Company is in
the midst of a comprehensive review of these systems in preparation for the Year
2000. The Company's strategy for addressing Year 2000 compliance is to replace
or renovate all critical systems identified as non-compliant by a target date of
June 30, 1999 followed by final testing and remediation by September 30, 1999.
The first phase of this approach involves identifying all critical IT and non-IT
systems and making an initial assessment of each as either Year 2000 compliant
or non-compliant. The Company is substantially complete with this phase of its
Year 2000 review and is currently replacing or renovating systems which were
found to be non-compliant and verifying the compliance of systems initially
assessed as compliant. To date, the Company has met all costs of its Year 2000
remediation efforts with existing internal staff resources. The cost of these
efforts has not been separately tracked or allocated and, accordingly the
Company cannot reasonably estimate the expense incurred. The Company does not
anticipate future Year 2000 costs will be material and will continue to use
internal staff supplemented by external resources if necessary.
While the Company continues to believe that the Year 2000 matters discussed
above will not have a material impact on its business, financial condition or
<PAGE>
results of operation it remains uncertain whether or to what extent the Company
may be affected.
Seasonality
The Company's business is highly seasonal. Due to the impact of the
year-end holiday shopping season, the Company experiences a substantial portion
of its annual net sales and profitability in its third fiscal quarter (ending
December 31st). The Company has generally experienced lower net sales in each of
the first, second and fourth quarters and lower net income or net losses in each
of those quarters.
The Company's results of operations may fluctuate significantly from
quarter to quarter as a result of a variety of factors, including fluctuations
in the price of gold, the amount and timing of acquisitions and new store
openings, the integration of recently acquired and newly opened stores into the
operations of the Company, the timing of promotions, and changes in national and
regional economic conditions.
Recent accounting pronouncement
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. This statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. Management
believes the effect on the Company of the adoption of this standard will be
limited to changes in financial statement disclosure and will not have a
material impact on financial condition or results of operations.
Forward-looking statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements. A number of the matters and subject areas
discussed in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" are not limited to historical or current facts and deal
with potential future circumstances and developments. Prospective investors are
cautioned that such forward-looking statements are only predictions and that
actual events or results may differ materially. A variety of factors could cause
the Company's actual results to differ materially from the expected results
expressed in the Company's forward-looking statements, including, without
limitation: the Company's ability to hire, train and retain qualified personnel,
the availability of adequate capital resources and the successful integration of
new and acquired stores into the Company's existing operations; the Company's
ability to successfully implement and improve management information systems,
procedures and controls on a timely basis and in such a manner as is necessary
to accommodate the increased number of transactions and customers and the
increased size of the Company's operations; the Company's ability to
successfully complete its Year
<PAGE>
2000 project on a timely basis; the Company's ability to improve the
operations of its newly opened and acquired stores; the Company's ability to
secure suitable store sites on a timely basis and on satisfactory terms;
fluctuations in quarterly net sales, and, in particular, third quarter net
sales; fluctuations in gold prices; competitive conditions; economic conditions
affecting disposable consumer income, such as employment, business conditions,
interest rates and taxation, as well as trends with respect to mall shopping
generally and the ability of mall anchor tenants and other attractions to
generate customer traffic in the vicinity of the Company's stores; and the
possibility of the enactment of legislation, or the modification of existing or
pending legislation, in jurisdictions in which the Company operates, that would
adversely affect the Company's ear piercing or other activities.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 19, 1998, a lawsuit was filed, purportedly as a class action,
against the Company and certain of its executive officers in the U.S. District
Court of the Eastern District of Pennsylvania. The lawsuit alleges, among other
things, that the Company and certain of its officers made materially false and
misleading statements and/or failed to disclose material information regarding
the Company's business performance and prospects. The Company believes that the
lawsuit has no merit, and intends to vigorously defend the action. Although the
ultimate outcome of the lawsuit cannot be determined, management does not
believe the outcome of the lawsuit will have a material adverse effect on the
financial position, results of operations or cash flows of the Company. However,
there can be no assurance as to the ultimate resolution of this matter.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.52 Second Amendment to Syndicated Loan Agreement Date September
2, 1998 between Piercing Pagoda, Inc. ("the Registrant") and
Summit Bank, First Union National Bank and CoreStates Bank,
N.A.
10.53 Second Revolving Replacement Note Dated September 2, 1998
between the Registrant and Summit Bank.
10.54 Second Revolving Replacement Note Dated September 2, 1998
between the Registrant and First Union National Bank.
10.55 Bond Placement Agreement Dated April 29, 1998 between the
Registrant and CoreStates Securities Corp.
10.56 Open-end Mortgage and Security Agreement Dated April 29,
1998 between the Registrant and CoreStates Bank, N.A.
10.57 Trust Indenture Dated April 29, 1998 between the Registrant
and Dauphin Deposit Bank And Trust Company.
10.58 Pledge and Security Agreement Dated April 29, 1998 between
the Registrant and CoreStates Bank, N.A.
10.59 Assignment of Lease Interest Dated April 29, 1998 between
the Registrant and CoreStates Bank, N.A.
10.60 Reimbursement Agreement Dated April 29, 1998 between the
Registrant and Summit Bank, First Union National Bank and
CoreStates Bank, N.A.
27 Financial Data Schedule
27.1 Financial Data Schedule.
b) Reports on Form 8-K
During the quarter ended December 31, 1998, no reports on Form 8-K
were filed.
<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.
PIERCING PAGODA, INC.
(Registrant)
Date: February 12, 1999 /s/ John F. Eureyecko
John F. Eureyecko
President,
Chief Operating Officer
(Principal Financial Officer)
Date: February 12, 1999 /s/ Brandon R. Lehman
Brandon R. Lehman
Treasurer
(Principal Accounting Officer)
SECOND AMENDMENT TO SYNDICATED LOAN AGREEMENT
This Second Amendment to Syndicated Loan Agreement ("Second Amendment") is
made this 2nd day of September, 1998, by and among Piercing Pagoda, Inc.
("PPI"), a Delaware corporation having its chief executive office at 3910 Adler
Place, Bethlehem, Pennsylvania 18016, Piercing Pagoda of Florida, Inc. ("PPF"),
a Florida corporation having its chief executive office at 1370 Washington
Avenue, Suite 314, Miami Beach, Florida 33139 (PPI and PPF are hereinafter
collectively referred to and obligated as "Borrower"), the financial
institutions now or hereafter parties hereto and their respective successors and
assigns (each a "Lender" and collectively, the "Lenders"), Summit Bank
("Summit"), a New Jersey bank having offices at One Bethlehem Plaza, Bethlehem,
Pennsylvania 18018, and First Union National Bank ("FUNB"), a national bank
having offices at 123 South Broad Street, Philadelphia, Pennsylvania 19109,
successor by merger to CoreStates Bank, N.A. ("CoreStates"). Summit and FUNB are
co-agent for Lenders (in such capacity, each an "Agent" and collectively, the
"Agents"), and FUNB is administrative agent and issuing bank for the Lenders (in
such capacity, the "Administrative Agent").
BACKGROUND
Pursuant to the terms and subject to the conditions set forth in that
certain Syndicated Loan Agreement dated March 27, 1997 by and among PPI,
Lenders, Agents and Administrative Agent as amended by that certain First
Amendment to Syndicated Loan Agreement dated November 21, 1997, by and among
such parties (as amended, the "Loan Agreement"), PPI is currently indebted to
Lenders for repayment of various loans, advances and extensions of credit made
by Lenders to or for the benefit of PPI under a revolving credit facility in the
principal sum of up to Eighty Million ($80,000,000.00) Dollars (the "Revolving
Loan"), which indebtedness is evidenced by those certain Replacement Revolving
Loan Notes dated November 21, 1997, executed and delivered by PPI to each Lender
(in the amount of each such Lender's Commitment).
Effective April 28, 1998, CoreStates was merged into and succeeded by
FUNB. As a consequence of said merger, FUNB has succeeded to and assumed
CoreStates' interest in and obligations under the Loan Agreement, the Loan
Documents and the Revolving Loan, including the Commitment then held by
CoreStates.
PPI has notified Lenders that it intends to purchase from Richard P.
Russ ("Russ") all of the issued and outstanding capital stock of PPF, a
franchisee of PPI.
PPI has requested that: (i) each Lender approve the acquisition by
PPI of all of the issued and outstanding capital stock of PPF from Russ, (ii)
FUNB temporarily increase its Commitment under the Revolving Loan by the amount
of Ten Million ($10,000,000.00) Dollars (the "Temporary Commitment Increase"),
(iii) in conjunction with the Temporary Commitment Increase, the Cash Advance
Sublimit under the Revolving Loan be temporarily increased by Ten Million
($10,000,000.00) Dollars to Sixty Million ($60,000,000.00) Dollars, and (iv) the
Line Limit under the Revolving Loan be temporarily increased by Ten Million
($10,000,000.00) Dollars to Ninety Million ($90,000,000.00) Dollars; and the
Lenders are willing to do so under the terms and subject to the conditions set
forth in this Second Amendment and the instruments, agreements and documents to
be executed and/or delivered pursuant to this Second Amendment.
NOW, THEREFORE, with the foregoing Background deemed incorporated
hereinafter by this reference and hereby made a part hereof, the parties hereto,
intending to be legally bound, hereby covenant and agree as follows:
SECTION 1. DEFINITIONS.
1.01 Capitalized Terms. All capitalized terms not otherwise defined in
this Second Amendment shall have the meanings ascribed to such terms in the Loan
Agreement.
SECTION 2. CONFIRMATION OF EXISTING INDEBTEDNESS AND RATIFICATION
OF LOAN DOCUMENTS.
2.01 Confirmation of Existing Indebtedness. Borrower hereby
unconditionally acknowledges and confirms that: the aggregate outstanding
principal balance of PPI to Lenders evidenced by the Replacement Revolving Loan
Notes is, as of August 31, 1998, Sixty-Seven Million Three Hundred Nineteen
Thousand Thirteen and 55/100 ($67,319,013.55) Dollars; the aggregate face amount
of Letters of Credit issued by the Administrative Agent on behalf of each Lender
for the Account of PPI under the Revolving Loan is, as of the date hereof,
Forty-Two Million One Hundred Ninteen Thousand Thirteen and 55/100
($42,119,013.55) Dollars; interest on the Obligations has been paid through July
31, 1998; and the foregoing indebtedness, together with continually accruing
interest and related costs, fees and expenses is, as of the date hereof, owing
without claim, counterclaim, right of recoupment, defense or set-off of any kind
or of any nature whatsoever.
2.02 Ratification of Loan Documents.
(A) Borrower hereby unconditionally ratifies and confirms and
reaffirms in all respects and without condition, all of the terms, covenants and
conditions set forth in the Loan Documents, and agrees that it remains
unconditionally liable to Bank in accordance with the respective terms,
covenants and conditions of such instruments, agreements and documents.
(B) Without limiting the generality of the immediately preceding
Subparagraph 2.02(A), Borrower hereby unconditionally ratifies and confirms and
reaffirms in all respects and without condition, the provisions of the Loan
Documents permitting
Lenders to Confess Judgment against Borrower.
SECTION 3. AMENDMENTS TO FINANCING AGREEMENTS.
3.01 The Revolving Loan.
(A) Paragraph 1.15 of the Loan Agreement is hereby amended to
temporarily increase the Cash Advance Sublimit from Fifty Million
($50,000,000.00) Dollars to Sixty Million ($60,000,000.00) Dollars; on November
1, 1998, the Cash Advance Sublimit shall, without further notice to Borrower or
any other action on the part of Lenders or the Administrative Agent to be taken,
be reduced to Fifty Million ($50,000,000.00) Dollars;
(B) Paragraph 1.17 of the Loan Agreement is hereby amended to provide
that the aggregate "Commitment" of the Lenders is hereby temporarily increased
by the sum of Ten Million ($10,000,000.00) Dollars to the sum of Ninety Million
($90,000,000.00) Dollars; on November 1, 1998, the aggregate Commitment of
Lenders shall, without further notice to Borrower or any other action on the
part of Lenders or the Administrative Agent to be taken, be reduced to Eighty
Million ($80,000,000.00) Dollars;
(C) FUNB's Commitment shall be increased from Fifty-Three Million
Three Hundred Thirty-Five Thousand ($53,335,000.00) Dollars (inclusive of the
Commitment of CoreStates prior to its merger into FUNB) to Sixty-Three Million
Three Hundred Thirty-Five Thousand ($63,335,000.00) Dollars;
(D) Paragraph 1.45 of the Loan Agreement is hereby temporarily
amended to increase the Line Limit by the sum of Ten Million ($10,000,000.00)
Dollars to the sum of Ninety Million ($90,000,000.00) Dollars; on November 1,
1998, the Line Limit shall be reduced to Eighty Million ($80,000,000.00)
Dollars; and
(E) Paragraph 1.52 of the Loan Agreement is hereby amended to
redefine the term "Notes" to mean, collectively, the "Second Replacement
Revolving Loan Notes" (as hereinafter defined).
3.02 The Second Replacement Revolving Loan Notes. Contemporaneously
herewith, to evidence FUNB's increase in its Commitment, the merger of
CoreStates into FUNB, the joinder of PPF to the Loan Documents and the Temporary
Commitment Increase, Borrower shall execute and deliver to each Lender its
Second Replacement Revolving Loan Note in an amount equal to each Lender's
Commitment. Each Second Replacement Revolving Loan Note shall replace and
supersede (but not extinguish any unpaid Obligations evidenced by) the
Replacement Revolving Loan Notes dated November 21, 1997, executed and delivered
by Borrower to each Lender (and CoreStates).
3.03 Joinder of PPF to Loan Documents. In consideration of the mutual
covenants set forth herein, PPF, hereby joins in and agrees to be jointly and
severally liable and obligated to Lenders as a Borrower under the Loan Agreement
and the other Loan Documents and agrees to be bound by all the terms and
conditions set forth therein. Effective as of the date hereof, the term
"Borrower" as used in the Loan Agreement and the other Loan Documents shall
jointly and severally refer to PPI and PPF.
3.04 Repayment of the Temporary Commitment Increase. On or before October
31, 1998, Borrower shall repay to FUNB the Temporary Commitment Increase, or so
much thereof as shall have been advanced by FUNB, together with all accrued and
unpaid interest. Commencing November 1, 1998, FUNB's Commitment shall be
permanently reduced to Fifty-Three Million Three Hundred Thirty-Three Thousand
($53,333,000.00) Dollars.
SECTION 4. WARRANTIES AND REPRESENTATIONS.
4.01 Reaffirmation of Warranties and Representations. All warranties and
representations set forth in the Loan Agreement and the other Loan Documents are
hereby reasserted and restated by PPI as of the date hereof as if set forth at
length herein. Borrower hereby acknowledges that such warranties and
representations, and the warranties and representations set forth below, are
being specifically relied upon by Lenders as a material inducement to Lenders to
enter into this Second Amendment and increase aggregate Commitment, the Line
Limit and the Cash Advance Sublimit under the Revolving Loan.
4.02 Additional Warranties and Representations. To induce Lenders to enter
into this Second Amendment, Borrower further represents and warrants to Lenders
that:
(A) Borrower has the power, authority and capacity to enter into and
perform this Second Amendment and all related instruments, agreements and
documents, and to incur the Obligations herein and therein provided for, and
Borrower has taken all proper and necessary corporate action to authorize the
execution, delivery and performance of this Second Amendment and related
instruments, agreements and documents;
(B) This Second Amendment is valid, binding and enforceable against
Borrower in accordance with its terms;
(C) PPI has acquired all of the issued and outstanding shares of
stock of PPF pursuant to a Stock Purchase Agreement dated August 31, 1998
between PPI and Russ (the "Stock Purchase Agreement") and all applicable Law;
and
(D) No consent, approval or authorization of, or filing, registration
or qualification with, any Person is required to be obtained by Borrower in
connection with the execution and delivery of this Second Amendment or any
related instrument, agreement or document, or undertaking or performance of any
Obligation hereunder or thereunder.
SECTION 5. CONDITIONS PRECEDENT.
This Second Amendment is subject to the following conditions precedent
(all instruments, agreements and documents to be in form and substance
satisfactory to each Lender and its counsel):
5.01 Documents Required for Closing. Borrower shall have duly executed
and/or delivered (or caused to be duly executed and/or delivered) to
Administrative Agent the following:
(A) This Second Amendment, the Second Replacement Revolving Loan
Notes, Explanations and Waivers of Rights regarding Confession of Judgment with
respect to the Second Replacement Revolving Loan Notes and each other
instrument, agreement and document to be executed and/or delivered pursuant to
this Second Amendment and/or the instruments, agreements and documents referred
to in this Second Amendment;
(B) A certified (as of the date of this Second Amendment) copy of
resolutions of Borrower's Board of Directors authorizing the execution, delivery
and performance of this Second Amendment and each other document to be executed
and/or delivered pursuant hereto and any other instrument, agreement or document
referred to herein;
(C) A certificate (dated the date of this Second Amendment) of
Borrower's corporate secretary as to the incumbency and specimen signatures of
the officers of Borrower executing this Second Amendment and each other document
to be executed and/or delivered pursuant hereto;
(D) Receipt and approval by Lenders of the Stock Purchase Agreement,
all schedules thereto, and all related instruments, agreements and documents;
(E) EARS, Inc., a Delaware corporation, a guarantor and surety for
the Obligations, shall unconditionally reaffirm in writing its suretyship for
the Obligations and consent to this Second Amendment; and
(F) Such other instruments, agreements and documents as may be
required by each Lender and/or its counsel.
SECTION 6. MISCELLANEOUS.
6.01 Integrated Agreement. This Second Amendment and all of the
instruments, agreements and documents executed and/or delivered in conjunction
with this Second Amendment shall be effective upon the date of execution hereof
and thereof by all parties hereto and thereto, and shall be deemed incorporated
into and made a part of the Loan Agreement and the other Loan Documents. All
such instruments, agreements and documents, and this Second Amendment, shall be
construed as integrated and complementary of each other, and as augmenting and
not restricting Lender's rights, remedies, benefits and security. If, after
applying the foregoing, an inconsistency still exists, the provisions of this
Second Amendment shall constitute an amendment thereto and shall govern and
control.
6.02 Expenses of Lenders and Administrative Agent. Borrower will pay, on
demand, all reasonable out-of-pocket expenses, including the reasonable fees and
expenses of legal counsel for each Lender and the Administrative Agent, incurred
in connection with this Second Amendment and all instruments, agreements and
documents executed and/or delivered in connection with this Second Amendment.
Subject to Paragraph 2.11(B) of the Loan Agreement, any Agent may charge any
deposit account of Borrower maintained at such Agent for all or any part of any
amount due hereunder.
6.03 Counterpart Execution. This Second Amendment may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to Syndicated Loan Agreement to be duly executed and exchanged as of the day and
year first above written.
ATTEST: PIERCING PAGODA, INC.
By:_____________________________
By:______________________________
Name: Name:
Title: Title:
[Corporate Seal]
ATTEST: PIERCING PAGODA OF FLORIDA,
INC.
By:_____________________________
By:______________________________
Name: Name:
Title: Title:
[Corporate Seal]
Commitment: $26,665 ,000.00
SUMMIT BANK, for itself and as Agent
for Lenders
By:______________________________
Name:
Title:
[Signatures continue on following page.]
[Signatures continued from previous page.]
Commitment: $63,335,000.00 FIRST UNION NATIONAL
BANK, N.A., for itself, as successor to CoreStates Bank, N.A.,
and as Agent and Administrative Agent for Lenders
By:
Name:
Title:
PHIL1\144598-1
SECOND REPLACEMENT REVOLVING LOAN NOTE
$26,665,000.00 September 2, 1998
FOR VALUE RECEIVED AND INTENDING TO BE LEGALLY BOUND HEREBY, the undersigned,
Piercing Pagoda, Inc. ("PPI"), a Delaware corporation and Piercing Pagoda of
Florida, Inc., a Florida corporation, (jointly and severally referred to and
obligated as "Borrower"), promise to pay to the order of Summit Bank ("Lender"),
at the offices of First Union National Bank ("Administrative Agent"), a national
bank with an office at 123 South Broad Street, Philadelphia, Pennsylvania, or at
such other location as Administrative Agent may designate from time to time,
with interest as set forth below, the principal sum of Twenty-Six Million Six
Hundred Sixty-Five Thousand ($26,665,000.00) Dollars or such lesser sum which
represents Lender's Pro Rata Share of the principal balance outstanding under
the Revolving Loan established pursuant to the provisions of that certain
Syndicated Loan Agreement dated March 27, 1997 among PPI, Administrative Agent,
Lender and the other "Lenders" listed therein, as amended pursuant to the
provisions of that certain First Amendment to Syndicated Loan Agreement dated
November 21, 1997 among such parties and that certain Second Amendment to
Syndicated Loan Agreement of even date herewith among such parties and PPF (as
it may be supplemented, restated, superseded, further amended or replaced from
time to time, "Loan Agreement"). The outstanding principal balance hereunder
shall, absent earlier acceleration, be payable on the Revolving Loan Termination
Date. The actual amount due and owing from time to time hereunder shall be
evidenced by Administrative Agent's records of receipts and disbursements with
respect to the Revolving Loan, which shall be prima facie evidence of the
amount. All capitalized terms used herein without further definition shall have
the respective meanings ascribed thereto in the Loan Agreement.
Borrower further agrees to pay interest on the outstanding principal
balance hereunder from time to time at one or more of the per annum Rates set
forth in Paragraph 2.8 of the Loan Agreement. Interest shall be calculated on
the basis of a year of three hundred sixty (360) days for the actual number of
days elapsed, and shall be due and payable as set forth in the Loan Agreement.
The Revolving Loan shall continue to accrue interest at the applicable
Rates provided for in the Loan Agreement even after Default, an Event of
Default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings of
any kind or the happening of any other event or occurrence, whether similar or
dissimilar.
If an Event of Default occurs and is continuing under the Loan Agreement,
the unpaid principal balance of this Second Replacement Revolving Loan Note,
together with all accrued and unpaid interest and other outstanding Obligations
shall become, or may be declared, immediately due and payable as provided in the
Loan Agreement.
This Second Replacement Revolving Loan Note may be prepaid only in
accordance with the terms and conditions of the Loan Agreement.
Any failure or delay of Administrative Agent, any Agent or Lender to
exercise any right hereunder shall not be construed as a waiver of the right to
exercise the same or any other right at any other time or times. The waiver by
Administrative Agent, any Agent or Lender of a breach or default of any
provision of this Second Replacement Revolving Loan Note shall not operate or be
construed as a waiver of any subsequent breach or default hereof. Borrower
agrees to reimburse Administrative Agent for all expenses incurred by
Administrative Agent, Lender or any other Lender in accordance with the
provisions of the Loan Agreement.
This Second Replacement Revolving Loan Note shall be construed and
governed by the laws of the Commonwealth of Pennsylvania without regard to
otherwise applicable principles of conflicts of laws. The provisions of this
Second Replacement Revolving Loan Note are severable and the invalidity or
unenforceability of any provision shall not alter or impair the remaining
provisions of this Second Replacement Revolving Loan Note. No modification
hereof shall be binding or enforceable against Lender unless approved in writing
by Lender.
THE FOLLOWING SETS FORTH A WARRANT OF AUTHORITY FOR ANY ATTORNEY TO, AFTER THE
OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, CONFESS JUDGMENT
AGAINST BORROWER. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT
AGAINST BORROWER, BORROWER, FOLLOWING CONSULTATION WITH (OR DECISION NOT TO
CONSULT WITH) SEPARATE COUNSEL FOR BORROWER, AND WITH KNOWLEDGE OF THE LEGAL
EFFECT HEREOF, HEREBY WAIVES ANY AND ALL RIGHTS BORROWER HAS, OR MAY HAVE, TO
PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING BEFORE ENTRY OF JUDGMENT, OR
EXECUTION UPON ANY REAL OR PERSONAL PROPERTY OF BORROWER UNDER THE CONSTITUTIONS
AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. BORROWER
SPECIFICALLY ACKNOWLEDGES THAT ADMINISTRATIVE AGENT AND LENDERS HAVE RELIED ON
THIS WARRANT OF ATTORNEY IN GRANTING THE FINANCIAL ACCOMMODATIONS DESCRIBED
HEREIN.
AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, BORROWER
HEREBY EMPOWERS ANY PROTHONOTARY, CLERK, OR ATTORNEY OF ANY COURT OF RECORD IN
THE UNITED STATES, OR ELSEWHERE, TO APPEAR FOR BORROWER IN ANY AND ALL ACTIONS
WHICH MAY BE BROUGHT HEREUNDER IN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE
AND CONFESS JUDGMENT AGAINST BORROWER FOR ALL, OR ANY PART, OF THE UNPAID
PRINCIPAL BALANCE HEREUNDER, AND ACCRUED INTEREST TOGETHER WITH OTHER EXPENSES
INCURRED IN CONNECTION THEREWITH AND ATTORNEYS' FEES OF FIVE PERCENT (5%) OF THE
TOTAL OF THE FOREGOING SUMS, BUT IN NO EVENT LESS THAN FIVE THOUSAND ($5,000.00)
DOLLARS, AND FOR SUCH PURPOSE, THE ORIGINAL OR ANY PHOTOCOPY OF THIS REPLACEMENT
REVOLVING LOAN NOTE SHALL BE A GOOD AND SUFFICIENT WARRANT OF ATTORNEY. SUCH
AUTHORITY SHALL NOT BE EXHAUSTED BY ONE EXERCISE THEREOF BUT JUDGEMENT MAY BE
CONFESSED AS AFORESAID FROM TIME TO TIME. BORROWER WAIVES ALL ERRORS AND RIGHTS
OF APPEAL, AS WELL AS RIGHTS TO STAY OF EXECUTION AND EXEMPTION OF PROPERTY, IN
ANY ACTION TO ENFORCE ITS LIABILITY HEREON.
Except as expressly set forth in the Loan Agreement, Borrower hereby
waives protest, notice of protest, presentment, dishonor, notice of dishonor and
demand. To the extent permitted by law, Borrower hereby waives and releases all
errors, defects and imperfections in any proceedings instituted by
Administrative Agent or any Lender under the terms of this Second Replacement
Revolving Loan Note. The rights and privileges of Administrative Agent and any
Lender under this Second Replacement Revolving Loan Note shall inure to the
benefit of its successors and assigns. All representations, warranties and
agreements of Borrower made in connection with this Second Replacement Revolving
Loan Note shall bind Borrower's successors and assigns. The rights and remedies
of Administrative Agent or Lender under this Second Replacement Revolving Loan
Note shall be in addition to any other rights and remedies available to
Administrative Agent or Lender at law or in equity, all of which may be
exercised singly or concurrently. The parties agree to the exclusive
jurisdiction of the federal and state courts located in Pennsylvania in
connection with any matter arising hereunder, including the collection and
enforcement hereof, except as the Administrative Agent may otherwise elect.
Borrower (and Administrative Agent and Lender by their acceptance hereof)
each hereby waives any and all rights it may have to a jury trial in connection
with respect to rights any litigation arising with rights and obligations of the
parties hereto.
This Second Replacement Revolving Loan Note replaces and supersedes, but
does not extinguish or constitute a novation of any indebtedness evidenced by
that certain Replacement Revolving Loan Note dated November 21, 1997 executed
and delivered by PPI to Lender.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, intending to be legally bound, Borrower
has duly executed this Second Replacement Revolving Loan Note the day and year
first above written and has hereunto set hand and seal.
ATTEST: PIERCING PAGODA, INC.
By:____________________________
By:____________________________
Name: Name:
Title: Title:
(Corporate Seal)
ATTEST: PIERCING PAGODA OF FLORIDA, INC.
By:____________________________
By:____________________________
Name: Name:
Title: Title:
(Corporate Seal)
PHIL1\144692-1
SECOND REPLACEMENT REVOLVING LOAN NOTE
$63,335,000.00 September 2, 1998
FOR VALUE RECEIVED AND INTENDING TO BE LEGALLY BOUND HEREBY, the undersigned,
Piercing Pagoda, Inc. ("PPI"), a Delaware corporation and Piercing Pagoda of
Florida, Inc. ("PPF"), a Florida corporation (jointly and severally referred to
and obligated as "Borrower"), promise to pay to the order of First Union
National Bank ("Lender"), at the offices of Lender, in its capacity as
Administrative Agent under the Loan Agreement (as hereinafter defined) (acting
in such capacity, the "Administrative Agent") at 123 South Broad Street,
Philadelphia, Pennsylvania, or at such other location as Administrative Agent
may designate from time to time, with interest as set forth below, the principal
sum of Sixty-Three Million Three Hundred Thirty-Five Thousand ($63,335,000.00)
Dollars or such lesser sum which represents Lender's Pro Rata Share of the
principal balance outstanding under the Revolving Loan established pursuant to
the provisions of that certain Syndicated Loan Agreement dated March 27, 1997
among PPI, Administrative Agent, Lender and the other "Lenders" listed therein,
as amended pursuant to the provisions of that certain First Amendment to
Syndicated Loan Agreement dated November 21, 1997 among such parties and that
certain Second Amendment to Syndicated Loan Agreement of even date herewith
among such parties and PPF (as it may be supplemented, restated, superseded,
further amended or replaced from time to time, "Loan Agreement"). Except as
otherwise provided below, the outstanding principal balance hereunder shall,
absent earlier acceleration, be payable on the Revolving Loan Termination Date.
The actual amount due and owing from time to time hereunder shall be evidenced
by Administrative Agent's records of receipts and disbursements with respect to
the Revolving Loan, which shall be prima facie evidence of the amount. All
capitalized terms used herein without further definition shall have the
respective meanings ascribed thereto in the Loan Agreement.
Borrower further agrees to pay interest on the outstanding principal
balance hereunder from time to time at one or more of the per annum Rates set
forth in Paragraph 2.8 of the Loan Agreement. Interest shall be calculated on
the basis of a year of 360 days for the actual number of days elapsed, and shall
be due and payable as set forth in the Loan Agreement.
The Revolving Loan shall continue to accrue interest at the applicable
Rates provided for in the Loan Agreement even after Default, an Event of
Default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings of
any kind or the happening of any other event or occurrence, whether similar or
dissimilar.
On or before October 31, 1998, Borrower shall repay to Lender the
Temporary Commitment Increase, or so much thereof as shall have been advanced by
Lender, together with all accrued and unpaid interest.
If an Event of Default occurs and is continuing under the Loan Agreement,
the unpaid principal balance of this Second Replacement Revolving Loan Note,
together with all accrued and unpaid interest and other outstanding Obligations
shall become, or may be declared, immediately due and payable as provided in the
Loan Agreement.
This Second Replacement Revolving Loan Note may be prepaid only in
accordance with the terms and conditions of the Loan Agreement.
Any failure or delay of Administrative Agent, any Agent or Lender to
exercise any right hereunder shall not be construed as a waiver of the right to
exercise the same or any other right at any other time or times. The waiver by
Administrative Agent, any Agent or Lender of a breach or default of any
provision of this Second Replacement Revolving Loan Note shall not operate or be
construed as a waiver of any subsequent breach or default hereof. Borrower
agrees to reimburse Administrative Agent for all expenses incurred by
Administrative Agent, Lender or any other lender in accordance with the
provisions of the Loan Agreement.
This Second Replacement Revolving Loan Note shall be construed and
governed by the laws of the Commonwealth of Pennsylvania without regard to
otherwise applicable principles of conflicts of laws. The provisions of this
Second Replacement Revolving Loan Note are severable and the invalidity or
unenforceability of any provision shall not alter or impair the remaining
provisions of this Second Replacement Revolving Loan Note. No modification
hereof shall be binding or enforceable against Lender unless approved in writing
by Lender.
THE FOLLOWING SETS FORTH A WARRANT OF AUTHORITY FOR ANY ATTORNEY TO, AFTER THE
OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, CONFESS JUDGMENT
AGAINST BORROWER. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT
AGAINST BORROWER, BORROWER, FOLLOWING CONSULTATION WITH (OR DECISION NOT TO
CONSULT WITH) SEPARATE COUNSEL FOR BORROWER, AND WITH KNOWLEDGE OF THE LEGAL
EFFECT HEREOF, HEREBY WAIVES ANY AND ALL RIGHTS BORROWER HAS, OR MAY HAVE, TO
PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING BEFORE ENTRY OF JUDGMENT, OR
EXECUTION UPON ANY REAL OR PERSONAL PROPERTY OF BORROWER UNDER THE CONSTITUTIONS
AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. BORROWER
SPECIFICALLY ACKNOWLEDGES THAT ADMINISTRATIVE AGENT AND LENDERS HAVE RELIED ON
THIS WARRANT OF ATTORNEY IN GRANTING THE FINANCIAL ACCOMMODATIONS DESCRIBED
HEREIN.
AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, BORROWER
HEREBY EMPOWERS ANY PROTHONOTARY, CLERK, OR ATTORNEY OF ANY COURT OF RECORD IN
THE UNITED STATES, OR ELSEWHERE, TO APPEAR FOR BORROWER IN ANY AND ALL ACTIONS
WHICH MAY BE BROUGHT HEREUNDER IN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE
AND CONFESS JUDGMENT AGAINST BORROWER FOR ALL, OR ANY PART, OF THE UNPAID
PRINCIPAL BALANCE HEREUNDER, AND ACCRUED INTEREST TOGETHER WITH OTHER EXPENSES
INCURRED IN CONNECTION THEREWITH AND ATTORNEYS' FEES OF FIVE PERCENT (5%) OF THE
TOTAL OF THE FOREGOING SUMS, BUT IN NO EVENT LESS THAN FIVE THOUSAND ($5,000.00)
DOLLARS, AND FOR SUCH PURPOSE, THE ORIGINAL OR ANY PHOTOCOPY OF THIS REPLACEMENT
REVOLVING LOAN NOTE SHALL BE A GOOD AND SUFFICIENT WARRANT OF ATTORNEY. SUCH
AUTHORITY SHALL NOT BE EXHAUSTED BY ONE EXERCISE THEREOF BUT JUDGEMENT MAY BE
CONFESSED AS AFORESAID FROM TIME TO TIME. BORROWER WAIVES ALL ERRORS AND RIGHTS
OF APPEAL, AS WELL AS RIGHTS TO STAY OF EXECUTION AND EXEMPTION OF PROPERTY, IN
ANY ACTION TO ENFORCE ITS LIABILITY HEREON.
Except as expressly set forth in the Loan Agreement, Borrower hereby
waives protest, notice of protest, presentment, dishonor, notice of dishonor and
demand. To the extent permitted by law, Borrower hereby waives and releases all
errors, defects and imperfections in any proceedings instituted by
Administrative Agent or any Lender under the terms of this Second Replacement
Revolving Loan Note. The rights and privileges of Administrative Agent and any
Lender under this Second Replacement Revolving Loan Note shall inure to the
benefit of its successors and assigns. All representations, warranties and
agreements of Borrower made in connection with this Second Replacement Revolving
Loan Note shall bind Borrower's successors and assigns. The rights and remedies
of Administrative Agent or Lender under this Second Replacement Revolving Loan
Note shall be in addition to any other rights and remedies available to
Administrative Agent or Lender at law or in equity, all of which may be
exercised singly or concurrently. The parties agree to the exclusive
jurisdiction of the federal and state courts located in Pennsylvania in
connection with any matter arising hereunder, including the collection and
enforcement hereof, except as the Administrative Agent may otherwise elect.
Borrower (and Administrative Agent and Lender by their acceptance hereof)
each hereby waives any and all rights it may have to a jury trial in connection
with respect to rights any litigation arising with rights and obligations of the
parties hereto.
This Second Replacement Revolving Loan Note replaces and supersedes, but
does not extinguish or constitute a novation of any of the indebtedness
evidenced by a certain Replacement Revolving Loan Note dated November 21, 1997.
In the principal amount of Sixteen Million ($16,000,000.00) Dollars executed and
delivered by PPI to Lender and a certain Replacement Revolving Loan Note dated
November 21, 1997 in the principal amount of Thirty-Seven Million Three Hundred
Thirty-Five Thousand ($37,335,000.00) Dollars executed and delivered by PPI to
CoreStates Bank, N.A., Lender's predecessor-in-interest.
IN WITNESS WHEREOF, intending to be legally bound, Borrower has duly
executed this Second Replacement Revolving Loan Note the day and year first
above written and has hereunto set hand and seal.
ATTEST: PIERCING PAGODA, INC.
By:____________________________
By:____________________________
Name: Name:
Title: Title:
(Corporate Seal)
ATTEST: PIERCING PAGODA of FLORIDA, INC.
By: __________________________
By:________________________________
Name: Name:
Title: Title:
(Corporate Seal)
PHIL1\144695-1
BOND PLACEMENT AGREEMENT
$2,565,000
Piercing Pagoda, Inc.
Taxable Variable Rate Demand/Fixed Rate Bonds
Series of 1998
BOND PLACEMENT AGREEMENT, dated as of April 29, 1998, by and between PIERCING
PAGODA, INC., a Delaware corporation (the "Company") and CORESTATES SECURITIES,
CORP, (the "Placement Agent").
1. Background
A. The Company is issuing its Taxable Variable Rate Demand/Fixed Rate Bonds,
Series of 1998, in the aggregate principal amount of $2,565,000 (the "Bonds")
pursuant to a Trust Indenture dated as of April 29, 1998 (the "Indenture")
between the Company and Dauphin Deposit Bank and Trust Company, as Trustee (the
"Trustee"). The proceeds of the Bonds are being applied to finance a project
(the "Project") consisting of (i) the construction of a new 70,655 square feet
building on 5.3 acres of land at the Company headquarters in Hanover Township,
Northampton County, Pennsylvania for the purpose of expanding the Company's
capabilities to distribute, assemble and warehouse their products and to provide
for office space to carry out the administrative functions of the Company's
business; and (ii) the payment of fees and expenses relating to the issuance of
the Bonds.
B. Concurrently with, and as a condition to the issuance of the Bonds, the
Company will cause to be delivered to the Trustee an irrevocable, direct-pay
Letter of Credit, dated the date of issuance of the Bonds (the "Letter of
Credit") issued by CoreStates Bank, N.A. (the "Bank"). Under the terms of the
Letter of Credit, the Trustee will be entitled to draw up to an amount equal to
the principal of the Bonds plus at least forty-five (45) days' accrued and
unpaid interest thereon (at a maximum rate of 17% per annum for the Bonds, based
on a 365/366 day year, actual number of days elapsed). The Letter of Credit will
be issued pursuant to a Reimbursement Agreement, dated as of April 29, 1998 (the
"Reimbursement Agreement") between the Bank and the Company. The Letter of
Credit will expire pursuant to its terms on April 29, 2003, unless earlier
terminated pursuant to its terms (the "Letter of Credit Termination Date"). The
Bonds mature on May 1, 2013 and are subject to optional, extraordinary,
mandatory and mandatory sinking fund redemption prior to maturity, all as set
forth in the Preliminary Placement Memorandum (as hereinafter defined).
C. The Bonds will be issued pursuant to a resolution adopted by the Company (the
"Resolution") and pursuant to the Indenture.
D. The Bonds will be remarketed in accordance with the applicable provisions of
the Indenture and a Remarketing Agreement, dated as of April 29, 1998 (the
"Remarketing Agreement"), by and between CoreStates Securities, Corp, as
remarketing agent, and the Company.
E. As security for its obligations to the Bank under the Reimbursement
Agreement, the Company will, among other things, grant to the Bank a mortgage
lien on and security interest in its facility located in Hanover Township,
Northampton County, pursuant to an open end mortgage and security agreement
dated the date of original issuance of the Bonds (the "Mortgage").
F. The professional advisors referred to in this Bond
Placement Agreement are:
Bond Counsel King, McCardle, Herman, Freund & Olexa
and Placement 110-112 North Sixth Street
Agent Counsel: P.O. Box 449
Allentown, PA 19105
Company Counsel: Duane, Morris & Heckscher LLP
Suite 200
968 Postal Road
Allentown, PA 18103-9390
Bank Counsel: Klehr, Harrison, Harvey, Branzburg & Ellers, LLP
1401 Walnut Street
Philadelphia, PA 19102
2. Placement and Closing. Subject to the terms and conditions and in reliance on
the representations, warranties, agreements and indemnities set forth herein,
(i) the Placement Agent hereby agrees to privately place the Bonds with
qualified purchasers, as agent for the Company; and (ii) the Company hereby
agrees to deliver to such investors, all (but not less than all) of the Bonds as
provided in the Indenture. The aggregate price for the Bonds shall be 100% of
the principal amount thereof plus accrued interest to the date of Closing (as
hereinafter defined), payable in immediately available funds to the order of the
Trustee for the account of the Company. As consideration for its private
placement of the Bonds, the Company shall pay the Placement Agent a fee of in
immediately available moneys on the date of Closing. Closing will be held at the
offices of King, McCardle, Herman, Freund & Olexa, at 10:30 a.m. on April 29,
1998, or at such other place and time as may be agreed to by the parties hereto.
The Bonds will be delivered in New York, New York, in fully registered form in
such denominations and registered in such names as shall be requested by the
Placement Agent.
3. Company's Representations. To the best knowledge of the Company after
reasonable investigation (including but not limited to consultation with
counsel, when appropriate) the Company makes the following representations, all
of which will continue to be in effect subsequent to the private placement of
the Bonds:
(a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) The Company has full legal power to execute and deliver the Indenture, the
Reimbursement Agreement, the Mortgage, the Remarketing Agreement, the Pledge and
Security Agreement, this Bond Placement Agreement, the Reimbursement Documents
(as such term is defined in the Reimbursement Agreement) and any and all other
documents, certificates and agreements executed by the Company in connection
with the issuance of the Bonds and the Letter of Credit (collectively, the
"Company Documents") and to perform its obligations thereunder and hereunder;
(c) The Company has duly authorized the execution and delivery of the Company
Documents and the undertaking of their obligations thereunder and hereunder, and
the taking of all actions as may be required on the part of the Company to carry
out the same; and the making and performance of each such agreement will not
conflict with, nor constitute a breach of or a default under, any provision of
the Articles of Incorporation or By-laws of the Company or any indenture,
agreement or other instrument to which the Company is a party or by which the
Company or any of its properties may be bound, or any constitutional or
statutory provision or order, rule, regulation, decree or ordinance of any
court, government or governmental body to which the Company or any of its
properties are subject;
(d) As of the Closing, the Company Documents will be duly executed and delivered
by the Company, will be in full force and will constitute the legal, valid and
binding obligations of the Company enforceable in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium and similar terms in
effect from time to time affecting the enforcement of creditors' rights
generally.
(e) As of the Closing, there is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, regulatory agency,
public board or body pending or, to the best knowledge of the Company,
threatened against the Company, nor to the best knowledge of the Company is
there any basis therefor, wherein an unfavorable ruling or finding would
materially and adversely affect the validity or enforceability of the Company
Documents or would materially and adversely affect any of the transactions
contemplated by this Bond Placement Agreement;
(f) The information set forth in the Preliminary Placement Memorandum under the
headings "The Company", "Litigation" and the "Introductory Statement" with
respect to the Company (as hereinafter defined), is true and correct in all
material respects and does not contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(g) The Company has obtained all consents, approvals, authorizations and orders
of governmental or regulatory authorities that are required to be obtained by it
as a condition precedent to the execution by the Company of the Company
Documents. The Company has obtained all consents that are required to be
obtained by it for the performance of its obligations under the Company
Documents.
4. Placement Agent and Representations, Warranties and Covenants. The Placement
Agent makes the following representations, warranties and covenants, all of
which will continue to be in effect subsequent to the purchase and placement of
the Bonds:
(a) The Placement Agent has all requisite power and authority to enter into this
Agreement, consummate the transactions contemplated hereby and to carry on its
business as now constituted;
(b) The Placement Agent has received all necessary information with respect to
the Company, the Bank and the Project in order to place the Bonds and any and
all information relating to the Company or the Bank and their affairs, which the
Placement Agent has requested has been provided to the Placement Agent;
(c) This Agreement has been duly executed and delivered by the Placement Agent
and the information contained in the Memorandum (hereinafter defined) relating
to the Placement Agent does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statement therein not
misleading.
(d) The Placement Agent has received the Company Documents and all other
documents relating to the issuance of the Bonds, including without limitation,
the Trust Indenture and the Letter of Credit and such documents contain terms
reasonably acceptable to, and agreed to by, the Placement Agent;
(e) The Placement Agent is a broker-dealer registered as such under the
Securities Exchange Act of 1934 as amended (the "1934 Act") and under the
Securities laws of the State in which the Bonds will be offered or sold by the
Placement Agent in which such registration is required and is a member in good
standing of the NASD.
(f) The Bonds are being offered in authorized denominations of $100,000 or more
and are being sold to no more than thirty-five (35) persons each of whom the
Placement Agent reasonably believes (i) has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the prospective investment and (ii) is not purchasing for more than one
account or with a view to distributing the Bonds.
(g) There is no action, suit, proceeding, inquiry or investigation at law or in
equity, or before or by any court, public body or other governmental authority,
pending or, to the best knowledge and information of the Placement Agent,
threatened against or affecting the Placement Agent, wherein an unfavorable
decision, ruling or finding could materially adversely affect the business or
financial condition of the Placement Agent or could adversely affect the
transactions contemplated by this Agreement, or which in any manner raises any
questions concerning the legality, validity or enforceability of this Agreement
nor to the best knowledge and belief of the Placement Agent is there any basis
therefor; and
(h) The execution, delivery and performance by the Placement Agent of this
Agreement does not and will not violate the certificate of incorporation or
by-laws of the Placement Agent, or any order, injunction, ruling or decree by
which the Placement Agent is bound, and does not and will not constitute a
breach of or a default under any agreement, indenture, mortgage, lease, note or
other obligation, instrument or arrangement to which the Placement Agent is a
party or by which the Placement Agent or any of its property is bound, or
contravene or constitute a violation of any law, rule or regulation to which the
Placement Agent or any of its property is subject, and no approval or other
action by, or filing or registration with any governmental authority or agency
is required in connection therewith which has not been previously obtained or
accomplished. 5. Preliminary Placement Memorandum and Private Placement
Memorandum. Prior to the Closing, the Company shall approve and authorize the
distribution of the Preliminary Placement Memorandum (including all exhibits and
appendices thereto the "Preliminary Placement Memorandum") and the (including
all exhibits and appendices thereto, the "Private Placement Memorandum"), and
shall authorize the use of the Preliminary Placement Memorandum and the Private
Placement Memorandum in connection with the private placement of the Bonds.
6. Company Covenants. The Company covenants to indemnify, hold harmless and
defend the Placement Agent its officers, agents and employees, past, present and
future and each person, if any, who controls the Placement Agent within the
meaning of Section 15 of the Securities Act of 1933, as amended (individually,
an "Indemnified Party" and collectively, the ("Indemnified Parties"), to the
full extent permitted by law against any and all losses, claims, damages or
liabilities (including reasonable legal and other expenses of defending any
actions) that they or any of them may incur or have asserted against them caused
by (i) any untrue statement or alleged untrue statement of a material fact in
the Preliminary Placement Memorandum, except for the information contained in
Appendix A and B or any amendments or supplements to the Preliminary Placement
Memorandum ; or (ii) the omission or alleged omission to state therein a
material fact required to be stated in the Preliminary Placement Memorandum
necessary to make the statements therein, in light of the circumstances under
which they are made not misleading or (iii) any breach (or alleged breach) by
the Company of any of its representations or warranties set forth in this Bond
Placement Agreement or directly or indirectly resulting from, arising out of, or
relating to the Project.
7. Actions Brought Against Indemnified Parties. In case any action shall be
brought against any Indemnified Party with respect to which indemnity may be
sought against the Company under the provisions of this Bond Placement
Agreement, such Indemnified Party shall promptly notify the Company in writing,
and the Company shall assume the defense thereof, including the employment of
counsel and the payment of all reasonable expenses. Any Indemnified Party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
sole cost and expense of such Indemnified Party unless (i) the employment of
such counsel has been specifically authorized in writing by the Company; or (ii)
the named parties to any such action (including any impleaded parties) include
both such Indemnified Party and the Company and such Indemnified Party shall
have been advised by its counsel that it is probable that a conflict of interest
between the Company and such Indemnified Party may arise and for this reason it
is not desirable for the same counsel to represent both the Company and the
Indemnified Party (in which case the Company shall not have the right to assume
the defense of such action on behalf of such Indemnified Party); it being
understood, however, that in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, the Company shall not be liable
for the reasonable fees and expenses of more than one separate firm of attorneys
for all such Indemnified Parties, which firm shall be designated in writing by
the Indemnified Parties). The Company shall not be liable for any settlement of
any such action effected without its written consent, but if settled with the
written consent of the Company or if there is a final judgment for the plaintiff
in any such action, the Company agrees to indemnify and hold harmless any
Indemnified Party from and against any loss, cost, expense or liability by
reason of such settlement or judgment, including but not limited to reasonable
attorneys fees. This indemnity includes but is not limited to reimbursement for
expenses reasonably incurred by the Indemnified Party in investigating the claim
and in defending it if the Company declines to assume the defense, provided that
the matter is one for which indemnification is required of the Company under
this Agreement. The indemnity agreements of the Company contained in Section 6
hereof shall survive the delivery and payment of the Bonds.
8. Blue Sky Requirements. The Placement Agent shall, in its sole discretion,
determine the jurisdictions in which the Bonds shall be offered and sold. The
Placement Agent shall use its best efforts to qualify the Bonds for offer, sale
and delivery under the securities or "Blue Sky" laws of each such jurisdiction
to the extent required. The Company shall cooperate with the Placement Agent in
its efforts to qualify the Bonds for such offer, sale and delivery under the
securities or "Blue Sky" laws of such jurisdictions.
9. Conditions of Closing. The obligations of the Placement Agent to privately
place the Bonds on the date of Closing shall be subject, except as specifically
waived in writing by the Placement Agent in its sole discretion to (i) the
accuracy of the representations and warranties on the part of the Company
contained herein as of the date hereof and as of the date of Closing; (ii) the
accuracy in all material respects of the statements of the officers of the
Company made in any certificates or other documents furnished pursuant to the
provisions hereof, and (iii) the performance by the Company of its obligations
to be performed hereunder or otherwise at or prior to the Closing and to the
following additional conditions:
(a) At the Closing, the Resolution shall have been duly adopted by the Company
and shall be in full force and effect and constitute the legal, valid and
binding action of the Company, and the Company Documents, when executed and
delivered by the parties thereto, will constitute legal, valid and binding
obligations of the parties thereto, enforceable in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium and similar terms in
effect from time to time affecting the enforcement of creditors' rights, and
such documents shall not have been amended, modified or supplemented except as
may have been agreed to in writing by the Placement Agent;
(b) At the Closing, there shall not have been any material adverse change in the
business, properties or financial condition of the Bank, as described in the
Preliminary Placement Memorandum or of the Company which in the judgment of the
Placement Agent, makes it inadvisable to proceed with the offer and sale of the
Bonds;
(c) The Letter of Credit shall have been delivered by the Bank;
(d) At the Closing, the Preliminary Placement Memorandum shall not have been
amended, modified or supplemented, except as may have been agreed to in writing
by the Placement Agent;
(e) The Company shall not have defaulted in the performance of any of their
covenants hereunder, under the Indenture or under the Company Documents;
(f) The Placement Agent shall have received:
(i) The Preliminary Placement Memorandum executed by the
Company, including all appendices thereto;
(ii) An opinion of Bond Counsel, addressed to the Placement Agent, also dated
the date of Closing, covering the matters set forth in Exhibit A hereto and any
other matters which may be reasonably requested by the Placement Agent, with
such changes therein as are acceptable to the Placement Agent;
(iii) An opinion of Counsel for the Company, dated the date of Closing and
addressed to the Placement Agent, the Bank and the Trustee, covering the matters
set forth in Exhibit B hereto and any other matters which may be reasonably
requested by the Placement Agent, with such changes therein as are acceptable to
the Company, the Placement Agent, the Bank and the Trustee;
(iv) An opinion of Counsel for the Bank, dated the date of Closing and addressed
to the Placement Agent, the Bank and the Trustee, covering the matters set forth
in Exhibit C hereto, with such changes therein as are acceptable to the
Placement Agent, the Bank, the Trustee and Bond Counsel;
(v) A preference opinion of Counsel for the Bank dated the date of Closing and
addressed to Moody's (herein defined), the Trustee and the Placement Agent in
form satisfactory to the Placement Agent and Moody's;
(vi) A certificate, dated the date of Closing and signed by an authorized
officer of the Company to the effect (A) that the representations and warranties
regarding the Company contained herein are true and correct in all material
respects on and as of the date of Closing with the same effect as if made on the
date of Closing; (B) that no event has occurred since the date of the
Preliminary Placement Memorandum to render any statements therein untrue; (C)
that the information contained in the Preliminary Placement Memorandum does not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein in the
light of the circumstances under which they were made, not misleading; (D) that
the Company has complied with all the agreements and satisfied all material
conditions on their part to be performed or satisfied under this Bond Placement
Agreement and the Reimbursement Agreement or otherwise at or prior to the
Closing; and (E) such other matters as Bond Counsel and the Placement Agent may
reasonably request;
(vii) A certificate, dated the date of Closing and signed by an authorized
officer of the Bank to the effect that (A) the Bank is a national banking
association, duly organized, validly existing and in good standing under the
laws of the United States of America; (B) the Bank has full legal right, power
and authority to execute and deliver the Reimbursement Agreement and the Letter
of Credit and to perform its obligations thereunder; (C) the Reimbursement
Agreement and the Letter of Credit have been duly authorized, executed and
delivered by the Bank, are in full force and effect as to the Bank on the date
of Closing, and constitute legal, valid and binding obligations of the Bank
enforceable against the Bank in accordance with their respective terms, except
as enforcement may be limited by equitable principles, or by bankruptcy,
insolvency, reorganization, moratorium and liquidation laws and other similar
laws in effect from time to time affecting the enforcement of creditors' rights
generally, as such laws would apply in the event of the bankruptcy, insolvency,
reorganization or liquidation of, or other similar occurrence with respect to
the Bank in the event of any moratorium or similar occurrence affecting the
Bank; (D) to the Bank's knowledge, there is no action, suit, proceeding, inquiry
or investigation, at law or in equity, before or by any court, regulatory
agency, public board or body pending or threatened against the Bank wherein an
unfavorable ruling or finding would adversely affect the validity or
enforceability of the Reimbursement Agreement or the Letter of Credit, or would
materially and adversely affect the ability of the Bank to perform its
obligations thereunder; (E) all of the conditions precedent to the issuance of
the Letter of Credit contained in the Reimbursement Agreement have been
satisfied or waived by the Bank; and (F) to the best of said officer's
knowledge, as of the date of issuance of the Bonds, the information contained
under the heading "The Letter of Credit and the Reimbursement Agreement" and in
Appendix B to the Preliminary Placement Memorandum do not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(viii) A letter of Moody's Investors Services, Inc.
("Moody's") stating that it has issued a rating of "Aa3/VMIG1" on
the Bonds; and
(xi) Such additional documents, instruments, agreements, certificates and
opinions as Bond Counsel and the Placement Agent may reasonably request to
evidence the accuracy of the representations and warranties and compliance with
the covenants set forth herein, including the covenants as to the exemption of
the offering of the Bonds from registration under the Securities Act of 1933, as
amended; and
(g) Between the date hereof and the date of Closing, the market price or
marketability of the Bonds, at the initial offering prices set forth in the
Preliminary Placement Memorandum, shall not have been materially adversely
affected, in the reasonable judgment of the Placement Agent (evidenced by a
written notice to the Company terminating the obligation of the Placement Agent
to privately place the Bonds), by reason of any of the following:
(i) Legislation enacted by or introduced in the Congress of the
United States or reported out of or pending in committee or recommended for
passage by the President of the United States, or a decision rendered by a court
established under Article III of the Constitution of the United States, or an
order, ruling, regulation or official statement (final, temporary or proposed)
issued or made or any other release or announcement by or on behalf of the
Securities and Exchange Commission, or any other governmental agency having
jurisdiction of the subject matter, to the effect that obligations of the
general character of the Bonds are not exempt from qualification under, or other
requirements of, the Trust Indenture Act of 1939, as amended, or that the
issuance, offering or sale of obligations of the general character of the Bonds,
including any or all underlying arrangements as contemplated hereby or by the
Preliminary Placement Memorandum, is or would be in violation of the federal
securities laws as amended and then in effect and the regulations promulgated
thereunder; or
(ii) The declaration of war or engagement in major hostilities by the United
States or the occurrence of any other local, national or international emergency
or calamity relating to the effective operation of the government of or the
financial community in the United States, or a default with respect to the debt
obligations of, or the institution of proceedings under the federal bankruptcy
laws by or against, any state of the United States or agency thereof, the City
of New York, New York, or any city in the United States having a population of
over 1,000,000, the effect of which on the financial markets of the United
States will be such as, in the Placement Agent's judgment, makes it
impracticable for the Placement Agent to place the Bonds; or
(iii) The declaration of a general banking moratorium by federal New York, New
Jersey or Pennsylvania authorities, or the general suspension of trading on any
national securities exchange; or
(iv) Any amendment to the federal, Pennsylvania or New Jersey Constitutions or
action by any federal or state court, legislative body, regulatory body or other
authority materially adversely affecting the validity or enforceability of the
Resolution, the Bonds, the Indenture, the Reimbursement Agreement, the Letter of
Credit or this Bond Placement Agreement, or the ability of the Company or the
Bank to meet their respective covenants under such agreements; or
(v) Any event occurring, or information becoming known which, in the reasonable
judgment of the Placement Agent or the Company makes untrue in any material
respect any statement or information contained in the Preliminary Placement
Memorandum , or has the effect that the Preliminary Placement Memorandum
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
If the Placement Agent terminates its obligation to place the Bonds for any
reason permitted by this Bond Placement Agreement. This Bond Placement Agreement
will terminate without liability on the part of the Company or the Placement
Agent, except for the provisions of Sections 6 as to indemnification of the
Placement Agent.
10. Representation of the Placement Agent. The Placement Agent acknowledges that
each investor has been given or will have been given an opportunity to examine
such material relating to the Bonds and the Bank as is satisfactory to each of
them.
11. Notices and Other Actions. All notices, demands and formal actions hereunder
will be in writing, mailed, telegraphed or delivered to:
The Company:
Piercing Pagoda, Inc.
3910 Alder Drive
P.O. Box 25007
Lehigh Valley, PA 18002-5007
The Placement Agent:
CoreStates Securities, Corp
600 Penn Street, Second Floor South
Reading, PA 19602
Attention: Sales and Underwriting Department
12. Acknowledgment of Multiple Representation. Each of the parties hereto
acknowledges and confirms that it was advised on or before April 29, 1998 that
King, McCardle, Herman, Freund & Olexa would act as Bond Counsel and Counsel to
the Placement Agent in connection with the transaction described in this Bond
Placement Agreement. Each of the parties hereto further acknowledges and
confirms that, upon being so advised, it agreed to such multiple representation.
13. Execution in Counterparts. This Bond Placement Agreement may be executed in
any number of counterparts, all of which shall constitute but one and the same
document, and any parties hereto may execute this Bond Placement Agreement by
signing any such counterparts.
14. Successors. This Bond Placement Agreement will inure to the benefit of and
be binding upon the parties hereto and their successors, and no other person
shall acquire or have any right hereunder or by virtue hereof.
15. Applicable Law. This Bond Placement Agreement shall be governed by and
construed in accordance with the domestic internal laws (but not the law of
conflict of laws) of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Company and the Placement Agent, intending to be legally
bound, have caused their duly authorized representatives to execute and deliver
this Bond Placement Agreement as of the date first written above.
Attest: PIERCING PAGODA, INC.
- ------------------------- -------------------------------
Authorized Officer Chief Financial Officer
Attest: CORESTATES SECURITIES, CORP
- -------------------------- -------------------------------
Authorized Officer Senior Vice President
EXHIBIT A
Points to be covered
in Opinion of Bond Counsel
1. The Bonds are exempt from registration under the Securities Act of 1933 as
amended, in connection with the offering and sale of the Bonds and the Indenture
is exempt from qualification under the Trust Indenture Act of 1939, as amended.
2. The description and summaries under the captions entitled "The Bonds" (except
for the information extracted from information provided by DTC), and "The
Indenture" contained in the Preliminary Placement Memorandum fairly summarize
the applicable provisions of the documents or portions of applicable law, as the
case may be, which are purported to be summarized therein.
3. Except as to the possible application of state securities laws, as to which
no opinion need be expressed, no authorization, declaration, approval, consent
or other order of any governmental authority or agency is required to be
obtained by the Company which has not been obtained for the valid authorization,
execution, issuance and sale of the Bonds by the Company and the valid
authorization, execution and delivery of the Bond Placement Agreement and all
other documents executed by the Company in connection with the issuance of the
Bonds.
4. The issuance and sale of the Bonds have been duly authorized by the Company
and such Bonds have been duly executed and delivered by the Company and
authenticated by the Trustee, are valid and binding obligations of the Company
and are entitled to the benefit and security of the Indenture, except as the
rights created thereunder and the enforcement thereof may be limited by
bankruptcy, insolvency or other laws or equitable principles affecting the
enforcement of creditors' rights generally.
EXHIBIT B
Points to be covered in Opinion of Counsel for the Company
1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania.
2. The Company has the necessary authority to execute and deliver the Company
Documents, and the undertakings of its obligations thereunder, and the taking of
all actions as may be required on the part of the Company to carry out the same,
and the making and performance of each such agreement will not conflict with,
constitute a breach of or a default under, any provision of the Articles of
Incorporation or By-laws of the Company or, to the best of counsel's knowledge,
any indenture, agreement or other instrument to which the Company is a party or
by which the Company or any of its properties may be bound or any constitutional
or statutory provision or order, rule, regulation, decree or ordinance of any
court, government or governmental body to which the Company or any of its
properties are subject.
3. The Company Documents have been duly authorized, executed, acknowledged and
delivered by the Company, are in full force and effect and constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as enforcement may be limited to
equitable principles, or by bankruptcy, insolvency, reorganization, moratorium
and other similar laws or equitable principles in effect from time to time
affecting the enforcement of creditors' rights generally.
4. To the best of counsel's knowledge, no authorization, consent, approval or
review of any court or governmental body or regulatory authority is required for
the authorization, execution and delivery by the Company of, and performance by
the Company of its obligations under, the Company Documents or for any action
taken by the Company in connection with the transactions contemplated thereby,
which has not been obtained or effected.
5. To the best of counsel's knowledge, there is no action, suit, litigation,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, regulatory agency, public board or body pending or, threatened against
the Company, nor to the best of such counsel's knowledge is there any basis
therefor, wherein an unfavorable ruling or finding would materially and
adversely affect (i) the business, properties or financial condition of the
Company; (ii) the validity or enforceability of the Company Documents; or (iii)
any of the transactions contemplated by the undertaking of the Project and the
aforementioned documents.
6. The Company has duly authorized the taking of any and all action necessary to
carry out and give effect to the transactions contemplated to be performed on
its part by the Company Documents and the Preliminary Placement Memorandum.
7. To the best of counsel's knowledge, the Company has all necessary permits,
licenses, certifications and qualifications to conduct its business as it is
presently being conducted, subject to such exceptions which, in the aggregate,
would not have a material adverse effect on the business or operations of the
Company and the Company is not in any material way in breach of or in default
under any applicable law or administrative regulation of the Commonwealth of
Pennsylvania or of the United States or any applicable judgment or decree.
8. To the best of counsel's knowledge, the Company has obtained all approvals
required under applicable federal and state laws (other than securities laws) to
finance the Project.
EXHIBIT C
Points to be covered in the Opinion of Counsel for the Bank
1. The Bank is a national banking association, validly existing and in good
standing under the laws of the United States of America and has full power and
authority to issue and deliver the Letter of Credit and to execute and deliver
the Reimbursement Agreement and to perform its obligations thereunder.
2. The Reimbursement Agreement and the Letter of Credit have been duly
authorized and constitute valid and binding obligations of the Bank, enforceable
against the Bank in accordance with their respective terms, except as the
enforceability thereof may be limited by equitable principles, or by bankruptcy,
insolvency, reorganization, moratorium, liquidation and similar laws in effect
from time to time affecting the enforcement of creditors, rights generally, as
such laws would apply in the event of the bankruptcy, insolvency, reorganization
or liquidation of, or other similar occurrence with respect to, the Bank or in
the event of any moratorium or similar occurrence affecting the Bank.
3. The issuance of the Letter of Credit and the performance by the Bank of its
obligations thereunder (a) require no consents or approvals of, or filing with,
any governmental or other regulatory agencies and (b) do not violate any
existing law, rule, regulation or ordinance.
4. The Letter of Credit constitutes a security issued or guaranteed by a bank
within the meaning of Section 3(a)(2) of the Securities Act of 1933, as amended
(the "Securities Act") and, as such, is not required to be registered pursuant
to the Securities Act.
5. Although such counsel has not been engaged by the Bank to review generally,
or to express its opinion with respect to, disclosure materials used in
connection with the offer and sale of the Bonds and expresses no opinion with
respect thereto other than as set forth in this Paragraph 5, such counsel has
reviewed the information relating to the Letter of Credit and the Reimbursement
Agreement in the Preliminary Placement Memorandum (the "Preliminary Placement
Memorandum") set forth under the heading "The Letter of Credit and the
Reimbursement Agreement." Such information sets forth accurate summaries of the
portions of the Letter of Credit and Reimbursement Agreement purported to be
summarized therein.
OPEN-END MORTGAGE AND SECURITY AGREEMENT
THIS IS AN OPEN-END MORTGAGE AND SECURITY AGREEMENT
SECURING FUTURE ADVANCES UP TO A MAXIMUM PRINCIPAL AMOUNT
OF $2,619,954.25 PLUS ACCRUED INTEREST AND OTHER
INDEBTEDNESS AS DESCRIBED IN 42 Pa. C.S.A. ss.8143
THIS OPEN-END MORTGAGE AND SECURITY AGREEMENT made as of this 29th day of
April, 1998 (as amended, modified, extended, supplemented, restated and/or
replaced from time to time, this "Mortgage") is between PIERCING PAGODA, INC.
("Mortgagor"), a Delaware corporation having its chief executive office at 3910
Adler Place, Lehigh Valley, Pennsylvania 18002, and CORESTATES BANK, N.A., a
national bank with offices at 600 Penn Street, Reading, Pennsylvania 19603, as
administrative agent for the Lenders (hereinafter defined) under that certain
Syndicated Loan Agreement dated March 27, 1997 (as amended, modified, extended,
supplemented, restated and/or replaced from time to time, the "Syndicated Loan
Agreement") by and among Mortgagor, the lending institutions from time to time
parties thereto (each a "Lender" and collectively, the "Lenders"), and
Mortgagee, as administrative agent for itself and the other Lenders and as a
Lender (in such capacity, the "Mortgagee").
W I T N E S S E T H T H A T:
Pursuant to the terms and subject to the conditions set forth in the
Syndicated Loan Agreement and that certain Reimbursement Agreement dated as of
the date hereof (as amended, modified, extended, supplemented, restated and/or
replaced from time to time, the "Reimbursement Agreement") by and among
Mortgagor, the Lenders and Mortgagee, as the administrative agent for itself and
the other Lenders, Mortgagee, on behalf of each Lender (according to such
Lender's Pro Rata Share [as defined in the Syndicated Loan Agreement]) has
issued for the account of Mortgagor its irrevocable letter of credit (as
amended, modified, extended, supplemented, restated and/or replaced from time to
time, the "Letter of Credit") in an amount equal to Two Million Six Hundred
Nineteen Thousand Nine Hundred Fifty-Four and 25/100 ($2,619,954.25) Dollars to
provide credit enhancement for Mortgagor's Taxable Variable Rate Demand/Fixed
Rate Bonds, Series of 1998, in the aggregate amount of Two Million Five Hundred
Sixty-Five Thousand ($2,565,000.00) Dollars (as amended, modified, extended,
supplemented, restated and/or replaced from time to time, collectively, the
"Bonds").
The reimbursement obligation of Mortgagor to the Lenders is evidenced by
the Reimbursement Agreement, the Letter of Credit and those certain Revolving
Loan Notes executed and delivered by Mortgagor to the Lenders pursuant to, and
as described in, the Syndicated Loan Agreement. To induce the Lenders, through
Mortgagee as administrative agent and as issuer of the Letter of Credit, to
issue the Letter of Credit, Mortgagor is executing and delivering this Mortgage
to secure the existing and future debts, liabilities and obligations of
Mortgagor to the Lenders under the Reimbursement Agreement.
NOW, THEREFORE, in consideration of the issuance of the Letter of Credit,
and as security for payment and performance to Mortgagee under the Reimbursement
Agreement and this Mortgage, according to their respective terms and conditions
(including but not limited to any restructuring, refinancing, extension or
modification thereof) and for performance of the agreements, conditions,
covenants, provisions and stipulations contained herein and therein, and in
certain other agreements and instruments made and given by Mortgagor to
Mortgagee in connection therewith, Mortgagor has granted, conveyed, bargained,
sold, aliened, enfeoffed, released, confirmed and mortgaged, and by these
presents does hereby grant, convey, bargain, sell, alien, enfeoff, release,
confirm and mortgage unto Mortgagee all that certain real estate located in
Hanover Township, Northampton County, Pennsylvania, all as more fully described
in Exhibit A, attached hereto, incorporated herein by this reference and hereby
made a part hereof (the "Land").
TOGETHER WITH all of Mortgagor's right, title and interest now owned or
hereafter acquired in:
1) all buildings and improvements erected or
hereafter erected on the Land; and
2) all fixtures, appliances, machinery, furniture, furnishings and equipment of
any nature whatsoever and other articles of personal property owned by Mortgagor
now or at any time hereafter installed in, attached to or situated in or upon
the Land or any buildings and improvements now or hereafter erected thereon, or
used or intended to be used in connection with the Land, or in the operation of
any buildings and improvements now or hereafter erected thereon, or in the
operation or maintenance of any such building or improvement, plant or business
situate thereon, whether or not the personal property is or shall be affixed
thereto (the aforesaid buildings, improvements and fixtures located on the Land
being sometimes hereinafter collectively referred to as the "Improvements" and
the Land and Improvements being sometimes hereinafter collectively referred to
as the "Real Estate"); and
3) all building materials, fixtures, building machinery and building equipment
delivered to the Land during the course of, or in connection with, the
construction of, or reconstruction of, or remodeling of, any buildings and
improvements from time to time during the term hereof; and
4) any and all tenements, hereditaments and appurtenances belonging to the Real
Estate or any part thereof hereby mortgaged or intended so to be, or in any way
appertaining thereto, and all streets, alleys, passages, ways, water courses,
and all leases, licenses, permits, approvals, agreements, easements and
covenants now existing or hereafter created for the benefit of Mortgagor or any
subsequent owner or tenant of the Real Estate over ground adjoining the Real
Estate and all rights to enforce the maintenance thereof, and all other rights,
liberties and privileges of whatsoever kind or character, and the reversions and
remainders, income, rents, issues and profits arising therefrom, and all the
estate, right, title, interest, property, possession, claim and demand
whatsoever, at law or in equity, of Mortgagor in and to the Real Estate or any
part thereof; and
5) all rents, income, issues and profits arising or issuing from all leases and
subleases now or after the date of this Mortgage entered into covering all or
any part of the Real Estate, all of which rents, income, issues and profits are
hereby assigned and, if requested by Mortgagee, shall be caused to be further
assigned by Mortgagor to Mortgagee. The foregoing assignment shall include,
without limitation, cash or securities deposited under leases to secure
performance by lessees of their obligations under such leases, whether such cash
or securities are to be held until the expiration of the terms of such leases or
applied to one or more installments of rent coming due prior to the expiration
of such terms; and
6) all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims, including without limitation, proceeds
of insurance and condemnation awards.
All of the above-mentioned real estate, buildings, improvements, fixtures,
machinery, furniture, equipment, other personal property, materials, tenements,
hereditaments and appurtenances, leases and subleases and other property
interests are sometimes collectively referred to herein as the "Mortgaged
Property".
TO HAVE AND TO HOLD the Mortgaged Property hereby conveyed or mentioned
and intended so to be, unto Mortgagee, to its own use forever.
PROVIDED ALWAYS, and this instrument is upon the express condition that,
if Mortgagor pays or causes to be paid to the Lenders all sums payable by
Mortgagor to Mortgagee as are secured hereby, with interest thereon, as
applicable, in accordance with the provisions of the Reimbursement Agreement and
this Mortgage, at the times and in the manner specified, without deduction,
fraud or delay, and Mortgagor performs and complies with all the agreements,
conditions, covenants, provisions and stipulations contained herein and in the
Reimbursement Agreement, then this Mortgage and the estate hereby granted shall
cease and become void.
MORTGAGOR REPRESENTS, COVENANTS AND WARRANTS to and with Mortgagee that
until the indebtedness secured hereby is fully repaid:
1. Payment and Performance. Mortgagor shall pay to Mortgagee, in accordance with
the terms of the Reimbursement Agreement, the principal sums set forth therein
and in this Mortgage and interest thereon; shall perform and comply with all the
agreements, conditions, covenants, provisions and stipulations of the
Reimbursement Agreement and this Mortgage and all related instruments,
agreements and documents; and shall timely perform all of its obligations and
duties under any lease, easement agreement, license, permit, approval, covenant
or other agreement relating to, affecting, created for the benefit of or used in
connection with the operation of all or any portion of the Mortgaged Property
now or hereafter in effect. 2. Warranty of Title. Mortgagor warrants that (i) it
possesses a good and marketable unencumbered fee simple title to the Real
Estate, and a good and a marketable unencumbered title to the remainder of the
Mortgaged Property, except for those title exceptions listed in the mortgagee
title insurance policy approved by and issued to Mortgagee, insuring the
priority of the lien of this Mortgage, and (ii) this Mortgage is a valid and
enforceable first lien on the Mortgaged Property, subject only to the aforesaid
exceptions. Mortgagor shall preserve such title and the validity and priority of
the lien of this Mortgage and shall forever warrant and defend the same against
the claims of all persons and parties whomsoever.
3. Maintenance of Mortgaged Property. Mortgagor shall keep and maintain or cause
to be kept and maintained the Mortgaged Property and the sidewalks and curbs
abutting the Real Estate, in good order and condition and in a rentable and
tenantable state of repair, and will make or cause to be made, as and when
necessary, all repairs, renewals and replacements, structural and nonstructural,
exterior and interior, ordinary and extraordinary, foreseen and unforeseen.
Mortgagor shall abstain from and shall not permit the commission of waste in or
about the Real Estate; shall not remove or demolish any portion of the Real
Estate, or alter the structural character of any building, structure,
improvement or fixture erected at any time on the Land, without the prior
written consent of Mortgagee; and shall not permit the Real Estate to become
deserted or abandoned.
4. Insurance.
(a) Mortgagor shall keep the Improvements and all personal property located on
the Real Estate continuously insured, to the extent of their full insurable
replacement value, as such replacement value is reasonably determined by
Mortgagee from time to time, against loss or damage by fire, with extended
coverage and business interruption coverage, boiler and machinery coverage, and
coverage against loss or damage by vandalism, malicious mischief, sprinkler
leakage and, if required by federal law, against flood, and against such other
hazards as Mortgagee may reasonably require from time to time. Mortgagor shall
also maintain commercial general liability and property damage insurance with
contractual liability endorsement and employer's liability and worker's
compensation insurance, in such total amounts as Mortgagee may require from time
to time, but in no event less than $1,000,000 per occurrence, with excess
umbrella coverage of at least $2,000,000. Mortgagee shall be named as an
additional insured under such general liability policy. Such insurance shall
include protection for continuation of income for a period of twelve (12) months
in the event of any damage caused by the perils referred to above.
(b) All policies, including policies for any amounts carried in excess of the
required minimum and policies not specifically required by Mortgagee, shall be
in form satisfactory to Mortgagee, shall be issued by companies satisfactory to
Mortgagee, shall be maintained in full force and effect, shall be delivered to
Mortgagee, with premiums prepaid, and shall provide for at least thirty (30)
days' notice of cancellation to Mortgagee, and all hazard insurance policies
shall be endorsed with a standard mortgagee/loss payee clause in favor of
Mortgagee, not subject to contribution, and shall be for a term of at least one
year. Certificates of insurance, addressed to Mortgagee, evidencing such hazard
insurance, general liability, property damage and worker's compensation
insurance may be delivered to Mortgagee in lieu of the policies therefor.
(c) If the insurance, or any part thereof, shall expire, or be cancelled, or
become void or voidable by reason of breach of any condition thereof, or if
Mortgagee determines that such coverage is unsatisfactory by reason of the
failure or impairment of the capital of any company in which the insurance may
then be carried, or if for any reason whatever the insurance shall be
unsatisfactory to Mortgagee, Mortgagor shall place new insurance, satisfactory
to Mortgagee. All renewal policies, with premiums paid, shall be delivered to
Mortgagee at least thirty (30) days before expiration of the old policies.
(d) In the event of loss, Mortgagor will give immediate notice thereof to
Mortgagee, and Mortgagee may make proof of loss if not made promptly by
Mortgagor; provided, however, that any adjustment of a proof of loss shall
require the prior written consent of Mortgagee. Each insurance company issuing
hazard insurance policies in respect of the Improvements and the aforesaid
personal property is hereby authorized and directed to make payment under such
insurance, including return of unearned premiums, directly to Mortgagee instead
of to Mortgagor and Mortgagee jointly, and Mortgagor appoints Mortgagee,
irrevocably, as Mortgagor's attorney-in-fact to endorse any draft therefor.
Mortgagee shall have the right to retain and apply the proceeds of any such
insurance, at its election, to reduction of the indebtedness secured hereby or,
on such reasonable terms as Mortgagee may specify, to restoration or repair of
the property damaged. The contrary notwithstanding, however, the Mortgagee shall
permit the Mortgagor to use all or a portion of the loss proceeds for the
purpose of repairing, restoring, renovating or replacing the damaged property in
the event that the cost of the repair, restoration, renovation or replacement
(as reasonably determined by Mortgagee) is less than One Million ($1,000,000.00)
Dollars and: (a) the insurance carrier shall have waived any right of
subrogation against the Mortgagor under its policy; (b) no Event of Default or
event which, with the passage of time or the giving of notice, or both, could
constitute an Event of Default shall have occurred and be continuing at the time
of the casualty loss; (c) no Event of Default or event which, with the passage
of time or the giving of notice, or both, could constitute an Event of Default
shall occur during the course of such repair, restoration, renovation or
replacement; (d) the amount of the insurance proceeds and any separate funds to
be contributed by the Mortgagor, are sufficient, in the Mortgagee's sole
opinion, to effect such repair, restoration, renovation or replacement in a
satisfactory manner; (e) the Mortgagor submits to the Mortgagee an acceptable
construction budget and construction schedule for the repair, restoration,
renovation or replacement, as well as plans and specifications indicating that
such repair, restoration, renovation or replacement can be accomplished within
the time and cost restrictions shown on the construction budget and construction
schedule; and (f) the funds which are used to effect such repair, restoration,
renovation or replacement (whether in the form of insurance proceeds,
undisbursed loan proceeds, or an equity contribution by the Mortgagor) are held
and disbursed by the Mortgagee. Mortgagee's application of insurance proceeds to
reduction of the indebtedness secured by this Mortgage or to restoration or
repair of the property damaged shall not excuse or modify Mortgagor's obligation
to continue to pay the installments of interest and/or principal required under
the Note unless the amount of such insurance proceeds received by Mortgagee and
applied to reduction of the indebtedness secured by this Mortgage is sufficient
to repay in full all interest, principal and all other sums required to be paid
to Mortgagee under the Note and this Mortgage. Such hazard policies of insurance
and all renewals thereof are hereby assigned to Mortgagee as additional security
for payment of the indebtedness hereby secured and Mortgagor hereby agrees that
after default hereunder any values available thereunder upon cancellation or
termination of any of said policies or renewals, whether in the form of return
of premiums or otherwise, shall be payable to Mortgagee as assignee thereof. If
Mortgagee becomes the owner of the Mortgaged Property or any part thereof by
foreclosure or otherwise, such policies, including all right, title and interest
of Mortgagor thereunder, shall become the absolute property of Mortgagee.
5. Taxes and Other Charges. Mortgagor shall pay when due and payable and before
interest or penalties are due thereon, without any deduction, defalcation or
abatement, all taxes, assessments, water and sewer rents and all other charges
or claims which may be assessed, levied or filed at any time against Mortgagor,
the Mortgaged Property or any part thereof or against the interest of Mortgagee
therein, or which by any present or future law may have priority over the
indebtedness secured hereby either in lien or in distribution out of the
proceeds of any judicial sale; and Mortgagor shall produce to Mortgagee not
later than such dates receipts for the payment thereof. If, however, pursuant to
this Mortgage or otherwise, Mortgagor shall have deposited with Mortgagee before
the due date thereof sums sufficient to pay any such taxes, assessments, water
and sewer rents, charges or claims, and there does not exist an Event of Default
(as such term is hereinafter defined) or any event or condition which, with the
giving of notice or passage of time, or both, could become an Event of Default,
they shall be paid by Mortgagee. If there does not exist an Event of Default or
any such event or condition, and Mortgagor in good faith and by appropriate
legal action shall contest the validity of any such item, or the amount thereof,
and shall have established on its books or by deposit of cash with Mortgagee, as
Mortgagee may elect, a reserve for the payment thereof in such amount as
Mortgagee may require (including but not limited to any interest and penalties
which may be payable in connection therewith), then Mortgagor shall not be
required to pay the item or to produce the required receipts while the reserve
is maintained and so long as the contest that operates to prevent collection is
maintained and prosecuted with diligence, and shall not have been terminated or
discontinued adversely to Mortgagor. Further, Mortgagor will not apply for or
claim any deduction, by reason of this Mortgage, from the taxable value of all
or any part of the Mortgaged Property. It is expressly agreed that no credit
shall be claimed or allowed on the interest payable on the Note because of any
taxes or other charges paid.
6. Mortgagee's Right to Require Deposit of Certain Sums. At Mortgagee's request,
after the occurrence and during the continuance of an Event of Default,
Mortgagor shall deposit with Mortgagee, monthly, an amount equal to one-twelfth
(1/12) of the annual premiums for the insurance policies referred to in
paragraph 4 hereof and the annual real estate taxes, water and sewer rents, any
special assessments, charges or claims and any other item which at any time may
be or become a lien upon the Mortgaged Property prior to the lien of this
Mortgage; and on demand from time to time Mortgagor shall pay to Mortgagee any
additional sums necessary to pay the premiums and other items, all as estimated
by Mortgagee. Mortgagor hereby pledges the funds deposited hereunder to
Mortgagee as additional security for the obligations secured hereby. Unless
there shall have occurred an Event of Default, or any event or condition which,
with the giving of notice or passage of time, or both, could become an Event of
Default, Mortgagee shall apply the funds deposited hereunder to payment of said
taxes, assessments and insurance premiums. Mortgagee shall pay no interest to
Mortgagor on any funds deposited pursuant hereto, and may retain any income
therefrom for its own benefit. Mortgagee may commingle such funds with its
general funds. Mortgagee's acceptance of and holding of such deposits is not
intended to create any fiduciary relationship between Mortgagee and Mortgagor;
nor has Mortgagee by holding such payments consented to act as Mortgagor's agent
for the payment of taxes, assessments, water and sewer charges or insurance
premiums. In the event that title to the Mortgaged Property or any part thereof
passes, subject to the lien of this Mortgage, to any party either by action of
Mortgagor or any other person or by operation of law or by order of court or
otherwise in any manner whatsoever, Mortgagor's rights in the funds held by
Mortgagee pursuant hereto (or in such pro rata part of such funds as Mortgagee
shall reasonably determine if the transfer is of less than all the Mortgaged
Property) shall pass to the transferee of the Mortgaged Property. Upon any
assignment or other transfer of this Mortgage by Mortgagee, any deposits then
held by Mortgagee shall automatically be deemed to be assigned to the transferee
thereof, and Mortgagee shall have no further liability to Mortgagor therefor.
7. Corporate Existence and Taxes. If Mortgagor or any successor or grantee of
Mortgagor is a corporation, it shall keep in effect its existence and rights as
a corporation under the laws of the state of its incorporation and its right to
own property and transact business in the state in which the Real Estate is
situated during the entire time that it has any ownership interest in the Real
Estate. For all periods during which title to the Mortgaged Property or any part
thereof shall be held by a corporation or association subject to corporate taxes
or taxes similar to corporate taxes, Mortgagor shall file returns for such taxes
with the proper authorities, bureaus or departments and it shall pay, when due
and payable and before interest or penalties are due thereon, all taxes owing by
Mortgagor to the United States, to such state of incorporation and to the state
in which the Real Estate is situated and any political subdivision thereof, and,
at Mortgagee's request, shall produce to Mortgagee receipts showing payment of
any and all such taxes, charges or assessments prior to the last dates upon
which such taxes, charges or assessments are payable without interest or penalty
charges, and within ten (10) days of receipt thereof all notices of settlements,
notices of deficiency or overassessment and any other notices pertaining to
Mortgagor's tax liability, which may be issued by the United States, such state
of incorporation, the state in which the Real Estate is situated or any
political subdivision thereof.
8. Documentary and Other Stamps. If at any time the United States, the state in
which the Real Estate is located or any political subdivision thereof, or any
department or bureau of any of the foregoing shall require documentary, revenue
or other stamps on the Note or this Mortgage, Mortgagor on demand shall pay for
them together with any interest or penalties payable thereon.
9. Other Taxes. If any law or ordinance now or hereafter imposes a tax directly
or indirectly on Mortgagee with respect to the Mortgaged Property, the value of
Mortgagor's equity therein, or the indebtedness evidenced by the Note and
secured by this Mortgage, Mortgagor shall promptly pay such tax. If Mortgagor
fails to pay such tax or if Mortgagor is not lawfully permitted to pay such tax
or to reimburse Mortgagee for amounts advanced on account of such payment,
Mortgagee, at its election, shall have the right at any time to give Mortgagor
written notice declaring that the principal debt, with interest and other
appropriate charges, shall be due on a specified date not less than sixty (60)
days thereafter; provided, however, that such election shall be ineffective if,
prior to the specified date, Mortgagor lawfully pays the tax (in addition to all
other payments required hereunder) or reimburses Mortgagee for amounts advanced
and agrees to pay the tax whenever it becomes due and payable thereafter, which
agreement shall then constitute a part of this Mortgage.
10. Security Agreement. This Mortgage constitutes a security agreement under the
Uniform Commercial Code and creates a security interest in all that property
(and the proceeds thereof) included in the Mortgaged Property which might
otherwise be deemed "personal property". Upon filing this Mortgage in the office
of the recorder of deeds in and for Northampton County, Pennsylvania, this
Mortgage shall also be effective as a financing statement filed in such office
as a fixture filing. Mortgagor shall execute, deliver, file and refile any
financing statements, continuation statements or other security agreements
Mortgagee may require from time to time to confirm the lien of this Mortgage
with respect to such property. Without limiting the foregoing, Mortgagor hereby
irrevocably appoints Mortgagee attorney-in-fact for Mortgagor to execute,
deliver and file such instruments for and on behalf of Mortgagor. All costs of
such filing and refiling shall be paid by Mortgagor. Mortgagor shall not change
its principal place of business without giving Mortgagee at least thirty (30)
days' prior written notice thereof, which notice shall be accompanied by new
financing statements executed by Mortgagor in the same form as the financing
statements delivered to Mortgagee on the date hereof except for the change of
address; provided, however, that if the standard form accepted by the
Commonwealth of Pennsylvania for such financing statements has changed, then
such new financing statements shall be in such new form. Upon any Event of
Default hereunder or under the Note, Mortgagee shall have in addition to any
other rights and remedies hereunder or under the Note, all of the rights and
remedies granted to a secured party under the Uniform Commercial Code with
respect to all personal property. To the extent permitted by law, the items set
forth on the financing statements shall be treated as part of the Real Estate
regardless of the fact that such items are set forth in the financing
statements. Such items are contained in the financing statements to create a
security interest in favor of Mortgagee in the event such items are determined
to be personal property under the law. Notwithstanding any release of any or all
of that property included in the Mortgaged Property which is deemed "real
property", any proceedings to foreclose this Mortgage or its satisfaction of
record, the terms hereof shall survive as a security agreement with respect to
the security interest created hereby and referred to above until the repayment
or satisfaction in full of the obligations of Mortgagor as are now or hereafter
evidenced by the Note.
11. Compliance with Law and Regulations. Mortgagor shall comply with all laws,
ordinances, regulations and orders of all federal, state, municipal and other
governmental authorities relating to the Mortgaged Property.
12. Inspection. Mortgagee and any persons authorized by Mortgagee shall have the
right at any time, upon reasonable notice to Mortgagor, to enter the Real Estate
at a reasonable hour and to inspect and photograph its condition and state of
repair.
13. Declaration of No Set-Off. Within one (1) week after requested to do so by
Mortgagee, Mortgagor shall certify to Mortgagee or to any proposed assignee of
this Mortgage, in a writing duly acknowledged, the amount of principal, interest
and other charges then owing on the obligation secured by this Mortgage and by
prior liens, if any, and whether there are any set-offs or defenses against
them.
14. Required Notices. Mortgagor shall notify Mortgagee promptly of the
occurrence of any of the following:
(a) a fire or other casualty causing damage to any of
the Mortgaged Property;
(b) receipt of notice of eminent domain proceedings or
condemnation of all or any part of the Mortgaged Property;
(c) receipt of notice from any governmental authority relating to the structure,
use or occupancy of the Mortgaged Property or any real property adjacent to the
Real Estate;
(d) receipt of any default or termination notice from
any tenant of all or any portion of the Mortgaged Property;
(e) substantial change in the occupancy of the
Mortgaged Property;
(f) receipt of any default or acceleration notice from
the holder of any lien or security interest in the Mortgaged
Property; or
(g) commencement of any material litigation affecting
the Mortgaged Property.
15. 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, all proceeds (that is, the award or
agreed compensation for the damages sustained) allocable to Mortgagor, after
deducting therefrom all costs and expenses (regardless of the particular nature
thereof and whether incurred with or without suit) including but not limited to
attorney's fees incurred by Mortgagee in connection with the collection of such
proceeds, shall be applied as set forth in this paragraph 15, subject only to
any prior claim of the holder of a prior lien approved by Mortgagee. No
settlement for the damages sustained shall be made by Mortgagor without
Mortgagee's prior written approval, which shall not be unreasonably withheld.
Receipt by Mortgagee of any proceeds less than the full amount of the then
outstanding debt shall not alter or modify Mortgagor's obligation to continue to
pay the installments of principal, interest and other charges specified in the
Note and herein. All proceeds, after the aforesaid deductions, shall be applied
in the order and in the amounts that Mortgagee, in Mortgagee's sole discretion,
may elect, to payment of the principal (whether or not then due and payable),
interest or any sums secured by this Mortgage, or, on such reasonable terms as
Mortgagee may specify, to payment of the costs of altering, restoring or
rebuilding any part of the Mortgaged Property which may have been altered,
damaged or destroyed as a result of the taking, alteration of grade or other
injury to the Mortgaged Property.
(b) If following such condemnation or taking, but prior to the receipt of such
proceeds by Mortgagee, the Mortgaged Property shall have been sold on
foreclosure of this Mortgage, Mortgagee shall have the right to receive the
proceeds to the extent of:
(i) the full amount of all such proceeds if
Mortgagee is the successful purchaser at the foreclosure sale, or
(ii) if any one other than Mortgagee is the successful purchaser at the
foreclosure sale, any deficiency (as hereinafter defined) due to Mortgagee in
connection with the foreclosure sale, with legal interest thereon, and
reasonable counsel fees, costs and disbursements incurred by Mortgagee in
connection with collection of such proceeds and the establishment of such
deficiency. For purposes of this subparagraph 15(b)(ii), the word "deficiency"
shall be deemed to mean the difference between (A) the net sale proceeds
actually received by Mortgagee as a result of such foreclosure sale less any
costs and expenses incurred by Mortgagee in connection with enforcement of its
rights under the Note, this Mortgage and the other security instruments and (B)
the aggregate amount of all sums which Mortgagee is entitled to collect under
the Note, this Mortgage and the other security instruments.
(c) If the proceeds of the initial award of damages for the condemnation or
taking are insufficient to pay in full the indebtedness and all other amounts
secured hereby, Mortgagee shall have the right to prosecute to final
determination or settlement an appeal or other appropriate proceedings in the
name of Mortgagee or Mortgagor, for which Mortgagee is hereby appointed
irrevocably as attorney-in-fact for 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 Mortgagee shall be credited against the amounts
due under this Mortgage.
(d) Nothing herein shall limit the rights otherwise available to Mortgagee, at
law or in equity, including but not limited to the right to intervene as a party
to any condemnation proceeding.
16. Completion of Construction. Mortgagor shall complete and, within a
reasonable time, shall pay for any construction which is commenced at any time
on the Land, free of any mechanics' liens or other liens.
17. Leases. Mortgagor hereby represents that there are no leases or agreements
to lease all or any part of the Mortgaged Property now in effect. Mortgagor
agrees not to enter into any leases or agreements to lease all or any part of
the Mortgaged Property without the prior written approval thereof by Mortgagee.
18. Environmental Representations, Warranties and Covenants.
(a) Compliance with Law.
(i) Mortgagor represents, to the best of its knowledge and reasonable belief,
that no activity at the Mortgaged Property has been conducted, and represents
and warrants that no activity is being conducted, except in compliance with all
statutes, ordinances, regulations, orders and requirements of common law
concerning (A) those activities, (B) repairs or construction of any
improvements, (C) handling of any materials, (D) discharges to the air, soil,
surface water or ground water and (E) storage, treatment or disposal of any
waste at or connected with any activity at the Mortgaged Property (collectively,
"Environmental Statutes").
(ii) Mortgagor shall cause all activities at the Mortgaged Property to be
conducted in compliance with all Environmental Statutes. Mortgagor shall cause
all permits, licenses or approvals to be obtained, and shall cause all
notifications to be made, as required by Environmental Statutes. Mortgagor
shall, at all times, cause compliance with the terms and conditions of any such
approvals or notifications.
(iii) Mortgagor shall, upon receipt thereof, provide to Mortgagee copies of:
(A) applications or other materials submitted to any governmental agency in
compliance with Environmental Statutes;
(B) any notifications submitted to any person pursuant to
Environmental Statutes;
(C) any permit, license, approval, amendment or modification thereto granted
pursuant to Environmental Statutes;
(D) any record or manifest required to be maintained pursuant to Environmental
Statutes; and
(E) any correspondence, notice of violation, summons, order, complaint or other
document received by Mortgagor, its lessees, sublessees or assigns, pertaining
to compliance with any Environmental Statutes.
(b) Site Contamination.
(i) Mortgagor represents, to the best of its knowledge and reasonable belief,
that there is no contamination on or in the Mortgaged Property. Mortgagor shall
not permit contamination of Mortgaged Property by hazardous substances.
Mortgagor shall, at all times cause hazardous substances to be handled on the
Mortgaged Property in a manner which will not cause an undue risk of
contamination of the Mortgaged Property.
(ii) For purposes of this section, the term "contamination" shall mean the
uncontained presence of hazardous substances at the Mortgaged Property, or
arising from the Mortgaged Property, which may require remediation under any
applicable law.
(iii) For purposes of this section, "hazardous
substances" shall mean "hazardous substances" or "contaminants"
as defined pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss.ss. 9601-9675, as
amended by the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 99-499, 100 Stat. 1613 (Oct. 17, 1986),
"regulated substances" within the meaning of subtitle I of the
Resource Conservation and Recovery Act, 42 U.S.C. ss.ss. 6991-6991i,
as amended by the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 99-499, 100 Stat. 1613 (Oct. 17, 1986), and
"hazardous wastes" or "hazardous substances" as defined pursuant
to the Pennsylvania Solid Waste Management Act, Pa. Stat. Ann.
tit. 35, ss.ss. 6018.101 to .1003 (Purdon Supp. 1987), or any other
substances which may be the subject of liability pursuant to
Sections 316 or 401 of the Pennsylvania Clean Streams Law, Pa.
Stat. Ann. tit. 35, ss.ss. 691.1 to .1001 (Purdon 1977 and Supp.
1987).
(c) Other Hazardous or Toxic Materials.
Mortgagor represents and warrants that, to the best of its knowledge and
reasonable belief, there are no:
(i) polychlorinated biphenyls or substances
containing polychlorinated biphenyls present on or in the
Mortgaged Property;
(ii) asbestos or materials containing asbestos
present on or in the Mortgaged Property, or
(iii) urea formaldehyde foam insulation on or
in the Mortgaged Property.
(d) Environmentally Sensitive Areas.
Mortgagor represents and warrants that no portion of the Mortgaged Property
constitutes any of the following "Environmentally Sensitive Areas":
(i) a wetland or other "water of the United States" for purposes of Section 404
of the federal Clean Water Act, 33 U.S.C. ss. 1344, or any similar area
regulated under any state law;
(ii) a floodplain or other flood hazard area as
defined pursuant to the Pennsylvania Flood Plain Management Act,
Pa. Stat. Ann. tit. 32, ss.ss. 679.101 to .601 (Purdon Supp. 1987);
(iii) a portion of the coastal zone for
purposes of the federal Coastal Zone Management Act, 16 U.S.C.
ss.ss. 1451-1464; or
(iv) any other area development of which is specifically restricted under
applicable law by reason of its physical characteristics or prior use.
(e) Radon.
(i) Mortgagor represents that, to the best of its knowledge and reasonable
belief, there is no investigation of the Mortgaged Property for the presence of
radon gas or the presence of the radioactive decay products of radon.
(ii) Mortgagor shall cause all construction of new structures on the Mortgaged
Property to use design features which safeguard against or mitigate the
accumulation of radon on 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 on the Mortgaged Property, Mortgagor
shall commission an investigation of such new structure for the presence of
radon or radon-products and shall provide a report of such investigation to
Mortgagee.
(iii) For purposes of this paragraph, "acceptable level" shall mean the lowest
applicable maximum concentration established by any governmental agency with
jurisdiction over the Mortgaged Property. In the absence of a legally binding
maximum concentration, the "acceptable level" shall be an air concentration of 4
picocuries/liter. (f) Tanks.
(i) Mortgagor represents and warrants there are no tanks presently or formerly
used for the storage of any liquid or gas above or below ground are present on
the Mortgaged Property.
(ii) Mortgagor shall neither install nor permit to be installed any temporary or
permanent tanks for the storage of any liquid or gas above or below ground
except as in compliance with the other provisions of this section and after
obtaining written permission to do so from Mortgagee.
19. Environmental Investigations.
(a) Mortgagee may, at its discretion, at any time or from time to time,
commission an investigation at Mortgagor's expense (after the occurrence of an
Event of Default, if Mortgagee reasonably believes the existence of a violation
of Environmental Statutes, or receipt by Mortgagor of any notice described at
Subparagraph 18(a)(iii) of this Mortgage) of (i) compliance at the Mortgaged
Property with Environmental Statutes, (ii) the presence of hazardous substances
or contamination in the Mortgaged Property, (iii) the presence in the Mortgaged
Property of materials which are the subject of Paragraph 18(c), (iv) the
presence at the Mortgaged Property of Environmentally Sensitive Areas which are
the subject of Paragraph 18(d), (v) the presence at the Mortgaged Property of
radon-products, or (vi) the presence on the Mortgaged Property of tanks which
are the subject of Paragraph 18(f).
(b) In connection with any investigation pursuant to Subparagraph (a) of this
Paragraph 19, Mortgagor, its lessees, sublessees and assigns, shall comply with
any reasonable request for information made by Mortgagee or its agents in
connection with any such investigation. Mortgagor represents and warrants that
any response to any such request for information will be full and complete.
(c) Mortgagor will assist Mortgagee and its agents in obtaining any records
pertaining to the Mortgaged Property or to Mortgagor and the lessees, sublessees
or assigns of Mortgagor in connection with an investigation pursuant to
Subparagraph (a) of this Paragraph 19.
(d) Mortgagor will accord Mortgagee and its agents access to all areas of the
Mortgaged Property at reasonable times and in reasonable manners in connection
with any investigation pursuant to Subparagraph (a) of this Paragraph 19.
(e) No investigation commissioned pursuant to this paragraph shall have any
effect upon the representations or warranties made by Mortgagor to Mortgagee in
this Mortgage.
20. Indemnification. Mortgagor hereby agrees to indemnify Mortgagee and to hold
Mortgagee harmless of, from and against any and all expenses, loss or liability
suffered by Mortgagee by reason of Mortgagor's breach of any of the provisions
of this Section, including, but not limited to, (i) any and all expenses that
Mortgagee may incur in complying with any Environmental Statutes; (ii) any and
all costs that Mortgagee may incur in studying or remedying any contamination of
the Mortgaged Property; (iii) any and all fines, penalties or other sanctions
(including a voiding of any transfer of the Mortgaged Property) assessed upon
Mortgagee by reason of a failure of Mortgagee to have complied with
Environmental Statutes; (iv) any and all loss of value of the Mortgaged Property
by reason of (A) failure to comply with Environmental Statutes; (B) the presence
on the Mortgaged Property of any Hazardous Substances; (C) the presence on the
Mortgaged Property of any materials which are the subject of paragraph (c) of
Section 18; (D) the presence on the Mortgaged Property of any Environmentally
Sensitive Areas which are the subject of paragraph (d) of Section 18; (E) the
presence on the Mortgaged Property of radon or radon decay products in
concentrations not disclosed pursuant to paragraph (e) of Section 18; or (F) the
presence on the Mortgaged Property of any tank undisclosed pursuant to Paragraph
(f)(i) and not installed in compliance with Paragraph (f)(ii) of Section 18; and
(v) any and all legal and professional fees and costs incurred by Mortgagee in
connection with the foregoing. This indemnification shall survive payment of the
Note.
21. Other Financing or Liens.
(a) Mortgagee may, at its sole option, declare the entire unpaid balance of the
principal of and the accrued interest on the Note and all other sums secured by
this Mortgage immediately due and payable if Mortgagor, without the prior
written consent of Mortgagee, shall (i) lease any personal property, as lessee,
which is now or hereafter intended to be a part of the Mortgaged Property or is
necessary for the operation of Mortgagor's business at the Land, or (ii) create
or cause or permit to exist any lien on, or security interest in the Mortgaged
Property, including any furniture, fixtures, appliances, equipment or other
items of personal property which are intended to be or become part of the
Mortgaged Property, except the lien created hereby and any other liens granted
to or heretofore approved by Mortgagee including, without limitation, a lien in
favor of the Pennsylvania Industrial Development Authority to secure a loan
(through the auspices of the Northampton County New Jobs Corp.) to Mortgagor in
the amount of One Million ($1,000,000.00) Dollars, or (iii) incur any
indebtedness for money borrowed to purchase the Mortgaged Property or any part
thereof or any personal property or fixtures in substitution, renewal or
replacement of any portion of the Mortgaged Property, except the indebtedness
secured hereby and indebtedness heretofore approved by Mortgagee.
(b) Mortgagee may, at its sole option, declare the entire unpaid balance of the
principal of and the accrued interest on the Note and all other sums secured by
this Mortgage immediately due and payable if any lien or encumbrance of any
type, whether voluntary or involuntary, shall be permitted to be filed or
entered against all or any part of the Mortgaged Property without the prior
written consent of Mortgagee.
(c) Mortgagor shall have no right to permit the holder of any subordinate
mortgage or other subordinate lien, whether or not consented to by Mortgagee, to
terminate any lease of all or a portion of the Mortgaged Property whether or not
such lease is subordinate (whether by law or the terms of such lease or a
separate agreement) to the lien of this Mortgage without first obtaining the
prior written consent of Mortgagee. The holder of any subordinate mortgage or
other subordinate lien shall have no such right, whether by foreclosure of its
mortgage or lien or otherwise, to terminate any such lease, whether or not
permitted to do so by Mortgagor or as a matter of law, and any such attempt to
terminate any such lease shall be ineffective and void without first obtaining
the prior written consent of Mortgagee.
(d) In the event that the Mortgaged Property or any part thereof is now or
hereafter subject to a prior mortgage, lien or encumbrance, which has been
approved by Mortgagee ("Approved Prior Lien"):
(i) Mortgagor will pay the principal, interest and all other sums when due and
payable thereunder no later than five (5) days prior to their due date, and will
comply with all of the other terms, covenants and conditions thereof; and
(ii) if requested hereafter by Mortgagee, Mortgagor will produce to Mortgagee
from time to time no less than three (3) days prior to the due date of the
installments of principal, interest and other sums payable on the Approved Prior
Lien, receipts or other evidence of payment thereof satisfactory to Mortgagee;
and
(iii) Mortgagor will not enter into any modification, amendment, agreement or
arrangement, without the prior written consent of Mortgagee, pursuant to which
Mortgagor is granted any forbearance or indulgence (as to time or amount) in the
payment of any principal, interest or other sums due in accordance with the
terms and provisions of the Approved Prior Lien; and
(iv) Mortgagor will obtain, whenever possible, the agreement of the holder of
any such Approved Prior Lien to send Mortgagee copies of all notices; and
(v) Mortgagor shall notify Mortgagee promptly of the receipt of any notice given
by the holder of any Approved Prior Lien.
(e) Any default by Mortgagor under any Approved Prior Lien, by failure to make
payment or otherwise to comply with the terms thereof, or any failure by
Mortgagor to produce receipts, at the option of Mortgagee, shall constitute an
Event of Default under this Mortgage, and Mortgagee shall have the right, at its
election, to declare immediately due and payable the entire indebtedness secured
hereby with interest and other appropriate charges. Mortgagee, at its election,
and without notice to Mortgagor, may make, but shall not be obligated to make,
any payments which Mortgagor has failed to make under the Approved Prior Lien,
but such payments by Mortgagee shall not release Mortgagor from Mortgagor's
obligations or constitute a waiver of Mortgagor's default hereunder.
22. Management. Mortgagor shall not enter into any agreement for the management
or operation of all or part of the Mortgaged Property without (i) furnishing to
Mortgagee a copy thereof together with such financial and other information in
respect of the managing party as Mortgagee may reasonably request and (ii)
receiving Mortgagee's prior written consent thereto, such consent not to be
unreasonably withheld. As security for the indebtedness and other obligations
secured by this Mortgage, Mortgagor hereby grants to Mortgagee a security
interest in all of its rights under any agreement for the management or
operation of all or part of the Mortgaged Property, now existing or hereafter
created. All such agreements shall recite that Mortgagor's rights (but not
Mortgagor's obligations) thereunder have been assigned to Mortgagee as security
for Mortgagor's obligations hereunder and under the Note.
23. Acceleration upon Transfer. Mortgagee may, at its sole option, declare the
entire unpaid balance of the principal of and the accrued interest on the Note
and all other sums secured by this Mortgage immediately due and payable if
Mortgagor, without the prior written consent of Mortgagee, shall cause or
permit, to the extent it may do so, any transfer of title to or beneficial
interest in the Mortgaged Property or any part thereof, voluntarily or by
operation of law (other by execution on the Note or foreclosure under this
Mortgage).
24. Right to Remedy Defaults. If Mortgagor should fail to pay corporate taxes,
real estate taxes or other taxes, assessments, water and sewer rents, charges
and claims, sums due under any prior lien or Approved Prior Lien or insurance
premiums, or fail to complete construction of any improvements or make necessary
repairs, or permit waste, or fail to cure any default under any prior lien or
Approved Prior Lien, Mortgagee, at its election and without notice to Mortgagor,
shall have the right to make any payment or expenditure and to take any action
which Mortgagor should have made or taken, or which Mortgagee deems advisable to
protect the security of this Mortgage or the Mortgaged Property, without
prejudice to any of Mortgagee's rights or remedies available hereunder or
otherwise, at law or in equity. All such sums, as well as costs, advanced by
Mortgagee pursuant to this Mortgage shall be due immediately from Mortgagor to
Mortgagee, shall be secured hereby and the lien thereof shall relate back to the
date of this Mortgage, and shall bear interest from the date of payment by
Mortgagee until the date of repayment at a rate equal to the lesser of (i) a
rate five percent (5%) above the rate specified in the Note or (ii) the highest
rate permitted by applicable law.
25. Events of Default. The occurrence of an Event of Default as defined in the
Reimbursement Agreement or the Syndicated Loan Agreement shall constitute an
event of default ("Event of Default") hereunder.
26. Remedies.
(a) Upon the occurrence of any Event of Default, the entire unpaid balance of
the principal of and the accrued interest on the Note and all other sums secured
by this Mortgage shall become immediately due and payable, at the option of
Mortgagee, without notice or demand, and Mortgagee may do one or more of the
following: (i) Foreclosure. Mortgagee may institute an action of mortgage
foreclosure against the Mortgaged Property, or take such other action at law or
in equity for the enforcement of this Mortgage and realization on the mortgage
security or any other security herein or elsewhere provided for, as the law may
allow, and may proceed therein to final judgment and execution for the entire
unpaid balance of the principal debt, with interest at the rate stipulated in
the Note to the date of default, and thereafter at a rate equal to the lesser of
a rate five percent (5%) above the rate specified in the Note or the highest
rate permitted by applicable law, together with all other sums due by Mortgagor
in accordance with the provisions of the Note and this Mortgage, including all
sums which may have been loaned by Mortgagee to Mortgagor after the date of this
Mortgage, and all sums which may have been advanced by Mortgagee for taxes,
water or sewer rents, charges or claims, payments on prior liens, insurance or
construction of improvements or repairs to the Mortgaged Property (whether
incurred before or after the entry of judgment in favor of Mortgagee for the
unpaid balance of the amounts due under the Note or this Mortgage), all costs of
suit, together with interest at said rate on any judgment obtained by Mortgagee
from and after the date of any Sheriff's sale until actual payment is made by
the Sheriff of the full amount due Mortgagee, and an attorney's commission for
collection.
(ii) Possession. Mortgagee may enter into possession of the Mortgaged Property,
with or without legal action, and by force if necessary; collect therefrom all
rentals (which term shall also include sums payable for use and occupation) and,
after deducting all costs of collection and administration expense, apply the
net rentals to any or all of the following in such order and amounts as
Mortgagee, in Mortgagee's sole discretion, may elect: to the payment of any sums
due under any prior lien, and to the payment of taxes, water and sewer rents,
charges and claims, insurance premiums, and all other carrying charges, and to
the completion of construction of any improvements on the Land, and to the
maintenance, repair or restoration of the Mortgaged Property, and on account and
in reduction of the principal or interest, or both, hereby secured; in and for
that purpose Mortgagor hereby confirms the assignment to Mortgagee of all
rentals due and to become due under any lease or leases or rights to use and
occupation of the Mortgaged Property hereafter created, as well as all rights
and remedies provided in such lease or leases or at law or in equity for the
collection of the rentals. The taking of possession and collection of rents by
Mortgagee shall not be construed to be an affirmation of any lease of all or any
portion of the Mortgaged Property. FOR THE PURPOSE OF OBTAINING POSSESSION OF
THE MORTGAGED PROPERTY IN THE EVENT OF ANY EVENT OF ANY DEFAULT HEREUNDER OR
UNDER THE NOTE, MORTGAGOR HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY
COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, AS ATTORNEY
FOR MORTGAGOR AND ALL PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, TO APPEAR FOR
AND CONFESS JUDGMENT AGAINST MORTGAGOR, AND AGAINST ALL PERSONS CLAIMING UNDER
OR THROUGH MORTGAGOR, IN AN ACTION IN EJECTMENT FOR POSSESSION OF THE MORTGAGED
PROPERTY, IN FAVOR OF MORTGAGEE, FOR WHICH THIS MORTGAGE, OR A COPY THEREOF
VERIFIED BY AFFIDAVIT, SHALL BE A 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 MORTGAGOR, MORTGAGEE SHALL HAVE THE RIGHT FOR THE SAME DEFAULT OR
ANY SUBSEQUENT DEFAULT TO BRING ONE OR MORE FURTHER ACTIONS AS ABOVE PROVIDED TO
RECOVER POSSESSION OF THE MORTGAGED PROPERTY. MORTGAGEE MAY CONFESS JUDGMENT IN
AN ACTION IN EJECTMENT BEFORE OR AFTER THE INSTITUTION OF PROCEEDINGS TO
FORECLOSE THIS MORTGAGE OR TO ENFORCE THE NOTE, OR AFTER ENTRY OF JUDGMENT
THEREIN OR ON THE NOTE, OR AFTER A SHERIFF'S SALE OR JUDICIAL SALE OR OTHER
FORECLOSURE SALE OF THE MORTGAGED PROPERTY IN WHICH MORTGAGEE IS THE SUCCESSFUL
BIDDER, IT BEING THE UNDERSTANDING OF THE PARTIES THAT THE AUTHORIZATION TO
PURSUE SUCH PROCEEDINGS FOR CONFESSION OF JUDGMENT THEREIN IS AN ESSENTIAL PART
OF THE REMEDIES FOR ENFORCEMENT OF THE MORTGAGE AND THE NOTE, AND SHALL SURVIVE
ANY EXECUTION SALE TO MORTGAGEE.
(iii) Receiver. Mortgagee may apply for the appointment of a receiver of the
Mortgaged Property and/or the rents from the Mortgaged Property, without notice
except as required by law, and shall be entitled to the appointment of a
receiver as a matter of right, without consideration of value of the Mortgaged
Property, the solvency of the person liable for the payment of the Note or the
effect of the receivership on the operation of the Mortgaged Property or the
Mortgagor's business thereon. Mortgagor acknowledges that this paragraph was
specifically included in this Mortgage to induce the Mortgagee to issue the
Letter of Credit.
(b) Mortgagee shall have the right, from time to time, to bring an appropriate
action to recover any sums required to be paid by Mortgagor under the terms of
this Mortgage, as they become due, without regard to whether or not the
principal indebtedness or any other sums secured by the Note or this Mortgage
shall be due, and without prejudice to the right of Mortgagee thereafter to
bring an action of mortgage foreclosure, or any other action, for any default by
Mortgagor existing at the time the earlier action was commenced.
(c) Any real estate sold pursuant to any writ of execution issued on a judgment
obtained by virtue of the Note or this Mortgage, or pursuant to any other
judicial proceedings under this Mortgage, may be sold in one parcel, as an
entirety, or in such parcels, and in such manner or order as Mortgagee, in its
sole discretion, may elect.
(d) Mortgagee shall have the right to set off all or any part of any amount due
by Mortgagor to Mortgagee under the Note, this Mortgage or otherwise, against
any indebtedness, liabilities or obligations owing by Mortgagee for any reason
and in any capacity to Mortgagor, including any obligation to disburse to
Mortgagor or its designee any funds or other property on deposit with or
otherwise in the possession, control or custody of Mortgagee.
27. Rights and Remedies Cumulative.
(a) The rights and remedies of Mortgagee as provided in this Mortgage, in the
Note and the Reimbursement Agreement and in the warrants attached thereto or
contained therein shall be cumulative and concurrent; may be pursued separately,
successively or together against Mortgagor or against the Mortgaged Property, or
both, at the sole discretion of 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 Mortgagee to insist upon strict performance by Mortgagor of
any of the terms and provisions of this Mortgage or of the Note or the
Reimbursement Agreement shall not be deemed to be a waiver of any of the terms
or provisions of this Mortgage or the Note or the Reimbursement Agreement, and
Mortgagee shall have the right thereafter to insist upon strict performance by
Mortgagor of any and all of them.
(c) Neither Mortgagor nor any other person now or hereafter obligated for
payment of all or any part of the sums now or hereafter secured by this Mortgage
shall be relieved of such obligation by reason of the failure of Mortgagee to
comply with any request of Mortgagor or of any other person so obligated to take
action to foreclose on this Mortgage or otherwise enforce any provisions of this
Mortgage or the Note, or by reason of the release, regardless of consideration,
of all or any part of the security held for the indebtedness secured by this
Mortgage, or by reason of any agreement or stipulation between any subsequent
owner of the Mortgaged Property and Mortgagee extending the time of payment or
modifying the terms of this Mortgage or the Note without first having obtained
the consent of Mortgagor or such other person; and in the latter event Mortgagor
and all such other persons shall continue to be liable to make payments
according to the terms of any such extension or modification agreement, unless
expressly released and discharged in writing by Mortgagee.
(d) Mortgagee may release, regardless of consideration, any part of the security
held for the indebtedness secured by this Mortgage without, as to the remainder
of the security, in any way impairing or affecting the lien of this Mortgage or
its priority over any subordinate lien.
(e) For payment of the indebtedness secured hereby, Mortgagee may resort to any
other security therefor held by Mortgagee in such order and manner as Mortgagee
may elect.
(f) The receipt by Mortgagee of any sums from Mortgagor after the date on which
Mortgagee elects to accelerate the indebtedness secured hereby by reason of a
default hereunder or under the Note shall not constitute a cure or waiver of
such default or a reinstatement of the Note or this Mortgage unless Mortgagee
expressly agrees, by written notice to Mortgagor, that such payment shall be
accepted as a cure or waiver of the default.
28. Mortgagor's Waivers. Mortgagor hereby waives and releases:
(a) all procedural errors, defects and imperfections
in any proceeding instituted by Mortgagee under the Note or this
Mortgage or both;
(b) all benefit that might accrue to Mortgagor by virtue of any present or
future law exempting the Mortgaged Property, or any part of the proceeds arising
from any sale thereof, from attachment, levy or sale or execution, or providing
for any stay of execution, exemption from civil process or extension of time for
payment; and
(c) unless specifically required herein or in any other agreement of Mortgagee
delivered in connection herewith, all notices of Mortgagor's default or of
Mortgagee's election to exercise, or Mortgagee's actual exercise of, any option
under the Note or this Mortgage.
Mortgagor irrevocably as an independent covenant waives a jury trial and the
right thereto in any action or proceeding between Mortgagor and Mortgagee
whether hereunder or otherwise.
29. Counsel Fees. If Mortgagee becomes a party to any suit or proceeding
affecting the Mortgaged Property or title thereto, the lien created by this
Mortgage or Mortgagee's interest therein, or if Mortgagee has engaged counsel to
prepare or review the Note, this Mortgage or any other documents securing the
Note as a condition precedent to the granting of the loan evidenced by the Note
and whose fees and costs Mortgagor has agreed to pay as a condition of
Mortgagee's commitment to make this loan, or if Mortgagee engages counsel to
collect any of the indebtedness or to enforce performance of the agreements,
conditions, covenants, provisions or stipulations of this Mortgage or the Note,
Mortgagee's costs, expenses and reasonable counsel fees, whether or not suit is
instituted, shall be paid to Mortgagee by Mortgagor, on demand, with interest at
the then effective rate set forth in the Note, and until paid they shall be
deemed to be part of the indebtedness evidenced by the Note and secured by this
Mortgage.
30. Further Assurances. Mortgagor will execute and deliver such further
instruments and perform such further acts as may be reasonably requested by
Mortgagee from time to time to confirm the provisions of this Mortgage or the
Note, to carry out more effectively the purposes of this Mortgage or the other
documents securing the Note, or to confirm the priority of the lien created by
this Mortgage on any property, rights or interest encumbered or intended to be
encumbered by the lien of this Mortgage or the other documents securing the
Note. Mortgagor agrees to pay all costs of recording, filing, and acknowledging
such documents in such public offices as Mortgagee may require. 31. Advance
Money Mortgage.
(a) This Mortgage secures future advances made pursuant to this Mortgage or
pursuant to the Reimbursement Agreement. Without limiting the foregoing, this
Mortgage secures all advances made by Mortgagee of any kind or nature described
in 42 Pa. C.S.A. ss. 8144.
(b) If Mortgagor sends a written notice to Mortgagee which purports to limit the
indebtedness secured by this Mortgage and to release the obligation of Mortgagee
to make any additional advances to or for the benefit of Mortgagor, such a
notice shall be ineffective as to any future advances made: (i) to enable
completion of the improvements on the Land for which the loan secured hereby was
originally made; (ii) to pay taxes, assessments, maintenance charges and
insurance premiums; (iii) for costs incurred for the protection of the Mortgaged
Property or the lien of this Mortgage; (iv) on account of expenses incurred by
Mortgagee by reason of a default of Mortgagor hereunder or under the
Reimbursement Agreement or under the Note; and (v) on account of any other costs
incurred by Mortgagee to protect and preserve the Mortgaged Property or the lien
of this Mortgage. It is the intention of the parties hereto that any such
advance made by Mortgagee after any such notice by Mortgagor shall be secured by
the lien of this Mortgage on the Mortgaged Property.
32. Severability and Savings Clauses. If any provision of this Mortgage is held
to be invalid or unenforceable by a court of competent jurisdiction, the other
provisions of this Mortgage shall remain in full force and effect and shall be
liberally construed in favor of Mortgagee in order to effect the provisions of
this Mortgage. In addition, in no event shall the rate of interest under the
Note exceed the maximum rate of interest permitted to be charged by the
applicable law (including the choice of law rules) and any interest paid in
excess of the permitted rate shall be refunded to Mortgagor. Such refund shall
be made by application of the excessive amount of interest paid to any sums
outstanding under the Note and shall be applied in such order as Mortgagee may
determine. If the excessive amount of interest paid exceeds the sums outstanding
under the Note the portion exceeding the said sums outstanding under the Note
shall be refunded in cash by Mortgagee. Any such crediting or refund shall not
cure or waive any default by Mortgagor hereunder or under the Note. Mortgagor
agrees, however, that in determining whether or not any interest payable under
the Note or this Mortgage exceeds the highest rate permitted by law, any
non-principal payment (except payments specifically stated in the Note to be
"interest"), including without limitation, prepayment premiums and late charges,
shall be deemed to the extent permitted by law, to be an expense, fee, premium
or penalty rather than interest.
33. Communications. Any notice, demand or request under this Mortgage or the
Note shall be in writing, and shall be delivered by personal service or shall be
sent by postage prepaid, certified or registered mail, return receipt requested,
or by reputable national overnight delivery service addressed, if to Mortgagor
or Mortgagee, at the respective address set forth in the heading of this
Mortgage, or at such other address as the addressee may designate in writing.
Each notice, demand or request hereunder shall be deemed given on the date it is
delivered, in the case of personal service, or the date it is deposited with
sufficient postage with the Postal Service, in the case of certified or
registered mail, or the date it is delivered to the overnight delivery service
in the case of overnight delivery.
34. Covenant Running with the Land. Any act or agreement to be done or performed
by Mortgagor shall be construed as a covenant running with the land and shall be
binding upon Mortgagor and its successors and assigns as if they had personally
made such agreement.
35. Amendment. This Mortgage cannot be changed or amended
except by agreement in writing signed by the party against whom
enforcement of the change is sought.
36. Applicable Law. This Mortgage shall be governed by and
construed according to the laws of the Commonwealth of
Pennsylvania, without regard to the choice of law principles
thereof.
37. Definitions. Whenever used in this Mortgage, unless the context clearly
indicates a contrary intent:
(a) The word "Mortgagor" shall mean the person who executes this Mortgage, any
subsequent owner (beneficially or of record) of the Mortgaged Property and their
respective heirs, executors, administrators, successors and assigns;
(b) The word "Mortgagee" shall mean the person specifically named herein as
"Mortgagee" or any subsequent holder of this Mortgage;
(c) The word "person" shall mean individual,
corporation, partnership, joint venture or unincorporated
association;
(d) The use of any gender shall include all genders;
(e) The singular number shall include the plural and the plural the singular as
the context may require.
(f) If Mortgagor is more than one person, all agreements, conditions, covenants,
provisions, stipulations, warrants of attorney, authorizations, waivers,
releases, options, undertakings, rights and benefits made or given by Mortgagor
shall be joint and several, and shall bind and affect all persons who are
defined as "Mortgagor" as fully as though all of them were specifically named
herein wherever the word "Mortgagor" is used.
38. Captions. The captions preceding the text of the paragraphs or subparagraphs
of this Mortgage are inserted only for convenience of reference and shall not
constitute a part of this Mortgage, nor shall they in any way affect its
meaning, construction or effect.
PARAGRAPH 26 OF THIS MORTGAGE PROVIDES FOR THE REMEDY OF CONFESSION OF
JUDGMENT IN EJECTMENT. IN CONNECTION THEREWITH, MORTGAGOR VOLUNTARILY AND
KNOWINGLY WAIVES ITS RIGHTS, IF ANY, TO NOTICE AND TO BE HEARD BEFORE THE ENTRY
OF SUCH JUDGMENT. MORTGAGOR ACKNOWLEDGES THAT IT IS REPRESENTED BY COUNSEL AND
THAT COUNSEL HAS REVIEWED WITH AND EXPLAINED TO MORTGAGOR THE MEANING OF THIS
REMEDY.
IN WITNESS WHEREOF, Mortgagor has duly executed this Mortgage under seal
the day and year first above written.
(CORPORATE SEAL) PIERCING PAGODA, INC.
ATTEST:_______________________
By:_______________________________________
Name: Name:
Title: Title:
The Address of Mortgagee is: 600 Penn Street
Reading, Pennsylvania 19603
------------------------------
On Behalf of Mortgagee
COMMONWEALTH OF PENNSYLVANIA :
: ss.
COUNTY OF __________________ :
On the _____ day of April, 1998, before me, the subscriber, a Notary
Public in and for the Commonwealth and County aforesaid, personally appeared
_________________________, who acknowledged himself/herself to be the
_____________ of Piercing Pagoda, Inc., a Delaware corporation, and that he/she,
being authorized to do so, executed the foregoing Mortgage for the purposes
therein contained by signing the name of the corporation by himself/herself as
such officer.
WITNESS my hand and seal the day and year aforesaid.
- -----------------------------------
Notary Public
My Commission Expires:
PHIL1\106224-3
THIS TRUST INDENTURE, made and entered into as of April 29, 1998, by and between
PIERCING PAGODA, INC., a Delaware corporation (together with its successors and
assigns, the "Company") and DAUPHIN DEPOSIT BANK AND TRUST COMPANY, a state
banking corporation duly organized, existing and authorized to accept and
execute trusts of the character herein set out under and by virtue of the laws
of the Commonwealth of Pennsylvania, with its principal office located in
Harrisburg, Pennsylvania, as trustee (the "Trustee") and tender agent (the
"Tender Agent");
W I T N E S S E T H:
Certain of the terms and words used in these Recitals, and in the following
Granting Clauses, are defined in Section 1.01 of this Indenture.
WHEREAS, the Company has heretofore authorized and directed the issuance of its
$2,565,000 aggregate principal amount Taxable Variable Rate Demand/Fixed Rate
Bonds, Series of 1998 (the "Bonds") for the purpose of financing a project (the
"Project") consisting of (i) the construction of a new 70,655 square feet
building on 5.3 acres of land at the Company headquarters in Hanover Township,
Northampton County, Pennsylvania for the purpose of expanding the Company's
capabilities to distribute, assemble and warehouse their products and to provide
for office space to carry out the administrative functions of the Company's
business; and (ii) the payment of fees and expenses relating to the issuance of
the Bonds; and
WHEREAS, the Company has caused to be delivered to the Trustee an irrevocable
direct pay Letter of Credit (the "Letter of Credit") issued by CoreStates Bank,
N.A. (the "Bank") providing for the payment of the aggregate principal amount of
the Bonds, due and payable upon maturity, optional redemption, sinking fund
redemption or acceleration upon an event of default hereunder plus interest
calculated for a period up to forty-five (45) days at an interest rate of
seventeen percent (17%) per annum; and
WHEREAS, the Bank shall be entitled to reimbursement by the Company for all
amounts drawn under such Letter of Credit pursuant to a reimbursement and
security agreement between the Bank and the Company; and
WHEREAS, execution and delivery of this Indenture and the issuance of the Bonds
hereunder have been duly and validly authorized by resolution of the Company
duly adopted prior to such execution and delivery; and
WHEREAS, all acts and things necessary to make the Bonds, when authenticated by
the Trustee and issued as in this Indenture provided, the valid, binding and
legal obligations of the Company in accordance with their terms, and to
constitute this Indenture the valid and binding agreement for the security of
the Bonds, have been done and performed.
GRANTING CLAUSE AND AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the acceptance by the
Trustee of the trusts hereby created and of the purchase and acceptance of the
Bonds issued and sold by the Company under this Indenture by those who shall own
the same from time to time, and of the sum of one dollar, lawful money of the
United States of America, duly paid to the Company by the Trustee at or before
the execution and delivery of this Indenture, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
for the purpose of fixing and declaring the terms and conditions upon which the
Bonds are to be executed, authenticated, issued, delivered and accepted by all
persons who shall from time to time be or become owners thereto, and in order to
secure the payment of the principal of and premium (if any) and interest on, and
purchase price of, the Bonds according to their tenor and effect and the
performance and observance by the Company of all the covenants expressed or
implied herein and in the Bonds and the payment and performance of all other of
the Company's obligations, the Company does hereby grant, bargain, sell, convey,
pledge and assign, without recourse, unto the Trustee and unto its successors in
the trust forever, and grants to the Trustee and to its successors in the trust,
a security interest in all of the following:
All right, title and interest of the Company in and to all moneys and securities
from time to time held by the Trustee under the terms of this Indenture;
provided, however, that in consideration of the issuance by the Letter of Credit
Bank of the Letter of Credit, the Company hereby grants a security interest in
the Project Fund first, to the Trustee in order to secure payment of principal
of the Bonds issued hereunder and the premium (if any) and interest due or to
become due thereon and the purchase price thereto, and second, to the Letter of
Credit Bank in order to secure payment of the obligations of the Company under
the Reimbursement Agreement, the rights of the Letter of Credit Bank therein
being subject and subordinate to the rights of the Trustee so long as any amount
due in respect of the Bonds remains unpaid.
TO HAVE AND TO HOLD all and singular the Trust Estate with all privileges and
appurtenances hereby conveyed and assigned, or agreed or intended so to be to
the Trustee and its successors in trust forever.
IN TRUST NEVERTHELESS, under and subject to the terms and conditions hereinafter
set forth, (a) for the equal benefit, protection and security of the Owners of
any and all of the Bonds, all of which regardless of the time or times of their
issuance or maturity shall be of equal rank, without preference, priority or
distinction of any of the Bonds over any other thereto, except as otherwise
provided in or pursuant to this Indenture, (b) for securing the observance and
performance of the Company's obligations and of all others of the conditions,
promises, stipulations, agreements and terms and provisions of this Indenture
and the uses and purposes herein expressed and declared, and (c) for the benefit
of the Letter of Credit Bank, on a basis subject and subordinate to the interest
granted to the Trustee to secure payment of principal of the Bonds and premium
(if any) and interest due or to become due thereon and the purchase price
thereof.
PROVIDED, HOWEVER, that if the Company, its successors or assigns, well and
truly pays, or causes to be paid, the principal of the Bonds issued hereunder
and the premium (if any) and interest due or to become due thereon, and the
purchase price thereto, at the times and in the manner mentioned in the Bonds
and as provided herein, according to the true intent and meaning thereof, and
shall cause the payments to be made into the Bond Fund as required under Article
VI hereto, or shall provide, as permitted hereby, for payment thereto, in
accordance with Article XI hereto, and shall well and truly keep, perform and
observe all of the covenants and conditions pursuant to the terms of this
Indenture and all other of the Company's obligations to be kept, performed and
observed by it, and shall pay or cause to be paid to the Trustee all sums of
money due or to become due in accordance with the terms and provisions hereof,
then upon such final payments or deposits as provided in Article XI hereto, the
right, title and interest of the Trustee in and to the Trust Estate shall cease,
terminate and be void, and the Trustee shall thereupon assign, transfer, and
turn over the Trust Estate to the Letter of Credit Bank; provided, that if the
Trustee shall have received written evidence from the Letter of Credit Bank that
all obligations of the Company under the Reimbursement Agreement have been
satisfied and that the Reimbursement Agreement has been terminated, or if no
Letter of Credit Bank shall then exist, the Trust Estate shall be assigned,
transferred and turned over to the Company; and the Trustee shall execute and
deliver to the Letter of Credit Bank and the Company, as appropriate, such
instruments in writing as shall be requisite to evidence such transfer of the
Trust Estate Upon the Trustee's assignment, transfer and turning over to the
Letter of Credit Bank or the Company, as appropriate, of the Trust Estate
pursuant to the provisions of Article XI hereto, the Trustee shall have no
further duties, responsibilities or obligations under and pursuant to this
Indenture.
AND IT IS EXPRESSLY DECLARED that all Bonds issued and secured hereunder are to
be issued, authenticated and delivered and all of the Trust Estate hereby
pledged is to be dealt with and disposed of under, upon and subject to the
terms, conditions, stipulations, covenants, agreements, trusts, uses and
purposes hereinafter expressed, and the Company has agreed and covenanted and
intending to be legally bound does hereby agree and covenant with the Trustee
and with the respective Owners from time to time of the Bonds, or any part
thereof as follows:
ARTICLE I
DEFINITIONS: CONTENT OF CERTIFICATES AND OPINIONS
SECTION 1.01. Definitions. Unless the context otherwise requires, the terms
defined in this Section shall, for all purposes of the recitals hereto, this
Indenture and of any indenture supplemental hereto and of any certificate,
opinion or other document herein mentioned, have the meanings herein specified,
to be equally applicable to both the singular and plural forms of any of the
terms herein defined. Unless otherwise defined in this Indenture, all terms used
herein shall have the meanings assigned to such terms in the Act.
"Accountant" means any firm of independent certified public accountants (not an
individual) selected by the Company and acceptable to the Letter of Credit Bank.
"Administrative Expenses" means those expenses of the Bank which are properly
chargeable to the Company on account of the Bonds and the Bond Documents as
administrative expenses under Generally Accepted Accounting Principles and
include, without limiting the generality of the foregoing, the following: (a)
fees and expenses of the Trustee, the Tender Agent, the Letter of Credit Bank
and the Placement Agent; and (b) reasonable fees and expenses of the Bank's, the
Trustee's, the Tender Agent's and the Placement Agent's professional advisors
reasonably necessary and fairly attributable to the Project Facilities,
including without limiting the generality of the foregoing, reasonable fees and
expenses of the Trustee's, the Bank's and the Placement Agent's counsel.
"Authorized Newspaper" shall mean a newspaper printed in English and customarily
published at least once a day, five days a week and generally circulated in the
County. When successive publications in an Authorized Newspaper are required,
they may be made in the same or different Authorized Newspaper
"Authorized Representative" means with respect to the Company, the President,
Vice President, Secretary, Assistant Secretary or Treasurer thereto, or any
other person designated as an Authorized Representative of the Company by a
Certificate of the Company signed by the President, Vice President, Secretary,
Assistant Secretary or Treasurer of the Company and filed with the Trustee.
"Available Moneys" means (i) moneys derived from drawings under the Letter of
Credit, (ii) moneys held by the Trustee in funds and accounts established under
this Indenture for a period of at least three hundred sixty-seven (367) days and
not commingled with any moneys so held for less than said three hundred sixty-
seven (367) day period and during and prior to which period, no petition in
bankruptcy was filed by or against the Company under the Bankruptcy Code or any
applicable state bankruptcy or insolvency law, unless such petition was
dismissed and all applicable appeal periods have expired without an appeal
having been filed, (iii) investment income derived from the investment of moneys
described in clauses (i) or (ii) above, or (iv) any other moneys, if the Trustee
and the Letter of Credit Bank have received an opinion of nationally recognized
counsel acceptable to Moody's experienced in bankruptcy matters to the effect
that payment of the principal or purchase price of or interest on the Bonds with
such moneys would not, in the event of bankruptcy of the Company, any affiliate
of the Company or other payor, constitute a voidable preference under the
Bankruptcy Code or any applicable state bankruptcy or insolvency law.
"Bank" shall have the meaning set forth in the Recitals.
"Bankruptcy Code" means the Federal Bankruptcy Code, 11 U.S.C.
ss.101 et seq., as amended and supplemented from time to time.
"Bond Documents" means any or all of this Indenture, the Tender Agent Agreement,
the Remarketing Agreement and all documents, certificates and instruments
executed in connection therewith.
"Bond Fund" means the fund created in Section 6.01 hereof.
"Bond Registrar" means any bank, national banking association or trust company
designated as registrar for the Bonds, and its successor appointed under the
Indenture.
"Bonds" shall have the meaning set forth in the Recitals.
"Business Day" means a day which is not a Saturday, Sunday or legal holiday on
which banking institutions in the State of New York, the City of New York, the
City of Philadelphia, City of Harrisburg, or the Commonwealth of Pennsylvania
are authorized to remain closed or on which the New York Stock Exchange is
closed.
"Certificate," "Statement," "Request," "Requisition" and "Order" means with
respect to the Company, a written certificate, statement, request, requisition
or order signed by its Authorized Representative. Any such instrument and
supporting opinions or representations, if any, may, but need not, be combined
in a single instrument with any other instrument, opinion or representation, and
the two or more so combined shall be read and construed as a single instrument.
If and to the extent required by Section 1.02 hereof, each such instrument shall
include the statements provided for, in, such Section 1.02.
"Certified Resolution of the Company" means a copy of the resolution of the
Company duly adopted and in full force and effect as of the date of the
execution and delivery of the Bonds and the Letter of Credit.
"Clearing Fund" means the fund established by that name pursuant to Section 3.03
hereof.
"Closing Date" April 29, 1998, or such other date which shall be the date of the
execution and delivery of the Bond Documents and the issuance and delivery of
the Bonds.
"Conversion Date" means the Optional conversion date.
"Conversion Option" means the option granted to the Company in Section 5.01
hereof pursuant to which the interest rate on the Bonds is converted from the
Floating Rate to the Fixed Rate as of the Optional Conversion Date.
"Cost" or "Costs," means any cost in respect of the Project Facilities permitted
under the Code.
"Counsel" means an attorney-at-law or law firm (who may be
counsel for the Company) not unsatisfactory to the Trustee.
"Demand Purchase Notice" means a notice delivered pursuant to paragraph (i) of
Section 5.05 hereof.
"Demand Purchase Option" means the option granted to Owners of Bonds to require
that Bonds be purchased prior to the Conversion Date pursuant to Section 5.05
hereof.
"Determination Date" means with respect to any Floating Rate Bonds, each
Wednesday or if such Wednesday is not a Business Day, on the next succeeding
Business Day.
"Event of Default" means any of the events specified in Section
8.01 of this Indenture.
"Fiscal Year" means the period of twelve (12) consecutive months beginning
January 1 of each year, or such other period of twelve consecutive months
established by the Company as its new Fiscal Year.
"Fixed Rate" means the interest rate in effect on any Bonds from and after the
Conversion Date, as said rate is determined in accordance with Section 2.02(d)
hereof.
"Fixed Rate Bonds" means any Bonds which shall be converted to a Fixed Rate in
accordance with the provisions of this Indenture.
"Fixed Rate Period" means, with respect to any Bonds, a period during which
interest on such Bonds accrues at a Fixed Rate.
"Floating Rate" means a variable rate of interest equal to the minimum rate of
interest necessary, in the sole judgment of the Remarketing Agent, to sell the
Bonds at a price equal to the principal amount thereto, exclusive of accrued
interest, if any, thereon, said interest rate to be in effect on the Bonds from
the date of issuance of the Bonds until (but not including) the Conversion Date,
as said rate is determined in accordance with Section 2.02(c) hereof.
"Floating Rate Bonds" means any Bonds which bear interest at the Floating Rate.
"Generally Accepted Accounting Principles" means those accounting principles
applicable in the preparation of financial statements of business institutions
as promulgated by the Financial Accounting Standards Board or such other body
recognized as authoritative by the American Institute of Certified Public
Accountants or any successor body.
"Government Obligations" means direct obligations of (including obligations
issued or held in book entry form), or obligations the principal of and interest
on which are unconditionally guaranteed as to full and timely payment by the
United States of America.
"Holder," "Owner" or "Bondholders" whenever used herein with respect to a Bond,
means the person in whose name such Bond is registered on the registration books
maintained by the Trustee.
"Indenture" means this Indenture, as originally executed or as it may from time
to time be supplemented, modified or amended by any Supplemental Indenture.
"Interest Payment Date" means, (i) prior to the Conversion Date, the first (1st)
Wednesday of each calendar month, or if such date is not a Business Day, the
next succeeding Business Day, commencing June 3, 1998; (ii) the Conversion Date;
and (iii) from and after the Conversion Date, May 1 and November 1 of each year,
commencing on May 1 or November 1 next following the Conversion Date.
"Investment Securities" means any of the following which at the time are legal
investments under the laws of the State for moneys held hereunder and then
proposed to be invested therein:
(i) Government Obligations;
(ii) bonds, debentures, notes or other evidences of indebtedness issued by any
agency or other governmental body of the United States, provided, however, that
the full and timely payment of the securities issued by each such agency or
government sponsored agency is secured by the full faith and credit of the
United States;
(iii) certificates of deposit of, or time deposits in, any bank (including the
Trustee) or savings and loan association having securities rated at the time of
purchase in one of the three highest rating categories of Moody's or S&P;
(iv) certificates which evidence ownership of the right to the payment of the
principal of and interest on obligations described in clauses (i) and (ii) of
this definition, provided that such obligations are held in the custody of a
bank or trust company acceptable to the Trustee in a special account separate
from the general assets of such custodian,
(v) obligations which are rated at the time of purchase in one of the two
highest rating categories of Moody's and the interest on which is not includable
in gross income for federal income tax purposes and the timely payment of the
principal of and interest on which is fully provided for by the deposit in trust
or escrow of cash or obligations described in clauses (i) or (ii) of this
definition;
(vi) guaranteed investment contracts or other similar financial instruments with
a commercial bank, insurance company or other financial institution whose long
term debt obligations are rated in one of the two highest rating categories by
Moody's;
(vii) any investment approved in writing by the Bank and with respect to which
the Rating Agency has provided a certificate to the effect that such investment
will not affect the rating on the Bonds;
(viii) repurchase agreements issued by financial institutions (i) insured by the
Federal Deposit Insurance Corporation or (ii) whose senior debt obligations at
the time of purchase are rated in any of the three highest rating categories by
Moody's; provided, such repurchase agreements are subject to perfected security
interests in the Investment Securities of the kind specified in paragraphs (i)
or (ii) above; and provided further (1) the Trustee has possession of the
collateral, (2) the Trustee has a perfected first security interest in the
Collateral, (3) the Collateral is free and clear of any third-party liens and
(4) failure to maintain the requisite collateral percentage will require the
Trustee to liquidate the Collateral, and
(ix) money market mutual funds investing in Government Obligations or in
repurchase agreements backed by Government Obligations and rated in either of
the two highest rating categories by Standard & Poors or Moody's, including
mutual funds for which the Trustee or any of its affiliates provide investment
advisory, custodial, transfer agency, shareholder servicing or other services
and are separately and additionally compensated therefor, and
(x) any other security or obligation, provided that the Bank consents to the
investment of funds in such security or obligation and the Rating Agency
provides a certificate to the effect that the investment in such security or
obligation will not affect the rating on the Bonds.
"Issue Date" means the date on which the Trustee authenticates the Bonds and on
which the Bonds are delivered to the purchasers thereof upon original issuance.
"Letter of Credit" means the Irrevocable Direct Pay Letter of Credit issued by
the Bank pursuant to the provisions of the Reimbursement Agreement, or, in the
event of delivery of a Substitute Letter of Credit, such Substitute Letter of
Credit.
"Letter of Credit Bank" means the Bank, as issuer of the Letter of Credit and to
the extent applicable, the issuer of any Substitute Letter of Credit.
"Letter of Credit Termination Date" means the later of (i) that date upon which
the Letter of Credit shall expire or terminate pursuant to its terms, or (ii)
that date to which the expiration or termination of the Letter of Credit may be
extended, from time to time, either by extension or renewal of the existing
Letter of Credit or the issuance of a Substitute Letter of Credit.
"Moody's" means Moody's Investors Service, a corporation organized and existing
under the laws of the State of Delaware, its successors and their assigns, or,
if such corporation shall be dissolved or liquidated or shall no longer perform
the functions of a securities rating agency, any other nationally recognized
securities rating agency designated by the Company.
"Net Proceeds" when used with respect to any insurance proceeds or any
condemnation award, means the amount remaining after deducting all expenses
(including attorneys' fees and disbursements) incurred in the collection of such
proceeds or award from the gross proceeds thereof
"Obligation Termination Date" means the date on which the Bank delivers to the
Trustee a certificate to the effect that all obligations owing to the Bank under
the Reimbursement Agreement have been paid in full. "Officers' Certificate"
means, with respect to the Company, a certificate duly executed by its
Authorized Representative, under the seal of the Company.
"Opinion of Counsel" means a written opinion of counsel (who may be counsel for
the Company) selected by the Company and acceptable to the Trustee. If and to
the extent required by the provisions of Section 1.02 hereof, each Opinion of
Counsel shall include in substance the statements provided for in such Section
1.02.
"Optional Conversion Date" means a date on or after June 3, 1998, which shall be
a Business Day, from and after which the interest rate on the Bonds is converted
from the Floating Rate to the Fixed Rate as a result of the exercise by the
Company of the Conversion Option in accordance with the terms of this Indenture.
"Outstanding" when used as of any particular time with reference to Bonds, means
(subject to the provisions of Section 12.10) all Bonds theretofore, or thereupon
being, authenticated and delivered by the Trustee under this Indenture, except
(1) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for
cancellation; (2) Bonds with respect to which all liability of the Company shall
have been discharged in accordance with Section 11.02, including Bonds (or
portions of Bonds) referred to in Section 12.10; and (3) Bonds for the transfer
or exchange of or in lieu of or in substitution for which other Bonds shall have
been authenticated and delivered by the Trustee pursuant to this Indenture.
"Permitted Encumbrances" means any liens or encumbrances permitted under the
Reimbursement Agreement or otherwise permitted by the Bank.
"Person" means an individual, corporation, firm, association, partnership,
trust, or other legal entity or group of entities, including a governmental
entity or any agency or political subdivision thereof
"Placement Agent" means CoreStates Securities, Corp.
"Pledge Agreement" means (i) the Pledge and Security Agreement dated as of April
29, 1998, by and between the Bank and the Company and any amendments or
supplements thereof; and (ii) the Pledge and Security Agreement made by the
Company to any Substitute Bank and any amendments or supplements thereto.
"Pledged Bonds" means any Bonds which shall, at the time of determination
thereof, beheld in pledge for the benefit of the Bank by the Pledged Bonds
Custodian pursuant to the Pledge Agreement.
"Pledged Bonds Custodian" means that banking corporation which
serves as the custodian for the Pledged Bonds under the terms and
conditions of the Reimbursement Agreement. The initial Pledged
Bonds Custodian shall be the Trustee.
"Prime Rate" shall mean the fluctuating interest rate per annum equal to the
rate of interest publicly announced from time to time by the Bank as its "prime
rate" or "prime lending rate" as a means of pricing some loans to its customers,
adjusted on and as of the announced effective date of any change in the Prime
Rate. The Prime Rate does not necessarily reflect the lowest rate of interest
actually charged to any particular class or category of customers or in
connection with extensions of credit.
"Principal Corporate Trust Office" means the principal corporate trust office of
the Trustee, which at the date of the execution of the Indenture is located at
213 Market Street, Harrisburg, Pennsylvania 17101.
"Project" shall have the meaning set forth in the Recitals.
"Project Facilities" shall mean the real property, improvements, equipment and
machinery purchased, financed or refinanced, in whole or in part, with the
proceeds of the Bonds.
"Project Fund" means the fund established by that name pursuant
to Section 6.05 hereof
"Purchase Date" means the date determined pursuant to Section
5.06(b)(i) hereof
"Purchase Price" means an amount equal to 100% of the principal amount of any
Bond tendered or deemed tendered pursuant to Sections 5.01, 5.04 or 5.05 hereof,
plus accrued and unpaid interest thereon to the date of purchase.
"Rating Agency" means Moody's when the Bonds are rated by Moody's and S&P when
the Bonds are rated by S&P.
"Rating Category" means one of the general rating categories of Moody's or S&P,
without regard to any refinement or gradation of such rating category by a
numerical modifier or otherwise.
"Record Date" means, prior to the Conversion Date, that day which is the seventh
calendar day next preceding any Interest Payment Date and thereafter, that date
which is the fifteenth day of the month next preceding any Interest Payment
Date.
"Reimbursement Agreement" means the Letter of Credit Reimbursement Agreement
dated as of April 29, 1998 by and between the Company and the Bank, and any
other similar agreement entered into in connection with the issuance of any
Substitute Letter of Credit and any and all modifications, alterations,
amendments and supplements thereto.
"Remarketing Agent" means (singly or collectively, as the case may be) the
remarketing agent(s) appointed in writing by the Company and at the time serving
as such under the Remarketing Agreement.
"Remarketing Agreement" means the Remarketing Agreement, dated as of April 29,
1998, by and between the Company and CoreStates Securities, Corp and any other
similar agreements between the Company and the Remarketing Agent and any and all
modifications, alterations, amendments and supplements thereto.
"S&P" means Standard & Poor's Ratings Group, a division of the McGraw-Hill
Company, Inc., a corporation organized and existing under the laws of the State
of Delaware, its successors and their assigns, or, if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of a securities
rating agency designated by the Company.
"Substitute Bank" means a commercial bank, savings and loan association or
savings bank which has issued a Substitute Letter of Credit.
"Substitute Letter of Credit" means an irrevocable, direct pay letter of credit
delivered to the Trustee in accordance with Section 6.13 hereof (i) issued by
the Bank or a Substitute Bank, (ii) replacing any existing Letter of Credit,
(iii) dated no later than the date of the expiration or replacement date of the
Letter of Credit for which the same is to be substituted, (iv) which shall
expire on a date which is fifteen (15) days after an Interest Payment Date for
the Bonds, (v) having a term of at least one year and (vi) if issued prior to
the Conversion Date, issued on substantially identical terms and conditions as
the then existing Letter of Credit except that the stated amount of the
Substitute Letter of Credit shall equal the sum of (A) the aggregate principal
amount of Bonds at the time Outstanding, plus (B) an amount equal to forty-five
(45) days interest (computed at a maximum rate of seventeen percent (17%) per
annum on all Bonds at the time Outstanding).
"Supplemental Indenture" means any indenture hereafter duly authorized and
entered into between the Company and the Trustee, supplementing, modifying or
amending this Indenture, but only if and to the extent that such Supplemental
Indenture is specifically authorized hereunder.
"Tender Agent" means the Trustee and its successors and any corporation
resulting from or surviving any consolidation or merger to which it or its
successors may be a party and any successor Tender Agent at the time serving as
successor Tender Agent hereunder and under the Tender Agent Agreement. "Delivery
Office" and "Principal Office" of the Tender Agent means 213 Market Street,
Harrisburg, Pennsylvania 17101, or such other addresss as may be designated in
writing to the Company, the Trustee and the Remarketing Agent.
"Tender Agent Agreement" means the Tender Agent Agreement dated as of April 29,
1998, among the Company and the Trustee, and any amendments and supplements
thereto.
"Trust Estate" means all property rights and interests transferred, assigned, or
otherwise pledged first to the Trustee and second, to the Letter of Credit Bank
pursuant to the Granting Clauses hereof
"Trustee" means Dauphin Deposit Bank and Trust Company, and its successor and
any corporation resulting from or surviving any consolidation or merger to which
it or its successors may be a party and any successor trustee at the time
serving as successor trustee hereunder.
"Unremarketed Bonds" means Bonds which have been purchased pursuant to Section
5.01, 5.04 or 5.05 hereof but which have not been remarketed.
"Weekly Period" shall mean, while the Bonds bear interest at the Floating Rate,
the weekly period that begins on and includes Wednesday of each calendar week
and ends at the close of business on Tuesday of the next succeeding week.
SECTION 1.02. Content of Certificates and Opinions. The Trustee may, but shall
not be obligated to, require that every certificate or opinion provided for in
this Indenture with respect to compliance with any provision hereof shall
include (1) a statement to the effect that the Person making or giving such
certificate or opinion has read such provision and the definitions herein
relating thereto, (2) a brief statement as to the nature and scope of the
examination or investigation upon which the certificate or opinion is based; (3)
a statement to the effect that in the opinion of such person, he has made or
caused to be made such examination or investigation as is necessary to enable
him to express an informed opinion with respect to the subject matter referred
to in the instrument to which his signature is affixed; (4) a statement of the
assumptions upon which such certificate or opinion is based, and that such
assumptions are reasonable; and (5) a statement as to whether, in the opinion of
such person, such provision has been complied with.
Any such certificate or opinion made or given by an officer of the Company may
be based, insofar as it relates to legal or accounting matters, upon a
certificate or opinion of or representation by counsel or an accountant, unless
such officer knows, or in the exercise of reasonable care should have known,
that the certificate, opinion or representation with respect to the matters upon
which such certificate or statement may be based, as aforesaid, is erroneous.
Any such certificate or opinion made or given by counsel or an accountant may be
based, insofar as it relates to factual matters (with respect to which
information is in the possession of the Company) upon a certificate or opinion
of or representation by an officer of the Company, unless such counsel or
accountant knows that the certificate or opinion or representation with respect
to the matters upon which such person's certificate or opinion or representation
may be based, as aforesaid, is erroneous. The same officer of the Company, or
the same counsel or accountant, as the case may be, need not certify to all of
the matters required to be certified under any provision of this Indenture, but
different officers, counsel or accountants may certify to different matters,
respectively.
SECTION 1.03. Interpretation. (a) Unless the context otherwise indicates, words
expressed in the singular shall include the plural and vice versa and the use of
the neuter, masculine, or feminine gender is for convenience only and shall be
deemed to mean and include the neuter, masculine, or feminine gender, as
appropriate.
(b) Headings of articles and sections herein and the table of contents hereof
are solely for convenience of reference, do not constitute a part hereof and
shall not affect the meaning, construction or effect hereof.
(c) All references herein to "Articles." "Sections" and other subdivisions are
to the corresponding Articles, Sections or subdivisions of this Indenture, the
words "herein," "hereof," "hereby," "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or subdivision hereof.
(d) Whenever in this Indenture it is required that notice be provided to the
Bank or that consent of the Bank be obtained, such provisions shall be effective
only when (i) the Letter of Credit is in effect or (ii) the Bank, in its
capacity as provider of the Letter of Credit, is the Holder of any Bonds.
ARTICLE II
THE BONDS
SECTION 2.01. Authorization of Bonds. The Bonds shall be issued hereunder in
order to obtain moneys to finance the Project for the benefit of the Company.
The Bonds shall be comprised of one series of bonds designated as "Piercing
Pagoda, Inc., Taxable Variable Rate Demand/Fixed Rate Bonds, Series of 1998."
The aggregate principal amount of Bonds which may be issued and Outstanding
under this Indenture shall not exceed Two Million Five Hundred Sixty-Five
Thousand Dollars ($2,565,000). No additional Bonds may be issued under this
Indenture. This Indenture constitutes a continuing agreement by the Company for
the benefit of the Holders from time to time of the Bonds to secure the full
payment of the principal of and interest on all such Bonds subject to the
covenants, provisions and conditions herein contained.
SECTION 2.02. Terms of Bonds; Interest on the Bonds. (a) The Bonds shall be
issued in fully registered form. Prior to the Conversion Date, (i) such Bonds
shall be Outstanding in denominations of $100,000 or any integral multiple of
$5,000 in excess thereof; and (ii) such Bonds may not be issued, exchanged or
transferred except in the authorized denominations of $100,000 or any integral
multiple of $5,000 in excess thereof. From and after the Conversion Date, (i)
such Bonds shall be Outstanding in denominations of $5,000 or any integral
multiple of $5,000 and (ii) such Bonds may not be issued, exchanged or
transferred except in the authorized denominations of $5,000 or any integral
multiple of $5,000 in excess thereof. The Bonds shall be dated as of the date of
delivery and shall mature, subject to prior redemption, as provided herein.
Unless the Company shall otherwise direct, prior to the Conversion Date the
Bonds shall be lettered "VR" and shall be numbered consecutively from 1 upward
and after the Conversion Date the Bonds shall be lettered "FR" and shall be
numbered consecutively from 1 upward.
(b) Each of the Bonds shall be dated the Issue Date and shall bear interest,
payable (i) prior to the Conversion Date, on the first Wednesday of each
calendar month, or if such date is not a Business Day, the next succeeding
Business Day commencing June 3, 1998, (ii) on the Conversion Date; and (iii)
from and after the Conversion Date, on May 1 and November 1 of each year,
commencing on May 1 or November 1 next following the Conversion Date, in each
case from the Interest Payment Date next preceding the date of authentication
thereof to which interest has been paid or duly provided for, unless the date of
authentication thereof is an Interest Payment Date to which interest has been
paid or duly provided for, in which case from the date of authentication
thereof, or unless no interest has been paid or duly provided for on the Bonds,
in which case from the Issue Date, until payment of the principal thereof has
been made or duly provided for.
Notwithstanding the foregoing, any Bond authenticated after any Record Date and
before the following Interest Payment Date shall bear interest from such
Interest Payment Date, provided, however, that if the Company shall default in
the payment of interest from the next preceding Interest Payment Date to which
interest has been paid or duly provided for, or, if no interest has been paid or
duly provided for on the Bonds, from the Issue Date.
The Bonds shall mature on May 1, 2013 as provided in Section 4.01(d) herein.
(c) (i) From the Issue Date to the Conversion Date, the Bonds shall bear
interest at the Floating Rate. The Floating Rate applicable to the Bonds shall
be determined by the Remarketing Agent by 9.30 a. m. on each Determination Date
and shall be effective on such Determination Date for the immediately following
Weekly Period.
(ii) The Remarketing Agent shall advise the Trustee of the Floating Rate
applicable to the Bonds by telephone (confirmed by telecopy to the Trustee) at
or before the close of business on each Determination Date. Upon written request
of any Bondholder, the Remarketing Agent shall notify such Bondholder of the
Floating Rate then borne by the Bonds.
(iii) If for any reason the interest rate on a Bond for any Weekly Period is not
determined by the Remarketing Agent pursuant to (c)(i) above, or a court holds
that the Floating Rate, set as provided pursuant to (c)(i) above, is invalid or
unenforceable, the Floating Rate for the Bonds shall be for (a) the first such
week that the applicable Floating Rate is not determined by the Remarketing
Agent or has been determined invalid or unenforceable, a rate per annum equal to
the Floating Rate for the Bonds established by the Remarketing Agent pursuant to
(c)(i) on the immediately preceding Determination Date and (b) on each
Determination Date thereafter, shall be a rate per annum equal to one hundred
twenty percent (120%) of the interest rate per annum for 30 day commercial paper
having a rating of A-2/P-2 as reported in The Wall Street Journal on each
Determination Date.
(iv) The determination of the Floating Rate by the Remarketing Agent shall be
conclusive and binding upon the Company, the Trustee, the Bank, the Remarketing
Agent, the Tender Agent and the Owners of the Bonds.
Anything herein to the contrary notwithstanding, the Floating Rate shall in no
event exceed seventeen percent (17%) per annum.
(d) The Bonds shall bear interest at the Fixed Rate from and after the
Conversion Date until the maturity of the Bonds. The Fixed Rate shall be a fixed
annual interest rate on the Bonds such Fixed Rate to be established by the
Remarketing Agent as the rate of interest for which the Remarketing Agent has
received commitments from purchasers on or prior to the fifth (5th) day
preceding the Conversion Date to purchase all the Outstanding Bonds on the
Conversion Date at a price of par.
(e) Prior to the Conversion Date, interest on the Bonds shall be computed on the
basis of a 365/366-day year, for the actual number of days elapsed. On and after
the Conversion Date, interest on the Bonds shall be computed on the basis of a
360-day year of twelve 30-day months. The principal of and premium, if any, on
the Bonds shall be payable in lawful money of the United States of America at
the Principal Corporate Trust Office of the Trustee. The Purchase Price of the
Bonds shall be payable in lawful money of the United States of America by the
Tender Agent to the Owner of Bonds entitled to receive such Purchase Price.
Interest on the Bonds shall be payable on each Interest Payment Date to the
persons in whose name the Bonds are registered at the close of business on the
Record Date for the respective Interest Payment Date. Interest shall be paid by
check mailed to each Owner at the addresses shown on the registration books
maintained by the Trustee, provided that such interest shall be paid by wire
transfer to (i) the Bank and (ii) any Holder of at least $1,000,000 in aggregate
principal amount of Bonds, if the Holder makes a written request to the Trustee
at least fifteen (15) days before a Record Date specifying the account address
(which shall be an account at a bank in the continental United States) and
wiring instructions. Such a request may provide that it will remain in effect
for subsequent interest payments until changed or revoked by written notice to
the Trustee or upon the transfer or reregistration of the Bond.
The principal of the Bonds shall be payable in lawful money of the United States
of America at the Principal Corporate Trust Office of the Trustee. No payment of
principal shall be made on any Bond until such Bond is surrendered to the
Trustee at its Principal Corporate Trust Office.
SECTION 2.03 Execution of Bonds. The Bonds shall be executed in the name and on
behalf of the Company with the manual or facsimile signature of its President,
under its seal and attested by the manual or facsimile signature of its
Secretary. The seal of the Company will be impressed or imprinted on the Bonds
by facsimile or otherwise. The Bonds shall then be delivered to the Trustee for
authentication by it. In case any of the officers who shall have signed or
attested any of the Bonds shall cease to be such officer or officers of the
Company before the Bonds so signed or attested shall have been authenticated or
delivered by the Trustee or issued by the Company, such Bonds may nevertheless
be authenticated, delivered and issued and, upon such authentication, delivery
and issue, shall be as binding upon the Company as though those who signed and
attested the same had continued to be such officers of the Company.
SECTION 2.04 Authentication (a) The Company hereby appoints the Tender Agent as
a co-authenticating agent for the Bonds.
(b) No Bond shall be valid or obligatory for any purpose or entitled to any
security or benefit under this Indenture unless and until a certificate of
authentication on such Bond, substantially in the form set forth in Exhibit A or
B attached hereto, shall have been duly executed by the Trustee or by the Tender
Agent and such executed certificate of authentication upon any such Bond shall
be conclusive evidence that such Bond has been authenticated and delivered under
this Indenture. The certificate of authentication on any Bond shall be deemed to
have been executed by the Trustee or the Tender Agent if signed by an authorized
signatory of the Trustee or the Tender Agent, as the case may be, but it shall
not be necessary that the same signatory execute the certificate of
authentication on all of the Bonds.
(c) In the event the Bond is deemed tendered to the Tender Agent as provided in
Section 5.01, 5.04 or 5.05 hereof but is not physically delivered to the Tender
Agent, the Company shall execute and the Trustee or the Tender Agent shall
authenticate a new Bond of like denomination as that deemed tendered.
SECTION 2.05. Form of Bonds. The Floating Rate Bonds and the certificate of
authentication to be endorsed thereon prior to the Conversion Date are to be
substantially in the form set forth in Exhibit A attached hereto, with
appropriate variations, omissions and insertions as permitted or required by
this Indenture and applicable law. The Fixed Rate Bonds and the certificate of
authentication to be endorsed thereon are to be in substantially the form set
forth in Exhibit B attached hereto, with appropriate variations, omissions and
insertions as permitted or required by this Indenture and applicable law.
SECTION 2.06. Transfer of Bonds. Any Bond may be transferred in accordance with
its terms upon the books required to be kept pursuant to the provisions of
Section 2.08 hereof. Such transfer shall be made, in accordance with the
requirements of Section 2.02 hereof, by the person in whose name it is
registered, in person or by his duly authorized attorney, upon surrender of such
registered Bond for cancellation, accompanied by delivery of a written
instrument of transfer duly executed in a form approved by the Trustee.
Whenever any Bond or Bonds shall be surrendered for transfer, the Company shall
execute and the Trustee or the Tender Agent, as the case may be, shall
authenticate and deliver a new Bond or Bonds for a like aggregate principal
amount. The Trustee shall require the Bondholder requesting such transfer to pay
any tax or other governmental charge required to be paid with respect to such
transfer, and may in addition require the payment of a reasonable sum to cover
expenses incurred by the Company or the Trustee in connection with such
transfer. No transfer of any Bond shall be valid unless made in accordance with
such requirements and similarly noted by endorsement of the Trustee on such Bond
or unless, at the expense of the registered owner of the Bond, the Company shall
execute, and the Trustee shall authenticate a new Bond or Bonds registered in
the name of the transferee.
The Trustee shall not be required to transfer any Bond during the period
beginning fifteen (15) days before the mailing of notice of redemption calling
the Bond or any portion of the Bond for redemption and ending on the redemption
date.
SECTION 2.07. Exchange of Bonds. Bonds may be exchanged at the Principal
Corporate Trust Office of the Trustee for a like aggregate principal amount of
Bonds of other authorized denominations in accordance with the requirements of
Section 2.02 hereof. The Trustee shall require the Bondholder requesting such
exchange to pay any tax or other governmental charge required to be paid with
respect to such exchange, and may in addition require the payment of a
reasonable sum to cover expenses incurred by the Company or the Trustee in
connection with such exchange.
The Trustee shall not be required to exchange any Bond during the period
beginning fifteen (15) days before the mailing of notice of redemption calling
the Bonds or any portion of the Bond for redemption and ending on the redemption
date.
SECTION 2.08. Bond Registrar. The Trustee is hereby appointed the Bond
Registrar of the Company and the Tender Agent is hereby appointed the Co-Bond
Registrar of the Company. The Trustee or the Tender Agent, as the case may be,
will keep or cause to be kept sufficient books for the registration and transfer
of the Bonds, which shall at all times be open to inspection during regular
business hours by any Bondholder or his agent duly authorized in writing, the
Company, the Bank and the Remarketing Agent; and, upon presentation for such
purpose, the Trustee or the Tender Agent, as the case may be, shall, under such
reasonable regulations as they or the Company may prescribe, register or
transfer or cause to be registered or transferred, on such books, Bonds as
hereinbefore provided.
SECTION 2.09. Temporary Bonds. The Bonds may be issued in temporary form
exchangeable for definitive Bonds when ready for delivery. Any temporary Bond
may be printed, lithographed or typewritten, shall be of such denomination as
may be determined by the Company, shall be in fully registered form without
coupons and may contain such reference to any of the provisions of this
Indenture as may be appropriate. Every temporary Bond shall be executed by the
Company and be authenticated by the Trustee or Tender Agent, as the case may be,
upon the same conditions and in substantially the same manner as the definitive
Bonds. If the Company issues temporary Bonds it will execute and deliver
definitive Bonds as promptly thereafter as practicable, and thereupon the
temporary Bonds may be surrendered for cancellation, in exchange therefor at the
Principal Corporate Trust Office of the Trustee and the Trustee or the Tender
Agent, as the case may be, shall authenticate and deliver in exchange for such
temporary Bonds an equal aggregate principal amount of definitive Bonds of
authorized denominations. Until so exchanged, the temporary Bonds shall be
entitled to the same benefits under this Indenture as definitive Bonds
authenticated and delivered hereunder.
SECTION 2.10. Bond Mutilated, Lost, Destroyed or Stolen. If any Bond shall
become mutilated, the Company, at the expense of the Holder of said Bond, shall
execute and the Trustee shall thereupon authenticate and deliver, a new Bond of
like tenor and number in exchange and substitution for the Bond so mutilated,
but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated
Bond so surrendered to the Trustee shall be canceled by it and delivered to, or
upon the order of, the Company. If any Bond shall be lost, destroyed or stolen,
evidence of such loss, destruction or theft may be submitted to the Company and
the Trustee and, if such evidence be satisfactory to both and indemnity
satisfactory to them both shall be given, the Company, at the expense of the
Holder, shall execute, and the Trustee shall thereupon authenticate and deliver,
a new Bond of like tenor and number in lieu of and in substitution for the Bond
so lost, destroyed or stolen (or if any such Bond shall have matured or shall be
about to mature instead of issuing a substitute Bond, the Trustee may pay the
same without surrender thereof). The Company may require payment by the Holder
of a sum not exceeding the actual cost of preparing each new Bond issued under
this Section and of the expenses which may be incurred by the Company and the
Trustee in connection therewith. Any Bond issued under the provisions of this
Section in lieu of any Bond alleged to be lost, destroyed or stolen shall
constitute an original additional contractual obligation on the part of the
Company whether or not the Bond so alleged to be lost, destroyed or stolen be at
any time enforceable by anyone, and shall be entitled to the benefits of this
Indenture with all other Bonds secured by this Indenture.
SECTION 2.11. Cancellation and Destruction of Surrendered Bonds. All Bonds
surrendered for payment or redemption and all Bonds purchased with moneys
available for that purpose in any funds established under this Indenture, shall,
at the time of such payment or redemption, be canceled and destroyed by the
Trustee. The Trustee shall deliver to the Company certificates of destruction
with respect to all Bonds destroyed in accordance with this Section.
SECTION 2.12. Acts of Bondholders; Evidence of Ownership. Any action to be taken
by Bondholders may be evidenced by one or more concurrent written instruments of
similar tenor signed or executed by such Bondholders in person or by agents
appointed in writing. The fact and date of the execution by any person of any
such instrument may be proved by acknowledgment before a notary public or other
officer empowered to take acknowledgements or by an affidavit of a witness to
such execution. Any action by the Holder of any Bond shall bind all future
Holders of the same Bond in respect of any thing done or suffered by the Company
or the Trustee in pursuance thereof.
SECTION 2.13 Book-Entry-Only System. (a) Notwithstanding the foregoing
provisions of this Article II, the Bonds shall initially be issued in the form
of one fully registered Bond for the aggregate principal amount of the Bonds of
each maturity, which Bonds shall be registered in the name of CEDE & Co., as
nominee of The Depository Trust Company ("DTC"). Except as provided in paragraph
(g) below, all of the Bonds shall be registered in the registration books kept
by the Trustee in the name of CEDE & Co., as nominee of DTC, provided that if
DTC shall request that the Bonds be registered in the name of a different
nominee, the Trustee shall exchange all or any portion of the Bonds for an equal
aggregate principal amount of Bonds registered in the name of such nominee or
nominees of DTC. No person other than DTC or its nominee shall be entitled to
receive from the Company or the Trustee either a Bond or any other evidence of
ownership of the Bonds, or any right to receive any payment in respect thereof
unless DTC or its nominee shall transfer record ownership of all or any portion
of the Bonds on the registration books maintained by the Trustee, in connection
with discontinuing the book entry system as provided in paragraph (g) below or
otherwise.
(b) So long as the Bonds or any portion thereof are registered in the name of
DTC or its nominee, the principal or redemption price of and interest on such
Bond shall be made to DTC or its nominee in same day funds on the dates provided
for such payments under this Indenture. Each such payment to DTC or its nominee
shall be valid and effective to discharge fully all liability of the Company or
the Trustee with respect to the principal or redemption price of or interest on
the Bonds to the extent of the sum or sums so paid. In the event of the
redemption of less than all of the Bonds Outstanding of any maturity, the
Trustee shall not require surrender by DTC or its nominee of the Bonds so
redeemed, but DTC (or its nominee) may retain such Bonds and make an appropriate
notation on the Bonds certificate as to the amount of such partial redemption;
provided that DTC shall deliver to the Trustee, in each case, a written
confirmation of such partial redemption and thereafter the records maintained by
the Trustee shall be conclusive as to the amount of the Bonds of such maturity
which have been redeemed.
(c) The Company and the Trustee shall treat DTC (or its nominee) as the sole and
exclusive Owner of the Bonds registered in its name for the purposes of payment
of the principal or redemption price of or interest on the Bonds, selecting the
Bonds or portions thereof to be redeemed, giving any notice permitted or
required to be given to Owners of Bonds under this Indenture, registering the
transfer of Bonds, obtaining any consent or other action to be taken by Owners
of Bonds and for all other purposes whatsoever; and neither the Company nor the
Trustee shall be affected by any notice to the contrary. Neither the Company nor
the Trustee shall have any responsibility or obligation to any participant in
DTC, any person claiming a beneficial ownership interest in the Bonds under or
through DTC or any such participant, or any other person which is not shown on
the registration books of the Trustee as being an owner of Bonds, with respect
to either (1) the Bonds; or (2) the accuracy of any records maintained by DTC or
any such participants; or (3) the payment by DTC or any such participant of any
amount in respect of the principal or redemption price of or interest on the
Bonds; or (4) any notice which is permitted or required to be given to Owners of
Bonds under this Indenture; or (5) the selection by DTC or any such participant
of any person to receive payment in the event of a partial redemption of the
Bonds; or (6) any consent given or other action taken by DTC as an Owner of
Bonds.
(d) So long as the Bonds or any portion thereof are registered in the name of
DTC or any nominee thereof, all notices required or permitted to be given to the
Owners of Bonds under this Indenture shall be given to DTC as provided in the
Letter of Representation, the form of which is attached hereto as Exhibit D.
(e) In connection with any notice or other communication to be provided to
Owners of Bonds pursuant to this Indenture by the Company or the Trustee with
respect to any consent or other action to be taken by Owners of Bonds, DTC shall
consider the date of receipt of notice requesting such consent or other action
as the Record Date for such consent or other action, provided that the Company
or the Trustee may establish a special Record Date for such consent or other
action. The Company or the Trustee shall give DTC notice of such special Record
Date not less than fifteen (15) calendar days in advance of such special Record
Date to the extent possible.
(f) At or prior to settlement for the Bonds, the Company and the Trustee shall
execute or signify their approval of the Letter of Representation in
substantially the form attached hereto as Exhibit D. Any successor Trustee
shall, in its written acceptance of its duties under this Indenture, agree to
take any actions necessary from time to time to comply with the requirements of
the Letter of Representation.
(g) The book-entry-only system for registration of the ownership of the Bonds
may be discontinued at any time if either; (1) after notice to the Company and
the Trustee, DTC determines to resign as securities depository for the Bonds, or
(2) after notice to DTC and the Trustee, the Company determines that
continuation of the system of book-entry-only transfers through DTC (or through
a successor securities depository) is not in the best interest of the Company.
In either of such events, unless the Company appoints a successor securities
depository, the Bonds shall be delivered in registered certificate form to such
persons, and in such maturities and principal amounts, as may be designated in
writing by DTC, but without any liability on the part of the Company or the
Trustee for the accuracy of such designation. Whenever DTC requests the Company
and the Trustee to do so, the Company and the Trustee shall cooperate with DTC
in taking appropriate action after reasonable written notice to arrange for
another securities depository to maintain custody of certificates evidencing the
Bonds.
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
SECTION 3.01 Issuance of the Bonds. At any time after the execution of this
Indenture, the Company may execute and the Trustee or the Tender Agent, as the
case may be, shall authenticate and, upon request of the Company, deliver the
Bonds in the aggregate principal amount of Two Million Five Hundred Sixty-Five
Thousand Dollars ($2,565,000).
SECTION 3.02. Validity of Bonds. The recital contained in the Bonds that the
same are issued pursuant to the Constitution and laws of the State shall be
conclusive evidence of their validity and of compliance with all provisions of
law in their issuance.
SECTION 3.03. Disposition of Proceeds of the Bonds and Other Amounts. The
Company shall deposit or cause to be deposited with the Trustee, immediately
upon receipt thereof, all proceeds derived from the sale of the Bonds. The
Trustee shall deposit all such amounts in a special fund which the Trustee is
hereby directed to establish, to be known as the Clearing Fund, and in the
following order, the Trustee shall:
(a) Transfer to the Company, upon receipt of a duly executed requisition in the
form attached hereto as Exhibit C, funds sufficient to reimburse the Company for
costs of the Project incurred and paid prior to the Closing Date;
(b) Transfer to the Persons identified on the Closing Statement delivered to the
Trustee on the Closing Date to pay or reserve for payment any and all costs of
issuance incurred in connection with the Bonds; and
(c) Transfer to the credit of the Project Fund the balance of the Clearing Fund
not otherwise reserved for payment of the items described in Subsection 3.03(a)
and (b) above.
ARTICLE IV
REDEMPTION AND PURCHASE OF BONDS BEFORE MATURITY
SECTION 4.01. (a) Extraordinary Redemption. The Bonds are callable for
redemption in the event the Project Facilities or any portion thereof is damaged
or destroyed or taken in a condemnation proceeding as provided in Article XII
hereof. If called for redemption at any time pursuant to this Section 4.01(a),
the Bonds shall be subject to redemption by the Company on any Interest Payment
Date, in whole or in part, at a redemption price equal to 100% of the principal
amount thereof being redeemed, plus accrued interest to the redemption date,
from the proceeds of any casualty insurance coverage or condemnation award
resulting from the damage or destruction of the Project Facilities or any
portion thereof if the Company in its discretion so elects.
(b) The Bonds will be redeemable in whole on any Interest Payment Date at 100%
of the principal amount thereof plus accrued interest to the redemption date
upon the exercise by the Company of its option to cause the Bonds to be redeemed
if any of the following events shall have occurred:
(1) the Project Facilities or any portion thereof shall have been damaged or
destroyed (A) to such extent that it cannot in the Company's judgment be
reasonably restored within a period of six (6) months to the condition thereof
immediately preceding such damage or destruction or (B) to such extent that the
Company is thereby prevented, in its judgment, from carrying on the normal
operations at the Project Facilities for a period of six (6) months or more;
(2) title to, or the temporary use for a period of six (6) months or more of,
all or substantially all of the Project Facilities, or such part thereof as
shall materially interfere, in the Company's reasonable judgment, with the
operation of the Project Facilities for the purpose for which the operation of
the Project Facilities are designed, shall have been taken under the exercise of
the power of eminent domain by any governmental body or by any person, firm or
corporation acting under governmental authority (including such a taking or
takings as results in the Company being thereby prevented from carrying on its
normal operations at the Project Facilities for a period of six (6) months or
more);
(3) changes which the Company cannot reasonably control or overcome in the
economic availability of materials, supplies, labor, equipment and other
properties and things necessary for the efficient operation of the Project
Facilities for the purpose contemplated shall have occurred, or technological or
other changes shall have occurred which in the judgment of the Company render
the continued operation of the Project Facilities uneconomical for such
purposes; or
(4) as a result of any changes in the Constitution of the Commonwealth of
Pennsylvania or the Constitution of the United States of America or of
legislative or administrative action (whether state or federal) or by final
decree, judgment or order of any court or administrative body (whether state or
federal) entered after the contest thereof by the Company in good faith,
unreasonable burdens or excessive liabilities shall have been imposed on the
Company in respect to the Project Facilities, including, without limitation,
federal, state or other ad valorem, property, income or other taxes not being
imposed on the date of the Indenture.
(c) Mandatory Redemption. The Bonds are subject to mandatory
redemption:
(i) fifteen (15) days prior to the Letter of Credit Termination Date, in whole,
at a redemption price equal to one hundred percent (100%) of the principal
amount thereof being redeemed plus accrued interest to the redemption date if,
on the thirtieth (30th) Business Day prior to the Letter of Credit Termination
Date, the Trustee shall not have received a Substitute Letter of Credit which
will be effective on or before the Letter of Credit Termination Date.
(ii) on any Interest Payment Date, in whole or in part, at a redemption price
equal to one hundred percent (100%) of the principal amount thereof being
redeemed plus accrued interest to the redemption date, if any proceeds of the
sale of the Bonds remain on deposit in the Project Fund established hereunder
upon completion of the Project, as set forth in Section 6.08 hereof.
(d) Mandatory Sinking Fund Redemption. The Bonds are subject to mandatory
redemption on the Interest Payment Date occurring in the month of May in each of
the years set forth below commencing on the Interest Payment Date occurring on
June 3 of 1998 (each, a "Mandatory Sinking Account Payment Date"), at a
redemption price equal to 100% of the principal amount thereof plus accrued
interest as follows:
BONDS
Mandatory Sinking
Year Account Payments
1999 $125,000.00
2000 $120,000.00
2001 $125,000.00
2002 $130,000.00
2003 $140,000.00
2004 $150,000.00
2005 $155,000.00
2006 $165,000.00
2007 $175,000.00
2008 $185,000.00
2009 $195,000.00
2010 $205,000.00
2011 $220,000.00
2012 $230,000.00
*2013 $245,000.00
*Final maturity
SECTION 4.02. Optional Redemption. On or prior to the Conversion Date, the Bonds
are subject to redemption by the Company, at any time, subject to provisions of
Section 4.03 hereof, in whole or in part at the redemption price of 100% of the
principal amount thereof being redeemed plus accrued interest to the redemption
date.
SECTION 4.03. Notice of Redemption. Notice of the call for redemption,
identifying the Bonds or portions thereof to be redeemed and the redemption
price (including the premium, if any), shall be given by the Trustee by mailing
a copy of the redemption notice by first class mail at least (i) ten (10) days
prior to the date fixed for mandatory redemption pursuant to Section 4.01(c)(i)
hereof, and (ii) thirty (30) days but not more than sixty (60) days prior to the
date fixed for redemption in all other instances to the Owner of each Bond to be
redeemed in whole or in part at the address shown on the registration books.
Such notice shall contain such matters specified in the Bonds for the redemption
thereof and, in the case of any extraordinary or optional redemption, shall
state that such redemption is conditional upon the receipt of monies by the
Trustee for such purpose on or prior to the redemption date. Any notice mailed
as provided in this Section shall be conclusively presumed to have been duly
given, whether or not the Owner receives the notice. The Trustee shall deliver a
copy of any such redemption notice to the Tender Agent, the Bank, the Company
and to the Remarketing Agent.
SECTION 4.04. Interest on Bonds Called for Redemption. Upon the giving of notice
and the deposit of Available Moneys for redemption at the required times on or
prior to the date fixed for redemption, as provided in this Article, interest on
the Bonds or portions thereof thus called shall no longer accrue after the date
fixed for redemption.
SECTION 4.05 Cancellation. All Bonds which have been redeemed shall not be
reissued but shall be canceled and destroyed by the Trustee in accordance with
Section 2.11 thereof.
SECTION 4.06. Partial Redemption of Bonds. (a) If less than all the Bonds are to
be redeemed, the particular Bonds or portions thereof to be redeemed shall be
selected by the Trustee at random or in such other manner as the Trustee in its
discretion shall deem fair and appropriate.
(b) Upon surrender of any Bond for redemption in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the Owner thereof a
new Bond or Bonds of authorized denominations, in an aggregate principal amount
equal to the unredeemed portion of the Bond surrendered. If all or a portion of
Bonds tendered for purchase pursuant to hereof have been selected by the Trustee
for redemption, the Tender Agent, upon receipt of such tendered Bonds, shall
authenticate and redeliver only such portion of tendered Bonds not subject to
redemption. The Tender Agent shall deliver to the tendering Bondholder a copy of
the notice of redemption, indicating the portion of the Bonds subject thereto,
and upon receipt of funds as provided herein, an amount representing the
principal of and interest on the Bonds not called for redemption. The principal
of and interest accrued on the Bonds called for redemption shall be paid to such
Bondholder on the redemption date. The Tender Agent shall cancel the Bond or
such portion thereof tendered for purchase and subject to redemption, and shall
deliver a certificate evidencing such cancellation and the canceled Bond to the
Trustee.
(c) (i) Prior to the Conversion Date, in case a Bond is of a denomination larger
than $100,000, a portion of such Bond ($100,000 or any integral multiple of
$5,000 in excess thereof) may be redeemed, but Bonds shall be redeemed only if
the remaining unredeemed portion of such Bond is in the principal amount of
$100,000 or any integral multiple of $5,000 in excess of $100,000.
(ii) After the Conversion Date, in case a Bond is of a denomination larger than
$5,000, a portion of such Bond ($5,000 or any integral multiple thereof) may be
redeemed, but Bonds shall be redeemed only if the remaining unredeemed portion
of such Bond is in the principal amount of $5,000 or any integral multiple of
$5,000.
(d) Notwithstanding anything to the contrary contained in this Indenture,
whenever the Bonds are to be redeemed in part, Bonds which are Pledged Bonds at
the time of selection of Bonds for redemption shall be selected for redemption
prior to the selection of any other Bonds. If the aggregate principal amount of
Pledged Bonds at the time of selection is less than the amount available for the
partial redemption of the Bonds, the Trustee may select for redemption Bonds in
an aggregate principal amount equal to such excess in such manner as the Trustee
in its discretion shall deem fair and appropriate.
SECTION 4.07. Payment of Redemption Price with Available Moneys. Notwithstanding
any provision to the contrary contained in this Indenture, the payment of the
redemption price of bonds shall be made only from funds described in clause (i)
of the definition of Available Moneys. On each date that the Bonds are subject
to redemption, the Trustee shall draw on the Letter of Credit in an amount
sufficient to pay the full redemption price of the Bonds then subject to
redemption from the sources and in the order provided in Section 6.03 hereof.
ARTICLE V
CONVERSION OF INTEREST RATE; DEMAND PURCHASE OPTION
SECTION 5.01.Conversion of Interest Rate on Conversion Date; Mandatory Tender of
Bonds. (a) The interest rate on the Bonds shall be converted from the Floating
Rate to the Fixed Rate upon the exercise by the Company of the Conversion
Option, and the Bonds shall be subject to mandatory tender for purchase by the
Owners thereof on the Conversion Date. To exercise the Conversion Option, the
Company shall notify the Trustee, the Tender Agent, the Bank and the Remarketing
Agent at least thirty-five (35) days prior to the Conversion Date of such
exercise, cause the Remarketing Agent to furnish to the Trustee the information
set forth in paragraphs 1, 2 and 6 below and, thereafter cause the Trustee to
deliver or mail by first class mail a notice at least twenty (20) days but not
more than thirty (30) days prior to the Conversion Date to the Owner of each
Bond at the address shown on the registration books of the Bond Registrar. No
such notice may be given unless the Trustee first receives (i) a commitment from
the Bank or a Substitute Bank to issue a Substitute Letter of Credit to take
effect on the Conversion Date, together with a form of such Substitute Letter of
Credit, and (ii) a certificate from Company to the effect that each of the
Company's representations and warranties made in any agreements or certificates
given by the Company in connection with the issuance of the Bonds remain true
and correct in all material respects as of the proposed Conversion Date. Any
notice given as provided in this Section shall be conclusively presumed to have
been duly given, whether or not the Owner receives the notice. Said notice shall
state in substance the following:
1. The Conversion Date.
2. The method of computation of the Fixed Rate which will take effect on the
Conversion Date.
3. That from and after the Conversion Date the Demand Purchase Option will no
longer be available to Owners of Bonds.
4. That the existing Letter of Credit will expire two (2) Business Days after
the Conversion Date and that the Bonds are to be secured by a Substitute Letter
of Credit after the Conversion Date, and stating the identity of the issuer of
such Substitute Letter of Credit.
5. That unless firm commitments for the purchase of all Outstanding Bonds have
been received on or prior to the fifth (5th) Business Day prior to the proposed
Conversion Date, the Company has the option to rescind an optional conversion of
the Bonds.
6. That in the event the Company elects not to rescind the optional conversion
of the Bonds, although firm commitments have not been received for the purchase
of all Outstanding Bonds, all Bonds which have not been remarketed on or prior
to the Conversion Date shall be subject to mandatory tender on the Conversion
Date pursuant to this Section 5.01.
7. That from and after the Conversion Date, the rating then in effect on the
Bonds may be reduced or may no longer be maintained.
(b) On or prior to the Conversion Date, Owners of Bonds shall be required to
deliver their Bonds to the Tender Agent for purchase at the Purchase Price, and
any such Bonds not delivered to the Tender Agent on or prior to the Conversion
Date ("Undelivered Bonds"), for which there has been irrevocably deposited in
trust with the Trustee or the Tender Agent an amount of money sufficient to pay
the Purchase Price of the Undelivered Bonds, shall be deemed to have been
purchased pursuant to this Section 5.01 and are deemed to be no longer
Outstanding with respect to such prior Owners. IN THE EVENT OF A FAILURE BY AN
OWNER OF BONDS TO DELIVER ITS BONDS ON OR PRIOR TO THE CONVERSION DATE, SAID
OWNER SHALL NOT BE ENTITLED TO ANY PAYMENT (INCLUDING ANY INTEREST TO ACCRUE ON
OR SUBSEQUENT TO THE OPTIONAL CONVERSION DATE) OTHER THAN THE PURCHASE PRICE FOR
SUCH UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS SHALL NO LONGER BE ENTITLED TO
THE BENEFITS OF THIS INDENTURE, EXCEPT FOR THE PURPOSE OF PAYMENT OF THE
PURCHASE PRICE THEREFOR.
(c) Notwithstanding the foregoing provisions, to the extent that at the close of
the fifth Business Day prior to the proposed Conversion Date, the Remarketing
Agent has not presented to the Company firm commitments for the purchase of all
of the Bonds, the Company, at its option may rescind an optional conversion of
the Bonds. Any such election to rescind must be made by the close of the fourth
Business Day prior to the proposed Conversion Date and the Company shall give
written notice to the Trustee, the Tender Agent and the Bank of its decision to
rescind by such time. The Company shall cause the Trustee to notify immediately
the Owners of such rescission and thereafter the Bonds shall bear interest at
the Floating Rate in effect for the current Weekly Period and thereafter the
Bonds shall bear interest at the Floating Rate applicable to such Bonds until
any subsequent Conversion Date effected in accordance with this indenture.
(d) In the event the Company rescinds the proposed optional
conversion in accordance with the terms of the foregoing paragraph, the Letter
of Credit then in effect will remain in effect in accordance with its terms.
(e) The Bonds are subject to mandatory tender in whole on the
Conversion Date, at a purchase price equal to 100% of the principal amount
thereof being purchased, plus accrued interest to the purchase date; provided,
however, that (i) all Pledged Bonds for which a commitment to purchase has not
been received in connection with a conversion of the Bonds to the Fixed Rate
shall be redeemed or otherwise paid by the Company on or before the Conversion
Date; and (ii) no such mandatory tender shall take place in the event the
Company exercises its right to rescind the conversion.
SECTION 5.02. Delivery of Bonds After Conversion Date. Upon the Conversion Date,
the Trustee or the Tender Agent, as the case may be, shall deliver Bonds in the
form of Exhibit B hereto. Prior to the delivery by the Trustee of such Bonds,
there shall be filed with the Trustee a request and authorization to the Trustee
on behalf of the Company and signed by an Authorized Representative of the
Company to authenticate and deliver the Bonds, as executed by the Company, to
the purchasers thereof. Such delivery shall be made by the Trustee or the Tender
Agent, as the case may be, without making any charge therefor to the Owner of
such Bonds.
SECTION 5.03. Condition to Conversion. As a condition to the giving of notice as
provided in Section 5.01 above, the Company shall provide the Trustee (a) a
commitment from the Bank or a Substitute Bank to issue a Substitute Letter of
Credit to take effect on the Conversion Date, together with a form of such
Substitute Letter of Credit; and (b) a certificate to the effect that each of
the representations and warranties made by the Company herein remain true and
correct in all material respects as of the proposed Conversion Date.
SECTION 5.04. Mandatory Tender Upon Provision of Substitute Letter of Credit by
Substitute Bank. The Bonds are subject to mandatory tender in whole at least two
business days prior to the effective date (the "Tender Date") of any Substitute
Letter of Credit provided by a Substitute Bank, at a purchase price equal to
100% of the principal amount thereof, plus accrued interest to the purchase
date. The Company shall notify the Trustee, the Tender Agent, the Bank and the
Remarketing Agent at least thirty-five (35) days prior to the Tender Date, and
thereafter cause the Trustee to deliver or mail by first class mail a notice at
least twenty (20) days but not more than thirty (30) days prior to the Tender
Date to the Owner of each Bond at the address shown on the registration books of
the Bond Registrar. Such notice shall state the Tender Date and that the Bonds
are subject to mandatory tender on such date. IN THE EVENT OF A FAILURE BY AN
OWNER OF BONDS TO DELIVER ITS BONDS IN RESPONSE TO SUCH NOTICE OF A MANDATORY
TENDER, SAID OWNER SHALL NOT BE ENTITLED TO ANY PAYMENT (INCLUDING INTEREST TO
ACCRUE ON OR SUBSEQUENT TO THE TENDER DATE IN THE APPLICABLE NOTICE) OTHER THAN
THE PURCHASE PRICE FOR SUCH UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS SHALL
NO LONGER BE ENTITLED TO THE BENEFITS OF THE INDENTURE, EXCEPT FOR THE PAYMENT
OF THE PURCHASE PRICE THEREFOR. Any notice given as provided in this Section
shall be conclusively presumed to have been duly given, whether or not the Owner
receives the notice.
SECTION 5.05. Demand Purchase Option. Prior to the Conversion
Date, any Bond shall be purchased at the Purchase Price from the
Owner thereof upon:
(i) delivery by such Owner to the Trustee and the Tender Agent at their
Principal Office and Delivery Office, respectively, and to the Remarketing Agent
at its Principal Office, of a notice (the "Demand Purchase Notice") (said notice
to be irrevocable and effective upon receipt) which states (1) the aggregate
principal amount and bond numbers of the Bonds to be purchased; and (2) the date
on which such Bonds are to be purchased, which date shall be a Business Day not
prior to the seventh (7th) day next succeeding the date of delivery of such
notice and which date shall be prior to the Conversion Date;
(ii) if such Bonds are to be purchased prior to an Interest Payment Date and
after the Record Date in respect thereof, delivery to the Tender Agent together
with the Demand Purchase Notice described in (i) above, of a non-recourse
due-bill, payable to bearer, for interest due on such Interest Payment Date; and
(iii) delivery to the Tender Agent at its Delivery Office at or prior to 10:00
a.m., New York City time, on the date designated for purchase in the applicable
Demand Purchase Notice of such Bonds to be purchased, with an appropriate
endorsement for transfer or accompanied by a bond power endorsed in blank.
Any Bond, as to which a Demand Purchase Notice has been delivered pursuant to
paragraph (i) above, must be delivered to the Tender Agent, as provided in
paragraph (iii) above, and any such Bond not so delivered ("Undelivered Bonds"),
for which there has been irrevocably deposited in trust with the Trustee or the
Tender Agent an amount of money sufficient to pay the Purchase Price thereof,
shall be deemed to have been purchased at the Purchase Price pursuant to this
Section 5.05 and are deemed to be no longer Outstanding with respect to such
tendering Owner. IN THE EVENT OF A FAILURE BY AN OWNER OF BONDS TO DELIVER ITS
BONDS AS SPECIFIED ABOVE, SAID OWNER SHALL NOT BE ENTITLED TO ANY PAYMENT
(INCLUDING INTEREST TO ACCRUE ON OR SUBSEQUENT TO THE DATE DESIGNATED FOR
PURCHASE IN THE APPLICABLE DEMAND PURCHASE NOTICE) OTHER THAN THE PURCHASE PRICE
FOR SUCH UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS SHALL NO LONGER BE
ENTITLED TO THE BENEFITS OF THE INDENTURE, EXCEPT FOR THE PAYMENT OF THE
PURCHASE PRICE THEREFOR.
Notwithstanding the foregoing provisions, in the event any Bonds as to which the
Owner thereof has exercised the Demand Purchase Option is remarketed to such
Owner pursuant to the Remarketing Agreement, such Owner need not deliver such
Bond to the Tender Agent as provided in paragraph (iii) above, although such
Bonds shall be deemed to have been delivered to the Tender Agent, redelivered to
such Owner, and remarketed for purposes of this Indenture, including, without
limitation, for purposes of adjusting the Floating Rate applicable to such Bond
as provided in Section 2.02(c) hereof.
SECTION 5.06. Funds for Purchase of Bonds. (a) On the date Bonds are to be
purchased pursuant to Sections 5.01, 5.04 or 5.05 hereof, such Bonds shall be
purchased at the Purchase Price only from the funds listed below. Subject to the
provisions of Section 6.12(b), funds for the payment of the Purchase Price shall
be derived from the following sources in the order of priority indicated:
(i) moneys drawn by the Trustee under the Letter of Credit, and
(ii) any other moneys furnished to the Trustee, or the Tender Agent and
available for such purpose.
(b) Payment for the Bonds purchased pursuant to Sections 5.01, 5.04 or 5.05
shall be made as follows:
(i) On the date on which such Bonds are to be purchased (the "Purchase Date"),
the Trustee shall make a drawing pursuant to the Letter of Credit in respect of
the Purchase Price of such Bonds. In connection therewith, the Trustee shall
prepare and present to the Bank the appropriate certificates required under the
Letter of Credit by 12:00 noon, New York City time, on the Business Day
immediately preceding the Purchase Date.
(ii) By not later than 10:00 a.m., New York City time, on the Purchase Date, the
Remarketing Agent shall give telephonic notice promptly confirmed in writing to
the Bank, the Trustee and the Tender Agent, specifying:
(1) The total principal amount of Bonds, if any, remarketed by it.
(2) The names of the persons to whom such Bonds were sold and are to be
registered, each such person's address and social security number or taxpayer
identification number, the denominations in which replacement Bonds are to be
prepared, and any other appropriate registration and transfer instructions.
(iii) There is hereby established with the Tender Agent a special fund to be
designated the "Bond Purchase Fund" and therein two separate and segregated
accounts to be designated the "Remarketing Account" and the "Bank Account." An
amount equal to the proceeds received by the Trustee pursuant to a draw under
the Letter of Credit shall be transferred by the Trustee in immediately
available funds to the Tender Agent for deposit in the Bank Account no later
than 12:30 p.m., New York City time, on the applicable Purchase Date.
(iv) No later than 1:00 p.m., New York City time, on each Purchase Date the
Tender Agent shall give telephonic notice (promptly confirmed by telecopy) to
the Remarketing Agent of the amount deposited in the Bank Account on such date.
No later than 2:00 p.m., New York City time, on each Purchase Date the
Remarketing Agent shall transfer to the Bank an amount of the proceeds of the
remarketing of the Bonds equal to the amount of the Remarketed Bonds on such
Purchase Date and shall give telephonic notice (promptly confirmed by telecopy)
to the Tender Agent of the amount of such proceeds transferred to the Bank.
(v) The Bank shall give telephonic confirmation to the Tender Agent and the
Trustee by 4:00 p.m., New York City time, on the applicable Purchase Date of its
receipt of the remarketing proceeds described in Section 5.06(b)(iv) hereof.
SECTION 5.07. Delivery of Purchased Bonds. (a) Remarketed Bonds
shall be delivered by the Tender Agent, at its Delivery Office,
to or upon the order of the purchasers thereof.
(b) Unremarketed Bonds purchased with funds drawn under the Letter of Credit
shall be delivered by the Tender Agent to the Pledged Bonds Custodian or
otherwise upon the order of the Bank pursuant to the Reimbursement Agreement.
(c) Unremarketed Bonds purchased with moneys described in Section 5.06(a)(ii)
hereof shall, at the direction of the Company, be (i) delivered as instructed by
the Company, or (ii) delivered to the Trustee for cancellation; provided,
however, that any Bonds so purchased after the selection thereof by the Trustee
for redemption shall be delivered to the Trustee for cancellation.
(d) The Tender Agent shall deliver to the person to whom the Tender Agent is to
deliver such Bonds, the nonrecourse due-bills, if any, delivered to the Tender
Agent with respect to such Bonds in accordance with Section 5.05 hereof.
Bonds delivered as provided in this Section shall be registered in the manner
directed by the recipient thereof.
SECTION 5.08. Sale of Bonds by Remarketing Agent. (a) On each Purchase Date, the
Remarketing Agent shall offer for sale and use its best efforts to sell, as
agent of the Company, all Bonds tendered or deemed tendered for purchase on such
Purchase Date at the Purchase Price thereof and, if such Bonds are not sold on
such date, the Remarketing Agent shall continue, for a period not in excess of
thirty (30) days thereafter, to use its best efforts to sell such Bonds. In no
event shall the Bonds be remarketed to the Company or any affiliates of the
Company.
(b) Notwithstanding anything to the contrary herein, the Remarketing Agent shall
use its best efforts to remarket any Bonds tendered or deemed tendered for
purchase in such a manner that, immediately following the remarketing of any
Bonds, at least one (1) Holder will own at least $200,000 in aggregate principal
amount of Bonds.
SECTION 5.09. Delivery of Proceeds of Sale of Purchased Bonds. (a) Except in the
case of the sale of any Pledged Bonds, the proceeds of the sale of any Bonds
delivered or deemed delivered to the Tender Agent pursuant to Section 5.01, 5.04
or 5.05 hereof, to the extent not required to reimburse the Bank under the
Reimbursement Agreement or to pay the Purchase Price to the tendering
Bondholder, shall be paid to or upon the order of the Trustee.
(b) In the event the Remarketing Agent shall have remarketed any Pledged Bonds
and the Company or the Remarketing Agent shall have directed the Bank to cause
the Pledged Bond Custodian to deliver such Pledged Bonds to the Tender Agent
pursuant to the Reimbursement Agreement, such Bonds shall be delivered to the
Tender Agent and the proceeds of sale of such Bonds shall be delivered to the
Principal Corporate Trust Office of the Tender Agent and shall be paid to or
upon the order of the Bank; provided that any amounts so paid in excess of
amounts then due to the Bank in respect of drawings under the Letter of Credit
shall be delivered by the Bank to or upon the order of the Company; provided
further that Pledged Bonds shall not be delivered to the Tender Agent until the
Letter of Credit has been reinstated in accordance with the terms of the
Reimbursement Agreement and the Letter of Credit.
SECTION 5.10. Duties of Trustee and Tender Agent with Respect to Purchase of
Bonds. (a) The Tender Agent shall hold all Bonds delivered to it pursuant to
Sections 5.01, 5.04 or 5.05 hereof in trust for the benefit of the respective
Owners of Bonds which shall have so delivered such Bonds until moneys
representing the Purchase Price of such Bonds shall have been delivered to or
for the account of or to the order of such Owners of Bonds. Upon delivery of
moneys representing the Purchase Price of such Bonds to or for the account of or
to the order of such Owners of Bonds, the Tender Agent shall deliver all such
Unremarketed Bonds, the funds for the purchase of which shall have been obtained
by a drawing under the Letter of Credit, to the Pledged Bonds Custodian pursuant
to Section 5.07(b) hereof for the purpose of perfecting the Bank's security
interest therein under the Reimbursement Agreement unless the Bank shall direct
the Tender Agent to deliver such Bonds to or upon the order of the Bank in
accordance with Section 5.07 hereof.
(b) The Trustee and the Tender Agent shall hold all moneys delivered to them
pursuant to this Indenture for the purchase of Bonds in a separate account, in
trust for the benefit of the Bank or, in the case of Remarketed Bonds, the
purchasers of such Bonds, until the Bonds purchased with such moneys shall have
been delivered to or for the account of the Pledged Bond Custodian, the Bank or
to such other purchaser, as appropriate.
(c) The Trustee shall deliver to the Company and the Bank a copy of each notice
delivered to it in accordance with Section 5.05 within two (2) days of the
receipt thereof.
(d) As soon as possible, but not later than the close of business on any date
designated for purchase of Bonds in accordance with Section 5.05, the Tender
Agent shall give telephonic or telegraphic notice to the Remarketing Agent and
the Trustee specifying the principal amount of Bonds delivered or deemed
delivered for purchase on such date.
(e) The Trustee shall draw moneys under the Letter of Credit in accordance with
the terms thereof to the extent required by Sections 5.06 and 6.12 hereof to
provide for timely payment of the Purchase Price of Bonds.
SECTION 5.11. No Purchases or Sales After Certain Defaults. Anything in this
Indenture to the contrary notwithstanding, there shall be no purchases (in the
case of (i), below) or sales (in the case of (ii), below) of Bonds pursuant to
Section 5.05 (i) if there shall have occurred any Event of Default in respect of
which the principal of all Bonds Outstanding shall have been declared
immediately due and payable pursuant to Section 8.02 and such declaration shall
not have been annulled or (ii) if the Trustee shall have given notice of a call
for redemption pursuant to Section 4.03 hereof and such notice shall not have
been rescinded. Nothing in this Section is intended to limit secondary trading
or transfer of the Bonds.
ARTICLE VI
REVENUES AND FUNDS
SECTION 6.01. Creation of the Bond Fund. There is hereby created and established
with the Trustee a trust fund to be designated "Bond Fund." Upon receipt of
moneys pursuant to Section 6.02 hereof, the Trustee shall deposit such moneys
into the Bond Fund, which amounts shall be used to pay when due the principal
and premium, if any, and interest on the Bonds.
SECTION 6.02. Payments into the Bond Fund. There shall be
deposited into the Bond Fund from time to time the following:
(a) any amount in the Project Fund directed to be paid into the
Bond Fund in accordance with the provisions of Section 6.07
hereof,
(b) any amount deposited into the Bond Fund pursuant to Section
6.04 hereof,
(c) any moneys drawn under the Letter of Credit to be used for the payment of
redemption price and principal of, premium, if any, and interest on the Bonds,
which moneys shall be deposited in a separate subaccount of the Bond Fund and
shall not be commingled with any other moneys held by the Trustee, and
(d) any moneys drawn under the Letter of Credit which moneys shall be deposited
in a separate subaccount of the Bond Fund and shall not be commingled with any
other moneys held by the Trustees, and
(e) amounts, if any, held by the Trustee pursuant to Section 5.10 hereof.
SECTION 6.03. Use of Moneys in the Bond Fund. Except as provided in Section
5.06, 5.10 and 6.11 hereof, moneys in the Bond Fund shall be used solely for the
payment of the principal of, premium, if any, and interest on the Bonds, for the
redemption of the Bonds prior to maturity and for payment of the Acceleration
Price as defined in Section 8.02 hereof. Subject to the provisions of Section
6.12(b) hereof, funds for such payments of redemption price and principal of and
premium, if any, and interest on the Bonds shall be derived from the following
sources in the order of priority indicated:
(i) moneys drawn by the Trustee under the Letter of Credit (and in connection
with all such draws the Trustee shall prepare and present to the Bank the
appropriate certificates required under the Letter of Credit by 12:00 noon, New
York City time, on the Business Day immediately preceding the payment date),
(ii) amounts deposited into the Bond Fund which constitute Available Moneys
(other than moneys drawn by the Trustee under the Letter of Credit), and
(iii) any other moneys furnished to the Trustee and available for such
purpose.
SECTION 6.04. Custody of Separate Trust Fund. The Trustee is authorized and
directed to hold all Net Proceeds from any insurance proceeds or condemnation
award and disburse such proceeds in accordance with Article XII hereof. If the
Company directs that any portion of such Net Proceeds be applied to redeem
Bonds, the Trustee shall deposit such Net Proceeds in a separate subaccount of
the Bond Fund, and the Company shall take and cause to be taken any action
necessary to redeem on the earliest possible redemption date the amount of Bonds
so specified.
SECTION 6.05. Project Fund. There is hereby created and established with the
Trustee a trust fund to be designated "Project Fund," which shall be expended in
accordance with the provisions hereof.
SECTION 6.06. Payments into the Project Fund; Disbursements. The Project Fund
shall initially consist of those monies deposited therein pursuant to Section
3.03(c) hereof. Proceeds of the Bonds deposited in the Project Fund shall be
applied to pay a portion of the costs of the Project. The Trustee is hereby
authorized and directed to make disbursements from the Project Fund upon the
receipt of a requisition in the form of Exhibit C hereto signed by the Company
and approved by the Bank. The Trustee shall keep and maintain adequate records
pertaining to the Project Fund and all disbursements therefrom, and the Trustee
shall, upon request of the Company, furnish statements in the form customarily
prepared by the Trustee. The Trustee shall hold all moneys and investments from
time to time on deposit in the Project Fund for the Owners and for the Bank, the
rights of the Bank being subject and subordinate to the rights of the Trustee so
long as any amount due in respect of the Bonds remains unpaid.
SECTION 6.07. Use of Money in the Project Fund Upon Default. If the principal of
the Bonds shall have become due and payable pursuant to Article VIII hereof, any
balance remaining in the Project Fund shall without further authorization (i)
prior to the Obligation Termination Date, if any amounts are due and owing under
the Reimbursement Agreement, be transferred immediately to the Bank, as long as
the Bank is not in default of its obligations under the Letter of Credit, or
(ii) after the Obligation Termination Date, be transferred into the Bond Fund.
SECTION 6.08. Use of Money in the Project Fund Upon Completion of the Project.
The completion of the Project and payment or provision for payment of all Costs
of the Project shall be evidenced by the filing with the Trustee of an Officers'
Certificate requesting, as soon as practicable and in any event not more than
sixty (60) days from the date of receipt by the Trustee of the certificate
referred to in the preceding sentence, that any balance remaining in the Project
Fund (except amounts the Company shall have directed the Trustee to retain for
any Cost of the Project not then due and payable) shall, without further
authorization be transferred into a separate subaccount within the Bond Fund.
Thereafter, the Trustee shall cause a mandatory redemption of the Bonds in
accordance with the terms of Section 4.01(c)(2) hereof in an amount such that
the funds transferred to the Bond Fund pursuant to this Section 6.08 will be
sufficient to reimburse the Letter of Credit Bank for the redemption price of
the Bonds. On the date fixed for redemption, the Trustee (i) shall draw on the
Letter of Credit in an amount sufficient to pay the full redemption price of the
Bonds from the sources and in the order provided in Section 6.03 hereof and (ii)
transfer to the Letter of Credit Bank funds from the separate subaccount within
the Bond Fund created pursuant to this Section 6.08 to reimburse the Bank for
such drawing. If there are any excess funds remaining in the Bond Fund after
such mandatory redemption (except amounts that the Company shall have directed
the Trustee to retain for any cost of a project not then due and payable), such
funds shall be transferred by the Trustee on the next Interest Payment Date to
the Letter of Credit Bank to reimburse the Letter of Credit Bank for a drawing
affected pursuant to Section 6.12 hereof.
SECTION 6.09. Nonpresentment of Bonds. In the event any Bond shall not be
presented for payment when the principal thereof becomes due, either at
maturity, or at the date fixed for redemption thereof, or otherwise, if
Available Moneys sufficient to pay any such Bond shall have been made available
to the Trustee for the benefit of the Owner thereof, all liability of the
Company to the Owner thereof for the payment of such Bond shall forthwith cease,
determine and be completely discharged, and thereupon it shall be the duty of
the Trustee to hold such funds uninvested, without liability for interest
thereon, for the benefit of the Owner of such Bond who shall thereafter be
restricted exclusively to such funds for any claim of whatever nature on his
part under this Indenture with respect to such Bond.
Any moneys so deposited with and held by the Trustee not so applied to the
payment of Bonds within five (5) years after the date on which the same shall
have become due shall be repaid by the Trustee to the Company upon written
direction of an Authorized Representative of the Company, and thereafter Owners
of Bonds shall be entitled to look only to the Company for payment, and then to
the extent of the amount so repaid, and all liability of the Trustee with
respect to such money shall thereupon cease, and the Company shall not be liable
for any interest thereon and shall not be regarded as a trustee of such money.
SECTION 6.10. Moneys to be Held in Trust. All moneys required to be deposited
with or paid to the Trustee for the account of any fund or account referred to
in any provision of this Indenture shall be held by the Trustee in trust, and
shall, while held by the Trustee, constitute part of the Trust Estate and be
subject to the lien and security interest created hereby.
SECTION 6.11. Repayment to the Bank and the Company from the Bond Fund or the
Project Fund. Any amounts remaining in the Bond Purchase Fund, the Bond Fund,
the Project Fund or any other fund or account created hereunder after payment in
full of the principal of, premium, if any, and interest on the Bonds, the fees,
charges and expenses of the Trustee and all other amounts required to be paid
hereunder, shall be paid as soon as possible to the Bank unless the Bank
notifies the Trustee to the contrary, in writing, in which case such amounts
shall be paid directly to Company.
SECTION 6.12. Letter of Credit. (a) During the term of the Letter of Credit, the
Trustee shall draw moneys under the Letter of Credit in accordance with the
terms thereof (i) to pay when due (whether by reason of maturity, redemption,
conversion, acceleration or otherwise) the principal of, and interest and, to
the extent the Letter of Credit covers same, any premium on the Bonds, and (ii)
to pay when due the Purchase Price of the Bonds.
(b) Notwithstanding any provision to the contrary which may be contained in this
Indenture, including, without limitation, Section 6.12(a)(i) in computing the
amount to be drawn under the Letter of Credit on account of the payment of the
principal or Purchase Price of, interest or, to the extent the Letter of Credit
covers same, any premium on the Bonds, the Trustee shall exclude any such
amounts in respect of any Bonds which are Pledged Bonds or Borrower Bonds prior
to the date such payment is due, and (ii) amounts drawn by the Trustee under the
Letter of Credit shall not be applied to the payment of the Purchase Price of
any Bonds which are Pledged Bonds or Borrower Bonds prior to the date such
payment is due.
(c) The Letter of Credit shall terminate in accordance with its terms on the
Letter of Credit Termination Date. Upon such termination, the Trustee shall
deliver the terminated Letter of Credit to the Bank, together with such
certificates as may be required by the terms of the Letter of Credit; provided,
however, that the Trustee shall not surrender the Letter of Credit to the Bank
until the third Business Day following the effective date of any Substitute
Letter of Credit or, in the event the Trustee shall not have received a
Substitute Letter of Credit which will be effective on or before the Letter of
Credit Termination Date, until the Bank has honored all draws under such
terminated Letter of Credit made in accordance with the terms thereof.
SECTION 6.13. Substitute Letter of Credit. The Company, upon at least
thirty-five (35) days prior written notice to the Trustee, the Tender Agent and
the Remarketing Agent may, at any time, at its option, provide for the delivery
on any Business Day to the Trustee of a Substitute Letter of Credit. Any
Substitute Letter of Credit shall have administrative terms and provisions
reasonably acceptable to the Trustee and shall be delivered to the Trustee not
later than the thirtieth (30th) Business Day prior to expiration of the Letter
of Credit it is being issued to replace. On or before the date of the delivery
of any Substitute Letter of Credit to the Trustee, as a condition to the
acceptance of any Substitute Letter of Credit by the Trustee, the Company shall
furnish to the Trustee and the Remarketing Agent: (a) written evidence that the
issuer of the Substitute Letter of Credit is a commercial bank organized and
doing business in the United States or a branch or agency of a foreign
commercial bank located and doing business in the United States and subject to
regulation by state or federal banking regulatory authorities; (b) an opinion of
Bond Counsel stating that delivery of such Substitute Letter of Credit is
authorized under the Indenture and complies with the terms thereof; (c) an
opinion of counsel satisfactory to the Trustee, the Company and the Remarketing
Agent to the effect that (i) the Substitute Letter of Credit is a legal, valid
and binding obligation of the issuer (or, in the case of a branch or agency of a
foreign commercial bank, the branch or agency) issuing the same, enforceable in
accordance with its terms, (ii) payments of principal or redemption price,
premium, if any (if such Substitute Letter of Credit secures the payment of
premium), or Purchase Price of and interest on the Bonds from the proceeds of a
drawing on the Substitute Letter of Credit will not constitute avoidable
preferences under the Bankruptcy Code or other applicable laws and regulations,
and (iii) it is not necessary to register the Substitute Letter of Credit under
the Securities Act of 1933, as amended, or to qualify an indenture with respect
thereto under the Trust Indenture Act of 1939, as amended. An additional opinion
of counsel, satisfactory to the Trustee, the Company and the Remarketing Agent,
shall be required regarding the legality, validity and binding effect of a
Substitute Letter of Credit issued by a branch or agency of a foreign commercial
bank. The Trustee shall accept any such Substitute Letter of Credit only in
accordance with its terms and upon the satisfaction of the foregoing conditions
and other provisions contained in the Indenture.
SECTION 6.14. Investment of Moneys in Funds. All moneys in any of the funds
established pursuant to this Indenture (except moneys obtained from a draw on
the Letter of Credit which shall be uninvested) shall be invested by the
Trustee, as directed in writing by the Company, solely in Investment Securities
except with respect to Available Moneys held by the Trustee for the payment of
Undelivered Bonds, which Available Moneys the Trustee shall not invest.
Investment Securities may be purchased at such prices as the Trustee may in its
discretion determine or as may be directed by the Company. Absent written
investment directions from the Company, the Trustee shall invest available fund
balances in investments described in subparagraph (ix) of the definition of
Investment Securities.
To the extent the Bank has not been reimbursed under the Reimbursement Agreement
and has notified the Trustee of same in writing, all interest, profits and other
income received from the investment of moneys in any fund established pursuant
to this Indenture shall be transferred to the Bank in the amount specified by
the Bank. Otherwise, such amounts shall be deposited to the appropriate fund or
account in which such investments were made. Notwithstanding anything to the
contrary contained in this paragraph, an amount of interest received with
respect to any Investment Security equal to the amount of accrued interest, or
premium paid, if any paid as part of the purchase price of such Investment
Security shall be credited to the fund from which such accrued interest was
paid.
Investment Securities acquired as an investment of moneys in any fund
established under this Indenture shall be credited to such fund. For the purpose
of determining the amount in any fund, all Investment Securities credited to
such fund shall be valued at the lesser of cost or par value plus, prior to the
first payment of interest following purchase, the amount of accrued interest, if
any, paid as a part of the purchase price.
The Trustee may act as principal or agent in the making or disposing of any
investment. The Trustee may sell at the best price obtainable, or present for
redemption, any Investment Securities so purchased whenever it shall be
necessary to provide moneys to meet any required payment, transfer, withdrawal
or disbursement from the fund to which such Investment Security is credited, and
the Trustee shall not be liable or responsible for any loss resulting from such
investment.
ARTICLE VII
PARTICULAR COVENANTS
SECTION 7.01. Punctual Payment. The Company shall punctually pay or cause to be
paid the principal, premium, if any, and interest to become due in respect of
all the Bonds, in strict conformity with the terms of the Bonds and of this
Indenture, according to the true intent and meaning thereof.
SECTION 7.02. Extension of Payment of Bonds. The Company shall not directly or
indirectly extend or assent to the extension of the maturity of any of the Bonds
or the time of payment of any claims for interest by the purchase or funding of
such Bonds or claims for interest or by any other arrangement and in case the
maturity of any of the Bonds or the time of payment of any such claims for
interest shall be extended, such Bonds or claims for interest shall not be
entitled, in case of any default hereunder, to the benefits of this Indenture,
except subject to the prior payment in full of the principal of all of the Bonds
then outstanding and of all claims for interest thereon which shall not have
been so extended. Nothing in this Section shall be deemed to limit the right of
the Company to issue Bonds for the purpose of refunding any Outstanding Bonds,
and such issuance shall not be deemed to constitute an extension of maturity of
Bonds.
SECTION 7.03. Against Encumbrances. The Company shall not create, or permit the
creation of, any pledge, lien, charge or other encumbrance upon the revenues and
other assets pledged or assigned under this Indenture while any of the Bonds are
Outstanding, except the pledge and assignment created by this Indenture and will
assist the Trustee in contesting any such pledge, lien, charge or other
encumbrance which may be created.
SECTION 7.04. Power to Issue Bonds and Make Pledge and Assignment. The Company
represents and covenants that it is duly authorized pursuant to law to issue the
Bonds and to enter into this Indenture. The Bonds and the provisions of this
Indenture are and will be the legal, valid and binding obligations of the
Company in accordance with their terms, and the Company and Trustee shall at all
times, to the extent permitted by law, defend, preserve and protect all the
rights of the Bondholders under this Indenture against all claims and demands of
all Persons whomsoever.
SECTION 7.05. Accounting Records and Financial Statements. (a) The Trustee shall
at all times keep, or cause to be kept, proper books of record and account as
shall be consistent with prudent industry practice, in which complete and
accurate entries shall be made of all transactions relating to the proceeds of
Bonds and all funds established pursuant to this Indenture. Such books of record
and account shall be available for inspection by the Company, the Bank and any
Bondholder, or his agent or representative duly authorized in writing, at
reasonable hours and under reasonable circumstances.
(b) The Trustee shall within thirty (30) days after the end of each month
furnish to the Company a monthly statement (which need not be audited) covering
receipts, disbursements, allocation and application of any moneys (including
proceeds of Bonds) in any of the funds and accounts established pursuant to this
Indenture for such month.
SECTION 7.06. Waiver of Laws. The Company shall not at any time insist upon or
plead in any manner whatsoever, or claim or take the benefit or advantage of,
any stay or extension provided by law now or at any time hereafter in force that
may affect the covenants and agreements contained in this Indenture or in the
Bonds, and all benefit or advantage of any such law or laws is hereby expressly
waived by the Company to the extent permitted by law.
SECTION 7.07. Further Assurances. The Company will make, execute and deliver any
and all such further indentures, instruments and assurances as may be reasonably
necessary or proper to carry out the intention or to facilitate the performance
of this Indenture and for the better assuring and confirming unto the Holders of
the Bonds of the rights and benefits provided in this Indenture.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS
SECTION 8.01. Events of Default. The following events shall be
Events of Default:
(a) default in the due and punctual payment of the principal of any Bond when
and as the same shall become due and payable, whether at maturity as therein
expressed, by proceedings for redemption, by acceleration, or otherwise; or
(b) default in the due and punctual payment of any installment of interest on
any Bond when and as the same shall become due and payable; or
(c) failure to pay the Purchase Price on any Bond tendered pursuant to Article V
when such payment is due; or
(d) default by the Company in the observance of any of the other covenants,
agreements or conditions on its part in this Indenture or in the Bonds, if such
default shall have continued for a period of sixty (60) days after written
notice thereof, specifying such default and requiring the same to be remedied,
shall have been given to the Company by the Trustee, or to the Company and the
Trustee by the Holders of not less than twenty-five percent (25%) in aggregate
principal amount of the Bonds at the time Outstanding; provided, however, that
if such observance requires work to be done, actions to be taken or conditions
to be remedied, which by their nature cannot reasonably be done, taken or
remedied, as the case may be, within such sixty (60) day period, no Event of
Default shall be deemed to have occurred or to exist if, and so long as, the
Company shall commence such performance within such sixty (60) day period and
shall diligently and continuously proceed to completion; or
(e) if the Company makes an assignment for the benefit of creditors or a
composition agreement with all or a material part of its creditors, or a
trustee, receiver, executor, conservator, liquidator, sequestrator or other
judicial representative, similar or dissimilar, is appointed for the Company or
any of its assets or revenues, or there is commenced any proceeding in
liquidation, bankruptcy, reorganization, arrangement of debts, debtor
rehabilitation, creditor adjustment or insolvency, local, state or federal, by
or against the Company; or
(f) the Trustee's receipt of written notice from the Bank of declaration by the
Bank of an Event of Default under the provisions of the Reimbursement Agreement;
or
(g) if, at any time after a draw under the Letter of Credit, the Trustee shall
have received written notice from the Bank that the amount of such draw
corresponding to the payment of interest on the Bonds shall not be reinstated in
the amount and in the manner set forth in the Letter of Credit.
Upon actual knowledge of the existence of any Event of Default, the Trustee
shall as soon as practicable notify the Bank, the Company, the Tender Agent and
the Remarketing Agent. Anything contained in this Indenture to the contrary
notwithstanding, (i) no Event of Default under subsections (d) or (e) above
shall be deemed to have occurred without the prior written consent of the Bank
so long as the Bank is not in default under the terms of the Letter of Credit
and (ii) the Trustee shall not notify Bondholders of the existence of any Event
of Default under (d) or (e) without the prior written consent of the Bank, as
long as the Bank is not in default under the terms of the Letter of Credit.
SECTION 8.02. Acceleration. If any Event of Default under Section 8.01 hereof
occurs, the Trustee (with the written consent of the Bank provided the Bank is
not in default of its obligations under the Letter of Credit) may, and upon
request of the Owners of 25% in principal amount of the Bonds then Outstanding
shall, by written notice to the Bank and the Company, declare the principal
amount of all Bonds then Outstanding and the interest accrued thereon to such
date (the "Acceleration Date") to be due and the Acceleration Price (as
hereinafter defined) shall thereupon become payable on the first (1st) Business
Day following the Acceleration Date (the "Payment Date"). Thereupon, the
Trustee, among other things, shall draw immediately upon the Letter of Credit as
set forth in Section 6.12 hereof. Interest on the accelerated Bonds shall cease
to accrue on the Acceleration Date. Accelerated Bonds shall be payable at a
price equal to 100% of the aggregate principal amount thereof plus interest
accrued to the Acceleration Date the "Acceleration Price"). Notwithstanding
anything contained herein to the contrary, upon the occurrence of an Event of
Default described in Section 8.01(f) or (g) hereof, the Trustee shall, by
written notice to the Bank, and the Company declare immediately due and payable
the principal amount of the Outstanding Bonds.
Any such declaration is subject to the condition that if, at any time after such
declaration and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered, the Letter of Credit shall have been
reinstated in full as to principal and interest and the reasonable charges and
expenses of the Trustee, and any and all other defaults known to the Trustee
(other than in the payment of principal of and interest on the Bonds due and
payable solely by reason of such declaration) shall have been made good or cured
to the satisfaction of the Trustee or provision deemed by the Trustee to be
adequate shall have been made therefor, then, and in every such case, the
Holders of not less than 25% in aggregate principal amount of the Bonds then
Outstanding, by written notice to the Company, the Bank and the Trustee, or the
Trustee if such declaration was made by the Trustee, may, on behalf of the
Holders of all of the Bonds, rescind and annul such declaration and its
consequences and waive such default; but such rescission and annulment shall not
extend to or affect any subsequent default, and shall not impair or exhaust any
right or power in consequence thereof.
Upon any declaration of acceleration hereunder, the Trustee shall as soon as
possible give written notice of the acceleration to the Bondholders as set forth
below. In addition, notice of such acceleration shall be mailed, by registered
or certified mail or overnight mail, to the Rating Agency then rating the Bonds,
if any, but failure to mail any such notice or any defect in the mailing thereof
shall not affect the validity of such acceleration. Such notice of acceleration
(i) shall be given in the name of the Company, (ii) shall identify the
accelerated Bonds (by name, date of issue, interest rate and maturity date);
(iii) shall specify the Acceleration Date; (iv) shall state that the interest on
the accelerated Bonds ceased to accrue on the Acceleration Date; (vi) shall
state the reason for the acceleration; and (vii) shall state that on the Payment
Date the Acceleration Price will be payable at the principal corporate trust
office of the Trustee. The Trustee shall use "CUSIP" numbers on such notices as
a convenience to Bondholders and such notice shall state that no representation
is made as to the correctness of such numbers either as printed on the Bonds or
as contained in any notice of acceleration and that reliance may be placed only
on the bond numbers printed on the Bonds.
Upon acceleration pursuant to this Section 8.02, the Trustee shall immediately
draw upon the Letter of Credit as provided in Section 6.12 hereof in an amount
that is sufficient to pay the Acceleration Price due on the Outstanding Bonds on
the Payment Date.
Upon receipt by the Trustee of any amount from the Bank under the preceding
paragraphs of this Section 8.02 (or after receipt by the Trustee of any amounts
from the Bank under any other provision of this Indenture), the Bank shall be
subrogated to the right, title and interest of the Trustee and the Bondholders
in and to any security held for the payment of the Bonds and upon payment of any
fees and expenses due and payable to the Trustee pursuant to this Indenture,
shall be assigned by the Trustee to the Bank.
SECTION 8.03. Other Remedies. If any Event of Default occurs and is continuing,
the Trustee, before or after declaring the principal of the Bonds immediately
due and payable, may enforce each and every right granted to the Trustee under
the Letter of Credit or any other security instrument, or under any supplements
or amendments thereto, and shall, at all times complying with the provisions of
Section 8.02 hereof, apply Available Moneys in the Bond Fund held by the Trustee
to the payment of principal of or interest on the Bonds. In exercising such
rights and the rights given the Trustee under this Article VII, the Trustee
shall take such action, as in the judgment of the Trustee, applying the
standards described in Section 9.01 hereof, would best serve the interests of
the Bondholders.
SECTION 8.04. Legal Proceedings by Trustee. If any Event of Default has occurred
and is continuing, the Trustee in its discretion may and, upon the written
request of the Bank or the Owners of 25% in principal amount of the Bonds then
Outstanding (subject to the consent of the Bank, as long as the Bank is not in
default of its obligations under the Letter of Credit or a voluntary or
involuntary case has not been commenced by the filing of a petition under the
Bankruptcy Code or any other law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts by or against
the Bank) and receipt of indemnity to its satisfaction shall, in its own name.
A. By mandamus, other Suit, action or proceeding at law or in equity, enforce
all rights of the Bondholders, including the right to require the Company to
carry out any provisions of this Indenture for the benefit of the Bondholders
and to perform its duties under the Act;
B. Bring suit upon the Bonds;
C. By action or suit in equity require the Company to account
as if it were the trustee of an express trust for the
Bondholders; and
D. By action or suit in equity enjoin any acts or things that may be unlawful or
in violation of the rights of the Bondholders.
SECTION 8.05. Discontinuance of Proceedings by Trustee. If any proceeding taken
by the Trustee on account of any Event of Default is discontinued or is
determined adversely to the Trustee, the Company, the Trustee, the Bondholders
and the Bank shall be restored to their former positions and rights hereunder as
though no such proceeding had been taken, but subject to the limitations of any
such adverse determination.
SECTION 8.06. Bondholders May Direct Proceedings by Trustee. The Holders of a
majority in principal amount of the Bonds Outstanding hereunder shall have the
right to direct the method and place of conducting all remedial proceedings by
the Trustee hereunder, provided that such direction shall not be otherwise than
in accordance with law or the provisions of this Indenture, and that the Trustee
shall not be required to comply with any such direction which it deems to be
unlawful or unjustly prejudicial to Bondholders not parties to such direction.
The foregoing provisions of this Section 8.06 to the contrary notwithstanding,
the Bank shall have the right to direct the method and the place of conducting
all remedial proceedings by the Trustee hereunder provided that such direction
shall not be otherwise than in accordance with law or the provisions of this
Indenture and as long as the Bank shall not be in default under the Letter of
Credit.
SECTION 8.07. Limitations on Actions by Bondholders. Anything in this Indenture
to the contrary notwithstanding, no Bondholder shall have any right to pursue
any remedy hereunder unless:
(a) The Trustee shall have been given written notice of an Event of Default;
(b) The holders of at least 25% in aggregate principal amount of the Bonds
Outstanding shall have requested the Trustee, in writing, to exercise the powers
hereinabove granted or to pursue such remedy in its or their name or names;
(c) The Trustee shall have been offered indemnity satisfactory to it against
costs, expenses and liabilities;
(d) The Trustee shall have failed to comply with such request within a
reasonable time; and
(e) The Bank shall be in default of its obligations under the Letter of Credit;
provided, however, that nothing herein shall affect or impair the right of any
Owner of any Bond to enforce payment of the principal thereof and interest
thereon at and after the maturity thereof, or the obligation of the Company to
pay such principal and interest to the respective Owners of the Bonds at the
time and place from the source and in the manner expressed herein and in the
Bonds provided further that such action shall not disturb or prejudice the lien
of this Indenture.
SECTION 8.08. Trustee May Enforce Rights Without Possession of Bonds. All rights
under this Indenture and the Bonds may be enforced by the Trustee without the
possession of any Bonds or the production thereof at the trial or other
proceedings relative thereto, and any proceedings instituted by the Trustee
shall be brought in its name for the ratable benefit of the Owners of the Bonds.
SECTION 8.09. Delays and Omissions Not to Impair Rights. No delay or omission in
respect of exercising any right or power accruing upon any Event of Default
shall impair such right or power or be a waiver of such Event of Default and
every remedy given by this Article VIII may be exercised, from time to time and
as often as may be deemed expedient.
SECTION 8.10. Application of Moneys in Event of Default. Any money received by
the Trustee under this Article VIII shall be applied in the order listed below
(provided that any money received by the Trustee upon drawing under the Letter
of Credit together with Available Moneys on deposit in the Bond Fund and
available for payment of principal and interest on all Outstanding Bonds any
money held by the Trustee upon the nonpresentment of Bonds and any money held by
the Trustee for the defeasance of Bonds pursuant to Article XI shall be applied
only as provided in clause (b) below and only to pay outstanding principal and
accrued interest as provided in the Letter of Credit, with respect to the
Bonds):
(a) to the payment of the fees and expenses of the Trustee including reasonable
counsel fees and expenses, and any disbursements of the Trustee with interest
thereon and its reasonable compensation;
(b) To the payment of principal and interest then owing on the Bonds, including
any interest on overdue interest, and in case such money shall be insufficient
to pay the same in full, then to the payment of principal and interest ratably
without preference or priority of one over another or of any installment of
interest over any other installment of interest;
(c) To the payment of any unreimbursed drawing under the Letter of Credit or
other obligations owing by the Company to the Bank under the Reimbursement
Agreement; and
(d) The surplus if any remaining after the application of the money as set forth
above shall be paid to the Company or the person lawfully entitled to receive
the same as a court of competent jurisdiction may direct.
SECTION 8.11. Remedies Not Exclusive. No remedy herein conferred is intended to
be exclusive of any other remedy or remedies, and each remedy is in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute.
SECTION 8.12. Subrogation Rights of Bank. The Trustee agrees that the Bank or
other provider of a Substitute Letter of Credit shall be subrogated to all
rights, remedies and collateral of the Trustee under this Indenture or any other
document or instrument, to the extent the Bank or other provider of a Substitute
Letter of Credit has honored a draw under the Letter of Credit or Substitute
Letter of Credit, as the case may be, and has not been reimbursed or paid
therefor.
SECTION 8.13. Waiver of Default. As long as the Bank is not in default of its
obligations under the Letter of Credit and the Letter of Credit is in full force
and effect, the Bank may waive an Event of Default and if the Bank does so, the
Trustee must also waive such Event of Default. The Trustee may not waive an
Event of Default under this Indenture if the Letter of Credit has not been
reinstated to cover principal and interest on the Bonds in accordance with the
terms of the Letter of Credit.
ARTICLE IX
THE TRUSTEE, THE TENDER AGENT AND
THE REMARKETING AGENT
SECTION 9.01. Duties, Immunities and Liabilities of Trustee. (a) The Trustee
shall, prior to an Event of Default, and after the curing of all Events of
Default which may have occurred, perform such duties and only such duties as are
specifically set forth in this Indenture. The Trustee shall, during the
existence of any Event of Default (which has not been cured), exercise such of
the rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
(b) Any Trustee hereunder may be removed at any time by an instrument appointing
a successor to the Trustee so removed, executed by the Holders of a majority in
principal amount of the Bonds then Outstanding or the Bank (provided that the
Bank is not in default under the Letter of Credit) and filed with the Trustee,
and the Company. Such removal shall take effect only upon the appointment of a
successor trustee.
(c) The Trustee may at any time resign by giving written notice of such
resignation to the Company and the Bank and by giving the Bondholders notice of
such resignation by mail at the addresses shown on the registration books
maintained by the Bond Registrar. Upon receiving such notice of resignation, the
Company shall promptly notify the Bank, and the Company shall promptly appoint a
successor Trustee by an instrument in writing.
(d) Any removal or resignation of the Trustee and appointment of a successor
Trustee shall become effective upon acceptance of appointment by the successor
Trustee. If no successor Trustee shall have been appointed and have accepted
appointment within forty-five (45) days of giving notice of removal or notice of
resignation as aforesaid, the resigning Trustee or any Bondholder (on behalf of
himself and all other Bondholders) may petition any court of competent
jurisdiction for the appointment of a successor Trustee. Any successor Trustee
appointed under this Indenture, shall signify its acceptance of such appointment
by executing and delivering to the Company and to its predecessor Trustee a
written acceptance thereof, and thereupon such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the moneys,
estates, properties, rights, powers, trusts, duties and obligations of such
predecessor Trustee, with like effect as if originally named Trustee herein,
but, nevertheless at the request of the Company or the request of the successor
Trustee, such predecessor Trustee shall execute and deliver any and all
instruments of conveyance or further assurance and do such other things as may
reasonably be required for more fully and certainly vesting in and confirming to
such successor Trustee all the right, title and interest of such predecessor
Trustee in and to any property held by it under this Indenture and shall pay
over, transfer, assign and deliver to the successor Trustee any money or other
property subject to the trusts and conditions herein set forth. Upon request of
the successor Trustee, the Company shall execute and deliver any and all
instruments as may be reasonably required for more fully and certainly vesting
in and confirming to such successor Trustee all such moneys estates, properties,
rights, powers, trusts, duties and obligations. Upon acceptance of appointment
by a successor Trustee as provided in this subsection, such successor Trustee at
its expense shall mail a notice of its succession to the trusts hereunder to
Moody's and to the Bondholders at the addresses shown on the registration books
maintained by the Bond Registrar.
(e) Any Trustee appointed under the provisions of this section in succession to
the Trustee shall be a trust company or bank having the powers of a trust
company having a corporate trust office in the State, having a combined capital
and surplus of at least One Hundred Million Dollars ($100,000,000), subject to
supervision or examination by federal or state authorities and shall be rated by
Moody's or have received written evidence from Moody's that the use of such
Trustee would not result in a reduction or withdrawal of the rating on the
Bonds. If such bank or trust company publishes a report of condition at least
annually, pursuant to law or to the requirements of any supervising or examining
authority above referred to, then for the purpose of this subsection the
combined capital and surplus of such bank or trust company shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this subsection (e), the Trustee
shall resign immediately in the manner and with the effect specified in this
Section.
SECTION 9.O1A. Compensation and Indemnity. The Company shall pay to the Trustee
from time to time, and the Trustee shall be entitled to, compensation for its
services as set forth in the Trustee's letter to the Placement Agent dated
January 16, 1998. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses incurred or made
by it, including costs of collection, costs of preparing and reviewing reports,
certificates and other documents, costs of preparation and mailing of notices to
Holders and reasonable costs of counsel retained by the Trustee in addition to
the compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts. The Company shall indemnify and hold harmless
the Trustee against any and all losses, liability or expense (including
reasonable attorneys' fees) incurred by it in connection with the administration
of this trust and the performance of its duties hereunder, including the costs
and expenses of enforcing this Indenture (including this Section 9.O1A) and of
defending itself against any claims (whether asserted by any Holder, the Company
or otherwise). The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee may have separate counsel and the Company shall
pay the fees and expenses of such counsel. The Company need not reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own willful misconduct or gross negligence.
To secure the Company's payment obligations in this Section 9.01A, the Trustee
shall have a lien prior to the Bonds on all money or property held or collected
by the Trustee other than money or property held in trust to pay principal of
and interest on particular Bonds in accordance with Section 8.10 and proceeds of
drawings on the Letter of Credit. The Trustee's right to receive payment of any
amounts due under this Section 9.01A shall not be subordinate to any other
liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section 9.O1A shall survive
the discharge of this Indenture. When the Trustee incurs expenses after the
occurrence of a Default specified in Section 8.01(e) with respect to the
Company, the expenses are intended to constitute expenses of administration
under any bankruptcy law.
SECTION 9.02. Merger or Consolidation. Any company into which the Trustee may be
merged or converted or with which it may be consolidated or any company
resulting from any merger, conversion or consolidation to which it shall be a
party or any company to which the Trustee may sell or transfer all or
substantially all of its corporate trust business, provided such company shall
be eligible under subsection (e) of Section 9.01, shall be the successor to such
Trustee without the execution or filing of any paper or any further act,
anything herein to the contrary notwithstanding.
SECTION 9.03. Liability of Trustee. (a) The recitals of facts herein and in the
Bonds contained shall be taken as statements of the Company, and the Trustee
shall assume no responsibility for the correctness of the same, or make any
representations as to the validity or sufficiency of this Indenture or of the
Bonds or shall incur any responsibility in respect thereof, other than in
connection with the duties or obligations herein or in the Bonds assigned to or
imposed upon it. The Trustee shall, however, be responsible for its
representations contained in its certificate of authentication on the Bonds. The
Trustee shall not be liable in connection with the performance of its duties
hereunder, except for its own gross negligence or willful misconduct. The
Trustee may become the Owner of Bonds with the same rights it would have if it
were not Trustee and, to the extent permitted by law, may act as depositary for
and permit any of its officers or directors to act as a member of, or in any
other capacity with respect to, any committee formed to protect the rights of
Bondholders, whether or not such committee shall represent the Holders of a
majority in principal amount of the Bonds then Outstanding.
(b) The Trustee shall not be liable for any error of judgment made in good faith
by a responsible officer, unless it shall be proved that the Trustee was grossly
negligent in ascertaining the pertinent facts.
(c) The Trustee shall not be liable with respect to any action taken or omitted
to be taken by it in good faith in accordance with the direction of the Bank or
the Holders of not less than a majority in aggregate principal amount of the
Bonds at the time Outstanding relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee under this Indenture.
(d) The Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture (other than the making of a draw under the
Letter of Credit in accordance with its terms and the terms hereof, declaring
the principal of the Bonds to be immediately due and payable when required
hereunder or making payments on the Bonds when due) at the request, order or
direction of any of the Bondholders or the Bank pursuant to the provisions of
this Indenture unless such Bondholders or the Bank shall have offered to the
Trustee indemnification to its satisfaction for indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby.
(e) The Trustee shall not be liable for any action taken by it in good faith and
believed by it to be authorized or within the discretion or rights or powers
conferred upon it by this Indenture.
SECTION 9.04. Right of Trustee to Rely on Documents. The Trustee may
conclusively rely, and shall be protected in acting upon any notice, resolution,
request, consent, order, certificate, report, opinion, bond or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties. The Trustee may consult with counsel, who may be
counsel of or to the Company, with regard to legal questions, and the opinion of
such counsel shall be full and complete authorization and protection in respect
of any action taken or suffered by it hereunder in good faith and in accordance
therewith.
The Trustee shall not be bound to recognize any person as the Holder of a Bond
unless and until such Bond is submitted for inspection, if required, and his
title thereto is satisfactorily established, if disputed.
Whenever in the administration of the trusts imposed upon it by this Indenture
the Trustee shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a Certificate of the
Company, and such Certificate shall be full warrant to the Trustee for any
action taken or suffered in good faith under the provisions of this Indenture in
reliance upon such Certificate, but in its discretion the Trustee may, in lieu
thereof, accept other evidence of such matter or may require such additional
evidence as it may deem reasonable.
SECTION 9.05. Preservation and Inspection of Documents.
(a) All documents received by the Trustee under the provisions of this Indenture
shall be retained in its possession and shall be subject during normal business
hours of the Trustee to the inspection of the Company and any Bondholder, and
their agents and representatives duly authorized in writing, at reasonable hours
and under reasonable conditions.
(b) The Trustee covenants and agrees that it shall maintain a current list of
the names and addresses of all the Bondholders.
SECTION 9.06. Compensation. The Trustee shall be paid from time to time
reasonable compensation for all services rendered under this Indenture, and also
all reasonable expenses, charges, legal and consulting fees and other
disbursements and those of its attorneys, agents and employees, incurred in and
about the performance of its powers and duties under this Indenture, all as
provided in its bid submitted to the Remarketing Agent and the Company to
provide services under this Indenture.
SECTION 9.07. The Tender Agent. Dauphin Deposit Bank and Trust Company, the
initial Tender Agent appointed by the Company, and each successor tender agent
appointed in accordance herewith, shall designate its office and signify its
acceptance of the duties and obligations imposed upon it as described herein by
a written instrument of acceptance delivered to the Trustee and the Company
under which the Tender Agent shall, among other things:
(a) hold all Bonds delivered to it hereunder in trust for the benefit of the
respective Owners of Bonds which shall have so delivered such Bonds until moneys
representing the Purchase Price of such Bond shall have been delivered to or for
the account of or to the order of such Owners of Bonds. Upon delivery of moneys
representing the Purchase Price of such Bonds to or for the account of or to the
order of such Owners of Bonds, the Tender Agent shall hold all such Bonds which
are required to be delivered to the Pledged Bond Custodian pursuant to Section
5.07(b) hereof, as the agent of the Bank for the purpose of perfecting the
Bank's security interest therein under the Pledge Agreement (which agency shall
terminate upon delivery of such Bonds by the Tender Agent to or upon the order
of the Bank in accordance with such Section 5.07(b)); and
(b) hold all moneys delivered to it hereunder and under the Tender Agent
Agreement for the purchase of such Bonds in a separate account in trust for the
benefit of the person or entity which shall have so delivered such moneys until
required to transfer such funds as provided herein.
SECTION 9.08. Qualification of Tender Agent. (a) The Tender Agent shall be a
bank or trust company duly organized under the laws of the United States of
America or any state or territory thereof, having a combined capital stock,
surplus and undivided profits of at least One Hundred Million Dollars
($100,000,000) or that is a wholly-owned subsidiary of such a bank or trust
company, and authorized by law to perform all duties imposed upon it by this
Indenture and shall be rated at least Baa3/P-3 by Moody's if the Bonds are then
rated by Moody's, or has received written evidence from Moody's that the use of
such Tender Agent would not result in a reduction or withdrawal of the rating on
the Bonds. The Tender Agent may at any time resign and be discharged of its
duties and obligations by giving at least sixty (60) days notice to the Company,
the Trustee, the Remarketing Agent and the Bank; provided that such resignation
or removal shall not take effect until the appointment of a successor Tender
Agent, and in accordance with the provisions hereof. Upon the written approval
of the Bank, the Tender Agent may be removed at any time by the Company upon
written notice to the Trustee and the Remarketing Agent. Successor Tender Agents
may be appointed from time to time by the Company, with the prior written
consent of the Bank.
(b) Upon the resignation or removal of the Tender Agent, the Tender Agent shall
deliver any Bonds and moneys held by it in such capacity to its successor.
SECTION 9.09. Qualifications of Remarketing Agent; Resignation; Removal. The
Remarketing Agent shall be a financial institution or registered broker/dealer
authorized by law to perform all of the duties imposed upon it by this
Indenture. The Remarketing Agent may at any time resign and be discharged of its
duties and obligations created by this Indenture giving at least thirty (30)
days notice to the Company and the Trustee. The Remarketing Agent may be removed
at any time, upon not less than thirty (30) days written notice from the Company
filed with the Trustee. Upon the resignation or removal of the Remarketing
Agent, the Company shall appoint a successor Remarketing Agent and shall provide
written notice thereof to the Trustee. The resignation or removal of the
Remarketing Agent shall not become effective until a successor Remarketing Agent
is appointed and accepts such appointment. If the Bonds are rated by a Rating
Agency, any successor Remarketing Agent shall be rated at least Baa3/P-3 or
otherwise be acceptable to such Rating Agency.
SECTION 9.10. Construction of Ambiguous Provisions. The Trustee may construe any
provision hereof insofar as such may appear to be ambiguous or inconsistent with
any other provision hereof, and any construction of any such provision by the
Trustee, in good faith shall be binding upon the Owners of the Bonds.
ARTICLE X
MODIFICATION OR AMENDMENT OF THE INDENTURE
SECTION 10.01. Amendments Permitted. This Indenture and the rights and
obligations of the Company, of the Trustee and of the Holders of the Bonds may
be modified or amended from time to time and at any time for any lawful purpose,
by an indenture or indentures supplemental hereto, which the Company and the
Trustee may enter into without the consent of any Bondholders but with the prior
written consent of the Bank (as long as the Bank is not in default under the
Letter of Credit). The foregoing to the contrary notwithstanding, no such
modification or amendment shall, without the consent of the holders of all Bonds
then Outstanding, (a) extend the maturity date of any Bond, (b) reduce the
amount of principal thereof, (c) extend the time of payment or change the method
of computing the rate of interest thereon, without the consent of the Holder of
each Bond so affected, or eliminate the Holders' rights to tender the Bonds, (d)
extend the due date for the purchase of Bonds tendered by the Holders thereof,
or (e) reduce the Purchase Price of such Bonds. It shall not be necessary for
the consent of the Bondholders to approve the particular form of any
Supplemental Indenture, but it shall be sufficient if such consent shall approve
the substance thereof. Promptly after the execution by the Company and the
Trustee of any Supplemental Indenture pursuant to this Section 10.01, the
Trustee shall mail a notice, setting forth in general terms the substance of
such Supplemental Indenture, to each Rating Agency then rating the Bonds and the
Holders of the Bonds at the address shown on the registration books of the
Trustee. Any failure to give such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such Supplemental
Indenture.
SECTION 10.02. Effect of Supplemental Indenture. Upon the execution of any
Supplemental Indenture pursuant to this Article, this Indenture shall be deemed
to be modified and amended in accordance therewith, and the respective rights,
duties and obligations under this Indenture of the Company, the Trustee and all
Holders of Bonds Outstanding shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modification and amendment,
and all the terms and conditions of any such Supplemental Indenture shall be
deemed to be part of the terms and conditions of this Indenture for any and all
purposes. SECTION 10.03. Trustee Authorized to Join in Amendments and
Supplements; Reliance on Counsel. The Trustee is authorized to join with the
Company in the execution and delivery of any supplemental indenture or amendment
permitted by this Article X and in so doing shall be fully protected by an
opinion of counsel that such, supplemental indenture or amendment is so
permitted and has been duly authorized by the Company and that all things
necessary to make it a valid and binding agreement have been done.
ARTICLE XI
DEFEASANCE
SECTION 11.01. Discharge of Indenture. The Bonds may be paid by the Company in
any of the following ways, provided that the Company also pays or causes to be
paid any other sums payable hereunder by the Company:
(a) by paying or causing to be paid the principal of and interest on the Bonds,
as and when the same become due and payable.
(b) with respect to Bonds which bear interest at the Fixed Rate, by depositing
with the Trustee, in trust, Available Moneys or securities purchased with
Available Moneys in the necessary amount (as provided in Section 11.03) to pay
or redeem all Bonds then Outstanding; or
(c) by delivering to the Trustee, for cancellation by it, the Bonds then
Outstanding.
If the Company shall pay or cause to be paid all Bonds then Outstanding and
shall also pay or cause to be paid all other sums payable hereunder by the
Company, then and in that case, at the election of the Company (evidenced by a
Certificate of the Company filed with the Trustee, signifying the intention of
the Company to discharge all such indebtedness and this Indenture), and
notwithstanding that any Bonds shall not have been surrendered for payment, this
Indenture and the pledge of Revenues and other assets made under this Indenture
and all covenants, agreements and other obligations of the Company under this
Indenture shall cease, terminate, become void and be completely discharged and
satisfied. In such event, upon Request of the Company, the Trustee shall cause
an accounting for such period or periods as may be requested by the Company to
be prepared and filed with the Company and shall execute and deliver to the
Company all such instruments, as prepared by or caused to be prepared by the
Company, that may be necessary or desirable to evidence such discharge and
satisfaction, and the Trustee shall pay over, transfer, assign or deliver all
moneys or securities or other property held by it pursuant to this Indenture,
which are not required for (i) the payment of all the charges and reasonable
expenses of the Trustee under this Indenture, (ii) the payment or redemption of
Bonds not theretofore surrendered for such payment or redemption or (iii) the
payment of amounts owed to the Bank by the Company under the Reimbursement
Agreement, to the Company.
SECTION 11.02. Discharge of Liability on Bonds. During the Fixed Rate Period,
upon the deposit with the Trustee, in trust, at or before maturity, of money or
securities in the necessary amount (as provided in Section 11.03) to pay or
redeem any Outstanding Bond (whether upon or prior to the end of the Fixed Rate
Period or the redemption date of such Bond), provided that, if such Bond is to
be redeemed prior to maturity, notice of such redemption shall have been given
as in Article IV provided provision satisfactory to the Trustee shall have been
made for the giving of such notice, then all liability of the Company in respect
of such Bond shall cease, terminate and be completely discharged, and the Holder
thereof shall thereafter be entitled only to payment out of such money or
securities deposited with the Trustee as aforesaid for their payment, subject,
however, to the provisions of Section 11.04 below.
The Company may at any time surrender to the Trustee for cancellation by it any
Bonds previously issued and delivered, which the Company may have acquired in
any manner whatsoever, and such Bonds, upon such surrender and cancellation,
shall be deemed to be paid and retired.
SECTION 11.03. Deposit of Money or Securities with Trustee. During the Fixed
Rate Period, whenever in this Indenture it is provided or permitted that there
be deposited with or held in trust by the Trustee money or securities in the
necessary amount to pay or redeem any Bonds, the money or securities so to be
deposited or held shall be cash or Investment Securities described in clauses
(i) or (ii) of the definition thereof in Section 1.01 hereof, which Investment
Securities shall be noncallable and not subject to prepayment, the principal of
and interest on which when due will provide money sufficient to pay the
principal of, premium, if any, and all unpaid interest to maturity, or to the
redemption date, as the case may be, on the Bonds to be paid or redeemed, as
such principal, premium, if any, and interest become due, provided that, in the
case of Bonds which are to be redeemed prior to the maturity thereof, notice of
such redemption shall have been given as provided in Article IV or provision
satisfactory to the Trustee shall have been made for the giving of such notice,
provided, in each case, that the Trustee shall have been irrevocably instructed
(by request of the Company) to apply such money to the payment of such principal
and interest with respect to such Bonds.
Whenever Investment Securities are deposited with the Trustee in accordance with
this Section 11.03, the Company shall provide to the Trustee and the Rating
Agency (a) a verification report from an Accountant, satisfactory in form and
content to the Trustee, demonstrating that the Investment Securities so
deposited and the income thereon shall be sufficient to pay the principal of,
premium, if any, and all unpaid interest to maturity, or to the redemption date,
as the case may be, on the Bonds to be paid or redeemed, as such principal,
premium, if any, and interest become due and (b) an opinion acceptable to the
Rating Agency, of nationally recognized bankruptcy counsel, to the effect that
the provision for payment of the Bonds contemplated to be made pursuant to this
Section 11.03 will not constitute or result in such payments constituting
voidable preferences under Section 547 of the Bankruptcy Code.
SECTION 11.04. Payment of Bonds After Discharge of Indenture. Notwithstanding
any provisions of this Indenture, any moneys held by the Trustee in trust for
the payment of the principal of, premium, if any, or interest on, any Bonds and
remaining unclaimed for five (5) years after the principal of all of the Bonds
has become due and payable (whether at maturity or upon call for redemption or
by acceleration as provided in this Indenture), if such moneys were so held at
such date, or five (5) years after the date of deposit of such moneys if
deposited after said date when all of the Bonds became due and payable, shall be
repaid to the Company, upon its written request, free from the trusts created by
this Indenture and all liability of the Trustee with respect to such moneys
shall thereupon cease, provided, however, that before the repayment of such
moneys to the Company as aforesaid, the Trustee may (at the cost and request of
the Company) first mail to the Holders of Bonds which have not been paid, at the
addresses last shown on the registration books maintained by the Trustee, a
notice, in such form as may be deemed appropriate by the Trustee with respect to
the Bonds so payable and not presented and with respect to the provisions
relating to the repayment to the Bank and the Company of the moneys held for the
payment thereof.
ARTICLE XII
INSURANCE; DESTRUCTION, DAMAGE, EMINENT DOMAIN
SECTION 12.01. Insurance to be Maintained. The Company covenants to provide and
maintain continuously, unless otherwise herein provided, adequate insurance on
the Project Facilities as shall be mutually agreed upon by the Bank and the
Company. Each insurance policy with respect to the Project Facilities shall name
the Bank and the Trustee as additional insureds.
SECTION 12.02. Destruction, Damage and Eminent Domain. If the Project Facilities
shall be wholly or partially destroyed or damaged by fire or other casualty
covered by insurance, or shall be wholly or partially condemned, taken or
injured by any Person, including any Person possessing the right to exercise the
power of or a power in the nature of eminent domain or shall be transferred to
such a Person by way of a conveyance in lieu of the exercise of such a power by
such a Person, the Company covenants that it will take all actions and will do
all things which may be necessary to enable recovery to be made upon such
policies of insurance or on account of such taking, condemnation, conveyance,
damage or injury. The Company is authorized, in its own name, as trustee of an
express trust, to demand, collect, sue, settle claims, receive and release
moneys which may be due and payable under policies of insurance covering such
damage or destruction or on account of such condemnation, damage or injury. Any
moneys recovered (i) on policies of insurance required to be maintained
hereunder or (ii) as a result of any taking, condemnation, conveyance, damage or
injury shall be deposited in the Project Fund held by the Trustee under this
Indenture and shall be applied in accordance with the provisions of Section
12.04 hereof, provided, however, that as long as the Bank is not in default
under the terms of the Letter of Credit, the applicable provisions of the
Reimbursement Agreement shall control the disposition of casualty insurance and
condemnation award proceeds.
Any appraisement or adjustment of loss or damage and any settlement or payment
therefore, shall be agreed upon by the Company, the Bank (as long as the Bank in
not in default under the Letter of Credit) and the appropriate insurer or
condemnor or Person, shall be evidenced to the Bank by the certificate and
approvals set forth in this Indenture. The Bank may rely conclusively upon such
certificates.
SECTION 12.03. Notice of Property Loss. After the occurrence of loss or damage
to, or after receipt of notice of condemnation of, the Project Facilities, the
Company shall within five (5) Business Days thereof notify the Trustee and the
Bank, in writing, of such damage.
SECTION 12.04. Disposition of Casualty Insurance and Condemnation
Award Proceeds.
(a) If the Bank is in default under the terms of the Letter of Credit, the
Company may elect, in its discretion, whether to apply the proceeds of any
casualty insurance coverage and/or condemnation awards to (i) the repair,
reconstruction or replacement of damaged, destroyed or injured property
comprising the Project Facilities or (ii) the redemption of Bonds pursuant to
the applicable provisions of this Indenture. Absent timely direction from the
Company as to the application of any casualty insurance coverage and/or
condemnation awards, the proceeds thereof shall be applied to the extraordinary
redemption of the Bonds at par plus accrued interest through the date of
redemption. For purposes of the preceding sentence, "timely direction" shall
mean thirty (30) days after the Company has agreed, in connection with any
damage to or condemnation of the Project Facilities, upon the settlement or
payment with respect to any appraisement or adjustment of loss or damage, as
appropriate.
(b) If the Bank is not in default under the terms of the Letter of Credit, the
proceeds of any casualty insurance coverage and/or condemnation awards shall be
applied in accordance with Section 7(f) of the Reimbursement Agreement.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. Successor is Deemed Included in All References to Predecessor.
Whenever in this Indenture either the Company or the Trustee is named or
referred to, such reference shall be deemed to include the successors or assigns
thereof, and all the covenants and agreements in this Indenture contained by or
on behalf of the Company or the Trustee shall bind and inure to the benefit of
the respective successors and assigns thereof whether so expressed or not.
SECTION 13.02. Limitation of Rights to Parties, Bank, Company and Bondholders.
Nothing in this Indenture or in the Bonds expressed or implied is intended or
shall be construed to give to any person other than the Company, the Trustee,
the Bank, and the Holders of the Bonds, any legal or equitable right, remedy or
claim under or in respect of this Indenture or any covenant, condition or
provision therein or herein contained, and all such covenants, conditions and
provisions are and shall be held to be for the sole and exclusive benefit of the
Company, the Trustee, the Bank, and the Holders of the Bonds.
SECTION 13.03. Waiver of Notice. Whenever in this Indenture the giving of notice
by mail or otherwise is required, the giving of such notice may be waived in
writing by the person entitled to receive such notice and in any such case the
giving or receipt of such notice shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
SECTION 13.04. Severability of Invalid Provisions. If any one or more of the
provisions contained in this Indenture or in the Bonds shall for any reason be
held to be invalid, illegal or unenforceable in any respect, then such provision
or provisions shall be deemed several from the remaining provisions contained in
this Indenture and such invalidity, illegality or unenforceability shall not
affect any other provision of this Indenture, and this Indenture shall be
construed as if such invalid or illegal or unenforceable provision and never
been contained herein. The Company hereby declares that it would have entered
into this Indenture and each and every other section, paragraph, sentence,
clause or phrase hereof and authorized the issuance of the Bonds pursuant
thereto irrespective of the fact that any one or more sections, paragraphs,
sentences, clauses or phrases of this Indenture may be held illegal, invalid or
unenforceable.
SECTION 13.05. Notices. All notices to Bondholders shall be given by certified
or registered mail, commercial overnight delivery services, telex, telegram,
telecopier or other telecommunication device unless otherwise provided herein
and confirmed in writing as soon as practicable. All such notices shall also be
sent to the Holders and any person designated by any Holder to receive copies of
such notices. Any notice to or demand upon the Trustee may be served or
presented, and such demand may be made, at the principal corporate trust office
of the Trustee, or at such other address as may have been filed in writing by
the Trustee, the Trustees agent, the Company, the Remarketing Agent, the
Placement Agent, the Tender Agent or the Bank shall be deemed to have been
sufficiently given or served for all purposes by being delivered or sent by
telex or by being deposited, postage prepaid, in a post office letter box,
addressed as follows:
To the Trustee:
Dauphin Deposit Bank and Trust Company
213 Market Street
Harrisburg, PA 17101
To the Company:
Piercing Pagoda, Inc.
3910 Alder Place
P.O. Box 25007
Lehigh Valley, PA 18002-5007
(or such other address as may have been filed in writing by the
Company with the Trustee),
To the Remarketing Agent:
CoreStates Securities, Corp
600 Penn Street, Second Floor South
Reading, PA 19602
(or such other address as may have been filed in writing by the
Remarketing Agent with the Trustee),
To the Placement Agent:
CoreStates Securities, Corp
600 Penn Street, Second Floor South
Reading, PA 19602
To the Tender Agent:
Dauphin Deposit Bank and Trust Company
213 Market Street
Harrisburg, PA 17101
(or such other address as may have been filed in writing by the
Tender Agent with the Trustee),
To the Bank:
CoreStates Bank, N.A.
600 Penn Street, Third Floor North
Reading, PA 19102
(or such other address as may have been filed in writing by the Bank with the
Trustee).
To the Rating Agency:
Moody's Investors Service
99 Church Street
New York, NY 10007
(or such other address as may have been filed in writing by the this Indenture
and shall be conclusive in favor of the Trustee and of the Company if made in
the manner provided in this Section.
The fact and date of the execution by any person of any such request, consent or
other instrument or writing may be proved by the certificate of any notary
public or other officer of any jurisdiction, authorized by the laws thereof to
take acknowledgements of deeds, certifying that the person signing such request,
consent or other instrument acknowledged to him the execution thereof, or by an
affidavit of a witness of such execution duly sworn to before such notary public
or other officer.
The ownership of Bonds shall be proved by the bond registration books held by
the Trustee.
Any request, consent or other instrument or writing of the Holder of any Bond
shall bind every future Holder of the same Bond and the Holder of every Bond
issued in exchange therefor or in lieu thereof, in respect of anything done or
suffered to be done by the Trustee or the Company in accordance therewith or in
reliance thereon.
SECTION 13.07. Disqualified Bonds. In determining whether the Holders of the
requisite aggregate principal amount of Bonds have concurred in any demand,
request, direction, consent or waiver under this Indenture, Bonds which are
owned or held by or for the account of the Company, or by any other obligor on
the Bonds, or by any person directly or indirectly controlling or controlled by,
or under direct or indirect common control with the Company, or any other
obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for
the purposes of this Section. Bonds so owned which have been pledged in good
faith may be regarded as outstanding for the purposes of this Section if the
pledgee shall establish to the satisfaction of the Trustee the pledgee's right
to vote such Bonds and that the pledgee is not a person directly or indirectly
controlling or controlled by, or under direct or indirect common control with,
the Company, or any other obligor on the Bonds. In case of a dispute as to such
right, any decision by the Trustee taken upon the advice of counsel shall be
full protection to the Trustee.
SECTION 13.08. Money Held for Particular Bonds. The money held by the Trustee
for the payment of the interest, principal or premium due on any date with
respect to particular Bonds (or portions of Bonds in the case of registered
Bonds redeemed in part only) shall, on and after such date and pending such
payment, be set aside on its books and held uninvested in trust by it for the
Holders of the Bonds entitled thereto, subject, however, to the provisions of
Section 11.04 hereof.
SECTION 13.09. Funds. Any fund required by this Indenture to be established and
maintained by the Trustee may be established and maintained in the accounting
records of the Trustee, either as a fund or an account, and may, for the
purposes of such records, any audits thereof and any reports or statements with
respect thereto, be treated either as a fund or as an account, but all such
records with respect to all such funds shall at all time be maintained in
accordance with current industry standards, to the extent practicable, and with
due regard for the requirements of Section 7.05 hereof and for the protection of
the security of the Bonds and the rights of every holder thereof.
SECTION 13.10. Payments Due on Days other than Business Days. If a payment day
is not a Business Day at the place of payment, then payment may be made at that
place on the next Business Day and no interest shall accrue for the intervening
period.
SECTION 13.11. Execution in Several Counterparts. This Indenture may be executed
in any number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original; and all such counterparts, or as many of
them as the Company and the Trustee shall preserve undestroyed, shall together
constitute but one and the same instrument.
SECTION 13.12. Notices to Rating Agency. Written notice shall be provided by the
Company to each Rating Agency of (a) the appointment of any successor Trustee,
Tender Agent or Remarketing Agent, (b) any Supplemental Indenture or any
amendment to the Letter of Credit or the Reimbursement Agreement, (c) the
expiration, termination, extension or substitution of the Letter of Credit, (d)
the payment of all Outstanding Bonds,(e) the conversion of the Bonds to the
Fixed Rate, (f) redemption, (g) defeasance, (h) mandatory tender, and (i)
acceleration.
SECTION 13.13. Governing Law. This Indenture shall be governed by
and construed in accordance with the laws of the Commonwealth of
Pennsylvania (without regard to any conflict of laws provision).
IN WITNESS WHEREOF, PIERCING PAGODA, INC. has caused this Indenture to be signed
in its name by its President or other duly authorized officer and its seal to be
hereunto affixed and attested by its Secretary or Assistant Secretary, and
Dauphin Deposit Bank and Trust Company, in token of its acceptance of the trusts
created hereunder, has caused this Indenture to be signed in its corporate name
by its duly authorized officer and its corporate seal to be hereunto affixed and
attested, all as of the day and year first above written.
Witness:
PIERCING PAGODA, INC.
- ------------------------- -----------------------------------
[SEAL]
Attest: DAUPHIN DEPOSIT BANK AND TRUST
COMPANY
- --------------------------- -----------------------------------
Assistant Secretary Vice President
EXHIBIT A
PIERCING PAGODA, INC.
TAXABLE VARIABLE RATE DEMAND/FIXED RATE BONDS
SERIES OF 1998
No. VR 1
$2,565,000
REGISTERED OWNER: CEDE & CO
Interest Rate Maturity Date Dated Date CUSIP
Variable May 1, 2013 April 30, 1998 720773AA8
THIS BOND IS SUBJECT TO MANDATORY TENDER FOR PURCHASE AT THE TIME AND IN THE
MANNER HEREINAFTER DESCRIBED, AND MUST BE SO TENDERED OR WILL BE DEEMED TO HAVE
BEEN SO TENDERED UNDER CERTAIN CIRCUMSTANCES DESCRIBED HEREIN.
BY ACCEPTANCE OF THIS BOND, THE REGISTERED OWNER HEREOF AGREES THAT THIS BOND
WILL BE PURCHASED, WHETHER OR NOT SURRENDERED, (A) ON CONVERSION OF THE INTEREST
RATE MADE OF THE BONDS OR ANY EXPIRATION OF THE LETTER OF CREDIT FACILITY AS
DESCRIBED BELOW, OR (B) ON ANY PURCHASE DATE SPECIFIED BY THE REGISTERED OWNER
HEREOF IN THE EXERCISE OF THE RIGHT TO DEMAND PURCHASE OF THIS BOND AS DESCRIBED
BELOW. IN SUCH EVENT THE REGISTERED OWNER OF THE BOND SHALL NOT BE ENTITLED TO
RECEIVE ANY FURTHER INTEREST THEREON, SHALL HAVE NO FURTHER RIGHTS UNDER THIS
BOND OR THE INDENTURE EXCEPT TO PAYMENT OF THE PURCHASE PRICE HELD THEREFOR, AND
SHALL THEREAFTER HOLD THIS BOND AS AGENT FOR THE TENDER AGENT.
KNOW ALL MEN BY THESE PRESENTS that PIERCING PAGODA, INC. (the "Company"), for
value received, promises to pay to CEDE & Co. or registered assigns, on May 1,
2013, upon surrender hereof, the principal sum of Two Million Five Hundred
Sixty-Five Thousand ($2,565,000), and in like manner to pay interest on said sum
at the rate described below on the first Wednesday of each calendar month, or if
such date is not a Business Day, the next succeeding Business Day (hereinafter
defined) and on the Conversion Date (hereinafter defined), commencing, June 3,
1998 (each an "Interest Payment Date"), from the Interest Payment Date next
preceding the date of authentication hereof to which interest has been paid or
duly provided for, unless the date of authentication hereof is an Interest
Payment Date to which interest has been paid or duly provided for, in which case
from the date of authentication hereof, or unless no interest has been paid or
duly provided for on the Bonds (as hereinafter defined), in which case from,
April 30, 1998 (the "Date of Issuance"), until payment of the principal hereof
has been made or duly provided for.
Notwithstanding the foregoing, if this Bond is authenticated after any date
which is the seventh calendar day (as hereinafter defined) next preceding any
Interest Payment Date (a "Record Date") and before the following Interest
Payment Date, this Bond shall bear interest from such Interest Payment Date;
provided, however, that if the Company shall default in the payment of interest
due on such Interest Payment Date, then this Bond shall bear interest from the
next preceding Interest Payment Date to which interest has been paid or duly
provided for, or, if no interest has been paid or duly provided for on the
Bonds, from the Date of Issuance. The principal of this Bond is payable in
lawful money of the United States of America at the principal corporate trust
office of the Trustee or at the duly designated office of any successor Trustee
under the Indenture. Payment of interest on this Bond shall be made on each
Interest Payment Date to the registered Owner hereof as of the applicable Record
Date and shall be paid by check mailed by the Trustee to such registered Owner
at his address as it appears on the registration books of the Company or at such
other address as is furnished to the Trustee in writing by such registered
Owner, or in such other manner as may be permitted by the Indenture. The
Purchase Price (hereinafter defined) of this Bond shall be payable by Dauphin
Deposit Bank and Trust Company (together with any successor, the "Tender Agent")
to the registered Owner hereof, upon presentation hereof, at the principal
corporate trust office of the Tender Agent. As used herein, the term "Business
Day" means a day which is not a Saturday, Sunday or legal holiday on which
banking institutions in the State of New York, the City of New York, the
Commonwealth of Pennsylvania, City of Harrisburg, or the City of Philadelphia
are authorized to remain closed or on which the New York Stock Exchange is
closed.
This Bond shall bear interest as follows:
(A) From the Date of Issuance of this Bond to the Conversion Date, this Bond
shall bear interest at the "Floating Rate. The "Floating Rate" shall be a
variable rate of interest equal to the minimum rate of interest necessary, in
the sole judgment of the Remarketing Agent, to sell the Bonds on any Business
Day at a price equal to the principal amount thereof, exclusive of accrued
interest, if any, thereon. The Floating Rate shall be determined weekly by
CoreStates Securities, Corp, Reading, Pennsylvania (the "Remarketing Agent") by
9:30 a.m. on each Wednesday (or if such Wednesday is not a Business Day, on the
next succeeding Business Day) and shall be effective on such Wednesday for the
immediately following Weekly Period (as hereinafter defined), all as more fully
set forth in the Indenture. The determination of the Floating Rate shall be
conclusive and binding upon the Company, the Trustee, the Bank (as hereinafter
defined), the Remarketing Agent, the Tender Agent and the Owners of this Bond.
Anything herein to the contrary notwithstanding. the Floating
Rate shall in no event exceed seventeen percent (17%) per annum.
(B) The Bonds shall bear interest at the "Fixed Rate" from and after the
Conversion Date. In such event, the Fixed Rate shall be applicable until the
maturity of the Bonds. The "Fixed Rate" shall be a fixed annual interest rate on
the Bonds established by the Remarketing Agent as the rate of interest for which
the Remarketing Agent has received commitments on or prior to the fifth (5th)
day preceding the Conversion Date, at a price of par without discount or
premium.
Prior to the Conversion Date, interest on the Bonds shall be computed on the
basis of a 365/366 day year, actual number of days elapsed. On and after the
Conversion Date, interest on the Bonds shall be computed on the basis of a 360
day year of twelve 30 day months.
As used herein, the term "Conversion Date" means the Optional Conversion Date
(as hereinafter defined); the term "Letter of Credit Termination Date" means the
later of (i) that date upon which the Letter of Credit (hereinafter defined)
shall expire or terminate pursuant to its terms, or (ii) that date to which the
expiration or termination of the Letter of Credit may be extended, from time to
time, either by extension or renewal of the existing Letter of Credit or the
issuance of a Substitute Letter of Credit (as defined in the Indenture); the
term "Optional Conversion Date" means that date, which shall be a Business Day,
from and after which the interest rate on the Bonds is converted from the
Floating Rate to the Fixed Rate as a result of the exercise by the Company of
the Conversion Option (as hereinafter defined); the term "Conversion Option"
means the option granted to the Company in the Indenture pursuant to which the
interest rate on the Bonds is converted from the Floating Rate to the Fixed Rate
as of the Optional Conversion Date; the term "Purchase Price" means an amount
equal to 100% of the principal amount of any Bond tendered or deemed tendered
for purchase pursuant to the Indenture or with respect to which the Demand
Purchase Option (as hereinafter defined) has been exercised, plus accrued and
unpaid interest thereon to the date of purchase.
The interest rate on the Bonds may be converted from the Floating Rate to the
Fixed Rate at any time after the Initial Interest Payment Date upon satisfaction
of certain conditions and notice given by the Trustee at the direction of the
Company to the Owners of the Bonds at least twenty (20) days but not more than
thirty (30) days prior to the Conversion Date in accordance with the
requirements of the Indenture, and the Bonds shall be subject to mandatory
tender by the Owners thereof on the Conversion Date. On and after the Conversion
Date, the Demand Purchase Option will not be available to the Owners of the
Bonds. On or prior to the Conversion Date, Owners of the Bonds shall be required
to deliver their Bonds to the Tender Agent for purchase at the Purchase Price.
Accrued interest on the Bonds will be payable on the Conversion Date to the
Owners of Bonds as of the Conversion Date. Any Bonds not delivered to the Tender
Agent on or prior to the Conversion Date ("Undelivered Bonds"), for which there
has been irrevocably deposited in trust with the Trustee or the Tender Agent an
amount of money sufficient to pay the Purchase Price of the Undelivered Bonds,
shall be deemed to have been purchased at the Purchase Price and are deemed to
be no longer outstanding with respect to such prior Owners. IN THE EVENT OF A
FAILURE BY AN OWNER OF BONDS TO DELIVER ITS BONDS ON OR PRIOR TO THE CONVERSION
DATE, SAID OWNER SHALL NOT BE ENTITLED TO ANY, PAYMENT (INCLUDING ANY, INTEREST
TO ACCRUE ON OR SUBSEQUENT TO THE CONVERSION DATE) OTHER THAN THE PURCHASE PRICE
FOR SUCH UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS SHALL NO LONGER BE
ENTITLED TO THE BENEFITS OF THE INDENTURE, EXCEPT FOR THE PURPOSE OF PAYMENT OF
THE PURCHASE PRICE THEREFOR.
Notwithstanding the foregoing provisions, to the extent that at the close of the
fifth (5th) Business Day prior to the proposed Optional Conversion Date, the
Remarketing Agent has not presented to the Company firm commitments for the
purchase of all of the Bonds, the Company, at its option, may rescind an
optional conversion of the Bonds. Any such election to rescind must be made by
the close of the fourth Business Day prior to the proposed Conversion Date and
the Company shall give written notice to the Trustee, the Tender Agent and the
Bank of its decision to rescind the optional conversion by such time. The
Company shall cause the Trustee to immediately notify the Owners of such
rescission and thereafter the Bonds shall bear interest at the Floating Rate in
effect for the then current Weekly Period and thereafter the Bonds shall bear
interest at the Floating Rate until any subsequent Conversion Date effected in
accordance with the Indenture. As used herein, "Weekly Period" means, while this
Bond bears interest at the Floating Rate, the weekly period that begins on and
includes Wednesday of each calendar week and ends at the close of business on
Tuesday of the next succeeding week.
At any time prior to the Record Date preceding the first Interest Payment Date
following the Conversion Date, the Trustee or the Tender Agent, as the case may
be, shall deliver a replacement Bond evidencing interest payable at the Fixed
Rate.
Prior to the Conversion Date, this Bond shall be purchased, at the option of the
Owner hereof("Demand Purchase Option") at the Purchase Price, upon:
(a) delivery by such Owner to the Trustee and the Tender Agent at their
principal corporate trust office and Delivery Office (hereinafter defined)
respectively; and to the Remarketing Agent at its principal office of a notice
(a "Demand Purchase Notice") (said notice to be irrevocable and effective upon
receipt) which states (i) the aggregate principal amount and the bond numbers of
Bonds to be purchased; and (ii) the date on which such Bonds are to be
purchased, which date shall be a Business Day not prior to the seventh (7th) day
next succeeding the date of delivery of such notice and which date shall be
prior to the Conversion Date;
(b) if such Bonds are to be purchased prior to an Interest Payment Date and
after the Record Date in respect thereof, delivery to the Tender Agent together
with the Demand Purchase Notice described in (a) above, of a non-recourse
due-bill, payable to bearer, for interest due on such Interest Payment Date; and
(c) delivery to the Tender Agent at its Delivery Office (as hereinafter defined)
at or prior to 10:00 a.m., New York City time, on the date designated for
purchase in the applicable Demand Purchase Notice of such Bonds to be purchased
with an appropriate endorsement for transfer or accompanied by a bond power
endorsed in blank.
Any Bond as to which a Demand Purchase Notice has been delivered pursuant to (a)
above, must be delivered to the Tender Agent as provided in (c) above, and any
such Bonds not so delivered ("Undelivered Bonds"), for which there has been
irrevocably deposited in trust with the Trustee or the Tender Agent an amount of
money sufficient to pay the Purchase Price thereof, shall be deemed to have been
purchased at the Purchase Price and are deemed to be no longer outstanding with
respect to such tendering Owner. IN THE EVENT OF A FAILURE BY AN OWNER OF BONDS
TO DELIVER ITS BONDS AS SPECIFIED ABOVE, SAID OWNER SHALL NOT BE ENTITLED TO ANY
PAYMENT (INCLUDING ANY, INTEREST TO ACCRUE ON OR SUBSEQUENT TO THE DATE
DESIGNATED FOR PURCHASE IN THE APPLICABLE DEMAND PURCHASE NOTICE) OTHER THAN THE
PURCHASE PRICE FOR SUCH UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS SHALL NO
LONGER BE ENTITLED TO THE BENEFITS OF THE INDENTURE, EXCEPT FOR THE PAYMENT OF
THE PURCHASE PRICE THEREFOR.
Notwithstanding the foregoing provisions, in the event any Bond as to which the
Owner thereof has exercised the Demand Purchase Option is remarketed to such
Owner pursuant to the Remarketing Agreement, such Owner need not deliver such
Bond to the Tender Agent as provided in (c) above, although such Bond shall be
deemed to have been delivered to the Tender Agent, redelivered to such Owner,
and remarketed for purposes of the indenture.
Any delivery of a notice required to be made to the Trustee at its principal
corporate trust office pursuant to (a) above shall be delivered to the Trustee
at 213 Market Street, Harrisburg, PA 17101, Attention: Corporate Trust
Department, or to the office designated for such purpose by any successor
Trustee, any delivery of a notice required to be made to the Remarketing Agent
at its principal office pursuant to (a) above shall be delivered to the
Remarketing Agent at 600 Penn Street, Second Floor South, Reading, PA 19602, or
to the office designated for such purpose by any successor Remarketing Agent,
and any delivery of Bonds required to be made to the Tender Agent pursuant to
(b) above shall be delivered to the Tender Agent at 213 Market Street,
Harrisburg, PA 17101, or the office designated for such purpose by any successor
Tender Agent (the "Delivery Office").
This Bond and the Bonds of the Series of which it is a part is comprised of a
duly authorized issue of bonds designated as "Taxable Variable Rate Demand/Fixed
Rate Bonds, Series of 1998" (the "Bonds") issued in the aggregate principal
amount of $2,565,000 and by virtue of a resolution duly adopted by the Company
on April 27, 1998 (the "Bond Resolution"), and equally and ratably secured under
a Trust Indenture dated as of April 29, 1998, by and between the Company and
Dauphin Deposit Bank and Trust Company, as Trustee, or its successor in trust
(herein called the "Trustee") as the same from time to time has been or may be
amended, modified or supplemented by supplemental indentures (being herein
collectively called the "Indenture"), for the purpose of raising funds to
finance a project (the "Project") consisting of (i) the construction of a new
70,655 square feet building on 5.3 acres of land at the Company headquarters in
Hanover Township, Northampton County, Pennsylvania for the purpose of expanding
the Company's capabilities to distribute, assemble and warehouse their products
and to provide for office space to carry out the administrative functions of the
Company's business; and (ii) the payment of fees and expenses relating to the
issuance of the Bonds.
The Bonds are all issued under and are equally and ratably secured by and
entitled to the protection of the Indenture, pursuant to which the Company is
obligated to make payment of the principal and Purchase Price of, and premium,
if any, and interest on the Bonds and certain costs, fees and expenses of the
Trustee. The Company has caused to be delivered to the Trustee an irrevocable
direct pay letter of credit (together with any Substitute Letter of Credit, the
"Letter of Credit") issued by CoreStates Bank, N.A. (in such capacity, the
"Bank") and dated the Date of Issuance of the Bonds, which will expire, unless
earlier terminated or extended, on April 29, 2003 (the "Letter of Credit
Termination Date"). Subject to certain conditions, the Letter of Credit may be
replaced by a Substitute Letter of Credit of another commercial bank, savings
and loan association or savings bank. Under the Letter of Credit, the Trustee is
entitled to draw up to an amount sufficient to pay (a) the principal of the
Bonds or the portion of the Purchase Price corresponding to the principal of the
Bonds and (b) forty-five (45) days accrued interest (calculated at the maximum
rate of 17% per annum based on a 365/366 day year and the actual number of days
elapsed) on the Bonds or the portion of the Purchase Price of the Bonds
corresponding to accrued interest thereon.
Reference is hereby made to the Indenture and the Letter of Credit for
description of the property pledged and assigned, the provisions, among others,
with respect to the nature and extent of the security, the rights, duties and
obligations of the Company, the Trustee and the Owners of the Bonds and the
terms upon which the Bonds are issued and secured; and the Owner of this Bond,
by acceptance hereof, hereby consents to the terms and provisions of all of the
foregoing as a material portion of the consideration for the issuance of this
Bond.
This Bond is transferable by the registered Owner hereof in person or by his
attorney duly authorized in writing, at the principal corporate trust office of
the Trustee or at the Delivery Office of the Tender Agent or that of any
successor Tender Agent, but only in the manner, subject to the limitations and
upon payment of the charges provided in the Indenture, and upon surrender and
cancellation of this Bond. Upon such transfer a new registered Bond or Bonds of
authorized denomination or denominations for the same aggregate principal amount
will be issued to the transferee in exchange therefor. The Company, the Tender
Agent and the Trustee may deem and treat the registered Owner hereof as the
absolute Owner
hereof (whether or not this Bond shall be overdue) for all purposes, and neither
the Company, the Tender Agent nor the Trustee shall be bound by any notice or
knowledge to the contrary.
Prior to the Conversion Date, (i) the Bonds are issuable as fully registered
bonds without coupons in the denominations of $100,000 or any integral multiple
of $5,000 in excess thereof; and (ii) the Bonds may not be issued, exchanged or
transferred except in authorized denominations of $100,000 or any integral
multiple of $5,000 in excess thereof from and after the Conversion Date, the
Bonds shall be issuable as fully registered bonds without coupons in the
denominations of $5,000 or any integral multiple thereof.
Extraordinary Redemption
The Bonds are callable for redemption in the event the Project Facilities or any
portion thereof is damaged or destroyed or taken in a condemnation proceeding as
provided in Article XII of the Indenture. If called for redemption at any time
as provided in the preceding sentence, the Bonds shall be subject to redemption
by the Company on any Interest Payment Date, in whole or in part, at a
redemption price of one hundred percent (100%) of the principal amount thereof
plus accrued interest to the redemption date pursuant to Section 4.01(b) of this
Indenture.
Mandatory Redemption
The Bonds are subject to mandatory redemption, fifteen (15) days prior to the
Letter of Credit Termination Date, in whole, at a redemption price equal to one
hundred percent (100%) of the principal amount thereof being redeemed plus
accrued interest to the redemption date if; on the thirtieth (30th) Business Day
prior to the Letter of Credit Termination Date, the Trustee shall not have
received a Substitute Letter of Credit which will be effective on or before the
Letter of Credit Termination Date.
The Bonds are also subject to mandatory redemption, in whole or in part, on any
Interest Payment Date, at a redemption price equal to one hundred percent (100%)
of the principal amount thereof being redeemed plus accrued interest to the
redemption date, if any proceeds of the sale of the Bonds remain on deposit in
the Project Fund established under the Indenture upon completion of the Project,
under the conditions specified therein.
If less than all the Bonds are to be redeemed, the particular Bonds or portions
thereof to be redeemed shall be selected by the Trustee at random or in such
other manner as the Trustee in its discretion shall deem fair and appropriate.
Mandatory Sinking Fund Redemption
The Bonds are subject to mandatory redemption on the Interest Payment Date
occurring in the month of May in each of the years set forth below commencing on
the Interest Payment Date occurring in May 1999 (each, a "Mandatory Sinking
Account Payment Date"), at a
redemption price equal to 100% of the principal amount thereof plus accrued
interest as follows:
BONDS
Mandatory Sinking
Year Account Payments
1999 $125,000.00
2000 $120,000.00
2001 $125,000.00
2002 $130,000.00
2003 $140,000.00
2004 $150,000.00
2005 $155,000.00
2006 $165,000.00
2007 $175,000.00
2008 $185,000.00
2009 $195,000.00
2010 $205,000.00
2011 $220,000.00
2012 $230,000.00
*2013 $245,000.00
*Final maturity
Optional Redemption
On or prior to the Conversion Date, the Bonds are subject to redemption by the
Company, at the option of the Company, at any time, subject to the notice
provisions described below, in whole or in part, at the redemption price of 100%
of the principal amount thereof being redeemed plus accrued interest to the
redemption date.
In the event of any of the Bonds or portions thereof are called for redemption
as aforesaid, notice of the call for redemption, identifying the Bonds or
portions thereof to be redeemed and the redemption price (including the premium,
if any), shall be given by the Trustee by mailing a copy of the redemption
notice by first-class mail at least (i) ten (10) days prior to the date fixed
for redemption in the event of a mandatory redemption because the Trustee shall
not have received a Substitute Letter of Credit effective on or before the
Letter of Credit Termination Date, and (ii) thirty (30) days but not more than
sixty (60) days prior to the date fixed for redemption in all other instances to
the Owner of each Bond to be redeemed in whole or in part at the address shown
on the registration books. Any notice mailed as provided above shall be
conclusively presumed to have been duly given, whether or not the Owner receives
the notice. No further interest shall accrue on the principal of any Bond called
for redemption after the redemption date if Available Moneys (as defined in the
Indenture) sufficient for such redemption have been deposited with the Trustee.
Notwithstanding the foregoing, the notice requirements contained in the first
sentence of this paragraph may be deemed satisfied with respect to a transferee
of a Bond which has been purchased pursuant to the Demand Purchase Option under
certain circumstances provided in Section 5.05 of the Indenture, after such Bond
has previously been called for redemption, notwithstanding the failure to
satisfy the notice requirements of the first sentence of this paragraph with
respect to such transferee.
Mandatory Tender
The Bonds are subject to mandatory tender in whole on the effective date of any
Substitute Letter of Credit provided by a Substitute Bank (as such term is
defined in the Indenture), at a purchase price equal to 100% of the principal
amount thereof, plus accrued interest to the purchase date.
In the event of a mandatory tender, notice of such tender shall be given by the
Trustee by delivering or mailing by first-class mail a copy of such notice at
least twenty (20) days but not more than thirty (30) days prior to the date of
such tender to the Owner of each Bond at the address shown on the registration
books.
The Bonds are issued pursuant to and in full compliance with the Constitution
and laws of the Commonwealth of Pennsylvania, and by appropriate action duly
taken by the Company authorizing the execution and delivery of the Indenture.
The Owner of this Bond shall have no right to enforce the provisions of the
Indenture or to institute action to enforce the covenants therein, or to take
any action with respect to any default under the Indenture, or to institute,
appear in or defend any suit or other proceedings with respect thereto, unless
certain circumstances described in the Indenture shall have occurred. In certain
events, on the conditions, in the manner and with the effect set forth in the
Indenture, the principal of all the Bonds issued under the Indenture and then
outstanding may become or may be declared due and payable before the stated
maturity thereof, together with interest accrued thereon.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modifications of the rights and obligations of the
Company and the rights of the owners of the Bonds at any time by the Company
with the consent of the Bank and the Holders of all Bonds at the time
Outstanding. Any such consent or any waiver by the Bank and the Holders of all
Bonds at the time Outstanding shall be conclusive and binding upon the Owner and
upon all future Owners of this Bond and of any Bond issued in replacement hereof
whether or not notation of such consent or waiver is made upon this Bond. The
Indenture also contains provisions which, subject to certain conditions, permit
or require the Trustee to waive certain past defaults under the Indenture and
their consequences.
It is hereby certified, recited and declared that all acts, conditions and
things required to exist, happen and be performed precedent to and in connection
with the execution and delivery of the Indenture and the issuance of this Bond
do exist, have happened and have been performed in due time, form and manner as
required by law.
This Bond shall not be valid or become obligatory for any purpose or be entitled
to any security or benefit under the Indenture until the certificate of
authentication hereon shall have been signed by the Trustee or the Tender Agent,
as authenticating agent.
IN WITNESS WHEREOF, Piercing Pagoda, Inc. has caused this Bond to be signed in
its name and on its behalf by the manual or facsimile signature of its President
and its corporate seal to be affixed, imprinted or reproduced hereon and
attested by the manual or facsimile signature of its authorized officer, all as
of the Date of Issuance.
Attest: PIERCING PAGODA, INC.
- -------------------------- -----------------------------
Authorized Officer President
[SEAL]
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 GIFT MIN ACT - Custodian
(Cust) (Minor)
under Uniform Gifts to Minors
Act
(State)
Additional abbreviations may also be used, though not in the above list.
(Form of Certificate of Authentication)
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds of the issue described in the within-mentioned
Trust Indenture.
DAUPHIN DEPOSIT BANK AND TRUST
COMPANY
By:
Authorized Signature
Date of Authentication: April 30, 1998
(Form of Transfer)
FOR VALUE RECEIVED, ____________ , the undersigned, hereby sells, assigns and
transfers unto _______________(Tax Identification or Social Security No.
_____________) the within Bond and all rights thereunder, and hereby irrevocably
constitutes and appoints ____________________________attorney to transfer the
within Bond on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: ___________________ ______________________________
NOTICE: Signature must be NOTICE: The signature to this guaranteed by an
approved assignment must correspond with the eligible guarantor name as it
appears upon the face of institution, an the within Bond in every particular
institution which is a without alteration or enlargement participant in a
Securities or any change whatsoever. Transfer Association recognized signature
guarantee program.
[FORM OF BOND COUNSEL OPINION]
Re: Piercing Pagoda, Inc.
$2,565,000
Taxable Variable Rate Demand/Fixed Rate Bonds,
Series of 1998 (the "Bonds")
TO THE REGISTERED OWNERS OF THE ABOVE BONDS
We have acted as Bond Counsel in connection with the issuance by Piercing
Pagoda, Inc., of the above-captioned Bonds. The proceeds of the Bonds will be
used by the Company to finance a project (the "Project") consisting of (i) the
construction of a new 70,655 square feet building on 5.3 acres of land at the
Company headquarters in Hanover Township, Northampton County, Pennsylvania for
the purpose of expanding the Company's capabilities to distribute, assemble and
warehouse their products and to provide for office space to carry out the
administrative functions of the Company's business; and (ii) the payment of fees
and expenses relating to the issuance of the Bonds. All capitalized terms used
in this opinion and not defined herein shall have the meanings assigned to them
in the Indenture unless the context clearly requires otherwise.
The Bonds issued this date mature on May 1, 2013 and bear interest and are
subject to purchase and redemption prior to maturity upon the terms and
conditions stated therein and in the Indenture. The Bonds initially are issuable
as registered bonds in denominations of $100,000 or integral multiples of $5,000
in excess thereof. After the Conversion Date the Bonds shall be in denominations
of $5,000 or integral multiples of $5,000 in excess thereof.
In connection with the issuance of the Bonds, CoreStates Bank, N.A. ("Bank"), at
the request of the Borrower, has issued a certain irrevocable, direct pay Letter
of Credit dated the date of issuance of the Bonds (the "Letter of Credit"), in
favor of the Trustee. Pursuant to the terms and conditions set forth in the
Letter of Credit and the Indenture, on each debt service payment date the
Trustee shall draw upon the Letter of Credit the amount necessary to pay the
principal of and interest payable on the Bonds on such debt service payment
date.
In connection with providing our opinion, we have examined the following:
1. Section 103 and Sections 141 through 150 of the Internal Revenue Code of
1986, as amended (the "Code");
2. Copies of the resolution of the Company authorizing, among other things, the
issuance of the Bonds (the "Resolution");
3. A copy of the executed Letter of Credit;
4. A specimen copy of one of the Bonds (we assume due execution and
authentication of each Bond);
5. Executed copies of the Indenture, the Reimbursement Agreement, the Letter of
Credit, the Remarketing Agreement, the Tender Agent Agreement, the Pledge and
Security Agreement, the Company General Certificate and the other documents,
agreements, certificates and opinions delivered at the closing held this day.
Based upon our examination of the foregoing and upon our attendance at the Bond
Closing, it is our opinion that, as of the date hereof:
A. The Indenture has been duly authorized, executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company
enforceable in accordance with its respective terms.
B. The Bonds are exempt from registration under the Securities Act of 1933 as
amended, in connection with the offering and sale of the Bonds and the Indenture
is exempt from qualification under the Trust Indenture Act of 1939, as amended.
C. The issuance and sale of the Bonds have been duly authorized by the Company
and such Bonds have been duly executed and delivered by the Company and
authenticated by the Trustee, are valid and binding obligations of the Company
and are entitled to the benefit and security of the Indenture, except as the
rights created thereunder and the enforcement thereof may be limited to
bankruptcy, insolvency or other laws or equitable principles affecting the
enforcement of creditors' rights generally.
D. Except as to the possible application of state securities laws, as to which
no opinion need be expressed, no authorization, declaration, approval, consent
or other order of any governmental authority or agency is required to be
obtained by the Company and the valid authorization, execution and delivery of
the Bond Placement Agreement and all other documents executed by the Company in
connection with the issuance of the Bonds.
E. The description and summaries under the captions entitled "The Bonds" (except
for the information extracted from information provided by DTC), and "The
Indenture" contained in the Placement Memorandum fairly summarize the applicable
provisions of the documents or portions of applicable law, as the case may be,
which are purported to be summarized therein.
F. Interest on the Bonds is not excluded from gross income for federal or state
income tax purposes.
In providing the foregoing opinions, we advise you as follows:
(a) The enforceability of the provisions of the Bonds and the Indenture (and any
other applicable document) may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' rights generally.
(b) Equitable remedies with respect to the Bonds and the Indenture (and any
other applicable document) lie in the discretion of the courts and, accordingly,
may not be available.
(c) Except as specifically set forth above, we express no opinion regarding
other federal or state income tax consequences arising with respect to the
Bonds.
(d) We have not been engaged to verify, nor have we independently verified, nor
do we express any opinion to the registered owners of the Bonds with respect to,
the accuracy, completeness or truthfulness of any statements, certifications,
information or financial statements set forth in the Placement Memorandum dated
April 23, 1998 (the "Placement Memorandum"), or with respect to any other
materials used in connection with the placement of the Bonds other than the
opinion expressed in 5(e) herein.
We express no opinion with respect to whether the Company or any other person in
connection with the placement of the Bonds or the preparation of the Placement
Memorandum, has made any untrue statement of a material fact or omitted to state
a material fact necessary in order to make any statement made, not misleading.
Further, we have not verified, and express no opinion as to the accuracy of, any
"CUSIP" identification number that may be printed on any Bond. We have also
assumed the genuineness of the signatures appearing on all the certificates,
documents and instruments executed and delivered at closing.
Very truly yours,
KING, MCCARDLE, HERMAN, FREUND & OLEXA
EXHIBIT B
FIXED RATE FORM OF BOND
PIERCING PAGODA, INC.
TAXABLE VARIABLE RATE DEMAND/FIXED RATE BONDS
SERIES OF 1998
No. FR- $2,565,000
Interest Rate Maturity Date Dated Date CUSIP
May 1, 2013 April 29, 1998 720773AA8
KNOW ALL MEN BY THESE PRESENTS that PIERCING PAGODA, INC. (the "Company"), for
value received, promises to pay to CEDE & Co., or registered assigns, on upon
surrender hereof, the principal sum of Two Million Five Hundred Sixty-Five
Thousand Dollars ($2,565,000), and in like manner to pay interest (calculated on
the basis of a 360-day year of twelve 30-day months) on said sum at the rate
of_____% per annum on May 1 and November 1 of each year, commencing (each an
"Interest Payment Date"), from the Interest Payment Date next preceding the date
of authentication hereof to which interest has been paid or duly provided for,
unless the date of authentication hereof is an Interest Payment Date to which
interest has been paid or duly provided for, in which case from the date of
authentication hereof, or unless no interest has been paid or duly provided for
on the Bonds (as hereinafter defined), in which case from the Conversion Date
(as defined in the Indenture, as hereinafter defined), until payment of the
principal hereof has been made or duly provided for. Notwithstanding the
foregoing, if this Bond is authenticated after any date which is the fifteenth
calendar day (as hereinafter defined) next preceding any Interest Payment Date
(a "Record Date") and before the following Interest Payment Date, this Bond
shall bear interest from such Interest Payment Date; provided, however, that if
the Company shall default in the payment of interest due on such Interest
Payment Date, then this Bond shall bear interest from the next preceding
Interest Payment Date to which interest has been paid or duly provided for, or,
if no interest has been paid or duly provided for on the Bonds, from the
Conversion Date. The principal of this Bond is payable in lawful money of the
United States of America at the principal corporate trust office of the Trustee
or at the duly designated office of any successor Trustee under the Indenture
(as hereinafter defined). Payment of interest on this Bond shall be made on each
Interest Payment Date to the registered Owner hereof as of the applicable Record
Date and shall be paid by check mailed by the Trustee to such registered Owner
at his address as it appears on the registration books of the Company or at such
other address as is furnished to the Trustee in writing by such registered
Owner, or in such other manner as may be permitted by the Indenture. The
Purchase Price (hereinafter defined) of this Bond shall be payable by Dauphin
Deposit Bank and Trust Company (together with any successor, the "Tender Agent")
to the registered Owner hereof, upon presentation hereof, at the principal
corporate trust office of the Tender Agent. As used herein, the term "Business
Day" means a day which is not a Saturday, Sunday or legal holiday on which
banking institutions in the State of New York, the City of New York, the
Commonwealth of Pennsylvania, City of Harrisburg, or the City of Philadelphia
are authorized to remain closed or on which the New York Stock Exchange is
closed.
This Bond and the Bonds of the Series of which it is a part is comprised of a
duly authorized issue of bonds designated as "Taxable Variable Rate Demand/Fixed
Rate Bonds, Series of 1998" (the "Bonds") issued in the aggregate principal
amount of $2,565,000 and by virtue of a resolution duly adopted by the Company
on and equally and ratably secured under a Trust Indenture dated as of April 29,
1998, by and between the Company and Dauphin Deposit Bank and Trust Company, as
Trustee, or its successor in trust (herein called the "Trustee") as the same
from time to time has been or may be amended, modified or supplemented by
supplemental indentures (being herein collectively called the "Indenture"), for
the purpose of financing a project (the "Project") consisting of (i) the
construction of a new 70,655 square feet building on 5.3 acres of land at the
Company headquarters in Hanover Township, Northampton County, Pennsylvania for
the purpose of expanding the Company's capabilities to distribute, assemble and
warehouse their products and to provide for office space to carry out the
administrative functions of the Company's business; and (ii) the payment of fees
and expenses relating to the issuance of the Bonds.
The Bonds are all issued under and are equally and ratably secured by and
entitled to the protection of the Indenture, pursuant to which the Company is
obligated to make payment of the principal and premium, if any, and interest on
the Bonds and certain costs, fees and expenses of the Trustee. The Company has
caused to be delivered to the Trustee an irrevocable direct pay letter of credit
(together with any Substitute Letter of Credit, the "Letter of Credit") issued
by CoreStates Bank, N.A. (in such capacity, the "Bank") and dated the Date of
Issuance of the Bonds, which will expire, unless earlier terminated or extended,
on (the "Letter of Credit Termination Date"). Subject to certain conditions, the
Letter of Credit may be replaced by a Substitute Letter of credit of another
commercial bank, savings and loan association or savings bank. Under the Letter
of Credit, the trustee is entitled to draw up to an amount sufficient to pay (a)
the principal of the Bonds and (b) 205 days accrued interest (calculated at the
maximum rate of____% per annum based on a 360 day year and the actual number of
days elapsed) on the Bonds.
Reference is hereby made to the Indenture and the Letter of Credit for
description of the property pledged and assigned, the provisions, among others,
with respect to the nature and extent of the security, the rights, duties and
obligations of the Company, the Trustee and the Owners of the Bonds and the
terms upon which the Bonds are issued and secured; and the Owner of this Bond,
by acceptance hereof, hereby consents to the terms and provisions of all of the
foregoing as a material portion of the consideration for the issuance of this
Bond.
This Bond is transferable by the registered Owner hereof in person or by his
attorney duly authorized in writing, at the principal corporate trust office of
the Trustee but only in the manner, subject to the limitations and upon payment
of the charges provided in the Indenture, and upon surrender and cancellation of
this Bond. Upon such transfer a new registered Bond or Bonds of authorized
denomination or denominations for the same aggregate principal amount will be
issued to the transferee in exchange therefor. The Company and the Trustee may
deem and treat the registered Owner hereof as the absolute Owner hereof (whether
nor not this Bond shall be overdue) for all purposes, and neither the Company
nor the Trustee shall be bound by any notice or knowledge to the contrary.
The Bonds shall be issuable as fully registered bonds without coupons in the
denominations of $5,000 or any integral multiple thereof.
Extraordinary Redemption
The Bonds are callable for redemption in the event the Project Facilities or any
portion thereof is damaged or destroyed or taken in a condemnation proceeding as
provided in Article XII of the Indenture. If called for redemption at any time
as provided in the preceding sentence, the Bonds shall be subject to redemption
by the Company on any Interest Payment Date, in whole or in part, at a
redemption price of one hundred percent (100%) of the principal amount thereof
plus accrued interest to the redemption date pursuant to Section 4.01(b) of the
Indenture.
Mandatory Redemption
The Bonds are subject to mandatory redemption, fifteen (15) days prior to the
Letter of Credit Termination Date, in whole, at a redemption price equal to one
hundred percent (100%) of the principal amount thereof being redeemed plus
accrued interest to the redemption date if, on the thirtieth (30th) Business Day
prior to the Letter of Credit Termination Date, the Trustee shall not have
received a Substitute Letter of Credit which will be effective on or before the
Letter of Credit Termination Date.
The Bonds are also subject to mandatory redemption, in whole or in part, on any
Interest Payment Date, at a redemption price equal to one hundred percent (100%)
of the principal amount thereof being redeemed plus accrued interest to the
redemption date, if any proceeds of the sale of the Bonds remain on deposit in
the Project Fund established under the Indenture upon completion of the Project,
under the conditions specified therein.
If less than all the Bonds are to be redeemed, the particular Bonds or portions
thereof to be redeemed shall be selected by the Trustee at random or in such
other manner as the Trustee in its discretion shall deem fair and appropriate.
Mandatory Sinking Fund Redemption
The Bonds are subject to mandatory redemption on the Interest Payment Date
occurring in the month of May in each of the years set forth below commencing on
the Interest Payment Date occurring in June (each, a "Mandatory Sinking Account
Payment Date"), at a redemption price equal to 100% of the principal amount
thereof plus accrued interest as follows:
BONDS
Mandatory Sinking
Year Account Payments
1999 $125,000.00
2000 $120,000.00
2001 $125,000.00
2002 $130,000.00
2003 $140,000.00
2004 $150,000.00
2005 $155,000.00
2006 $165,000.00
2007 $175,000.00
2008 $185,000.00
2009 $195,000.00
2010 $205,000.00
2011 $220,000.00
2012 $230,000.00
*2013 $245,000.00
*Final maturity
In the event of any of the Bonds or portions thereof are called for redemption
as aforesaid, notice of the call for redemption, identifying the Bonds or
portions thereof to be redeemed and the redemption price (including the premium,
if any), shall be given by the Trustee by mailing a copy of the redemption
notice by first-class mail at least (i) ten (10) days prior to the date fixed
for redemption in the event of a mandatory redemption because the Trustee shall
not have received a Substitute Letter of Credit effective on or before the
Letter of Credit Termination Date, and (ii) thirty (30) days but not more than
sixty (60) days prior to the date fixed for redemption in all other instances to
the Owner of each Bond to be redeemed in whole or in part at the address shown
on the registration books. Any notice mailed as provided above shall be
conclusively presumed to have been duly given, whether or not the Owner receives
the notice. No further interest shall accrue on the principal of any Bond called
for redemption after the redemption date if Available Moneys (as defined in the
Indenture) sufficient for such redemption have been deposited with the Trustee.
Mandatory Tender
The Bonds are subject to mandatory tender in whole on the effective date of any
Substitute Letter of Credit provided by a Substitute Bank (as defined in the
Indenture), at a purchase price equal to 100% of the principal amount thereof,
plus accrued interest to the purchase date.
In the event of a mandatory tender, notice of such tender shall be given by the
Trustee by delivering or mailing by first-class mail a copy of such notice at
least twenty (20) days but not more than thirty (30) days prior to the date of
such tender to the Owner of each Bond at the address shown on the registration
books.
The Bonds are issued pursuant to and in full compliance with the Constitution
and laws of the Commonwealth of Pennsylvania, and by appropriate action duly
taken by the Company which authorizes the execution and delivery of the
Indenture.
The Owner of this Bond shall have no right to enforce the provisions of the
Indenture or to institute action to enforce the covenants therein, or to take
any action with respect to any default under the Indenture, or to institute,
appear in or defend any suit or other proceedings with respect thereto, unless
certain circumstances described in the Indenture shall have occurred. In certain
events, on the conditions, in the manner and with the effect set forth in the
Indenture, the principal of all the Bonds issued under the Indenture and then
outstanding may become or may be declared due and payable before the stated
maturity thereof together with interest accrued thereon.
The Indenture permits with certain exceptions as therein provided, the amendment
thereof and the modifications of the rights and obligations of the Company and
the rights of the Owners of the Bonds at any time by the Company with the
consent of the Bank and the Holders of all Bonds at the time Outstanding. Any
such consent or any waiver by the Bank and the Holders of all Bonds at the time
Outstanding shall be conclusive and binding upon the Owner and upon all future
Owners of this Bond and of any Bond issued in replacement hereof whether or not
notation of such consent or waiver is made upon this Bond. The Indenture also
contains provisions which, subject to certain conditions, permit or require the
Trustee to waive certain past defaults under the Indenture and their
consequences. It is hereby certified, recited and declared that all acts,
conditions and things required to exist, happen and be performed precedent to
and in connection with the execution and delivery of the Indenture and the
issuance of this Bond do exist, have happened and have been performed in due
time, form and manner as required by law.
This Bond shall not be valid or become obligatory for any purpose or be entitled
to any security or benefit under the Indenture until the certificate of
authentication hereon shall have been signed by the Trustee or the Tender Agent,
as authenticating agent.
IN WITNESS WHEREOF, Piercing Pagoda, Inc. has caused this Bond to be signed in
its name and on its behalf by the manual or facsimile signature of its President
and its corporate seal to be affixed, imprinted or reproduced hereon and
attested by the manual or facsimile signature of its Secretary, all as of the
Date of Issuance.
Attest: PIERCING PAGODA, INC.
- -------------------------- -----------------------------
Secretary President
[SEAL]
(Form of Certificate of Authentication)
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds of the issue described in the within-mentioned
Trust Indenture.
Dauphin Deposit Bank and
Trust Company, as Trustee
By:
Authorized Signature
Date of Authentication: April 29, 1998
(Form of Transfer)
FOR VALUE RECEIVED, ____________ , the undersigned, hereby sells, assigns and
transfers unto _______________(Tax Identification or Social Security No.
_____________) the within Bond and all rights thereunder, and hereby irrevocably
constitutes and appoints ____________________________attorney to transfer the
within Bond on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: ___________________ ______________________________
NOTICE: Signature must be NOTICE: The signature to this guaranteed by an
approved assignment must correspond with the eligible guarantor name as it
appears upon the face of institution, an the within Bond in every particular
institution which is a without alteration or enlargement participant in a
Securities or any change whatsoever. Transfer Association recognized signature
guarantee program.
EXHIBIT C
PROJECT FUND REQUISITION
FORM OF
PROJECT FUND REQUISITION
April 29, 1998
Dauphin Deposit Bank and Trust Company
213 Market Street
Harrisburg, PA 17101
CoreStates Bank, N.A.
600 Penn Street, Third Floor North
Reading, PA 19102
Ladies and Gentlemen:
I hereby requisition pursuant to Section 6.06 of the Trust Indenture dated as of
April 29, 1998 (the "Indenture") by and between Piercing Pagoda, Inc. (the
"Company") and CoreStates Securities, Corp, as Trustee, and Section 4.04 of the
Reimbursement Agreement dated as of April 29, 1998 (the "Reimbursement
Agreement") by and between the Company and CoreStates Bank, N.A. (the "Bank"),
the sum of $ from the Project Fund to be paid as described below:
I hereby certify that (a) such obligation has been incurred by the Company in
connection with the Project, as defined in the Indenture, (b) each item is a
proper charge against the Project Fund, (c) such obligation has not been the
basis for a prior requisition which has been paid, (d) no written notice of any
lien, right to lien or attachment upon, or claim affecting the right to receive
payment of, any of the moneys payable under the requisition above has been
received, (e) no material adverse change has occurred in the condition of the
Company, financial or otherwise, since the date of the Reimbursement Agreement,
(f) the payment of such requisition will not violate any prohibitions or
requirements relating to the use of proceeds set forth in the Indenture, (g) the
Company has complied fully with all provisions of the Reimbursement Agreement
and all representations and warranties made by the Company in the Reimbursement
Agreement and the other Reimbursement Documents (as such term is defined in the
Reimbursement Agreement) are true and correct on and as of the date hereof, (h)
all conditions precedent to the issuance of the Letter of Credit (as such term
is defined in the Reimbursement Agreement) and to disbursement in Sections 4.01,
4.02, 4.03 and 4.04 of the Reimbursement Agreement have been satisfied, (i) no
Event of Default, as defined in the Indenture, or event which after notice or
lapse of time or both would constitute an Event of Default thereunder, has
occurred and not been waived or cured, and no Event of Default or Potential
Event of Default as defined in the Reimbursement Agreement, has occurred
and is continuing or shall result from the funding of the
disbursement requisitioned hereby.
The Company further certifies that the contractors listed below have delivered
certain requests for payment on AIA Forms 702 and 703 which are attached hereto
for review and approval by the Bank:
Name of Payee Amount of Request Amount of Retainage
Other Project expenses included in this Request for Disbursement are as follows:
Name of Payee Amount of Request Purpose
PIERCING PAGODA, INC.
Chief Financial Officer
NOTE: THIS REQUISITION IS NOT COMPLETE AND IS NOT TO BE PAID
UNTIL THE APPROVAL OF THE BANK IS RECEIVED.
BANK APPROVAL
CoreStates Bank, N.A., issuer of the Letter of Credit, hereby
approves the Company's Requisition No. .
CORESTATES BANK, N.A.
Vice President
Dated: April 29, 1998
LETTER OF REPRESENTATIONS
[To be completed by Issuer, Remarketing Agent,
Tender Agent, Paying Agent, and Trustee]
Piercing Pagoda, Inc.
[Name of Issuer]
CoreStates Securities, Corp
[Name of Remarketing Agent]
Dauphin Deposit Bank and Trust Company
[Name of Tender Agent]
Dauphin Deposit Bank and Trust Company
[Name of Paying Agent]
Dauphin Deposit Bank and Trust Company
[Name of Trustee]
April 29,1998
Date
Attention: Underwriting Department
The Depository Trust Company
55 Water Street, 50th Floor
New York, NY 10041-0099
Re: $2,565,000 Piercing Pagoda, Inc.
Taxable Variable Rate Demand/Fixed Rate Bonds
Series of 1998 720773AA8
(Issuer Description) (CUSIP)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"). The Securities will
be issued pursuant to a trust indenture, bond resolution, or other such document
authorizing the issuance of the Securities dated April 29, 1998 (the
"Document"). CoreStates Securities, Corp ("Underwriter") is distributing the
Securities through The Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for
deposit
at DTC, and to act in accordance with its Rules with respect to the Securities,
Issuer, Remarketing Agent, Tender Agent, Paying Agent, and Trustee make the
following representations to DTC:
1. Prior to closing on the Securities on April 29, 1998, there shall be
deposited with DTC one Security certificate registered in the name of DTC's
nominee, Cede & Co., for each stated maturity of the Securities, the total of
which represents 100% of the principal amount of such Securities. If, however,
the aggregate principal amount of any maturity exceeds $150 million, one
certificate will be issued with respect to each $150 million of principal amount
and an additional certificate will be issued with respect to any remaining
principal amount. Each Security certificate shall bear the following legend:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
2. In the event of any solicitation of consents from or voting by holders of the
Securities, Trustee or Issuer shall establish a record date for such purposes
(with no provision for revocation of consents or votes by subsequent holders,
and shall, to the extent possible, send notice of such record date to DTC not
less than 15 calendar days in advance of such record date. If delivered by hand
or sent by mail or overnight delivery, such notice shall be sent to:
Supervisor; Proxy
Reorganization Department
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 1OOO4-2695
If sent by telecopy, such notice shall be sent to (212) 709-6896 or (212)
709-6897. Trustee or Issuer shall confirm DTC's receipt of such telecopy by
telephoning (212) 709-6870.
3. In the event of a redemption or any other similar transaction resulting in
the retirement of all Securities outstanding or a reduction in the aggregate
principal amount of Securities outstanding ("full or partial redemption",
Trustee or Issuer shall send DTC a notice of such event not less than 30 days
nor more than 60 days prior to the redemption date or, in the case of an advance
refunding of all or part of the Securities outstanding, the date that the
proceeds are deposited in escrow.
In the event of a partial redemption of the outstanding Securities, Trustee or
Issuer shall send a notice to DTC specifying: (a) the amount of the redemption;
(b) the date such notice is to be mailed to beneficial owners or published (the
"Publication Date"); and (c) whether any concurrent optional tender privilege is
available. Such notice shall be sent to DTC by a secure means (e.g. legible
telecopy, registered or certified mail, overnight delivery,) in a timely manner
designed to assure that such notice is in DTC's possession no later than the
close of business two business days before the Publication Date. Trustee or
Issuer shall forward such notice either in a separate secure transmission for
each CUSIP number or in a secure transmission for multiple CUSIP numbers if
applicable), which shall include a manifest or list of each CUSIP number
submitted in that transmission. The Publication Date shall be not less than 30
days nor more than 60 days prior to the redemption date.
Notices to DTC pursuant to Paragraph 3, if sent by mail or overnight delivery,
shall be sent to:
Supervisor; Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
If sent by telecopy such notices shall be sent to (516) 227-4164 or (516)
227-4190. If Trustee or Issuer does not receive a telecopy receipt from DTC
confirming that the notice has been received, it should telephone (516)
227-4070.
In the event that certain Securities are not subject to a partial redemption,
DTC will exclude such Securities from its redemption procedures if such
exclusion is requested as follows. Such request shall be in writing and shall
contain: (a) certification by Trustee or Issuer that the principal amount of
such Securities is not subject to the partial redemption and certification by a
custodian/DTC Participant that the Participant's position on DTC's records
includes such Securities; and (b) certification by Trustee or Issuer that the
election to exclude such Securities from the partial redemption is authorized
under the Document. Such request shall be sent to DTC's Call Notification
Department in the manner indicated above to assure that such request is in DTC's
possession no later than the close of business two business days before the
Publication Date of the partial redemption notice.
4. For so long as the Securities have an adjustable rate of interest,
Remarketing Agent shall deliver to DTC by hand or by
telecopy, before the close of business on the final rate determination date
preceding each interest payment date?, a written notice containing the following
information:
(a) "Today's" date (the final rate determination date);
(b) Security CUSIP number;
(c) Security description;
(d) Interest record date;
(e) Interest payment date;
(f) Amount of the interest payment expressed in whole and fractional
dollars per S1,000 of Security face amount;
(g) Whether interest accrues record date to record date or payment date
to payment date; and
(h) The name, telephone number, and address of Remarketing Agent person
responsible for determining (f) and (g)
above.
The name, telephone number, telecopy number (if available), and address of
Remarketing Agent person initially responsible for determining (f) and (g) above
at the time of issuance of the securities will be:
Angel L. Helm, Managing Director
CoreStates Securities, Corp
600 Penn Street, Second Floor South
Reading, PA 19602
Telephone: (610) 655-3366 Fax: (610) 655-0934
If delivered by hand, such notice shall be sent to:
Manager; VRDO Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
- ------------------------------------
?The final rate determination date for each interest payment shall occur not
less than two business day prior to the interest payment date. If sent by
telecopy, such notice shall be sent to (212) 709-1723 or (212) 709-1686.
Remarketing Agent shall confirm DTC's receipt of such telecopy by telephoning
(212) 709-1178.
If the interest payment date is a moving calendar day (such as the first
Wednesday or fifth business day of each month), or if optional tenders of
Securities are made daily following same day notice, Remarketing Agent shall
send a copy of such notice to a service bureau designated by DTC, by hand or by
telecopy before the close of business on the final rate determination date
preceding each interest payment date. Such notice initially shall be sent to:
Attention: Ms. Jennifer Haynes
Municipal Market Data
155 Federal Street; 4th Floor
Boston, MA 02110-1715
If sent by telecopy, such notice shall be sent to (617) 426-8068. Remarketing
Agent shall confirm Municipal Market Data's receipt of such telecopy by
telephoning (617) 542-2277.
In order to enable DTC to confirm independently the interest payment information
provided by Remarketing Agent, Trustee shall deliver to DTC by noon ET on the
business day next following the final rate determination date a written notice
containing the following information:
(a) "Today's" date (the business day next following the final rate determination
date);
(b) Security CUSIP number;
(c) Security description:
(d) Interest record date:
(e) Interest payment date:
(f) Amount of the interest payment expressed in whole and fractional dollars per
$1,000 of Security face amount; and
(g) The name, telephone number, telecopy number (if available), and address of
Trustee person responsible for determining (f) above.
The name, telephone number, telecopy number (if available), and address of
Trustee person initially responsible for determining (f)
above at the time of issuance of the Securities will be:
Bernard V. Kelly, Jr.
Dauphin Deposit Bank and Trust Company
213 Market Street
Harrisburg, PA 17101
Telephone: (717) 255-2121 Fax: (717) 231-2615
Such notice shall be sent to Manager, VRDO Announcements, Dividend Department as
indicated above.
If the interest payment date is a moving calendar day (such as the first
Wednesday or fifth business day of each month), or if optional tenders of
Securities are made daily following same-day notice, Trustee shall send a copy
of such notice to a service bureau designated by DTC, by hand or by telecopy by
noon ET on the business day next following the final rate determination date.
Such notice initially shall be sent to Municipal Market Data in the manner
indicated earlier in this Paragraph.
5. Transactions in the Securities shall be eligible for same-day (Federal) funds
settlement in DTC's Same-Day Funds Settlement ("SDFS") system. For so long as
the Securities are Eligible Securities in the SDFS system ("SDFS Securities"):
A. Interest payments shall be received by Cede & Co., as nominee of DTC, or its
registered assigns in same-day funds on each payment date (or the equivalent in
accordance with existing arrangements between Paying Agent and DTC). Such
payments shall be made payable to the order of Cede & Co. Absent any other
existing arrangements, such payments shall be addressed as follows:
Manager; Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York, NY 10004-2695
B. Principal payments shall be received by Cede & Co., as nominee of DTC, or its
registered assigns in same-day funds on each payment date in the manner set
forth in the SDFS Paying Agent Operating Procedures (a copy of which has
previously been furnished to Paying Agent). Such payments shall be sent to DTC
in time to be credited to DTC's account at the Federal Reserve Bank of New York
("FRBNY") no later than 10:00 a.m. (Paying Agent's local time) on the payment
date or as soon as possible thereafter following Paying Agent's receipt of funds
from Issuer. It is understood that unless DTC receives such
payments in its FRBNY account by 2:00 p.m. (Eastern Time), it may be unable to
distribute such payments that same day.
The name, telephone number, telecopy number (if available), and address of
Paying Agent person initially responsible for arranging such payments to DTC
will be:
Bernard V. Kelly, Jr.
Dauphin Deposit Bank and Trust Company
213 Market Street
Harrisburg, PA 17101
Telephone: (717) 255-2121 Fax: (717) 231-2615
6. In the event that transactions in the Securities become eligible for next-day
(Clearinghouse) funds settlement in DTC's Next-Day Funds Settlement "NDFS")
system, and for so long as the Securities are Eligible Securities in the NDFS
system ("NDFS Securities"):
A. Interest payments shall be received by Cede & Co., a nominee of DTC, or its
registered assigns, in next- day funds on each payment date (or the equivalent
in accordance with existing arrangements between Paying Agent and DTC). Such
payments shall be made payable to the order of Cede & Co. Absent any other
existing arrangements, such payments shall be addressed as follows:
Manager; Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York, NY 10004-2695
B. Principal payments shall be received by Cede & Co., as nominee of DTC, or its
registered assigns, in next-day funds on each payment date (or the equivalent in
accordance with existing arrangements between Paying Agent and DTC). Such
payments shall be made payable to the order of Cede & Co., and shall be
addressed as follows:
Collection Supervisor; Redemptions
Reorganization Department
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
7. It is understood that for so long as optional tenders of the Securities may
be made daily following same day or seven day
notice, such tenders will be effected by means of DTC's Deliver Order
Procedures. DTC shall have no responsibility to distribute notices regarding
such optional tenders, or to ascertain whether any such tender has been made.
Except as otherwise provided herein, and in accordance with DTC's procedures for
exercise of voting and consenting rights, the parties hereto acknowledge that so
long as Cede & Co. is the sole record owner of the Securities it shall be
entitled to all voting rights applicable to the Securities and to receive the
full amount of all distributions payable with respect to the Securities. The
parties acknowledge that DTC shall treat any DTC Participant ("Participant")
having Securities credited to its DTC accounts as entitled to the full benefits
of ownership of such Securities even if the credits of Securities to the DTC
accounts of such Participant result from failures to deliver Securities or
improper deliveries of Securities by an owner of Securities subject to tender
for purchase. Without limiting the generality of the preceding sentence, the
parties acknowledge that DTC shall treat any Participant having Securities
created to its DTC accounts as entitled to receive distributions and voting
rights, if any, with respect to the Securities and to receive certificates
evidencing Securities if such certificates are to be issued in accordance with
Paragraphs 12 or 13 hereof. (The treatment by DTC of the effects of the
crediting by it of Securities to the accounts of Participants described in the
preceding two sentences shall not affect the rights of the parties hereto
against any Participant.)
8. It is understood that for so long as optional tenders of the Securities may
be made less frequently, than daily following same day or seven day notice
(e.g., during a monthly, quarterly, semiannual, or annual tender period) and
Cede & Co., as nominee of DTC, or its registered assigns as the record owner of
Securities, is entitled to tender the Securities, such tenders will be effected
by means of DTC's Repayment Option Procedures. Under the Repayment Option
Procedures, DTC will receive during the applicable tender period instructions
from its Participants to tender Securities for purchase. The undersigned agree
that such tenders for purchase may be made by DTC by means of a book entry
credit of such Securities to the account of Tender Agent, provided that such
credit is made on or before the final day of the applicable tender period, DTC
agrees that, promptly after the recording of any such book entry credit, it will
provide to Tender Agent an Agent Put Daily Activity Report in accordance with
the Repayment Option Procedures, identifying the Securities and the aggregate
principal amount thereof as to which such tenders for purchase have been made.
Trustee or Issuer shall send a notice to DTC regarding such optional tenders of
Securities by hand or by a secure means, e.g., legible telecopy, registered or
certified mail, overnight delivery) in a timely manner designed to assure that
such notice is in DTC's possession no later than the close of business two
business days before the Publication Date. The Publication Date shall be not
less
than 15 days prior to the start of the applicable tender period. Such notice
shall state whether any partial redemption of the Securities is scheduled to
occur during the applicable optional tender period.
If delivered by hand or sent by mail or overnight delivery, such notice shall be
sent to:
Supervisor; Put Bond Unit
Reorganization Department
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 1OOO4-2695
If sent by telecopy, such notice shall be sent to (212) 709-1093 or (212)
709-1094. Trustee or Issuer shall confirm DTC's receipt of such telecopy by
telephoning (212) 709-1470.
For so long as the Securities are SDFS Securities, principal payments (plus
accrued interest, if any) as the result of optional tenders for purchase
effected by means of DTC's Repayment Option Procedures shall be received by DTC
on each purchase date in same-day funds in the manner set forth in the SDFS
Paying Agent Operating Procedures. Such payments shall be sent in time to be
credited to DTC's account at the FRBNY no later than 10:00 a.m. (Paying Agent's
local time) on the purchase date or as soon as possible thereafter following
Paying Agent's receipt of funds from Issuer. It is understood that; (a) until
DTC receives such payments in its FRBNY account, the optionally tendered
Securities will remain in Tender Agent's DTC account: and (b) unless DTC
receives such payments in its FRBNY account by 2:00 p.m. (Eastern Time), it may
be unable to distribute such payments to DTC Participants nor release the
Securities to the Remarketing Agent that same day.
The name, telephone number, telecopy number (if available), and address of
Tender Agent person initially responsible for arranging such payments to DTC
will be:
Bernard V. Kelly, Jr.
Dauphin Deposit Bank and Trust Company
213 Market Street
Harrisburg, PA 17101
Telephone: (717)255-2121 Fax: (717) 231-2615
For so long as the Securities are NDFS Securities, principal payments (plus
accrued interest, if any) as the result of optional tenders for purchase
effected by means of DTC's Repayment Option Procedures shall be received by Cede
& Co., as nominee of DTC, or its registered assigns, on each purchase date in
next-day funds or the equivalent in accordance with existing arrangements
between Tender Agent and DTC. Such payments shall be made payable to the
order of Cede & Co. and shall be addressed to Supervisor, Put
Bond Unit, Reorganization Department, as indicated above.
9. In the event of a change or proposed change in the interest rate mode of the
Securities from one variable-rate mode to any other variable-rate mode, or to a
fixed-rate mode, Trustee or Issuer shall send a notice to DTC of such event
specifying, as applicable: (a) the name and number of the DTC Participant
account to which mandatorily tendered Securities are to be delivered by DTC on
the purchase date after DTC receives payment for such Securities; and (b) the
first interest payment date under the new mode. Such notice shall be sent to DTC
by a secure means (e.g. legible telecopy, registered or certified mail,
overnight delivery) in a timely manner designed to assure that such notice is in
DTC's possession no later than the close of business two business days before
the Publication Date. The Publication Date shall be not less than 15 days prior
to the expiration date of the period provided for security owner elections to
retain Securities as discussed in paragraph 10. If delivered by hand or sent by
mail or overnight delivery, such notice shall be sent to both:
Manager; VRDO Eligibility Section Supervisor; Put Bond Unit
Underwriting Department Reorganization Department
The Depository Trust Company The Depository Trust Company
55 Water Street, 50th Floor 7 Hanover Square, 23rd
Floor
New York, NY 10041-0099 New York, NY 10004-2695
If sent by telecopy, such notice shall be sent to both:
Trustee or Issuer shall confirm DTC's receipt of such telecopy by telephoning
the Underwriting Department at (212) 709-3731 and the Reorganization Department
at (212) 709-1470. All other notices regarding the interest rate on the
Securities (before and after any change in the interest rate mode) shall be
delivered to Manager, VRDO Announcements, Dividend Department, as indicated in
Paragraph 4.
10. In the event of expiration or substitution of a facility supporting the
Securities (such as a letter of credit) or non-reinstatement of the amount
available to pay interest on the Securities pursuant to such a facility Trustee
or Issuer shall send a notice to DTC of such event specifying, as applicable,
the name and number of the DTC Participant account to which mandatorily tendered
Securities are to be delivered by DTC on the purchase date
after DTC receives payment for such Securities. Such notice shall be sent to DTC
by a secure means (e.g., legible telecopy, registered or certified mail,
overnight delivery in a timely manner designed to assure that such notice is in
DTC's possession no later than the close of business two business days before
the Publication Date or, as applicable, immediately after Trustee receives
notice that the Securities are subject to acceleration. The Publication Date
shall be not less than 15 days prior to the expiration date of the period
provided for security over elections to retain Securities as discussed in
paragraph 10. Such notice shall be sent to Supervisor, Put Bond Unit,
Reorganization Department, as indicated in Paragraph 7.
11. Where the Document provides that the Securities are subject to mandatory
tender except with respect to security owner elections to retain Securities, it
is understood that DTC will use its Repayment Option Procedures to process such
elections. Under the Repayment Option Procedures, DTC will receive instructions
during the applicable election period from Participants to retain Securities.
DTC, on behalf of such Participants, will notify Tender Agent of the aggregate
principal amount of Securities that will not be tendered and will be retained.
If the mandatorily tendered Securities are to be replaced with two or more
issues of Securities the "Replacement Securities"), Tender Agent shall be
responsible for allocating specific Replacement Securities by CUSIP number to
the Participants that elected to retain Securities.
In cases in which prior to a mandatory tender, certain Securities are not
subject to such mandatory tender, if requested as follows DTC will exclude such
Securities from its mandatory tender procedures. Such request shall be in
writing and shall contain: (a) certification by Trustee or Issuer that the
principal amount of such Securities is not subject to the mandatory tender and
certification by a custodian/Participant that the Participant's position on
DTC's records includes such Securities; and (b) certification by Trustee or
Issuer that the election to exclude such Securities from the mandatory tender is
authorized under the Document. Such request shall be sent to Supervisor, Put
Bond Unit, Reorganization Department, in the manner indicated in Paragraph 7 to
assure that such request is in DTC's possession no later than the close of
business two business days before the Publication Date of the mandatory tender
notice.
For so long as the Securities are SDFS Securities, principal payments (plus
accrued interest, if any) as the result of mandatory tenders for purchase
(including mandatory tenders upon change in the interest rate mode of the
Securities, or upon expiration, substitution, or non-reinstatement of a facility
supporting the Securities) shall be received by DTC on the purchase date in same
day funds in the manner set forth in Paragraph 7.
For so long as the Securities are NDFS Securities, such principal payments shall
be received by DTC on the purchase date in next-day funds in the manner set
forth in Paragraph 7.
12. In the event of a redemption, acceleration, or any other similar transaction
e.g., tenders made and accepted in response to Trustee's or Issuer's invitation
to tender) necessitating a reduction in aggregate principal amount of Securities
outstanding or an advance refunding of part of the Securities outstanding, DTC,
in its discretion; a) may request Trustee or Issuer to issue and authenticate a
new Securities certificate; or (b) may make an appropriate notation on the
Security certificate indicating the date and amounts of such reduction in
principal except in the case of final maturity in which case the certificate
must be presented to Trustee prior to payment. In the event of an advance
refunding of part of the Securities outstanding, Trustee or Issuer shall obtain
a CUSIP number from the CUSIP Service Bureau and issue and authenticate a new
Security certificate for the refunded Securities.
13. In the event that Issuer determines that beneficial owners of Securities
shall be able to obtain certificated Securities, Trustee or Issuer shall notify
DTC of the availability of Security certificates. In such event, Issuer or
Trustee shall issue, transfer, and exchange Security certificates in appropriate
amounts, as required by DTC and others.
14. DTC may discontinue providing its services as securities depository with
respect to the Securities at any time by giving reasonable notice to Trustee or
Issuer (at which time DTC will confirm with Trustee or Issuer the aggregate
principal amount of Securities outstanding). Under such circumstances, at DTC's
request Trustee or Issuer shall cooperate fully with DTC by taking appropriate
action to make available one or more separate certificates evidencing Securities
to any Participant having Securities credited to its DTC accounts.
15. Nothing herein shall be deemed to require Paying Agent to advance funds on
behalf of Issuer.
16. All notices and payment advances sent to DTC shall contain the CUSIP number
of Securities.
17. DTC may direct Issuer, Remarketing Agent, Tender Agent, Paying Agent, or
Trustee to use any other telephone number or address as the number or address to
which notices or payments of interest or principal may be sent.
18. Issuer, Remarketing Agent, Tender Agent, Paying Agent, or Trustee sending
notices or requests to DTC shall have a method to verify subsequently the use of
the means to deliver such notices and requests to DTC, and timeliness of receipt
of them by DTC.
19. Issuer: (a) understands that DTC has no obligation to and will not,
communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither Participants nor any person having an interest in the
Securities shall be deemed to have notice of the provisions of the Security
certificate(s) by virtue of submission of such certificate(s) to DTC.
Note:
Schedule A contains statements that DTC believes accurately describe DTC, the
method of effecting book-entry transfers of securities distributed through DTC
and certain related matters.
Very truly yours,
Piercing Pagoda, Inc.
(Issuer)
By:
CoreStates Securities, Corp Dauphin Deposit Bank and Trust
(Remarketing Agent) Company
(Tender Agent)
By: By:
Dauphin Deposit Bank and Trust Dauphin Deposit Bank and Trust
Company
Company (Paying Agent)
(Trustee)
By: By:
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:
SCHEDULE A
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
(Prepared by DTC--bracketed material may be applicable only
to certain Issues)
1. The Depository Trust Company ("DTC"), New York, NY, will act as securities
depository for the securities (the "Securities"). The Securities will be issued
as fully-registered securities registered in the name of Dede & Co. (DTC's
partnership nominee). One fully-registered Security certificate will be issued
for [each issue of] the Securities, [each] in the aggregate principal amount of
such issue, and will be deposited with DTC. [If, however, the aggregate
principal amount of [any] issue exceeds $150 million, one certificate will be
issued with respect to each $150 million of principal amount and an additional
certificate will be issued with respect to any remaining principal amount of
such issue.]
2. DTC is a limited-purpose trust company organized under the New York Banking
Law, a banking organization within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a clearing corporation within the meaning
of the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934. DTC holds securities that its participants ("Participants") deposit with
DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securitIes through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on DTC's
records. The ownership Interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership Interests in Securities,
except in the event that use of the book-entry system for the Securities is
discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Participants
with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The
deposit of Securities with DTC and their registration in the name of Cede & Co.
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Securities; DTC's records reflect only the identify of
the Direct Participants to whose accounts such Securities are credited, which
may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
6. Redemption notices shall be sent to Cede & Co. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such issue to be
redeemed.
7. Neither DTC nor Cede & Co. will consent or vote with respect to Securities.
Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
8. Principal and interest payments on the Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in Street name, and will be the
responsibility of such Participant and not of DTC, the Agent, or the issuer,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to DTC is the responsibility of
the Issuer or the Agent, disbursement of such payments to Direct Participants
shall be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to the [Tender/Remarketing]
Agent, and shall effect delivery of such Securities by causing the Direct
Participant to transfer the Participant's interest in the Securities, on DTC's
records, to the [Tender/Remarketing] Agent. The requirement for physical
delivery of Securities in connection with a demand for purchase or a mandatory
purchase will be deemed satisfied when the ownership rights in the Securities
are transferred by Direct Participants on DTC's records.
10. DTC may discontinue providing its services as securities depository with
respect to the Securities at any time by giving reasonable notice to the Issuer
or the Agent. Under such circumstances, in the event that a successor securities
depository is not obtained, Security certificates are required to be printed and
delivered.
11. The Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuer believes to be reliable, but the
Issuer takes no responsibility for the accuracy thereof.
Principal and Income Payments Rider
1. This Rider supersedes any contradictory language set forth in the Letter of
Representations to which it is appended.
2. With respect to payments in the Securities:
A. Issuer or Agent shall provide notice to a standard interest and dividend
announcement service subscribed to by DTC. In the event that no such service
exists, Issuer or Agent shall provide such notice directly to DTC
electronically, as previously arranged by Issuer or Agent and DTC. If electronic
transmission has not been arranged, absent any other arrangements between Issuer
or Agent and DTC, such notice shall be sent by telecopy to DTC's Dividend
Department at (212) 709-1723 or (212) 709-1686, and receipt of such notices
shall be confirmed by telephoning (212) 709-1270. Notices to DTC pursuant to the
above by mail or any other means shall be sent to:
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 22nd Floor
New York, NY 10004-2695
B. Issuer or Agent shall provide DTC, no later than noon (Eastern Time) on each
periodic interest, principal or dividend payment date, a written notice of
payment information containing the Security CUSIP numbers for which payment will
be sent, as well as the dollar amount of payment.
C. Dividends, interest payments, and principal payments that are part of
periodic principal-and-interest payments shall be received by Cede & Co., as
nominee of DTC, or its registered assigns, in same-day funds no later than 2:30
p.m. (Eastern Time) on each payment date. Absent any other arrangements between
Issuer or Agent and DTC, such funds shall be wired as follows:
The Chase Manhattan Bank ABA # 021 000 021 For credit to a/c Cede & Co.
c/o The Depository Trust Company
Dividend Deposit Account # 066-026776
D. Maturity and redemption payments with CUSIP-level detail shall be received by
Cede & Co., as nominee of DTC, or its registered assigns, in same-day funds by
2:30 p.m. (Eastern Time) on the payable date. Absent any other
arrangements between Issuer or Agent and DTC, such funds shall be wired as
follows:
The Chase Manhattan Bank ABA # 021 000 021 For credit to a/c Cede & Co.
c/o The Depository Trust Company
Redemption Deposit Account # 066-027306
E. Principal payments (plus accrued interest, if any) as the result of optional
tenders for purchase effected by means of DTC's Repayment Option Procedures
shall be received by Cede & Co., as nominee of DTC, or its registered assigns,
in same-day funds by 2:30 p.m. (Eastern Time) on the first payable date. Absent
any other arrangements between Issuer or Agent and DTC, such funds shall be
wired as follows:
The Chase Manhattan Bank ABA # 021 000 021 For credit to a/c Cede & Co.
c/o The Depository Trust Company
Reorganization Deposit Account # 066-027608
See # 1, Vol II,
Exhibits A & B
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of April 29, 1998,
between PIERCING PAGODA, INC., a Delaware corporation (the "Company" or the
"Pledgor") and CORESTATES BANK, N.A. (the "Bank").
WHEREAS, the Company has issued its $2,565,000 aggregate principal amount
Taxable Variable Rate Demand/Fixed Rate Bonds, Series of 1998 (the "Bonds")
under a Trust Indenture dated as of April 29, 1998 (the "Indenture"), by and
between the Company and Dauphin Deposit Bank and Trust Company, as trustee (the
"Trustee"); and
WHEREAS, Pledgor and the Bank have entered into a Reimbursement Agreement dated
as of April 29, 1998 (the "Reimbursement Agreement"), pursuant to which the Bank
has agreed, subject to the conditions precedent provided in the Reimbursement
Agreement, to issue an irrevocable direct pay letter of credit in favor of the
Trustee (the "Letter of Credit").
NOW, THEREFORE the parties, intending to be legally bound, agree as follows:
1. Defined Terms. As used in this Agreement, the terms defined in the preambles
to this Agreement shall have such meanings and the following terms have the
following meanings.
"Collateral" means all property at any time pledged to the Bank under this
Agreement (whether described in this Agreement or not) and all income therefrom
and proceeds thereof.
"Event of Default" has the meaning given to such term in the
Reimbursement Agreement.
"Obligations" has the meaning given to such term in the
Reimbursement.
"Pledged Bonds" has the meaning given to such term in Section 3
hereof.
"Pledged Bonds Custodian" means Dauphin Deposit Bank and Trust Company (or such
other successor to or substitute) in its capacity as collateral agent for the
Bank.
"Remarketing Agent" has the meaning given to such term in the
Indenture.
"Tender Agent" has the meaning given to such term in the
Indenture.
"Unremarketed Bonds" has the meaning given to such term in the
Indenture.
2. Interpretation. (a) Unless the context otherwise indicates, words expressed
in the singular shall include the plural and vice versa and the use of the
neuter, masculine or feminine gender is for convenience only and shall be deemed
to mean and include the neuter, masculine or feminine gender, as appropriate.
(b) Headings of articles and sections herein are solely for convenience of
reference, do not constitute a part hereof and shall not affect the meaning,
construction or effect hereof.
(c) All references herein to "Articles," "Sections," "Paragraphs" and other
subdivisions are to the corresponding Articles, Sections, Paragraphs or
subdivisions of this Agreement; the words "herein," "hereof," "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section, Paragraph or subdivision hereof.
3. Pledge. The Pledgor hereby pledges, assigns, hypothecates and transfers to
the Bank all of the Pledgor's right, title and interest to the Unremarketed
Bonds delivered from time to time to the Tender Agent by the owners thereof and
grants to the Bank a first lien on, and security interest in, all of its right,
title and interest in and to the Unremarketed Bonds, the interest thereon, and
all proceeds thereof, as collateral security for the prompt and complete payment
by the Pledgor (by acceleration, at stated maturity, or otherwise) of all
amounts payable from time to time by the Pledgor to the Bank in respect of the
Obligations. Unless all amounts drawn under the Letter of Credit with respect to
the payment of the Purchase Price (as defined in the Indenture) of the Bonds
pursuant to mandatory and optional tenders of the Bonds are reimbursed to the
Bank on the same day as such drawings, the Pledgor shall, no later than 5:00
p.m. (New York City time) on the same day, (a) deliver or use its best efforts
to cause to be delivered to the Pledged Bonds Custodian, Unremarketed Bonds in a
principal amount equal to the unreimbursed portion of such drawing (such
Unremarketed Bonds so delivered to and held by the Pledged Bonds Custodian from
time to time to be referred to as the "Pledged Bonds") and (b) give or use its
best efforts to cause to be given to the Bank notice of the number and principal
amount of each such Pledged Bond.
4. Registration of and Interest on Pledged Bonds. Upon delivery to the Pledged
Bonds Custodian, Pledged Bonds shall be registered in the name of the Pledged
Bonds Custodian and shall be duly endorsed for transfer by the Pledged Bonds
Custodian in blank or by appropriate instruments of transfer duly executed in
blank. The Bank may, but shall not be obligated to, request that Pledged Bonds
be registered in its name at any time or from time to time. Any interest on
Pledged Bonds shall be paid to or upon the order of the Bank and shall be
applied as a credit against the Obligations with respect to the related
Principal and Interest Drawings under the Letter of Credit in accordance with
the terms of the Reimbursement Agreement.
5. Release of Pledged Bonds. Upon payment to the Bank of the proceeds of
remarketed Pledged Bonds in an amount sufficient to cover the principal of and
accrued interest, if any, on the Unremarketed Bonds, the Bank shall (i)
reinstate the Letter of Credit to an amount equal to the principal amount of
such Bonds together with an amount equal to forty-five (45) days interest
thereon calculated at an interest rate (based on a 365/366 day year for the
actual number of days elapsed) of seventeen percent (17%) to pay interest on the
Bonds; (ii) notify the Trustee of the amount of such reinstatement; and (iii)
release or instruct the Pledged Bonds Custodian to release Pledged Bonds in a
principal amount equal to the principal amount of such payment to the Bank from
the pledge and security interest created by this Agreement for resale in
accordance with Section 5.01, 5.04 or 5.05 of the Indenture. Such Pledged Bonds
shall be delivered to or upon the order of the Tender Agent only after payment
to the Bank as aforesaid.
6. Redemption of Pledged Bonds. In the event any Pledged Bond is called for
redemption under the Indenture, Pledgor shall use its best efforts to cause the
Pledged Bonds Custodian to take all such actions as shall be required under the
Indenture to effect the redemption and shall pay or cause to be paid the
redemption price to or to the order of the Bank as a credit against the
Obligations.
7. Rights of the Bank. The Bank shall not be liable, except in the case of its
willful misconduct or gross negligence, for failure to collect or realize upon
the Obligations or the Collateral or any part thereof, or for any delay in so
doing, nor shall the Bank be under any obligation to take any action whatsoever
with regard thereto. If an Event of Default has occurred and is continuing, the
Bank, with or without notice, shall have the right to exercise all rights,
privileges or options pertaining to any Pledged Bonds, as if it were the
absolute owner thereof, upon such terms and conditions as it may, in its sole
discretion determine, all without liability except to account to the Pledgor for
property actually received by it. The Bank shall have no duty to exercise any of
the aforesaid rights, privileges or options and shall not be responsible for any
failure to do so or delay in so doing.
8. Remedies. In the event that any portion of the Obligations has been declared
due and payable (upon scheduled maturity, acceleration or otherwise), the Bank,
without demand for performance or other demand, advertisement or notice of any
kind (except the notice specified below of time and place of public or private
sale) to the Pledgor or any other person (all and each of which demands,
advertisements and/or notices are expressly waived by the Pledgor), may
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give an option or options to
purchase, contract to sell, or otherwise dispose of and deliver the Collateral,
or any part thereof, in one or more parcels or portions at public or private
sale or sales, at any exchange, broker's board or at any of the Bank's offices
or elsewhere upon such terms and conditions as it may, in its sole discretion,
deem advisable and at such prices as it may deem best, for cash or on credit or
for future delivery without assumption of any credit risk, with the right to the
Bank, upon any such sale or sales, public or private, to purchase the whole or
any part of the Collateral so sold, free of any right or equity of redemption in
the Pledgor, which right or equity is hereby expressly waived or released by
Pledgor. The net proceeds of any such collection, recovery, receipts,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care, safekeeping,
or otherwise of any and all of the Collateral or in any way relating to the
rights of the Bank under this Agreement, including, but not limited to,
reasonable attorneys' fees and legal expenses, shall be applied first to the
satisfaction of the Obligations in such order as the Bank may elect, the Pledgor
remaining liable for any deficiency remaining unpaid after such application, and
only after so paying over such net proceeds and after the payment by the Bank of
any other amount required by any provision of law, including, without
limitation. Section 9-504(i)(c) of the Uniform Commercial Code of the
Commonwealth of Pennsylvania, need the Bank account for the surplus, if any, to
the Pledgor. The Pledgor agrees that the Bank or the Pledged Bonds Custodian
need not give more than thirty (30) days' notice of the time and place of any
public sale or of the time after which a private sale or other intended
disposition is to take place and that such notice is reasonable notification of
such matters. In addition to the rights and remedies granted to it in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to any of the Obligations, the Bank or the Pledged Bonds Custodian
shall have the authority to exercise all the rights and remedies of a secured
party under the Uniform Commercial Code of the Commonwealth of Pennsylvania.
Notwithstanding anything contained herein to the contrary, the Bank may not
sell, assign, give an option or options to purchase, contract to sell or
otherwise dispose of and deliver the Collateral unless it shall reinstate the
Letter of Credit in full as to principal and interest with respect to such
Bonds, except this shall not apply in the case of a conversion of the Bonds to a
Fixed Rate in accordance with the terms of the Indenture.
9. Representations, Warranties and Covenants of the Pledgor. The Pledgor
represents and warrants that: (a) on the date of delivery to the Bank or the
Pledged Bonds Custodian of any Pledged Bonds, none of the Authority, the
Remarketing Agent, the Tender Agent, the Trustee nor any other person, firm or
corporation (other than the Pledgor or the Bank or the Pledged Bonds Custodian)
will have any right, title or interest in and to the Pledged Bonds; (b) it has,
and on the date of delivery to the Bank or the Pledged Bonds Custodian of any
Pledged Bonds will have, full power, authority and legal right to pledge all of
its right, title and interest in and to the Pledged Bonds pursuant to this
Agreement; (c) the Pledged Bonds and the proceeds thereof, are not subject to
any pledge, lien, mortgage, hypothecation, security interest, charge, option or
encumbrance or to any agreement purporting to grant to any third party a
security interest in the property or assets of the Pledgor which would include
the Pledged Bonds. The Pledgor covenants and agrees that it will defend the
Bank's and the Pledged Bonds Custodian's right, title and security interest in
and to the Pledged Bonds and the proceeds thereof against the claims and demands
of all persons at the Pledgor's sole cost and expense.
10. No Disposition, etc. Except as contemplated in this Agreement, without the
prior written consent of the Bank, the Pledgor agrees that it will not sell,
assign, transfer, exchange or otherwise dispose of or grant any option with
respect to, the Collateral, nor will it create, incur or permit to exist any
pledge, lien, mortgage, hypothecation, security interest, charge, option or any
other encumbrance with respect to any of the Collateral, or any interest
therein, or any proceeds thereof, except for the lien and security interest
provided for by this Agreement and sale of the Pledged Bonds pursuant to Section
5.01, 5.04 or 5.05 of the Indenture.
11. Sale of Collateral. (a) The Pledgor recognizes that the Bank may be unable
to effect a public sale of any or all of the Pledged Bonds by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws, but may be compelled to
resort to one or more private sales thereof to a restricted group of purchasers
who may be obliged to agree, among other things, to acquire such securities for
their own account for investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges and agrees that any such private sale
may result in prices and other terms less favorable to the seller than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner. The Bank shall be under no obligation to delay a sale of any of the
Pledged Bonds for the period of time necessary to permit the Pledgor to register
such securities for public sale under the Securities Act, or under applicable
state securities laws, even if the Pledgor would agree to do so.
(b) The Pledgor further agrees to promptly do or cause to be done all such other
reasonable acts and things as may be necessary to make any sale or sales of all
or any portion of the Pledged Bonds valid and binding and in compliance with any
and all applicable laws, regulations, orders, writs, injunctions, decrees or
awards of any and all courts, arbitrators or governmental instrumentalities,
domestic or foreign, having jurisdiction over any such sale or sales, all at the
Pledgor's cost and expense.
12. Further Assurances. The Pledgor agrees that at any time and from time to
time upon the written request of the Bank or the Pledged Bonds Custodian, the
Pledgor will execute and deliver such further documents and do such further acts
and things as the Bank or the Pledged Bonds Custodian may reasonably request in
order to effect the purposes of this Agreement.
13. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provision of this Agreement, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. No Waiver; Cumulative Remedies. No act, delay or omission of the Bank or the
Pledged Bonds Custodian shall be deemed to be a waiver of any rights or remedies
granted under this Agreement and no waiver shall be valid unless in writing,
signed by the Bank, and then only to the extent set forth in such waiver. A
waiver of any right or remedy under this Agreement on any one occasion shall not
be construed as a bar to any right or remedy which the Bank would otherwise have
on any future occasion. No failure to exercise and no delay in exercising on the
part of the Bank or the Pledged Bonds Custodian any right, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under this Agreement preclude
any other right, power or privilege. The rights and remedies provided in this
Agreement are cumulative and may be exercised singly or concurrently, and are
not exclusive of any rights or remedies provided by law or equity.
15. Waivers, Amendments; Applicable Law. None of the terms or provision of this
Agreement may be waived, altered, modified or amended except by an instrument in
writing, duly executed by the Pledgor and the Bank. This Agreement and all
obligations of the Pledgor under this Agreement shall be binding upon the
successors and assigns of the Pledgor, and shall, together with the rights and
remedies of the Bank or the Pledged Bonds Custodian under this Agreement, inure
to the benefit of the Bank and its successors and assigns.
16. Fees and Expenses of the Pledged Bonds Custodian. The Pledgor agrees that it
will pay or reimburse the Bank for (i) all fees charged and expenses incurred by
the Pledged Bonds Custodian for and in connection with its acting as such for
the purposes of this Agreement and (ii) all costs and other expenses incurred by
the Bank or the Pledged Bonds Custodian in connection with the transfer,
registration or exchange of the Pledged Bonds.
17. Governing Law. This Agreement shall be governed by and be
construed and interpreted in accordance with the laws of the
Commonwealth of Pennsylvania.
18. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be an original and all of which shall constitute but one and the
same instrument.
IN WITNESS WHEREOF, the Pledgor and the Bank have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the day and
year first above written.
Attest: PIERCING PAGODA, INC.
- -------------------------- -----------------------------
Authorized Officer Chief Financial Officer
Attest: CORESTATES BANK, N.A.
- ------------------------- -----------------------------
Authorized Officer Vice President
CORESTATES BANK, N.A.
530 Walnut Street
Philadelphia, PA 19106
Ladies and Gentlemen:
We refer to the Pledge and Security Agreement dated as of April 29, 1998 (the
"Agreement"), between PIERCING PAGODA, INC., a Delaware corporation (the
"Pledgor") and you. All terms used in this letter and not otherwise defined
shall have the meanings given to such terms in the Agreement.
We accept our appointment as Pledged Bonds Custodian under the Agreement and
undertake to hold any Pledged Bonds which the Pledgor shall deliver or cause to
be delivered to us in such capacity as your collateral agent until otherwise
directed by you and to otherwise perform the duties of the Pledged Bonds
Custodian under the Agreement.
The Pledgor by its signature to this letter agrees to indemnify and hold us
harmless against any loss, liability or expense incurred by us without gross
negligence or bad faith on our part and arising out of or in connection with any
of our duties as Pledged Bonds Custodian, including the reasonable costs and
expense of defending ourselves against any claim or liability in connection with
the exercise or performance of any of our powers or duties in such capacity. The
provisions of the preceding sentence shall survive the termination of the
Agreement.
Very truly yours,
DAUPHIN DEPOSIT BANK AND TRUST COMPANY,
By:
Vice President
Acknowledged and AGREED
PIERCING PAGODA, INC.
By:
EXHIBIT A
to UCC-1 Financing Statement
1. A security interest in all of the following:
(a) All right, title and interest of the Debtor in and to all moneys and
securities from time to time held by the Trustee under the terms of that certain
Trust Indenture, dated as of April 29, 1998 (the "Indenture"), by and between
the Debtor and the Secured Party.
(b) Any and all other property rights and interests of every kind and nature
from time to time hereafter by delivery or by writing of any kind granted,
bargained, sold, alienated, demised, released, conveyed, assigned, transferred,
mortgaged, pledged, hypothecated or otherwise subjected to the lien of the
Indenture, as and for additional security therewith, by the Debtor or any other
person on its behalf or with its written consent.
2. Piercing Pagoda, Inc. is the Debtor and Dauphin Deposit Bank
and Trust Company, is the Secured Party in the UCC-I financing
statement to which this Exhibit A is attached.
ASSIGNMENT OF LESSOR'S INTEREST IN LEASES
THIS ASSIGNMENT made as of this 29th day of April, 1998 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Assignment") is between PIERCING PAGODA, INC. ("Assignor"), a Delaware
corporation having its chief executive office at 3910 Adler Place, Lehigh
Valley, Pennsylvania 18002, and CORESTATES BANK, N.A., a national bank with
offices at 600 Penn Street, Reading, Pennsylvania 19603, as administrative agent
for the Lenders (hereinafter defined) under that certain Syndicated Loan
Agreement dated March 27, 1997 (as amended, modified, extended, supplemented,
restated and/or replaced from time to time, the "Syndicated Loan Agreement") by
and among Assignor, the lending institutions from time to time parties thereto
(each a "Lender" and collectively, the "Lenders"), and Assignee, as
administrative agent for itself and the other Lenders and as a Lender (in such
capacity, the "Assignee").
W I T N E S S E T H T H A T:
Pursuant to the terms and subject to the conditions set forth in the
Syndicated Loan Agreement and that certain Reimbursement Agreement dated as of
the date hereof (as amended, modified, extended, supplemented, restated and/or
replaced from time to time, the "Reimbursement Agreement") by and among
Assignor, the Lenders and Assignee, as the administrative agent for itself and
the other Lenders. Assignee, on behalf of each Lender (according to such
Lender's Pro Rata Share [as defined in the Syndicated Loan Agreement]) has
issued for the account of Assignor its irrevocable letter of credit (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
the "Letter of Credit") in an amount equal to Two Million Six Hundred Nineteen
Thousand Nine Hundred Fifty-Four and 25/100 ($2,619,954.25) Dollars to provide
credit enhancement for Assignor's Taxable Variable Rate Demand/Fixed Rate Bonds,
Series of 1998, in the aggregate amount of Two Million Five Hundred Sixty-Five
Thousand ($2,565,000.00) Dollars (as amended, modified, extended, supplemented,
restated and/or replaced from time to time collectively, the "Bonds").
The reimbursement obligation of Assignor to the Lenders is evidenced by
the Letter of Credit and those certain Revolving Loan Notes executed and
delivered by Assignor to the Lenders pursuant to, and as described in, the
Syndicated Loan Agreement. To induce the Lenders, through Assignee as
administrative agent and as issuer of the Letter of Credit, to issue the Letter
of Credit, Assignor is executing and delivering an Open-End Mortgage and
Security Agreement (as amended, modified, extended, supplemented restated and/or
replaced, the "Mortgage") to secure the existing and future debts, liabilities
and obligations of Assignor to the Lenders under the Reimbursement Agreement. As
a future condition to the issuance of the Letter of Credit, and as additional
collateral security for the liabilities and obligations secured by the Mortgage,
Assignee has required the execution and delivery of this Assignment.
NOW, THEREFORE, for value received and intending to be legally bound,
Assignor agrees as follows: 1) As security for the payment of all sums and
performance of all obligations secured by the Mortgage and as security for the
payment and performance of all of Assignor's obligations under the Reimbursement
Agreement, Assignor hereby assigns to Assignee all of its right, title and
interest as lessor in, to and under all leases now or hereafter affecting the
Property, together with all extensions and modifications of any such leases and
all guarantees of lessee's obligations thereunder now or hereafter in force
(said leases, extensions, modifications and guarantees being hereinafter
collectively called the "Lease"). This Assignment includes, without limitation,
the right to receive all rents and other amounts payable under the Lease. Upon
the payment in full of all amounts secured hereby, as evidenced by the recording
or filing of an instrument or instruments of satisfaction or full release of the
Mortgage, this Assignment shall terminate and be of no further force or effect.
2) Assignor represents, warrants and covenants that:
(a) The Lease shall be subordinate in estate, lien, operation and effect to the
Note and the Mortgage.
(b) Assignor has not made and will not make any other
assignment of the Lease.
(c) There are no leases or agreements to lease all or
any part of the Property now in effect.
(d) Assignor will not enter into any leases for all or any part of the Property
without the prior written approval thereof by Assignee. All leases of all or any
part of the Property shall include subordination and attornment provisions
satisfactory to Assignee, and shall be on the form of standard lease approved by
Assignee in writing with no modifications except such modifications as Assignee
may approve in writing prior to the execution and delivery of the respective
lease. No lease of all or any part of the Property shall be materially amended
except any such amendments as Assignee may approve in writing prior to the
execution and delivery of the respective amendments.
(e) Within ninety (90) days after the end of each fiscal year of Assignor,
Assignor will deliver to Assignee an occupancy report stating as of the date of
delivery thereof with respect to each lease of all or any part of the Property
the lessee's name, the date thereof, the premises demised, the term, the rent,
the security deposits, any advance rent payments in excess of one month and any
defaults by the lessee or Assignor in respect thereof.
3) Except as otherwise provided in paragraph 9 hereof, Assignor shall have the
right to collect, but not more than thirty (30) days prior to accrual, all
stated rent and other amounts due to Assignor under the Lease, and to retain,
use and enjoy the same.
4) Assignor will: (a) fulfill or perform every condition and covenant of the
Lease by the lessor to be fulfilled or performed; (b) give to Assignee prompt
notice of the receipt of any notice received by Assignor of a default under the
Lease by Assignor or any lessee, together with a copy of such default notice;
(c) enforce, short of termination of the Lease, the performance or observance of
every covenant and condition of the Lease by any lessee to be performed or
observed; (d) not terminate the Lease or accept a surrender thereof unless
required to do so by the terms of the Lease; (e) not anticipate the rents under
the Lease for more than 30 days prior to accrual; (f) neither waive nor release
any lessee from any obligations or conditions under the Lease; and (g) deliver
to Assignee, upon written demand, a statement specifying the rents and profits
derived or received from the Lease for the period specified in such demand, the
disbursements made for such period and the names of all lessees of the Property,
together with true and correct copies of all leases that have not been delivered
to Assignee previously for which rent is so accounted.
5) Assignor shall, at its sole expense, appear in and defend any action growing
out of or in any manner connected with the Lease or the obligations or
liabilities of the lessor or any lessee or guarantor thereunder.
6) Should Assignor fail to make any payment or to do any act as herein provided,
Assignee may but need not, without notice to or demand on Assignor and without
releasing Assignor from any obligation herein, make or do the same, including
without limitation, appearing in and defending any action purporting to affect
the security hereof or the rights or powers of Assignee, performing any
obligation of the lessor in the Lease contained, and, in exercising any such
powers, paying necessary costs and expenses, including without limitation,
reasonable attorneys' fees. Assignor will pay immediately upon demand all sums
expended by Assignee under the authority hereof, together with interest thereon
at the lower of a rate equal to five percent per annum above the rate of
interest extant under the Note or the highest rate permitted by applicable law,
which sums together with such interest thereon shall be secured hereby.
7) After the occurrence of an Event of Default (as defined in the Reimbursement
Agreement) and so long as an Event of Default is continuing, Assignee, at its
option, without further notice and without regard to the adequacy of the
security for the sums secured hereby, either in person or by agent, with or
without bringing any action or proceeding, may do any one or more of the
following: (a) enter upon, take possession of and operate the Property; (b)
make, enforce, modify and accept the surrender of the Lease or any of them; (c)
obtain and evict lessees; (d) fix and modify rents and other sums payable by any
lessee under the Lease; (e) either with or without taking possession of the
Property, in its own name or in the name of Assignor or both, sue for or
otherwise collect and receive all rents, issues and profits, including those
past due and unpaid, and apply the same, less costs and expenses of operation
and collection, including reasonable attorneys' fees, to the obligations secured
hereby in such order as Assignee may determine; (f) exercise any and all rights
and remedies available to a secured party under the Uniform Commercial Code and
any and all other rights and remedies now or hereafter available at law or in
equity; and (g) do any other acts which Assignee deems proper to protect its
rights hereunder. The net proceeds, if any, received by Assignee from the
Property in excess of the amount necessary to meet all obligations of Assignor
hereunder or secured hereby, including any accelerated indebtedness, shall be
paid over by Assignee to Assignor. The entering upon and taking possession of
the Property, the collection of the rents, issues and profits and the
application thereof as aforesaid, shall not cure or waive any default or waive,
modify or affect any notice of any Event of Default or invalidate any act done
pursuant to such notice. All rights and remedies of Assignee provided herein or
in the Note or the instruments delivered to Assignee in connection with the
Letter of Credit Facility (a) are cumulative and concurrent, (b) may be
exercised independently, successively or together against Assignor or its
properties at the sole discretion of Assignee, (c) shall not be exhausted by any
exercise thereof, but may be exercised as often as occasion therefor may arise,
and (d) shall not be construed to be waived or released by Assignee's delay in
exercising, or failure to exercise, them or any of them at any time it may be
entitled to do so.
8) Without the prior written consent of Assignee, Assignor will not cause or
permit the leasehold estate under the Lease to merge with Assignor's
reversionary or equitable interest in the Property.
9) Assignor hereby authorizes Assignee to give written notice of this Assignment
at any time to the lessee or lessees of all or any part of the Property. All
lessees are hereby authorized and directed to pay rent and other sums payable to
Assignor under the Lease directly to Assignee upon receipt from Assignee of a
statement that there has occurred an Event of Default in respect of the
obligations secured hereby, without any further evidence of such Event of
Default.
10) Assignee shall not be obligated to perform or discharge any obligation under
the Lease, and Assignor hereby agrees to indemnify Assignee against and hold it
harmless from any and all liability, loss or damage which it may incur under the
Lease or under or by reason of this Assignment and of and from any and all
claims and demands whatsoever which may be asserted against it by reason of any
alleged obligation or undertaking on its part to perform or discharge any of the
terms of the Lease.
11) Assignor will, upon Assignee's request, execute and deliver to Assignee or
otherwise obtain for Assignee's benefit such further assignments and other
documents and do or cause to be done such acts or things as Assignee, in its
sole discretion, may require to perfect, protect or continue this Assignment, to
otherwise effect the transactions contemplated hereby or to vest or confirm any
right or remedy herein granted. Assignor will pay all costs of acknowledging,
recording and filing this Assignment and such other documents in such public
offices as Assignee may require.
12) 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 Assignee in order to effect the provisions
hereof. 13) Notices hereunder shall be in writing and shall be delivered by
personal service or shall be sent by postage prepaid, registered mail, return
receipt requested or reputable nationally recognized overnight delivery service,
addressed if to Assignee or Assignor, at the respective address set forth in the
heading of this Assignment, or at such other address as the addressee may
designate in writing. Each notice hereunder shall be deemed given on the date it
is delivered in the case of personal service, or the date it is deposited with
the Postal Service or the overnight delivery service in the case of registered
mail or overnight delivery, respectively.
14) This Assignment shall be governed by and construed according to the
substantive laws of the Commonwealth of Pennsylvania, without regard to its
choice of law principles.
15) This Assignment shall inure to the benefit of the successors and assigns of
Assignee and shall bind Assignor's successors and assigns. If Assignor is more
than one person, this Assignment shall be a joint and several obligation of each
person named herein as "Assignor", and each of such persons shall be deemed to
have made the representations and warranties herein set forth.
IN WITNESS WHEREOF, Assignor has duly executed this Assignment the
day and year first above written.
(CORPORATE SEAL) PIERCING PAGODA, INC.
ATTEST:_______________________ By:______________________________
Name: Name:
Title: Title:
COMMONWEALTH OF PENNSYLVANIA :
: ss.
COUNTY OF _________________________ :
On this _____ day of April, 1998, before me, the subscriber, a Notary
Public in and for the Commonwealth of Pennsylvania, personally appeared
______________ _____________________ who acknowledged himself/herself to be the
_______________ of Piercing Pagoda, Inc., a Delaware corporation, and that
he/she, being authorized to do so, executed the foregoing instrument for the
purposes therein contained by signing the name of the corporation as such
officer.
IN WITNESS WHEREOF, I have hereunto set my hand and notarial seal.
[SEAL]
- ----------------------------------------
Notary Public
My commission expires:
PHIL1\106213-3
- -1-
REIMBURSEMENT AGREEMENT
among
PIERCING PAGODA, INC.
and
CORESTATES BANK, N.A., as Administrative Agent, Co-Agent and a
Lender
and
SUMMIT BANK, as Co-Agent and a Lender
and
FIRST UNION NATIONAL BANK, as a Lender
Dated as of April 29, 1998
Piercing Pagoda, Inc.
Taxable Variable Rate Demand/Fixed Rate Bonds
Series of 1998
REIMBURSEMENT AGREEMENT
This Reimbursement Agreement (as amended, modified, extended,
supplemented, restated and/or replaced from time to time, the "Agreement"),
dated as of April 29, 1998, is by and among Piercing Pagoda, Inc. ("Borrower"),
a Delaware corporation having its chief executive office at 3910 Adler Place,
Bethlehem, Pennsylvania 18016, the financial institutions now or hereafter
parties to this Agreement and their respective successors and assigns (each a
"Lender" and collectively, the "Lenders"), CoreStates Bank, N.A. ("CoreStates"),
a national bank having offices at 600 Penn Street, Reading, Pennsylvania 19603,
Summit Bank ("Summit"), a New Jersey bank having offices at 1 Bethlehem Plaza,
Bethlehem, Pennsylvania 18018, and First Union National Bank ("FUNB"), a
national bank having offices at 702 Hamilton Mall, Allentown, Pennsylvania
18101.
BACKGROUND
A. Pursuant to the terms and subject to the conditions set forth in that certain
Syndicated Loan Agreement dated March 27, 1997 among the parties to this
Agreement (as amended, modified, extended, supplemented, restated and/or
replaced from time to time, the "Syndicated Loan Agreement"), CoreStates and
Summit are co-agents for the Lenders (in such capacity, each an "Agent" and
collectively, the "Agents"), and CoreStates is administrative agent and letter
of credit issuing agent for the Lenders (in such capacity, the "Administrative
Agent").
B. Borrower has authorized and directed the issuance of its $2,565,000.00
aggregate principal amount Taxable Variable Rate Demand/Fixed Rate Bonds, Series
of 1998 (the "Bonds") to finance a project (the "Project") consisting of the
construction of a 70,655 square foot building on 5.3 acres of land in Hanover
Township, Northampton County, Pennsylvania. The Project shall be constructed in
accordance with certain plans and specifications (together with all
modifications thereto approved by Administrative Agent, the "Plans and
Specifications"), copies of which, when prepared, shall be signed by both
Borrower and Administrative Agent for identification purposes and deposited with
Administrative Agent. The Bonds shall issue pursuant to the Trust Indenture,
dated as of April 29, 1998 (the "Indenture"), among Borrower, Dauphin Deposit
Bank and Trust Company, as trustee under the Indenture (with its successors and
assigns, the "Trustee") and Dauphin Deposit Bank and Trust Company, as tender
agent.
C. Under the terms and subject to the conditions set forth in the Syndicated
Loan Agreement, Borrower has requested Administrative Agent, on behalf of each
Lender (according to such Lender's Pro Rata Shares), to issue an irrevocable
letter of credit in the form of Exhibit "A", attached hereto, incorporated
herein by this reference and hereby made a part hereof (as amended, modified,
extended, supplemented, restated and/or replaced from time to time, the "Letter
of Credit") in an amount equal to $2,619,954.25, of which the sum of
$2,565,000.00 shall be in respect of the payment of principal of the Bonds (the
"Principal Component") and $54,954.25 shall be in respect of the payment of a
certain portion of interest accrued on the Bonds on or prior to the stated
maturity of the Bonds (the "Interest Component").
D. The proceeds from the sale of Bonds shall, in accordance with the terms and
subject to the conditions of the Indenture, be deposited with the Trustee from
the Project Fund (as defined in the Indenture), with advances of such proceeds
being made by the Trustee, with the consent of Administrative Agent, which
consent shall not be unreasonably withheld or delayed if the conditions to such
consent as set forth in this Agreement are satisfied.
NOW, THEREFORE, with the foregoing Background deemed incorporated
hereinafter by this reference and hereby made a part hereof, the parties hereto,
intending to be legally bound, hereby covenant and agree as follows:
SECTION 1 - DEFINITIONS: ACCOUNTING TERMS. For the purpose of
this Agreement, in addition to terms defined elsewhere herein,
the following terms shall have the following meanings:
"Advance" shall have the meaning assigned to such term in
Section 2(d).
"Affiliate" shall mean any corporation or other business enterprise
directly or indirectly controlled by, or under direct or indirect common control
with the Company.
"Authorized Officer" means the President or the Chief
Financial Officer of Borrower.
"Basic Documents" means, collectively, the Bond Documents
and the Letter of Credit Documents, and "Basic Document" shall
mean any one of them.
"Bond Documents" means two or more, including all, of the Bonds, the
Indenture, and the Placement Agreement, all as the same may be amended,
modified, supplemented or restated from time to time, and "Bond Document" shall
mean any one of the foregoing.
"Bond Placement Agreement" shall have the meaning assigned to such term in
the Indenture.
"Business Day" shall have the meaning assigned to such term
in the Indenture.
"Certifying Officer" shall mean the Secretary or an
Assistant Secretary of the specified corporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Completion Date" means June 30, 1998.
"Date of Issuance" shall mean the date of issuance and
delivery of the Letter of Credit.
"Debt" means:
i. All items (except items of capital stock or capital surplus or of contingency
reserves, reserves or allowances for deferred income taxes or reserves or
allowances for unearned revenues) which in accordance with GAAP applied on a
consistent basis would be included in determining total liabilities as shown on
the liability side of a balance sheet of any such Person as of the date on which
Debt is to be determined, regardless whether the Debt secured thereby shall be
recourse Debt or otherwise; and
ii. All Debt of others within the meaning of (i) above which any such Person has
directly or indirectly made a Guarantee, endorsed (otherwise than for collection
or deposit in the ordinary course of business), discounted with recourse or
agreed (contingently or otherwise) to purchase or repurchase or otherwise
acquire or become liable for, or in respect of which such purchase or other
acquisition of any product, materials, or supplies, or for the making of
shipments, or for the payment for services, if in any such case payment therefor
is to be made regardless of the nondelivery of the product, materials, or
supplies or the nonfurnishing of the transportation or services.
"Default" shall mean any event which, with notice or lapse of time, or
both, would become an Event of Default.
"Dollars" and "$" shall mean United States dollars or such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts in the United States.
"Drawing" shall mean a drawing under the Letter of Credit pursuant to the
terms thereof.
"Environmental Laws" shall mean all provisions of law, statutes,
ordinances, rules, regulations, permits, licenses, judgments, writs,
injunctions, decrees, orders, awards and standards promulgated by the government
of the United States of America or by any state or municipality thereof or by
any court, agency, instrumentality, regulatory authority or commission of any of
the foregoing concerning health, safety and protection of, or regulation of the
discharge of substances into, the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time. Section references to ERISA are to ERISA as in effect
at the date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" means, as applied to any Person, any trade or business
(whether or not incorporated) that would be aggregated with Borrower for any
purpose relevant to ERISA or the Code relating to any Plan.
"Event of Default" shall have the meaning assigned to such term in Section
8 hereof.
"Expiration Date" shall have the meaning assigned to the term the "Letter
of Credit Termination Date" in the Indenture, as said date may be extended
pursuant to Section 16 hereof.
"GAAP" means generally accepted accounting principles as in effect in the
United States for Persons in the United States applied on a basis consistent
with Borrower's present accounting standards.
"Guarantee" means, as to any Person, any obligation of such Person
guaranteeing or in effect guaranteeing any Debt, leases, dividends or other
obligations ("primary obligations") of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, including, without limitation,
any obligation of such Person, whether or not contingent, (a) to purchase any
such primary obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment or any
such primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the owner of such primary obligation
against loss in respect thereof, provided, however, that the term "Guarantee"
shall not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Guarantee shall be deemed to be
an amount equal to the stated or determinable amount of the primary obligation
in respect of which such Guarantee is made or, if not stated or determinable,
the maximum reasonably anticipated liability in respect thereof as determined by
Administrative Agent in good faith.
"Hazardous Substances" shall have the meaning ascribed to such term or
similar terms such as "hazardous waste" in any applicable state or federal law
or regulation.
"Investment" means any advance, extension of credit (excluding current
accounts receivable arising in the ordinary course of business and endorsements
of negotiable instruments for collection in the ordinary course of business) or
contribution of capital to any Person or purchase or other acquisition of the
stock or any notes, debentures or other securities of, or any equity interest
in, any other Person.
"Letter of Credit Amount" shall have the meaning assigned to such term in
the Letter of Credit.
"Letter of Credit Documents" means this Agreement, the Note, that certain
Continuing Letter of Credit Agreement, that certain Open-End Mortgage and
Security Agreement, that certain Assignment of Lessor's Interest in Leases and
all related instruments, agreements and documents, each to be executed and
delivered by Borrower in connection with the issuance of the Letter of Credit,
all as the same may be amended, modified, supplemented or restated from time to
time.
"Material Adverse Effect" is defined in Section 6(a).
"Net Income" means, at any time, the net income after taxes of Borrower,
as such would appear on a statement of operations of Borrower prepared in
accordance with GAAP.
"Note(s)" means the Revolving Loan Note(s) as defined in the
Syndicated Loan Agreement.
"Obligations" shall mean all indebtedness, liabilities, responsibilities
and obligations, whether now existing or hereafter arising, primary or
contingent, owing to Administrative Agent by Borrower, pursuant to this
Agreement or the Basic Documents and all covenants, agreements and obligations,
whether now existing or hereafter arising, to be performed or observed in favor
of Administrative Agent by Borrower, pursuant to this Agreement or any Basic
Document.
"Outstanding" shall have the meaning assigned to such term
in the Indenture.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Person" shall mean a corporation, a limited liability company, an
association, a partnership, an organization, a trust or business trust, an
individual, a government or political subdivision thereof or a governmental
agency.
"Plan" means any pension plan which is covered by Title IV of ERISA in
respect of which Borrower or any ERISA Affiliate would have any liability
pursuant to ERISA.
"Prime Rate" shall mean a fluctuating interest rate per annum equal at all
times to the rate of interest determined by Administrative Agent, from time to
time, as its Prime Rate, with each change in such rate to automatically and
immediately change the Prime Rate.
"Project Facilities" shall have the meaning assigned to such
term in the Indenture.
"Property" means, collectively, the real property and improvements situate
in Hanover Township, Northampton County, Pennsylvania, upon which the Project
Facilities are being constructed, all as more fully described in the Letter of
Credit Documents.
"Pro Rata Share" shall have the meaning ascribed to such term in the Loan
Agreement.
"Rating Agency" shall have the meaning assigned to such term
in the Indenture.
"Reportable Event" shall have the meaning assigned to such term under
Section 4043 of ERISA.
"SEC" shall mean the Securities and Exchange Commission and
its successors.
"Subordinated Indebtedness" means all Indebtedness incurred at any time by
Borrower, the repayment of which is subordinated to the Loans in form and manner
satisfactory to Administrative Agent.
"Subsidiary" of a Person shall mean any entity organized under the laws of
any state, province or country, or political subdivision thereof, a majority of
the voting stock of which shall, at the time as of which any determination is
being made, be owned by such Person either directly or indirectly through any
other Person.
"Substitute Letter of Credit" shall have the meaning assigned to such term
in the Indenture.
"Tangible Capital Funds" means, at any time, the amount by which all
Assets, excluding deferred costs and intangible Assets, exceed all Liabilities,
as would be shown on a balance sheet of Borrower prepared as of the date of
determination in accordance with GAAP, plus Subordinated Indebtedness.
"Taxes" shall mean all federal, state and local or foreign income,
payroll, withholding, excise, sales, use, real and personal property, use and
occupancy, business and occupation, mercantile, real estate, capital stock and
franchise or other taxes, including interest and penalties thereon, and
including estimated taxes thereof.
"10-K and 10-Q Reports" shall have the meaning assigned to such term in
Section 6(f).
"Unfunded Liability" shall mean, with regard to any Plan, the excess of
the actuarial present value of benefit liabilities under the Plan over the
current value of the Plan's assets. The term "benefit liabilities" shall have
the meaning assigned to such term in Section 4001 of ERISA. Whenever this
Agreement requires the amount of any Unfunded Liability to be determined, it
shall be determined as of the end of the most recent Plan year based on the
final actuarial valuation prepared for the Plan for funding purposes.
Whenever any agreement, pledge, or other agreement, instrument or document
is defined in this Agreement, such definition shall be deemed to mean and
include, from and after the date of an amendment, restatement, or modification
thereof, such agreement, pledge, or other instrument or document as so amended,
restated or modified. All terms defined in this Agreement in the singular shall
have comparable meanings when used in the plural and vice versa. The words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
All accounting terms used in this Agreement which are not expressly
defined in this Agreement shall have the respective meanings given to them in
accordance with GAAP consistently applied. All computations made pursuant to
this Agreement shall be made in accordance with GAAP consistently applied. In
the event that a change in GAAP occurs or is first adopted by Borrower after the
date of this Reimbursement Agreement and, in the view of Borrower or
Administrative Agent, such change would have a significant effect on the
calculation of or the compliance by Borrower with any of the financial
requirements of Section 6 hereof, then Company and Administrative Agent agree to
make such adjustments to the financial requirements contained herein as are
reasonable under the circumstances and which, as near as is practicable, reflect
the impact of the change in GAAP.
All capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Syndicated Loan Agreement. To the extent of any
inconsistency between the terms of this Agreement and the terms of the
Syndicated Loan Agreement, this Agreement shall govern and control.
SECTION 2 REIMBURSEMENT AND OTHER PAYMENTS; COLLATERAL SECURITY.
a) Reimbursement and Interest. Borrower hereby agrees to
pay to Administrative Agent:
i) on the same Business Day of any Drawing, but after payment by Administrative
Agent of such Drawing to the Trustee, a sum (and interest on such sum as
provided in clause (ii) below) equal to such amount so drawn under the Letter of
Credit;
ii) notwithstanding the rate(s) of interest set forth in the Syndicated Loan
Agreement and the Notes, interest on any and all amounts not paid by Borrower
hereunder from the earlier of the date of a Drawing under the Letter of Credit
or the date such amounts become payable until payment in full, payable on
demand, at a fluctuating interest rate per annum equal to the Prime Rate plus
two percent (2%); and
iii) any and all charges and expenses which Administrative Agent may pay or
incur relative to the Letter of Credit and any and all expenses incurred by
Administrative Agent in enforcing any rights under this Agreement and the other
Basic Documents.
b) Issuance and Other Fees.
i) Borrower hereby agrees to pay to Administrative Agent an issuance fee with
respect to the Letter of Credit from the Date of Issuance to the Expiration Date
computed at the rate of one percent (1%) per annum on the Letter of Credit
Amount. This fee shall be payable annually on or before the date sixty (60) days
prior to any Expiration Date. The first payment of the issuance fee is due
concurrently herewith.
ii) Upon each Drawing, amendment, transfer of the Letter of Credit in accordance
with its terms and any amendment of the Letter of Credit or this Reimbursement
Agreement requested by Borrower or the Trustee, Borrower agrees to pay to
Administrative Agent its then existing standard charges for such letter of
credit activity plus Administrative Agent's actual costs and expenses associated
with such transfer or amendment (and interest on such costs and expenses from
the date expended by Administrative Agent to the date reimbursed by Borrower at
the interest rate specified in Section 2(a)(ii)), payable on the date of such
transfer or amendment.
c) Computation of Interest and Commission. Interest and commission payable
hereunder shall be computed on the basis of a year of 360 days, for the actual
number of days elapsed. Whenever any payment under this Agreement shall be due
on any day that is not a Business Day, the date for payment thereof shall be
extended to the next succeeding Business Day. If the due date for any such
payment is so extended or extended for any other reason, including operation of
law, interest shall accrue and be payable for such extended time.
d) Change in Law: Compensation.
i) If any change in any law, regulation, guideline or directive (whether or not
having the force of law) or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration thereof
shall either (1) impose, modify or deem applicable any reserve, special deposit
or similar requirement against letters of credit issued by Administrative Agent
or any advance or forbearance in respect of the reimbursement obligations of
Borrower under this Agreement (an "Advance") (2) reduce the amount of any
payment to be received by Administrative Agent under this Agreement or, (3)
impose on Administrative Agent any other condition regarding this Agreement, the
Letter of Credit or an Advance, and the result of any event referred to in
clauses (1), (2) or (3) above shall be to increase the cost to Administrative
Agent of issuing or maintaining the Letter of Credit or any Advance (which
increase in cost shall be the result of Administrative Agent's reasonable
allocation of the aggregate of such cost increases resulting from such events)
or reduce the amount to be received by Administrative Agent under this
Agreement, then, from time to time as specified by Administrative Agent, upon
demand by Administrative Agent, Borrower shall pay to Administrative Agent
within five Business Days after receipt of written demand for payment such
additional amounts which shall be sufficient to compensate Administrative Agent
for such increased cost or reduction of amount received from the date of such
change, together with interest on each such amount from the due date until
payment in full thereof at the rate provided in clause (ii) of paragraph (a)
above. Administrative Agent shall submit to Borrower, at or prior to the making
of each such demand, a certificate setting forth in reasonable detail such
increased cost incurred or reduction of amount received by Administrative Agent
as a result of any event mentioned in clauses (1), (2) or (3) above and the
basis therefor, which certificate shall be presumed to be correct as to the
amount and the basis thereof.
ii) Without limiting the foregoing clause (i), in the event that the
application, enactment or adoption of, or any change in, any law, rule,
regulation, treaty, guideline or directive, (including, without limitation,
pursuant to the "risk-based capital guidelines" published at 54 F.R. 4168 or 54
F.R. 4186 and any successor guidelines or regulations) or the occurrence of the
effective date of any law, rule, regulation, treaty, guideline or directive or
any provision thereof enacted or adopted on the date of the execution hereof but
which has not yet become effective, or the application, interpretation or
enforcement of any of the foregoing by any court, central bank, administrative
or governmental authority charged with the administration thereof (whether or
not having the force of law) affects or would affect the amount of capital
required, expected or advisable to be maintained by Administrative Agent in
connection with the Letter of Credit or any Advances, and the result of any of
the foregoing shall be to increase the cost to Administrative Agent of
extending, issuing or maintaining the Letter of Credit or any Advances or to
reduce any amount (or the effective return on any amount) received or receivable
by Administrative Agent or reduce the rate of return on Administrative Agent's
capital as a consequence of its obligations in respect of the Letter of Credit
or any Advances to a level below that which Administrative Agent could have
achieved but for such adoption, change or compliance (taking into consideration
Administrative Agent's policies with respect to capital adequacy) by any amount
deemed by Administrative Agent to be material, in connection with the Letter of
Credit or any Advances (which increase in cost or reduction in yield shall be
the result of Administrative Agent's reasonable allocation of the aggregate of
such cost increases or yield reductions resulting from such event), then, from
time to time as specified by Administrative Agent, within five (5) Business Days
after written demand by Administrative Agent, Borrower shall pay to
Administrative Agent such additional amounts which shall be sufficient to
compensate Administrative Agent for all such increased costs or reductions in
yield incurred since the date of any such imposition, modification or
application. Administrative Agent shall submit to Borrower, at or prior to the
making of each such demand, a certificate setting forth in reasonable detail the
amount of and the basis for such increased costs or yield reductions incurred by
Administrative Agent as a result of any of the foregoing which certificate shall
be presumed to be correct as to the amount thereof and basis therefor.
iii) If any change in any law, regulation, guideline or directive (whether or
not having the force of law) or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration thereof
shall prohibit or restrict the making of any drawing under the Letter of Credit,
maintaining as outstanding any Advance or the charging of interest on such
Advance, Borrower agrees that Administrative Agent shall have the right to
comply with such prohibition or restriction and require repayment in full of
each Advance together with accrued interest thereon. Administrative Agent shall
submit to Borrower, at or prior to the making of each such request, a
certificate setting forth the details concerning the foregoing, which
certificate shall be presumed to be correct as to such matters.
e) Time and Place of Payment. All payments by Borrower to Administrative Agent
hereunder shall be made by 1:00 p.m. Reading, Pennsylvania time on the date due
in lawful currency of the United States in immediately available funds to
Administrative Agent at 600 Penn Street, Reading, Pennsylvania, or at such other
place as Administrative Agent shall have designated to Borrower in writing. Any
payment made after such time shall be deemed to be made on the next following
Business Day.
f) Maintenance of Accounts. Administrative Agent shall maintain in accordance
with its usual practice an account or accounts evidencing the Obligations of
Borrower and the amounts payable and paid from time to time hereunder. In any
legal action or proceeding in respect of this Agreement, the entries made in
such account or accounts shall be presumptive evidence of the existence and
amounts of the Obligations of Borrower therein recorded. The failure to record
any such amount shall not, however, limit or otherwise affect the Obligations of
Borrower hereunder, together with all interest accrued thereon as provided in
this Section 2.
g) Cure. Borrower agrees to pay to Administrative Agent on demand any amounts
advanced by or on behalf of Administrative Agent to the extent required to cure
any Default or Event of Default under this Agreement or any Basic Document. This
provision shall give Administrative Agent the right to cure any such default,
event of default or event of nonperformance but shall not be construed as
obligating, and shall not in any way obligate, Administrative Agent to do so.
SECTION 3 - SECURITY.
a) Security and Subrogation Under Indenture. Borrower and Administrative Agent
intend that (i) Administrative Agent will have the security and benefit of the
Bond Documents as provided in the Indenture and (ii) in the event that one or
more Draws are not reimbursed under the Letter of Credit and applied to the
payment of Bonds, Administrative Agent will be subrogated pro tanto to the
rights of the Trustee and the holders of such Bonds under the Bond Documents and
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, the Bond Fund, the Project Fund, all other funds and Investment
Securities and other instruments comprising investments thereof (each as defined
in the Indenture). In addition, Administrative Agent shall have any and all
other subrogation rights available to Administrative Agent at law and in equity.
b) Pledge of Rights to Certain Funds and Investments. To secure Borrower's
obligations to Administrative Agent under this Agreement, Borrower hereby
pledges to Administrative Agent, and grants to Administrative Agent a security
interest in, all of 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, the funds
and Investment Securities described above, 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 under the Indenture. Borrower covenants and agrees that it will
defend Administrative Agent'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 Basic Documents, Administrative
Agent shall have all the rights and remedies of a secured party under the
Uniform Commercial Code or other applicable law with respect to the security
interests created by this Section. Administrative Agent's rights under this
Section are in addition to, and not in lieu of, its rights described in Section
(a).
c) Letter of Credit Documents. To further secure Borrower's obligations to
Administrative Agent under this Agreement, on or prior to the Date of Issuance,
Borrower shall execute and deliver to Administrative Agent the Letter of Credit
Documents.
d) Financing Statements. Borrower will execute and deliver such financing
statements and continuation statements ("Financing Statements") under the
Uniform Commercial Code or other applicable law as Administrative Agent may
reasonably specify in order to perfect and maintain perfection of Administrative
Agent's security interests under this Agreement and the other Letter of Credit
Documents and will pay the costs of filing the same in such public offices as
Administrative Agent may designate.
SECTION 4 - AGREEMENT OF BANK; CONDITIONS PRECEDENT TO ISSUANCE OF THE LETTER OF
CREDIT.
a) Agreement of Administrative Agent. Subject to the
terms and conditions of this Agreement, Administrative Agent
agrees to issue the Letter of Credit.
b) Conditions Precedent to Issuance of the Letter of
Credit.
i) Administrative Agent shall have received on or before the Date of Issuance
the following, each dated the Date of Issuance or the date hereof, as
Administrative Agent may require, in form and substance reasonably satisfactory
to Administrative Agent:
A) Articles or Certificate of Incorporation of Borrower
certified as of a recent date by the Secretary of the
Commonwealth of Pennsylvania;
B) Certificate of good standing for Borrower issued as of
a recent date by the Secretary of the Commonwealth of
Pennsylvania;
C) copies of each of the following:
1) Bylaws of Borrower; and
2) resolutions of the Board of Directors of Borrower
authorizing the execution, delivery and performance of this
Agreement and the Basic Documents to which it is a party;
in each case certified by a respective Certifying Officer which certificate
shall state that such bylaws and resolutions are in full force and effect on the
Date of Issuance;
D) a certificate of a Certifying Officer of Borrower certifying the name and
true signatures of the officers of Borrower authorized to sign this Agreement
and the Basic Documents to be executed and delivered by it; E) each of the
Letter of Credit Documents and Financing Statements fully executed by Borrower
and accompanied by (i) UCC, tax and judgment lien records search results in the
name of Borrower in the Commonwealth of Pennsylvania (including the counties in
which Borrower does business in each such state), (ii) a loan policy of title
insurance insuring Administrative Agent's lien on the Property and the other
Project Facilities as a first lien subject only to such standard exceptions as
may be approved by Administrative Agent and (iii) policies (and related
endorsements) of casualty insurance required by the Basic Documents;
F) an opinion of Duane, Morris and Heckscher LLP, counsel
to Borrower, as to such matters as Administrative Agent may
reasonably request, which opinion shall be satisfactory to
Administrative Agent in form and substance;
G) an opinion of King, McCardle, Herman, Freund & Olexa, as Bond Counsel, as to
such matters as Administrative Agent may reasonably request, which opinion shall
be satisfactory to Administrative Agent in form and substance;
H) a fully executed copy (or a duplicate thereof) of each
of the other Basic Documents not listed above;
I) a survey prepared by a licensed surveyor or civil engineer dated not more
than thirty (30) days prior to the Date of Issuance showing the boundary lines
of the Property, the rights-of-way of the nearest streets, the location of all
utility and other easements and rights-of-way affecting the Property, the
proposed location(s) of the Project Facilities and such other details as
Administrative Agent may reasonably require;
J) a cost budget for construction of the Project Facilities, copies of the Plans
and Specifications and certified copies of all appropriate certificates
including, without limitation, approvals, documents, writings and drawings
issued by the governmental departments or agencies authorized to issue such
writings or drawings, evidencing that the Project Facilities when constructed,
will be in compliance with all applicable statutes, laws, ordinances, rules,
regulations and requirements including, without limitation, all zoning and
environmental requirements; and
K) evidence that Borrower has obtained a commitment for financing for the
construction of a portion of the Project Facilities through the Pennsylvania
Industrial Development Authority ("PIDA") in an amount not less than One Million
($1,000,000.00) Dollars to be secured by liens and security interests in and to
the Project Facilities which liens and security interests shall be subject and
subordinate to the liens and security interests of Administrative Agent in and
to the Project Facilities, up to the sum of One Million Nine Hundred Eighty
Thousand ($1,980,000.00) Dollars, the Bond Fund, all other funds and Investment
Securities and other instruments comprising investments thereof;
L) payment of a nonrefundable commitment fee equal to 1/2%
of the face amount of the Letter of Credit;
M) such other documents, instruments, approvals (and, if requested by
Administrative Agent, certified duplicates of executed copies thereof) or
opinions as Administrative Agent may otherwise reasonably request.
ii) The following statements shall be true and correct on the Date of Issuance
and Administrative Agent shall have received a certificate of Borrower signed on
its behalf by an Authorized Officer, dated the Date of Issuance, stating that:
A) the representations and warranties of Borrower
contained in any of the Basic Documents and in Section 6 of this
Agreement, are correct on and as of the Date of Issuance as
though made on and as of such date; and
B) no Event of Default or Default has occurred and is
continuing, or would result from the issuance of the Letter of
Credit and/or the consummation of the transactions contemplated
by the Basic Documents.
iii) On or before the Date of Issuance:
A) the Issuer and the Trustee shall have duly authorized
and executed the Indenture and the Indenture shall be in full
force and effect; and
B) the Bonds shall be validly issued and outstanding.
c) Conditions Precedent to Administrative Agent's Consent
to Requisitions for Disbursements from the Project Fund.
i) No Event of Default or Default shall have occurred
and be continuing;
ii) The Project Facilities shall be in compliance with all applicable laws,
statutes, ordinances, rules, regulations and requirements, including, without
limitation, all zoning and environmental requirements;
iii) The construction of the Project Facilities shall be and have been performed
substantially in accordance with the Plans and Specifications and strictly in
accordance with all applicable statutes, laws and ordinances, and any and all
requirements of governmental authorities having jurisdiction in and for the
locality in which the Project is located;
iv) Each requisition for disbursements from the Project Fund shall be in the
form of Exhibit C to the Indenture, and shall be accompanied by, among other
things, a certification by Borrower, any general contractor and any architect
for the Project and, if required by Administrative Agent, Administrative Agent's
inspecting architect or engineer (at Borrower's expense) that upon review of the
Plans and Specifications and the progress of the construction of Project
Facilities, the construction is in accordance with the Plans and Specifications,
the Project Facilities will be completed by the Completion Date and in
accordance with Borrower's budget for construction of the Project Facilities
approved by Administrative Agent, it being understood, acknowledged and agreed
that any approval of a requisition and any payment made by the Trustee from the
Project Fund with the consent of Administrative Agent shall not constitute a
waiver of Administrative Agent's rights as to any work or material which may be
defective or which may fail to comply with the Plans and Specifications or with
any terms of this Agreement;
v) Unless waived by Administrative Agent, each requisition shall be submitted at
least fifteen (15) days in advance of the date requested for proceeds from the
Project Fund;
vi) Advances may be made (directly or through a title insurer) to Borrower
and/or any general contractor or any prime contractor(s), subcontractor(s),
materialmen or others who have furnished goods or services in connection with
the Project, or some of them, in accordance with Administrative Agent's
direction to the Trustee from time to time; and
vii) Notwithstanding anything to the contrary set forth herein or in the
Indenture, Administrative Agent shall have the right to request the Trustee to
advance proceeds from the Project Fund, without any request therefor being
submitted by Borrower, for the purposes of paying real estate taxes, insurance
premiums, fees and expenses of Administrative Agent's counsel or to cure any
Event of Default which Administrative Agent may (without obligation) elect to
cure. Administrative Agent shall furnish to Borrower a copy of any request given
to the Trustee for an advance of proceeds from the Project Fund.
SECTION 5 - OBLIGATIONS ABSOLUTE. The Obligations of Borrower under this
Agreement shall be absolute, unconditional and irrevocable, and shall be paid
and performed strictly in accordance with the respective terms thereof, under
all circumstances whatsoever, including, without limitation, the following
circumstances:
i) any lack of validity or enforceability of the Letter of
Credit or any of the Basic Documents;
ii) any amendment or waiver of or any consent to departure
from all or any of the Basic Documents;
iii) the existence of any claim, setoff, defense or other rights which Borrower
may have at any time against the Trustee, the Issuer, any beneficiary or any
transferee of the Letter of Credit (or any persons or entities for whom the
Trustee, any such beneficiary or any such transferee may be acting),
Administrative Agent (other than the defense of payment to Administrative Agent
in accordance with the terms of this Agreement) or any other person or entity,
whether in connection with this Agreement, the Basic Documents or any unrelated
transaction;
iv) any statement or any other document presented under the Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect whatsoever;
v) payment by Administrative Agent under the Letter of
Credit against presentation of a sight draft or certificate which
does not comply with the terms of the Letter of Credit;
vi) payment by Administrative Agent under the Letter of
Credit notwithstanding:
A) any instructions of Borrower given after the Letter of
Credit is issued not to make payment thereunder;
B) the occurrence of any event including,
without limitation, the commencement of legal proceedings to
prohibit payment under the Letter of Credit; or
C) the issuance of any order by any government agency,
governing body or court whether or not having jurisdiction in the
premises prohibiting payment under the Letter of Credit; and
vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing.
SECTION 6 - REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants as follows:
a) Syndicated Loan Agreement Representations and Warranties. The representations
and warranties set forth in the Syndicated Loan Agreement are hereby reasserted
and restated by Borrower as of the date of this Reimbursement Agreement as if
set forth at length herein.
b) Execution, Delivery and Performance. The execution, delivery and performance
by Borrower of this Agreement and the other Basic Documents to which it is a
party are within Borrower's powers as a corporation, have been duly authorized
by all necessary corporate action, do not contravene (i) its Articles or
Certificate of Incorporation and bylaws, (ii) any law, regulations, order,
judgment, decree or contractual restriction binding on or affecting Borrower or
(iii) the Syndicated Loan Agreement, and do not allow for, result in or require
(A) the creation of any lien, security interest or other charge or encumbrance
upon or with respect to any of its properties except in favor of Administrative
Agent or (B) the acceleration of any payment of, or maturity of, any Debt. c)
Regulatory Authority. Borrower is duly authorized and licensed to operate the
Project under the laws, rulings, regulations and ordinances of the Commonwealth
of Pennsylvania and the departments, agencies and political subdivisions thereof
and Borrower has obtained all requisite approvals of the Commonwealth of
Pennsylvania and of federal, regional and local governmental bodies required to
be obtained prior to the date of delivery of the Bonds and this Agreement and
the failure to obtain would have a Material Adverse Effect. The Project is in
compliance with all applicable federal, state and local zoning, subdivision,
environmental, pollution control and other laws, rules, regulations, codes and
ordinances.
d) No Consent, etc. No consent, authorization or approval or other action by,
and no notice to or filing with (that has not already been obtained, taken or
made), any Person is required for the due execution, delivery and performance by
Borrower of this Agreement and any other Basic Documents to which it is a party.
e) Legal, Valid and Binding. This Agreement and the Basic Documents to which it
is a party are the legally valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms.
f) No Misrepresentation. Except as otherwise specifically set forth in writing
to Administrative Agent, taken as a whole, all factual information heretofore or
contemporaneously furnished in writing to Administrative Agent by Borrower was,
when furnished and is as of the Date of Issuance, true and accurate in all
material respects and did and does not omit to state any material fact necessary
to make such information not misleading at such time in light of the
circumstances under which such information was provided.
g) Regulation U, etc. Borrower does not own or have any present intention of
acquiring, any "margin stock" within the meaning of Regulation U (12 CFR Part
221) of the Board of Governors of the Federal Reserve System (herein called
"margin stock"). None of the proceeds of the Bonds will be used directly or
indirectly, by Borrower for the purpose of purchasing or carrying, or for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry, any margin stock or for any other purpose which would
cause the transactions contemplated hereby to be considered a "purpose credit"
within the meaning of said Regulation U, or which would cause this Agreement to
violate Regulation G, Regulation U, Regulation T, Regulation X or any other
regulation of the Board of Governors of the Federal Reserve System or the
Securities Exchange Act of 1934. Borrower is not an "Investment Company" within
the meaning of the Investment Company Act of 1940, as amended.
h) Compliance with Laws. Borrower is in compliance with all material laws,
rules, regulations, court orders and decrees, and orders of any governmental
agency which are applicable to Borrower, or to its properties, including, but
not limited to, laws, rules, regulations, court orders and decrees and orders of
any governmental agency with respect to employee benefits and Environmental
Matters except to the extent that Borrower is contesting in good faith and by
appropriate proceedings in accordance with applicable laws the compliance with
such laws, rules, regulations, court orders and decrees and there has been set
aside on its books such reserves with respect thereto as are required by GAAP or
the failure of Borrower to be in compliance with would have a Material Adverse
Effect. As of the Date of Issuance, there are no instances where Borrower is
contesting its obligation to comply with any material law, rule, regulation,
court order, or decree.
i) Public Utility Holding Company Act. Borrower is not subject to any state law
or regulation regulating public utilities or similar entities, and is not,
within the meaning of the Public Utility Holding Company Act of 1935, as
amended, (a) a holding company, (b) a subsidiary or affiliate of a holding
company or (c) a public utility.
j) Title to Properties: Patents, Trademarks, etc. Borrower has good and
marketable title to all its properties and assets, including, without
limitation, the Project Facilities. Except as permitted by the Syndicated Loan
Agreement and the other Letter of Credit Documents, there are no mortgages,
liens, charges, or encumbrances of any nature whatsoever on any of the
properties or assets of Borrower. Borrower owns or possesses all the patents,
trademarks, service marks, trade names, copyrights and licenses and rights with
respect to the foregoing necessary for the conduct of its businesses, without
any known conflict with the valid rights of others which would be inconsistent
with the conduct of its business substantially as now conducted and as currently
proposed to be conducted.
k) Environmental Matters. Borrower is conducting its business in compliance in
all material respects with all applicable federal, state and local Environmental
Laws including but not limited to the Resource Conservation and Recovery Act,
the Clean Air Act, the Federal Water Pollution Control Act, the Toxic Substances
Control Act and the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") and, except as set forth in the 10-K, there is not
pending or, to the best knowledge of Borrower after diligent investigation,
threatened, civil or criminal litigation, notice of violation or lien, or
administrative proceeding relating to Environmental Laws involving Borrower
which, either individually or in the aggregate, under current interpretation of
current law could reasonably be expected to result in a Material Adverse Effect.
To the best of Borrower's knowledge after diligent investigation, there is no
condition or situation, including, without limitation, any lien or encumbrance,
with respect to Environmental Laws which, either individually or in the
aggregate, under current interpretation of current law could reasonably be
expected to result in a Material Adverse Effect. Borrower has obtained from
every governmental body including, but not limited to, the United States
Environmental Protection Agency and the similar agency of Pennsylvania, all
material approvals, consents, licenses, permits, and orders necessary to carry
on its business as currently conducted. Except as set forth in the 10-K, to the
best of its knowledge after diligent investigation, Borrower has not transported
Hazardous Substances or arranged for the transportation of such Hazardous
Substances to any location which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against
Borrower for clean-up costs, remedial work, damages to natural resources or for
personal injury claims which, either individually or in the aggregate, under
current interpretation of current law could reasonably be expected to result in
a Material Adverse Effect. Borrower has not treated, stored for more than 90
days, recycled or disposed of any Hazardous Substances on any property now or
previously owned or leased by Borrower which under current interpretation of
current law could reasonably be expected to result in a Material Adverse Effect.
For purposes of this subsection (q) the term "diligent investigation" shall mean
inquiry of employees who should have knowledge as to the matters involved and
review of records of Borrower but does not require the engagement of third
parties to conduct independent reviews and examinations.
SECTION 7 - AFFIRMATIVE COVENANTS OF BORROWER. So long as the Expiration Date
has not occurred or any Obligation has not been completely performed or
otherwise satisfied unless Administrative Agent shall otherwise consent in
writing:
a) Existence, Business, etc. Borrower will cause to be done all things necessary
to preserve and to keep in full force and effect its existence and rights and
will conduct its business in a prudent manner. Borrower will comply in all
material respects with all valid laws and regulations now in effect or hereafter
promulgated by any properly constituted governmental authority having
jurisdiction including, without limitation, Environmental Laws; provided,
however, Borrower shall not be required to comply with any law or regulation
which it is contesting in good faith by appropriate proceedings so long as
either the effect of such law or regulation is stayed pending the resolution of
such proceedings or the effect of not complying with such law or regulation does
not materially and adversely affect the business, properties, operation or
condition (financial or otherwise) of Borrower.
b) Accounts and Reports. Borrower will maintain a standard system of accounting
in accordance with GAAP and furnish to Administrative Agent the following
reports:
i) As soon as available, and in any event within ninety (90) calendar days after
the end of each fiscal year of Borrower, for such fiscal year, (x) balance
sheets of Borrower, (y) statements of income and expenses of Borrower and (z)
statements of changes in financial position of Borrower, certified by
independent certified public accountants and accompanied by a statement of such
Person certifying the financial statements comprising such report have not
disclosed the existence of any condition or event which constitutes a Default or
an Event of Default or, if such a condition or event exists, specifying the
nature thereof,
ii) As soon as available, and in any event within forty-five (45) calendar days
after the end of each fiscal quarter, for such fiscal quarter, unaudited
statements of income and expense and balance sheets of Borrower certified by an
Authorized Officer of Borrower and a statement of such officer that the
examination made in preparing and certifying such unaudited financial statements
has not disclosed the existence of any condition or event which constitutes a
Default or an Event of Default or, if such a condition or event exists,
specifying the nature thereof,
iii) With each report required to be provided pursuant to clause (ii) above, a
certificate signed by an Authorized Officer setting forth in detail the
calculations used in determining Borrower's compliance with the covenants set
forth in the Syndicated Loan Agreement;
iv) As soon as possible, but in any event not more than ten (10) calendar days
after the occurrence of any condition or event which constitutes a Default or an
Event of Default, notice of such condition or event and the action which
Borrower proposes to take with respect thereto;
v) As soon as possible, and in any event within ten (10) calendar days after
Borrower knows or has reason to know that any Reportable Event has occurred with
respect to any Plan, a statement from an Authorized Officer setting forth
details as to such Reportable Event and the action which Borrower proposes to
take with respect thereto, together with a copy of the notice of such reportable
event, if any, given to the PBGC if a copy of such notice is available to
Borrower.
vi) Promptly after receipt thereof, a copy of any notice which Borrower or any
ERISA Affiliate receives from the PBGC, the Department of Labor, or the Internal
Revenue Service with respect to any Plan; provided, however, that this clause
(vi) shall not apply to (i) notices of general application promulgated by the
Department of Labor or (ii) notices that do not relate to a tax that may be
assessed, or a liability that may be asserted, against Borrower or any ERISA
Affiliate, unless it relates to an investigation or inquiry, or a fact,
situation, or state of affairs that may lead to the assessment of any such tax
or the assertion of any such liability;
vii) Promptly upon receipt thereof, a copy of any notice, compliance inquiry,
administrative complaint or any complaint received by Borrower on any material
matter from any governmental authority or agency concerning Environmental Laws
excluding notices of general application from any such agency or authority;
viii) Borrower will promptly notify Administrative Agent in writing of any
litigation, legal proceeding or, when known by any Company, threat of legal
proceeding affecting Borrower in accordance with the provisions of the
Syndicated Loan Agreement; and
ix) Copies of all notices, definitive proxy statements and other similar
documents sent by Borrower to the holders of any of its debentures or bonds or
the trustee of any indenture securing the same or pursuant to which they have
been issued or, to the extent applicable, to any securities exchange or the SEC
or state agency regarding securities of Borrower.
c) Inspection. Borrower will furnish to Administrative Agent, upon reasonable
request of Administrative Agent, full information pertinent to any covenant,
provision, or condition of this Agreement or of any other Basic Document at all
reasonable times and as often as Administrative Agent may reasonably request,
will permit any authorized representative designated by Administrative Agent,
prior to occurrence of a Default upon reasonable prior notice, but after the
occurrence of a Default or Event of Default without any notice required, to
visit and inspect, at the expense of Administrative Agent (but after the
occurrence and during the continuance of, an Event of Default, at Borrower's
expense), during normal business hours any of its properties, including its
books (and to take extracts therefrom) and to discuss affairs, finances, and
accounts with its officers and employees.
d) Incorporation of Loan Agreement and Syndicated Loan Agreement Covenants.
Borrower will observe, perform and comply with each and every covenant, term and
provision contained in the Syndicated Loan Agreement (the "Incorporated
Provisions"), each of which is incorporated herein by this reference as if fully
rewritten at length herein, such covenants, terms and provisions to continue in
full force and effect with respect to this Agreement so long as it is in effect
and until all of the Obligations are paid in full. In the event of any
replacement of the Syndicated Loan Agreement with a similar credit facility to
which Administrative Agent is a party (the "New Facility"), the representations,
warranties, covenants and additional terms contained in such New Facility which
correspond to the representations, warranties and covenants set forth in this
Agreement, and such additional terms, shall be deemed incorporated provisions to
the extent the same are consented to in writing by Administrative Agent and, if
such consent is not granted or if the Syndicated Loan Agreement is terminated
(and Administrative Agent and the Lenders waive any Event of Default arising by
virtue of such termination) and not replaced, then the representations,
warranties and covenants set forth in this Agreement shall continue to be the
Incorporated Provisions. Nothing contained in this Subparagraph shall be deemed
to impair the rights of the Lenders upon the termination of or the occurrence of
an Event of Default under the Syndicated Loan Agreement.
SECTION 8 - NEGATIVE COVENANTS OF BORROWER. So long as the Expiration Date has
not occurred or any Obligation has not been completely performed or otherwise
satisfied:
a) Amendment of Agreements. Borrower will not enter into
or consent to any amendments of any of the Basic Documents.
b) No Drawings on Letter of Credit, No Optional Redemptions. Borrower will not,
and will not permit any Affiliate to, have any Bond (including the principal
amount thereof and interest accrued thereon) legally or beneficially owned by
any of them to be purchased, or redeemed or otherwise paid, directly or
indirectly, by any drawing on the Letter of Credit. Borrower also agrees not to
cause any optional redemption of the Bond pursuant to Section 6 of the
Indenture, without the prior written consent of Administrative Agent which shall
not be unreasonably withheld so long as no Default or Event of Default then
exists or would result from or arise after such optional redemption. Borrower
will give Administrative Agent notice of any proposed redemption not later than
twenty (20) days prior to the date that Borrower plans to give notice to the
Trustee but in no event later than thirty (30) days prior to the date of such
proposed conversion or redemption. Any notice of a proposed conversion or
redemption shall include reasonable detail as to how Borrower will immediately
reimburse Administrative Agent for the Drawings that will be made in connection
with such conversion or redemption.
c) Bond Status. Borrower shall not take any action that will cause the Rating
Agency to reduce the rating on Bonds from that in effect on the Date of
Issuance; provided that in no event shall Borrower be responsible for any change
in such rating resulting from Administrative Agent's action or a change in the
credit ratings of Administrative Agent.
SECTION 9 - EVENTS OF DEFAULT. Upon the occurrence of any of the following
events (herein referred to as an "Event of Default"), unless waived by
Administrative Agent pursuant to Section 9 hereof:
a) Untrue Representation. Any material representation or warranty made by
Borrower herein or in any Basic Document or in any certificate, financial or
other statement furnished to Administrative Agent by Borrower pursuant to this
Agreement or any Basic Document shall prove to have been untrue or incomplete in
any material respect when made; or
b) Failure to Pay. Borrower shall fail to pay when due any amount including,
without limitation, payment pursuant to Section 2 hereof, specified in this
Agreement or any of the other Basic Documents and such failure shall continue
for five (5) consecutive days; or
c) Certain Section 7 Defaults. Default shall be made in the due observance or
performance of any covenant, agreement, or provision contained in subsections
(a), (b) and (c) of Section 7 and such default shall continue for thirty (30)
consecutive calendar days (or if such default cannot be cured within thirty (30)
consecutive calendar days, Borrower shall have commenced within thirty (30)
consecutive calendar days and shall be diligently taking action to cure such
default and, if such default is material, so long as such default shall have
been cured in any event within sixty (60) consecutive calendar days), or
d) Other Section 7 and Section 8 Defaults. Default shall
be made in the due observance or performance of any covenant,
agreement or provision contained in Section 7(f) or in Section 8
hereof; or
e) Other Provision Default. Default (not otherwise specified in this Section 9
shall be made in the due observance or performance of any other covenant,
agreement, or provision of this Agreement or of any other Letter of Credit
Document to be performed or observed by Borrower and such default shall not be
corrected or cured within thirty (30) consecutive calendar days (or if such
default cannot be cured within thirty (30) consecutive calendar days, Borrower
shall have commenced within thirty (30) consecutive calendar days and shall be
diligently taking action to cure such default and, if such default is material,
so long as such default shall have been cured in any event within sixty (60)
consecutive calendar days); or
f) Lack of Validity. Any provision of this Agreement or any Letter of Credit
shall at any time for any reason cease to be valid and binding on Borrower or
the validity or enforceability thereof shall be contested by Borrower or any
other party thereto (excluding Administrative Agent) or any governmental agency
or authority (other than the Issuer), or Borrower shall deny that it has any or
further liability or obligation under this Agreement or any Letter of Credit
Document; or
g) Basic Document Default. An "Event of Default" shall have occurred under and
as defined in (i) Section 6.1 of the Loan Agreement or (ii) Section 8.01 of the
Indenture, or an "Event of Default" shall occurred under and as defined in
Section 7 of the Syndicated Loan Agreement; or
h) Material Adverse Change. A material adverse change in the business,
operations, management, properties or financial condition of Borrower, as
determined by Administrative Agent in good faith, shall have occurred and shall
be continuing without amelioration by Borrower for such period as Administrative
Agent in its reasonable exercise of discretion deems appropriate in light of all
circumstances Borrower shall have failed to provide to Administrative Agent its
written explanation thereof; or
i) The Syndicated Loan Agreement shall have terminated or Administrative Agent
shall no longer be a participant in or otherwise a party to the financing
arrangements described therein.
Then, and in any such event, Administrative Agent may, in its sole discretion,
declare the Obligations whether or not otherwise contingent or not then due or
payable to be forthwith due and payable, and the same shall thereupon become due
and payable without demand, presentment, protest or further notice of any kind,
all of which are hereby expressly waived. Administrative Agent, in its sole
discretion, may notify the Trustee of the occurrence of an Event of Default
hereunder and thereby require the Trustee to declare the principal of the Bonds
and the interest accrued thereon to be due and payable immediately (or, at the
discretion of Administrative Agent, subject to mandatory purchase), all in
accordance with the terms of the Indenture, and, upon said declaration, such
principal and interest shall become and be immediately, due and payable. Upon
any Event of Default, Administrative Agent may make the declaration or give the
notice provided for above, but it shall not be obligated to do so, and
Administrative Agent may, but shall not be obligated to, cure any default, event
of default or event of nonperformance under any Basic Document, in which event
Borrower shall reimburse Administrative Agent therefor pursuant to Section 17
hereof. In addition to the foregoing, Administrative Agent may exercise any
other rights or remedies available under any Basic Document, any other agreement
or at law or in equity. If the Event of Default is the failure by Borrower to
reimburse Administrative Agent on a timely basis for an "Interest Drawing" (as
defined in the Letter of Credit), Administrative Agent may, no later than the
tenth (10th) Business Day following such drawing, deliver to the Trustee notice
that the Letter of Credit will not be reinstated.
j) The rights and remedies of Administrative Agent specified herein are for the
sole and exclusive benefit, use and protection of Administrative Agent, and
Administrative Agent is entitled, but shall have no duty or obligation to
Borrower, the Trustee, the Bondholders (as defined in the Indenture) or
otherwise, (i) to exercise or to refrain from exercising any right or remedy
reserved to Administrative Agent hereunder, or (ii) to cause the Trustee or any
other party to exercise or to refrain from exercising any right or remedy
available to it under any of the Basic Documents. Administrative Agent may, in
its sole discretion, also require the Trustee to cause the holders of the Bonds
to surrender the Bonds for mandatory purchase pursuant to the provisions of the
Indenture. Any amounts drawn on the Letter of Credit after declaration by
Administrative Agent that the Obligations are due and payable shall
automatically be immediately due and payable by Borrower.
SECTION 10 - AMENDMENTS, ETC. No amendment or waiver of any provision of this
Agreement or consent to any departure by Borrower therefrom shall in any event
be effective unless the same shall be in writing and signed by Administrative
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 11 - ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing and, if to Borrower, mailed or
delivered to it, addressed to it at 3910 Adler Place, Bethlehem, Pennsylvania
18016, Attention: Richard H. Penske, Chief Financial Officer; with a copy to
Duane, Morris & Heckscher LLP, 968 Postal Road, P.O. Box 90400, Allentown,
Pennsylvania 18109-0400; or if to Administrative Agent, mailed or delivered to
it, addressed to it at CoreStates Administrative Agent, N.A., 600 Penn Street,
P. O. Box 1102, Reading, Pennsylvania 19603, Attention: Lynn B. Eagleson, Vice
President; with a copy to Klehr, Harrison, Harvey, Branzburg & Ellers LLP, 1401
Walnut Street, Philadelphia, Pennsylvania 19102, Attention: Richard S. Roisman,
Esquire, or as to each party at such other address as shall be designated by
such party in a written notice to the other party. All such notices and other
communications shall be effective when delivered to the aforesaid addresses or,
if mailed, be effective three (3) days after the date of deposit in the mails,
addressed as aforesaid.
SECTION 12 - NO WAIVER: REMEDIES. No failure on the part of Administrative Agent
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other further exercise thereof or the exercise of any other right.
The remedies herein provided are cumulative and not exclusive of any remedies
provided in any Basic Document now or hereafter existing at law or in equity.
SECTION 13 - RIGHT OF SET-OFF. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
during the continuance of any Event of Default hereunder, Administrative Agent
is hereby authorized at any time and from time to time, without notice to
Borrower or to any other person or entity, any such notice being hereby
expressly waived by Borrower, to setoff and to appropriate and apply any and all
deposits (general or special) and any other indebtedness at any time held or
owing by Administrative Agent to or for the credit or the account of Borrower
against and on account of the Obligations of Borrower, irrespective of whether
or not Administrative Agent shall have made any demand hereunder and although
said obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
SECTION 14 - INDEMNIFICATION. Borrower hereby indemnifies and holds harmless
Administrative Agent from and against any and all claims, damages, losses,
liabilities, reasonable costs or expenses whatsoever which Administrative Agent
may incur (or which may be claimed against Administrative Agent by any person or
entity whatsoever) by reason of or in connection with (i) the execution and
delivery or transfer of, or payment or failure to pay under, the Letter of
Credit, (ii) the issuance and sale of the Bonds or (iii) disputes between
Borrower and any general contractor for the Project, or between any contractor
and any subcontractor, materialman or supplier, or between Borrower or any
contractor or any subcontractor and any municipal or public authority, or
between Borrower and any broker pertaining to the transaction, including,
without limitation, any of the foregoing resulting from the making of any
Advance; provided that Borrower shall not be required to indemnify
Administrative Agent for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by (a) the willful
misconduct or gross negligence of Administrative Agent in determining whether a
sight draft or certificate presented under the Letter of Credit complied with
the terms of the Letter of Credit or (b) Administrative Agent's willful failure
to pay under the Letter of Credit after the presentation to it by the Trustee of
a sight draft and certificate strictly complying with the terms and conditions
of the Letter of Credit. Nothing in this Section 14 is intended to limit the
reimbursement obligation of Borrower contained in Section 2(a) hereof. In case
any action or proceeding is brought against Administrative Agent in respect of
which indemnity may be sought under this Agreement Administrative Agent shall
give notice of any such action or proceeding to Borrower and may require
Borrower, upon such notice, to assume the defense of the action or proceeding;
provided that failure of Administrative Agent to give such notice shall not
relieve Borrower from any of its obligations under this Section 14. Upon receipt
of notice from Administrative Agent, Borrower shall resist and defend such
action or proceeding at Borrower's expense. The obligations of Borrower under
this Section 14 shall survive the payment of the Bonds and/or any Obligations
and the termination of this Agreement for such period which is equal to the last
statute of limitations governing when a claim may be brought against
Administrative Agent for which it is entitled to indemnification pursuant to
this Section 14 plus six (6) months.
SECTION 15 - CONTINUING OBLIGATION. This Agreement is a continuing obligation
and shall (i) be binding upon Borrower, its successors and assigns, and (ii)
inure to the benefit of and be enforceable by Administrative Agent and its
successors, transferees and assigns; provided that Borrower may not assign all
or any part of this Agreement without the prior written consent of
Administrative Agent. Administrative Agent may assign, negotiate, pledge or
otherwise hypothecate all or any portion of this Agreement, or grant
participations herein, in the Letter of Credit or in any of its rights
hereunder. No such assignment or participation by Administrative Agent, however,
will relieve Administrative Agent of its obligation under the Letter of Credit.
In connection with any assignment or participation, Administrative Agent may
disclose to the proposed assignee or participant any information that Borrower
is required to deliver to Administrative Agent pursuant to this Agreement.
SECTION 16 - LIMITED LIABILITY OF BANK. Borrower assumes all risks of the acts
or omissions of the Trustee and any transferee of the Letter of Credit with
respect to its use of the Letter of Credit. Neither Administrative Agent nor any
of its officers or directors shall be liable or responsible for: (a) the use
which may be made of the Letter of Credit or for any acts or omissions of the
Trustee; (b) the validity, sufficiency or genuineness of documents, or of any
endorsement(s) thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (c) payment by
Administrative Agent against presentation of documents which do not comply with
the terms of the Letter of Credit, including failure of any documents to bear
any reference or adequate reference to the Letter of Credit; or (d) any other
circumstances whatsoever in making or failing to make payment under the Letter
of Credit, except only that Borrower shall have a claim against Administrative
Agent, and Administrative Agent shall be liable to Borrower, to the extent, but
only to the extent, of any direct, as opposed to consequential, damages suffered
by Borrower which Borrower proves were caused by (i) Administrative Agent'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) Administrative Agent's willful failure to pay under the Letter of
Credit after the presentation to it by the Trustee of a sight draft and
certificate strictly complying with the terms and conditions of the Letter of
Credit. In furtherance and not in limitation of the foregoing, Administrative
Agent may accept documents and certificates that appear on their face to be in
order, without responsibility for further investigation, regardless of any
knowledge or notice to Administrative Agent that the information contained
therein is or may be inaccurate or false.
SECTION 17 - COSTS, EXPENSES AND TAXES. Borrower agrees to pay on demand all
costs and expenses of Lenders in connection with the preparation, execution,
delivery and administration of this Agreement and any other documents which may
be delivered in connection with this Agreement and all costs and expenses, if
any, in connection with (i) the change in terms, maintenance, renewal or
cancellation of the Letter of Credit, (ii) any and all amounts which
Administrative Agent has paid relative to Administrative Agent's curing of any
Event of Default resulting from the acts or omissions of Borrower under this
Agreement or any Basic Document, (iii) the enforcement of this Agreement or any
other Basic Document, or (iv) any action or proceeding relating to a court
order, injunction, or other process or decree restraining or seeking to restrain
Administrative Agent from paying any amount under the Letter of Credit. In
addition, Borrower shall pay any and all stamp and other similar taxes and fees
payable or determined to be payable in connection with the execution, delivery,
filing and recording of the Letter of Credit, this Agreement, any other Basic
Document, or any other document which may be delivered in connection with this
Agreement, and agrees to save Administrative Agent 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.
SECTION 18 - 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 non-authorization without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.
SECTION 19 - SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the term of this Agreement
required to be satisfactory to Administrative Agent, the determination of such
satisfaction shall be made by Administrative Agent in its sole and exclusive
judgment.
SECTION 20 - GOVERNING LAW. This Agreement is being intended to be performed in
the Commonwealth of Pennsylvania, and shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
such Commonwealth. Borrower AGREES AND CONSENTS TO THE EXERCISE OF JURISDICTION
OVER IT BY ANY STATE OR FEDERAL COURT IN THE COMMONWEALTH OF PENNSYLVANIA AND
THAT ANY ACTION OR PROCEEDING BROUGHT BY THE COMPANY UNDER THIS AGREEMENT OR ANY
BASIC DOCUMENT AGAINST BANK SHALL BE BROUGHT IN SUCH COURTS.
SECTION 21 - COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart.
SECTION 22 - HEADINGS. 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 23 - WAIVER OF JURY TRIAL. BORROWER AND BANK WAIVE ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, BETWEEN OR AMONG, AS THE CASE MAY BE, BANK, OR BORROWER ARISING
OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE PREPARATION,
EXECUTION, ADMINISTRATION OR ENFORCEMENT OF THIS AGREEMENT, THE LETTER OF
CREDIT, THE BASIC DOCUMENTS OR ANY AGREEMENT OR DOCUMENT EXECUTED IN CONNECTION
WITH ANY OF THE FOREGOING.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
(CORPORATE SEAL) PIERCING PAGODA, INC.
ATTEST:_______________________
By:__________________________________
Name: Name:
Title: Title:
CORESTATES BANK, N.A., for itself and as
Agent and Administrative Agent for the Lenders
By:_______________________________________
Name:
Title:
SUMMIT BANK, for itself and as Agent for the Lenders
By:_______________________________________
Name:
Title:
FIRST UNION NATIONAL BANK
By:_______________________________________
Name:
Title:
PHIL1\106185-5
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