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EXHIBIT 10.2
EXECUTION COPY
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CITY OF OLATHE, KANSAS,
AS LESSOR
AND
PACIFIC SUNWEAR STORES CORP.,
AS LESSEE
---------------
LEASE AGREEMENT
DATED AS OF JULY 1, 2007
---------------
RELATING TO:
$24,500,000
(AGGREGATE MAXIMUM PRINCIPAL AMOUNT)
CITY OF OLATHE, KANSAS
INDUSTRIAL REVENUE BONDS
(PACSUN PROJECT)
SERIES 2007
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THE INTEREST OF THE CITY OF OLATHE, KANSAS (THE "CITY") IN THIS
LEASE AGREEMENT
HAS BEEN PLEDGED AND ASSIGNED TO U.S. BANK NATIONAL ASSOCIATION,
AS TRUSTEE
UNDER THE TRUST INDENTURE DATED AS OF JULY 1, 2007, BETWEEN THE
CITY AND THE
TRUSTEE.
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LEASE AGREEMENT
TABLE OF CONTENTS
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Page
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Parties.................................................................................
1
Recitals
...............................................................................
1
ARTICLE I
DEFINITIONS
Section 1.1. Definitions of Words and
Terms..........................................................
1
Section 1.2. Rules of
Interpretation.................................................................
3
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations by the
City.............................................................
3
Section 2.2. Representations by the
Corporation......................................................
4
ARTICLE III
GRANTING PROVISIONS
Section 3.1. Granting of Leasehold
Estate............................................................
5
Section 3.2. Lease
Term..............................................................................
5
Section 3.3. Possession and Use of the
Project.......................................................
5
ARTICLE IV
PURCHASE, CONSTRUCTION, RENOVATION, INSTALLATION OF THE
PROJECT
Section 4.1. Issuance of the
Bonds...................................................................
6
Section 4.2. Purchase, Construction, Renovation, Installation of
the Project......................... 6
Section 4.3. Project
Costs...........................................................................
7
Section 4.4. Payment for Project
Costs...............................................................
7
Section 4.5. Establishment of Completion
Date........................................................ 7
Section 4.6. Surplus or Deficiency in Construction
Fund.............................................. 8
Section 4.7. Project Property of
City................................................................
8
ARTICLE V
RENT PROVISIONS
Section 5.1. Basic
Rent..............................................................................
8
Section 5.2. Additional
Rent.........................................................................
9
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Section 5.3. Obligations of Corporation Absolute and
Unconditional................................... 9
Section 5.4. Prepayment of Basic
Rent................................................................
10
Section 5.5. Redemption of
Bonds.....................................................................
10
ARTICLE VI
MAINTENANCE, TAXES AND UTILITIES
Section 6.1. Maintenance and
Repairs.................................................................
10
Section 6.2. Taxes, Assessments and Other Governmental
Charges....................................... 10
Section 6.3.
Utilities...............................................................................
11
Section 6.4. Ad Valorem
Taxes........................................................................
11
Section 6.5. Payment in Lieu of
Taxes................................................................
11
Section 6.6. Kansas Retailers' Sales
Tax.............................................................
11
ARTICLE VII
INSURANCE
Section 7.1. Title
Insurance.........................................................................
12
Section 7.2. Casualty
Insurance......................................................................
12
Section 7.3. Public Liability
Insurance..............................................................
13
Section 7.4. Blanket Insurance
Policies..............................................................
14
Section 7.5. Indemnification of
Trustee..............................................................
14
ARTICLE VIII
ALTERATION OF THE PROJECT
Section 8.1. Additions, Modifications and Improvements of the
Project................................ 14
Section 8.3. Additional Improvements on the Project
Site............................................. 14
Section 8.4. Permits and
Authorizations..............................................................
15
Section 8.5. Mechanics'
Liens........................................................................
15
Section 8.6. Option to Purchase Unimproved Portions of the
Project Site.............................. 15
ARTICLE IX
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 9.1. Damage or
Destruction...................................................................
16
Section 9.2.
Condemnation............................................................................
18
ARTICLE X
SPECIAL COVENANTS
Section 10.1. No Warranty of Condition or Suitability by the
City; Exculpation and Indemnification.... 19
Section 10.2. Surrender of
Possession.................................................................
20
Section 10.3. City's Right of Access to the
Project................................................... 20
Section 10.4. Granting of Easements; Leasehold
Mortgages.............................................. 20
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Section 10.5. Indemnification of City and
Trustee..................................................... 23
Section 10.6. Depreciation, Investment Tax Credit and Other Tax
Benefits.............................. 24
Section 10.7. Corporation to Maintain its Corporate
Existence......................................... 24
Section 10.8. Security
Interests......................................................................
24
ARTICLE XI
OPTION AND OBLIGATION TO PURCHASE THE PROJECT
Section 11.1. Option to Purchase the
Project..........................................................
24
Section 11.2. Conveyance of the
Project...............................................................
25
Section 11.3. Relative Position of Option and
Indenture............................................... 25
Section 11.4. Obligation to Purchase the
Project......................................................
25
ARTICLE XII
DEFAULTS AND REMEDIES
Section 12.1. Events of
Default.......................................................................
26
Section 12.2. Remedies on
Default.....................................................................
26
Section 12.3. Survival of
Obligations.................................................................
27
Section 12.4. Limitation of Liability and
Indemnity................................................... 28
Section 12.5. Performance of the Corporation's Obligations by
the City................................ 28
Section 12.6. Rights and Remedies
Cumulative..........................................................
28
Section 12.7. Waiver of
Breach........................................................................
28
Section 12.8. Notice of Defaults Under Section 12.1; Opportunity
of Corporation to Cure Defaults...... 28
Section 12.9. Trustee's Exercise of the City's
Remedies............................................... 29
ARTICLE XIII
ASSIGNMENT AND SUBLEASE
Section 13.1. Assignment;
Sublease....................................................................
29
Section 13.2. Assignment of Revenues by
City..........................................................
30
Section 13.3. Prohibition Against Fee Mortgage of
Project............................................. 30
Section 13.4. Restrictions on Sale or Encumbrance of Project by
City.................................. 30
ARTICLE XIV
AMENDMENTS, CHANGES AND MODIFICATIONS
Section 14.1. Amendments, Changes and
Modifications...................................................
31
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.1.
Notices.................................................................................
31
Section 15.2. City Shall Not Unreasonably Withhold Consents and
Approvals............................. 31
Section 15.3. Net
Lease...............................................................................
32
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Section 15.4. No Pecuniary
Liability..................................................................
31
Section 15.5. Governing
Law...........................................................................
32
Section 15.6. Binding
Effect..........................................................................
32
Section 15.7. Electronic
Storage......................................................................
32
Section 15.8.
Severability............................................................................
32
Section 15.9. Execution in
Counterparts...............................................................
32
Signatures and Seals
Acknowledgments
Exhibit A Project Improvements
Exhibit B Project Site
Exhibit C Form of Requisition Certificate
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LEASE AGREEMENT
THIS LEASE AGREEMENT dated as of July 1, 2007 (the "Lease"),
between the
CITY OF OLATHE, KANSAS, a municipal corporation organized and
existing under the
laws of the State of Kansas (the "City"), as lessor, and PACIFIC
SUNWEAR STORES
CORP., a California corporation (the "Corporation"), as
lessee;
WITNESSETH:
WHEREAS, the City is authorized under the provisions of K.S.A.
12-1740 to
12-1749d, inclusive, as amended (the "Act"), to purchase,
acquire, construct,
improve, equip, remodel, sell and lease certain facilities
within its
jurisdiction for commercial purposes, and to issue revenue bonds
for the purpose
of paying the cost of such facilities, and to pledge the income
and revenues to
be derived from the operation of such facilities to secure the
payment of the
principal of and interest on such bonds;
WHEREAS, pursuant to the Act, the governing body of the City
has
heretofore passed Ordinance No. 07-34 (the "Ordinance")
authorizing the City to
issue its Industrial Revenue Bonds (PacSun Project), Series 2007
(the "Bonds"),
the Bonds to be issued in the aggregate maximum principal amount
of $24,500,000
for the purpose of acquiring, purchasing, constructing and
installing a
commercial project, consisting of a distribution facility,
including land,
buildings, structures, improvements and fixtures as hereinafter
more fully
described (the "Project"), and authorizing the City to lease the
Project to the
Corporation;
WHEREAS, pursuant to the Ordinance, the City is authorized to
enter into a
Trust Indenture of even date herewith (the "Indenture"), with
U.S. Bank National
Association, a national banking association, as trustee (the
"Trustee"), for the
purpose of issuing and securing the Bonds, as therein provided,
and to enter
into this Lease with the Corporation under which the City will
acquire,
purchase, construct, improve and remodel the Project and will
lease the Project
to the Corporation in consideration of rental payments by the
Corporation which
will be sufficient to pay the principal of and interest on the
Bonds; and
WHEREAS, pursuant to the foregoing, the City desires to lease
the Project
to the Corporation and the Corporation desires to lease the
Project from the
City, for the rentals and upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual
representations, covenants and agreements herein contained, the
City and the
Corporation do hereby represent, covenant and agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS OF WORDS AND TERMS. In addition to any
words and
terms defined elsewhere in this Lease and the words and terms
defined in SECTION
101 of the Indenture which definitions are hereby incorporated
herein by
reference, and terms defined, the following words and terms as
used in this
Lease shall have the following meanings:
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"ADDITIONAL RENT" means the additional rental described in
SECTIONS 5.2
and 6.2 of this Lease and, in addition, all payments required to
be made to the
Johnson County Treasurer in lieu of general ad valorem and
personal property
taxes pursuant to the Tax Abatement Agreement.
"BASIC RENT" means the rental described in SECTION 5.1 of this
Lease.
"EVENT OF DEFAULT" means any Event of Default as described in
SECTION 12.1
of this Lease.
"FULL INSURABLE VALUE" means the lesser of: (i) the actual
replacement
cost of the Project less physical depreciation and exclusive of
land,
excavations, footings, foundation and parking lots as determined
in accordance
with SECTION 7.2(a) hereof, or (ii) an amount at least
sufficient to avoid the
effect of any coinsurance provisions of the applicable fire and
casualty
insurance policy.
"INDENTURE" means the Trust Indenture dated as of July 1, 2007,
between
the City and the Trustee, as from time to time amended and
supplemented in
accordance with the provisions thereof.
"LEASE" means this Lease Agreement, between the City and the
Corporation,
as from time to time amended and supplemented in accordance with
the provisions
of this Lease and ARTICLE XII of the Indenture.
"LEASEHOLD MORTGAGE" means any leasehold mortgage permitted
pursuant to
the provisions of SECTION 10.4(b) hereof.
"LEASE TERM" means the period from the effective date of this
Lease until
the expiration thereof pursuant to SECTION 3.2 of this
Lease.
"NET PROCEEDS" means, when used with respect to any insurance
or
condemnation award with respect to the Project, the gross
proceeds from the
insurance or condemnation award with respect to which that term
is used
remaining after payment of all expenses (including attorneys'
fees, trustee's
fees and any extraordinary expenses of the City and the Trustee)
incurred in the
collection of such gross proceeds.
"PERMITTED ENCUMBRANCES" means, as of any particular time (a)
liens for ad
valorem taxes and special assessments not then delinquent, (b)
the Indenture,
(c) this Lease, (d) utility, access and other easements and
rights-of-way,
mineral rights, restrictions, exceptions and encumbrances that
will not
materially interfere with or impair the operations being
conducted on the
Project Site or easements granted to the City, (e) such minor
defects,
irregularities, encumbrances, easements, mechanic's liens,
rights-of-way and
clouds on title as normally exist with respect to properties
similar in
character to the Project and as do not in the aggregate
materially impair the
property affected thereby for the purpose for which it was
acquired or is held
by the City, (f) any Leasehold Mortgage, and (g) any other lien,
encumbrance,
lease, easements, restrictions or covenants consented to by the
Owner of 100% of
the principal amount of the Bonds.
"PLANS AND SPECIFICATIONS" means the plans and specifications
prepared for
and showing the Project, as amended by the Corporation from time
to time prior
to the Completion Date, the same being duly certified by the
Corporation, and on
file at the principal office of the Corporation in Olathe,
Kansas and which
shall be available for reasonable inspection by the City, the
Trustee and their
duly appointed representatives.
"PROJECT IMPROVEMENTS" means all buildings, structures,
improvements and
fixtures located on or to be acquired, purchased, constructed,
improved or
remodeled on the Project Site pursuant to ARTICLE IV
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hereof, as described in EXHIBIT A attached hereto and by this
reference made a
part hereof, and all additions, alterations, modifications and
improvements
thereof made pursuant to this Lease.
"PROJECT SITE" means all of the real estate described in EXHIBIT
B
attached hereto and by this reference made a part hereof.
"TRUSTEE" means U.S. Bank National Association in the City of
Los Angeles,
California, a national banking association, duly organized and
existing under
the laws of the United States of America, and its successor or
successors and
any other corporation which at the time may be substituted in
its place pursuant
to and at the time serving as Trustee under the Indenture.
SECTION 1.2. RULES OF INTERPRETATION.
(a) Words of the masculine gender shall be deemed and construed
to include
correlative words of the feminine and neuter genders.
(b) Unless the context shall otherwise indicate, words importing
the
singular number shall include the plural and vice versa, and
words importing
persons shall include firms, associations and corporations,
including
governmental entities, as well as natural persons.
(c) Wherever in this Lease it is provided that either party
shall or will
make any payment or perform or refrain from performing any act
or obligation,
each such provision shall, even though not so expressed, be
construed as an
express covenant to make such payment or to perform, or not to
perform, as the
case may be, such act or obligation.
(d) All references in this instrument to designated "Articles,"
"Sections"
and other subdivisions are, unless otherwise specified, to the
designated
Articles, Sections and subdivisions of this instrument as
originally executed.
The words "herein," "hereof," "hereunder" and other words of
similar import
refer to this Lease Agreement as a whole and not to any
particular Article,
Section or other subdivision.
(e) The Table of Contents and the Article and Section headings
of this
Lease shall not be treated as a part of this Lease or as
affecting the true
meaning of the provisions hereof.
(f) Wherever in this Lease the words "the Corporation shall" are
used,
such words shall obligate the Corporation to take such action or
to cause such
action to be taken or not taken to the extent such action is not
directly within
the control of the Corporation.
ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS BY THE CITY. The City makes the
following
representations as the basis for the undertakings on its part
herein contained:
(a) The City is a municipal corporation duly organized and
validly
existing under the laws of the State of Kansas (the "State").
Under the
provisions of the Act, the City has lawful power and authority
to enter into the
transactions contemplated by this Lease and to carry out its
obligations
hereunder. By
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proper action of its governing body, the City has been duly
authorized to
execute and deliver this Lease, acting by and through its duly
authorized
officers.
(b) The City proposes to acquire the Project Site, subject to
Permitted
Encumbrances, and proposes to acquire, purchase, construct,
improve and remodel
or cause to be acquired, purchased, constructed, improved and
remodeled on the
Project Site the Project Improvements. The City proposes to
lease the Project to
the Corporation and sell the Project to the Corporation if the
Corporation
exercises its option to purchase the Project, all for the
purpose of furthering
the public purposes of the Act, and the governing body of the
City has found and
determined that the acquisition, purchase, construction,
improving and
remodeling of the Project will further the public purposes of
the Act.
(c) To finance the costs of the Project, the City proposes to
issue the
Bonds which will be scheduled to mature as set forth in ARTICLE
II of the
Indenture and will be subject to redemption prior to maturity in
accordance with
the provisions of ARTICLE III of the Indenture.
(d) The Bonds are to be issued under and secured by the
Indenture,
pursuant to which the Project and the net earnings therefrom,
including all
rents, revenues and receipts to be derived by the City from the
leasing or sale
of the Project, will be pledged and assigned to the Trustee as
security for
payment of the principal of and interest on the Bonds.
(e) The City will not mortgage the Project or pledge the
revenues derived
therefrom for any bonds or other obligations other than the
Bonds except with
the written consent of the Authorized Corporation
Representative.
(f) The City shall have no authority to operate the Project as a
business
or in any other manner except as the lessor thereof.
(g) The acquisition, purchase, construction, improvement and
remodeling of
the Project and the leasing of the Project by the City to the
Corporation will
further the public purposes of the Act.
(h) No member of the governing body of the City or any other
officer of
the City has any significant or conflicting interest, financial,
employment or
otherwise, in the Corporation or in the transactions
contemplated hereby.
SECTION 2.2. REPRESENTATIONS BY THE CORPORATION. The Corporation
makes the
following representations as the basis for the undertakings on
its part herein
contained:
(a) The Corporation is a corporation validly existing and in
good standing
under the laws of the State of California and duly qualified to
do business in
the State of Kansas.
(b) The Corporation has lawful power and authority to enter into
this
Lease and to carry out its obligations hereunder and by proper
corporate action
of its Board of Directors, the Corporation has been duly
authorized to execute
and deliver this Lease, acting by and through its duly
authorized officers.
(c) The execution and delivery of this Lease, the consummation
of the
transactions contemplated hereby, and the performance of or
compliance with the
terms and conditions of this Lease by the Corporation will not
conflict with or
result in a material breach of any of the terms, conditions or
provisions of, or
constitute a material default under, any mortgage, deed of
trust, lease or any
other corporate restrictions or any agreement or instrument to
which the
Corporation is a party or by which it or any of its
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property is bound, or the Corporation's Articles of
Incorporation or Bylaws or
any order, rule or regulation applicable to the Corporation or
any of its
property of any court or governmental body, or constitute a
material default
under any of the foregoing, or result in the creation or
imposition of any
prohibited lien, charge or encumbrance of any nature whatsoever
upon any of the
property or assets of the Corporation under the terms of any
instrument or
agreement to which the Corporation is a party.
(d) The Project will comply with all presently applicable
building and
zoning, health, environmental and safety ordinances and laws,
and to the best of
its knowledge, without independent investigation, the Project
will comply with
all other applicable laws, rules and regulations.
(e) The Project is located wholly within the corporate limits of
the City
of Olathe, Kansas.
ARTICLE III
GRANTING PROVISIONS
SECTION 3.1. GRANTING OF LEASEHOLD ESTATE. The City hereby
rents, leases
and lets the Project to the Corporation, subject to Permitted
Encumbrances, and
the Corporation hereby rents, leases and hires the Project from
the City,
subject to Permitted Encumbrances, for the rentals and upon and
subject to the
terms and conditions herein contained.
SECTION 3.2. LEASE TERM. This Lease shall become effective upon
its
delivery, and subject to sooner termination pursuant to the
provisions of this
Lease, shall have an initial term commencing as of the date of
this Lease and
terminating on January 1, 2018.
SECTION 3.3. POSSESSION AND USE OF THE PROJECT.
(a) The City covenants and agrees that as long as neither the
City nor the
Trustee has exercised any of the remedies set forth in SECTION
12.2(c) following
the occurrence and continuance of an Event of Default, the
Corporation shall
have sole and exclusive possession of the Project (subject to
Permitted
Encumbrances and the City's and the Trustee's right of access
pursuant to
SECTION 10.3 hereof) and shall and may peaceably and quietly
have, hold and
enjoy the Project during the Lease Term. The City covenants and
agrees that it
will not take any action, other than expressly pursuant to
ARTICLE XII of this
Lease, to prevent the Corporation from having quiet and
peaceable possession and
enjoyment of the Project during the Lease Term and will, at the
request and
expense of the Corporation, cooperate with the Corporation in
order that the
Corporation may have quiet and peaceable possession and
enjoyment of the Project
and will defend the Corporation's enjoyment and possession
thereof against all
parties.
(b) Subject to the provisions of this Section, the Corporation
shall have
the right to use the Project for any lawful purpose allowed by
law and
contemplated by the Act. The Corporation shall comply with all
statutes, laws,
ordinances, orders, judgments, decrees, regulations, directions
and requirements
of all federal, state, local and other governments or
governmental authorities,
now or hereafter applicable to the Project or to any adjoining
public ways, as
to the manner of use or the condition of the Project or of
adjoining public
ways. The Corporation shall also comply with the mandatory
requirements, rules
and regulations of all insurers under the policies carried under
the provisions
of ARTICLE VII hereof. The Corporation shall pay all costs,
expenses, claims,
fines, penalties and damages that may in any manner arise out
of, or be imposed
as a result of, the failure of the Corporation to comply with
the provisions of
this Section. Notwithstanding any provision contained in this
Section, however,
the Corporation shall have the
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right, at its own cost and expense, to contest or review by
legal or other
appropriate procedures the validity, legality or application of
any such
governmental statute, law, ordinance, order, judgment, decree,
regulation,
direction or requirement, or any such requirement, rule or
regulation of an
insurer, and during such contest or review the Corporation may
refrain from
complying therewith.
ARTICLE IV
PURCHASE, CONSTRUCTION, RENOVATION AND
INSTALLATION OF THE PROJECT
SECTION 4.1. ISSUANCE OF THE BONDS.
(a) In order to provide funds for the payment of the Project
Costs, the
City agrees that it will issue, sell and cause to be delivered
to the purchaser
thereof the Bonds in accordance with the provisions of the
Indenture and the
Bond Purchase Agreement. The proceeds of the sale of the Bonds,
when received,
shall be paid over to the Trustee for the account of the City.
The Trustee shall
promptly deposit such proceeds, when received, as provided in
the Indenture, to
be used and applied as hereinafter provided in this Article and
in the
Indenture.
(b) The City may authorize the issuance of Additional Bonds from
time to
time upon the terms and conditions provided in SECTION 209 of
the Indenture for
the purposes described therein.
(c) If the Corporation is not in default hereunder, the City
will, at the
request of the Corporation, from time to time, use its best
efforts to issue the
amount of Additional Bonds specified by the Corporation;
provided that the terms
of such Additional Bonds, the purchase price to be paid therefor
and the manner
in which the proceeds therefrom are to be disbursed shall have
been approved in
writing by the Corporation; provided further that the
Corporation and the City
shall have entered into an amendment to this Lease to provide an
increase in for
rent in an amount at least sufficient to pay principal and
interest on the
Additional Bonds when due and the City shall have otherwise
complied with the
provisions of the Indenture with respect to the issuance of such
Additional
Bonds.
SECTION 4.2. PURCHASE, CONSTRUCTION, RENOVATION AND INSTALLATION
OF THE
PROJECT. The City and the Corporation agree that the City will
and the
Corporation as the agent of the City shall, but solely from the
Construction
Fund except as otherwise provided herein, acquire, purchase,
construct, improve
and remodel the Project as follows:
(a) Concurrently with the execution of this Lease, the City will
acquire
the Project Site and any Project Improvements located on the
Project Site and
which the Corporation desires to convey to the City, subject to
the Permitted
Encumbrances. Concurrently with the execution of this Lease (1)
a deed and any
other necessary instruments of transfer will be delivered to the
City, (2) said
deed will be placed of record, and (3) the title insurance
policies required by
ARTICLE VII hereof or commitments to issue such policies will be
delivered to
the Trustee.
(b) The Corporation will, on behalf of the City, acquire,
purchase,
construct, improve and remodel the Project Improvements on the
Project Site and
otherwise improve the Project Site substantially in accordance
with the Plans
and Specifications. The Corporation may make minor changes in
and to the
construction contracts and the Plans and Specifications
incorporated therein
without the consent of the City. The Corporation shall notify
the City in
writing of major changes. "Major changes" shall be any change
that
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has an estimated cost (increase or decrease) of $1,000,000. The
Corporation
agrees that the aforesaid acquisition, purchase, construction,
improvement and
remodeling will, with such changes and additions as may be made
hereunder,
result in a project suitable for use by the Corporation for its
purposes, and
that all real property described therein is necessary in
connection with the
Project.
(c) The Corporation agrees that it will use commercially
reasonable and
good faith efforts to cause the acquisition, purchase,
construction, improvement
and remodeling of the Project to be completed as soon as
practicable with all
reasonable dispatch. In the event such acquisition, purchase,
construction,
improvement and remodeling commences prior to the receipt of
proceeds from the
sale of the Bonds, the Corporation agrees to advance all funds
necessary for
such purpose. The Corporation shall seek reimbursement for all
such funds
advanced.
SECTION 4.3. PROJECT COSTS. The City hereby agrees to pay for,
but solely
from the Construction Fund, and hereby authorizes and directs
the Trustee to pay
for, but solely from the Construction Fund, all Project Costs
upon receipt by
the Trustee of a certificate pursuant to SECTION 4.4 hereof. The
term Project
Costs shall have the meaning set forth in the Indenture.
SECTION 4.4. PAYMENT FOR PROJECT COSTS. All Project Costs as
specified in
SECTION 4.3 hereof shall be paid by the Trustee from the
Construction Fund as
more fully provided in the Indenture. The City hereby authorizes
and directs the
Trustee to make disbursements from the Construction Fund, upon
receipt by the
Trustee of certificates in substantially the form attached
hereto as EXHIBIT E,
signed by an Authorized Corporation Representative:
(a) requesting payment of a specified amount of such funds
and
directing to whom such amount shall be paid (whose name and
address shall
be stated);
(b) describing in reasonable detail each item of Project Costs
for
which payment is being requested;
(c) stating that each item for which payment is requested is or
was
necessary and appropriate in connection with the purchase,
acquisition,
construction, improvement or remodeling of the Project, has been
properly
incurred and is a proper charge against the Construction Fund,
that the
amount requested either has been paid, or is justly due, and has
not been
the basis of any previous requisition from the Construction
Fund; and
(d) stating that, except for the amounts, if any, stated in
said
certificate, to the best of their knowledge there are no
outstanding
statements which are then due and payable for labor, wages,
materials,
supplies or services in connection with the purchase,
acquisition,
construction, improving or remodeling of the Project which, if
unpaid,
might become the basis of a vendors', mechanics', laborers'
or
materialmen's statutory or other similar lien upon the Project
or any part
thereof, or setting out (i) all disputed statements and the
reason for
such disputes, and (ii) all statements in process but not yet
presented to
the Trustee for payment.
The Trustee may rely conclusively on any such certificate and
shall not be
required to make any independent investigation in connection
therewith.
SECTION 4.5. ESTABLISHMENT OF COMPLETION DATE. The Completion
Date shall
be evidenced to the Trustee by a certificate signed by the
Authorized
Corporation Representative stating (a) that the acquisition,
purchase,
construction, improvement and remodeling of the Project has been
completed
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substantially in accordance with the Plans and Specifications in
all material
respects, (b) that all costs and expenses incurred in the
acquisition, purchase,
construction, improvement and remodeling of the Project have
been paid except
costs and expenses the payment of which is not yet due or is
being retained or
contested in good faith by the Corporation, and (c) amounts to
be retained by
Trustee with respect to item (b) above. Notwithstanding the
foregoing, such
certificate shall state that it is given without prejudice to
any rights against
third parties which exist at the date of such certificate or
which may
subsequently come into being. The Corporation and the City agree
to cooperate in
causing such certificate to be furnished to the Trustee.
SECTION 4.6. SURPLUS OR DEFICIENCY IN CONSTRUCTION FUND.
(a) Upon receipt of the certificate described in SECTION 4.5
hereof, the
Trustee shall, as provided in SECTION 504 of the Indenture,
transfer any
remaining moneys then in the Construction Fund to the Bond Fund
to be applied as
directed by the Corporation solely to (1) the payment of
principal and premium,
if any, of the Bonds through the payment (including regularly
scheduled
principal payments, if any) or redemption thereof at the
earliest date
permissible under the terms of the Indenture, or (2) at the
option of the
Corporation, to the purchase of Bonds at such earlier date or
dates as the
Corporation may elect. Any amount so deposited in the Bond Fund
may be invested
as permitted by SECTION 702 of the Indenture.
(b) If the Construction Fund shall be insufficient to pay fully
all
Project Costs and to complete the Project lien free, the
Corporation shall pay,
in cash, the full amount of any such deficiency by making
payments thereof
directly to the contractors and to the suppliers of materials
and services as
the same shall become due, and the Corporation shall save the
City and the
Trustee whole and harmless from any obligation to pay such
deficiency.
SECTION 4.7. PROJECT PROPERTY OF CITY. The Project Site and all
Project
Improvements located thereon at the execution hereof and which
the Corporation
desires to convey to the City, all work and materials on the
Project
Improvements as such work progresses, and all additions or
enlargements thereto
or thereof, the Project as fully completed, anything under this
Lease which
becomes, is deemed to be, or constitutes a part of the Project,
and the Project
as repaired, rebuilt, rearranged, restored or replaced by the
Corporation under
the provisions of this Lease, except as otherwise specifically
provided herein,
shall immediately when erected or installed become the absolute
property of the
City, subject only to Permitted Encumbrances.
ARTICLE V
RENT PROVISIONS
SECTION 5.1. BASIC RENT. The Corporation covenants and agrees to
pay to
the Trustee in same day funds for the account of the City during
this Lease
Term, for deposit in the Bond Fund on or before 11:00 A.M.,
Trustee's local
time, on each January 1 and July 1, commencing January 1, 2008,
the amount of
principal of and the interest on the Bonds then due in
accordance with the
provisions of the Indenture, as Basic Rent for the Project, in
an amount which,
when added to any collected funds then on deposit in the Bond
Fund and available
for the payment of principal on the Bonds and the interest
thereon on such
payment date, shall be equal to the amount payable on such
payment date as
principal of the Bonds and the interest thereon as provided in
the Indenture.
All payments of Basic Rent provided for in this Section shall be
paid directly
to the Trustee and shall be deposited in accordance with the
provisions of the
Indenture into the Bond Fund and shall be used and applied by
the Trustee in the
manner and for the purposes set forth in this
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Lease and the Indenture. Subject to the other provisions of this
Lease and the
Indenture, at any time that the Corporation is the sole
Bondowner, the
Corporation may, at its option, make payments of Basic Rent by
tendering a
portion of the principal amount of the Bonds equal to such
principal payment
thereon to the Trustee for cancellation.
SECTION 5.2. ADDITIONAL RENT. The Corporation shall pay as
Additional Rent
the following amounts (to the extent such amounts have not
already been paid
pursuant to other provisions under this Lease):
(a) all reasonable fees, charges and expenses, including agent
and counsel
fees, of the Trustee and the Paying Agent incurred under the
Indenture, as and
when the same become due;
(b) all costs incident to the payment of the principal of and
interest on
the Bonds as the same becomes due and payable, including all
costs and expenses
in connection with the call, redemption and payment of all
Outstanding Bonds;
(c) all expenses reasonably incurred in connection with the
enforcement of
any rights against the Corporation or the Project under this
Lease or the
Indenture by the City, the Trustee or the Bondowners, except for
such expenses
as may be incurred solely as a result of the gross negligence or
wrongful
misconduct of the City, the Trustee or both;
(d) an amount sufficient to reimburse the City for all expenses
reasonably
incurred by the City hereunder and in connection with the
performance of its
obligations under this Lease, the Indenture or the Tax Abatement
Agreement;
(e) all amounts payable under the Tax Abatement Agreement;
(f) all annual fees of the City or the Kansas Board of Tax
Appeals; and
(g) all other payments of whatever nature which the Corporation
has agreed
to pay or assume under the provisions of this Lease.
SECTION 5.3. OBLIGATIONS OF CORPORATION ABSOLUTE AND
UNCONDITIONAL.
(a) Except as expressly provided herein, the obligations of
the
Corporation under this Lease to make payments of Basic Rent and
Additional Rent
on or before the date the same become due, and to perform all of
its other
obligations, covenants and agreements hereunder shall be
absolute and
unconditional, without notice or demand, and without abatement,
deduction,
set-off, counterclaim, recoupment or defense or any right of
termination or
cancellation arising from any circumstance whatsoever, whether
now existing or
hereafter arising, and irrespective of whether the Project shall
have been
started or completed, or whether the City's title thereto or to
any part thereof
is defective or nonexistent, and notwithstanding any damage to,
loss, theft or
destruction of, the Project or any part thereof, any failure of
consideration or
frustration of commercial purpose, the taking by eminent domain
of title to or
of the right of temporary use of all or any part of the Project,
legal
curtailment of the Corporation's use thereof, the eviction or
constructive
eviction of the Corporation, any change in the tax or other laws
of the United
States of America, the State of Kansas or any political
subdivision thereof, any
change in the City's legal organization or status, or any
default of the City
hereunder, and regardless of the invalidity of any action of the
City, and
regardless of the invalidity of any portion of this Lease.
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(b) Nothing in this Lease shall be construed to release the City
from the
performance of any agreement on its part herein contained or as
a waiver by the
Corporation of any rights or claims the Corporation may have
against City under
this Lease or otherwise, but any recovery upon such rights and
claims shall be
had from the City separately, it being the intent of this Lease
that the
Corporation shall be unconditionally and absolutely obligated to
perform fully
all of its obligations, agreements and covenants under this
Lease (including the
obligation to pay Basic Rent and Additional Rent) for the
benefit of the
Bondowners. The Corporation may, however, at its own cost and
expense and in its
own name or in the name of the City, prosecute or defend any
action or
proceeding or take any other action involving third persons
which the
Corporation deems reasonably necessary in order to secure or
protect its right
of possession, occupancy and use hereunder, and in such event
the City hereby
agrees to cooperate fully with the Corporation and to take all
action necessary
to effect the substitution of the Corporation for the City in
any such action or
proceeding if the Corporation shall so request.
SECTION 5.4. PREPAYMENT OF BASIC RENT. The Corporation may at
any time
prepay all or any part of the Basic Rent provided for hereunder.
During such
times as the amount held by the Trustee in the Bond Fund shall
be sufficient to
pay, at the time required, the principal of and interest on all
the Bonds then
remaining unpaid, the Corporation shall not be obligated to make
payments of
Basic Rent under the provisions of this Lease.
SECTION 5.5. REDEMPTION OF BONDS. The City and the Trustee, at
the written
direction of the Corporation, at any time the aggregate moneys
in the Bond Fund
are sufficient for such purposes, shall (a) if the same are then
redeemable
under the provision of ARTICLE III of the Indenture, take all
steps that may be
necessary under the applicable redemption provisions of the
Indenture to effect
the redemption of all or such part of the then Outstanding Bonds
as may be
specified by the Corporation, on such redemption date as may be
specified by the
Corporation or (b) cause such moneys in the Bond Fund or such
part thereof as
the Corporation shall direct, to be applied by the Trustee for
the purchase of
Bonds in the open market for the purpose of cancellation at
prices not exceeding
the principal amount thereof, or (c) a combination of (a) and
(b) as provided in
such direction.
ARTICLE VI
MAINTENANCE, TAXES AND UTILITIES
SECTION 6.1. MAINTENANCE AND REPAIRS. Throughout the Lease Term
the
Corporation shall, at its own expense, keep the Project in as
reasonably safe
condition as the operation thereof will permit, and keep the
Project in good
repair and in good operating condition, making from time to time
such repairs
thereto and renewals and replacements thereof as the Corporation
deems
necessary.
SECTION 6.2. TAXES, ASSESSMENTS AND OTHER GOVERNMENTAL
CHARGES.
(a) The Corporation shall promptly pay and discharge, as the
same become
due, all taxes and assessments, general and special, and other
governmental
charges of any kind whatsoever that may be lawfully taxed,
charged, levied,
assessed or imposed upon or against the Project, or any part
thereof or interest
therein (including the leasehold estate of the Corporation
therein) or any
buildings, improvements at any time installed thereon by the
Corporation, or the
income therefrom or Basic Rent and other amounts payable under
this Lease,
including any new taxes and assessments not of the kind
enumerated above to the
extent that the same are lawfully made, levied or assessed in
lieu of or in
addition to taxes or assessments now customarily levied against
real or personal
property, and further including all utility charges,
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assessments and other general governmental charges and
impositions whatsoever,
foreseen or unforeseen, which if not paid when due would
materially impair the
security of the Bonds or materially encumber the City's title to
the Project;
provided that with respect to any special assessments or other
governmental
charges that are lawfully levied and assessed which may be paid
in installments,
the Corporation shall be obligated to pay only such installments
thereof as
become due and payable during the Lease Term.
(b) The Corporation shall have the right, in its own name or in
the City's
name, to contest the validity, application or amount of any tax,
assessment or
other governmental charge which the Corporation is required to
bear, pay and
discharge pursuant to the terms of this Article by appropriate
legal proceedings
instituted before the tax, assessment or other governmental
charge complained of
becomes delinquent if and provided (1) the Corporation, before
instituting any
such contest, gives the City written notice of its intention so
to do, (2) the
Corporation diligently prosecutes any such contest, at all times
effectively
stays or prevents any official or judicial sale therefor, under
execution or
otherwise, and (3) the Corporation promptly pays any final
judgment enforcing
the tax, assessment or other governmental charge so contested
and thereafter
promptly procures record release or satisfaction thereof. The
City agrees to
cooperate fully with the Corporation in connection with any and
all
administrative or judicial proceedings related to any tax,
assessment or other
governmental charge. The Corporation shall hold the City whole
and harmless from
any costs and expenses the City may incur related to any of the
above.
SECTION 6.3. UTILITIES. All utilities and utility services used
by the
Corporation in, on or about the Project shall be paid for by the
Corporation and
shall be contracted for by the Corporation in the Corporation's
own name, and
the Corporation shall, at its sole cost and expense, procure any
and all
permits, licenses or authorizations necessary in connection
therewith.
SECTION 6.4. AD VALOREM TAXES. The City and the Corporation
acknowledge
that under the existing provisions of K.S.A. 79-201a, as
amended, the property
purchased, acquired, constructed, reconstructed, improved,
furnished, repaired,
enlarged or remodeled with the proceeds of the Bonds is entitled
to exemption
from general ad valorem and property taxes (other than special
assessments
levied on account of special benefits) on real and personal
property, other than
inventory, for a period of ten (10) calendar years after the
calendar year in
which the Bonds are issued, provided proper application is made
therefor. The
City covenants that it will not voluntarily take any action
which may be
reasonably construed as tending to cause or induce the levy or
assessment of
such ad valorem or property taxes on the Project so long as any
of the Bonds are
Outstanding and unpaid or for said ten (10) year period,
whichever shall be the
shorter time, and at the Corporation's request, fully cooperate
with the
Corporation in all reasonable ways to prevent any such levy or
assessment. The
City shall file the Application for Exemption to effect the
property tax
abatement described in K.S.A. 79-201a using information to be
provided by the
Corporation. The Corporation agrees to pay any such levies or
assessments that
are lawful on the Project.
SECTION 6.5. PAYMENT IN LIEU OF TAXES. The Corporation agrees
that, during
each year the Project is exempt from ad valorem and personal
property taxes by
reason thereof, the Corporation will make a payment in lieu of
taxes to the City
in the amounts and at the times set forth in the Tax Abatement
Agreement
providing for payments in lieu of such ad valorem and personal
property taxes.
Such payment shall be made each year at the time ad valorem
taxes on the Project
would first be due and payable but for such exemption.
SECTION 6.6. KANSAS RETAILERS' SALES TAX. The parties have
entered into
this Lease Agreement in contemplation that, under the existing
provisions of
K.S.A. 79-3606(d) and other applicable laws, sales of tangible
personal property
or services purchased in connection with the acquisition,
purchase,
construction, improving or remodeling of the Project are
entitled to exemption
from the tax imposed by the Kansas
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Retailers' Sales Tax Act. The parties agree that the City shall,
upon the
request of and with the Corporation's assistance, promptly
obtain from the State
and furnish to the contractors and suppliers an exemption
certificate for the
acquisition, purchase, construction, improving or remodeling of
the Project. The
Corporation covenants that said exemption shall be used only in
connection with
the purchase of tangible personal property or services becoming
a part of the
Project.
ARTICLE VII
INSURANCE
SECTION 7.1. TITLE INSURANCE. The Corporation will purchase, on
behalf of
the City and the Trustee, at its expense, from a Corporation
duly qualified to
issue such insurance in the State of Kansas, an owner's policy
of title
insurance in the amount of at least $1,000,000. Copies of said
policy or a
commitment therefor will be delivered to the Trustee by the
Corporation on or
before the date of issuance of the Bonds.
SECTION 7.2. CASUALTY INSURANCE.
(a) Subject to the right of the Corporation to increase the
deductibles
described herein and to provide for self-insurance as provided
in subparagraph
(c) of this Section, the Corporation shall at all times during
the construction
period maintain at its sole cost and expense, or cause the
contractors under the
construction contracts to maintain, in full force and effect a
policy or
policies of Builder's Risk-Completed Value Form Insurance
insuring the Project
against fire, lightning and all other risks covered by the
extended coverage
endorsement then in use in the State of Kansas to the Full
Insurable Value of
the Project (subject to reasonable loss deductible clauses not
to exceed
$1,000,000).
Subject to the rights of the Corporation provided in
subparagraph (c) of
this Section, prior to or simultaneously with the expiration of
said Builder's
Risk Insurance, the Corporation shall at its sole cost and
expense obtain and
shall maintain throughout the Lease Term, a policy or policies
of insurance to
keep the Project constantly insured against loss or damage by
fire, lightning
and all other risks covered by the extended coverage insurance
endorsement then
in use in the State of Kansas in an amount equal to the Full
Insurable Value
thereof (subject to reasonable loss deductible clauses not to
exceed
$1,000,000). The initial determination of Full Insurable Value
shall be made at
the Completion Date, and thereafter, the Full Insurable Value of
the Project
shall be provided from time to time at the written request of
the City or the
Trustee (but not more frequently than once in every three years)
by the
certificate of an Authorized Corporation Representative or the
chief financial
officer of the Corporation. The insurance required pursuant to
this Section
shall be maintained at the Corporation's sole cost and expense,
shall be
maintained with generally recognized responsible insurance
company or companies
authorized to do business in the State of Kansas as may be
selected by the
Corporation. Copies of the insurance policies required under
this Section, or
originals or certificates thereof, shall be delivered by the
Corporation to the
Trustee. All such policies of insurance pursuant to this
Section, and all
renewals thereof, shall name the City, the Corporation and the
Trustee as
insureds as their respective interests may appear, and shall
contain a provision
that such insurance may not be canceled by the issuer thereof
without at least
30 days' advance written notice to the City, the Corporation and
the Trustee,
and shall be payable to the Trustee.
(b) In the event of loss or damage to the Project, the Net
Proceeds of
casualty insurance carried pursuant to this Section shall be
paid over to the
Trustee and shall be applied as provided in ARTICLE IX of this
Lease.
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(c) In lieu of obtaining all or any part of the insurance
required by
subparagraph (a) hereof, the Corporation may elect to be
self-insured for all or
any part of the foregoing requirements (which right to self
insure shall include
the right of the Corporation to increase the deductibles on such
policies to an
amount not to exceed $1,000,000) provided the Corporation
complies with each of
the following: (i) the Corporation notifies the City and the
Trustee in writing
that it has ele
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