<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1996
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
METRO NETWORKS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4899 76-0505148
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
</TABLE>
2700 POST OAK BOULEVARD
SUITE 1400
HOUSTON, TEXAS 77056
(713) 621-2800
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
DAVID I. SAPERSTEIN
CHIEF EXECUTIVE OFFICER
METRO NETWORKS, INC.
2700 Post Oak Boulevard
Houston, Texas 77056
(713) 621-2800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
Neil A. Torpey, Esq. Robert E. Buckholz, Jr.,
Paul, Hastings, Janofsky & Esq.
Walker Sullivan & Cromwell
399 Park Avenue 125 Broad Street
New York, New York 10022 New York, New York 10004
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
------------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AGGREGATE OFFERING AMOUNT OF REGISTRATION
REGISTERED PRICE(1) FEE
<S> <C> <C>
Common Stock, $.001 par value.......... $115,000,000 $39,656
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act of 1933, as amended.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
METRO NETWORKS, INC.
CROSS-REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM S-1
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus....................... Front Cover Page of Registration Statement;
Cross-Reference Sheet; Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges............................ Prospectus Summary; Risk Factors; The Company;
Selected Consolidated Financial Data
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Principal and Selling Stockholders
8. Plan of Distribution................................. Underwriting
9. Description of Securities to be Registered........... Description of Capital Stock
10. Interests of Named Experts and Counsel............... *
11. Information with Respect to the Registrant........... Outside Front Cover Page of Prospectus; Prospectus
Summary; Risk Factors; The Company; Capitalization;
Selected Financial and Operating Data; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business; Management;
Principal and Selling Stockholders; Certain
Transactions; Description of Capital Stock; Shares
Eligible for Future Sale; Available Information;
Combined Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities....................... *
</TABLE>
- ------------------------
* Not applicable.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 19, 1996
[ ] SHARES
[LOGO] METRO NETWORKS, INC.
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
--------------
Of the [ ] shares of Common Stock offered hereby, [ ] shares
are being sold by the Company and [ ] shares are being sold by the Selling
Stockholder. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholder. See "Principal and Selling Stockholders."
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering price
per share will be between $ and $ . For factors to be considered in
determining the initial public offering price, see "Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 HEREOF FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
Application will be made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "MTNT."
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------
<TABLE>
<S> <C> <C> <C> <C>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDER(2)
------------------ ------------------ ------------------ ------------------
Per Share........................... $ $ $ $
Total(3)............................ $ $ $ $
</TABLE>
- --------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional [ ] shares of Common Stock at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. If such option is exercised in full, the total initial
public offering price, underwriting discount and proceeds to the Company
will be $ , $ and $ , respectively. See "Underwriting".
--------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York on or about
August , 1996, against payment therefor in immediately available funds.
--------------
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
--------------
The date of this Prospectus is , 1996.
<PAGE>
[PICTURES AND TEXT]
[MAP OF MARKETS]
--------------
The Company intends to furnish to its shareholders annual reports containing
audited financial statements and quarterly reports containing unaudited interim
financial information for the first three fiscal quarters of each fiscal year.
--------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES 10B-6,
10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND COMBINED FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN
THIS PROSPECTUS ASSUMES THAT THE OVER-ALLOTMENT OPTIONS GRANTED TO THE
UNDERWRITERS ARE NOT EXERCISED. IN ADDITION, UNLESS THE CONTEXT REQUIRES
OTHERWISE, REFERENCES TO THE COMPANY REFER TO METRO NETWORKS, INC., A DELAWARE
CORPORATION, AND ITS SUBSIDIARIES AFTER THE REORGANIZATION (AS DEFINED HEREIN).
A GLOSSARY OF CERTAIN TERMS APPEARING HEREIN HAS BEEN INCLUDED IN THIS
PROSPECTUS. SEE "GLOSSARY."
THE COMPANY
OVERVIEW
The Company is the largest provider of traffic reporting services, and a
leading supplier of local news, sports, weather and other information reporting
services, to the television and radio broadcast industries. The Company's
information reports, which are customized to meet the specific needs of each of
the Company's individual radio and television station affiliates, are presently
being broadcast by approximately 1,275 radio station affiliates and 100
television station affiliates. The Company provides local broadcast information
reports in 47 of the 50 largest MSA markets in the United States. In exchange
for the Company's information reports, radio and television station affiliates
provide commercial airtime inventory to the Company. The packaging and sale of
this commercial airtime inventory accounts for substantially all of the
Company's revenue. See "Business."
Because the Company has numerous radio station affiliates in each of its
markets (averaging 21 affiliates per market), the Company believes that its
broadcasts of local traffic information reach more people, more often, in a
higher impact manner than can be achieved using any other advertising medium.
The Company's information reports are broadcast daily in 60 MSA markets and are
heard by more than 100 million people (age 12 and over). Such reports and the
Company's commercial messages are listened to by an average of 88% of the
population (age 12 and over) in its markets. The Company's large network of
affiliates allows it to offer advertisers the opportunity to reach a broad-based
local, regional or national audience, through a single purchase of commercial
airtime inventory. See "Business."
The Company offers advertisers three different networks on which to
broadcast their advertisements: the network of radio stations (the "Radio
Traffic Services Network") which broadcasts the Company's traffic information
reports (the "Radio Traffic Services"); the network of radio stations (the
"Expanded Radio Services Network") which broadcasts an array of customized local
news, sports, weather and other programming services (the "Expanded Radio
Services"); and the network of television stations (the "MetroTV Network") which
broadcasts the Company's television traffic services and video news services
(the "Television Traffic Services" and "Video News Services" and collectively,
the "MetroTV Services"). The Company believes that the Expanded Radio Services
Network and the MetroTV Network, both of which are currently being developed,
will become separate broad-based networks through which the Company will be able
to acquire, package and sell additional commercial airtime inventory. See
"Business -- Operating Strategy."
Since its founding in 1978, the Company has demonstrated growth in net
revenues and Pro Forma EBITDA (I.E., the Company's income from operations plus
depreciation and amortization and predecessor shareholder costs). The Company
had net revenues of $23.0 million and Pro Forma EBITDA of $3.7 million for the
three months ended March 31, 1996, representing increases of $8.4 million and
$2.8 million, respectively, from $14.7 million and $0.9 million, respectively,
for the three months ended March 31, 1995. For the year ended December 31, 1995,
the Company had net revenues of $72.4 million and Pro Forma EBITDA of $10.8
million. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Selected Financial and Operating Data."
3
<PAGE>
OPERATING STRATEGY
The Company's strategy is to realize operating efficiencies by; (i)
expanding geographically, (ii) increasing the number of affiliates using Radio
Traffic Services within existing markets, (iii) developing the Expanded Radio
Services, (iv) developing the MetroTV Services and (v) continuing to strengthen
its marketing, sales and inventory management operations.
-EXPAND GEOGRAPHICALLY. The Company, which currently operates in 60 MSA
markets in the United States, including 54 of the largest 75 MSA markets,
believes that the economic model for its local information services
business is viable in each of those markets. Since July 1994, the Company
has entered 16 new markets and the Company intends to expand into the
remaining 21 markets over the next three years through strategic
acquisitions and start-ups. The Company is always examining acquisition and
expansion opportunities.
-INCREASE THE NUMBER OF AFFILIATES USING RADIO TRAFFIC SERVICES WITHIN
EXISTING MARKETS. The Company believes there are substantial opportunities
for continued growth in the Radio Traffic Services Network. As of March 31,
1996, the Company provided its Radio Traffic Services to approximately
1,275 radio station affiliates, an increase from 914 radio station
affiliates as of December 31, 1994. The Company believes that opportunities
are available to increase its market penetration by establishing affiliate
relationships with additional radio stations nationwide. Its current
affiliates represent 68% of the approximately 1,861 radio stations in the
60 MSA markets in which the Company operates. The Company believes that in
many markets, it may be possible to establish affiliate relationships with
substantially all of the radio stations in the market.
-DEVELOP THE EXPANDED RADIO SERVICES. Having established a substantial
market presence in Radio Traffic Services, the Company began during 1994 to
leverage this business by offering Expanded Radio Services to its network
of radio station affiliates. As of March 31, 1996, the Company provided
Expanded Radio Services to more than 200 radio station affiliates in 26 MSA
markets, an increase from 92 radio station affiliates in 17 MSA markets as
of December 31, 1994. The Company intends to expand these services to all
of its markets by the end of 1997.
-DEVELOP METROTV SERVICES. The Company has provided Television Traffic
Services to the MetroTV Network for over ten years. This network consisted
of 103 television stations in 46 DMA markets as of March 31, 1996, an
increase from 71 television stations in 33 DMA markets as of December 31,
1994. In connection with its core Radio Traffic Services business, the
Company developed an extensive array of video surveillance and broadcast
equipment, including jet helicopters, broadcast quality remote and
omni-directional aircraft mounted camera systems, mobile units,
computer-generated graphic displays and broadcasting technology. In 1995,
the Company began to use this infrastructure to offer the Video News
Services to its network of television station affiliates, and is currently
providing these services to 16 of its television station affiliates in nine
of its 46 DMA markets. The MetroTV Services include full service, 24 hours
per day/7 days per week video coverage from camera crews in the Company's
aircraft and mobile ground units covering breaking news stories. The
Company intends to expand the Video News Services into the 25 largest DMA
markets in the United States over the next three years.
-CONTINUE TO STRENGTHEN ITS MARKETING, SALES AND INVENTORY MANAGEMENT
OPERATIONS. Over the past year, the Company has invested in, and continues
to initiate and implement, new operating strategies and systems to increase
revenues and Pro Forma EBITDA. In order to increase the percentage of the
Company's commercial airtime inventory sold, the Company has (i) increased
its sales force from approximately 70 sales representatives as of December
31, 1994 to approximately 125 sales representatives as of March 31, 1996;
(ii) developed a corporate marketing department to support the efforts of
its sales representatives by providing extensive training, research,
sales/marketing materials and analysis; (iii) hired additional general
managers and sales managers to better manage the activities of its sales
representatives and enhance its affiliate relationships; (iv) fully
automated its commercial airtime inventory management system to
4
<PAGE>
improve inventory control and pricing; and (v) reduced the level of
reciprocal arrangements (the exchange of commercial airtime for goods and
services) to focus sales representatives on cash revenue business.
PROGRAMMING
Every aspect of the Company's information reports (including the length of
report, content of report, specific geographic coverage area, time of broadcast,
number of reports aired per day, broadcaster's style, etc.) is customized to
meet each individual affiliate's requirements. The Company typically works
closely with the program directors, news directors, and general managers of its
affiliates to ensure that the Company's services meet its affiliates' quality
standards. The Company and its affiliates jointly select the on-air broadcasters
to ensure that each broadcaster's style is appropriate for the station's format.
The Company's broadcasters often become integral "personalities" on such
affiliates' stations as a result of their significant on-air presence and
interaction with the stations' on-air personnel. In order to realize operating
efficiencies, the Company endeavors to utilize its professional broadcasters on
multiple affiliate stations within a particular market. Generally, each of the
Company's broadcasters deliver reports to between two and four of the Company's
affiliates.
The Company does not require its affiliates to identify the Company as the
supplier of its information reports. This provides the Company's affiliates with
a high degree of customization and flexibility, as each affiliate has the right
to present the information reports provided by the Company as if the affiliate
had generated such reports with its own resources. For example, multiple
affiliates in a single market may suggest that the Company's infrastructure,
including its airplanes, helicopters and broadcasters, are those of the
affiliate. See "Business -- Programming".
INFRASTRUCTURE
The Company believes that its extensive fleet of aircraft and other
information-gathering technology and broadcast equipment has allowed the Company
to provide high quality programming, enabling it to retain and expand its
affiliate base. In the aggregate, the Company has approximately 69 fixed-wing
aircraft, 17 helicopters, 30 mobile units, 7 airborne camera systems, 16
fixed-position camera systems, 50 broadcast studios and 1,148 broadcasters and
producers. The Company also maintains a staff of computer programmers and
graphics experts to supply customized graphics and other visual programming
elements to television stations. In addition, each of the Company's operating
centers and broadcast studios has sophisticated computer technology, video and
broadcast equipment and cellular and wireless technology which enables the
Company's broadcasters to deliver accurate and timely reports to its affiliates.
The infrastructure and resources dedicated to a specific market by the Company
are determined by the size of the market, the number of affiliates the Company
serves in the market and the type of services being provided. See "Business -
Infrastructure."
ADVERTISING SALES AND MARKETING
The Company's primary source of revenue is the packaging and sale to
advertisers of commercial airtime inventory provided to the Company by its
affiliates in exchange for its information reports. The Company's standard radio
affiliate contract, which is generally for a term of one year or longer,
typically requires that for each report provided by the Company, the radio
station provide the Company with an opening announcement and a ten second
commercial message (or "sponsorship") to be broadcast as part of the report. The
Company packages its radio commercial airtime inventory for sale to advertisers
on a market-wide, regional or national basis and then broadcasts these
sponsorship advertisements among its entire network of affiliates within a
particular market on a fair and equal rotation (i.e., each advertiser receives
its pro rata share of advertisements on each of the Company's affiliates in the
relevant market). The Company believes that its radio sponsorships, which are
typically sold in multiple "sponsorship" packages (generally 125, 250 or 500
sponsorships broadcast over four week periods in each market), provide
advertisers with an effective and efficient medium to reach a high percentage of
the population in its markets. In the Company's MSA markets, the Company's 500
sponsorship package (which the Company believes is the most frequently purchased
package) reaches an average of approximately 70% of the population (age 12 and
over). The Company's advertisers have the ability to
5
<PAGE>
target individual markets and customize their commercial messages by station
format. Because most of the sponsorships are read live, advertisers can change
their messages on short notice. The Company believes that its radio advertising
networks have a high degree of impact because the commercial messages are
imbedded in the affiliates' programming and are generally delivered live by the
Company's broadcasters during peak drive periods. The Company provides its
MetroTV Services to television stations in exchange for thirty second commercial
airtime inventory. The amount and day-part placement of the commercial airtime
inventory that the Company receives from television stations varies by market
and by the type of service provided by the Company.
In each of the markets in which it conducts operations, the Company
maintains an advertising sales office as part of its operations center. The
Company's advertising sales force is able to sell available commercial airtime
inventory in any and all of the Company's markets in addition to selling such
inventory in each local market. The Company believes this affords its sales
representatives an advantage over certain of their competitors. The Company's
advertising sales force is comprised of approximately 125 sales representatives.
Although the Company typically has two or three sales representatives in an
individual market, the number of sales representatives ranges from one to eight
depending on the size of the market and the number of potential regional and
national advertising clients headquartered in the market. Specialized programs
and marketing campaigns, which support nationwide sales and other special forms
of advertising, are managed from the Company's headquarters in Houston, Texas.
As the Company's business has developed, the Company has sold increasing
amounts of its commercial airtime inventory to regional/national advertisers.
For the year ended December 31, 1994, approximately 25% of the Company's
advertising revenue was attributable to regional/national advertisers, with the
balance attributable to local advertisers. For the three months ended March 31,
1996, sales to regional/national advertisers accounted for approximately 50% of
total advertising revenues. See "Business -- Advertising and Sales".
RECENT DEVELOPMENTS
During the past two years, through strategic acquisitions and new start-ups,
the Company has expanded into 16 new markets, comprised of 14 new markets as a
result of strategic acquisitions and two new markets as a result of new
start-ups. In this period, the Company has made six strategic acquisitions
(which accounted for new markets including Salt Lake City, Utah; Phoenix and
Tucson, Arizona; Las Vegas, Nevada; St. Louis, Missouri; Milwaukee, Wisconsin;
Nashville and Memphis, Tennessee; Louisville, Kentucky; Charlotte, North
Carolina; Providence, Rhode Island; Hartford, Danbury and New Haven,
Connecticut) and made an additional strategic acquisition to expand its
operations in Atlanta, Georgia, for an aggregate purchase price of approximately
$20 million. On a pro forma basis, the operations acquired by the Company in
this period generated revenues of approximately $15 million and EBITDA of
approximately $3 million for the year ended December 31, 1995. See "Business --
Acquisitions".
-SALT LAKE CITY ACQUISITION. On January 3, 1996, the Company acquired
Aeromedia, Inc. ("Aeromedia"). As of March 31, 1996, the Company (through
Aeromedia) provided traffic services to 22 radio station and two television
station affiliates in Salt Lake City, Utah, the thirty-fifth largest MSA
market.
-NEW ENGLAND ACQUISITION. On January 4, 1996, the Company acquired a group
of companies (the "Traffic Net Group"). As of March 31, 1996, the Company
(through the Traffic Net Group) provided local traffic information services
to approximately 70 radio station and three television station affiliates
in and around the Hartford, Connecticut area (the forty-first largest MSA
market), and Providence, Rhode Island (the thirty-first largest MSA
market). In addition, one of the companies in the Traffic Net Group
provides weather reporting services to approximately 47 radio station
affiliates in Boston, Massachusetts (the tenth largest MSA market), and
throughout New England. See "Business -- Acquisitions."
6
<PAGE>
REORGANIZATION
From 1978 until the closing of the offering, the business of the Company
will have been operated through Metro Traffic Control, Inc., a Maryland
corporation; Metro Networks, Ltd., a Texas limited partnership, Metro Video
News, Inc., a Texas corporation; Metro Reciprocal, Inc., a Texas corporation and
their subsidiaries (collectively, the "Predecessor Companies"). Until the
closing of this offering, all of the equity interests in the Predecessor
Companies will be owned by David I. Saperstein, the Chairman and Chief Executive
Officer of the Company, and certain trusts (the "Trusts") created for the
benefit of Mr. Saperstein's children (collectively, the "Saperstein Family").
In May 1996, the Company was incorporated in Delaware. Immediately prior to
the closing of this offering, the Saperstein Family will establish the Company
as a holding company in order to consolidate the issued and outstanding equity
interests in the Predecessor Companies, in exchange for shares of the
Company's Common Stock. As of the date of the closing of this offering, each of
the Predecessor Companies will be a direct or indirect wholly-owned subsidiary
of the Company. See "Business -- Reorganization."
The principal executive offices of Metro Networks, Inc. are located at 2700
Post Oak Boulevard, Suite 1400, Houston, Texas 77056. The telephone number at
that location is (713) 621-2800.
7
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... [ ] shares
Common Stock offered by the Selling
Stockholder................................. [ ] shares
Common Stock outstanding after the
offering.................................... [ ] shares(1)
Proposed Nasdaq National Market Symbol....... MTNT
Use of Proceeds.............................. To reduce bank indebtedness, to fund growth,
including growth through potential
acquisitions and entry into new markets, and
for working capital purposes. See "Use of
Proceeds."
Risk Factors................................. See "Risk Factors" for a discussion of
certain considerations relevant to an
investment in the Common Stock.
</TABLE>
- ------------------------
(1) Does not include 350,000 shares of Common Stock reserved for issuance upon
the exercise of stock options to be granted to employees under the Company's
1996 Incentive Stock Option Plan upon the effective date of the offering
(the "1996 Plan"). See "Management -- Executive Compensation."
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER OPERATING DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31,
-------------------------------------------- MARCH 31,
PRO FORMA --------------------
1993 1994 1995 1995(1) 1995 1996
--------- --------- --------- ----------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Advertising revenues, net.......................... $ 47,905 $ 60,048 $ 72,433 $ 77,704 $ 14,655 $ 23,030
Cost of operations............................... 27,384 32,239 41,286 43,354 9,442 12,468
--------- --------- --------- ----------- --------- ---------
Gross margin....................................... 20,521 27,809 31,147 34,350 5,213 10,562
Operating expenses:
Marketing expense................................ 8,848 11,355 14,504 15,502 2,830 5,485
General and administrative expense............... 6,994 5,939 7,193 7,662 1,784 1,710
Depreciation and amortization expense............ 1,814 1,302 3,981 5,658 474 1,462
--------- --------- --------- ----------- --------- ---------
Income from operations............................. 2,865 9,213 5,469 5,528 125 1,905
Other expense (income)........................... 237 (164) (137) (137) (60) (30)
Interest expense................................. 145 293 1,260 1,628 203 323
--------- --------- --------- ----------- --------- ---------
Income before tax provision........................ 2,482 9,084 4,346 4,037 (18) 1,612
Income tax provision............................. 1,066 2,179 1,036 962 (5) 503
Income (loss) from continuing operations........... 1,416 6,905 3,310 3,075 (13) 1,109
--------- --------- --------- ----------- --------- ---------
Discontinued operations.......................... (561) -- -- -- -- --
--------- --------- --------- ----------- --------- ---------
Net income (loss).................................. $ 855 $ 6,905 $ 3,310 $ 3,075 $ (13) $ 1,109
Pro forma net income per share from continuing
operations(2)
--------- --------- --------- ----------- --------- ---------
Pro forma weighted average shares outstanding(2)
--------- --------- --------- ----------- --------- ---------
OTHER DATA:
EBITDA (3)......................................... $ 4,679 $ 10,515 $ 9,450 $ 11,186 599 3,367
Predecessor shareholder costs (4).................. 2,022 1,734 1,392 1,392 295 355
--------- --------- --------- ----------- --------- ---------
Pro Forma EBITDA (5)............................... $ 6,701 $ 12,249 $ 10,842 $ 12,578 894 3,722
Capital expenditures............................... 890 2,712 2,746 2,746 659 562
Affiliates:
Radio.......................................... 754 914 1,152 1,244 1,040 1,276
Television..................................... 59 71 91 96 82 103
Markets:
Radio.......................................... 38 46 54 59 52 60
Television..................................... 29 33 38 41 37 46
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------
AS ADJUSTED
ACTUAL -------------
-----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital................................................................ $ 7,655 $
Total assets................................................................... 47,755
Total debt..................................................................... 25,902
Common stockholder's equity/partners' capital.................................. 4,566
</TABLE>
- ------------------------------
(1) The unaudited pro forma operating data for the year ended December 31, 1995
were prepared assuming that the 1995 Acquisitions and 1996 Acquisitions
were consummated as of January 1, 1995. The unaudited pro forma operating
data give effect to the proposed acquisitions under the purchase method of
accounting and certain estimated operational and financial effects that are
direct results of the acquisitions. See "Business -- Acquisitions."
(2) Weighted average shares outstanding and net income per common share are
calculated assuming the shares issued in conjunction with the
Reorganization were outstanding for all periods presented. See
"Reorganization."
9
<PAGE>
(3) EBITDA is earnings before other expense (income), interest expense, taxes,
depreciation and amortization. EBITDA does not represent cash flows as
defined by generally accepted accounting principles and does not
necessarily indicate that cash flows are sufficient to fund all of the
Company's cash needs. EBITDA should not be considered in isolation or as a
substitute for net income, cash from operating activities or other measures
of liquidity determined in accordance with generally accepted accounting
principles.
(4) Predecessor shareholder costs consist of the expenses incurred by the
Predecessor Companies on behalf of their shareholders, which expenses will
not be incurred by the Company after the closing of this offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Transactions."
(5) Pro Forma EBITDA is EBITDA plus predecessor shareholder costs. The Company
believes that Pro Forma EBITDA is useful to prospective investors as a
measure of the Company's historical financial performance.
10
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING
THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY.
INFORMATION SERVICES COMPETITION
The success of the Company's business is largely dependent on the Company's
ability to maintain and acquire affiliate contracts with radio and television
stations. The Company faces intense competition for such affiliates from other
providers of information reporting services in many of its markets.
Additionally, the Company faces competition from individual radio stations and
groups of radio stations that provide their own information services. As a
result of the passage of the Telecommunications Act of 1996 (the "Telecom Act"),
the Company may face additional competition from consolidated groups of radio
stations that choose to provide their own information services. Certain of the
Company's current and potential competitors may offer alternative types of
information services and may have substantially greater financial, technical,
marketing and other resources than the Company. There can be no assurance that
the Company's business will not be adversely affected by current or increased
competition for the provision of information services in the markets in which it
operates. See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations -- Liquidity and Capital Resources."
DEPENDENCE ON ADVERTISING REVENUES
The success of the Company's business is closely linked to the performance
of the advertising industry. A significant decline in national and regional
advertising would have a material adverse effect on the Company's revenues.
There can be no assurance that such a decline will not occur, or that the
Company's business will not be materially adversely affected thereby. See
"Business."
COMPETITION FOR ADVERTISING SALES
The Company's business is dependent, in part, on its ability to sell the
commercial airtime inventory obtained from its affiliates in exchange for the
Company's provision of information reporting services. The business of selling
broadcast advertising time is highly competitive. The Company positions its
advertising so as not to compete with the advertising of its local radio and
television station affiliates. The Company competes for advertising dollars with
other media such as newspapers and magazines, outdoor advertising, network radio
and network television advertising, transit advertising, direct response
advertising, yellow page directories and point of sale advertising. There can be
no assurance that the Company will not be adversely affected by such competition
in the future. See "Business -- Competition."
LIMITED OPERATING HISTORY IN NEW BUSINESSES
The Company introduced its Expanded Radio Services to radio stations in 1994
and its Video News Services to television stations in 1995. Accordingly,
although the Company has provided its Radio Traffic Services and Television
Traffic Services for many years, the Company has a limited history of providing
its Expanded Radio Services and Video News Services. The success of the
Company's Radio Traffic Services may not be indicative of the results of its
efforts to provide the Expanded Radio Services and Video News Services. The
successful operation of the Expanded Radio Services Network and MetroTV Network
will require a certain level of continued capital expenditures and operating
expenditures which the Company is committed to undertaking. There can be no
assurance that the Company will be able to develop such businesses as
successfully as it has its Radio Traffic Services business. See "Business."
ACQUISITIONS AND NEW MARKETS
The Company's continued growth and expansion is dependent, in part, on its
ability to establish affiliate relations in new markets by acquiring existing
operations or developing new operations. There can be no assurance that the
Company will be able to identify and acquire operations or establish operations
in new markets or that it will be able to finance such acquisitions or expansion
in the future.
11
<PAGE>
There can be no assurance that the Company will be able to integrate
successfully any acquired business or realize any operating efficiencies
therefrom. The Company's past operating history may not be indicative of its
ability to integrate new markets and acquisitions. See "Business --
Acquisitions."
INCREASING CAPITAL REQUIREMENTS
The Company's expansion into new markets and continued growth of its
Expanded Radio Services Network and MetroTV Network will require significant
additional capital expenditures. There can be no assurance that the Company will
be able to secure financing for such expenditures when needed or on terms
acceptable to the Company. Moreover, the Company's day-to-day operations require
the use of sophisticated equipment and technology. The maintenance and
replacement of such equipment requires significant expenditures. There can be no
assurance that the Company will be able to continue to finance the maintenance
and replacement of such equipment.
DEPENDENCE ON KEY PERSONNEL
The Company's continued success is dependent to a significant degree upon
the efforts of its current executive officers. The loss or unavailability of any
such executive officer could have an adverse effect on the Company. The Company
intends to enter employment agreements with Messrs. David I. Saperstein, the
Company's Founder, Chairman and Chief Executive Officer, Charles I. Bortnick,
the Company's President, Shane E. Coppola, the Company's Executive Vice
President, Curtis H. Coleman, the Company's Senior Vice President and Chief
Financial Officer and Gary L. Worobow, the Company's Senior Vice President,
General Counsel and Secretary; however, there can be no assurance that these
individuals will continue to provide services to the Company. Moreover, the
continued success and viability of the Company is dependent to a significant
extent upon its ability to attract and retain qualified personnel in all areas
of its business, especially management positions. In the event the Company is
unable to attract and retain qualified personnel, its business may be adversely
affected. See "Management."
FEDERAL REGULATION OF BROADCASTING
The ownership, operation and sale of stations are subject to the
jurisdiction of the Federal Communications Commission (the "FCC"), which acts
under authority granted by the Communications Act of 1934, as amended, (the
"Communications Act"). Among other things, the FCC adopts and implements
regulations and policies that directly or indirectly affect the ownership,
operations and sale of radio and television stations, and has the power to
impose penalties for violations of its rules or the Communications Act. Such
regulation may adversely affect the Company's business. On February 8, 1996,
President Clinton signed the Telecom Act. The Telecom Act, among other measures,
directs the FCC to eliminate national radio ownership limits and increase local
radio ownership limits. Certain of these measures have been adopted by the FCC.
Other provisions of the Telecom Act will be acted upon by the FCC through
rulemaking proceedings, presently scheduled for completion by the end of 1996.
These measures could lead to greater industry consolidation. The effects of the
Telecom Act on the broadcasting industry and thus on the Company's businesses
are uncertain, and there can be no assurance that the Telecom Act will not
negatively impact the Company's operations in the future.
RESTRICTIONS IMPOSED BY LENDERS
The Credit Agreement among NationsBank of Texas, N.A. and the Company's
subsidiaries, Metro Traffic Control, Inc. and Metro Networks, Ltd., dated
October 21, 1994, as amended (the "Credit Agreement") prohibits the Company
from, among other things, (i) incurring certain additional indebtedness, (ii)
incurring certain liens, (iii) disposing of the assets of the Company through
merger, consolidation or sale, (iv) making certain acquisitions without the
consent of the lenders, and (v) achieving certain leverage ratios. Although
these restrictions to date have not restricted the Company's ability to operate
or to make strategic acquisitions, there can be no assurance that such
restrictions will not have a materially adverse effect on the Company's
operations in the future. Upon completion of this offering, the Company expects
to enter into an amended and restated credit agreement (the "Amended Line of
Credit") with NationsBank. The Company anticipates that the Amended Line of
Credit will be secured by
12
<PAGE>
the granting of a lien by the Company on all of its assets and the pledge of its
equity interests in each of the Predecessor Companies in favor of NationsBank.
See "Management's Discussion and Analysis of Financial Conditions and Results of
Operations -- Liquidity and Capital Resources."
CONTROL BY EXISTING STOCKHOLDERS
Upon completion of this offering, the Saperstein Family will beneficially
own % of the Company's outstanding Common Stock ( % if the Underwriters'
overallotment option is exercised in full). As a result, the Saperstein Family
will continue to have the ability to elect or remove any or all of the Company's
directors and to control substantially all corporate activities involving the
Company, including tender offers, mergers, proxy contests or other purchases of
Common Stock that could give the stockholders of the Company the opportunity to
realize a premium over the then prevailing market price for their shares of
Common Stock. See "Principal and Selling Stockholders."
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain provisions
that could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, control of
the Company. Such provisions could limit the price that certain investors might
be willing to pay in the future for shares of Common Stock. The Company's
Certificate of Incorporation provides that up to 1,000,000 shares of Preferred
Stock may be issued by the Company from time to time in one or more series. The
Board of Directors may authorize and issue Preferred Stock with voting or
conversion rights that could adversely affect the voting power or other rights
of the holders of Common Stock. See "-- Control by Existing Stockholders" and
"Description of Capital Stock -- Preferred Stock."
DILUTION
Purchasers of Common Stock in this offering will experience immediate and
substantial dilution in the net tangible book value per share of Common Stock
from the initial public offering price and may incur additional substantial
dilution upon the exercise of outstanding stock options. See "Dilution."
INTANGIBLE ASSETS
Of the Company's total assets at March 31, 1996, approximately $17.8
million, or 37.2%, represented purchased broadcast contracts and other
intangibles associated with recent acquisitions. It is possible that no cash
would be recoverable from the voluntary or involuntary sale of the intangible
assets of the Company, including its goodwill. However, the Company believes
that its affiliation contracts and operating systems constitute assets having
substantial value, although there can be no assurance that such value or any
substantial part thereof would actually be realized upon a voluntary or
involuntary sale. See "Business -- Affiliates."
SHARES ELIGIBLE FOR FUTURE SALE; NO PRIOR TRADING MARKET
Sales of a substantial number of shares of the Company's Common Stock could
have the effect of depressing the prevailing market price of its Common Stock.
Upon completion of this offering, the Company will have outstanding shares of
Common Stock. Of these shares, the shares sold in this offering, (
if the over-allotment option is exercised in full) will be freely transferable
without restriction or further registration under the Securities Act of 1993
(the "Securities Act") unless purchased by "affiliates" of the Company as that
term is defined in Rule 144 of the Securities Act (an "Affiliate"), which Shares
purchased by affiliates will be subject to the resale limitations of Rule 144
adopted under the Securities Act. The remaining shares outstanding upon
completion of this offering, ( if the over-allotment option is exercised in
full) and held by existing shareholders will be "Restricted Securities" as that
term is defined under Rule 144 (the "Restricted Shares"). The Company intends to
file one or more registration statements on Form S-8 under the Securities Act to
register shares of Common Stock subject to stock options which will permit
resale of such shares, subject to the Rule 144 volume limitations applicable to
affiliates, vesting restrictions with the Company and lock-up agreements between
the option holders and the Company and the Underwriters. See "Shares Eligible
for Future Sale" and "Description of Capital Stock."
13
<PAGE>
ABSENCE OF PUBLIC MARKET
There is currently no public market for the Common Stock. Although
application will be made to approve the Common Stock for quotation and trading
on the Nasdaq National Market, there can be no assurance that an active public
market in the Common Stock will develop or that the initial public offering
price thereof will correspond to the price at which the Common Stock will trade
in the public market subsequent to this offering. The initial public offering
price for the Common Stock will be determined by negotiations among the Company
and the representatives of the Underwriters based on the factors described under
"Underwriting."
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the offering are estimated to be
approximately $ million ($ million if the Underwriters' over-allotment
option is exercised in full), based on an assumed offering price of $ per
share and after deductions for the underwriting discount and the estimated
offering expenses. The Company will not receive any proceeds from the sale of
shares of Common Stock by the Selling Stockholder.
The Company intends to use approximately $27 million of the proceeds to
repay existing indebtedness under the Credit Agreement and the balance of the
proceeds, including any proceeds from the Underwriters' exercise of the
over-allotment option, to fund its growth, including additional strategic
acquisitions or development of businesses complementary to the operations of the
Company including broadcast traffic reporting services and news, sports, weather
and other programming and information services. In addition, the Company will
use the proceeds to fund the continued expansion of its networks, its
development of new products and services, including capital expenditures for the
expansion of its networks and for working capital purposes. Although the Company
continually reviews potential acquisitions, and has engaged in discussions
concerning certain acquisitions (some of which are currently on-going), the
Company currently has no commitments, arrangements, or understandings with
respect to any such acquisition.
The Company's indebtedness outstanding under the Credit Agreement has a
final maturity of June 30, 2000 and bears interest at a variable rate
(approximately 7.17% at March 31, 1996). In fiscal 1995, interest on borrowings
under the Credit Agreement ranged from 6.80% to 7.55%. Upon the closing of this
offering, the Company expects to enter into the Amended Line of Credit. See
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
Following the repayment of outstanding indebtedness under the Credit Agreement,
approximately $30 million principal amount will be available thereunder for
borrowing.
Pending the application of the net proceeds for the purposes described
above, the Company will invest the net proceeds from the sale of the Common
Stock offered hereby in short-term interest-bearing marketable securities. See
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
DIVIDEND POLICY
The Company intends to retain all of its earnings to finance the development
and expansion of its business and therefore does not intend to pay any cash
dividends on the Common Stock for the foreseeable future. Any future payment of
cash dividends will be at the discretion of the Company's Board of Directors and
will depend on the Company's financial condition, results of operations, capital
requirements and other factors deemed relevant by the Company's Board of
Directors. In addition, the Credit Agreement restricts the payment of cash
dividends in certain situations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
15
<PAGE>
CAPITALIZATION
The following table sets forth the combined capitalization of the Company at
March 31, 1996 and as adjusted to reflect the sale of shares of Common
Stock offered by the Company hereby (assuming an initial public offering price
of $ per share) after deducting the estimated underwriting discount and
estimated offering expenses payable by the Company and the application of the
net proceeds as described under "Use of Proceeds." This table should be read in
conjunction with the Company's Combined Financial Statements and the Notes
thereto included elsewhere in this Prospectus. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-----------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Cash and cash equivalents............................................................... $ 3,450 $
--------- ------------
--------- ------------
SHORT-TERM DEBT:
Current maturities of long-term debt.................................................. $ 749 $
--------- ------------
--------- ------------
LONG-TERM DEBT:
Bank debt............................................................................. 24,718
Notes payable......................................................................... 435
--------- ------------
Total long-term debt................................................................ 25,153
--------- ------------
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $.001 per share, 1,000,000 shares authorized; shares
of Series A Convertible Preferred Stock issued and outstanding as adjusted........... --
Common Stock, par value $.001 per share, shares authorized, shares issued
and outstanding; shares issued and outstanding as adjusted..................... 3
Additional paid-in capital............................................................ 4,024
Partners' capital..................................................................... 517
Retained earnings..................................................................... 22
---------
Total stockholder's equity/partners' equity........................................... 4,566
--------- ------------
Total capitalization................................................................ $ 29,719 $
--------- ------------
--------- ------------
</TABLE>
16
<PAGE>
DILUTION
The net tangible book value of the Company at March 31, 1996 was $ million,
or $ per share of Common Stock. Net tangible book value per share is equal to
the Company's total tangible assets less total liabilities, divided by the total
number of outstanding shares of Common Stock. After giving effect to the sale of
shares of Common Stock offered by the Company hereby (after deduction of the
underwriting discount and estimated expenses of this offering) and the
application of the estimated proceeds to be received by the Company therefrom,
the pro forma net tangible book value at March 31, 1996 would have been $ ,
or $ per share. This represents an immediate increase in net tangible book
value of $ per share to existing shareholders and an immediate dilution of
$ per share to new investors. The following table illustrates this per
share dilution with respect to a new investor's purchase of a share of Common
Stock at March 31, 1996:
<TABLE>
<S> <C> <C>
Assumed initial public offering price.......................... $
Net tangible book value per share before this offering......... $
Increase in net tangible book value per share attributable to
new investors................................................. $
Pro forma net tangible book value per share after this
offering...................................................... $
Dilution in net tangible book value per share to new
investors..................................................... $
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1996,
the number of shares of Common Stock outstanding, the total consideration paid,
and the average price per share paid by current stockholders and by new
investors who purchase Common Stock pursuant to this offering, assuming an
initial public offering price of $ per share:
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE PER
-------------------- -------------------- ---------
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)............................... % $ % $
New investors..........................................
--------- --------- --------- --------- ---------
Total.............................................. 100.0% $ 100.0%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Sales by the Selling Stockholder in this offering will reduce the number of
shares of Common Stock held by the current stockholders to shares, or
% of the total number of shares of Common Stock to be outstanding after
this offering, and will increase the number of shares held by new investors
after this offering to shares, or % of the total number of shares
of Common Stock outstanding after this offering.
The foregoing tables do not assume exercise of any outstanding options. Upon
the effective date of this offering, there will be outstanding options to
purchase 350,000 shares of Common Stock under the 1996 Plan. The weighted
average exercise price of such options will be $ per share. To the extent
that any options are exercised in the future, there may be further dilution to
new investors. See "Business -- Management -- 1996 Incentive Stock Option Plan"
and "Management -- Board of Directors."
17
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The following selected financial and operating data should be read in
conjunction with the Company's historical combined financial statements and
related notes thereto and with Management's Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere herein. The statement of
operations data set forth below with respect to the years ended December 31,
1993, 1994 and 1995 are derived from the audited financial statements included
elsewhere in the Prospectus. The selected financial data for the years ended
December 31, 1991 and 1992 and the three months ended March 31, 1995 and 1996
are unaudited and reflect all normal recurring adjustments that in the opinion
of management of the Company are necessary for a fair presentation of the
results of such periods. The unaudited results of operations for the three
months ended March 31, 1996 are not necessarily indications of results expected
for the year ended December 31, 1996. The unaudited pro forma financial
information for 1995 presents the results of operations of the Company as if the
1995 Acquisitions and 1996 Acquisitions had been completed at the beginning of
1995. The unaudited pro forma financial data presented are not necessarily
indicative of the Company's financial results of operations that might have
occurred had such transactions been completed at the beginning of the period and
do not purport to indicate the Company's results of operations for any future
periods.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------ MARCH 31,
PRO FORMA --------------------
1991 1992 1993 1994 1995 1995(1) 1995 1996
--------- --------- --------- --------- --------- ----------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Advertising revenues, net........ $ 39,092 $ 41,957 $ 47,905 $ 60,048 $ 72,433 $ 77,704 $ 14,655 $ 23,030
Cost of operations............. 20,672 26,760 27,384 32,239 41,286 43,354 9,442 12,468
--------- --------- --------- --------- --------- ----------- --------- ---------
Gross margin..................... 18,420 15,197 20,521 27,809 31,147 34,350 5,213 10,562
Operating expenses:
Marketing expense.............. 8,278 8,393 8,848 11,355 14,504 15,502 2,830 5,485
General and administrative
expense....................... 3,845 4,522 6,994 5,939 7,193 7,662 1,784 1,710
Depreciation and amortization
expense....................... 1,564 1,841 1,814 1,302 3,981 5,658 474 1,462
--------- --------- --------- --------- --------- ----------- --------- ---------
Income from operations........... 4,733 441 2,865 9,213 5,469 5,528 125 1,905
Other expense (income)......... 63 (60) 237 (164) (137) (137) (60) (30)
Interest expense............... 43 97 145 293 1,260 1,628 203 323
--------- --------- --------- --------- --------- ----------- --------- ---------
Income before tax provision...... 4,627 404 2,482 9,084 4,346 4,037 (18) 1,612
Income tax provision........... 1,241 2,649 1,066 2,179 1,036 962 (5) 503
--------- --------- --------- --------- --------- ----------- --------- ---------
Income (loss) from continuing
operations...................... 3,386 (2,235) 1,416 6,905 3,310 3,075 (13) 1,109
--------- --------- --------- --------- --------- ----------- --------- ---------
Discontinued operations........ -- (563) (561) -- -- -- -- --
--------- --------- --------- --------- --------- ----------- --------- ---------
Net income (loss)................ $ 3,386 $ (2,798) $ 855 $ 6,905 $ 3,310 $ 3,075 $ (13) $ 1,109
--------- --------- --------- --------- --------- ----------- --------- ---------
--------- --------- --------- --------- --------- ----------- --------- ---------
Pro forma net income (loss) per
common share from continuing
operations (2)..................
--------- --------- --------- --------- --------- ----------- --------- ---------
--------- --------- --------- --------- --------- ----------- --------- ---------
Pro forma weighted average shares
outstanding (2)
--------- --------- --------- --------- --------- ----------- --------- ---------
--------- --------- --------- --------- --------- ----------- --------- ---------
OTHER DATA:
EBITDA (3)..................... $ 6,297 $ 2,282 $ 4,679 $ 10,515 $ 9,450 $ 11,186 599 3,367
Predecessor shareholder
costs (4)..................... 597 1,091 2,022 1,734 1,392 1,392 295 355
--------- --------- --------- --------- --------- ----------- --------- ---------
Pro Forma EBITDA (5)........... $ 6,800 $ 3,373 $ 6,701 $ 12,249 $ 10,842 $ 12,578 894 3,722
Capital expenditures........... 1,299 1,063 890 2,712 2,746 2,746 659 562
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................. $ 1,782 $ 18 $ 404 $ 7,414 $ 7,900 $ 6,348 $ 7,655
Total assets................................ 21,458 24,356 20,921 18,803 42,437 53,437 47,755
Total debt.................................. 82 466 2,097 6,650 22,624 14,718 25,902
Common stockholder's equity/partners'
capital.................................... 6,798 3,711 8,582 9,401 4,478 4,401 4,566
</TABLE>
- ------------------------
* See discussions of acquisitions in "Business -- Acquisitions" and
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations."
(1) The unaudited pro forma operating data for the year ended December 31, 1995
were prepared assuming that the 1995 Acquisitions and 1996 Acquisitions were
consummated as of January 1, 1995. The unaudited pro forma operating data
give effect to the proposed acquisitions under the purchase method of
accounting and certain estimated operational and financial effects that are
direct results of the acquisitions. See "Business -- Acquisitions."
(2) Weighted average shares outstanding and net income per common share are
calculated assuming the shares issued in conjunction with the reorganization
were outstanding for all periods presented. See "Reorganization."
(3) EBITDA is earnings before other expense (income), interest expense, taxes,
depreciation and amortization. EBITDA does not represent cash flows as
defined by generally accepted accounting principles and does not necessarily
indicate that cash flows are sufficient to fund all of the Company's cash
needs. EBITDA should not be considered in isolation or as a substitute for
net income, cash from operating activities or other measures of liquidity
determined in accordance with generally accepted accounting principles.
(4) Predecessor shareholder costs consist of the expenses incurred by the
Predecessor Companies on behalf of their shareholders, which expenses will
not be incurred by the Company after the closing of this offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(5) Pro Forma EBITDA consists of EBITDA plus predecessor shareholder costs. The
Company believes that Pro Forma EBITDA is useful to prospective investors as
a measure of the Company's historical financial performance.
19
<PAGE>
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company, which was founded in 1978, is the largest provider of traffic
reporting services and a leading supplier of local news, sports, weather and
other information reporting services to the television and radio broadcast
industries in the United States. The Company provides customized information
reports to affiliated radio and television stations in exchange for commercial
airtime inventory. The Company generates revenues by packaging such commercial
airtime inventory and selling it on a local, regional or national basis. While
the majority of the Company's revenues are currently generated from sales of
advertising on its Radio Traffic Services Network, the Company is experiencing
increased revenues from its Expanded Radio Services Network and its MetroTV
Network. The Company's expenses are primarily comprised of three categories: (i)
operations, which includes all the expenses related to gathering, producing, and
broadcasting its information reports; (ii) marketing, which includes sales
commissions, salaries and benefits for Company's sales personnel; and (iii)
general and administrative expenses, which includes corporate overhead. Most of
the Company's expenses are associated with its Radio Traffic Services. However,
during 1994, 1995 and the first quarter of 1996, the Company incurred additional
expenses attributable to the development and operation of its Expanded Radio
Services (including operating expenses incurred prior to the generation of
significant revenue from the Expanded Radio Services), and during 1995 and the
first quarter of 1996, it incurred similar additional expenses associated with
the development of its MetroTV Services.
The Company has experienced 18 years of growth in revenues. The Company has
also experienced increases in Pro Forma EBITDA, which has grown in each of the
last 18 years with the exception of 1992 and 1995. In 1995, Pro Forma EBITDA
results reflect the impact of approximately $3.1 million of expenses (with
minimal incremental revenues) associated with the development and operation of
the Company's Expanded Radio Services and MetroTV Services, which the Company
introduced in 1994 and 1995, respectively. The Company has grown through
acquisitions, new market expansion, internally generated growth, and by offering
new products and services to its affiliate stations and advertising clients.
In the analysis set forth below, the Company discusses its Pro Forma EBITDA.
"Pro Forma EBITDA" is defined as EBITDA plus predecessor shareholder costs.
"Predecessor shareholder costs" consist of expenses incurred by the Predecessor
Companies on behalf of their shareholders which will not be incurred by the
Company after its initial public offering. Such predecessor shareholder costs
include the portion of David I. Saperstein's current salary which exceeds that
which Mr. Saperstein will receive after the offering and certain other costs
described in "Certain Transactions." The Company believes that EBITDA is a
measure of financial performance widely used in the media and broadcast
industries and that Pro Forma EBITDA is useful to prospective investors as a
measure of the Company's historical financial performance. However, such
analysis should not be used singularly or as a substitute for net income, cash
flows from operating activities or other financial information prepared in
accordance with GAAP.
In certain circumstances, the Company engages in reciprocal arrangements
with advertisers whereby the Company exchanges a portion of its unsold
commercial airtime inventory for goods and services. The Company believes that
reciprocal arrangements are common in the broadcasting industry. The Company's
reciprocal arrangements are recorded based on their estimated fair market value
and generally have had a net neutral effect on Pro Forma EBITDA; the net impact
of reciprocal arrangements in 1994 and 1995 on Pro Forma EBITDA was $0.6 million
and ($0.1) million, respectively. In recent years, however, the Company has
reduced the number of reciprocal arrangements in which it engages in order to
better focus its efforts on cash revenue generation and reduce the
administrative costs associated with reciprocal arrangements. In 1993, revenues
from reciprocal arrangements accounted for 16.8% of total revenues and declined
to 13.3% in 1994 and 11.6% in 1995. During the three months ended March 31,
1995, revenues from reciprocal arrangements accounted for 17.2% of total
revenues, and
20
<PAGE>
declined to 14.3% for the three months ended March 31, 1996. Revenues from
reciprocal arrangements generally comprise a higher percentage of total revenues
during the first quarter of each year because the Company tends to have its
highest level of unsold commercial airtime inventory during that quarter, which
it seeks to use to fulfill reciprocal arrangements. The Company expects revenues
from reciprocal arrangements to be approximately 10% or less of total revenues
in 1996.
The Company's advertising revenues vary moderately over the calendar year
with the first quarter generally reflecting the lowest revenues and the fourth
quarter the highest revenues for the year. Expenses, other than cost of
operations, are generally spread evenly over the year, resulting in some
seasonality in the Company's Pro Forma EBITDA.
INCOME TAXES
The combined financial statements are derived from the combined financial
statements of Metro Traffic Control, Inc., Metro Reciprocal, Inc., Metro
Networks, Ltd. and Metro Video News, Inc. and their subsidiaries. Metro
Reciprocal, Inc., Metro Video News, Inc. and Metro Traffic Control, Inc. have
elected to be taxed under the S Corporation provisions of the Internal Revenue
Code. Metro Networks, Ltd. is a partnership for federal income tax purposes.
These entities are, therefore, not liable for federal income taxes on their
taxable income and accordingly no provision for federal income taxes in respect
of these entities is made in the combined financial statements. Metro Networks,
Ltd., however, wholly owns a corporation which is taxed under the C Corporation
provisions of the Internal Revenue Code and accordingly is liable for federal
income taxes on its federal taxable income. The income taxes payable by this
subsidiary have been reflected in the combined financial statements. As a
result, the income tax expense reflects the varying levels of income of the
taxable and nontaxable entities included in the combined financial statements
rather than the aggregate levels of income of the combined companies. After
consummation of the Reorganization, all of the entities described above will be
liable for federal income taxes. In addition, any differential between the book
and tax basis in the underlying net assets which is not presently reflected as a
deferred tax asset or liability will be recorded with a corresponding increase
or decrease in income tax expense.
21
<PAGE>
RESULTS OF OPERATIONS
The following table provides a summary of the Company's statement of
operations on an actual and percentage of revenues basis for the periods
indicated:
SUMMARY COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
-------------------------------------------------------------------------------------- MARCH 31,
PRO FORMA --------------------
1993 1994 1995 1995(1) 1995
-------------------- -------------------- -------------------- -------------------- --------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising
revenues, net...... $ 47,905 100.0% $ 60,048 100.0% $ 72,433 100.0% $ 77,704 100.0% $ 14,655 100.0%
Cost of
operations....... 27,384 57.2 32,239 53.7 41,286 57.0 43,354 55.8 9,442 64.4
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Gross Margin........ 20,521 42.8 27,809 46.3 31,147 43.0 34,350 44.2 5,213 35.6
Operating expenses:
Marketing
expense.......... 8,848 18.5 11,355 18.9 14,504 20.0 15,502 20.0 2,830 19.3
General and
administrative
expense.......... 6,994 14.6 5,939 9.9 7,193 9.9 7,662 9.9 1,784 12.2
Depreciation and
amortization
expense.......... 1,814 3.8 1,302 2.2 3,981 5.5 5,658 7.3 474 3.2
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Operating Income.... 2,865 6.0 9,213 15.3 5,469 7.6 5,528 7.1 125 .9
Other expenses.... 237 0.5 (164) (0.3) (137) (0.2) (137) (.2) (60) (0.4)
Interest
expense.......... 145 0.3 293 0.5 1,260 1.7 1,628 2.1 203 1.4
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Income before income
tax provision...... 2,482 5.2 9,084 15.1 4,346 6.0 4,037 5.2 (18) N.M.
Income tax
provision........ 1,066 2.2 2,179 3.6 1,036 1.4 962 1.2 (5) N.M.
Discontinued
operations....... (561) 1.2 -- * -- * -- * -- *
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net income.......... $ 855 1.8% $ 6,905 11.5% $ 3,310 4.6% $ 3,075 4.0% $ (13) N.M.
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1996
--------------------
<S> <C> <C>
Advertising
revenues, net...... $ 23,030 100.0%
Cost of
operations....... 12,468 54.1
--------- ---------
Gross Margin........ 10,562 45.9
Operating expenses:
Marketing
expense.......... 5,485 23.8
General and
administrative
expense.......... 1,710 7.4
Depreciation and
amortization
expense.......... 1,462 6.4
--------- ---------
Operating Income.... 1,905 8.3
Other expenses.... (30) (0.1)
Interest
expense.......... 323 1.4
--------- ---------
Income before income
tax provision...... 1,612 7.0
Income tax
provision........ 503 2.2
Discontinued
operations....... -- *
--------- ---------
Net income.......... $ 1,109 4.8%
--------- ---------
--------- ---------
</TABLE>
- ------------------------------
(1) The unaudited pro forma operating data for the year ended December 31, 1995
were prepared assuming that the 1995 Acquisitions and 1996 Acquisitions
were consummated as of January 1, 1995. The unaudited pro forma operating
data give effect to the proposed acquisitions under the purchase method of
accounting and certain estimated operational and financial effects that are
direct results of the acquisitions. See "Business -- Acquisitions."
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995
REVENUES. Revenues increased by $8.4 million, or approximately 57.2%, to
$23.0 million in the three months ended March 31, 1996 (the "March 1996 Period")
from $14.7 million in the three months ended March 31, 1995 (the "March 1995
Period"), primarily due to increased sales of commercial airtime inventory.
Excluding the results for the operations acquired in connection with the 1995
Acquisitions and 1996 Acquisitions, revenues increased by $5.2 million, or
36.5%, to $19.8 million in the March 1996 Period from $14.7 million in the March
1995 Period. The increase in "same market" revenues was primarily attributable
to an increased rate of commercial airtime inventory utilization ("sell-through
rate") which resulted from (i) the strengthening of the Company's sales,
marketing and inventory management operations, (ii) continued growth in the
Radio Traffic Services Network within markets historically served by the Company
and (iii) continued development of the Expanded Radio Services and MetroTV
Services.
22
<PAGE>
COST OF OPERATIONS. Cost of operations increased by $3.1 million, or
approximately 32.0%, to $12.5 million in the March 1996 Period from $9.4 million
in the March 1995 Period. This increase was attributable to increased operating
costs associated with the 1995 Acquisitions and 1996 Acquisitions, the continued
development and operation of the Company's Expanded Radio Services and MetroTV
Services and the commencement of operations in Cincinnati, Ohio. As a percentage
of revenues, cost of operations declined to 54.1% for the March 1996 Period as
compared to 64.4% in the March 1995 Period reflecting the improved sell-through
rate.
MARKETING EXPENSE. Marketing expense increased by $2.7 million to $5.5
million in the March 1996 Period from $2.8 million in the March 1995 Period.
This resulted from increased sales commissions associated with the increased
revenues generated in the March 1996 Period. As a percentage of revenues,
marketing expense increased to 23.8% in the March 1996 Period as compared to
19.3% in the March 1995 Period reflecting the impact of the Company's increased
hiring of sales representatives, sales managers and general managers.
GENERAL AND ADMINISTRATION EXPENSE. General and administrative expense
decreased by $0.1 million, or approximately 4.2%, to $1.7 million in the March
1996 Period from $1.8 million in the March 1995 Period. The Company increased
its headquarters staff in late 1994 and early 1995 in order to support the
operations acquired in the 1994 Acquisitions and 1995 Acquisitions and the
development of the Expanded Radio Services and MetroTV Services. As a result,
the Company did not need to increase its headquarters staff in the March 1996
Period and, therefore, general and administrative expense remained relatively
constant for such period.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased by $1.0 million to $1.5 million in the March 1996 Period, as a result
of the Company's increased asset base following the 1995 Acquisitions and 1996
Acquisitions.
INTEREST EXPENSE. Interest expense increased by $0.1 million to $0.3
million in the March 1996 Period from $0.2 million in the March 1995 Period. The
increase was primarily due to the incurrence of indebtedness in connection with
the 1995 Acquisitions and 1996 Acquisitions.
NET INCOME. As a result of the foregoing, net income increased to $1.1
million in the March 1996 Period from a loss of $13,000 in the March 1995
Period.
PRO FORMA EBITDA. Pro Forma EBITDA increased by $2.8 million to $3.7
million in the March 1996 Period from $0.9 million in the March 1995 Period. In
addition, Pro Forma EBITDA as a percentage of revenues ("operating margin")
improved to 16.2% in the March 1996 Period from 6.1% in the March 1995 Period.
These increases were primarily attributable to the Company's operating leverage.
Because cost of operations and general and administrative expense which
typically account for approximately 70-75% of the Company's operating expenses,
tend not to increase proportionately with revenues, increases in the Company's
revenues typically result in increases in operating margin and Pro Forma EBITDA
growth. On a "same market" basis, excluding the 1995 Acquisitions and 1996
Acquisitions, Pro Forma EBITDA increased by $1.5 million, to $2.3 million in the
March 1996 Period.
RECIPROCAL ARRANGEMENTS. Revenues from reciprocal arrangements were $3.3
million in the March 1996 Period and $2.5 million in the March 1995 Period. As a
percentage of total revenues, revenues from reciprocal arrangements declined to
14.3% in the March 1996 Period from 17.2% in the March 1995 Period. Such
decrease was primarily attributable to the Company's efforts to focus on cash
revenue generation and reduce the number of reciprocal arrangements in which it
engages. Pro Forma EBITDA from reciprocal arrangements was insignificant for
each of these periods.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994.
REVENUES. Revenues increased by $12.4 million, or approximately 20.6%, to
$72.4 million in 1995 from $60.0 million in 1994. This increase was primarily
due to revenues generated by the operations acquired in connection with the 1995
Acquisitions and increased sales of commercial airtime inventory on the Radio
Traffic Services Network. The 1995 Acquisitions generated revenues of
approximately $7.1
23
<PAGE>
million in 1995. Excluding these revenues, "same market" revenues increased $5.3
million in 1995 or 8.9%, a slower growth rate than in prior periods, because the
Company's management focused primarily on the acquisitions strategy during the
first half of 1995. Including the 1996 Acquisitions and the full year of the
1995 Acquisitions, pro forma revenues increased 29.4% to $77.7 million from
$60.0 million.
COST OF OPERATIONS. Cost of operations increased by $9.0 million, or 28.1%,
to $41.3 million in 1995 from $32.2 million in 1994. This increase was
attributable to the addition of 16 markets to the Company's operations
(including personnel costs and costs related to the facilities required to
support the Company's operations in its new markets), continued development of
the Expanded Radio Services and the development and operation of the MetroTV
Services. Cost of operations as a percentage of revenues increased to 57.0% in
1995 from 53.7% in 1994, primarily because the Company incurred $3.1 million of
operating costs associated with the development and operation of the Expanded
Radio Services and Video News Services in 1995, compared to $1.4 million of such
costs in 1994.
MARKETING EXPENSE. Marketing expense increased by $3.1 million, or
approximately 27.7%, to $14.5 million in 1995 from $11.4 million in 1994. This
increase resulted from increased sales commissions associated with the increased
revenues generated in 1995. As a percentage of revenues, marketing expenses were
20.0% in 1995 and 18.9% in 1994. This increase in percentage terms resulted
primarily from the addition of sales representatives, sales managers and
managerial staff in connection with the Company's efforts to improve the
sell-through rate, and higher marketing costs associated with the operations
acquired in connection with the 1995 Acquisitions.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased by $1.3 million, or approximately 21.1%, to $7.2 million in 1995 from
$5.9 million in 1994. This increase was primarily attributable to costs
associated with the acquisition and operation of the 1995 Acquisitions and the
development and expansion of the Expanded Radio Services and MetroTV Services.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased to $4.0 million in 1995 from $1.3 million in 1994. This increase
resulted primarily from the increases in the Company's asset base resulting from
the 1995 Acquisitions and the 1994 Acquisitions.
INTEREST EXPENSE. Interest expense increased to $1.3 million in 1995 from
$0.3 million in 1994. This increase resulted primarily from increases in
indebtedness incurred in connection with the 1995 Acquisitions.
NET INCOME. As a result of the foregoing, net income decreased by $3.6
million to $3.3 million in 1995 from $6.9 million in 1994.
PRO FORMA EBITDA. Pro Forma EBITDA decreased by $1.4 million, or
approximately 11.5%, to $10.8 million in 1995 from $12.2 million in 1994. This
decrease was attributable to increases in cost of operations, marketing expense
and general and administrative expense as discussed above. Pro Forma EBITDA as a
percentage of revenues decreased to 15.0% in 1995 from 20.4% in 1994. Pro Forma
EBITDA would have been $12.6 million in 1995, if the 1995 Acquisitions and 1996
Acquisitions had occurred as of January 1, 1995.
RECIPROCAL ARRANGEMENTS. Revenues from reciprocal arrangements as a
percentage of total revenues declined to 11.6% in 1995 from 13.3% in 1994. Pro
Forma EBITDA from reciprocal arrangements decreased $0.7 million to a loss of
$(0.1) million in 1995 from $0.6 million in 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
REVENUES. Revenues increased by $12.1 million, or approximately 25.3%, to
$60.0 million in 1994 from $47.9 million in 1993, primarily due to increased
sales of commercial airtime inventory in existing markets. In 1994, the
operations acquired in the 1994 Acquisitions generated revenues of approximately
$0.6 million.
COST OF OPERATIONS. Costs of operations increased by $4.9 million, or
approximately 17.7%, to $32.2 million in 1994 from $27.4 million in 1993. Such
increase was attributable to the 1994 Acquisitions,
24
<PAGE>
start-ups in new markets and costs of $1.4 million related to the development of
the Expanded Radio Services. Cost of operations as a percentage of revenues
decreased to 53.7% in 1994 from 57.2% in 1993, primarily as a result of strong
revenue growth. Such costs generally do not increase proportionately with
revenues.
MARKETING EXPENSE. Marketing expense increased by $2.5 million, or
approximately 28.3%, to $11.4 million in 1994 from $8.8 million in 1993. This
increase was attributable to increased sales commissions associated with revenue
increases in 1994. Marketing expense as a percentage of revenues remained
relatively constant at 18.9% in 1994 and 18.5% in 1993.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
decreased $1.1 million, or approximately 15.1%, to $5.9 million in 1994 from
$7.0 million in 1993. This decrease was primarily due to a decrease in
predecessor shareholder costs.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
decreased by $0.5 million, or 28.2%, to $1.3 million in 1994 from $1.8 million
in 1993, as a result of certain intangible assets associated with prior
acquisitions becoming fully amortized.
INTEREST EXPENSE. Interest expense increased by $0.2 million, to $0.3
million in 1994 from $0.1 million in 1993. This increase was primarily due to an
increase in indebtedness related to the 1994 Acquisitions.
NET INCOME. As a result of the foregoing, net income increased by $6.0
million to $6.9 million in 1994 from $0.9 million in 1993.
PRO FORMA EBITDA. Pro Forma EBITDA increased by $5.5 million to $12.2
million in 1994 from $6.7 million in 1993. This increase was due to an increase
in revenues which was partially offset by increases in the cost of operations,
marketing expenses and general and administrative expenses. Pro Forma EBITDA as
a percentage of revenues increased to 20.4% in 1994 from 14.0% in 1993.
RECIPROCAL ARRANGEMENTS. Revenues from reciprocal arrangements as a
percentage of total revenues declined to 13.3% in 1994 from 16.8% in 1993. Pro
Forma EBITDA from reciprocal arrangements decreased to $0.6 million in 1994 from
$0.7 million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company's working capital was $7.9 million
compared to $7.4 million at December 31, 1994. This increase was primarily
attributable to an increase in accounts receivable resulting from an increase in
the Company's revenues to $72.4 million in 1995 from $60.0 million in 1994. Such
increase was partially offset by an increase in accounts payable and accrued
liabilities to $4.5 million at December 31, 1995 from $3.5 million at December
31, 1994. Net cash provided by operating activities increased by $1.5 million to
$3.2 million in 1995 from $1.7 million in 1994.
Historically, the Company has financed its operations from cash generated by
operations and funds provided pursuant to the Credit Agreement. The Company has
used cash provided by operating activities to fund capital expenditures,
operations and distributions to its stockholders.
Net cash used in investing activities was $2.4 million in 1994 and $12.0
million in 1995. Cash used in investing activities related primarily to (i) in
1994, the 1994 Acquisitions and advances to a stockholder of the Company
(primarily for the payment of income taxes payable by the shareholders in
respect of S Corporation income) and (ii) in 1995, the 1995 Acquisitions and
acquisitions of information gathering and broadcasting equipment.
Net cash provided by financing activities in 1994 and 1995 was $3.2 million
and $8.1 million, respectively. Cash provided by financing activities was
primarily proceeds from funds provided pursuant to the Credit Agreement. As of
March 31, 1996, the Company had short-term debt of $0.8 million and long-term
debt of $25.1 million. Short-term debt consisted of current maturities of
borrowings under the
25
<PAGE>
Credit Agreement, current portions of long-term debt and current portions of
capitalized lease obligations. Long-term debt consisted of the long-term portion
of the Credit Agreement and the long-term portion of the notes relating to
certain acquisitions.
THE CREDIT AGREEMENT AND NOTES PAYABLE
The maximum aggregate permitted borrowings (the "Line of Credit") under the
Credit Agreement are $30.0 million. The Line of Credit bears interest at a
variable rate determined by the lender's prime rate or LIBOR and the Company's
total leverage; the interest rate ranges from 50 to 100 basis points over the
prime rate or 100 to 200 basis points over LIBOR. The Line of Credit has a
commitment fee of 0.375% per annum on the daily average unborrowed balance of
the Line of Credit. The Line of Credit currently is secured by a pledge of the
equity interests in each of the Predecessor Companies. The Credit Agreement
provides for various restrictions on the Company which preclude the Company,
without first obtaining the lender's consent, from taking certain actions,
including incurring additional indebtedness, purchasing the assets of any entity
other than in the ordinary course of business, merging or consolidating with any
other entity, altering its existing capital structure and paying certain
dividends. As of March 31, 1996, the Company had $24.6 million outstanding under
the Line of Credit. The Company intends to repay the balance outstanding under
the Line of Credit with a portion of the net proceeds of this offering.
Upon the closing of this offering, the Company expects to enter into an
Amended and Restated Credit Agreement with its lender. Such Amended Line of
Credit is expected to provide for maximum aggregate permitted borrowings of
$30.0 million. The Amended Line of Credit is expected to expire September 30,
2003, and to begin amortizing in September 1998. The Amended Line of Credit is
expected to bear interest at a variable rate indexed to the lender's prime rate
or LIBOR and the Company's total leverage. The Amended Line of Credit is
expected to have a commitment fee based on the daily average unborrowed balance
of the Amended Line of Credit. Upon the closing, the Company anticipates that
the Amended Line of Credit will be secured by the granting of a lien by the
Company on all of its assets and a pledge of its equity interests in each of the
Predecessor Companies in favor of its lender. The Amended Line of Credit is
expected to provide for various restrictions on the Company which would preclude
the Company, without first obtaining the lender's consent, from taking certain
actions, including incurring additional indebtedness, purchasing the assets of
any entity other than in the ordinary course of business, merging or
consolidating with any other entity, altering its existing capital structure and
paying certain dividends.
The Company issued noninterest bearing notes in connection with the Arizona
Acquisition and the Las Vegas Acquisition in 1995, and the Tennessee/Kentucky
Acquisition and the Charlotte Acquisition in 1994 which had principal amounts of
$0.2 million, $0.1 million, $0.2 million and $0.7 million, respectively,
outstanding as of March 31, 1996. The Company has guaranteed $0.7 million
letters-of-credit related to the Charlotte Acquisition as of December 31, 1995.
CAPITAL EXPENDITURES
Capital expenditures were $2.7 million in both 1994 and 1995. Historically,
the Company's capital expenditures have related principally to increasing the
Company's information gathering capabilities, broadcasting capacity and
technology base. The Company anticipates that capital expenditures in 1996 will
be approximately $7.0 million, which is expected to include between $4.0 million
and $5.0 million for expenditures associated with expanding the Company's
information gathering and broadcasting capabilities, including significant
expenditures on video broadcasting and surveillance.
The Company believes its existing sources of liquidity, cash provided by
operations, the Credit Agreement and the proceeds of this offering will satisfy
the Company's anticipated working capital and capital expenditure requirements
for the foreseeable future.
EFFECTS OF INFLATION
The Company believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on the Company's results of
operations.
26
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 123, "Accounting
for Stock Based Compensation" in October 1995, which establishes financial
accounting and reporting standards for stock based on employee compensation
plans including, stock purchase plans, stock options, restricted stock and stock
appreciation rights. The Company has elected to continue accounting for stock
based on compensation under Accounting Principles Board Opinion No. 25. The
disclosure requirements of SFAS No. 123 will be effective for the Company's
financial statements beginning in 1996. Management does not believe that the
implementation of SFAS 123 will have a material effect on its financial
statements.
27
<PAGE>
BUSINESS
OVERVIEW
The Company is the largest provider of traffic reporting services, and a
leading supplier of local news, sports, weather and other information reporting
services, to the television and radio broadcast industries. The Company's
information reports, which are customized to meet the specific needs of each of
the Company's individual radio and television station affiliates, are presently
being broadcast by more than 1,275 radio stations affiliates and 100 television
station affiliates. The Company provides local broadcast information reports in
47 of the 50 largest MSA markets in the United States. In exchange for the
Company's information reports, radio and television station affiliates provide
commercial airtime inventory to the Company. The packaging and sale of this
commercial airtime inventory accounts for substantially all of the Company's
revenue.
Because the Company has numerous radio station affiliates in each of its
markets (averaging 21 affiliates per market), the Company believes that its
broadcasts of local traffic information reach more people, more often, in a
higher impact manner than can be achieved using any other advertising medium.
The Company's information reports are broadcast daily in 60 MSA markets and are
heard by more than 100 million people (age 12 and over). Such reports and the
Company's commercial messages are listened to by an average of 88% of the
population (age 12 and over) in its markets. The Company's large network of
affiliates allows it to offer advertisers the opportunity to reach a broad-based
local, regional or national audience, through a single purchase of commercial
airtime inventory from the Company.
The Company offers advertisers three different networks on which to
broadcast their advertisements: the Radio Traffic Services Network which
broadcasts the Radio Traffic Services, the Expanded Radio Services Network which
broadcasts the Expanded Radio Services and the MetroTV Network which broadcasts
the MetroTV Services. The Company believes that the Expanded Radio Services
Network and the MetroTV Network, both of which are currently being developed,
will become separate broad-based networks through which the Company will be able
to acquire, package and sell additional commercial airtime inventory. See
"Business --Operating Strategy."
Since its founding in 1978, the Company has demonstrated growth in net
revenues and Pro Forma EBITDA. The Company had net revenues of $23.0 million and
Pro Forma EBITDA of $3.7 million for the three months ended March 31, 1996,
representing increases of $8.4 million and $2.8 million, respectively, from 14.7
million and $0.9 million for the three months ended March 31, 1995. For the year
ended December 31, 1995, the Company had net revenues of $72.4 million and Pro
Forma EBITDA of $10.8.
OPERATING STRATEGY
The Company's strategy is to realize operating efficiencies by: (i)
expanding geographically, (ii) increasing the number of affiliates using Radio
Traffic Services within existing markets, (iii) developing the Expanded Radio
Services, (iv) developing the MetroTV Services and (v) continuing to strengthen
its marketing, sales and inventory management operations.
EXPAND GEOGRAPHICALLY. The Company, which currently operates in 60 MSA
markets in the United States, including 54 of the largest 75 MSA markets in the
United States, believes that the economic model for its local information
services business is viable in each of those markets. Since July 1994, the
Company has entered 16 new markets, including six strategic acquisitions
accounting for an additional 14 markets and start-ups in two new markets
throughout the United States. Additionally, the Company intends to expand into
the remaining 21 markets over the next three years through strategic
acquisitions and start-ups. Strategic acquisitions afford the Company the
opportunity to realize economies of scale and cost savings as existing
operations are acquired and duplicative functions eliminated.
INCREASE THE NUMBER OF AFFILIATES USING RADIO TRAFFIC SERVICES WITHIN
EXISTING MARKETS. The Company believes that there are substantial opportunities
for continued growth in its Radio Traffic Services Network. As of March 31,
1996, the Company provided Radio Traffic Services to approximately 1,275 radio
station affiliates, an increase from 914 radio station affiliates as of December
31, 1994. The
28
<PAGE>
Company believes that opportunities are available to increase its market
penetration by establishing affiliate relationships with additional radio
stations. Its current affiliates represent 68% of the approximately 1,861 radio
stations in the 60 MSA markets in which the Company operates. The Company
believes that in numerous markets, it may be possible to establish affiliate
relationships with substantially all of the radio stations in the market. Once
the Company establishes a presence in a market by providing its services to at
least one affiliate, it can leverage its investment in information gathering
technology, such as aircraft and fixed-position cameras, by providing traffic
services to multiple affiliates, at minimal additional costs.
DEVELOP THE EXPANDED RADIO SERVICES. Having established a substantial
market presence in Radio Traffic Services, the Company began during 1994 to
leverage this business by offering Expanded Radio Services to its network of
radio station affiliates. As of March 31, 1996, the Company provided Expanded
Radio Services to more than 200 radio station affiliates in 26 MSA markets, an
increase from 92 radio station affiliates in 17 MSA markets as of December 31,
1994. The Company believes it can provide customized information reports of a
superior quality, at a lower cost than an individual station can provide on its
own. Moreover, the Company believes that consolidation in the radio industry may
increase the demand for the Expanded Radio Services Network because radio
station owners are likely to continue to increase their out-sourcing of various
programming elements in order to minimize operating costs. The Company plans to
focus on increasing the number of radio stations broadcasting the Expanded Radio
Services within its current markets, and to expand these services to all of its
markets by the end of 1997.
DEVELOP METROTV SERVICES. The Company has provided its Television Traffic
Services to the MetroTV Network for over ten years. This network consisted of
103 television stations in 46 DMA markets as of March 31, 1996 an increase from
71 television stations in 33 DMA markets as of December 31, 1994. In connection
with its core Radio Traffic Services business, the Company developed an
extensive infrastructure of video surveillance and broadcast equipment,
including jet helicopters, broadcast quality remote and omni-directional
aircraft-mounted camera systems, mobile units, computer generated graphic
displays and broadcasting technology. In 1995, the Company began to use this
infrastructure to offer the Video News Services to its network of television
station affiliates; the Company currently provides this service to 16 of its
television affiliates in nine of its DMA markets. The Company's MetroTV Services
include full service, 24 hours per day/7 days per week video coverage from
camera crews in the Company's aircraft and in the Company's mobile ground units
covering news stories. In addition, the Company's strategically located
fixed-position ground-based camera systems offer affiliates coverage of crucial
traffic arteries and news stories, and are capable of providing panoramic views
of the cities in which such cameras are located. The Company intends to expand
the Video News Services into the 25 largest DMA markets in the United States
over the next three years.
CONTINUE TO STRENGTHEN ITS SALES, MARKETING AND INVENTORY MANAGEMENT
OPERATIONS. Over the past year, the Company has invested in, and continues to
initiate and implement, new operating strategies and systems to increase
revenues and Pro Forma EBITDA in its operations. In order to increase the
percentage of the Company's commercial airtime inventory sold, the Company has
(i) increased its sales force from approximately 70 sales representatives as of
December 31, 1994 to approximately 125 sales representatives as of March 31,
1996; (ii) developed a corporate marketing department to support the efforts of
its sales representatives by providing extensive training, research,
sales/marketing materials and analysis; (iii) hired additional general managers
and sales managers to better manage the activities of its sales representatives
and enhance its affiliate relationships; (iv) fully automated its commercial
airtime inventory management system to improve inventory control and pricing;
and (v) reduced the level of reciprocal arrangements to focus sales
representatives on cash revenue business. These enhancements have allowed the
Company to increase advertising rates in each of 1994 and 1995. In addition, the
Company estimates that it sold approximately 66% in 1994 and 69% in 1995,
respectively, of its Radio Traffic Services Network and Expanded Radio Services
Network commercial airtime inventory. For the quarter ended March 31, 1996, the
Company estimates that it sold approximately 72% of its existing radio network
commercial airtime inventory.
29
<PAGE>
PROGRAMMING
Every aspect of the Company's information reports (including the length of
report, content of report, specific geographic coverage area, time of broadcast,
number of reports aired per day, broadcaster's style, etc.) is customized to
meet each individual affiliate's requirements. The Company typically works
closely with the program directors, news directors, and general managers of its
affiliates to ensure that the Company's services meet its affiliates' quality
standards. The Company and its affiliates jointly select the on-air broadcasters
to ensure that each broadcaster's style is appropriate for the station's format.
The Company's broadcasters often become integral "personalities" on such
affiliates' stations as a result of their significant on-air presence and
interaction with the stations' on-air personnel. In order to realize operating
efficiencies, the Company endeavors to utilize its professional broadcasters on
multiple affiliate stations within a particular market. Generally, each of the
Company's broadcasters deliver reports to between two and four of the Company's
affiliates.
The Company does not require its affiliates to identify the Company as the
supplier of its information reports. This provides the Company's affiliates with
a high degree of customization and flexibility, as each affiliate has the right
to present the information reports provided by the Company as if the affiliate
had generated such reports with its own resources. For example, multiple
affiliates in a single market may suggest that the Company's infrastructure,
including its airplanes, helicopters and broadcasters, are those of the
affiliate.
RADIO PROGRAMMING SERVICES
The Company has been supplying radio stations with customized Radio Traffic
Services since its inception in 1978. The Company is now the largest supplier of
Radio Traffic Services in the United States. The Company has offered its
Expanded Radio Services since 1994 and is now a leading supplier of such
services, with over 200 affiliates in 26 markets. Further, the Company intends
to have a general news reporting presence in all of its 60 markets by the end of
1997.
The Company gathers traffic and other data utilizing the Company's
information-gathering infrastructure, which includes aircraft (jet helicopters
and airplanes), broadcast quality remote camera systems positioned both at
strategically located ground positions and on aircraft, mobile units and
cellular systems, and by accessing various government based traffic tracking
systems. The Company also gathers information through various services including
Reuters America Inc., WeatherBank, Inc., Weather Services Corporation, City News
Service of Los Angeles, Sports Final Radio Net, Inc. and Bay City News, Inc. The
information is then processed, written into broadcast copy and entered into the
Company's computer systems by the Company's local writers and producers. The
Company's professional broadcasters then read the customized reports on the air.
The Company's information-gathering infrastructure and the flexibility
created by its ability to provide services 24 hours per day/7 days per week to
its affiliates, enabling the Company to respond to changing conditions and
enable its affiliates to provide their listeners with accurate up-to-the-minute
information. For example, responding to numerous radio station requests during
the Long Island fires in 1995, the Company's New York operations center
substantially increased the number of reports regarding this subject provided to
affiliates. Rapid response in similar circumstances, such as in connection with
the 1994 Los Angeles earthquake, is routinely achieved by the Company whenever
weather or other events impact either traffic or other conditions of interest to
the listeners or viewers of the Company's affiliates. As a result, the Company
has received numerous letters of commendation for its assistance efforts in
crisis situations, which management believes strengthens its affiliate
relationships. See "-- Infrastructure."
As a result of its extensive network of operations and broadcasters, the
Company often reports important news stories and provides its affiliates with
live coverage of these stories. The Company is able to customize and personalize
its reports of breaking stories using its individual affiliates' call letters
from the scene of news events. For example, during the Oklahoma City bombing,
the Company provided live
30
<PAGE>
customized reports from Oklahoma City to its affiliates all over the country.
The Company believes that it is the only radio network news organization which
has local studio operations which cover 60 markets and that is able to provide
such customized reports to these markets.
In addition, the Company is currently test marketing a regional news wire
service (non-customized text and audio) in five markets. If the test is
successful, the Company plans to launch its news wire service in various regions
beginning in the fourth quarter of 1996 and throughout 1997. The Company could
eventually offer this service in small and medium-sized markets without opening
any local operations centers as this would be a non-customized service and
distributed via satellite, thereby generating additional commercial airtime
inventory for Expanded Radio Services.
TELEVISION PROGRAMMING SERVICES
The Company has been supplying its Television Traffic Services to television
stations for over ten years and is currently providing such services to 103
television stations in 46 markets. Originally, the Company provided television
stations with audio reports of traffic information and simple graphics; as the
Company developed its Television Traffic Services, it provided more
sophisticated graphics displays to the MetroTV Network. In 1995, the Company
began to expand and enhance the information services that it provides to
television stations. The Company is now providing its Video News Services to
approximately 16 television stations in nine markets. As with its radio
programming services, the Company supplies customized information reports which
are delivered on air by its professional broadcasters to its television station
affiliates. In addition, the Company supplies customized graphics and other
visual programming elements to its television station affiliates.
The Company began utilizing live studio cameras in order to enable its
traffic reporters to provide its Video News Services on television from the
Company's local broadcast studios. In addition, the Company began in 1995 to
provide its Video News Services from its aircraft and ground based camera
systems. The Company provides its Television Traffic Services and Video News
Services to television stations owned by some of the largest television groups
in the nation, including A.H. Belo Corporation, Cox Communications, Inc., ABC
Inc., a subsidiary of The Walt Disney Company, Ellis Communications, Inc., Fox
Television Stations, Inc., a subsidiary of The News Corporation Limited,
National Broadcasting Company, Inc., a subsidiary of General Electric Company,
The Washington Post Co. and CBS, Inc., a subsidiary of Westinghouse Electric
Company.
The Video News Services include: (i) full-service, 24 hours per day/7 days
per week video coverage from the Company's camera crews, using broadcast quality
camera equipment and news vehicles; (ii) live video news feeds from the
Company's aircraft; and (iii) live video coverage from strategically located
ground based camera systems. Currently, the Company is providing all of such
Video News Services to four affiliates in Houston, Texas, where the Company has
tested the product for the past fifteen months, and plans to expand it into the
25 largest DMA markets in the country over the next three years. The capital and
operating expenditures needed to expand the Company's Video News Services have
been and will continue to be significant relative to the capital expenditures
required by the Company to operate its radio information services business.
METRO INFORMATION SERVICES
The Company initiated its Metro Information Services ("MIS") division to
develop non-broadcast, traffic information business. MIS develops innovative
techniques of gathering local traffic and transportation information as well as
new methods of distributing such information to the public. The Company believes
that in order to remain competitive and to continue to provide an information
product of the highest quality to its affiliates, it is necessary to invest in
and participate in the development of new technology. The Company is currently
working with numerous public and private entities across the United States to
improve dissemination of traffic and transportation information. The Company is
currently one of the largest information suppliers to the wireless telephone
industry, providing customized traffic information, direction services, and
other local information to cellular subscribers via the Company's STAR JAM (TM)
and STAR FIND (TM) services. Also, the Company plans to offer traffic
31
<PAGE>
information services via the Internet, other wireless communications, in-vehicle
systems and other potential delivery mechanisms. The Company believes that it is
well positioned, as a leading supplier of local traffic and other information,
to benefit from the evolution of future distribution systems.
The Company is currently participating in several United States Department
of Transportation ("USDOT") funded "Intelligent Transportation Systems" projects
including: (i) The Atlanta Showcase, a federally funded technology demonstration
project, which will take place during the Summer Olympics in 1996 and will
involve the delivery of traffic and mobility information and (ii) TravInfo
Traveler Information Center, a field operational test being conducted in the San
Francisco Bay Area to implement a region-wide, open-access, multi-model advanced
traveler information service.
INFRASTRUCTURE
The Company's geographically dispersed operations have historically been
organized into several regions. Formerly, a regional General Manager would
typically have overall management responsibility for sales and operations in
such General Manager's region, which would comprise four to six markets,
depending on the size of the markets. However, the Company believes that as it
continues to grow its Expanded Radio Services and Video News Services, a General
Manager focused exclusively on one market or a smaller number of markets will be
able to more effectively implement and maintain affiliate relationships and
maximize the percentage of available advertising inventory sold. Accordingly,
the Company presently intends to reorganize its management to place a single
General Manager in each of its 10 largest markets and to assign a General
Manager in its remaining markets to a small number of markets, generally one to
three.
In each of its markets, the Company employs a Director of Operations who is
responsible for all aspects of the Company's day-to-day operations. Each
Director of Operations is responsible for supervising all of the broadcasters,
airborne reporters, producers, editors, and writers in such Director's operation
center. Moreover, the Director of Operations is responsible for maintaining
day-to-day relations with affiliates and pursuing relationships with
unaffiliated stations. In addition, the Company employs eight Regional Directors
of Operations who supervise the Directors of Operation and who report to the
Company's General Managers.
The Company believes that its extensive fleet of aircraft and other
information-gathering technology and broadcast equipment have allowed the
Company to provide high quality programming, enabling it to retain and expand
its affiliate base. In the aggregate, the Company has approximately 69
fixed-wing aircraft, 17 helicopters, 30 mobile units, 7 airborne camera systems,
16 fixed-position camera systems, 50 broadcast studios and 1,148 broadcasters
and producers. The Company also maintains a staff of computer programmers and
graphics experts to supply customized graphics and other visual programming
elements to television stations. In addition, each of the Company's operating
centers and broadcast stations has sophisticated computer technology, video and
broadcast equipment and cellular and wireless technology which enables the
Company's broadcasters to deliver accurate reports to its affiliates. The
infrastructure and resources dedicated to a specific market by the Company are
determined by the size of the market, the number of affiliates the Company
serves in the market and the type of services being provided.
For example, in the New York City metropolitan area, the Company currently
utilizes two jet helicopters with mounted omni-directional cameras, four
airplanes and fixed position cameras positioned strategically to deliver
up-to-the-minute live reports. Traffic conditions are relayed via two way radio
to the producers in the Company's New York broadcast studio who transcribe the
report, enter it into the computer system and produce the broadcast copy which
is then delivered on-air to the Company's New York radio and television
affiliates by its broadcasters. The Company recently installed cameras on its
helicopters and on certain buildings, including the Empire State Building,
enabling the Company to provide its television station affiliates with live
video of breaking news and traffic conditions. The Company believes that its
investment in its New York City-area infrastructure has been a significant
factor in the increase in its number of radio station and television station
affiliates in its New York, Nassau/
32
<PAGE>
Suffolk (Long Island) and Monmouth/Ocean markets from 24 as of December 31, 1994
to 38 as of March 31, 1996. The following diagram depicts the infrastructure
supporting the Company's New York City metropolitan area operation:
[graph goes here]
[EDGAR DESCRIPTION: GRAPHIC DEPICTING THE NEW YORK METROPOLITAN AREA'S
OPERATIONAL RESOURCES.
This graphic demonstrates the infrastructure utilized in the operations of
the New York City Metropolitan area. The New York area is serviced by (i) four
airplanes (one in Central/Northern New Jersey, one in Westchester County and two
in Long Island), (ii) two jet helicopters (each with a mounted camera system);
and (iii) two camera systems, one at Newark Airport and one on the Empire State
Building. Traffic and news information reports and video are relayed back to the
New York City bureau. The graphic also shows the total personnel servicing the
local bureaus in the New York City metropolitan area. The New Jersey bureau has
two broadcasters and producers, the Long Island bureau has two broadcasters, the
Westchester County bureau has four broadcasters and producers and the New York
City broadcast studio has 25 traffic broadcasters, five news, sports and weather
broadcasters and eight producers and writers.]
In 1995, the Company established an electronic communications network in its
headquarters in Houston, Texas. The Company began expanding this network to
include its marketing and operations offices throughout the country in 1996. The
Company has created this Intranet for internal management as well as Internet
access. The Company believes that by networking each of its regional offices to
the corporate office, access to certain sales, marketing, scheduling and
accounting information will be more effectively updated, maintained and
disseminated to the Company's employees. The Company believes this will result
in an improvement in sales and marketing efficiency, and will also be beneficial
to general managers in tracking and maintaining commercial airtime inventory and
rate controls and affiliate information for their respective markets. The
Company has invested in this infrastructure, with ten markets currently on the
network, and plans to add its remaining markets to this network by 1997.
ADVERTISING SALES AND MARKETING
The Company packages its radio commercial airtime inventory on a network
basis, covering all affiliates in relevant markets. This packaged inventory
typically appeals to advertisers seeking a broader demographic reach than that
delivered by individual radio stations, which generally deliver an audience with
narrow, specific demographic characteristics. Because the Company sells its
commercial airtime inventory on a network basis rather than station by station,
the Company does not compete for advertising dollars with its local radio
station affiliates. The Company believes that this corporate policy is a key
factor in maintaining its affiliate relationships.
Currently, the Company's television commercial airtime inventory is sold by
members of its general advertising sales force. The Company is developing a
separate sales force to sell its television commercial airtime inventory.
Currently, the Company packages its television commercial airtime inventory on a
local, regional and national network basis. However, advertisers on the MetroTV
Network have the ability to select specific markets and television stations for
their advertisements. This enables advertisers to customize advertising packages
to their individual requirements.
In each of the markets in which it conducts operations, the Company
maintains an advertising sales office as part of its operations center. The
Company's advertising sales force is able to sell available commercial airtime
inventory in any and all of the Company's markets in addition to selling such
inventory in each local market, which the Company believes affords its sales
representatives an advantage over certain of their competitors. For example, an
airline advertiser can purchase airtime inventory in multiple markets from the
Company's local sales representative in the city in which the airline is
33
<PAGE>
headquartered. The Company's advertising sales force is comprised of
approximately 125 sales representatives. Although the Company typically has two
or three sales representatives in an individual market, the number of sales
representatives in an individual market ranges from one to eight depending on
the size of the market and the number of potential national and regional
advertising clients headquartered in the market. Specialized programs and
marketing campaigns, which support nationwide sales and other special forms of
advertising, are managed from the Company's headquarters in Houston, Texas.
Due to the number of the Company's markets, its reach within its markets and
the range of services it provides, the Company has a large number of advertising
clients in a diverse group of industries. No single advertiser represented more
than 6% of the Company's total revenues and the Company's top ten advertisers,
as a group, represented only 21% of the Company's total revenues for the year
ended December 31, 1995.
As the following table indicates, for the year ended December 31, 1995,
advertising sales to the ten largest industry groups which are purchasers of the
Company's commercial airtime inventory accounted for approximately 58% of the
Company's total sales and no single industry group accounted for more than 8% of
the Company's total sales.
<TABLE>
<CAPTION>
% OF TOTAL SALES FOR
TWELVE MONTHS
ADVERTISER INDUSTRY ENDED 12/31/95
- --------------------------------------------------------------------- ---------------------
<S> <C>
Consumer Goods....................................................... 8%
Retail (Home Improvement)............................................ 7%
Supermarkets......................................................... 6%
Automotive (Retail).................................................. 6%
Automotive........................................................... 6%
Other Retail......................................................... 6%
Cellular............................................................. 5%
Newspapers........................................................... 5%
Oil & Gasoline....................................................... 5%
Lotteries............................................................ 4%
---
Total.............................................................. 58%
---
---
</TABLE>
Due to the relatively long lead-time required to educate advertising
agencies on the merits of the Company's advertising packages, the Company has
historically targeted its advertising sales efforts directly to advertisers.
Many advertisers, however, have directed their advertising agencies to place
advertising with the Company and, as a result, such agencies have themselves
begun to direct more advertisers to the Company. Due to the growing strength of
the Company's advertising agency relationships, advertising sales booked through
advertising agencies grew to approximately 75% of the Company's total revenues
in 1995, an increase from 63% in 1992. The Company does not have significant
sales concentration among its agency-placed advertising, with advertising
inventory sold through an estimated 400 agencies during 1995.
RADIO TRAFFIC SERVICES NETWORK AND EXPANDED RADIO SERVICES NETWORK
The Company's typical radio advertisement on the Radio Traffic Services
Network and the Expanded Radio Services Network consists of an opening
announcement and a ten second commercial message presented immediately prior to,
in the middle of, or immediately following a regularly scheduled information
report. Because the Company has numerous radio station affiliates in each of its
markets (averaging 21 affiliates per market), the Company believes that its
traffic broadcasts reach more people, more often, in a higher impact manner than
can be achieved using any other advertising medium. The Company combines its
commercial airtime inventory into multiple "sponsorship" packages (generally
125, 250 or 500 sponsorships broadcast over a four week period in each market)
which it then sells as an information sponsorship package to radio advertisers.
These Company sponsorship packages are run on a fair and equal rotation (i.e.,
each advertiser receives its pro rata share of
34
<PAGE>
advertisements sold by the Company for broadcast on each of the Company's
affiliates in the relevant market or markets) throughout the Traffic Services
Network on a local, regional or national basis, primarily during prime morning
and afternoon drive periods. The Company does not allow an advertiser to select
individual stations from the Radio Traffic Services Network or Expanded Radio
Services Network on which to run its advertising campaign. In the Company's MSA
markets the Company's 500 sponsorship package (which the Company believes is its
most frequently purchased package), reaches an average of approximately 70% of
the population (age 12 and over). In addition, the Company's large network of
affiliates allows the Company to offer advertisers the opportunity to purchase
advertising in multiple markets nationwide through a single purchase from the
Company.
As the Company has developed and expanded the Expanded Radio Services
Network, it has primarily packaged and sold its commercial sponsorships of the
Expanded Radio Services in conjunction with its existing traffic report
sponsorships. Because the Expanded Radio Services Network is not fully mature,
the Company has not yet maximized the marketing of commercial airtime inventory
on the Expanded Radio Services Network as a separate product line. Accordingly,
the Company has only generated minimal revenues from the sale of advertisements
on the Expanded Radio Services Network. As the Company develops the Expanded
Radio Services Network in individual markets, it intends to package and sell
advertisements as a separate product. During the first quarter of 1996, the
Company began to package and sell separate Expanded Radio Services Network
sponsorship packages in five markets (Boston, Washington, Houston, Phoenix, and
Los Angeles). The Company intends to introduce the Expanded Radio Services
Network sponsorships in additional markets as it further develops the Expanded
Radio Services Network throughout 1996 and 1997.
As the Company's business has developed, it has sold increasing amounts of
its advertising to regional/national advertisers. For the year ended December
31, 1994, approximately 25% of the Company's radio advertising revenue was
attributable to regional/national advertisers, with the balance attributable to
local advertisers, and for the three months ended March 31, 1996, sales to
regional/ national advertisers accounted for approximately 50% of sales of total
commercial airtime inventory.
The Company believes that the positioning of advertisements within or
adjacent to its information reports appeals to advertisers because the
advertisers' messages are broadcast along with regularly scheduled programming
during peak morning and afternoon drive times when a majority of the radio
audience is listening. Radio advertisements broadcast during these times
typically generate premium rates. Moreover, surveys commissioned by the Company
demonstrate that because the Company's customized information reports are
related to topics of significant interest to listeners, listeners often seek out
the Company's information reports. Since advertisers' messages are imbedded in
the Company's information reports, such messages have a high degree of impact on
listeners and generally will not be "pre-empted" (i.e., moved by the radio
station to another time slot). Most of the Company's advertisements are read
live by the Company's on-air broadcasters, providing the Company's advertisers
with the added benefit of an implied endorsement for their product.
METROTV SERVICES
The Company provides its MetroTV Services to television stations in exchange
for thirty second commercial airtime inventory. The amount and day-part
placement of the commercial airtime inventory that the Company receives from
television stations varies by market and by the type of service provided by the
Company. As the Company has provided more enhanced MetroTV Services, it has been
able to acquire more commercial airtime inventory with better day-part
placement. The Company, in turn, packages this commercial airtime inventory and
sells it to advertisers on a local, regional and national basis. The Company
believes that it offers advertisers significant benefits because, unlike
traditional television networks, the MetroTV Network often delivers more than
one station in a market and advertisers have the ability to select specific
television stations and markets. Therefore, the Company can customize
advertising packages for individual advertisers based on each advertiser's
requirements.
Historically, revenues from sales of television commercial airtime inventory
have been an insignificant part of the Company's total revenues. In order to
significantly increase the Company's revenues
35
<PAGE>
from sales of television commercial airtime inventory, in early 1996 the
Company: (i) formed a separate television advertising sales staff; (ii) began
seeking an increased amount of higher value fixed position commercial airtime
inventory from television stations in exchange for providing enhanced Video News
Services; and (iii) pre-sold a significant amount of commercial airtime
inventory to a large national advertiser. As the Company continues to expand all
aspects of its Television Traffic Services and Video News Services, the Company
believes that revenues from television advertising sales will continue to
increase.
AFFILIATES
The Company's large network of affiliates allows the Company to offer
advertisers the opportunity to reach a broad-based, local, regional or national
audience through a single purchase of commercial airtime from the Company. The
Company has demonstrated consistent affiliate growth; for example, the number of
radio station affiliates has grown 39.6% from 914 as of December 31, 1994 to
1,276 as of March 31, 1996, and the number of the Company's television station
affiliates has increased 45.1% from 71 to 103 over the same period. In addition,
the Company's relationships with numerous radio station and television station
affiliates within a certain market creates economies of scale which allow the
Company to utilize a wide array of professional broadcasters,
information-gathering equipment and technology and extended hour operations less
expensively than if it had an affiliate relationship with only one individual
station or group in a particular market.
The number of the Company's radio station affiliates in an individual market
varies from 59 in the Los Angeles, California market to two in the Cincinnati,
Ohio market (which was a 1996 start-up) and currently averages 21 affiliates per
market. The Company's primary goal when entering a market is to enter into
affiliate relationships with every radio station and television station in the
market, thereby maximizing the percentage of listeners (i.e., the number of
people in the radio audience who have heard a report in a particular market) of
the Company's networks within each of its markets; such maximization is an
integral part of the Company's sales and marketing strategy. With the exception
of Cincinnati, Ohio, the Company's reports and sponsorships are heard by a low
of 43.7% in Nashville, Tennessee to a high of 100% of the radio listening
audience in six markets; on average the Company's reports and sponsorships are
heard by over 88% of the population (age 12 and over) in its markets.
The following chart presents, in order of MSA population (age 12 and over),
the Company's current number of radio station affiliates in each of its MSAs,
the MSA's population and the Company's audience reached in the relevant MSA.
36
<PAGE>
<TABLE>
<CAPTION>
# OF RADIO
STATION MSA
MSA(1) AFFILIATES POPULATION(1) % LISTENERS(2)
- -------------------- ----------- ------------- ---------------
<S> <C> <C> <C>
New York, NY 30 14,114,700 83.5
Monmouth/Ocean NJ 884,300 48.9
Los Angeles, CA 59 9,687,300 80.6
Riverside/San
Bernardino, CA 1,343,200 89.3
Oxnard, CA 362,000 68.9
Chicago, IL 35 6,895,700 81.8
San Francisco/ 30 5,367,400 78.6
Oakland, CA
Philadelphia, PA 33 4,067,000 95.3
Detroit, MI 31 3,652,100 91.3
Dallas/Ft. Worth, TX 29 3,570,000 84.0
Washington, DC 36 3,512,500 98.6
Houston/Galveston, 34 3,348,800 99.7
TX
Boston, MA 32 3,236,600 84.4
Miami/Ft. 33 2,936,100 96.9
Lauderdale/
Hollywood, FL
Atlanta, GA 37 2,843,600 80.3
Seattle/Tacoma, WA 23 2,698,900 100.0
Nassau/Suffolk (Long 3 2,253,200 64.5
Island), NY
San Diego, CA 23 2,212,900 75.3
Minneapolis/St. 33 2,202,400 98.4
Paul, MN
St. Louis, MO 27 2,083,800 95.6
Baltimore, MD 23 2,056,700 81.9
Pittsburgh, PA 25 2,036,900 84.1
Phoenix, AZ 40 1,997,400 99.8
Tampa/St. 30 1,885,200 100.0
Petersburg/
Clearwater, FL
Cleveland, OH 25 1,759,300 100.0
Denver/Boulder, CO 31 1,733,500 98.2
Portland, OR 23 1,598,900 83.0
Cincinnati, OH 2 1,556,300 6.0
Kansas City, MO 19 1,349,300 60.3
Milwaukee/Racine, WI 23 1,339,700 98.3
<CAPTION>
# OF RADIO
STATION MSA
MSA(1) AFFILIATES POPULATION(1) % LISTENERS(2)
- -------------------- ----------- ------------- ---------------
<S> <C> <C> <C>
Sacramento, CA 35 1,337,200 99.2
Stockton, CA 420,400 67.4
Modesto, CA 330,400 67.2
San Jose, CA 10 1,317,700 47.3
Providence/Warwick/ 20 1,263,700 96.9
Pawtucket, RI
Columbus, OH 12 1,223,900 60.4
Norfolk/Virginia 29 1,210,900 100.0
Beach/Newport News,
VA
San Antonio, TX 25 1,183,200 96.0
Salt Lake City/ 22 1,158,600 99.6
Ogden/Provo, UT
Indianapolis, IN 19 1,108,500 91.6
Charlotte/Gastonia/ 21 1,077,400 87.9
Rock Hill, NC
Orlando, FL 28 1,017,100 100.0
Buffalo/Niagara 14 991,600 98.5
Falls, NY
Hartford, CT 50 962,700 91.2
New Haven, CT 389,300 83.6
Danbury, CT 164,300 57.3
Memphis, TN 13 931,800 69.4
Nashville, TN 27 911,900 43.7
Rochester, NY 15 900,700 85.2
West Palm Beach/ 20 850,200 79.0
Boca Raton, FL
Las Vegas, NV 25 847,700 99.8
Louisville, KY 25 845,900 88.9
Oklahoma City, OK(3) 6 836,200 70.5
Jacksonville, FL(3) 21 823,900 98.7
Austin, TX 17 821,600 95.9
Richmond, VA 21 775,000 100.0
Tucson, AZ 12 628,100 94.1
Albuquerque, NM(3) 13 537,700 78.1
Wilmington, DE 2 506,900 67.4
Daytona Beach, FL 5 390,300 46.5
TOTAL 1,276 117,606,500(4) 88.0%
</TABLE>
- ------------------------
(1) Listed in The Arbitron Radio Metro and Television Market Population
Estimates in 1995-1996.*
(2) Percentage of the MSA population which hears the Company's information
reports, calculated using Arbitron Winter 1996 Radio Market Reports* and
Strata Marketing, Inc. Statistical Analysis.
(3) The Company has license agreements to provide national sales, marketing and
operational support in exchange for certain amounts of commercial airtime
inventory in Jacksonville, FL, Oklahoma City, OK, and Albuquerque, NM. The
Company packages and sells such commercial airtime on a regional and
national basis to its advertisers.
(4) Arbitron includes the population of Nassau/Suffolk and Monmouth counties in
the New York MSA. Therefore, these populations are not duplicated in the
total population figure.
*/ Copyright 1996 The Arbitron Company. All Rights Reserved.
37
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The following chart presents, in order of market population (age 12 and
over), the Company's current number of television affiliates in each market and
the DMA's population.
<TABLE>
<CAPTION>
# OF TELEVISION
STATION DMA
DMA(1) AFFILIATES POPULATION(1)
- --------------------------- --------------- -------------
<S> <C> <C>
New York, NY 3 15,922,200
Los Angeles, CA 2 12,447,700
Chicago, IL 2 7,153,300
Philadelphia, PA 1 6,046,200
San Francisco/Oakland/ San 3 5,304,500
Jose CA
Boston, MA 2 4,850,800
Washington, DC 5 4,323,100
Dallas/Ft. Worth, TX 1 4,033,000
Detroit, MI 2 3,899,200
Houston, TX 7 3,610,800
Atlanta, GA 4 3,557,400
Seattle/Tacoma, WA 2 3,199,100
Cleveland/Akron, OH 3 3,193,200
Minneapolis/St. Paul, MN 1 3,100,200
Miami/Ft. Lauderdale, FL 4 3,009,000
Tampa/St. Petersburg/ 3 2,901,800
Sarasota, FL
Phoenix, AZ 4 2,584,000
Sacramento/Stockton/ 4 2,561,700
Modesto, CA
Pittsburgh, PA 1 2,498,400
Denver, CO 1 2,437,800
St. Louis, MO 4 2,433,600
Baltimore, MD 2 2,214,500
Orlando/Daytona Beach/ 2 2,176,500
Melbourne, FL
Portland, OR 1 2,053,500
<CAPTION>
# OF TELEVISION
STATION DMA
DMA(1) AFFILIATES POPULATION(1)
- --------------------------- --------------- -------------
<S> <C> <C>
Hartford/New Haven, CT 2 2,050,700
Indianapolis, IN 2 2,033,200
Charlotte, NC 1 1,780,700
Nashville, TN 1 1,695,100
Kansas City, MO 2 1,682,200
Columbus, OH 1 1,609,200
Salt Lake City, UT 2 1,602,600
San Antonio, TX 2 1,514,400
Norfolk/Portsmouth/ Newport 3 1,411,000
News, VA
Buffalo, NY 1 1,400,800
Oklahoma City, OK 1 1,271,500
Albuquerque/Santa Fe, NM 1 1,266,300
Providence/New Bedford, RI 1 1,263,700
West Palm Beach/Ft. Pierce, 2 1,206,900
FL
Louisville, KY 2 1,199,600
Richmond/Petersburg, VA 2 1,109,700
Austin, TX 1 894,200
Las Vegas, NV 3 869,800
Rochester, NY 2 812,500
Tucson, AZ 2 747,300
Springfield/Holyoke, MA 1 554,100
Monterey/Salinas, CA 1 511,900
Total Affiliates 99
Cable News Channels(2) 4
TOTAL 103 133,998,900
</TABLE>
- ------------------------
(1) Listed in The Arbitron Radio Metro and Television Market Population
Estimates in 1995-1996.*
(2) Cable news channel affiliates in New York(2), Washington(1), and
Rochester(1).
* Copyright 1996 The Arbitron Company. All Rights Reserved.
The Company provides its Television Traffic Services to four cable
television affiliates. The Company believes that opportunities exist to increase
the number of cable news channel affiliates receiving Television Traffic
Services and Video News Services, and it intends to continue to market its
services to those stations.
ACQUISITIONS
Since July 1994, the Company has expanded into 14 markets through six
strategic acquisitions, and made an additional acquisition to expand its
operations in Atlanta, Georgia, for a total consideration of approximately $20
million.
The Company is in various stages of pursuing additional strategic
acquisitions. The Company is currently in discussions with five entities that,
if acquired, would result in new or expanded coverage of approximately eight to
ten markets by the Company. The Company, however, does not have any commitments,
arrangements, or understandings with respect to any such acquisitions. Further,
there can be no assurance that the Company will be able to effect any such
transactions or that any such transactions, if consummated, will prove to be
beneficial to the Company.
The Company generally consolidates the operations of the acquired companies
or assets into its existing operations so that duplicative costs can be
eliminated, resulting in margin improvements for the consolidated operations. In
addition, as a result of the Company's significant sales force and existing
advertising relationships, the Company is generally able to increase revenues by
selling advertising in
38
<PAGE>
the acquired market to the Company's existing regional and national sponsors.
Moreover, as the Company continues to add new markets and to increase its
presence in existing markets, it has been able to offer advertisers increased
market penetration and to generate incremental revenues from existing
advertising clients.
The following acquisitions have been completed in 1996 (the "1996
Acquisitions"):
SALT LAKE CITY ACQUISITION. On January 3, 1996, the Company acquired (the
"Salt Lake City Acquisition") all of the tangible and intangible assets of
Aeromedia, Inc. ("Aeromedia"). As of March 31, 1996, the Company, (through
Aeromedia), provided Radio Traffic Services to a network of 22 radio stations
and two television stations in Salt Lake City, Utah, which is the thirty-fifth
largest MSA market.
NEW ENGLAND ACQUISITION. On January 4, 1996, the Company acquired (the "New
England Acquisition") all of the stock of Traffic Net Inc., a Rhode Island
corporation, Traffic Net of Connecticut, Inc., a Connecticut corporation, and
The Weather Bureau, Inc., a Massachusetts corporation (collectively, the
"Traffic Net Group"). As of March 31, 1996, the Company (through the Traffic Net
Group) provided local traffic information services to approximately 70 radio
station and three television station affiliates in and around the Hartford,
Connecticut area (the forty-first largest MSA market), and Providence, Rhode
Island (the thirty-first largest MSA market). In addition, The Weather Bureau,
Inc. (d/b/a The New England Weather Bureau) provides weather reporting services
to approximately 47 radio station affiliates in Boston, Massachusetts (the tenth
largest MSA market), and throughout New England.
The following acquisitions were completed in 1995 (the "1995 Acquisitions"):
THE ARIZONA ACQUISITION. On March 9, 1995, the Company acquired (the
"Arizona Acquisition") the stock of Skyview Broadcasting Networks, Inc., an
Arizona corporation ("Skyview"). As of March 31, 1996, the Company (through
Skyview) provided services to 52 radio and 5 television stations in Phoenix and
Tucson, Arizona, the twentieth and sixty-second largest MSAs, respectively.
THE LAS VEGAS ACQUISITION. On March 9, 1995, the Company acquired (the "Las
Vegas Acquisition") the stock of Airborne Broadcast Consultants, a Nevada
corporation ("Airborne"), which was under common ownership with Skyview. As of
March 31, 1996, the Company (through Airborne) provided traffic programming
services to 25 radio and 3 television stations in Las Vegas, Nevada, the
forty-eighth largest MSA market, respectively.
THE TENNESSEE/KENTUCKY ACQUISITION. On March 9, 1995, the Company acquired
(the "Tennessee/ Kentucky Acquisition") substantially all of the tangible and
intangible assets and certain liabilities of Airborne Broadcasting Systems,
Inc., a Tennessee corporation ("ABS", which was also under common ownership with
Skyview (ABS, Skyview and Airborne are collectively referred to as the "Skyview
Group")). As of March 31, 1996, the Company provided traffic information reports
to a network of 65 radio station affiliates serving the greater Nashville and
Memphis, Tennessee markets and the Louisville, Kentucky market. The MSA market
rank of these MSA markets is forty-fourth, forty-third and forty-ninth,
respectively.
THE ATLANTA ACQUISITION. On March 24, 1995, the Company acquired (the
"Atlanta Acquisition") 100% of the stock of TrafficScan, Inc., a Georgia
corporation ("TSI"). As of March 31, 1996, the Company (through TSI) provided
traffic information services to 23 radio station affiliates and one television
station affiliate in the greater Atlanta region. Atlanta is the twelfth largest
MSA market.
The following acquisitions were completed in 1994 (the "1994 Acquisitions"):
THE WISCONSIN ACQUISITION. On July 1, 1994, the Company acquired (the
"Wisconsin Acquisition") substantially all of the tangible and intangible assets
of Wisconsin Information Systems, Inc., an Ohio corporation ("WIS"). As of March
31, 1996, the Company provided traffic information reports to 23 radio station
affiliates in Milwaukee, Wisconsin, the twenty-eighth largest MSA market.
39
<PAGE>
THE ST. LOUIS ACQUISITION. On July 19, 1994, the Company acquired (the "St.
Louis Acquisition") substantially all of the tangible and intangible assets of
Hildebrand Communications, Inc. ("Hildebrand"). As of March 31, 1996, the
Company provided traffic information reports to 27 radio station affiliates and
4 television station affiliates in St. Louis, Missouri, the seventeenth largest
MSA market.
THE CHARLOTTE ACQUISITION. On October 24, 1994, the Company acquired (the
"Charlotte Acquisition") substantially all of the tangible and intangible assets
of Charlotte Traffic Patrol, Inc., a North Carolina corporation ("Charlotte").
As of March 31, 1996, the Company provided traffic reports to 21 radio station
affiliates and 1 television station affiliate in the metropolitan area of
Charlotte, North Carolina, the thirty-seventh largest MSA market.
RADIO AND TELEVISION INDUSTRY
Total radio and television advertising revenues increased 4.2% to $39.4
billion during 1995, according to industry sources. Total radio advertising
revenues were $11.5 billion while television advertising revenues were
approximately $23.9 billion in 1995, the highest levels in each respective
industry's history.
The growth in total radio and television advertising revenues tends to be
fairly stable and has generally grown at a faster rate than the Gross National
Product ("GNP"). With the exception of 1991, when total radio and television
advertising revenues fell by approximately 3.4% compared to the prior year,
advertising revenues have risen in each of the past 15 years more rapidly than
either inflation or the GNP.
The United States radio market is comprised of approximately 11,528
commercially licensed stations which primarily serve local markets. The United
States television market is comprised of approximately 1,103 commercially
licensed stations which also serve primarily local markets.
According to the Radio Advertising Bureau's Radio Marketing Guide and Fact
Book for Advertisers (1993-1994), each week, radio reaches approximately 96% of
all Americans over the age of 12. More than one-half of all radio listening is
done outside the home, in contrast to other advertising mediums, and three out
of four adults are reached by car radio each week. The average listener spends
approximately three hours and 12 minutes per day listening to radio. The highest
portion of radio listenership occurs during the morning, particularly between
the time a listener wakes up and the time the listener reaches work. This
"morning drive time" period reaches more than 85% of people over 12 years of
age. According to the Television Advertising Bureau, television reaches
approximately 98% of all American households each week. The average household
spends approximately seven hours and sixteen minutes per day watching television
INTERNATIONAL
The Company's international presence has been limited to its participation
in licensing agreements in the United Kingdom and France. Pursuant to these
license agreements, the Company provides its licensees the right to use its
name, computer technology, training and sales expertise in exchange for
commercial airtime inventory. Revenues from such licensing agreements are not
material and the Company has no immediate intention to pursue opportunities
internationally, although it may choose to do so in the future if resources and
opportunities are available.
COMPETITION
The Company faces various sources of competition in the provision of its
information reporting services. Single market operators and groups of radio
stations providing their own information reports comprise the Company's primary
competition. Although the Company is significantly larger than the next largest
provider of traffic and local information services, there are several
multi-market operators providing local radio and television programming services
in various markets. The Company believes that the next largest provider of
traffic and local information services (which operates under the names "Shadow
Traffic" and "Express Traffic") currently has a presence in approximately 14 of
the 50 largest MSA markets in the United States, as compared to the Company's
operations in 47 of the 50 largest MSA markets.
40
<PAGE>
The Company also faces competition in the sale of its commercial airtime
inventory. The Company positions its advertising so as not to compete with the
advertising of its local radio and television affiliates. The Company competes
for advertising dollars with other media such as newspapers and magazines,
outdoor advertising, network radio and network television advertising, transit
advertising, direct response advertising, yellow page directories and
point-of-sale advertising.
EMPLOYEES
The Company employed approximately 939 full-time and 435 part-time persons
as of March 31, 1996, none of whom was covered by a collective bargaining
arrangement. Of these employees, approximately 1,148 were engaged in
broadcasting and operations; 125 in sales and marketing; and 101 in general and
administrative activities. Approximately 18% of the Company's employees are
located in the Company's Houston, Texas headquarters. The Company considers its
relationship with its employees to be satisfactory.
PROPERTIES
The Company's headquarters facility, which includes its principal
administrative, sales, marketing, management information systems and product
development offices and its local operations center, is located in approximately
23,232 square feet of leased space in Houston, Texas. The lease on this facility
terminates in July 1998. The Company intends to relocate its headquarters during
the third quarter of 1996, to another facility in Houston, Texas. The new
facility is located in approximately 28,216 square feet of subleased space, the
sublease with respect to this facility began in April, 1996 and terminates in
March 2004.
The Company leases additional operation centers/broadcast studios and
marketing offices across the United States consisting of approximately 44,964
square feet in the aggregate, pursuant to the terms of various lease agreements.
The Company believes that its existing facilities are adequate to meet current
requirements and that suitable additional space in close proximity to its
existing headquarters will be available as needed to accommodate growth of its
operations and additional sales and support offices through the foreseeable
future.
For the year ended December 31, 1995, the Company incurred $2.7 million in
facilities rental expense.
TRADEMARKS
The Company has registered "Metro Traffic Control", "Metro Networks" and
certain other marks which are relevant to its business. The Company does not
believe that its operations are materially dependent on these trademarks.
LEGAL PROCEEDINGS
The Company is subject to certain litigation arising in the ordinary course
of business. Management believes that the resolution of such matters will not
have a material adverse effect on the Company's financial position or results of
operations.
REORGANIZATION
From 1978 through the closing of this offering, the business of the Company
will have been operated through the Predecessor Companies. Until the closing of
this offering, all of the equity interests in the Predecessor Companies will be
owned by the Saperstein Family. Immediately prior to the closing of this
offering, the Saperstein Family will establish the Company as a holding company
in order to consolidate the issued and outstanding equity interests in the
Predecessor Companies, in exchange for shares of the Company's Common
Stock. As of the date of the closing of this offering, each of the Predecessor
Companies will be a direct or indirect wholly-owned subsidiary of the Company.
41
<PAGE>
MANAGEMENT
The following table sets forth certain information regarding the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE TITLE
- --------------------------------- ----------- --------------------------------------------------------------------
<S> <C> <C>
David I. Saperstein 55 Chairman of the Board of Directors and Chief Executive Officer
Charles I. Bortnick 42 President and Director
Shane E. Coppola 30 Executive Vice President and Director
Curtis H. Coleman 46 Senior Vice President, Chief Financial Officer and Director
Gary L. Worobow 31 Senior Vice President, General Counsel, Secretary and Director
</TABLE>
DAVID I. SAPERSTEIN founded the Company in 1978. Since 1978, Mr. Saperstein
has been the Chief Executive Officer and a Director of the Company. Mr.
Saperstein serves on the Boards of Directors for the Variety Club of Houston,
the Business Arts Fund, the Houston Symphony and the Toxoplasmosis Research
Institute of the Michael Reese Hospital in Chicago. Mr. Saperstein serves on the
Board of Trustees for the local chapter of the United Way and is a member of the
Dean's Advisory Council for Touro College of Law in New York. Prior to 1978, Mr.
Saperstein owned and operated several Ford automobile dealerships in Baltimore,
Maryland.
CHARLES I. BORTNICK has been President and a Director of the Company since
June 1996. From April 1994 to May 1996, Mr. Bortnick served as Executive Vice
President/General Manager of the Company. Mr. Bortnick joined the Company in
March 1993 as Vice President/General Manager-Midwest Region based in Chicago.
Prior to joining the Company, Mr. Bortnick had 17 years of experience in the
radio broadcasting industry. From November 1987 through March 1993, Mr. Bortnick
served as Vice President/General Manager for Malrite Communications at its
WMMS-FM/WHK-AM radio station in Cleveland, Ohio and its KKHT-FM radio station in
Houston, Texas. From September 1984 to October 1987, Mr. Bortnick served as Vice
President/General Manager for TK Communications at its WSHE-FM/WSRF-AM radio
stations in Miami/Ft. Lauderdale.
SHANE E. COPPOLA has served as Executive Vice President and a Director of
the Company since June 1996. From April 1992 through May 1996, Mr. Coppola was
Vice President -- Corporate Development of the Company. From August 1989 through
March 1992, Mr. Coppola was a member of the Communications Finance Group at The
Toronto-Dominion Bank. Mr. Coppola earned a Masters of Business Administration
from the William E. Simon School of Business Administration in 1989 and a
Bachelor of Arts from the University of Rochester in 1988. Mr. Coppola is the
son-in-law of Mr. Saperstein.
CURTIS H. COLEMAN has served as Chief Financial Officer of the Company since
September 1995, as a Senior Vice President and a Director of the Company since
June 1996. Mr. Coleman served as Vice President-Treasurer and Vice
President-Controller of the Company from March 1990 through September 1995.
Prior to joining the Company, Mr. Coleman served in various financial and
accounting positions with Energy Service Company, Inc., Crutcher Resources
Corporation and Arthur Young & Company. Mr. Coleman is a certified public
accountant.
GARY L. WOROBOW has served as General Counsel and Secretary of the Company
since May 1995, as a Senior Vice President and a Director of the Company since
June 1996. From August 1991 until joining the Company, Mr. Worobow was an
attorney with the New York law firm of Stursberg & Veith. Mr. Worobow earned a
Juris Doctorate from Fordham Law School in 1991, a Masters of Business
Administration from the William E. Simon School of Business Administration in
1989 and a Bachelor of Arts from the University of Rochester in 1987.
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<PAGE>
BOARD OF DIRECTORS
The Company intends to name four outside directors to the Board of Directors
prior to the closing of the offering. These outside directors will comprise the
majority of the members of the Company's Audit and Compensation Committees.
NON-EMPLOYEE DIRECTOR COMPENSATION
Each member of the Board of Directors who is not an officer or an owner, or
the representative of an owner, of more than 5% of the outstanding Common Stock
of the Company receives compensation of $1,000 per meeting for serving on the
Board of Directors. The Company also reimburses Directors for any expenses
incurred in attending meetings of the Board of Directors and the committees
thereof. Upon their election to the Board of Directors or the closing of this
offering (whichever is later), each non-employee Board member will be granted
options to purchase 10,000 shares of the Company's Common Stock. Such options
will be exercisable at the fair market value of the common stock at the date of
grant. These options will become vested and exercisable for up to 33% of the
total optioned shares upon the first anniversary of the grant of the options and
for an additional 33% of the total optioned shares upon each succeeding
anniversary until the option is fully exercisable at the end of the third year.
EXECUTIVE COMPENSATION
The following table sets forth certain information for the fiscal years
indicated concerning the cash and non-cash compensation earned by or awarded to
the Chief Executive Officer of the Company and each of the other four most
highly compensated executive officers of the Company whose combined salary and
bonus exceeded $100,000 in such periods (the "Named Executive Officers.")
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
NAME AND OTHER ANNUAL STOCK
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) ALL OTHER
- --------------------------------------- --------- ----------- ----------- ------------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
David I. Saperstein.................... 1995 960,000 -- 58,982(1)
23,081(2) -- --
Charles I. Bortnick.................... 1995 256,290(3) 58,303 -- -- --
Shane E. Coppola....................... 1995 247,917 -- -- -- --
Curtis H. Coleman...................... 1995 131,042(3) -- -- -- --
</TABLE>
- ------------------------------
(1) Expenses related to automobiles.
(2) Non-taxable shareholder distribution.
(3) Includes the Company's contributions under the 401(k) Plan.
1996 INCENTIVE STOCK OPTION PLAN
The Company's Board of Directors has adopted the 1996 Incentive Stock Option
Plan (the "1996 Plan") for the Company's officers and employees. The Board of
Directors has discretionary authority, subject to certain restrictions, to
administer the 1996 Plan, including but not limited to determining the
individuals to whom, the times at which, and the exercise price for which
options will be granted. The total number of shares reserved for issuance under
the 1996 Plan is , of which 350,000 will be issued upon the
effective date of this offering. The exercise price of options granted under the
1996 Plan may not be less than 100% of the fair market value (or not less than
110% of the fair market value as to any individual who, at the time the option
is granted, owned more than 10% of the total combined voting power of all
classes of stock of the Company) of the Common Stock on the date such option was
granted. Options granted under the 1996 Plan are not transferable by the
optionholders except by will or by the laws of descent and distribution. Options
granted under the 1996 Plan typically become vested and exercisable for up to
33 1/3% of the total optioned shares upon the first anniversary of the grant of
the option and for an additional 33 1/3% of the total optioned shares upon each
succeeding anniversary until the option is fully exercisable at the end of the
third year. Generally, the unexercised portion of any option
43
<PAGE>
automatically terminates upon (i) termination of the optionee's employment with
the Company, (ii) the expiration of 90 days from the date his employment with
the Company terminates for any reason other than cause, death, or disability or
(iii) the expiration of one year after the optionee's death. Upon the sale,
merger or liquidation of the Company, outstanding options may be exercised
immediately prior to the consummation of such a transaction, whether or not
vested as of such date of consummation.
EMPLOYEE STOCK PURCHASE PLAN
A total of shares of the Company's Common Stock have been reserved
for issuance under the Company's 1996 Employee Stock Purchase Plan (the
"Purchase Plan"). None of such shares have been issued. The Purchase Plan
permits an eligible employee of the Company to purchase common stock at a
discount through payroll deductions not to exceed 10% of the compensation
received by such employee during such pay period ("Employee Purchases").
Employee Purchases cannot exceed $25,000 in any plan year. The price at which
the Common Stock is purchased under the Purchase Plan is set by the Board of
Directors but may not be less than 95% of the fair market value of the Common
Stock on the date of purchase.
DEFINED BENEFIT AND DEFINED CONTRIBUTION PLAN
Effective in April 1995, the Company established a profit sharing plan under
Section 401(k) of the Internal Revenue Code (the "401(k) Plan") for all eligible
employees. Under the 401(k) Plan, all eligible employees are permitted to defer
compensation up to a maximum of 10% of their income. The 401(k) Plan provides
for a matching contribution by the Company equal to 25% of the amount
contributed by the employee, up to 6% of the employee's total compensation.
These contributions amounted to $195,000 in 1995. The employee's contribution is
immediately vested, which 20% of the Company's matching contribution vests every
year after the second year of the employee's participation in the plan.
Accordingly, the matching contribution is fully vested six years after such
contribution.
EMPLOYMENT AGREEMENTS
As discussed more particularly below, the Company intends to enter into
employment agreements with each of the Named Executive Officers and with Gary L.
Worobow, the Company's Senior Vice President, Secretary and General Counsel
("Mr. Worobow", and collectively with the Named Executive Officers, the
"Executive Officers"). Such employment agreements prohibit each of the Executive
Officers from competing with the Company for a period of one year after
termination of employment. Each of such agreements also provides that upon the
termination of such agreement by the Company under certain circumstances, or
upon the termination of such agreement by the Executive Officer under certain
circumstances, the Executive Officer will continue to receive the benefits
provided for under his employment agreement as well as payments of salary and
bonus, for a specified period following termination of employment. Additionally,
upon a change of control (as defined in the employment agreement) of the
Company, if the Executive Officer's employment does not continue for a minimum
of one year, he would be entitled to receive two (2) times his then current base
salary.
Mr. Saperstein will be a party to an employment agreement with the Company
pursuant to which he will serve as Chief Executive Officer of the Company. Under
the terms of Mr. Saperstein's employment agreement, he will be entitled to
receive an annual base salary of $350,000. Such base salary will increase by 5%
during each year term of the employment agreement. The employment agreement will
provide that Mr. Saperstein may receive a bonus of up to $150,000 per annum at
the discretion of the Board of Directors. The bonus potential will increase by
5% during each year of the term of the employment agreement. Pursuant to the
employment agreement, Mr. Saperstein will be granted stock options under the
1996 Plan to purchase up to 100,000 shares of the Company's Common Stock at an
exercise price equal to 110% of the initial public offering price. Subsequent
grants of options to Mr. Saperstein during the term of the employment agreement
will be at the discretion of the Board of Directors. Mr. Saperstein's employment
agreement will be effective as of the closing of this offering, and will have a
two year term subject to automatic renewal at the end of the second year for an
additional
44
<PAGE>
period of one year, unless the Company gives written notice at least 90 days
prior to the end of such second year of its election to terminate such
employment agreement at the end of such second year (hereinafter, a
"Non-Renewal"). Mr. Saperstein currently receives a base salary of $960,000.
Mr. Bortnick will be a party to an employment agreement with the Company
pursuant to which he will serve as President of the Company. Under the terms of
Mr. Bortnick's employment agreement he will be entitled to receive an annual
base salary of $275,000. Such base salary will increase by 5% upon each
anniversary of the closing during the term of the employment agreement. The
agreement will provide that Mr. Bortnick may receive a bonus of up to $100,000
per annum at the discretion of the Board of Directors. The bonus potential
increases by 5% during each year of the term of the employment agreement.
Pursuant to the employment agreement, Mr. Bortnick will be granted stock options
under the 1996 Plan to purchase up to 75,000 shares of the Company's Common
Stock at an exercise price equal to the initial public offering price.
Subsequent grants during the term of the employment agreement will be at the
discretion of the Board of Directors. Mr. Bortnick's employment agreement will
have a two year term from the closing date of the offering with an automatic
renewal provision of one year, subject to Non-Renewal. Mr. Bortnick currently
receives a base salary of $275,000.
Mr. Coppola will be a party to an employment agreement with the Company
pursuant to which he will serve as Executive Vice President of the Company.
Under the terms of Mr. Coppola's employment agreement he will be entitled to
receive an annual base salary of $200,000. Such base salary will be increased by
5% during each year of the term of the employment agreement. The employment
agreement provides that Mr. Coppola may receive a bonus of up to $100,000 per
annum at the discretion of the Board of Directors. The bonus potential will
increase by 5% during each year of the term of the employment agreement.
Pursuant to the employment agreement, Mr. Coppola will be granted stock options
under the 1996 Plan to purchase up to 75,000 shares of the Company's Common
Stock at an exercise price equal to the initial public offering price.
Subsequent grants during the term of the employment agreement will be at the
discretion of the Board of Directors. Mr. Coppola's employment agreement will be
effective as of the closing of this offering, and will have a two year term with
an automatic renewal provision of one year, subject to Non-Renewal. Mr. Coppola
currently receives a base salary of $410,000.
Mr. Coleman will be a party to an employment agreement with the Company
pursuant to which he will serve as Senior Vice President and Chief Financial
Officer of the Company. Under the terms of Mr. Coleman's employment agreement he
will be entitled to receive an annual base salary of $150,000. Such base salary
will increase by 5% during each year of the term of the employment agreement.
The employment agreement provides that Mr. Coleman may receive a bonus of up to
$50,000 per annum at the discretion of the Board of Directors. The bonus
potential will increase by 5% during each year of the term of the employment
agreement. Pursuant to the employment agreement, Mr. Coleman will be granted
stock options under the 1996 Plan to purchase up to 55,000 shares of the
Company's Common Stock at an exercise price equal to the initial public offering
price. Subsequent grants during the term of the employment agreement will be at
the discretion of the Board of Directors. Mr. Coleman currently receives a base
salary of $150,000.
Mr. Worobow will be a party to an employment agreement with the Company
pursuant to which he will serve as Senior Vice President, General Counsel and
Secretary of the Company. Under the terms of Mr. Worobow's employment agreement
he will be entitled to receive an annual base salary of $117,500. Such base
salary will increase by 5% during each year of the term of the employment
agreement. The employment agreement provides that Mr. Worobow may receive a
bonus of up to $37,500 per annum at the discretion of the Board of Directors.
The bonus potential will increase by 5% during each year of the term of the
employment agreement. Pursuant to the employment agreement, Mr. Worobow will be
granted stock options under the 1996 Plan to purchase up to 45,000 shares of the
Company's Common Stock at an exercise price equal to the initial public offering
price. Subsequent grants during the term of
45
<PAGE>
the employment agreement will be at the discretion of the Board of Directors.
Mr. Worobow's employment agreement will be effective as of the closing of this
offering, and will have a two year term with an automatic renewal provision of
one year, subject to Non-Renewal. Mr. Worobow currently receives a base salary
of $105,000.
INDEMNIFICATION MATTERS
The Company's Articles of Incorporation and Bylaws requires the Company to
indemnify each officer, director or employee in respect of claims made by reason
of his or her status with the Company, including stockholder derivative suits,
provided he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interest of the Company and, with
respect to any criminal act or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. Expenses incurred in the defense of any such
action may be paid by the Company in advance of final disposition upon receipt
of an undertaking from the officer, director or employee to repay the advances
if there is an ultimate determination that he or she is not entitled to be
indemnified.
CERTAIN TRANSACTIONS
The Company has entered into several arrangements with or on behalf of
parties related to the Company. Upon the closing of this offering these
arrangements will terminate, except as indicated below, and the Company will
enter into transactions with related parties only on an arm's-length basis.
The Company leases certain real property in Vail, Colorado and in Malibu,
California from Five S Properties, Ltd., a limited partnership of which a
company owned by Mr. Saperstein is the general partner ("Five S"). The annual
lease payments on these properties are $60,000 and $240,000, respectively. Such
leases will be terminated as of the closing of this offering, and the Company
has no intention to enter into similar leases.
The Company has entered into certain reciprocal arrangements with unrelated
third parties as a result of which the Company will receive goods and services
for the benefit of Mr. Saperstein. The reciprocal arrangements obligate the
Company to provide commercial airtime, provide other goods and services, and
make cash disbursements to such third parties in exchange for the goods and
services received by the Company. As of March 31, 1996, the Company was
obligated to provide approximately $2.5 million of commercial airtime, goods and
services and cash under these reciprocal arrangements. Immediately prior to the
offering, the Company intends to enter into an agreement with Mr. Saperstein
pursuant to which Mr. Saperstein will be distributed the goods and services the
Company holds for Mr. Saperstein's benefit. The Company also will distribute to
Mr. Saperstein all of its rights to the goods and services that are the subject
of existing reciprocal arrangements but which have not yet been delivered to the
Company. The value of such goods and services is expected to be approximately
$2.0 million. Following the offering, the Company does not intend to enter into
reciprocal arrangements for the benefit of Mr. Saperstein.
The Company has entered into certain transactions with Pro Journey Travel,
Inc., a company owned by Mr. Saperstein ("Pro Journey"). The Company has
guaranteed annual lease payments for Pro Journey, in the amount of $60,000 per
annum; such obligation shall continue through December 31, 1996. Additionally,
the Company has (i) posted a bond of $20,000 with the Airline Reservations
Clearinghouse on behalf of Pro Journey and (ii) provided coverage for Pro
Journey under the Company's liability insurance policies. The premiums which
would have been paid by Pro Journey to obtain such coverage had a value in 1995
equal to approximately $2,548. In addition, the employees of Pro Journey
participate in the Company's insurance plans; the premiums which would have been
paid by Pro Journey to obtain coverage under similar insurance plans had a value
in 1995 equal to approximately $6,539. The Company purchases the majority of its
travel tickets through Pro Journey, on terms which the Company believes are no
less favorable than those available from third parties. After December 31, 1996,
the Company will cease all transactions and arrangements with Pro Journey.
46
<PAGE>
Mr. Saperstein has personally utilized the services of several of the
Company's employees. The total compensation paid to such employees was $180,995
in 1995. Except for two individuals who will provide security and transportation
services to Mr. Saperstein, these persons will cease to be employees of the
Company as of the closing of this offering. The individuals who will remain in
the Company's employ will be paid combined annual compensation of approximately
$75,000.
Through a separate company, Mr. Saperstein holds an equity interest in Posh
International, Inc. ("Posh"), a car care products company. In exchange for such
interest, the Company provided Posh with commercial airtime inventory valued at
$566,000 during the twelve months ended December 31, 1995 and $363,000 during
the year ended December 31, 1994. The Company has agreed to sell commercial
airtime inventory valued at $1.1 million to Posh at a discount through December
31, 1996, subject to availability and prepayment. As of the date of this
Prospectus, Posh has not purchased any such inventory from the Company.
Upon the closing of this offering, the Company and Mr. Saperstein will enter
into an agreement pursuant to which Mr. Saperstein may seek reimbursement from
the Company for any income tax obligation attributable to any period prior to
the Reorganization. Alternatively, the Company may seek reimbursement from Mr.
Saperstein for any distributions in excess of his income tax obligations during
such periods. The Company does not anticipate that such liability would exceed
$1.0 million.
Immediately prior to the closing of this offering, the Company will enter
into a Stock Loan and Pledge Agreement with Mr. Saperstein pursuant to which the
Company will loan Mr. Saperstein __ shares of Common Stock. The loan will be for
a term of ten years, although the Company will have the right to require the
return of the loaned Common Stock (the "Loaned Stock") from Mr. Saperstein prior
to that time upon three days notice. As security for the loan, Mr. Saperstein
will pledge a number of shares of Series A Convertible Preferred Stock of the
Company equal to the number of shares of Loaned Stock. Mr. Saperstein will be
obligated to pay to the Company an annual fee over the term of the loan of %
of the average fair market value of the Loaned Stock during the five day period
immediately following the date of the Stock Loan and Pledge Agreement. One-half
of this fee will be payable annually, and the remaining one-half of this fee
will be payable upon the termination of the loan if such termination occurs
pursuant to an Event of Default (as defined in the Stock Loan and Pledge
Agreement) or at the end of the ten year term of the Stock Loan and Pledge
Agreement. The Company will forfeit this portion of the fee if it calls the loan
prior to the end of the ten year term. In addition, Mr. Saperstein will pay an
upfront transaction fee of $ to the Company.
47
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by (i) the Selling
Stockholder, (ii) each person known to the Company to be the beneficial owner of
5% or more thereof, (iii) each director of the Company, (iv) each Executive
Officer and (v) all executive officers and directors as a group, as of June ,
1996, and as adjusted to reflect the sale of the Common Stock offered hereby.
Each of the named persons has sole voting and investment power with respect to
all shares of Common Stock owned by such person. See "Management."
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THIS OFFERING AFTER THIS OFFERING
---------------------------- SHARES BEING --------------------------
NAME AND ADDRESS SHARES PERCENTAGE OFFERED SHARES PERCENTAGE
- --------------------------------------------------- ----------- --------------- ----------------- --------- ---------------
%
<S> <C> <C> <C> <C> <C>
David I. Saperstein................................ % (1)
Charles I. Bortnick................................ -- -- 75,000(2) *
Shane E. Coppola................................... -- 75,000(2) *
Curtis H. Coleman.................................. -- -- 55,000(2) *
Gary L. Worobow.................................... -- -- 45,000(2) *
All executive officers and directors as a group (5
persons).......................................... % (2)
</TABLE>
- ------------------------------
* Less than 1%.
(1) Includes 100,000 shares pursuant to the grant of stock options under the
1996 Plan upon the effective date of this offering.
(2) Pursuant to the grant of stock options under the 1996 Plan upon the
effective date of the offering.
All of the shares of Common Stock being offered for sale by David I.
Saperstein were borrowed from the Michelle Joy Coppola 1994 Trust, the Jennifer
Beth Saperstein 1994 Trust, the Jonathan Alexander Saperstein 1994 Trust, the
Alexis Daniella Saperstein 1994 Trust, and the Stefanie Nicole Saperstein 1994
Trust (collectively, the "Trusts") and the Company. Mr. Saperstein will be
obligated to repay these loans by delivering a number of shares of Common Stock
equal to the number of borrowed shares. Mr. Saperstein will pledge an equivalent
number of shares of Series A Convertible Preferred Stock as security for the
loans from the Company. See "Management -- Certain Transactions".
48
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue [ ] shares of Common Stock, par
value $0.001 per share, shares of preferred stock, par value $0.001 per
share. At June , 1996, there were shares of Common Stock and
shares of Series A Convertible Preferred Stock outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Stockholders casting a plurality of votes of the stockholders entitled
to vote in an election of directors may elect all of the directors standing for
election. Holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available therefore, subject to any preferential dividend rights of
Preferred Stock that may be issued at such future time or times. Upon the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive ratably the net assets of the Company that may be
available after the payment of all debts and other liabilities and subject to
the prior rights of Preferred Stock that may be issued and outstanding at such
time. Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares of
Common Stock offered in this offering, when issued and paid for, will be fully
paid and nonassessable. The rights, preferences and privileges of holders of
Common Stock are subject to the rights of the holders of shares of any series of
Preferred Stock which the Company may designate and issue in the future.
As of June , 1996 there were shares of Common Stock outstanding
held only by or for the benefit of members of the Saperstein Family.
PREFERRED STOCK
Preferred Stock may be issued from time to time by the Company's Board of
Directors, without stockholder approval, in one or more classes or series.
Subject to the provisions of the Certificate of Incorporation and the
limitations prescribed by law, the Board of Directors is expressly authorized to
adopt resolutions to issue the shares of Preferred Stock, to fix the number of
shares and to change the number of shares constituting any series, and to
provide for or change the voting powers, designations, preferences and relative,
participating, optional or other special rights, qualifications, limitations or
restrictions thereof, including dividend rights (including whether dividends are
cumulative), dividend rates, terms of redemption (including sinking fund
provisions), redemption prices, conversion rights and liquidation preferences of
the shares constituting any class or series of Preferred Stock, in each case
without any further action or vote by the stockholders.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of the Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, Preferred Stock issued by the Company may
rank prior to the Common Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock. Accordingly, the issuance of shares of Preferred Stock may
discourage bids for the Common Stock at a premium or may otherwise adversely
affect the market price of the Common Stock.
SERIES A CONVERTIBLE PREFERRED STOCK
The Company has created a series of Preferred Stock designated as "Series A
Convertible Preferred Stock." Such series consists of shares. Holders of
Series A Convertible Preferred Stock are entitled to one vote for each share
held on all matters submitted to a vote of stockholders and do not have
cumulative voting rights. Shares of the Series A Convertible Preferred Stock
will not be entitled to receive dividends. Upon the liquidation, dissolution or
winding-up of the Company, the holders of the Series A Convertible Preferred
Stock are entitled to a liquidation preference over the then outstanding
49
<PAGE>
Common Stock and any other then outstanding Preferred Stock of other classes
with respect to the assets of the Company in an amount equal to 10% of the fair
market value of the Common Stock to be determined at the closing of the initial
public offering. Each share of Series A Convertible Preferred Stock is
convertible upon three days notice with no premium into one share of Common
Stock (subject to adjustment for stock splits, stock dividends, reverse stock
splits, recapitalization and similar events) at the option of the holder.
The Series A Convertible Preferred Stock will be, when issued and paid for,
fully paid and nonassessable.
DELAWARE LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
Upon consummation of this offering, the Company will be subject to the
provisions of Section 203 of Delaware General ("Section 203"). Section 203
provides, with certain exceptions, that a Delaware corporation may not engage in
any of a broad range of business combinations with a person or an affiliate, or
associate of such person, who is an "interested stockholder" for a period of
three years from the date that such person became an interested stockholder
unless (i) prior to such date either the transaction which resulted in the
person becoming an interested stockholder, or the business combination, is
approved by the board of directors, (ii) upon consummation of the transaction
which resulted in such person becoming an interested stockholder, the interested
stockholder owned 85% or more of the outstanding voting stock of the corporation
(excluding shares owned by persons who are both officers and directors of the
corporation, and shares held by certain employee stock ownership plans) or (iii)
on or after the date the person becomes an interested stockholder, the business
combination is approved by the corporation's board of directors and by the
holders of at least 66 2/3% of the corporation's outstanding voting stock at an
annual or special meeting, excluding shares owned by the interested stockholder.
Under Section 203, an "interested stockholder" is defined as any person who is
(i) the owner of 15% or more of the outstanding voting stock of the corporation
or (ii) an affiliate or associate of the corporation and who was the owner of
15% or more of the outstanding voting stock of the corporation at any time
within the three-year period immediately prior to the date on which it is sought
to be determined whether such person is an interested stockholder. Mr.
Saperstein will not be subject to the restrictions of Section 203 because he was
an interested stockholder at the time of Reorganization.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or bylaws by action of
its stockholders to exempt itself from coverage, provided that such bylaw or
certificate of incorporation amendment shall not become effective until 12
months after the date it is adopted. The Company intends to adopt an amendment
to its Certificate of Incorporation to exempt itself from coverage of Section
203.
CERTAIN CHARTER AND BYLAW PROVISIONS
STAGGERED BOARD OF DIRECTORS
Pursuant to Article 3 of the Company's Bylaws the Company's Board of
Directors is divided into three classes, which are elected for staggered terms
of three years. As a result, a change in a majority of the directors of the
Company cannot be effected at a single annual meeting of stockholders. While the
principal purpose of Article 3 is to provide continuity on the Board of
Directors, the provisions could have the effect of discouraging a third party
from attempting to change the management and policies of the Company by
effecting a change in the majority of the Board of Directors through a proxy
contest.
These provisions of the Company's Bylaws may have the effect of delaying
consideration of a stockholder proposal until the next annual meeting of
stockholders, unless a special meeting is called by the Chief Executive Officer
or the Board of Directors. These provisions also would prevent the holders of a
majority of the voting power of the Company from using the written consent
procedure to take stockholder action without giving all the stockholders of the
Company entitled to vote on a particular matter the opportunity to participate
in determining such proposed action. Additionally, a stockholder
50
<PAGE>
could not force consideration of a proposal by stockholders over the opposition
of the Board of Directors of the Company by calling a special meeting of
stockholders prior to the time the Board believes such consideration to be
appropriate.
ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
The Company's Bylaws establish an advance notice procedure for the
nomination of candidates for election as directors and the presentation of
certain other matters before an annual meeting of stockholders of the Company,
other than by or at the direction of the Board of Directors or the chairman of
the meeting. For such nominations or other business to be considered properly
brought by a stockholder before an annual meeting of stockholders of the
Company, such stockholder must have given timely prior written notice to the
Secretary of the Company of his or her intent to bring such nominations or
business before the meeting. To be timely, such notice must be received by the
Secretary at least 90 days prior to the date on which, in the immediately
preceding calendar year, the annual meeting of stockholders of the Company for
such year was held (provided that if the date of the annual meeting is changed
by more than 30 days from such anniversary date, such stockholder's notice must
be received by the Secretary no later than 10 days after notice or prior public
disclosure of the meeting is first given or made to stockholders).
A stockholder notice must contain a brief description of the nomination or
business to be brought before the meeting, the name and address of the
stockholder making the notice and of any person to be nominated, a
representation that the stockholder is a holder of record of stock of the
Company entitled to vote at the meeting and intends to appear at the meeting to
bring such nominations or business before the meeting; a description of all
arrangements or understandings between the stockholder and each nominee (in the
case of a nomination) or of any material interest of the stockholder in the
business matter (in the case of other business); such other information
regarding the nominee or matter of business to be proposed as would be required
to be included in a proxy statement soliciting proxies for the election of such
nominee or approval of such other business; and, in the case of a nomination of
the nominee.
The purpose of these procedures is to provide an orderly procedure for
conducting annual meetings of stockholders and to afford the Board of Directors
a meaningful opportunity to consider the qualifications of the proposed nominees
and to inform themselves, and where appropriate to inform stockholders, in
advance of the meeting of any business proposed to be conducted at the meeting.
Although the Company's Bylaws do not give the Board of Directors any power to
approve or disapprove stockholder nominations for the election of directors or
any other business proposed by a stockholder to be conducted at any annual
meeting, the Bylaws may have the effect of precluding a nomination or the
consideration of certain business at a particular annual meeting if the proper
procedures are not followed. These procedures may also discourage or deter a
third party from conducting a solicitation of proxies to elect its own slate of
directors or from attempting to obtain control of the Company, even if the
conduct of such solicitation or such attempt might be beneficial to the Company
and its stockholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS; LIMITATION OF MONETARY LIABILITY
Section 145 of the General Corporation Law of the State of Delaware Law
permits the Company to indemnify an officer, director or employee in respect of
claims made by reason of his or her status with the Company, including
stockholder derivative suits, provided he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interest of the Company and, with respect to any criminal act or proceeding, had
no reasonable cause to believe his or her conduct was unlawful. Expenses
incurred in the defense of any such action may be paid by the Company in advance
of final disposition upon receipt of an undertaking from the officer, director
or employee to repay the advances if there is an ultimate determination that he
or she is not entitled to be indemnified. Article 8 of the Company's Certificate
of Incorporation provides such indemnification to the full extent permitted by
law. The Company intends to purchase directors' and officers' liability coverage
to insure its indemnification of the Company's directors and officers.
Article 6 of the Company's Certificate of Incorporation exonerates the
Company's directors from personal liability to the Company or its stockholders
for monetary damages for breach of the fiduciary
51
<PAGE>
duty of care as a director, provided that Article 6 does not eliminate or limit
liability for any breach of the directors' duty of loyalty for acts or omissions
not in good faith or which involve intentional misconduct or knowing violations
of law, for any improper declaration of dividend or for any transaction from
which the director derived an improper personal benefit. Article 6 does not
eliminate a stockholder's right to seek non-monetary, equitable remedies, such
as an injunction or recision to redress an action taken by the directors.
However, as a principal matter, equitable remedies may not be available in all
situations, and there may be instances in which no effective remedy is
available.
The discussions of the Common Stock and Preferred Stock here and elsewhere
in this Prospectus are qualified in their entirety by reference to (i) the
Certificate of Incorporation of the Company, as amended, and the Bylaws of the
Company, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus is a part, and (ii) the applicable provisions
of Delaware law.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is
.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this offering, there will be shares of Common
Stock outstanding. Of these shares, the shares sold in this offering will
be freely tradeable without restriction (except as to "affiliates" of the
Company (as defined under the Securities Act)) or registration under the
Securities Act of 1933. The remaining shares will be "restricted
securities" as defined in Rule 144 under the Securities Act ("Rule 144"). Of
such shares, without consideration of the contractual restrictions described
below, approximately shares would be available for resale in the public
market pursuant to Rule 144(k) (see below).
Restricted securities may be sold in the public market only if registered or
if they qualify for an exemption from registration under Rules 144, 144(k) or
701 promulgated under the Securities Act, which rules are summarized below. As a
result of the contractual restrictions described below, and the provisions of
Rule 144, 144(k) and 701, additional shares will be available for sale in the
public market as follows: (i) no shares will be available for immediate sale in
the public market on the date of the Prospectus, (ii) shares issuable upon
the exercise of stock options granted under the 1996 Plan that are vested or
will vest and, if exercised, will become eligible for sale without lock-up
restrictions on various dates prior to 180 days following the date of this
Prospectus, (iii) currently outstanding shares will be eligible for sale upon
expiration of lock-up agreements 180 days after the date of this Prospectus, and
(iv) currently outstanding shares will be eligible for sale upon expiration
of their respective two-year holding periods, subject in the case of shares held
by affiliates to compliance with certain volume restrictions.
Rule 701 under the Securities Act provides that, beginning ninety (90) days
after the date of this Prospectus, shares of Common Stock acquired upon the
exercise of outstanding options may be resold by persons other than affiliates
subject only to the manner of sale provisions of Rule 144 ( ), and by
affiliates subject to all provisions of Rule 144 except the two-year minimum
holding period.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares of
Common Stock for at least two years, including an "affiliate" as that term is
defined under the Securities Act, is entitled to sell a number of shares that
does not exceed the greater of 1% of the then outstanding shares of Common Stock
or the average weekly trading volume of the Common Stock on all exchanges and/or
reported through the automated quotation system of a registered securities
association during the four calendar weeks preceding the date on which notice of
the sale is filed with the Securities and Exchange Commission. Sales under Rule
144 are also subject to certain manner of sale provisions, notice requirements
and the availability of current public information about the Company. A person
(or persons whose shares are aggregated) who
52
<PAGE>
is not deemed to have been an "affiliate" of the Company at any time during the
90 days preceding a sale, and who has beneficially owned the shares proposed to
be sold for at least three years, would be entitled to sell such shares under
Rule 144(k) without regard to the limitations described above.
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Paul, Hastings, Janofsky & Walker, New York, New York
and for the Underwriters by Sullivan & Cromwell, New York, New York.
EXPERTS
The combined financial statements of Metro Traffic Control, Inc., Metro
Reciprocal, Inc., Metro Networks, Ltd. and Metro Video News, Inc. as of December
31, 1994 and 1995, and for each of the years in the three-year period ended
December 31, 1995, included herein have been included herein in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 under the Securities Act,
with respect to the shares of Common Stock offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information with respect to the
Company and the shares of Common Stock offered hereby, reference is hereby made
to such Registration Statement, and the exhibits and schedules thereto, copies
of which may be inspected without charge at the public reference facilities
maintained by the Commission at Judiciary Plaza Building, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and its regional offices located at 7
World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and
copies of all or any part thereof may be obtained from each office upon payment
of the fees prescribed by the Commission. The summaries in this Prospectus of
additional information included in the Registration Statement or any exhibit
thereto are qualified in their entirety by reference to such information or
exhibit.
53
<PAGE>
GLOSSARY
DMA. Designated Market Area, as listed on The Arbitron Radio Metro and
Television Market Population Estimates 1995-1996.
EXPANDED RADIO SERVICES. The Company's news, sports, weather and other
information reports provided to radio station affiliates.
EXPANDED RADIO SERVICES NETWORK. The network of radio station affiliates to
which the Company provides its Expanded Radio Services.
GAAP. Generally accepted accounting principles.
% LISTENERS. Percentage of an MSA population which hears the Company's
information reports over a 4-week period calculated using data from the Arbitron
Winter 1996 Radio Market Reports* and Strata Marketing, Inc. statistical
analysis.
METROTV NETWORK. The network of broadcast television station affiliates and
cable news channel affiliates to which the Company provides its Television
Traffic Services and Video News Services.
MSA. Metro Survey Area, as listed in The Arbitron Radio Metro and Television
Market Population Estimates 1995-1996.*
RADIO TRAFFIC SERVICES. The Company's core traffic information reports
provided to radio station affiliates.
RADIO TRAFFIC SERVICES NETWORK. The network of radio station affiliates to
which the Company provides its Radio Traffic Services.
RECIPROCAL ARRANGEMENTS. Arrangements in which the Company exchanges certain
commercial advertising inventory for goods and services.
ROS. Thirty second and sixty second commercial advertising that the
Company's affiliate radio and television stations broadcast for the Company
based on availabilities in such affiliates's schedules. Generally, ROS time
provided to the Company is broadcast between 6:00 a.m. and 11:00 p.m., Monday-
Sunday.
SPONSORSHIP. An opening announcement and ten second commercial message
broadcast during, immediately before or immediately after one of the Company's
information reports on either the Radio Traffic Services Network or the Expanded
Radio Services Network.
TELEVISION TRAFFIC SERVICES. The Company's traffic information reports
provided to television station affiliates.
VIDEO NEWS SERVICES. The Company's video news (other than traffic)
information products provided to television station affiliates.
- ------------------------
* Copyright 1996 by The Arbitron Company. All Rights Reserved. The information
provided herein regarding Arbitron's audience listening estimates is based on
Arbitron's copyrighted and proprietary data and estimates concerning the
applicable stations' average quarter hour persons share, Monday- Sunday,
6am-Midnight, from the applicable Winter 1996 Radio Market Reports for the
demographic, day-part and metro areas listed herein and from The Arbitron Radio
Metro Television Market Population Estimates 1995-1996.
54
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholder have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs
& Co., CS First Boston Corporation and Donaldson, Lufkin & Jenrette Securities
Corporation are acting as representatives, has severally agreed to purchase from
the Company and the Selling Stockholder, the respective number of shares of
Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
- ------------------------------------------------------------------------- ---------------
<S> <C>
Goldman, Sachs & Co......................................................
CS First Boston Corporation..............................................
Donaldson, Lufkin & Jenrette Securities Corporation......................
---------------
Total............................................................
---------------
---------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The Underwriters propose to offer the shares in part directly to the public
at the public offering price set forth on the cover page of this Prospectus and
in part to certain securities dealers at such a price less a concession of $
per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain brokers and dealers. After
the shares of Common Stock are released for sale to the public, the offering
price and other selling terms may from time to time be varied by the
representatives.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the shares of Common Stock
offered.
The Company, the Seller Stockholder and the Trusts have agreed that, during
the period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of the Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any securities of the
Company (other than pursuant to employee stock option plans existing, or on the
conversion or exchange of convertible or exchangeable securities outstanding, on
the date of this Prospectus) which are substantially similar to the shares of
Common Stock or which are convertible or exchangeable into securities which are
substantially similar to the shares of Common stock without the prior written
consent of the representatives, except for the shares of Common Stock offered in
connection with the offering.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Common Stock offered by them.
U-1
<PAGE>
Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among the Company, the Selling
Stockholder and the representatives. Among the factors to be considered in
determining the initial public offering price of the Common stock, in addition
to prevailing market conditions, will be the Company's historical performance,
estimates of the business potential and earnings prospects of the Company, an
assessment of the Company's management and the consideration of the above
factors in relation to market valuation of companies in related businesses.
The Common Stock will be quoted on the Nasdaq National Market under the
symbol "MTNT".
The Company and the Selling Stockholder have agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
U-2
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report.......................................................................... F-2
Combined Balance Sheets............................................................................... F-3
Combined Statements of Operations..................................................................... F-5
Combined Statements of Stockholder's Equity/Partners' Capital......................................... F-6
Combined Statements of Cash Flows..................................................................... F-7
Notes to Combined Financial Statements................................................................ F-9
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Boards of Directors and Partners
Metro Traffic Control, Inc.
Metro Reciprocal, Inc.
Metro Networks, Ltd.
Metro Video News, Inc.:
We have audited the accompanying combined balance sheets of Metro Traffic
Control, Inc., Metro Reciprocal, Inc., Metro Networks, Ltd., and Metro Video
News, Inc. (collectively, the Companies) as of December 31, 1995 and 1994, and
the related combined statements of operations, stockholder's equity/ partners'
capital and cash flows for each of the years in the three-year period ended
December 31, 1995. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Companies as of December 31, 1995 and 1994, and the combined results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Houston, Texas
June 13, 1996
F-2
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31, 1996
ASSETS 1994 1995 (UNAUDITED)
-------------- -------------- --------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents..................................... $ 3,676,357 3,049,946 3,450,031
Accounts receivable, net........................................ 8,636,230 12,662,716 12,909,159
Prepaid expenses and other current assets....................... 226,129 357,473 414,193
Total cash exchange............................................. 12,538,716 16,070,135 16,773,383
Barter receivables, net......................................... 5,002,719 4,561,786 4,241,063
Merchandise and scrip inventory................................. 422,851 399,606 643,858
Prepaid expenses and other current assets....................... 838,249 679,199 810,227
Total barter exchange........................................... 6,263,819 5,640,591 5,695,148
Total current assets............................................ 18,802,535 21,710,726 22,468,531
Receivables from related parties................................ 288,669 1,075,030 1,224,397
Note receivable from stockholder................................ 1,706,641 -- --
Property and equipment:
Operating equipment............................................. 5,627,122 7,887,769 8,344,062
Transportation equipment........................................ 136,876 709,323 741,233
Leasehold improvements.......................................... 476,190 615,380 716,365
-------------- -------------- --------------
6,240,188 9,212,472 9,801,660
-------------- -------------- --------------
Less: accumulated depreciation 3,046,307 4,234,972 4,599,497
-------------- -------------- --------------
3,193,881 4,977,500 5,202,163
-------------- -------------- --------------
Purchased broadcast contracts and other intangibles, net of
accumulated amortization of $4,103,863 in 1995 and $3,437,712
in 1994........................................................ 3,107,634 13,749,644 17,809,854
Other assets.................................................... 402,244 923,714 1,050,475
-------------- -------------- --------------
$ 27,501,604 42,436,614 47,755,420
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
COMBINED BALANCE SHEETS, CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------------- 1996
LIABILITIES 1994 1995 (UNAUDITED)
-------------- ------------- -------------
<S> <C> <C> <C>
Current liabilities
Disbursement float............................................... $ 1,511,672 1,800,433 1,569,990
Accounts payable................................................. 1,465,253 1,808,274 2,378,237
Accrued liabilities.............................................. 1,146,228 1,707,085 2,132,589
Accrued payroll liabilities...................................... 863,831 996,695 1,113,258
Notes payable and current portion of long-term debt.............. 202,758 746,537 749,172
Deferred revenues................................................ 1,340,017 727,947 804,285
Income tax payable............................................... 68,868 302,000 744,948
-------------- ------------- -------------
Total cash exchange.......................................... 6,598,627 8,088,971 9,492,479
-------------- ------------- -------------
Accrued barter liabilities....................................... 2,350,367 2,316,975 2,591,400
Barter and airtime obligations................................... 2,439,990 3,404,296 2,730,109
-------------- ------------- -------------
Total barter exchange........................................ 4,790,357 5,721,271 5,321,509
Total current liabilities.................................... 11,388,984 13,810,242 14,813,988
-------------- ------------- -------------
Long-term debt..................................................... 6,447,245 21,877,156 25,152,924
Deferred income tax................................................ -- 2,083,842 3,054,311
Other liabilities.................................................. 264,189 187,146 167,885
-------------- ------------- -------------
Total liabilities............................................ 18,100,418 37,958,386 43,189,108
-------------- ------------- -------------
Stockholder's equity/partners' capital
Common stock....................................................... 3,015 3,015 3,015
Additional paid-in capital......................................... 1,023,811 4,023,811 4,023,811
Partners' capital.................................................. 1,239,646 736,403 517,165
Retained earnings (deficit)........................................ 7,134,714 -285,001 22,319
Total stockholder's equity/partners' capital................. 9,401,186 4,478,228 4,566,310
$ 27,501,604 42,436,614 47,755,418
</TABLE>
See accompanying notes to combined financial statements.
F-4
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
FOR THE YEAR ENDED MARCH 31,
DECEMBER 31, (UNAUDITED)
-------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Advertising revenues........................ $ 47,904,876 60,048,350 72,432,951 14,655,448 23,030,197
Cost of operations.......................... 27,384,125 32,239,358 41,285,973 9,442,191 12,468,213
-------------- ------------- ------------- ------------- -------------
Gross margin............................ 20,520,751 27,808,992 31,146,978 5,213,257 10,561,984
-------------- ------------- ------------- ------------- -------------
Operating costs:
Marketing expense......................... 8,848,207 11,354,698 14,503,640 2,829,617 5,484,607
General and administrative expense........ 8,125,752 6,438,692 10,731,367 2,147,449 3,123,914
Provision for doubtful receivables........ 681,810 802,230 443,169 110,970 48,977
-------------- ------------- ------------- ------------- -------------
17,655,769 18,595,620 25,678,176 5,088,036 8,657,498
-------------- ------------- ------------- ------------- -------------
2,864,982 9,213,372 5,468,802 125,221 1,904,486
-------------- ------------- ------------- ------------- -------------
Other (income) expense:
Interest income........................... (59,929) (165,551) (165,079) (60,385) (22,608)
Interest expense.......................... 145,064 293,010 1,260,185 203,174 322,109
Other..................................... 297,354 1,785 27,967 (6,691)
-------------- ------------- ------------- ------------- -------------
382,489 129,244 1,123,073 142,789 292,810
-------------- ------------- ------------- ------------- -------------
Income (loss) from continuing operations
before income tax.......................... 2,482,493 9,084,128 4,345,729 (17,568) 1,611,676
Income tax expense (benefit)................ 1,066,448 2,179,143 1,036,352 (4,392) 502,948
-------------- ------------- ------------- ------------- -------------
Income (loss) from continuing operations.... 1,416,045 6,904,985 3,309,377 (13,176) 1,108,728
Discontinued operations:
Loss from operations (net of tax benefit
of $166,600)............................. 323,435 -- -- -- --
Loss on disposal (net of tax benefit of
$122,200)................................ 237,363 -- -- -- --
Net income (loss)....................... $ 855,247 6,904,985 3,309,377 (13,176) 1,108,728
-------------- ------------- ------------- ------------- -------------
-------------- ------------- ------------- ------------- -------------
Pro forma income (loss) data (unaudited):
Income (loss) from continuing operations
as reported.............................. $ 4,345,729 $ 1,611,676
Proforma federal and state income tax..... (1,542,734) (572,145)
------------- -------------
Pro forma net income...................... $ 2,802,995 $ 1,039,531
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY/PARTNERS' CAPITAL
For the years ended December 31, 1995, 1994, 1993 and
for the three month period ended March 31, 1996
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON PAID-IN PARTNERS' EARNINGS
STOCK CAPITAL CAPITAL (DEFICIT) TOTAL
----------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992............... $ 2,995 21,831 -- 5,143,183 5,168,009
Distribution............................... -- -- -- -1,871,296 -1,871,296
Capital contributed........................ 10 990 -- -- 1,000
Net earnings............................... -- -- -- 855,247 855,247
Balance at December 31, 1993............... 3,005 22,821 -- 4,127,134 4,152,960
Distribution............................... -- -- -- -3,857,759 -3,857,759
Stock issuance............................. 10 990 -- -- 1,000
Capital contributed........................ -- 1,000,000 1,200,000 -- 2,200,000
Net earnings............................... -- -- 35,484 6,869,501 6,904,985
Balance at December 31, 1994............... 3,015 1,023,811 1,235,484 7,138,876 9,401,186
Distribution............................... -- -- -- -11,232,335 -11,232,335
Capital contributed........................ -- 3,000,000 -- -- 3,000,000
Net earnings (loss)........................ -- -- -584,576 3,893,953 3,309,377
Balance at December 31, 1995............... 3,015 4,023,811 650,908 -199,506 4,478,228
Distribution - unaudited................... -- -- -- -1,020,646 -1,020,646
Net earnings (loss) - unaudited............ -- -- -133,743 1,242,471 1,108,728
Balance at March 31, 1996 - unaudit........ $ 3,015 4,023,811 517,165 22,319 4,566,310
</TABLE>
See accompanying notes to combined financial statements.
F-6
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
FOR THE YEAR ENDED MARCH 31,
DECEMBER 31, (UNAUDITED)
----------------------------------------- ----------------------------
1993 1994 1995 1995 1996
----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings................................. $ 855,247 6,904,985 3,309,377 -13,176 1,108,728
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization.................. 1,814,257 1,302,434 3,980,525 611,775 1,489,671
(Gain) loss on disposition of property and
equipment..................................... 297,353 -98,215 1,607 -- --
Loss on discontinued operations.............. 849,598 -- -- -- --
Loss on investment........................... -- 100,000 26,900 -- --
Amortization of discount on note payable -- -- 27,580 -- 23,526
Provision for doubtful receivables........... 681,810 802,230 443,169 110,970 48,977
Deferred federal income tax.................... -66,599 366,599 -- -- -180,108
Decrease (increase) in, net of acquisition of
businesses
Accounts receivable, net..................... -1,697,853 -4,178,646 -3,496,445 2,412,164 258,562
Prepaid expenses and other curre............. -580,491 -8,822 -124,344 -424,354 -56,720
Other assets................................. 27,554 -116,606 -286,221 -61,557 -147,464
(Decrease) increase in, net of acquisition of
businesses Accounts payable................... -207,313 365,984 -521,669 -256,562 466,721
Accrued liabilities.......................... -120,861 37,852 506,101 -56,534 425,504
Accrued payroll liabilities.................. 39,480 152,979 132,864 21,709 116,563
Deferred revenues............................ -414,408 725,347 -612,070 2,625,084 76,338
Income tax payable........................... -124,015 -1,810,851 220,328 5,688 442,948
Other liabilities............................ -77,043 -77,043 -77,043 -19,261 -19,261
Net barter activity............................ -2,188,772 -3,214,830 -1,424,927 478,187 -838,083
Net cash provided by (used in) operating
activities................................. -912,056 1,253,397 2,105,732 5,434,133 3,215,902
Cash flows from investing activities:
Acquisitions of companies.................... -- -585,432 -9,218,718 -8,970,780 -4,266,886
Advances on receivables to related p......... -1,004,150 -316,993 -786,361 -1,014,816 -149,367
Advances on receivable from stockholders..... 25,300 -1,693,043 -84,227 -42,275 --
Proceeds from sale of property and e......... 31,150 1,043,601 224,957 39,184 --
Acquisitions of property and equipment....... -270,400 -835,050 -2,043,245 -596,818 -486,907
Net cash used in investing activities.... -1,218,100 -2,386,917 -11,907,594 -10,585,505 -4,903,160
</TABLE>
See accompanying notes to combined financial statements.
F-7
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
COMBINED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
FOR THE YEAR ENDED MARCH 31,
DECEMBER 31, (UNAUDITED)
------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Increase (decrease) in disbursements....... 376,085 451,249 288,761 -559,425 -230,443
Financing costs............................ -- -229,885 -314,601 -- --
Proceeds from long-term debt............... 1,981,564 8,008,536 16,890,155 6,917,111 3,532,060
Principal payments on long-term debt....... -395,931 -4,441,471 -2,057,748 -156,148 -281,901
Distributions.............................. -- -2,364,225 -8,631,116 -2,406,726 -932,373
Issuance of stock.......................... 1,000 1,000 -- -- --
Capital contributions........................ -- 2,200,000 3,000,000 -- --
Net cash provided by financing activities.... 1,962,718 3,625,204 9,175,451 3,794,812 2,087,343
Net (decrease) increase in cash and cash
equivalents................................. -167,438 2,491,684 -626,411 -1,356,560 400,085
Cash and cash equivalents at beginning of
year........................................ 1,352,111 1,184,673 3,676,357 3,676,357 3,049,946
Cash and cash equivalents at end of year..... $ 1,184,673 3,676,357 3,049,946 2,319,797 3,450,031
Supplemental disclosures of cash flow
information:
Cash paid during the year for interest..... $ 154,064 261,000 1,246,000 -- 106,970
Cash paid during the year for income
taxes...................................... $ 1,115,387 4,325,000 923,000 69,000 60,000
Supplemental noncash investing and financing
activities:
Stockholder distributions by:
Reduction of stockholder note receivable... -- 560,165 1,790,868 -- --
Transfer of property....................... 1,871,296 933,369 810,351 218,953 --
------------- ------------- ------------- ------------- -------------
$ 1,871,296 1,493,534 2,601,219 218,953 --
------------- ------------- ------------- ------------- -------------
Property and equipment acquired through
barter activities.......................... $ 620,868 1,877,372 702,970 61,691 74,626
Barter activities related to business
acquisitions............................... $ -- 2,000,000 1,500,000 -- --
</TABLE>
See accompanying notes to combined financial statements.
F-8
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The combined financial statements consist of Metro Traffic Control, Inc.
(MTC), Metro Reciprocal, Inc. (MRI), Metro Networks, Ltd. (MNW) (a limited
liability partnership) and Metro Video News, Inc. (MVN) and their subsidiaries
(collectively, the "Company"). These entities are all controlled by the same
shareholder. All intercompany accounts and transactions have been eliminated in
combination.
The Company provides traffic reporting services, local news, sports, weather
and other information reporting services to the television and radio broadcast
industries. In exchange for the Company's information reports, television and
radio station broadcast affiliates provide commercial airtime to the Company.
The packaging and sale of this commercial airtime accounts for substantially all
of the Company's revenue. The Companies' information reports are broadcast by
broadcast affiliates throughout the United states and in over 50 of the largest
metropolitan areas.
REVENUE RECOGNITION
The Company provides programming to radio and television stations in
exchange for commercial airtime. The airtime is subsequently sold to advertisers
for either cash or other goods and services. Revenue is recognized at the time
commercials are broadcasted, and accounts receivable are recorded at that time.
If cash, merchandise or services are received prior to the broadcast of the
commercial, deferred revenue is recorded.
Revenue from the Company's exchange of advertising time for goods and
services is recorded at the estimated fair market value of goods or services
received or to be received. The value of goods and services is charged to
expense when used.
Operations are charged with a provision for doubtful accounts based on
collection experience and a current review of the collectibility of accounts.
Accounts deemed uncollectible are applied against the allowance for doubtful
accounts.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
MERCHANDISE AND SCRIP INVENTORY
Merchandise and scrip inventory consists of miscellaneous merchandise and
airline tickets, lodging, meals and other goods received by the Company in
exchange for advertising time, and are valued at the fair market value of goods
received.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The cost of ordinary maintenance
is charged to operations, while renewals and replacements are capitalized.
Depreciation is computed based on the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Operating equipment 3 - 10 years
Transportation equipment 3 years
Leasehold improvements 10 years
</TABLE>
Depreciation expense for the years ended December 31, 1995, 1994 and 1993
was $1,249,702, $882,577 and $746,919, respectively.
F-9
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangible assets include goodwill, purchased broadcast contracts,
non-compete agreements, trademarks and licenses. Intangible assets are amortized
on a straight-line basis over the term of the contract or the estimated useful
life of the asset for periods ranging from three to five years. The Company
adopted FAS 121 (Accounting for Impairment Of Long-Lived Assets And For
Long-Lived Assets To Be Disposed Of) effective January 1, 1996. This standard
requires that long-lived assets and certain identifiable intangibles held and
used by the Company be reviewed for impairment whenever events or changes in
events indicate that the carrying amount of the asset cannot be recoverable. The
adoption of FAS 121 did not materially affect the Company's combined results of
operations or financial position.
FEDERAL AND STATE INCOME TAX
The Companies file separate federal and state tax returns. Therefore, the
Companies record the income tax expense (recovery) based on their separate
returns.
MRI and MVN have elected to be taxed under S Corporation provisions of the
Internal Revenue Code. Effective July 1, 1994, MTC elected to be taxed under S
Corporation provisions of the Internal Revenue Code. Under these provisions,
MRI, MVN and MTC are not liable for federal income taxes. Instead, the
stockholders are liable for individual federal income taxes on their taxable
income. Accordingly, losses are not available to the Company to offset income.
MNW is a partnership for federal income tax purposes and accordingly, the
partners are liable for federal income taxes on their respective income.
MNW owns corporations which are taxed under the C corporation provisions of
the Internal Revenue Code. Taxes related to income from the entities taxed under
the C corporation provisions are reported under the liability method;
accordingly, deferred tax assets and liabilities are determined based on
differences between financial and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws.
ACCRUED BARTER LIABILITIES
Accrued barter liabilities represent goods and services owed to radio
stations in exchange for airtime received from these radio stations.
BARTER AND AIRTIME OBLIGATIONS
Barter and airtime obligations represent broadcast obligations incurred as
part of the purchase price for acquisitions. Such obligations are recorded at
the fair market value of the airtime when the acquisition was made.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
UNAUDITED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
In the opinion of management, the unaudited interim financial statements for
the three months ended March 31, 1995 and 1996, presented herein, include all
adjustments, consisting only of normal
F-10
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recurring adjustments, necessary for the fair presentation of the Company's
financial position, results of operations, shareholder's equity and cash flows
for the interim period. The combined results of operations and cash flows for
the three months ended March 31, 1996 and 1995 are not necessarily indicative of
the results which would be expected for a full year.
PRO FORMA FINANCIAL DATA
Pro forma income taxes are set forth herein because certain of the combined
companies operate as subchapter S corporations. Pro forma income taxes reflect
federal income taxes that would have been incurred had all the combined
companies been subject to such taxes. Such amounts have been deducted from net
earnings in the accompanying statement of operations pursuant to the rules and
regulations of the Securities and Exchange Commission.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of related party receivables, note receivable from
shareholder and long-term debt are not materially different from carrying value
for financial statement purposes.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company made the following acquisitions, each of which has been
accounted for as a purchase.
On October 26, 1994, the Company acquired substantially all of the business
assets and assumed certain liabilities of Charlotte Traffic Patrol, Inc. (CTP),
a North Carolina corporation. CTP is engaged in the business of providing
vehicular traffic condition reports through the broadcast media in the
metropolitan area of Charlotte, North Carolina and certain surrounding areas.
The purchase price of $3.5 million consisted of a $600,000 cash payment at
closing and notes payable of $900,000. The notes payable are secured by a
stand-by letter of credit issued by a commercial bank. As part of the
consideration for the purchase of the assets, the Company agreed to provide CTP
with advertising radio spots in the Charlotte area each calendar month during
the five-year period beginning the date of closing and ending October 31, 1999.
The Company also assumed CTP's obligations under its existing office lease and
CTP's affiliate contracts.
On July 19, 1994, the Company acquired substantially all of the tangible and
intangible assets, contracts, distributor relationships, advertiser and
affiliate lists of Hildebrand Communications, Inc. (Hildebrand), and assumed
certain liabilities in exchange for cash consideration of $100,000. The excess
of the aggregate purchase price over the fair market value of the net assets
acquired of $15,000 was recognized as the value of the non-compete agreement
executed by the seller and is being amortized over a five-year period.
On July 1, 1994, the Company acquired substantially all of the tangible and
intangible assets, contracts, distributor relationships, advertiser and
affiliate lists of Wisconsin Information Systems, Inc. (Wisconsin), and assumed
certain liabilities in exchange for cash consideration of $79,000. MTC also
agreed to provide the seller with a performance fee for the initial twenty-four
months of MTC's ownership equal to 15% of net operating revenue, as defined. The
excess of the aggregate purchase price over the fair market value of the net
assets acquired of $15,000 was recognized as the value of the non-compete
agreement executed by the seller and is being amortized over a five-year period.
F-11
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On March 24, 1995, the Company acquired 100% of the stock of TrafficScan,
Inc. (TSI). TSI is in the business of providing traffic information services to
the broadcast media in the greater Atlanta geographic region. The consideration
for the stock of TSI included cash of approximately $4 million and trade credits
of approximately $1.5 million. Approximately $5.1 million of the purchase price
was allocated to the value of purchased broadcast contracts, non-compete
agreements and goodwill and is being amortized on a straight-line basis over
five years.
On March 9, 1995, the Company acquired all of the outstanding shares of
Skyview Broadcasting Networks, Inc. (SBN), an Arizona corporation. The
consideration for the stock of SBN included cash of $2.28 million and
noninterest bearing notes payable of approximately $463,000. The purchase price
was allocated to the net assets based upon their estimated fair market values.
The excess of the purchase price over the estimated fair value of the net assets
acquired was approximately $2.5 million. The excess purchase price was allocated
to the value of purchased broadcast contracts, non-compete agreements and
goodwill and is being amortized on a straight-line basis over five years.
On March 9, 1995, the Company also acquired 100% of the shares of Airborne
Broadcast Consultants, Inc. (ABC), a Nevada corporation. The Company acquired
the stock for cash consideration of $1.14 million and noninterest bearing notes
payable of approximately $232,000. The purchase price was allocated to the net
assets of the acquired company based upon their estimated fair value. The excess
purchase price of approximately $1.3 million was allocated to the value of
purchased broadcast contracts, non-compete agreements and goodwill and is being
amortized on a straight-line basis over five years. The consideration
represented by the notes payable for the SBN and ABC stock purchases are payable
in the amounts of approximately $347,000 each to the two previous owners in
twenty-three equal installments of approximately $15,000, with a final payment
in the twenty-fourth month. These notes payable are noninterest bearing and are
discounted at an interest rate of 8%.
On March 9, 1995, the Company acquired substantially all of the tangible and
intangible business assets and acquired certain liabilities of Airborne
Broadcasting Systems, Inc. (ABS), a Tennessee corporation. ABS operates a
network of broadcast affiliates serving the greater Nashville and Memphis,
Tennessee markets and the Louisville and Lexington, Kentucky markets. Through
these affiliates, ABS provides traffic, news and weather information in exchange
for advertising availabilities. The purchase price of approximately $2.1 million
consisted of cash consideration of $1,780,000 and noninterest bearing notes
payable of approximately $358,000, less note discount at 8%. The purchase price
was allocated to the net assets based upon their estimated fair market values.
The excess purchase price of approximately $2.1 million was allocated to the
value of purchased broadcast contracts, non-compete agreements and goodwill and
is being amortized over a five-year period.
Subsequent to December 31, 1995, the Company made the following asset and
stock acquisitions. These acquisitions were accounted for on the purchase method
of accounting. Accordingly, the purchase price was allocated to the net assets
based upon their fair market values. The excess purchase price was allocated to
the value of purchased affiliate contracts, non-compete agreements and goodwill
and will be amortized over five years.
On January 3, 1996, the Company acquired substantially all of the tangible
and intangible business assets and certain liabilities of Aeromedia, Inc.
(Aeromedia), a Utah corporation. Aeromedia operates a network of broadcast
affiliates serving the Salt Lake City metropolitan area in exchange for
advertising availabilities and other compensation. As consideration for the
asset purchase, the Company paid $200,000 at closing and agreed to pay
additional contingent consideration in a final payment based
F-12
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
upon net sales of Aeromedia for the calendar year 1996. The final payment, based
upon net sales as defined in the Asset Purchase Agreement, ranges from zero for
net sales less than $500,000 up to $250,000 for net sales greater than $600,000.
On January 4, 1996, the Company acquired the stock of TrafficNet, Inc.
(TNI), a Rhode Island corporation, TrafficNet of Connecticut, Inc. (TNCI), a
Connecticut corporation, and The Weather Bureau, Inc. (TWB), a Massachusetts
corporation (collectively, the Traffic Net Group). In exchange for 100% of the
outstanding shares of the Traffic Net Group, the Company paid cash consideration
of approximately $2.9 million, net of $100,000 in deferred purchase price
related to certain contingent liabilities, as described in the TNI Stock
Purchase Agreement. As additional consideration, the Company paid cash of
approximately $410,000 to acquire existing trade receivables, net of an escrow
reserve of approximately $137,000 for potentially uncollectible trade account.
The following is a summary of the acquisitions:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Assets acquired:
Accounts receivable............................................. $ 126,831 $ 855,722 $ 410,000
Fixed Assets.................................................... 226,911 513,670 27,655
Other assets.................................................... 30,000 339,542 6,520
Purchased broadcast contracts and other intangibles............. 5,053,258 12,480,377 4,076,179
------------- ------------- -------------
5,437,000 14,189,311 4,520,354
Liabilities assumed:
Notes payable................................................... 601,839 1,956,610 --
Other liabilities............................................... 3,156,161 2,003,177 528,775
------------- ------------- -------------
3,758,000 3,959,787 528,775
Less: Notes payable issued........................................ 900,000 1,052,913 --
------------- ------------- -------------
Cash paid......................................................... $ 779,000 $ 9,176,611 $ 3,991,579
------------- ------------- -------------
</TABLE>
The following unaudited pro forma information represents the combined
results of operations of the Company as if (i) the TSI, SBN, ABC and ABS
acquisitions had been combined with the Company as of January 1, 1995 and 1994
and (ii) the CTP, Hildebrand and Wisconsin acquisitions had been combined with
the Company as of January 1, 1994.
<TABLE>
<CAPTION>
DECEMBER 31,
(000'S)
(UNAUDITED)
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Advertising Revenues................................................... $ 67,469 $ 74,042
Net Income............................................................. 7,197 2,546
</TABLE>
The pro forma information is not necessarily indicative of operating results
that would have occurred if each major acquisition had been consummated as of
January 1 of each respective period, nor is it necessarily indicative of future
operating results. The actual results of operations of an acquired company are
included in the Company's combined financial statements only from the date of
acquisition.
F-13
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 3 -- ALLOWANCE FOR DOUBTFUL ACCOUNTS
The activity in the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO WRITE-OFFS
BEGINNING OF COSTS AND NET BALANCE AT THE
PERIOD EXPENSES OF RECOVERIES END OF PERIOD
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Year ended December 31, 1993...................... $ 633,740 $ 681,810 $ (623,638) $ 691,912
Year ended December 31, 1994...................... 691,912 802,230 (1,000,299) 493,843
Year ended December 31, 1995...................... 493,843 443,169 (626,750) 310,262
</TABLE>
NOTE 4 -- PURCHASED BROADCAST CONTRACTS AND OTHER INTANGIBLES
Purchased broadcast contracts and other intangibles is comprised of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Non-compete agreements........................................... $ 1,516,686 $ 3,060,649 $ 3,473,570
Purchased broadcast contracts.................................... 4,986,483 12,278,545 15,703,335
Goodwill, trademarks and licenses................................ 42,177 2,514,313 3,807,358
-------------- -------------- --------------
6,545,346 17,853,507 22,984,263
Less: accumulated amortization................................... 3,437,712 4,103,863 5,174,409
-------------- -------------- --------------
$ 3,107,634 $ 13,749,644 $ 17,809,854
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
Amortization expense for the years ended December 31, 1995, 1994 and 1993
was $2,669,151 and $408,362, $1,067,338, respectively.
NOTE 5 -- LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995 MARCH 31, 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Notes payable related to $30,000,000 revolving credit
agreement...................................................... $ 5,847,423 $ 21,121,000 $ 24,621,000
Various acquisition notes payable, discounted at 8%, due 1996
through 1999................................................... 682,432 1,224,083 1,079,995
Unsecured note payable to bank at prime (8.75% at December 31,
1995), due 1996 through 2000................................... 132,750 123,750
Various notes payable at fixed rates of 7% to 9.50%, due 1996
through 2000................................................... 120,148 145,860 77,351
-------------- -------------- --------------
6,650,003 22,623,693 25,902,096
Less: Current portion 202,758 746,537 749,172
-------------- -------------- --------------
$ 6,447,245 $ 21,877,156 $ 25,152,924
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
F-14
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 5 -- LONG-TERM DEBT (CONTINUED)
The following is a schedule of future maturities of notes payable and
long-term debt as of December 31, 1995:
<TABLE>
<S> <C>
1996............ $ 746,537
1997............ 1,906,080
1998............ 5,919,310
1999............ 7,333,251
2000............ 6,718,515
-----------
$22,623,693
-----------
-----------
</TABLE>
In October, 1994, the Company entered into a credit agreement, as
subsequently amended, with a commercial bank that allows borrowings up to
$30,000,000 under notes payable indexed to the bank's prime rate or the London
Interbank Offered Rate (LIBOR). The credit agreement, as amended, provides for
scheduled commitment reductions, which ranges between 5% and 10% of the original
commitment, beginning June 30, 1996 through June 30, 2000, at which time the
commitment matures. The credit agreement also contains, among other provisions,
requirements for maintaining defined levels of debt service coverage, fixed
charges coverage and maximum levels of leverage indebtedness, executive
compensation and other restrictions. The credit facility is secured by a pledge
of the stock or other equity interests of each of the combined Companies. A
commitment fee of .375% per year is charged on the daily unused balance.
The Company issued noninterest bearing notes payable, discounted at 8% per
annum, in connection with the stock acquisitions of SBN and ABC in 1995, and the
asset acquisitions of ABS in 1995 and CTP in 1994. The Company has guaranteed
$732,000 letters-of-credit related to its acquisition of the assets of CTP as of
December 31, 1995.
NOTE 6 -- INCOME TAXES
Income tax expense from continuing operations is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Current, federal.................................................... $ 1,022,307 $ 1,265,662 $ 722,254
Current, state...................................................... 110,740 546,882 314,098
Deferred, non-current federal....................................... (66,559) 366,599
------------- ------------- -------------
$ 1,066,448 $ 2,179,143 $ 1,036,352
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
F-15
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 6 -- INCOME TAXES (CONTINUED)
The difference between the effective tax rate of income tax expense and the
amount which would be determined by applying the statutory U.S. income tax rates
to income from continuing operations before income tax expense is explained
below according to the tax implications of various items of income or expense:
<TABLE>
<CAPTION>
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Provision for income tax expense at U.S. statutory rates............ $ 844,048 $ 3,088,604 $ 1,477,548
Increase (decrease) in tax provision resulting from:
Nontaxable S-Corporation and partnership (earnings) losses........ 10,410 (1,645,277) (666,838)
State income taxes, net of federal tax benefit.................... 73,088 351,042 204,164
Deferred federal income tax reversal due to change in tax
status........................................................... 321,599
Other............................................................. 138,902 63,175 21,478
------------- ------------- -------------
$ 1,066,448 $ 2,179,143 $ 1,036,352
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes related to the C corporations
included in the combined group. As of December 31, 1995, this amount primarily
relates to the differential in book and tax basis of the intangibles as a result
of the recent acquisitions.
MTC is subject to IRC 1374 tax on pre-election built-in gains on property
held prior to election as an S corporation for a ten-year period following the
election. The built-in gain has not been determined at this time. Recognition of
the built-in gain and the accompanying tax liability is contingent upon assets
owned at the time of the S election being sold in the future at amounts
exceeding their tax basis and their fair market values at election date.
The book basis exceeds the tax basis in the underlying assets of the
entities included in the combined group which have elected by be taxed under the
S corporation provisions of the Internal Revenue Code by approximately $2.4
million.
NOTE 7 -- COMMITMENTS AND CONTINGENCIES
The Company leases certain of its office facilities and equipment over
periods ranging from one to ten years. Rent expense for the years ended December
31, 1995, 1994 and 1993, was $2,701,000, $2,256,000 and $636,000, respectively.
Future rentals for operating leases at December 31, 1995, are as follows:
<TABLE>
<S> <C>
1996.................................................. $ 1,329,000
1997.................................................. 1,104,000
1998.................................................. 780,000
1999.................................................. 474,000
2000.................................................. 401,000
Thereafter............................................ 1,266,000
-----------
$ 5,354,000
-----------
-----------
</TABLE>
F-16
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 7 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
Additionally, the Company is obligated to provide advertising in exchange
for leasing certain office facilities and equipment over periods ranging from
one to ten years. Future rentals for operating leases at December 31, 1995,
based on the fair market value of the lease are as follows:
<TABLE>
<S> <C>
1996.................................................. $ 1,297,000
1997.................................................. 1,030,000
1998.................................................. 593,000
1999.................................................. 524,000
2000.................................................. 399,000
Thereafter............................................ 642,000
-----------
$ 4,485,000
-----------
-----------
</TABLE>
The Company is subject to other litigation arising in the ordinary course of
business. Management believes that the resolution of such matters will not have
a material adverse effect on the Company's financial position or results of
operations.
NOTE 8 -- PROFIT SHARING PLAN
Effective April, 1995, the Company established a profit sharing plan under
Section 401(k) of the Internal Revenue Code for all eligible employees. All
eligible employees are permitted to defer compensation up to a maximum of 10% of
their income. The plan provides for a matching contribution by the Company,
which amounted to $195,000 in 1995.
NOTE 9 -- COMMON STOCK AND PARTNERS' CAPITAL
Common stock is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
METRO TRAFFIC CONTROL, INC.
Common stock - stated value $2.50, 2,600 shares authorized, 1,198 shares issued and
outstanding............................................................................... $ 2,995 $ 2,995
METRO RECIPROCAL, INC.
Common stock - $.01 par value, 1,000,000 shares authorized, 1,000 issued and outstanding... 10 10
METRO VIDEO NEWS, INC.
Common stock - $.01 par value, 1,000,000 shares authorized, 1,000 shares issued and
outstanding............................................................................... 10 10
--------- ---------
$ 3,015 $ 3,015
--------- ---------
--------- ---------
</TABLE>
Partners' capital account represents the partners capital of MNW.
NOTE 10 -- RELATED PARTY TRANSACTIONS
The Company leases certain real property in Vail, Colorado and in Malibu,
California from a partnership owned by the controlling shareholder. The annual
lease payments on these properties are $60,000 and $240,000, respectively.
The Company has entered into certain reciprocal arrangements with unrelated
third parties as a result of which the Company will receive goods and services
for the benefit of the controlling shareholder. The reciprocal arrangements
obligate the Company to provide commercial airtime, provide other
F-17
<PAGE>
METRO TRAFFIC CONTROL, INC., METRO RECIPROCAL, INC.,
METRO NETWORKS, LTD., AND METRO VIDEO NEWS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
NOTE 10 -- RELATED PARTY TRANSACTIONS (CONTINUED)
goods and services, and make cash disbursements to such third parties in
exchange for the goods and services received by the Company. As of March 31,
1996, the Company was obligated to provide approximately $2.5 million
(unaudited) of commercial airtime, goods and services under these reciprocal
arrangements. The Company intends to enter into an agreement with the
controlling shareholder pursuant to which the controlling shareholder will be
distributed the goods and services the Company holds for the controlling
shareholder's benefit. The Company also will distribute to the controlling
shareholder all of its rights to the goods and services that are the subject of
existing reciprocal arrangements but which have not yet been delivered to the
Company. The value of such goods and services is expected to be approximately $2
million (unaudited). The Company does not intend to enter into future reciprocal
arrangements for the benefit of the controlling shareholder.
The Company has entered into certain transactions with a company owned by
the stockholder. The Company has guaranteed the annual lease payments for such
company in the amount of $60,000; such obligations shall continue through
December 31, 1996. Additionally, the Company has posted a bond of $20,000 with
the Airline Reservations Clearinghouse for the company. The Company purchases
the majority of its travel tickets through the company.
The stockholder and members of his family have personally utilized the
services of several of the Company's employees. The total compensation paid to
such employees was $180,995 in 1995.
At December 31, 1994, the Company had a demand note receivable from the
stockholder totaling $1,706,641, bearing interest at the prime rate plus 1% for
cash advances made to the controlling stockholder. In addition, at December 31,
1995 and 1994, the Company had outstanding receivables from affiliated entities
totaling $1,075,030 and $288,669, respectively, bearing interest at the prime
rate plus 1%. For the years ended December 31, 1995, 1994 and 1993, the Company
had recorded $131,797, $105,641 and $112,736, respectively, in interest income
related to the above receivables.
The Company paid $300,000 and $100,000 in rent expense to an entity related
by common control for the years ended December 31, 1995 and 1994, respectively.
Additionally, the Company is obligated under lease agreements for future minimum
lease payments of $300,000 in 1996 and $135,000 in 1997. These amounts have been
included in Note 7.
NOTE 11 -- DISCONTINUED OPERATIONS
In June 1993, the Company approved a plan to discontinue the Company's
magazine publishing business, and disposed of the business in August 1993.
NOTE 12 -- EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT - REORGANIZATION
(UNAUDITED)
From 1978 through June 1996, the business of the Company was operated
through Metro Traffic Control, Inc. and the other combined companies. All of the
equity interest in these companies were controlled by a single shareholder. In
conjunction with an anticipated offering of equity securities, a new entity was
formed. It is expected that the single share holder will contribute or cause to
be contributed all of the issued and out standing equity interests in the
Companies to this newly formed entity in exchange for common stock. Subsequent
to the reorganization, the Companies will be direct or indirect wholly owned
subsidiaries of the newly formed entity.
Upon the reorganization, the resulting entity will be liable for income
taxes, at which time the entity will be required to record a deferred tax
liability for the differential between the book and tax basis of the underlying
assets. Accordingly, this differential will result in an increase in income tax
expense at the time of reorganization of approximately $800,000.
F-18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 11
Use of Proceeds................................ 15
Dividend Policy................................ 15
Capitalization................................. 16
Dilution....................................... 17
Selected Financial and Operating Data.......... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 20
Business....................................... 28
Management..................................... 42
Certain Transactions........................... 46
Principal and Selling Stockholders............. 48
Description of Capital Stock 49
Shares Eligible For Future Sale................ 52
Validity of Common Stock....................... 53
Experts........................................ 53
Additional Information......................... 53
Glossary....................................... 54
Underwriting................................... U-1
Index to Consolidated Financial Statements..... F-1
</TABLE>
THROUGH AND INCLUDING , 1996 (THE 25TH DAY AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
SHARES
METRO NETWORKS, INC.
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
------------------------
[LOGO]
------------------
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts, payable by the Company in connection with the sale of
the Common Stock being registered. All amounts are estimates except the
registration and filing fees:
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
-----------
<S> <C>
Securities and Exchange Commission
Registration Fee............................................................. $ 39,656
NASD Fee...................................................................... 12,000
Printing and engraving expenses............................................... *
Legal fees and expenses....................................................... *
Accounting fees and expenses.................................................. *
Blue Sky fees and expenses.................................................... *
Transfer Agent and Registrar fee.............................................. *
Miscellaneous expenses........................................................ *
-----------
Total......................................................................... *
</TABLE>
- ------------------------
* To be supplied by amendment.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware Law General Law and Article EIGHTH of the
Company's Certificate of Incorporation provide for indemnification of the
Company's directors and officers in a variety of circumstances which may include
liabilities under the Securities Act of 1933. Article EIGHTH provides that
unless otherwise determined by the Board of Directors of the Company, the
Company shall indemnify to the full extent permitted by the laws of Delaware as
from time to time in effect, the persons described in Section 145 of Delaware
Law.
The general effect of the provisions in the Company's Amended and Restated
Certificate of Incorporation and Delaware Law is to provide that the Company
shall indemnify its directors and officers against all liabilities and expenses
actually and reasonably incurred in connection with the defense or settlement of
any judicial or administrative proceedings in which they have become involved by
reason of their status as corporate directors or officers, if they acted in good
faith and in the reasonable belief that their conduct was neither unlawful (in
the case of criminal proceedings) nor inconsistent with the best interests of
the Company. With respect to legal proceedings by or in the right of the Company
in which a director or officer is adjudged liable for improper performance of
his duty to the Company or another enterprise which such person served in a
similar capacity at the request of the Company, indemnification is limited by
such provisions that amount which is permitted by the court.
The Company will maintain officers' and directors' liability insurance which
will insure against liabilities that officers and directors of the Company may
incur in such capacities. The Company has also entered into indemnification
agreements with its directors and officers.
Reference is made to the Proposed Form of Underwriting Agreement filed as
Exhibit 1 which provides for indemnification of the directors and officers of
the Company signing the Registration Statement and certain controlling persons
of the Company against certain liabilities, including those arising under the
Securities Act in certain instances, of the Underwriters.
II-1
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
In connection with the Reorganization, the Company issued shares of
Common Stock to Mr. David Saperstein, shares of Common Stock to the Michelle
Joy Saperstein Coppola 1994 Trust, shares of Common Stock to the Jennifer
Beth Saperstein 1994 Trust, shares of Common Stock to the Jonathan Alexander
Saperstein 1994 Trust, shares of Common Stock to the Alexis Daniella
Saperstein 1994 Trust and shares to the Stefanie Nicole Saperstein 1994
Trust.
EXHIBITS
(2a) Exhibits. See Exhibit Index
UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1)For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2)For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on June 18, 1996.
METRO NETWORKS, INC.
By: /s/ DAVID I. SAPERSTEIN
-----------------------------------
David I. Saperstein
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Messrs. Saperstein and Coppola, and each of them,
his true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments, including post-effective
amendments, to this Registration Statement, and any registration statement
relating to the offering covered by this Registration Statement and filed
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that each of said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<C> <S> <C>
NAME TITLE DATE
- ------------------------------------------------------ ------------------------------- ------------------------
/s/ /S/ DAVID I. SAPERSTEIN Chairman of the Board of
------------------------------------------- Directors and Chief Executive June 18, 1996
David I. Saperstein Officer
/s/ CHARLES I. BORTNICK
------------------------------------------- President and Director June 18, 1996
Charles I. Bortnick
/s/ SHANE E. COPPOLA
------------------------------------------- Executive Vice President and June 18, 1996
Shane E. Coppola Director
/s/ CURTIS H. COLEMAN
------------------------------------------- Senior Vice President, Chief June 18, 1996
Curtis H. Coleman Financial Officer and Director
/s/ GARY L. WOROBOW Senior Vice President, General
------------------------------------------- Counsel, Secretary and June 18, 1996
Gary L. Worobow Director
</TABLE>
II-3
<PAGE>
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S> <C>
1.1** Form of Underwriting Agreement between the Registrant and the
Representatives.
3.1** Certificate of Incorporation of the Registrant
3.2** Form of Amended and Restated Certificate of Incorporation of the Registrant
3.3** Bylaws of the Registrant
4.1** Form of Common Stock Certificate
5.1** Opinion of Paul, Hastings, Janofsky & Walker as to the validity of the
Common Stock.
10.1* Credit Agreement dated October 21, 1994 among Metro Traffic Control, Inc.,
Metro Networks, Ltd, and NationsBank of Texas, N.A.
10.2* First Amendment to Credit Agreement dated May 22, 1995 among Metro Traffic
Control, Inc., Metro Networks, Ltd, and NationsBank of Texas, N.A.
10.3* Second Amendment to Credit Agreement dated November 22, 1995 among Metro
Traffic Control, Inc., Metro Networks, Ltd, and NationsBank of Texas, N.A.
10.4* Lease Agreement, dated April 15, 1988 between Tower, Limited and Metro
Traffic Control, Inc.
10.5* First Amendment to Lease Agreement, dated September 1, 1988 between Tower,
Limited and Metro Traffic Control, Inc.
10.6* Lease Amendment Number Two, dated April 23, 1991 between Tower, Limited and
the Registrant.
10.7* Lease Amendment Number Three, dated January 28, 1992 between Tower, Limited
and the Registrant.
10.8* Sublease Agreement dated January 5, 1996 between Transcontinental Gas Pipe
Line Corporation and Metro Traffic Control, Inc.
10.9* Lease Agreement dated April 18, 1980 between Transco Tower Limited and
Metro Traffic Control, Inc.
10.10* Lease Amendment Number One dated October 19, 1988 between Transco Tower,
Limited and Metro Traffic Control, Inc.
10.11* Lease Amendment Number Two dated January 29, 1992 between Transco Tower,
Limited and Metro Traffic Control, Inc.
10.12* Lease Amendment Number Three dated May 28, 1992 between Transco Tower,
Limited and Metro Traffic Control, Inc.
10.13** Employment Agreement between the Registrant and Mr. David I. Saperstein.
10.14** Employment Agreement between the Registrant and Mr. Charles I. Bortnick
10.15** Employment Agreement between the Registrant and Mr. Shane E. Coppola
10.16** Employment Agreement between the Registrant and Mr. Curtis H. Coleman
10.17** Employment Agreement between the Registrant and Mr. Gary L. Worobow
10.18** Metro Networks, Inc. Employee Payroll Deduction Stock Purchase Plan
10.19** 1996 Incentive Stock Option Plan
11.1** Statement re: computation of per share earnings
21.1** Subsidiaries of the Company.
23.1** Consent of KPMG Peat Marwick LLP
23.2** Consent of Paul, Hastings, Janofsky & Walker (included in Exhibit 5.1).
24. (a) Powers of Attorney, included on pages II-4 to II-9.
(b) Consolidated Financial Statement Schedules
27.1* Financial Data Schedule
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of October 21, 1994, among METRO TRAFFIC
CONTROL, INC., a Maryland corporation ("Metro"), METRO NETWORKS, LTD., a Texas
limited partnership ("MNLP") (Metro and MNLP are each a "Borrower", and together
with other Persons who may from time to time become a Borrower hereunder,
collectively, the "Borrowers"), the Lenders from time to time party hereto, and
NATIONSBANK OF TEXAS, N.A., a national banking association, as administrative
agent for the Lenders.
BACKGROUND
The Borrowers have requested that the Lenders make a credit facility
available to the Borrowers up to the maximum principal amount of $15,000,000.
The Lenders have agreed to do so, subject to the terms and conditions set forth
below.
In consideration of the mutual covenants and agreements contained herein,
and other good and valuable consideration hereby acknowledged, the parties
hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1 Defined Terms. For purposes of this Agreement:
"Accounts" shall have the meaning assigned to such term in the UCC.
"Acquisition" shall mean any transaction pursuant to which any Borrower or
any Subsidiary, (i) whether by means of a capital contribution or purchase or
other acquisition of stock or other securities or other equity participation or
interest, (A) acquires more than 50% of the equity interest in any Person
pursuant to a solicitation by such Borrower or such Subsidiary of tenders of
equity securities of such Person, or through one or more negotiated block,
market, private or other transactions not involving a tender offer, or a
combination of any of the foregoing, (B) makes any corporation a Subsidiary, or
causes any corporation to be merged into such Borrower or such Subsidiary (or
agrees to be merged into any other corporation other than a wholly-owned
Subsidiary), or (C) agrees to purchase all or substantially all of the assets of
any corporation, pursuant to a merger, purchase of assets or other
reorganization providing for the delivery or issuance to the holders of such
corporation's then outstanding securities, in exchange for such securities, of
cash or securities of such Borrower or such Subsidiary, or any combination
thereof, or (ii) purchases all or substantially all of the business or assets of
any Person or of any operating division of any Person.
"Acquisition Consideration" shall mean, without duplication, the
consideration given by any Borrower or any Subsidiary for an Acquisition,
including, but not limited to, the fair market
<PAGE>
value of any cash, property, stock or services given, the amount of any
Indebtedness assumed or incurred.
"Adjusted Excess Cash Flow" shall mean, for any year, calculated for the
Borrowers and the Subsidiaries on a combined basis, an amount equal to the
remainder of (a) Operating Cash Flow for said year (which calculation of
Operating Cash Flow shall not exclude from net income compensation to David
Saperstein permitted pursuant to Section 7.18(ii) hereof), minus (b) the sum of
(i) the greater of (X)$750,000, or (Y) Capital Expenditures for said year, plus
(ii) Dividends paid during said year, plus (iii) cash expenditures (other than
Cash Tax Dividends) for the payment of taxes during said year, if applicable,
plus (iv) principal, interest, fees and other amounts scheduled to be paid for
said year with respect to Indebtedness.
"Administrative Lender" shall mean NationsBank of Texas, N.A., a national
banking association, as administrative agent for Lenders, or such successor
administrative agent appointed pursuant to Section 10.1(b) hereof.
"Advance" shall mean any amount advanced by the Lenders to any Borrower
pursuant to Article 2 hereof on the occasion of any borrowing, including without
limitation any Refinancing Advance.
"Affiliate" shall mean any Person that directly or indirectly through one
or more Subsidiaries Controls, or is Controlled By or Under Common Control with,
any Borrower.
"Agreement" shall mean this Credit Agreement, as amended or renewed from
time to time.
"Agreement Date" shall mean the date of this Agreement.
"Applicable Environmental Laws" shall mean applicable laws pertaining to
health or the environment, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, "CERCLA"), the Resource Conservation and Recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act
amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as
amended from time to time, "RCRA"), the Texas Water Code, and the Texas Solid
Waste Disposal Act.
"Applicable Law" shall mean (a) in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person and its properties, including,
without limiting the foregoing, all orders and decrees of all courts and
arbitrators in proceedings or actions to which the Person in question is a
party, and (b) in respect of contracts relating to interest or finance charges
that are made or performed in the State of Texas, "Applicable Law" shall mean
the laws of the United States of America, including without limitation 12 USC
Sections 85 and 86, as amended from time to time,
-2-
<PAGE>
and any other statute of the United States of America now or at any time
hereafter prescribing the maximum rates of interest on loans and extensions of
credit, and the laws of the State of Texas, including, without limitation,
Article 5069-1.04, Title 79, Revised Civil Statutes of Texas, 1925, as amended
("Art. 1.04"), and any other statute of the State of Texas now or at any time
hereafter prescribing maximum rates of interest on loans and extensions of
credit; provided that the parties hereto agree that the provisions of Chapter
15,
Title 79, Revised Civil Statutes of Texas, 1925, as amended, shall not apply to
Advances, this Agreement, the Notes or any other Loan Documents.
"Applicable Margin" shall mean the following per annum percentages,
applicable in the following situations:
Prime Rate LIBOR
Applicability Basis Basis
------------- ----- -----
(i) If the Leverage Ratio is not less than 2.0 to 1 0.875 1.875
(ii) If the Leverage Ratio is less than 2.0 to 1 but 0.750 1.750
is not less than 1.5 to 1
(iii) If the Leverage Ratio is less than 1.5 to 1 but 0.500 1.500
is not less than 1.0 to 1
(iv) If the Leverage Ratio is less than 1.0 to 1 0.250 1.250
The Applicable Margin payable by the Borrowers on the Advances outstanding
hereunder shall be subject to reduction or increase, as applicable and as set
forth in the table above, on a quarterly basis according to the performance of
the Borrowers as tested by the Leverage Ratio. Except as set forth in the last
sentence hereof, any such increase or reduction in the Applicable Margin
provided for herein shall be effective three Business Days after receipt by
Administrative Lender of the financial statements required to be delivered
pursuant to Section 6.l(b) or 6.2(b) hereof, as applicable. If financial
statements of the Borrowers setting forth the Leverage Ratio are not received by
the Administrative Lender by the date required pursuant to Section 6.1 (b) or
6.2(b) hereof, as applicable, the Applicable Margin shall be determined as if
the Leverage Ratio is not less than 2.0 to 1 until such time as such financial
statements are received. For the final quarter of any fiscal year of the
Borrowers, the Borrowers may provide their unaudited financial statements,
subject only to year-end adjustments, for the purpose of adjusting the
Applicable Margin.
"Art. 1.04" shall have the meaning ascribed thereto in the definition of
"Applicable
"Assignees" shall mean any assignee of a Lender pursuant to an Assignment
Agreement and shall have the meaning ascribed thereto in Section 11.6 hereof.
"Assignment Agreement" shall have the meaning ascribed thereto in Section
11.6 hereof.
-3-
<PAGE>
"Authorized Signatory" shall mean such senior personnel of the Notification
Agent as may be duly authorized and designated in writing by the Notification
Agent to execute documents, agreements and instruments on behalf of the
Notification Agent, and to request Advances and Letters of Credit hereunder.
"Borrowers" shall mean, collectively, Metro, MNLP, and any other Persons
who as a result of a Corporate Reorganization shall become a Borrower hereunder
and for which the conditions precedent set forth in Section 3.3 hereof have been
satisfied, and "Borrower" means any one of them, as appropriate.
"Borrower Pledge Agreement" shall mean one or more pledge agreements,
executed by any Borrower, granting a first priority Lien on (i) the Pledged
Stock owned directly by such Borrower and (ii) each Intercompany Note evidencing
intercompany advances made by such Borrower, as security for the Obligations,
substantially in the form of Exhibit B hereto, as such agreement may be amended,
modified, renewed or extended from time to time.
"Borrower Security Agreement" shall mean one or more security agreements,
executed by any Borrower, granting a first priority Lien on (i) the Accounts and
related items of such Borrower and (ii) the tangible personal property of such
Borrower, as security for the Obligations, substantially in the form of Exhibit
E hereto, as such agreement may be amended, modified, renewed or extended from
time to time.
"Borrowers' Business" shall mean the communications, broadcasting
(including, but not limited to, traffic, news, sports and weather reports on
radio and television stations), media, information services, and advertising and
activities related thereto.
"Business Day" shall mean a day on which banks are open for the transaction
of business as required by this Agreement in Dallas, Texas and, with respect to
any LIBOR Advance, in London, England, and as otherwise relevant to the
determination to be made or the action to be taken.
"Capital Expenditures" shall mean cash expenditures for the purchase of
tangible assets of long-term use which are capitalized in accordance with GAAP.
"Capitalized Lease Obligations" shall mean that portion of any obligation
of any Borrower or any Subsidiary as lessee under a lease which at the time
would be required to be capitalized on a balance sheet prepared in accordance
with GAAP.
"Cash Tax Dividends" shall mean Dividends paid by (a) any corporate
Borrower which has elected Subchapter S status under the Code to such Borrower's
shareholders to pay income Taxes incurred by such shareholders solely as a
result of net income generated by such Borrower and (b) any Borrower which is a
partnership to such Borrower's partners to pay income Taxes incurred by such
partners solely as a result of net income generated by such Borrower.
-4-
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall mean any collateral hereafter granted by any Person to
the Administrative Lender for the benefit of the Lenders to secure the
Obligations.
"Commitment" shall mean $15,000,000, as reduced from time to time pursuant
to Section 2.6 hereof.
"Commitment Reduction Date" shall mean the last Business Day of March 1995.
"Control" or "Controlled By" or "Under Common Control" shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of voting securities, by
contract or otherwise); provided, however, that any Person which beneficially
owns, directly or indirectly, 5% or more (in number of votes) of the securities
(or in the case of a Person that is not a corporation, 5% or more of the equity
interest) having ordinary voting power shall be conclusively presumed to control
such Person.
"Controlled Group" shall mean, as to any Person, all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) which are under common control with such Person and which,
together with such Person, are treated as a single employer under Section
414(b), (c), (m) or (o) of the Code; provided, however, that the Subsidiaries of
any Borrower shall be deemed to be members of such Borrower's Controlled Group,
and any Borrower and any other entities (whether incorporated or not
incorporated) which are under common control with such Borrower and which,
together with such Borrower, are treated as a single employer under Section
414(b), (c), (m) or (o) of the Code, shall be deemed to be members of such
Borrower's Controlled Group on and after the Agreement Date.
"Default" shall mean an Event of Default and/or any of the events specified
in Section 8.1, regardless of whether there shall have occurred any passage of
time or giving of notice that would be necessary in order to constitute such
event an Event of Default.
"Default Rate" shall mean a simple per annum interest rate equal to the
lesser of (a) the Highest Lawful Rate, or (b) the sum of the Prime Rate Basis
plus two percent.
"Determining Lenders" shall mean, on any date of determination, any
combination of the Lenders having at least 100% of the aggregate amount of
Advances then outstanding; provided, however, that if there are no Advances
outstanding hereunder, "Determining Lenders" shall mean any combination of
Lenders whose Specified Percentages aggregate 100%. In the event that at any
time there shall be more than two Lenders, "Determining Lenders" shall mean, on
any date of determination, any combination of the Lenders having at least
66-2/3% of the aggregate amount of the Advances then outstanding; provided,
however, that if there are no Advances outstanding hereunder, "Determining
Lenders" shall mean any combination of Lenders whose Specified Percentages
aggregate at least 66-2/3%.
-5-
<PAGE>
"Dividend" shall mean, as to any Person, (a) any payment of any dividend
(other than a stock dividend) on, or the making of any distribution, loan,
advance or investment to or in any holder of, any shares of capital stock of
such Person and with respect to such shares, or (b) any purchase, redemption, or
other acquisition or retirement for value of any shares of capital stock of such
Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation promulgated thereunder.
"ERISA Event" shall mean, with respect to any Borrower and its
Subsidiaries, (a) a Reportable Event (other than a Reportable Event not subject
to the provision for 30-day notice to the PBGC under regulations issued under
Section 4043 of ERISA), (b) the withdrawal of any such Person or any member of
its Controlled Group from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the
(filing of a notice of intent to terminate under Section 4041 of ERISA, (d) the
institution of proceedings to terminate a Plan by the PBGC, (e) the failure to
make required contributions which could result in the imposition of a lien under
Section 412 of the Code or Section 302 of ERISA, or (f) any other event or
condition which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or the imposition of any liability under Title IV of ERISA
other than PBGC premiums due but not delinquent under Section 4007 of ERISA.
"Event of Default" shall mean any of the events specified in Section 8.1,
provided that any requirement for notice or lapse of time has been satisfied.
"Excess Cash Flow" shall mean, for any year, calculated for the Borrowers
and the Subsidiaries on a combined basis, an amount equal to the remainder of
(a) Operating Cash Flow for said year, minus (b) the sum of (i) Capital
Expenditures for said year, plus (ii) Dividends paid during said year, plus
(iii) cash expenditures (other than Cash Tax Dividends) for the payment of taxes
during said year, if applicable, plus (iv) principal, interest, fees, and other
amounts scheduled to be paid for said year with respect to Indebtedness.
"Existing Loan Agreement" shall mean that certain Amended and Restated Loan
Agreement dated as of March 15, 1993, by and between Metro and Southwest Bank of
Texas, N.A., as the same may have been amended, modified, renewed or extended
from time to time.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall
-6-
<PAGE>
be the average rate quoted to the Administrative Lender on such day on such
transactions as determined by Administrative Lender.
"Fixed Charges" shall mean, for the Borrowers and the Subsidiaries on a
combined basis determined in accordance with GAAP, for the four most recently
ended fiscal quarters preceding any date of determination, an amount equal to
the sum of (a) all payments of principal, interest, fees and other amounts paid
on Total Debt, plus (b) all payments under Capitalized Leases, plus (c) all
Capital Expenditures, plus (d) cash expenditures (including Cash Tax Dividends)
for the payment of taxes.
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis, set forth in the Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants, or the successors
which are applicable in the circumstances as of the date in question. The
requisite that such principles be applied on a consistent basis shall mean that
the accounting principles observed in a current period are comparable in all
material respects to those applied in a preceding period.
"Governmental Authority" shall mean (a) the government of (i) the United
States of America and any State or other political subdivision thereof or (ii)
any jurisdiction in which any Borrower or any Subsidiary conducts all or any
part of its business or owns any property or (b) any entity exercising
executive, legislative, judicial, regulatory or administrative functions of, or
pertaining to, any such government.
"Guaranty" or "Guaranteed", as applied to an obligation, shall mean and
include (a) a guaranty, direct or indirect, in any manner, of any part or all of
such obligation, and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of any part
or all of such obligation.
"Highest Lawful Rate" shall mean at the particular time in question the
maximum rate of interest which, under Applicable Law, the Lenders are then
permitted to charge on the Obligations. If the maximum rate of interest which,
under Applicable Law, the Lenders are permitted to charge on the Obligations
shall change after the date hereof, the Highest Lawful Rate shall be
automatically increased or decreased, as the case may be, from time to time as
of the effective time of each change in the Highest Lawful Rate without notice
to the Borrowers or the Notification Agent. For purposes of determining the
Highest Lawful Rate under the Applicable Law of the State of Texas, the
applicable rate ceiling shall be (a) the indicated rate ceiling described in and
computed in accordance with the provisions of Section (a)(1) of Art. 1.04, or
(b) if the parties subsequently contract as allowed by Applicable Law, the
quarterly ceiling or the annualized ceiling computed pursuant to Section (d) of
Art. 1.04; provided, however, that at any time the indicated rate ceiling, the
quarterly ceiling or the annualized ceiling shall be less than 18% per annum or
more than 24% per annum, the provisions of Sections (b)(1) and (2) of said Art.
1.04 shall control for purposes of such determination, as applicable.
-7-
<PAGE>
"Indebtedness" shall mean, with respect to any Person, (a) all items,
except items of partners' equity or of capital stock or of surplus or of general
contingency or deferred tax reserves, which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person, (b) the market value of any property or asset
owned by such Person on which a Lien has been granted to secure any obligation,
whether or not the obligation secured thereby shall have been assumed, (c) to
the extent not otherwise included, all Capitalized Lease Obligations of such
Person, all obligations of such Person with respect to leases constituting part
of a sale and leaseback arrangement, all Guaranties, all obligations under
Interest Hedge Agreements or similar hedge agreements, all indebtedness for
borrowed money (excluding, for purposes of calculation of financial covenants
only, indebtedness evidenced by Intercompany Notes), and all reimbursement
obligations with respect to outstanding letters of credit, (d) any "withdrawal
liability" of any Borrower or Subsidiary, as such term is defined under Part I
of Subtitle E of Title IV of ERISA, and (e) all Seller Obligations of any
Borrower or Subsidiary.
"Indemnified Matters" shall have the meaning ascribed to it in Section
5.10(a) hereof.
"Indemnitees" shall have the meaning ascribed to it in Section 5.10(a)
hereof.
"Intercompany Notes" shall mean any promissory note executed by any
Subsidiary made payable to the order of any Borrower in the original principal
amount not to exceed $15,000,000 evidencing loans and advances made or to be
made by such Borrower to such Subsidiary, together with any extension, renewal,
increase or amendment thereof, or substitution therefor.
"Interest Hedge Agreements" shall mean any and all agreements, devices or
arrangements designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange transactions, including, but not
limited to, dollar-denominated or cross-currency interest rate exchange
agreements, forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate options, puts and
warrants, as the same may be amended or modified and in effect from time to
time, and any and all cancellations, buy backs, reversals, terminations or
assignments of any of the foregoing.
"Interest Period" shall mean (a) for any Prime Rate Advance, the period
beginning on the day the Advance was made and ending on the first Quarterly Date
thereafter, and (b) for any LIBOR Advance, the period beginning on the day the
Advance is made and ending one, two, three or six months thereafter (as the
Borrowers shall select).
"Investment" shall mean any acquisition of all or substantially all assets
of any Person, or any direct or indirect purchase or other acquisition of, or
beneficial interest in, capital stock or other securities of any other Person,
or any direct or indirect loan, advance (other than advances to employees for
moving and travel expenses, drawing accounts and similar expenditures in the
ordinary course of business) or capital contribution to, or investment in any
other Person, including without limitation the incurrence or sufferance of
Indebtedness or the
-8-
<PAGE>
purchase (other than purchases in connection with an Acquisition) of accounts
receivable of any other Person that are not current assets or do not arise in
the ordinary course of business, which is not an Acquisition.
"Issuing Bank" shall mean NationsBank of Texas, N.A., in its capacity as
issuer of the Letters of Credit.
"Lender" shall mean each financial institution shown on the signature pages
hereof so long as such financial institution maintains a Commitment or is owed
any part of the Obligations (including the Administrative Lender in its
individual capacity), and each Assignee that hereafter becomes party hereto
pursuant to Section 11.6 hereof.
"L/C Cash Collateral Account" shall have the meaning specified in Section
2.16(g) hereof.
"L/C Related Documents" shall have the meaning specified in Section 2.16(d)
hereof.
"Letter of Credit" shall have the meaning specified in Section 2.16(a)
hereof.
"Letter of Credit Agreement" shall have the meaning specified in Section
2.16(b) hereof.
"Letter of Credit Facility" shall mean the amount of the Letters of Credit
the Issuing Bank may issue pursuant to Section 2.16(a) hereof.
"Leverage Ratio" shall mean, for any date of determination, the ratio of
Total Debt as of the date of determination to Operating Cash Flow for the four
most recently ended fiscal quarters preceding such date of determination.
"LIBOR Advance" shall mean an Advance which the Borrowers request to be
made as a LIBOR Advance or which is reborrowed as a LIBOR Advance, in accordance
with the provisions of Section 2.2 hereof.
"LIBOR Basis" shall mean a simple per annum interest rate equal to the
lesser of (a) the Highest Lawful Rate, or (b) the sum of the LIBOR Rate plus the
Applicable Margin. The LIBOR Basis shall, with respect to LIBOR Advances with
Interest Periods in excess of six months, be subject to premiums assessed by
each Lender, which are payable directly to each Lender. Once determined, the
LIBOR Basis shall remain unchanged during the applicable Interest Period.
"LIBOR Lending Office" shall mean, with respect to a Lender, the office
designated as its LIBOR Lending Office on Schedule 1 attached hereto, and such
other office of the Lender or any of its affiliates hereafter designated by
notice to the Notification Agent and the Administrative Lender.
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"LIBOR Rate" shall mean, for any Interest Period, the interest rate per
annum rounded upward to the nearest one-sixteenth (1/16th) of one percent) at
which deposits in United States Dollars are offered to the Administrative Lender
by leading banks reasonably selected by the Administrative Lender in the London
interbank market at approximately 11:00 a.m. (London time), two Business Days
before the first day of such Interest Period, in an amount approximately equal
to the principal amount of, and for a length of time approximately equal to the
Interest Period for, the LIBOR Advance sought by the Borrowers.
"Lien" shall mean, with respect to any property, any mortgage, lien,
pledge, collateral assignment, hypothecation, charge, security interest, title
retention agreement, levy, execution, seizure, attachment, garnishment or other
encumbrance of any kind in respect of such property, whether or not choate,
vested or perfected.
"Loan Documents" shall mean this Agreement, the Notes, the Pledge
Agreements, the Subsidiary Guaranty, the Security Agreements, any Interest Hedge
Agreement, with any of the Lenders, fee letters, and any other document,
agreement or instrument executed or delivered from time to time by any Borrower,
any Subsidiary or any other Person in connection herewith or as security for the
Obligations.
"Material Adverse Effect" shall mean any act or circumstance or event which
(a) causes a Default, (b) otherwise could be material and adverse to the
business, consolidated assets, liabilities, financial condition, results of
operations or prospects of the Borrowers and the Subsidiaries, together taken as
a whole, (c) in any material manner could adversely affect the validity or
enforceability of any of the Loan Documents, or (d) in any manner could impair
the value of any Collateral.
"Maturity Date" shall mean the last Business Day of September 30, 1999.
"Maximum Amount" shall mean the maximum amount of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations.
"Metro" shall mean Metro Traffic Control, Inc., a Maryland corporation.
"MNLP" shall mean Metro Networks, Ltd., a Texas limited partnership.
"Multiemployer Plan" shall mean, as to any Person, at any time, a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which such Person or any member of its Controlled Group is making, or is
obligated to make contributions or has made, or been obligated to make,
contributions.
"Necessary Authorization" shall mean any license, permit, consent, approval
or authorization from, or any filing or registration with, any governmental or
other regulatory authority necessary or appropriate to enable any Borrower or
Subsidiary to maintain and operate its business and properties.
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"Note" shall mean each promissory note of the Borrowers evidencing Advances
hereunder, substantially in the form of Exhibit A hereto, together with any
extension, renewal or amendment thereof, or substitution therefor.
"Notification Agent" shall mean Metro, or such other Borrower designated by
Metro and agreed to in writing by the Administrative Lender.
"Obligations" shall mean (a) all obligations of any nature (whether matured
or unmatured fixed or contingent, including the Reimbursement Obligations) of
the Borrowers and the Subsidiaries to the Lenders under the Loan Documents
(including obligations under any Interest Hedge Agreement to any Lender), as
they may be amended from time to time, and (b) all obligations of the Borrowers
and the Subsidiaries for losses, damages, expenses or any other liabilities of
any kind that any Lender may suffer by reason of a breach by any Borrower or any
Subsidiary of any obligation, covenant or undertaking with respect to any Loan
Document.
"Operating Cash Flow" shall mean, for any period, determined in accordance
with GAAP on a combined basis for the Borrowers and the Subsidiaries, the sum of
(a) pre-tax net income (pre-tax net income shall exclude (i) any items of
extraordinary gain, including net gains on the sale of assets other than asset
sales in the ordinary course of business, (ii) any items of extraordinary loss,
including net losses on the sale of assets other than asset sales in the
ordinary course of business, (iii) non-cash credits to the extent included in
net income, and (iv) any Seller Obligations to the extent such Seller
Obligations are treated as an expense and not a liability according to GAAP),
plus (b) interest expense, depreciation and amortization, and other non-cash
expenses. For purpose of calculation of Operating Cash Flow with respect to
assets not owned at all times during the four fiscal quarters preceding the date
of determination of Operating Cash Flow there shall be (i) included in Operating
Cash Flow the Operating Cash Flow of any assets acquired during any of such four
fiscal quarters for the twelve month period preceding the date of determination
and (ii) excluded from Operating Cash Flow the Operating Cash Flow of any assets
disposed of during any of such four fiscal quarters for the twelve month period
preceding the date of determination.
"Owner Pledge Agreement" shall mean one or more Pledge Agreements executed
by any Person owning or otherwise holding an equity interest in any Borrower,
granting a first priority Lien on the Pledged Stock owned by such Person,
substantially in the form of Exhibit I hereto, as such agreement may be amended,
modified, renewed or extended from time to time.
"Participant" shall have the meaning ascribed to it in Section 11.6(c)
hereof.
"Participation" shall have the meaning ascribed to it in Section 11.6(c)
hereof.
"Payment Date" shall mean the last day of the Interest Period for any
Advance.
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"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall mean, as applied to any Person:
(a) any Lien in favor of the Lenders to secure the Obligations hereunder;
(b) (i) Liens on real estate for real estate taxes not yet delinquent, (ii)
Liens created by lease agreements to secure the payments of rental amounts and
other sums not yet due thereunder, (iii) Liens on leasehold interests created by
the lessor in favor of any mortgagee of the leased premises, and (iv) Liens for
taxes, assessments, governmental charges, levies or claims that are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on such Person's books, but only so
long as no foreclosure, restraint, sale or similar proceedings have been
commenced with respect thereto;
(c) Liens of carriers, warehousemen, mechanics, laborers and materialmen
and other similar Liens incurred in the ordinary course of business for sums not
yet due or being contested in good faith, if such reserve or appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(d) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or similar legislation;
(e) Easements, right-of-way, restrictions and other similar encumbrances on
the use of real property which do not interfere with the ordinary conduct of the
business of such Person;
(f) Liens created to secure Indebtedness permitted by Section 7.l(f)
hereof which is incurred solely for the purpose of financing the acquisition of
such assets and incurred at the time of acquisition, so long as (i) each such
Lien shall at all times be confined solely to the asset or assets so acquired
(and proceeds thereof), and refinancings thereof and (ii) the amount of
Indebtedness related thereto does not result in a violation of Section 7.1(f)
hereof;
(g) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (i) such Person shall have established adequate reserves for such
judgments or awards, (ii) such judgments or awards shall be fully insured and
the insurer shall not have denied coverage, or (iii) such judgments or awards
shall have been bonded to the satisfaction of the Determining Lenders; and
(h) Any Liens existing on the Agreement Date which are described on
Schedule 2 hereto, and Liens resulting from the refinancing of the related
Indebtedness, provided that the Indebtedness secured thereby shall not be
increased and the Liens shall not cover additional assets of the Borrowers or
the Subsidiaries.
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"Person" shall mean an individual, corporation, partnership, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
"Plan" shall mean an employee pension benefit plan as defined in Section
3(2) of ERISA (including a Multiemployer Plan) that is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
and is maintained for the employees of any Borrower, its Subsidiaries or any
member of their Controlled Group.
"Pledge Agreements" shall mean the Borrower Pledge Agreements, the
Subsidiary Pledge Agreements and the Owner Pledge Agreements.
"Pledged Stock" shall mean, (a) as to any Borrower, the equity interests in
such Borrower, including, without limitation, the shares of each class of
capital stock of any Borrower that is a corporation and partnership interests
(general and limited) in any Borrower that is a partnership and (b) as to any
Subsidiary, the equity interests in such Subsidiary, including, without
limitation, the shares of each class of capital stock of any Subsidiary that is
a corporation and partnership interests (general and limited) in any Subsidiary
that is a partnership.
"Prime Rate" shall mean, at any time, the prime interest rate announced or
published by the Administrative Lender from time to time as its reference rate
for the determination of interest rates for loans of varying maturities in
United States dollars to United States residents of varying degrees of
creditworthiness and being quoted at such time by the Administrative Lender as
its "prime rate;" it being understood that such rate may not be the lowest rate
of interest charged by the Administrative Lender.
"Prime Rate Advance" shall mean any Advance bearing interest at the Prime
Rate Basis.
"Prime Rate Basis" shall mean, for any day, a per annum interest rate equal
to the lesser of (a) the Highest Lawful Rate on such day, or (b) the higher of
(i) the sum of (A) 0.50% plus (B) the Federal Funds Rate plus (C) the Applicable
Margin, or (ii) the sum of (A) the Prime Rate on such day plus (B) the
Applicable Margin. The Prime Rate Basis shall be adjusted automatically as of
the opening of business on the effective date of each change in the Prime Rate
or Federal Funds Rate, as the case may be, to account for such change.
"Pro-Forma Debt Service" shall mean, as of any date of determination,
determined in accordance with GAAP for the Borrowers and the Subsidiaries on a
combined basis, the sum (without duplication) of all payments of principal,
interest, fees and other amounts scheduled to be paid on all Indebtedness during
the succeeding four fiscal quarters (assuming for any Indebtedness subject to a
floating interest rate, an interest rate equal to the applicable rate in effect
on the date of determination).
"Quarterly Date" shall mean the last Business Day of each September,
December, March and June, beginning December, 1994.
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"Radio Affiliate Contracts" shall mean any agreements between any Borrower
or Subsidiary and any radio station pursuant to which such radio station agrees
to broadcast such Borrower's or such Subsidiary's traffic reports.
"Refinancing Advance" shall mean any Advance which is used to pay the
principal amount (or any portion thereof) of an Advance at the end of its
Interest Period and which, after giving effect to such application, does not
result in an increase in the aggregate amount of outstanding Advances.
"Reimbursement Obligation" shall mean, in respect of any Letter of Credit
as at any date of determination, the maximum aggregate amount which is then
available to be drawn under such Letter of Credit.
"Release Date" shall mean the date on which the Notes have been paid, all
other Obligations due and owing have been paid and performed in full, and the
Commitment has been terminated.
"Reportable Event" shall have the meaning set forth in Title IV of ERISA.
"Security Agreements" shall mean the Borrower Security Agreements and the
Subsidiary Security Agreements.
"Seller Obligations" shall mean all unconditional obligations to pay a sum
certain, of any Borrower or Subsidiary in respect of an Acquisition, whether or
not such obligations arise under a non-competition agreement, management
agreement, employment contract, earn-out or under any other agreement.
"Solvent" shall mean, with respect to any Person, that the fair value of
the assets of such Person (both at fair valuation and at present fair saleable
value) is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and such Person does not
have unreasonably small capital with which to carry on its business. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability discounted to present value
at rates believed to be reasonable by such Person.
"Special Counsel" shall mean the law firm of Donohoe, Jameson & Carroll,
P.C., or such other legal counsel as the Administrative Lender may select.
"Specified Percentage" shall mean, as to any Lender, the percentage
indicated beside its name on the signature pages hereof, or if applicable,
specified in its most recent Assignment Agreement.
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"Subordinated Debt" shall mean any Indebtedness of any Borrower or
Subsidiaries which shall have been and continues to be, validly and effectively
subordinated to the prior payment of the Obligations on terms and documentation
approved in writing by the Determining Lenders.
"Subsidiary" shall mean (a) any corporation of which 50% or more of the
outstanding stock (other than directors' qualifying shares) having ordinary
voting power to elect a majority of its board of directors, regardless of the
existence at the time of a right of the holders of any class of securities of
such corporation to exercise such voting power by reason of the happening of any
contingency, is at the time owned by any Borrower, directly or through one or
more intermediaries, (b) any other entity which is Controlled or then capable of
being Controlled by any Borrower, directly or through one or more
intermediaries, and (c) Metro Reciprocal, Inc., a Texas corporation, and Metro
Video News, Inc., a Texas corporation.
"Subsidiary Guaranty" shall mean any Guaranty executed by one or more
Subsidiaries, guarantying payment and performance of the Obligations,
substantially in the form of Exhibit D hereto, as such agreement may be amended,
modified, renewed or extended from time to time.
"Subsidiary Pledge Agreement" shall mean one or more Pledge Agreements
executed by a Subsidiary, granting a first priority Lien on (i) the Pledged
Stock owned by such Subsidiary and (ii) each Intercompany Note evidencing
intercompany advances made by such Subsidiary, as security for the Obligations,
substantially in the form of Exhibit C hereto, as such agreement may be amended,
modified, renewed or extended from time to time.
"Subsidiary Security Agreement" shall mean one or more security
agreements, executed by a Subsidiary, granting a first priority Lien on (i) the
Accounts and related items of such Subsidiary and (ii) the tangible personal
property of such Subsidiary, as security for the Obligations, substantially in
the form of Exhibit F hereto, as such agreement may be amended, modified,
renewed or extended from time to time.
"Tax" shall mean all taxes, assessments, imposts, fees, or other charges at
any time imposed by any laws or any state, commonwealth, federal, foreign,
international or other court or government body, subdivision, agency,
department, commission, board, bureau, or instrumentality of a governmental
body.
"Tax Benefits" shall mean, with respect to (a) each shareholder of any
Borrower which is a corporation, net operating losses and other Tax benefits
available to such shareholder solely as a result of such shareholder's ownership
interest in such Borrower, excluding and without giving effect to any Tax
benefits otherwise available to such shareholder and (b) each partner of any
Borrower which is a partnership, net operating losses and other Tax benefits
available to such partner solely as a result of such partner's ownership
interest in such Borrower, excluding and without giving effect to any Tax
benefits otherwise available to such partner..
"Termination Event" shall mean, with respect to any Borrower, any
Subsidiary, or any Plan, (a) a Reportable Event, (b) the withdrawal from a Plan
during a Plan year in which it was
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a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under Section 4041 of ERISA, (d) the institution of
proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan or
appoint a trustee to administer a Plan, (e) the failure to comply with the
minimum funding requirements of ERISA with respect to any Plan, or (f) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.
"Total Debt" shall mean, as of any date of determination, determined for
the Borrowers and the Subsidiaries on a combined basis, the sum (without
duplication and excluding debt evidenced by Intercompany Notes) of (a) all
principal and interest owing under the Loan Documents, (b) all debt evidenced by
a promissory note or otherwise representing borrowed money, (c) all Capitalized
Lease Obligations, (d) all Guaranties, (e) all reimbursement obligations for
letters of credit, and (f) all Seller Obligations.
"Trusts" shall mean, collectively, Michelle Joy Coppola 1994 Trust,
Jennifer Beth Saperstein 1994 Trust, Jonathan Alexander Saperstein 1994 Trust,
Alexis Daniella Saperstein 1994 Trust and Stephanie Nicole Saperstein 1994
Trust, all trusts organized under the laws of the State of Texas.
Section 1.2 Amendments and Renewals. Each definition of an agreement in
this Article 1 shall include such agreement as amended to date, and as amended
or renewed from time to time in accordance with its terms, but only with the
prior written consent of the Determining Lenders.
Section 1.3 Construction. The terms defined in this Article 1 (except as
otherwise expressly provided in this Agreement) for all purposes shall have the
meanings set forth in Section 1.1 hereof, and the singular shall include the
plural, and vice versa, unless otherwise specifically required by the context.
All accounting terms used in this Agreement which are not otherwise defined
herein shall be construed in accordance with GAAP on a combined basis for the
Borrowers and the Subsidiaries, unless otherwise expressly stated herein. For
the purpose of calculating the financial ratios set forth in Sections 7.10, 7.11
and 7.12 hereof and the maximum compensation of David Saperstein pursuant to
Section 7.18 hereof, such calculations shall be based solely on cash financial
statements without inclusion of any barter transactions.
ARTICLE 2
Advances
Section 2.1 The Advances. Each Lender severally agrees, upon the terms and
subject to the conditions of this Agreement, to make Advances to the Borrowers
from time to time in an aggregate amount not to exceed its Specified Percentage
of the Commitment less its Specified Percentage of the Reimbursement Obligations
then outstanding (assuming compliance with all
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conditions to drawing) for the purposes set forth in Section 5.9 hereof. Subject
to Section 2.9 hereof, Advances may be repaid and then reborrowed. Any Advance
shall, at the option of the Borrowers as provided in Section 2.2 hereof (and, in
the case of LIBOR Advances, subject to availability and to the provisions of
Article 9 hereof), be made as a Prime Rate Advance or a LIBOR Advance; provided
that there shall not be outstanding to any Lender, at any one time, more than
six LIBOR Advances. Notwithstanding any provision in any Loan Document to the
contrary, in no event shall the principal amount of all outstanding Advances and
Reimbursement Obligations exceed the Commitment. On the Maturity Date unless
sooner paid as provided herein, the Obligations shall be repaid in full.
Section 2.2 Manner of Borrowing and Disbursement.
(a) In the case of Prime Rate Advances, the Notification Agent, through an
Authorized Signatory, shall give the Administrative Lender at least one Business
Days' irrevocable written notice, or irrevocable telephonic notice followed
immediately by written notice (provided, however, that the Notification Agent's
failure to confirm any telephonic notice in writing shall not invalidate any
notice so given), of the Borrowers' intention to borrow or reborrow a Prime Rate
Advance hereunder. Notice shall be given to the Administrative Lender prior to
11:00 a.m., Dallas, Texas time, in order for such Business Day to count toward
the minimum number of Business Days required. Such notice of borrowing shall
specify the requested funding date, which shall be a Business Day, and the
amount of the proposed aggregate Prime Rate Advances to be made by Lenders. Each
Prime Rate Advance shall have an Interest Period beginning on the date such
Advance is made and ending on the Quarterly Date next following the date the
Advance is made; provided that no such Interest Period shall extend past the
Maturity Date.
(b) In the case of (i) LIBOR Advances other than the initial LIBOR Advance,
the Notification Agent, through an Authorized Signatory, shall give the
Administrative Lender at least three Business Days irrevocable written notice,
or irrevocable telephonic notice followed immediately by written notice
(provided, however, that the Notification Agent's failure to confirm any
telephonic notice in writing shall not invalidate any notice so given), of the
Borrowers' intention to borrow or reborrow a LIBOR Advance hereunder and (ii)
the initial LIBOR Advance, the Notification Agent, through an Authorized
Signatory, shall give the Administrative Lender at least two Business Days'
irrevocable written notice, or irrevocable telephonic notice followed
immediately by written notice (provided, however, that the Notification Agent's
failure to confirm any telephonic notice in writing shall not invalidate any
notice so given), of the Borrowers' intention to borrow or reborrow a LIBOR
Advance hereunder. Notice shall be given to the Administrative Lender prior to
11:00 a.m., Dallas, Texas time, in order for such Business Day to count toward
the minimum number of Business Days required. LIBOR Advances shall in all cases
be subject to availability and to Article 9 hereof. For LIBOR Advances, the
notice of borrowing shall specify the requested funding date, which shall be a
Business Day, the amount of the proposed aggregate LIBOR Advances to be made by
Lenders and the Interest Period of the proposed aggregate LIBOR Advances,
provided
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that no such Interest Period shall extend past the Maturity Date or prohibit or
impair any Borrower's ability to comply with Section 2.8 hereof.
(c) Subject to Sections 2.1 and 2.9 hereof, at least three Business Days
prior to each Payment Date for a LIBOR Advance, the Notification Agent, through
an Authorized Signatory, shall give the Administrative Lender irrevocable
written notice, or irrevocable telephonic notice followed immediately by written
notice (provided, however, that the Notification Agent's failure to confirm any
telephonic notice in writing shall not invalidate any notice so given),
specifying whether all or a portion of such LIBOR Advance outstanding on the
Payment Date (i) is to be repaid and then reborrowed in whole or in part as a
LIBOR Advance, (ii) is to be repaid and then reborrowed in whole or in part as a
Prime Rate Advance, or (iii) is to be repaid and not reborrowed; provided,
however, notwithstanding anything in this Agreement to the contrary, if on any
Payment Date a Default shall exist, such LIBOR Advance may only be reborrowed as
a Prime Rate Advance. Upon such Payment Date, such LIBOR Advance shall, subject
to the provisions hereof, be so repaid and, as applicable, reborrowed.
(d) Subject to Sections 2.1 and 2.9 hereof, upon at least one Business
Day's irrevocable prior written notice (or three Business Days if the Borrowers
wish to reborrow a LIBOR Advance); the Notification Agent, through an Authorized
Signatory, or irrevocable telephonic notice followed immediately by written
notice (provided, however, that the Notification Agent's failure to confirm any
telephonic notice in writing shall not invalidate any notice so given), the
Borrowers may repay a Prime Rate Advance on its Payment Date, or prepay a Prime
Rate Advance without regard to its Payment Date, and (i) reborrow all or a
portion of the principal amount thereof as a Prime Rate Advance, (ii) reborrow
all or a portion of the principal amount thereof as one or more LIBOR Advances,
or (iii) not reborrow all or any portion of such Prime Rate Advance. Upon such
Payment Date or date of repayment, such Prime Rate Advance shall, subject to the
provisions hereof, be so repaid and, as applicable, reborrowed.
(e) The aggregate amount of Prime Rate Advances to be made by the Lenders
on any day shall be in a principal amount which is at least $50,000 and which is
an integral multiple of $10,000; provided, however, that such amount may equal
the unused amount of the Commitment. The aggregate amount of LIBOR Advances
having the same Interest Period and to be made by the Lenders on any day shall
be in a principal amount which is at least $250,000 and which is an integral
multiple of $50,000.
(f) The Administrative Lender shall promptly notify the Lenders of each
notice received from the Notification Agent pursuant to this Section. Failure of
the Notification Agent to give any notice in accordance with Sections 2.2(c) and
(d) hereof shall result in a repayment of any such existing Advance on the
applicable Payment Date by a Refinancing Advance which is a Prime Rate Advance.
Each Lender shall, not later than noon, Dallas, Texas time, on the date of any
Advance that is not a Refinancing Advance, deliver to the Administrative Lender,
at its address set forth herein, such Lender's Specified Percentage of such
Advance in immediately available funds in accordance with the Administrative
Lender's instructions. Prior
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to 2:00 p.m., Dallas, Texas time, on the date of any Advance hereunder, the
Administrative Lender shall, subject to satisfaction of the conditions set forth
in Article 3, disburse the amounts made available to the Administrative Lender
by the Lenders by (i) transferring such amounts by wire transfer pursuant to the
Notification Agent's instructions, or (ii) in the absence of such instructions,
crediting such amounts to the joint account of the Borrowers maintained with the
Administrative Lender. All Advances shall be made by each Lender according to
its Specified Percentage.
Section 2.3 Interest.
(a) On Prime Rate Advances.
(i) The Borrowers jointly and severally shall pay interest on the
outstanding unpaid principal amount of each Prime Rate Advance, from the
date such Advance is made until it is due (whether at maturity, by reason
of acceleration, by scheduled reduction, or otherwise) or repaid, at a
simple interest rate per annum equal to the Prime Rate Basis as in effect
from time to time, provided that interest on Prime Rate Advances shall not
exceed the Maximum Amount. If at any time the Prime Rate Basis would exceed
the Highest Lawful Rate, interest payable on Prime Rate Advances shall be
limited to the Highest Lawful Rate, but the Prime Rate Basis shall not
thereafter be reduced below the Highest Lawful Rate until the total amount
of interest accrued on such Advances equals the amount of interest that
would have accrued if the Prime Rate Basis had been in effect at all times.
(ii) Interest on each Prime Rate Advance shall be computed on the
basis of a year of 365 or 366 days, as applicable, for the number of days
actually elapsed, and shall be payable in arrears on each Quarterly Date
and on the Maturity Date.
(b) On LIBOR Advances.
(i) The Borrowers jointly and severally shall pay interest on the
unpaid principal amount of each LIBOR Advance, from the date such Advance
is made until it is due (whether at maturity, by reason of acceleration, by
scheduled reduction, or otherwise) or repaid, at a rate per annum equal to
the LIBOR Basis for such Advance. The Administrative Lender, whose
determination shall be conclusive, shall determine the LIBOR Basis on the
second Business Day prior to the applicable funding date and shall notify
the Notification Agent and the Lenders of such LIBOR Basis.
(ii) Subject to Section 11.9 hereof, interest on each LIBOR Advance
shall be computed on the basis of a 360-day year for the actual number of
days elapsed, and shall be payable in arrears on the applicable Payment
Date and on the Maturity Date; provided, however, that if the Interest
Period for such Advance exceeds three months, interest shall also be due
and payable in arrears on each Quarterly Date during such Interest Period.
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(c) Interest if No Notice of Selection of LIBOR Basis or Interest Period.
If the Notification Agent fails to give the Administrative Lender timely notice
of the Borrowers' selection of a LIBOR Basis for a LIBOR Advance, or if for any
reason a determination of a LIBOR Basis for any Advance is not timely concluded
due to the fault of the Borrowers or the Notification Agent, the Prime Rate
Basis shall apply to the applicable Advance. If the Notification Agent fails to
give the Administrative Lender timely notice of the Borrowers' selection of an
Interest Period for a LIBOR Advance, a one-month Interest Period shall apply to
the applicable Advance.
(d) Interest After an Event of Default. (i) After an Event of Default
(other than an Event of Default specified in Section 8.1 (g) or (h) hereof) and
during any continuance thereof, at the option of Determining Lenders, and
(ii) after an Event of Default specified in Section 8.l (g) or (h) hereof and
during any continuance thereof, automatically and without any action by the
Administrative Lender or any Lender, the Obligations shall bear interest at a
rate per annum equal to the Default Rate. Such interest shall be payable on the
earlier of demand or the Maturity Date, and shall accrue until the earlier of
(i) waiver or cure (to the satisfaction of the Determining Lenders) of the
applicable Event of Default, (ii) agreement by the Lenders to rescind the
charging of interest at the Default Rate, or (iii) payment in full of the
Obligations. The Lenders shall not be required to accelerate the maturity of
the Advances, to exercise any other rights or remedies under the Loan Documents,
or to give notice to the Borrowers or the Notification Agent of the decision to
charge interest at the Default Rate. The Lenders will undertake to notify the
Notification Agent, after the effective date, of the decision to charge interest
at the Default Rate.
Section 2.4 Fees.
(a) Commitment Fee. Subject to Section 11.9 hereof, the Borrowers jointly
and severally agree to pay to the Administrative Lender, for the ratable account
of the Lenders, a commitment fee equal to 0.375% per annum of the daily average
unborrowed balance of the Commitment. Such fees shall be (i) payable in arrears
on each Quarterly Date and the Maturity Date, fully earned when due and, subject
to Section 11.9 hereof, nonrefundable when paid and (ii) subject to Section 11.9
hereof, computed on the basis of a year of 360 days for the actual number of
days elapsed. For purposes of calculating the commitment fee, undrawn portions
of Letters of Credit outstanding from time to time will reduce the unused
portion of the Commitment.
(b) Facility Fee. Subject to Section 11.9 hereof, the Borrowers jointly and
severally agree to pay directly to each Lender a facility fee in the amount
provided for in a facility fee letter between the Borrowers and each Lender.
Such fee shall be payable on the Agreement Date, fully earned when due and,
subject to Section 11.9 hereof, nonrefundable when paid.
(c) Administrative Fee. If at any time there shall be more than one Lender
party to this Credit Agreement and subject to Section 11.9 hereof, the Borrowers
jointly and severally shall pay to the Administrative Lender, for its account
and not the account of the Lenders, an
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administrative fee to be agreed upon by the Borrowers and the Administrative
Lender. Such fee shall be payable in arrears on each Quarterly Date and the
Maturity Date, fully earned when due and, subject to Section 11.9 hereof,
nonrefundable when paid.
Section 2.5 Prepayment.
(a) Voluntary Prepayments. The principal amount of any Prime Rate Advance
may be prepaid in full or in part at any time, without penalty and without
regard to the Payment Date for such Advance, upon one Business Day's (or three
Business Days for prepayment of a LIBOR Advance) prior telephonic notice (to be
promptly followed by written notice) by the Notification Agent, through an
Authorized Signatory, to the Administrative Lender. LIBOR Advances may be
voluntarily prepaid only so long as the Borrowers concurrently reimburse the
Lenders in accordance with Section 2.9 hereof. Any notice of prepayment shall be
irrevocable.
(b) Mandatory Prepayment. On or before the date of any reduction of the
Commitment, the Borrowers jointly and severally shall prepay applicable
outstanding Advances in an amount necessary to reduce the sum of outstanding
Advances and Reimbursement Obligations to an amount less than or equal to the
Commitment as so reduced. The Borrowers jointly and severally shall first prepay
all Prime Rate Advances and shall thereafter prepay LIBOR Advances. To the
extent that any prepayment requires that a LIBOR Advance be repaid on a date
other than the last day of its Interest Period, the Borrowers jointly and
severally shall reimburse each Lender in accordance with Section 2.9 hereof.
(c) Prepayments from Excess Cash Flow. Commencing on September 30, 1995 and
on each September 30 thereafter, the Borrowers jointly and severally shall
prepay Advances in an aggregate amount equal to 50% of the Excess Cash Flow, if
any, for the fiscal year ending on each June 30 immediately preceding each such
September 30; provided, however, that no such prepayment shall be required (i)
if the Leverage Ratio as of the June 30th date immediately preceding the
September 30th date such prepayment is to be made is less than or equal to 1.50
to 1 and (ii) in an amount exceeding the product of (Y) .25 times (Z) the
required Commitment reduction pursuant to Section 2.6(c) hereof on the June 30th
date immediately preceding the September 30th date such prepayment is to be
made.
(d) Prepayments, Generally. Any prepayment of an Advance shall be
accompanied by interest accrued on the principal amount being prepaid. Any
voluntary partial prepayment of a Prime Rate Advance shall be in a principal
amount which is at least $50,000 and which is an integral multiple of $10,000.
Any voluntary partial prepayment of a LIBOR Advance shall be in a principal
amount which is at least $100,000 and which is an integral multiple thereof.
Following the Commitment Reduction Date, prepayments shall be applied to the
mandatory reductions of the Commitment pursuant to Section 2.6(c) hereof in
inverse order and such prepayment shall not otherwise reduce the scheduled
Commitment reductions required pursuant to Section 2.6(c) hereof.
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Section 2.6 Reduction of Commitment.
(a) Voluntary Reduction. The Borrowers shall have the right, upon not less
than three Business Days' notice (provided no notice shall be required for a
termination in whole of the Commitment) by the Notification Agent, through an
Authorized Signatory, to the Administrative Lender (if telephonic, to be
confirmed by telex or in writing on or before the date of reduction or
termination), which shall promptly notify the Lenders, to terminate or reduce
the Commitment, in whole or in part. Each partial termination shall be in an
aggregate amount which is at least $100,000 and which is an integral multiple of
$100,000, and no voluntary reduction in the Commitment shall cause any LIBOR
Advance to be repaid prior to the last day of its Interest Period.
Notwithstanding anything herein to the contrary, in no event shall the Borrowers
have the right to reduce the Commitment to an amount less than the aggregate
outstanding Reimbursement Obligations.
(b) Mandatory Reduction. The Commitment shall be automatically reduced (i)
by the amount of any amount prepaid or required to be prepaid pursuant to
Section 2.5(b) or (c) hereof, and (ii) as set forth in Section 2.6(c) hereof.
Notwithstanding anything herein to the contrary, in no event shall the Borrowers
reduce the Commitment to an amount less than the aggregate outstanding
Reimbursement Obligations.
(c) Scheduled Reductions. On each Quarterly Date, commencing on the
Commitment Reduction Date, through the last Business Day of September 1999, the
Commitment outstanding on the Commitment Reduction Date shall automatically
reduce by an amount equal to the percentage reduction that the Commitment is to
reduce on the Quarterly Date pursuant to the table below. Notwithstanding the
foregoing, on the Maturity Date, the Commitment shall automatically reduce to
zero.
Quarterly Date % Reduction
-------------- -----------
March 1995 5.26%
June 1995 5.26%
September 1995 5.26%
December 1995 5.26%
March 1996 5.26%
June 1996 5.26%
September 1996 5.26%
December 1996 5.26%
March 1997 5.26%
June 1997 5.26%
September 1997 5.26%
December 1997 5.26%
March 1998 5.26%
June 1998 5.26%
September 1998 5.26%
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December 1998 5.26%
March 1999 5.26%
June 1999 5.26%
September 1999 5.32% and any remaining
balance such that the
Commitment shall be zero
(d) General Requirements. Upon any reduction of the Commitment pursuant to
Section 2.6(b) or 2.6(c), the Borrowers jointly and severally shall immediately
make a repayment of applicable Advances in accordance with Section 2.5(b)
hereof. The Borrowers jointly and severally shall reimburse each Lender for any
loss or out-of-pocket expense incurred by each Lender in connection with any
such payment, as set forth in Section 2.9 hereof. The Borrowers shall not have
any right to rescind any termination or reduction. Once reduced, the Commitment
may not be increased or reinstated.
Section 2.7 Non-Receipt of Funds by the Administrative Lender. Unless the
Administrative Lender shall have been notified by a Lender prior to the date of
any proposed Advance (which notice shall be effective upon receipt) that such
Lender does not intend to make the proceeds of such Advance available to the
Administrative Lender, the Administrative Lender may assume that such Lender has
made such proceeds available to the Administrative Lender on such date, and the
Administrative Lender may in reliance upon such assumption (but shall not be
required to) make available to the Borrowers a corresponding amount. If such
corresponding amount is not in fact made available to the Administrative Lender
by such Lender, the Administrative Lender shall be entitled to recover such
amount on demand from such Lender (or, if such Lender fails to pay such amount
forthwith upon such demand, from the Borrowers) together with interest thereon
in respect of each day during the period commencing on the date such amount was
available to the Borrowers and ending on (but excluding) the date the
Administrative Lender receives such amount from the Lender, with interest
thereon at a per annum rate equal to the Federal Funds Rate. No Lender shall be
liable for any other Lender's failure to fund an Advance hereunder.
Section 2.8 Payment of Principal of Advances. The Borrowers jointly and
severally agree to pay the principal amount of the Advances to the
Administrative Lender for the account of the Lenders as follows:
(a) End of Interest Period. The principal amount of each Advance hereunder
shall be due and payable on its Payment Date, which principal payment may be
made by means of a Refinancing Advance.
(b) Commitment Reduction. On the date of reduction of the Commitment
pursuant to Section 2.6 hereof, including the Maturity Date, the aggregate
amount of the Advances outstanding on such date of reduction in excess of the
Commitment as reduced minus all outstanding Reimbursement Obligations shall be
due and payable, which principal payment may not be made by means of Refinancing
Advances.
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(c) Maturity Date. The principal amount of the Advances, all accrued
interest and fees thereon, and all other Obligations, shall be due and payable
in full on the Maturity Date.
Section 2.9 Reimbursement. Whenever any Lender shall sustain or incur any
losses or reasonable out-of-pocket expenses in connection with (a) failure by
the Borrowers to borrow any LIBOR Advance after having given notice of their
intention to borrow in accordance with Section 2.2 hereof (whether by reason of
the Borrowers' election not to proceed or the non-fulfillment of any of the
conditions set forth in Article 3 hereof), or (b) any prepayment for any reason
of any LIBOR Advance in whole or in part (including a prepayment pursuant to
Sections 2.5(c) and 9.3(b) hereof), the Borrowers jointly and severally agree to
pay to any such Lender, upon its demand, an amount sufficient to compensate such
Lender for all such losses and out-of-pocket expenses. Such Lender's good faith
determination of the amount of such losses or out-of-pocket expenses, calculated
in its usual fashion, absent manifest error, shall be binding and conclusive.
Such losses shall include, without limiting the generality of the foregoing,
lost profits and reasonable expenses incurred by such Lender in connection with
the re-employment of funds prepaid, repaid, converted or not borrowed, converted
or paid, as the case may be. Upon request of the Notification Agent, such Lender
shall provide a certificate setting forth the amount to be paid to it by the
Borrowers hereunder and calculations therefor.
Section 2.10 Manner of Payment.
(a) Each payment (including prepayments) by the Borrowers of the principal
of or interest on the Advances, fees, and any other amount owed under this
Agreement or any other Loan Document shall be made not later than 1:00 p.m.
(Dallas, Texas time) on the date specified for payment under this Agreement to
the Administrative Lender at the Administrative Lender's office, in lawful money
of the United States of America constituting immediately available funds.
(b) If any payment under this Agreement or any other Loan Document shall be
specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day, unless such Business Day falls
in another calendar month, in which case payment shall be made on the preceding
Business Day. Any extension or reduction of time shall in such case be included
in computing interest and fees, if any, in connection with such payment.
(c) The Borrowers jointly and severally agree to pay principal, interest,
fees and all other amounts due under the Loan Documents without deduction for
set-off or counterclaim or any deduction whatsoever.
(d) If some but less than all amounts due from the Borrowers are received
by the Administrative Lender, the Administrative Lender shall apply such amounts
in the following order of priority: (i) to the payment of the Administrative
Lender's expenses incurred on behalf of the Lenders then due and payable, if
any; (ii) to the payment of all other fees then due and payable; (iii) to the
payment of interest then due and payable on the Advances; (iv) to the
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payment of all other amounts not otherwise referred to in this clause (d) then
due and payable under the Loan Documents; and (v) to the payment of principal
then due and payable on the Advances.
Section 2.11 LIBOR Lending Offices. Each Lender's initial LIBOR Lending
Office is set forth opposite its name in Schedule I attached hereto. Each Lender
shall have the right at any time and from time to time to designate a different
office of itself or of any Affiliate as such Lender's LIBOR Lending Office, and
to transfer any outstanding LIBOR Advance to such LIBOR Lending Office. No such
designation or transfer shall result in any liability on the part of the
Borrowers for increased costs or expenses resulting solely from such designation
or transfer (except any such transfer which is made by a Lender pursuant to
Section 9.2 or 9.3 hereof, or otherwise for the purpose of complying with
Applicable Law). Increased costs for expenses resulting from a change in law
occurring subsequent to any such designation or transfer shall be deemed not to
result solely from such designation or transfer.
Section 2.12 Sharing of Payments. Any Lender obtaining a payment (whether
voluntary or involuntary, due to the exercise of any right of set-off, or
otherwise) on account of its Advances in excess of its Specified Percentage of
all payments made by the Borrowers with respect to Advances shall purchase from
each other Lender such participation in the Advances made by such other Lender
as shall be necessary to cause such purchasing Lender to share the excess
payment pro rata according to Specified Percentages with each other Lender which
is not in default of its obligations hereunder with respect to such Advance;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest. The Borrowers agree that any Lender so purchasing a
participation from another Lender pursuant to this Section, to the fullest
extent permitted by law, may exercise all its rights of payment (including the
fight of set-off with respect to such participation as fully as if such Lender
were the direct creditor of the Borrowers in the amount of such participation.
Section 2.13 Calculation of LIBOR Rate. The provisions of this Agreement
relating to calculation of the LIBOR Rate are included only for the purpose of
determining the rate of interest or other amounts to be paid hereunder that are
based upon such rate, it being understood that each Lender shall be entitled to
fund and maintain its funding of all or any part of a LIBOR Advance as it sees
fit.
Section 2.14 Booking Loans. Any Lender may make, carry or transfer Advances
at, to or for the account of any of its branch offices or the office of any
Affiliate.
Section 2.15 Taxes.
(a) Any and all payments by the Borrowers hereunder shall be made, in
accordance with Section 2.10, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, and withholdings, and all
liabilities in respect of the Obligations, excluding, in the case of each Lender
and the Administrative Lender, taxes imposed on its
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overall net income, and franchise taxes imposed on it (including interest and
penalties imposed thereon), by the jurisdiction under the laws of which such
Lender or the Administrative Lender (as the case may be) is organized or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
withholdings and liabilities being hereinafter referred to as "Taxes"). If the
Borrowers shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder to any Lender or the Administrative Lender, (x) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.15) such Lender or the Administrative Lender (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (y) the Borrowers jointly and severally shall make such
deductions and (z) the Borrowers jointly and severally shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
(b) In addition, the Borrowers jointly and severally agree to pay any and
all stamp and documentary taxes and any and all other excise and property taxes,
charges and similar levies that arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other Taxes").
(c) The Borrowers jointly and severally will indemnify each Lender and the
Administrative Lender for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.15) paid by such Lender or the
Administrative Lender (as the case may be) and all liabilities (including
penalties, additions to tax, interest and reasonable expenses) arising therefrom
or with respect thereto whether or not such Taxes or Other Taxes were correctly
or legally asserted, other than penalties, additions to tax, interest and
expenses arising as a result of gross negligence on the part of such Lender or
the Administrative Lender, provided, however, that the Borrowers shall have no
obligation to indemnify such Lender or the Administrative Lender unless (i) such
Lender or the Administrative Lender, as applicable, has paid such Taxes or Other
Taxes, (ii) notice has been given by such Lender or the Administrative Lender,
as applicable, to the Notification Agent, in a time sufficient to afford the
Borrowers, in good faith and in the names of and on behalf of such Lender or the
Administrative Lender, a reasonable opportunity to contest such payment by such
Lender or the Administrative Lender, provided such opportunity to contest exists
under Applicable Law, and (iii) until such Lender or the Administrative Lender
shall have delivered to the Notification Agent a certificate setting forth in
reasonable detail the basis of the Borrowers' obligation to indemnify such
Lender or the Administrative Lender pursuant to this Section 2.15. This
indemnification shall be made within 45 days from the date such Lender or the
Administrative Lender (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Notification
Agent will furnish to the Administrative Lender the original or a certified copy
of a receipt evidencing payment thereof. If no Taxes are payable in respect of
any payment hereunder, the Notification Agent will furnish to the Administrative
Lender a certificate from each appropriate taxing
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authority, or an opinion of counsel acceptable to the Administrative Lender, in
either case stating that such payment is exempt from or not subject to Taxes,
provided, however, that such certificate or opinion need only be given if: (i)
the Borrowers make any payment from any account located outside the United
States, or (ii) the payment is made by a payor that is not a United States
Person. For purposes of this Section 2.15 the terms "United States" and "United
States Person" shall have the meanings set forth in Section 7701 of the Code.
(e) Each Lender which is not a United States Person hereby agrees that:
(i) it shall, no later than the Agreement Date (or, in the case of a
Lender which becomes a party hereto pursuant to Section 11.16 after the
Agreement Date, the date upon which such Lender becomes a party hereto)
deliver to the Notification Agent through the Administrative Lender, with a
copy to the Administrative Lender:
(A) if any lending office is located in the United States of America,
two (2) accurate and complete signed originals of Internal
Revenue Service Form 4224 or any successor thereto ("Form 4224"),
(B) if any lending office is located outside the United States of
America, two (2) accurate and complete signed originals of
Internal Revenue Service Form 1001 or any successor thereto
("Form 1001 ").
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such lending office or lending offices under this Agreement free
from withholding of United States Federal income tax;
(ii) if at any time such Lender changes its lending office or lending
offices or selects an additional lending office it shall, at the same time
or reasonably promptly thereafter but only to the extent the forms
previously delivered by it hereunder are no longer effective, deliver to
the Notification Agent through the Administrative Lender, with a copy to
the Administrative Lender, in replacement for the forms previously
delivered by it hereunder:
(A) if such changed or additional lending office is located in the
United States of America, two (2) accurate and complete signed
originals of Form 4224; or
(B) otherwise, two (2) accurate and complete signed originals of Form
1001,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such changed or additional lending office under this Agreement
free from withholding of United States Federal income tax;
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(iii) it shall, before or promptly after the occurrence of any event
(including the passing of time but excluding any event mentioned in clause
(ii) above) requiring a change in the most recent Form 4224 or Form 1001
previously delivered by such Lender and if the delivery of the same be
lawful, deliver to the Notification Agent through the Administrative Lender
with a copy to the Administrative Lender, two (2) accurate and complete
original signed copies of Form 4224 or Form 1001 in replacement for the
forms previously delivered by such Lender; and
(iv) it shall, promptly upon the request of the Notification Agent to
that effect, deliver to the Notification Agent such other forms or similar
documentation as may be required from time to time by any applicable law,
treaty, rule or regulation in order to establish such Lender's tax status
for withholding purposes.
(f) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 2.15 shall survive the payment in full of principal and interest
hereunder.
(g) Any Lender claiming any additional amounts payable pursuant to this
Section 2.15 shall use its reasonable best efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
lending office, if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts which may thereafter accrue
and would not, in the sole judgment of such Lender, be otherwise disadvantageous
to such Lender.
(h) Each Lender (and the Administrative Lender with respect to payments to
the Administrative Lender for its own account) agrees that (i) it will take all
reasonable actions by all usual means to maintain all exemptions, if any,
available to it from United States withholding taxes (whether available by
treaty, existing administrative waiver, by virtue of the location of any
Lender's lending office) and (ii) otherwise cooperate with the Borrowers to
minimize amounts payable by the Borrowers under this Section 2.15; provided,
however, the Lenders and the Administrative Lender shall not be obligated by
reason of this Section 2.15(h) to contest the payment of any Taxes or Other
Taxes or to disclose any information regarding its tax affairs or tax
computations or reorder its tax or other affairs or tax or other planning.
Section 2.16 Letters of Credit.
(a) The Letter of Credit Facility. The Borrowers, through an Authorized
Signatory of the Notification Agent, may request the Issuing Bank, on the terms
and conditions hereinafter set forth, to issue, and the Issuing Bank shall, if
so requested, issue, letters of credit (the "Letters of Credit") for the account
of any Borrower from time to time on any Business Day from the date of the
initial Advance until the Maturity Date in an aggregate maximum amount (assuming
compliance with all conditions to drawing) not to exceed at any time outstanding
the lesser of (i)$2,500,000 (the "Letter of Credit Facility"), and (ii) the sum
of (A) the Commitment minus (B) the aggregate principal amount of Advances then
outstanding. No Letter
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of Credit shall have an expiration date (including all rights of renewal) later
than the earlier of (i) the Maturity Date or (ii) one year after the date of
issuance thereof. The Borrowers shall be jointly and severally liable for all
obligations in respect of Letters of Credit. Immediately upon the issuance of
each Letter of Credit, the Issuing Bank shall be deemed to have sold and
transferred to each Lender, and each Lender shall be deemed to have purchased
and received from the Issuing Bank, in each case irrevocably and without any
further action by any party, an undivided interest and participation in such
Letter of Credit, each drawing thereunder and the obligations of the Borrowers
under this Agreement in respect thereof in an amount equal to the product of (i)
such Lender's Specified Percentage of the Commitment times (ii) the maximum
amount available to be drawn under such Letter of Credit (assuming compliance
with all conditions to drawing). Within the limits of the Letter of Credit
Facility, and subject to the limits referred to above, the Borrowers, through an
Authorized Signatory of the Notification Agent, may request the issuance of
Letters of Credit under this Section 2.16(a), repay any Advances resulting from
drawings thereunder pursuant to Section 2.16(c) and request the issuance of
additional Letters of Credit under this Section 2.16(a). During the term of this
Agreement, provided that no Default or Event of Default then exists and subject
to the appropriate conditions for the issuance of a Letter of Credit set forth
in Article 3 hereof, the Issuing Bank shall automatically renew any expiring
Letters of Credit for a period of time not to exceed the earlier of (x) the
Maturity Date or (y) one year after the date of issuance thereof.
(b) Request for Issuance. Each Letter of Credit shall be issued upon
notice, given not later than 11:00 a.m. (Dallas time) on the third Business Day
prior to the date of the proposed issuance of such Letter of Credit, by the
Notification Agent, through an Authorized Signatory, to the Issuing Bank, which
shall give to the Administrative Lender and each Lender prompt notice thereof by
telex, telecopier or cable. Each Letter of Credit shall be issued upon notice
given in accordance with the terms of any separate agreement between the
Borrowers and the Issuing Bank in form and substance reasonably satisfactory to
the Borrowers and the Issuing Bank providing for the issuance of Letters of
Credit pursuant to this Agreement and containing terms and conditions not
inconsistent with this Agreement (a "Letter of Credit Agreement"), provided that
if any such terms and conditions are inconsistent with this Agreement, this
Agreement shall control. Each such notice of issuance of a Letter of Credit (a
"Notice of Issuance") shall be by telex, telecopier or cable, specifying
therein, in the case of a Letter of Credit, the requested (A) date of such
issuance (which shall be a Business Day), (B) maximum amount of such Letter of
Credit, (C) expiration date of such Letter of Credit, (D) name and address of
the beneficiary of such Letter of Credit, (E) form of such Letter of Credit and
(F) such other information as shall be required pursuant to the relevant Letter
of Credit Agreement. If the requested terms of such Letter of Credit are
acceptable to the Issuing Bank in its reasonable discretion, the Issuing Bank
will, upon fulfillment of the applicable conditions set forth in Article 3
hereof, make such Letter of Credit available to the Notification Agent at its
office referred to in Section 11.1 or as otherwise agreed with the Borrowers in
connection with such issuance.
(c) Drawing and Reimbursement. The payment by the Issuing Bank of a draft
drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the
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Issuing Bank of an Advance, which shall bear interest at the applicable Prime
Rate Basis, in the amount of such draft (but without any requirement for
compliance with the conditions set forth in Article 3 hereof). In the event that
a drawing under any Letter of Credit is not reimbursed by the Borrowers by 11:00
a.m. (Dallas time) on the first Business Day after such drawing, the Issuing
Bank shall promptly notify Administrative Lender and each other Lender. Each
such Lender shall, on the first Business Day following such notification, make
an Advance, which shall bear interest at the applicable Prime Rate Basis, and
shall be used to repay the applicable portion of the Issuing Bank' s Advance
with respect to such Letter of Credit, in an amount equal to the amount of its
participation in such drawing for application to reimburse the Issuing Bank (but
without any requirement for compliance with the applicable conditions set forth
in Article 3 hereof) and shall make available to the Administrative Lender for
the account of the Issuing Bank, by deposit at the Administrative Lender's
office, in same day funds, the amount of such Advance. In the event that any
Lender fails to make available to the Administrative Lender for the account of
the Issuing Bank the amount of such Advance, the Issuing Bank shall be entitled
to recover such amount on demand from such Lender together with interest thereon
at a rate per annum equal to the lesser of (i) the Highest Lawful Rate or (ii)
the Federal Funds Rate.
(d) Increased Costs. If any change in any law or regulation or in the
interpretation thereof by any court or administrative or governmental authority
charged with the administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit or similar requirement against letters
of credit or guarantees issued by, or assets held by, or deposits in or for the
account of, the Issuing Bank or any Lender or (ii) impose on the Issuing Bank or
any Lender any other condition regarding this Agreement or such Lender or any
Letter of Credit, and the result of any event referred to in the preceding
clause (i) or (ii) shall be, in the reasonable opinion of the Issuing Bank or
any Lender, to increase the cost to the Issuing Bank of issuing or maintaining
any Letter of Credit or to any Lender of purchasing any participation therein or
making any Advance pursuant to Section 2.16(c), then, upon demand by the Issuing
Bank or such Lender upon the Notification Agent, the Borrowers jointly and
severally shall, subject to Section 11.9 hereof, pay to the Issuing Bank or such
Lender, from time to time as specified by the Issuing Bank or such Lender,
additional amounts that shall be sufficient to compensate the Issuing Bank or
such Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Notification Agent by the Issuing Bank or such
Lender, shall include in reasonable detail the basis for the demand for
additional compensation and shall be conclusive and binding for all purposes,
absent demonstrable error. The obligations of the Borrowers under this Section
2.16(d) shall survive termination of this Agreement. The Issuing Bank or any
Lender claiming any additional compensation under this Section 2.16(d) shall use
reasonable efforts (consistent with legal and regulatory restrictions) to reduce
or eliminate any such additional compensation which may thereafter accrue and
which efforts would not, in the sole discretion of the Issuing Bank or such
Lender, be otherwise disadvantageous.
(e) Obligations Absolute. The obligations of the Borrowers under this
Agreement with respect to any Letter of Credit, any Letter of Credit Agreement
and any other agreement or instrument relating to any Letter of Credit or any
Advance pursuant to Section 2.16(c) shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this
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Agreement, such Letter of Credit Agreement and such other agreement or
instrument under all circumstances, including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of this Agreement, any
other Loan Document, any Letter of Credit Agreement, any Letter of Credit
or any other agreement or instrument relating thereto (collectively, the
"L/C Related Documents");
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrowers in respect of
the Letters of Credit or any Advance pursuant to Section 2.16(c) or any
other amendment or waiver of or any consent to departure from all or any of
the L/C Related Documents;
(iii) the existence of any claim, set-off, defense or other right that
any Borrower may have at any time against any beneficiary or any transferee
of a Letter of Credit (or any Persons for whom any such beneficiary or any
such transferee may be acting), the Issuing Bank, any Lender or any other
Person, whether in connection with this Agreement, the transactions
contemplated hereby or by the L/C Related Documents or any unrelated
transaction;
(iv) any statement or any other document presented under a 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,
except to the extent that any payment by the Issuing Bank against any such
statement or other document shall be as a result of the Issuing Bank's
gross negligence or willful misconduct;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not comply with the terms
of the Letter of Credit, except for any payment made upon the Issuing
Bank's gross negligence or willful misconduct;
(vi) any exchange, release or non-perfection of any Collateral, or any
release or amendment or waiver of or consent to departure from any
Subsidiary Guaranty or any other guarantee, for all or any of the
Obligations of the Borrowers in respect of the Letters of Credit or any
Advance pursuant to Section 2.16(c); or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrowers or a guarantor, other than the Issuing Bank's
gross negligence or wilful misconduct.
(f) Compensation for Letters of Credit.
(i) Credit Fees. Subject to Section 11.9 hereof, the Borrowers jointly
and severally shall pay to the Administrative Lender for the account of
each Lender a credit
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fee (which shall be payable quarterly in arrears on each Quarterly Date and
on the Maturity Date) on the average daily amount available for drawing
under all outstanding Letters of Credit (computed, subject to Section 11.9
hereof, on the basis of a 360-day year for the actual number of days
elapsed) at the following per annum percentages, applicable in the
following situations:
Applicability Percentage
------------- ----------
(A) If the Leverage Ratio is not less than 2.0 to 1 1.850%
(B) If the Leverage Ratio is less than 2.0 to 1 but is not 1.750%
less than 1.5 to 1
(C) If the Leverage Ratio is less than 1.5 to 1 but is not 1.500%
less than 1.0 to 1
(D) If the Leverage Ratio is less than 1.0 to 1 1.250%
(ii) Adjustment of Credit Fee. The credit fee payable in respect of
the Letters of Credit shall be subject to reduction or increase, as
applicable and as set forth in the table in (i) above, on a quarterly basis
according to the performance of the Borrowers as tested by the Leverage
Ratio. Except as set forth in the last sentence hereof, any such increase
or reduction in such fee shall be effective on the third Business Day
following the date of receipt of the applicable financial statements
required to be delivered pursuant to Section 6.l(b) or 6.2(b) hereof. If
financial statements of the Borrowers setting forth the Leverage Ratio are
not received by the Administrative Lender by the date required pursuant to
Section 6.1(b) or 6.2(a) hereof, as applicable, the fee payable in respect
of the Letters of Credit shall be determined as if the Leverage Ratio
exceeds 2.0 to 1 until such time as such financial statements are received.
For the last fiscal quarter of any fiscal year of the Borrowers, the
Borrowers may provide their unaudited financial statements, subject only to
year-end adjustments, for the purpose of adjusting the Letter of Credit
fee.
(iii) Issuance Fee. Subject to Section 11.9 hereof, the Borrowers
jointly and severally shall pay to the Administrative Lender, for the sole
account of the Issuing Bank, an issuance fee of $500 on the date of
issuance of each Letter of Credit.
(g) L/C Cash Collateral Account.
(i) Upon the occurrence of an Event of Default and demand by the
Administrative Lender pursuant to Section 8.2(c), the Borrowers jointly and
severally will promptly pay to the Administrative Lender in immediately
available funds an amount equal to 100% of the maximum amount then
available to be drawn under the Letters of Credit then outstanding. Any
amounts so received by the Administrative Lender shall
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be deposited by the Administrative Lender in a deposit account maintained
by the Issuing Bank (the "L/C Cash Collateral Account").
(ii) As security for the payment of all Reimbursement Obligations and
for any other Obligations, the Borrowers hereby grant, convey, assign,
pledge, set over and transfer to the Administrative Lender (for the benefit
of the Issuing Bank and Lenders), and creates in the Administrative
Lender's favor (for the benefit of the Issuing Bank and Lenders) a Lien in,
all money, instruments and securities at any time held in or acquired in
connection with the L/C Cash Collateral Account, together with all proceeds
thereof. The L/C Cash Collateral Account shall be under the sole dominion
and control of the Administrative Lender and the Borrowers shall have no
right to withdraw or to cause the Administrative Lender to withdraw any
funds deposited in the L/C Cash Collateral Account except as otherwise
provided in Section 2.16(g)(iii). At any time and from time to time, upon
the Administrative Lender's request delivered to the Notification Agent,
the Borrowers promptly shall execute and deliver any and all such further
instruments and documents, including UCC financing statements, as may be
necessary, appropriate or desirable in the Administrative Lender's
judgment to obtain the full benefits (including perfection and priority) of
the security interest created or intended to be created by this paragraph
(ii) and of the rights and powers herein granted. The Borrowers shall not
create or suffer to exist any Lien on any amounts or investments held in
the L/C Cash Collateral Account other than the Lien granted under this
paragraph (ii) and Liens arising by operation of Applicable Law and not by
contract which secure amounts not yet due and payable.
(iii) The Administrative Lender shall (A) apply any funds in the L/C
Cash Collateral Account on account of Reimbursement Obligations when the
same become due and payable if and to the extent that the Borrowers shall
fail directly to pay such Reimbursement Obligations, (B) after the Maturity
Date, apply any proceeds remaining in the L/C Cash Collateral Account first
to pay any unpaid Obligations then outstanding hereunder and then to refund
any remaining amount to the Borrowers, and (C) provided no Default or Event
of Default shall be in existence, return any funds in the L/C Cash
Collateral Account to the Borrowers.
(iv) The Borrowers, no more than once in any calendar month, may,
through an Authorized Signatory of the Notification Agent, direct the
Administrative Lender to invest the funds held in the L/C Cash Collateral
Account (so long as the aggregate amount of such funds exceeds any relevant
minimum investment requirement) in (A) direct obligations of the United
States or any agency thereof, or obligations guaranteed by the United
States or any agency thereof and (B) one or more other types of investments
permitted by the Determining Lenders, in each case with such maturities as
the Borrowers, with the consent of the Determining Lenders, may specify,
pending application of such funds on account of Reimbursement Obligations
or on account of other Obligations, as the case may be. In the absence of
any such direction from the Borrowers through an Authorized Signatory of
the Notification Agent, the Administrative
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Lender shall invest the funds held in the L/C Cash Collateral Account (so
long as the aggregate amount of such funds exceeds any relevant minimum
investment requirement) in one or more types of investments with the
consent of the Determining Lenders with such maturities as the Borrowers,
with the consent of the Determining Lenders and through an Authorized
Signatory of the Notification Agent, may specify, pending application of
such funds on account of Reimbursement Obligations or on account of other
Obligations, as the case may be. All such investments shall be made in the
Administrative Lender's name for the account of the Lenders. The Borrowers
recognize that any losses or taxes with respect to such investments shall
be borne solely by the Borrowers, and the Borrowers jointly and severally
agree to hold the Administrative Lender and the Lenders harmless from any
and all such losses and taxes. Administrative Lender may liquidate any
investment held in the L/C Cash Collateral Account in order to apply the
proceeds of such investment on account of the Reimbursement Obligations (or
on account of any other Obligation then due and payable, as the case may
be) without regard to whether such investment has matured and without
liability for any penalty or other fee incurred (with respect to which the
Borrowers hereby agree to jointly and severally reimburse the
Administrative Lender) as a result of such application.
(v) The Borrowers jointly and severally shall pay to the
Administrative Lender the fees customarily charged by the Issuing Bank with
respect to the maintenance of accounts similar to the L/C Cash Collateral
Account in an amount not to exceed $1,000 in aggregate per calendar year.
ARTICLE 3
Conditions Precedent
Section 3.1 Conditions Precedent to Closing and the Initial Advance to, and
Letters of Credit on behalf of, Metro. The obligation of each Lender to sign
this Agreement and to make the initial Advance to Metro, and the obligation of
the Issuing Bank to issue the initial Letter of Credit on behalf of Metro, is
subject to receipt by the Administrative Lender of each of the following, in
form and substance satisfactory to the Administrative Lender, with a copy
(except for the Notes) for each Lender:
(a) a loan certificate of Metro certifying as to the incumbency of each
Authorized Signatory, and including (i) a copy of the Articles of Incorporation
of Metro, certified to be true, complete and correct by the secretary of state
of its state of incorporation, (ii) a copy of the By-Laws of Metro, as in effect
on the Agreement Date, (iii) a copy of the resolutions of Metro authorizing it
to execute, deliver and perform this Agreement, the Notes, and the other Loan
Documents to which it is a party, and (iv) a copy of a certificate of good
standing and a certificate of existence, as applicable, for its state of
incorporation and a certificate of authority to do business for each state in
which it is qualified to do business;
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(b) for each Subsidiary, a certificate of an officer acceptable to the
Lenders of each such Subsidiary, certifying as to the incumbency of the officers
signing the Loan Documents to which it is a party, and including (i) a copy of
its Articles of Incorporation, certified as true, complete and correct by the
secretary of state of its state of incorporation, (ii) a copy of its By-Laws, as
in effect on the Agreement Date, (iii) a copy of the resolutions authorizing it
to execute, deliver and perform the Loan Documents to which it is a party, and
(iv) a copy of a certificate of good standing and a certificate of existence, as
applicable, for its state of incorporation and certificate of authority to do
business in each state in which it is qualified to do business;
(c) duly executed Notes, payable to the order of each Lender and in an
amount for each Lender equal to its Specified Percentage of the Commitment;
(d) an Owner Pledge Agreement, duly executed and completed by David
Saperstein and acknowledged and consented to by David Saperstein's spouse, dated
as of the Agreement Date, granting the Lenders a first priority Lien and
security interest in the Pledged Stock owned by David Saperstein;
(e) a Borrower Pledge Agreement, duly executed and completed by Metro,
dated as of the Agreement Date, granting the Lenders a first priority Lien and
security interest in (i) the Pledged Stock owned directly by Metro and (ii)
Intercompany Notes evidencing intercompany advances made, or to be made, by
Metro to Subsidiaries;
(f) duly executed and completed Subsidiary Pledge Agreements, dated as of
the Agreement Date, granting the Lenders a first priority Lien and security
interest in the (i) Pledged Stock owned directly by each Subsidiary, and (ii)
Intercompany Notes evidencing intercompany advances made, or to be made, each
Subsidiary to other Subsidiaries;
(g) a duly executed and completed Borrower Security Agreement, dated as of
the Agreement Date, granting the Lenders a first priority Lien and security
interest in (i) the Accounts of Metro and (ii) the tangible personal property of
Metro;
(h) a duly executed and completed Subsidiary Security Agreement, dated as
of the Agreement Date, granting the Lenders a first priority Lien and security
interest in (i) the Accounts of each Subsidiary and (ii) the tangible personal
property of each Subsidiary;
(i) the Pledged Stock, together with stock powers duly executed in blank;
(j) the Intercompany Notes, duly endorsed;
(k) a duly executed and completed Subsidiary Guaranty, dated as of the
Agreement Date executed by each Subsidiary;
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(l) copies of insurance binders or certificates covering the assets of the
Borrowers and the Subsidiaries, and meeting the requirements of Section 5.5
hereof;
(m) reimbursement for Administrative Lender for Special Counsel's
reasonable fees and expenses rendered through the date hereof;
(n) evidence that all corporate proceedings of the Borrowers and the
Subsidiaries taken in connection with the transactions contemplated by this
Agreement and the other Loan Documents shall be reasonably satisfactory in form
and substance to the Lenders and Special Counsel; and the Lenders shall have
received copies of all documents or other evidence which the Administrative
Lender, Special Counsel or any Lender may reasonably request in connection with
such transactions;
(o) copies of the following combined and combining financial statements for
Metro and its Subsidiaries, as of and for the period ended June 30, 1994: (i)
combined and combining balance sheets as of the end of such period, and (ii)
combined and combining statements of income and changes in cash for such period;
which financial statements shall set forth in comparative form figures for the
corresponding periods in the previous fiscal year, all in reasonable detail and
certified by an Authorized Signatory to the best of his knowledge to be complete
and correct and prepared in accordance with GAAP (other than footnotes thereto),
subject to year-end adjustment;
(p) the facility fee for the account of each Lender as required pursuant to
Section 2.4(b) hereof;
(q) all Indebtedness owing by Metro under the Existing Loan Agreement shall
have been paid in full;
(r) opinions of counsel to the Borrower and the Subsidiaries addressed to
the Lenders and in form and substance reasonably satisfactory to the Lenders,
dated the Agreement date; and
(s) in form and substance satisfactory to the Lenders and Special Counsel,
such other documents, instruments and certificates as the Administrative Lender
may reasonably require in connection with the transactions contemplated hereby,
including without limitation the status, organization or authority of the
Borrowers or any Subsidiary, and the enforceability of and security for the
Obligation.
Section 3.2 Conditions Precedent to the Initial Advance to, and Letters of
Credit on behalf of, MNLP. The obligation of each Lender to make the initial
Advance to MNLP, and the obligation of the Issuing Bank to issue the initial
Letter of Credit on behalf of MNLP, is subject to receipt by the Administrative
Lender of each of the following, in form and substance satisfactory to the
Administrative Lender, with a copy (except for the Notes) for each Lender:
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(a) a general partner's certificate executed by the general partner of MNLP
(i) certifying as to the general partner of the partnership, (ii) certifying as
to the name of the partnership, (iii) including a copy of the Partnership
Agreement, certified to be true, complete and correct, and in full force and
effect, without amendment except as shown, and (iv) a copy of the certificate of
limited partnership of the partnership, certified to be true and correct;
(b) a certificate of an officer acceptable to the Lenders of Metro,
certifying as to the incumbency of the officers signing Loan Documents on behalf
of Metro, as the general partner of MNLP, and including a copy of the
resolutions authorizing it to execute, deliver and perform the Loan Documents to
which MNLP is a party;
(c) a copy of the resolutions authorizing Metro to execute, deliver and
perform the Owner Pledge Agreement;
(d) a Trustee's certificate executed by the Trustees of each Trust (i)
certifying as the numbers of the Trustees and (ii) including a copy of the Trust
Agreement, certified to be true, complete and correct, and in full force and
effect, without amendment except as shown;
(e) [Intentionally Omitted];
(f) duly executed Notes, payable to the order of each Lender and in an
amount for each Lender equal to its Specified Percentage of the Commitment;
(g) an Owner Pledge Agreement, duly executed and completed by David
Saperstein and acknowledged and consented to by David Saperstein's spouse, dated
as of the Agreement Date, granting the Lenders a first priority Lien and
security interest in the Pledged Stock owned by David Saperstein;
(h) an Owner Pledge Agreement, duly executed and completed by Metro, dated
as of the Agreement Date, granting the Lenders a first priority Lien and
security
interest in the Pledged Stock owned directly by Metro;
(i) Owner Pledge Agreements, duly executed and delivered by the Trusts,
dated as of the Agreement Date, granting the Lenders a first priority Lien and
security interest in the Pledged Stock owned by the Trusts;
(j) a Borrower Pledge Agreement, duly executed and completed by MNLP, dated
as of the Agreement Date, granting the Lenders a first priority Lien and
security
interest in the Pledged Stock owned directly by MNLP;
(k) a duly executed and completed Borrower Security Agreement, dated as of
the Agreement Date, granting the Lenders a first priority Lien and security
interest in (i) the Accounts of MNLP and (ii) the tangible personal property of
MNLP;
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(l) the Pledged Stock, together with stock powers duly executed in blank;
(m) the Intercompany Notes, duly endorsed;
(n) copies of insurance binders or certificates covering the assets of the
Borrowers MNLP, and meeting the requirements of Section 5.5 hereof;
(o) opinions of counsel to the Borrower and the Subsidiaries addressed to
the Lenders and in form and substance reasonably satisfactory to the Lenders,
dated the Agreement date; and
(p) in form and substance satisfactory to the Lenders and Special Counsel,
such other documents, instruments and certificates as the Administrative Lender
may reasonably require in connection with the transactions contemplated hereby,
including without limitation the status, organization or authority of the MNLP,
and the enforceability of and security for the Obligation.
Section 3.3 Conditions Precedent to the Initial Advance to, and Letters of
Credit on behalf of, Additional Borrowers. The obligation of each Lender to make
the initial Advance to, and the obligation of the Issuing Bank to issue the
initial Letter of Credit on behalf of, additional Borrowers becoming party to
this Agreement is subject to receipt by the Administrative Lender of each of the
following, in form and substance satisfactory to the Administrative Lender, with
a copy (except for the Notes) for each Lender:
(a) to the extent such Borrower is a corporation, a loan certificate of
such Borrower certifying as to the incumbency of officers signing the Loan
Documents to which it is a party, and including (i) a copy of its Articles of
Incorporation, certified to be true, complete and correct by the secretary of
state of its state of incorporation, (ii) a copy of its By-Laws, as in effect on
the Agreement Date, (iii) a copy of its resolutions authorizing it to execute,
deliver and perform this Agreement, the Notes, and the other Loan Documents to
which it is a party, and (iv) a copy of a certificate of good standing and a
certificate of existence, as applicable, for its state of incorporation and a
certificate of authority to do business for each state in which it is qualified
to do business;
(b) to the extent such Borrower is a partnership (general or limited), a
partner's consent to borrowing executed by each of its general and/or limited
partners (i) certifying as to the general and/or limited partners of the
partnership, (ii) certifying as to the name of the partnership, (iii) if
applicable, consenting to actions by the general partner on behalf of the
Partnership, (iv) consenting to the borrowings under this Agreement, (v)
including a copy of the Partnership Agreement, certified to be true, complete
and correct, and in full force and effect, without amendment except as shown,
and (vi) if applicable a copy of the certificate of limited partnership of the
partnership, certified to be true and correct;
(c) if a Subsidiary of such Borrower is a corporation, a certificate of an
officer acceptable to the Lenders of each Subsidiary of such Borrower certifying
as to the incumbency of the officers signing the Loan Documents to which it is a
party, and including (i) a copy of
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its Articles of Incorporation, certified as true, complete and correct by the
secretary of state of its state of incorporation, (ii) a copy of its By-Laws, as
in effect on the Agreement Date, (iii) a copy of the resolutions authorizing it
to execute, deliver and perform the Loan Documents to which it is a party, and
(iv) a copy of a certificate of good standing and a certificate of existence, as
applicable, for its state of incorporation and certificate of authority to do
business in each state in which it is qualified to do business;
(d) to the extent any Subsidiary of such Borrower is a partnership (general
or limited) a partner's consent to borrowing executed by each of its general
and/or limited partners (i) certifying as to the general and/or limited partners
of the partnership, (ii) certifying as to the name of the partnership, (iii) if
applicable, consenting to actions by the general partner on behalf of the
Partnership, (iv) consenting to the borrowings under this Agreement, (v)
including a copy of the Partnership Agreement, certified to be true, complete
and correct, and in full force and effect, without amendment except as shown,
and (vi) if applicable a copy of the certificate of limited partnership of the
partnership, certified to be true and correct;
(e) duly executed Notes, payable to the order of each Lender and in an
amount for each Lender equal to its Specified Percentage of the Commitment;
(f) an Owner Pledge Agreement, duly executed and completed by each equity
interest owner of such Borrower granting the Lenders a first priority Lien and
security interest in the Pledged Stock owned by each such equity interest owner;
(g) a duly executed and completed Borrower Pledge Agreement granting the
Lenders a first priority Lien and security interest in (i) the Pledged Stock
owned directly by such Borrower and (ii) Intercompany Notes evidencing
intercompany advances made, or to be made, by such Borrower to Subsidiaries;
(h) duly executed and completed Subsidiary Pledge Agreements granting the
Lenders a first priority Lien and security interest in the (i) Pledged Stock
owned directly by each Subsidiary, and (ii) Intercompany Notes evidencing
intercompany advances made, or to be made, by each Subsidiary of such Borrower
to other Subsidiaries;
(i) a duly executed and completed Borrower Security Agreement granting the
Lenders a first priority Lien and security interest in (i) the Accounts of such
Borrower and (ii) the tangible personal property of such Borrower;
(j) a duly executed and completed Subsidiary Security Agreement granting
the Lenders a first priority Lien and security interest in (i) the Accounts of
each Subsidiary of such Borrower and (ii) the tangible personal property of each
Subsidiary of such Borrower;
(k) the Pledged Stock, together with stock powers duly executed in blank;
(l) the Intercompany Notes, duly endorsed;
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(m) a duly executed and completed Subsidiary Guaranty executed by each
Subsidiary of such Borrower;
(n) copies of insurance binders or certificates covering the assets of such
Borrower and its Subsidiaries, and meeting the requirements of Section 5.5
hereof;
(o) evidence that all corporate and partnership proceedings of such
Borrowers and its Subsidiaries taken in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall be reasonably
satisfactory in form and substance to the Lenders and Special Counsel; and the
Lenders shall have received copies of all documents or other evidence which the
Administrative Lender, Special Counsel or any Lender may reasonably request in
connection with such transactions;
(p) if available copies of the following combined and combining financial
statements for such Borrower and its Subsidiaries, as of and for the most
recently ended fiscal quarter and fiscal year of such Borrower: (i) combined and
combining balance sheets as of the end of such period, and (ii) combined and
combining statements of income and changes in cash for such period; which
financial statements shall set forth in comparative form figures for the
corresponding periods in the previous fiscal year, all in reasonable detail and
certified by the president, vice president, treasurer or chief financial officer
of such Borrower to the best of his knowledge to be complete and correct and
prepared in accordance with GAAP (other than footnotes thereto), subject to
year-end adjustment;
(q) all prior Indebtedness of such Borrower shall have been paid in full;
(r) opinions of counsel to the Borrower and the Subsidiaries addressed to
the Lenders and in form and substance reasonably satisfactory to the Lenders,
dated the Agreement date; and
(s) in form and substance satisfactory to the Lenders and Special Counsel,
such other documents, instruments and certificates as the Administrative Lender
may reasonably require in connection with the transactions contemplated hereby,
including without limitation the status, organization or authority of such
Borrower or any of its Subsidiaries, and the enforceability of and security for
the Obligation.
Section 3.4 Conditions Precedent to All Advances. The obligation of each
Lender to make each Advance (including the initial Advance) and the obligation
of the Issuing Bank to issue each Letter of Credit (including the initial Letter
of Credit) hereunder is subject to fulfillment of the following conditions
immediately prior to or contemporaneously with each such Advance or issuance:
(a) With respect to Advances (other than Refinancing Advances) and each
issuance of a Letter of Credit, all of the representations and warranties of the
Borrowers under this Agreement, which, pursuant to Section 4.2 hereof, are made
at and as of the time of such
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Advance or issuance, shall be true and correct at such time in all material
respects, both before and after giving effect to the application of the proceeds
of the Advance or issuance;
(b) The incumbency of the Authorized Signatories and other officers shall
be as stated in the certificates of incumbency delivered in the certificates
pursuant to Sections 3.1(a) and (b), 3.2(a) and (b) and 3.3(a), (b) and (c)
hereof or as subsequently modified and reflected in certificates of incumbency
delivered to the Administrative Lender. The Lenders may, without waiving this
condition, consider it fulfilled and a representation by the Borrowers made to
such effect if no written notice to the contrary, dated on or before the date of
such Advance or issuance, is received by the Administrative Lender from the
Notification Agent prior to the making of such Advance or issuance;
(c) There shall not exist a Default hereunder, with respect to Advances
(other than Refinancing Advances) and with respect to issuance of each Letter of
Credit, or an Event of Default, with respect to any Refinancing Advance;
(d) The aggregate Advances and amount available for draws under Letters of
Credit, after giving effect to such proposed Advance or Letter of Credit, shall
not exceed the maximum principal amount then permitted to be outstanding
hereunder; and
(e) The Administrative Lender shall have received all such other
certificates, reports, statements or other documents as the Administrative
Lender may reasonably request.
Each request by the Notification Agent to the Administrative Lender or the
Issuing Bank, as appropriate, for an Advance or the issuance of a Letter of
Credit shall constitute a representation and warranty by the Borrowers as of the
date of the making of such Advance or the issuance of such Letter of Credit that
all the conditions contained in this Section 3.4 have been satisfied.
ARTICLE 4
Representations and Warranties
Section 4.1 Representations and Warranties. Each Borrower hereby represents
and warrants to each Lender as follows:
(a) Organization; Power; Qualification. As of the Agreement Date, the
respective jurisdictions of incorporation and percentage ownership by each
Borrower and each Subsidiary listed on Schedule 6 are true and correct. Each
Borrower and Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its state of organization. Each Borrower and
Subsidiary has the corporate power and authority to own its properties and to
carry on its business as now being and hereafter proposed to be conducted. Each
Borrower and Subsidiary is duly qualified, in good standing and authorized to do
business in each jurisdiction
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in which the character of its properties or the nature of its business requires
such qualification or authorization.
(b) Authorization. Each Borrower has the corporate or partnership power, as
applicable, and has taken all necessary corporate or partnership action, as
applicable, to authorize it to borrow hereunder. Each Borrower and Subsidiary
has the corporate or partnership power, as applicable, and has taken all
necessary corporate or partnership action, as applicable, to execute, deliver
and perform the Loan Documents to which it is party in accordance with the terms
thereof, and to consummate the transactions contemplated thereby. Each Loan
Document has been duly executed and delivered by the Borrower or the Subsidiary
executing it. Each of the Loan Documents to which any Borrower or Subsidiary is
party is a legal, valid and binding respective obligation of such Borrower or
Subsidiary, as applicable, enforceable in accordance with its terms, subject, to
enforcement of remedies, to the following qualifications: (i) equitable
principles generally, and (ii) bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws affecting enforcement of
creditors' rights generally (insofar as any such law relates to the bankruptcy,
insolvency or similar event of such Borrower or Subsidiary).
(c) Compliance with Other Loan Documents and Contemplated Transactions. The
execution, delivery and performance by each Borrower and Subsidiary of the other
Loan Documents to which they are respectively a party, and the consummation of
the transactions contemplated thereby, do not and will not (i) require any
consent or approval not already obtained, (ii) violate any Applicable Law, (iii)
conflict with, result in a breach of, or constitute a default under the articles
of incorporation, by-laws or partnership agreement as applicable, of such
Borrower or Subsidiary, or under any Necessary Authorization, indenture,
agreement or other instrument, to which such Borrower or Subsidiary is a party
or by which they or their respective properties may be bound, or (iv) result in
or require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by such Borrower or Subsidiary, except
Permitted Liens.
(d) Business. Each Borrower and Subsidiary is engaged solely in the
Borrowers' Business.
(e) Licenses, etc. All Necessary Authorizations have been duly authorized
and obtained, and are in full force and effect. Each Borrower and Subsidiary is
and will continue to be in compliance in all material respects with all
provisions thereof. No Necessary Authorization is the subject of any pending or,
to the best of each Borrower's knowledge, threatened challenge or revocation.
(f) Compliance with Law. Each Borrower and Subsidiary is in compliance with
all Applicable Laws, the violation of which could reasonably be expected to have
a Material Adverse Effect. Each Borrower and Subsidiary has duly and timely
filed all reports, statements and filings that are required to be filed by any
of them with any Governmental Authority, and are in all material respects in
compliance therewith, including without limitation the rules and
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regulations of any Governmental Authority relating to their business. Each
Borrower and Subsidiary has obtained all appropriate approvals and consents of,
and has made all filings with, the Governmental Authorities in connection with
the acquisition and ownership of each of their respective assets and the
operation of their business where the failure to obtain such consents and
approvals could have a Material Adverse Effect.
(g) Title to Properties. Each Borrower and Subsidiary has good and
indefeasible title to, or a valid leasehold interest in, all of their material
assets. None of their assets are subject to any Liens, except Permitted Liens.
No financing statement or other Lien filing (except relating to Permitted Liens)
is on file in any state or jurisdiction that names any Borrower or Subsidiary as
debtor or covers (or purports to cover) any assets of any Borrower or
Subsidiary. Each Borrower and Subsidiary has not signed any such financing
statement or filing, nor any security agreement authorizing any Person to file
any such financing statement or filing.
(h) Litigation. Except as reflected on Schedule 3 hereto, there is no
action, suit or proceeding pending against, or, to the best of each Borrower's
knowledge, threatened against such Borrower or any Subsidiary, or in any other
manner relating directly and materially adversely to such Borrower, any
Subsidiary, or any of their material properties, in any court or before any
arbitrator of any kind or before or by any governmental body the result of which
could reasonably be expected to require the payment of money by such Borrower or
any Subsidiary in an amount of $250,000 or more in any one such action, suit or
proceeding or $500,000 or more in the aggregate for all such actions, suits or
proceedings.
(i) Taxes. Except for where extensions have been duly filed and obtained,
all federal, state and other tax returns of each Borrower and Subsidiary
required by law to be filed have been duly filed and all federal, state and
other taxes, assessments and other governmental charges or levies upon each
Borrower, Subsidiary or any of their properties, income, profits and assets,
which are due and payable, have been paid (other than federal income taxes for
Metro's fiscal year ending on June 30, 1994), unless the same are being
diligently contested in good faith by appropriate proceedings, with adequate
reserves established therefor, and no Lien (other than a Permitted Lien) has
attached and no foreclosure, distraint, sale or similar proceedings have been
commenced. The charges, accruals and reserves on the books of each Borrower and
Subsidiary in respect of their taxes are, in the judgment of such Borrower,
adequate.
(j) Financial Statements; Material Liabilities. Metro has furnished or
caused to be furnished to the Lenders copies of its June 30, 1994, financial
statements, which are prepared in good faith and complete in all material
respects and present fairly in accordance with GAAP the financial position of
Metro and its Subsidiaries as at such dates and the results of operations for
the periods then ended, subject to normal year-end adjustments. No Borrower nor
any Subsidiary has any material liabilities, contingent or otherwise, or
material losses, except as disclosed in writing to the Lenders prior to the
Agreement Date.
(k) No Adverse Change. Since June 30, 1994, no event or circumstances has
occurred or arisen that could have a Material Adverse Effect.
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(l) ERISA. No Borrower or its Controlled Group maintains or contributes to
any Plan other than those disclosed to the Administrative Lender in writing.
Each such Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code, and any other applicable Federal or state law,
rule or regulation. With respect to each Plan of each Borrower and each member
of its Controlled Group (other than a Multiemployer Plan), all reports required
under ERISA or any other Applicable Law to be filed with any governmental
authority, the failure of which to file could reasonably result in liability of
such Borrower or any member of its Controlled Group in excess of $100,000, have
been duly filed. All such reports are true and correct in all material respects
as of the date given. No such Plan of any Borrower or any member of its
Controlled Group has been terminated nor has any accumulated funding deficiency
(as defined in Section 412(a) of the Code) been incurred (without regard to any
waiver granted under Section 412 of the Code), nor has any funding waiver from
the Internal Revenue Service been received or requested. No Borrower or any
member of its Controlled Group has failed to make any contribution or pay any
amount due or owing as required by Section 412 of the Code or Section 302 of
ERISA or the terms of any such Plan prior to the due date under Section 412 of
the Code and Section 302 of ERISA. There has been no ERISA Event or any event
requiring disclosure under Section 4041 (c)(3)(C), 4068(f), 4063(a) or 4043(b)
of ERISA with respect to any Plan or trust of any Borrower or any member of its
Controlled Group since the effective date of ERISA. The value of the assets of
each Plan (other than a Multiemployer Plan) of each Borrower and each member of
its Controlled Group equaled or exceeded the present value of the benefit
liabilities, as defined in Title IV of ERISA, of each such Plan as of the most
recent valuation date using Plan actuarial assumptions at such date. There are
no pending or, to the best of any Borrower's knowledge, threatened claims,
lawsuits or actions (other than routine claims for benefits in the ordinary
course) asserted or instituted against, and no Borrower or any member of its
Controlled Group has knowledge of any threatened litigation or claims against,
(i) the assets of any Plan or trust or against any fiduciary of a Plan with
respect to the operation of such Plan, or (ii) the assets of any employee
welfare benefit plan within the meaning of Section 3(1) or ERISA, or against any
fiduciary thereof with respect to the operation of any such plan. No Borrower or
any member of its Controlled Group has engaged in any prohibited transactions,
within the meaning of Section 406 of ERISA or Section 4975 of the Code, in
connection with any Plan. No Borrower or any member of its Controlled Group has
withdrawn from any Multiemployer Plan, nor has incurred or reasonably expects to
incur (A) any liability under Title IV of ERISA (other than premiums due under
Section 4007 of ERISA to the PBGC), (B) any withdrawal liability (and no event
has occurred which with the giving of notice under Section 4219 of ERISA would
result in such liability) under Section 4201 of ERISA as a result of a complete
or partial withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from
a Multiemployer Plan, or (C) any liability under Section 4062 of ERISA to the
PBGC or to a trustee appointed under Section 4042 of ERISA. No Borrower, any
member of its Controlled Group, or any organization to which any Borrower or any
member of its Controlled Group is a successor or parent corporation within the
meaning of ERISA Section 4069(b), has engaged in a transaction within the
meaning of ERISA Section 4069. No Borrower or any member of its Controlled Group
maintains or has established any welfare benefit plan within the meaning of
Section 3(1) of ERISA which provides for continuing benefits or coverage for any
participant or any beneficiary of any participant after such
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participant's termination of employment except as may be required by the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and
the regulations thereunder, and at the expense of the participant or the
beneficiary of the participant, or retiree medical liabilities. Each Borrower
and its Controlled Group which maintains a welfare benefit plan within the
meaning of Section 3(1) of ERISA has complied in all material respects with any
applicable notice and continuation requirements of COBRA and the regulations
thereunder.
(m) Compliance with Regulations G, T, U and X. No Borrower is engaged
principally or as one of its important activities in the business of extending
credit for the purpose of purchasing or carrying any margin stock within the
meaning of Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System, and no part of the proceeds of the Advances or the Letters of
Credit will be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock. No assets of
any Borrower or any Subsidiary are margin stock, and none of the Pledged
Stock is margin stock. No Borrower or Subsidiary, nor any agent acting on their
behalf, have taken or will knowingly take any action which might cause this
Agreement or any Loan Documents to violate any regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities Exchange
Act of 1934, in each case as in effect now or as the same may hereafter be in
effect.
(n) Governmental Regulation. Each Borrower and Subsidiary is not required
to obtain any Necessary Authorization that has not already been obtained from,
or effect any material filing or registration that has not already been effected
with, any federal, state or local regulatory authority in connection with the
execution and delivery of this Agreement or any other Loan Document, or the
performance thereof (other than any enforcement of remedies by the
Administrative Lender on behalf of the Lenders), in accordance with their
respective terms, including any borrowings hereunder.
(o) Absence of Default. Each Borrower and Subsidiary is in compliance in
all material respects with all of the provisions of their articles of
incorporation and by-laws, and no event has occurred or failed to occur, which
has not been remedied or waived, the occurrence or non-occurrence of which
constitutes, or which with the passage of time or giving of notice or both would
constitute, (i) an Event of Default or (ii) a default by such Borrower or
Subsidiary under any material indenture, agreement or other instrument, or any
judgment, decree or order to which such Borrower or Subsidiary is a party or by
which they or any of their material properties is bound.
(p) Investment Company Act. No Borrower is required to register under the
provisions of the Investment Company Act of 1940, as amended. Neither the
entering into or performance by any Borrower of this Agreement nor the issuance
of the Notes violates any provision of such act or requires any consent,
approval, or authorization of, or registration with, the Securities and Exchange
Commission or any other governmental or public body of authority pursuant to any
provisions of such act.
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(q) Environmental Matters. No Borrower nor any Subsidiary has any actual
knowledge or reason to believe that any substance deemed hazardous by any
Applicable Environmental Law, has been installed on any real property now owned
by any Borrower or any of its Subsidiaries. Each Borrower and Subsidiary are not
in violation of or subject to any existing, pending or, to the best of any
Borrower's knowledge, threatened investigation or inquiry by any governmental
authority or to any material remedial obligations under any Applicable
Environmental Laws, and this representation and warranty would continue to be
true and correct following disclosure to the applicable governmental authorities
of all relevant facts, conditions and circumstances, if any, pertaining to any
real property of any Borrower and its Subsidiaries. Each Borrower and Subsidiary
have not obtained and are not required to obtain any permits, licenses or
similar authorizations to construct, occupy, operate or use any buildings,
improvements, fixtures, and equipment forming a part of any real property of any
Borrower or any Subsidiary by reason of any Applicable Environmental Laws. Each
Borrower and Subsidiary undertook, at the time of acquisition of any real
property, reasonable inquiry into the previous ownership and uses of such real
property consistent with good commercial or customary practice. Each Borrower
and Subsidiary has taken all reasonable steps to determine, and no Borrower or
Subsidiary has actual knowledge or reason to believe, after reasonable
investigation, that any hazardous substances or solid wastes have been disposed
of or otherwise released on or to the real property of any Borrower or any
Subsidiary in any manner or quantities which would be deemed a violation of the
Applicable Environmental Laws.
(r) Valid Issuance of Securities. All Pledged Stock has been duly
authorized and validly issued, and is fully paid and nonassessable. The capital
stock described on Exhibit A to the Pledge Agreements constitutes all the issued
and outstanding capital stock of each Borrower, the Subsidiaries of each
Borrower or the Subsidiaries of another Subsidiary. No Person has conversion
rights with respect to, or any subscription rights, calls, commitments or claims
of any character for, or any repurchase or redemption options relating to, the
Pledged Stock, except for those listed on Schedule 5 hereto. The Pledged Stock,
when issued or sold, was either (i) registered or qualified under applicable
federal or state securities laws, or (ii) exempt therefrom.
(s) Certain Fees. No broker's, finder's or other fee or commission will be
payable by any Borrower (other than to the Lenders hereunder) with respect to
the making of the Commitments or the Advances hereunder or the issuance of
Letters of Credit. Each Borrower agrees to indemnify and hold harmless the
Administrative Lender and each Lender from and against any claims, demand,
liability, proceedings, costs or expenses asserted with respect to or arising in
connection with any such fees or commissions.
(t) Compliance. Attached as Schedule 4 hereto is a complete list of all
material licenses, consents, authorizations, permits and Necessary
Authorizations as of the Agreement Date. Such licenses, consents, permits and
authorizations constitute all that are necessary, appropriate or advisable for
each Borrower and Subsidiary to operation its business and own its properties,
and are in full force and effect. No event has occurred which permits (or with
the passage of time would permit) the revocation or termination of any such
license, consents,
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permits and authorizations, or which could result in the imposition of any
restriction thereon of such a nature that could reasonably be expected to have a
Material Adverse Effect.
(u) Patents, Etc. Each Borrower and Subsidiary has obtained all patents,
trademarks, service-marks, trade names, copyrights, licenses and other rights,
free from burdensome restrictions, that are necessary for the operation of their
business as presently conducted and as proposed to be conducted, the loss of
which could reasonably be expected to have a Material Adverse Effect. Nothing
has come to the attention of any Borrower or any Subsidiary to the effect that
(i) any process, method, part or other material presently contemplated to be
employed by any Borrower or Subsidiary may infringe any patent, trademark,
service-mark, trade name, copyright, license or other right owned by any other
Person, or (ii) there is pending or overtly threatened any claim or litigation
against or affecting any Borrower or Subsidiary contesting its right to sell or
use any such process, method, part or other material.
(v) Disclosure. Neither this Agreement nor any other document, certificate
or statement which has been furnished to any Lender by or on behalf of any
Borrower or Subsidiary in connection herewith contained any untrue statement of
a material fact or omitted to state a material fact necessary in order to make
the statement contained herein and therein not misleading at the time it was
furnished. There is no fact known to any Borrower and not known to the public
generally that could reasonably be expected to materially adversely affect the
assets or business of any Borrower or Subsidiary, or in the future could
reasonably be expected (so far as such Borrower can now foresee) to have a
Material Adverse Effect, which has not been set forth in this Agreement or in
the documents, certificates and statements furnished to the Lenders by or on
behalf of such Borrower prior to the date hereof in connection with the
transaction contemplated hereby.
(w) Solvency. Each Borrower is, and the Borrowers and the Subsidiaries on a
combined basis are, Solvent.
(x) Consolidated Business Entity. Each Borrower and Subsidiary is engaged
in the business set forth in Section 4.l(d) hereof. These operations require
financing on a basis such that the credit supplied can be made available from
time to time to the Borrowers and various of the Subsidiaries, as required for
the continued successful operation of the Borrowers and the Subsidiaries as a
whole. The Borrowers have requested Lenders to make credit available hereunder
primarily for the purposes of financing the operations and acquisitions of the
Borrowers and the Subsidiaries. The Borrowers and the Subsidiaries expect to
derive benefit (and the boards of directors of the Borrowers and the
Subsidiaries have determined that its Subsidiaries may reasonably be expected to
derive benefit), directly or indirectly, from the credit extended by Lenders
hereunder, both in their separate capacities and as members of the group of
companies, since the successful operation and condition of the Borrowers and the
Subsidiaries is dependent on the continued successful performance of the
functions of the group as a whole.
Section 4.2 Survival of Representations and Warranties, etc. All
representations and warranties made under this Agreement and the other Loan
Documents shall be deemed to be
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made at and as of the Agreement Date and at and as of the date of each Advance
and each Letter of Credit, and each shall be true and correct when made,
except to the extent (a) previously fulfilled in accordance with the terms
hereof, (b) applicable to a specific date or otherwise subsequently
inapplicable, or (c) previously waived in writing by the Determining Lenders
with respect to any particular factual circumstance. All such representations
and warranties shall survive, and not be waived by, the execution hereof by
any Lender, any investigation or inquiry by any Lender, or by the making of any
Advance under this Agreement.
ARTICLE 5
General Covenants
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 5.1 Preservation of Existence and Similar Matters. Each Borrower
shall, and shall cause each Subsidiary to:
(a) except in connection with any merger or consolidation permitted by
Section 7.5(b) hereof, preserve and maintain, or timely obtain and thereafter
preserve and maintain, its existence, rights, franchises, licenses,
authorizations, consents, privileges and all other Necessary Authorizations from
federal, state and local governmental bodies and any tribunal (regulatory or
otherwise), the loss of which could have a Material Adverse Effect; and
(b) qualify and remain qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, unless the failure to do
so could not have a Material Adverse Effect.
Section 5.2 Business; Compliance with Applicable Law. Each Borrower and
Subsidiary shall (a) engage substantially in the Borrowers' Business, and (b)
comply in all material respects with the requirements of all Applicable Law, the
failure of which could reasonably be expected to have a Material Adverse Effect.
Section 5.3 Maintenance of Properties. Each Borrower shall, and shall cause
each Subsidiary to, maintain or cause to be maintained all its properties
(whether owned or held under lease) in reasonably good repair, working order and
condition, taken as a whole, and from time to time make or cause to be made all
appropriate repairs, renewals, replacements, additions, betterments and
improvements thereto.
Section 5.4 Accounting Methods and Financial Records. Each Borrower shall,
and shall cause each Subsidiary to, (a) maintain a system of accounting
established and administered in accordance with GAAP, keep adequate records and
books of account in which complete entries will be made and all transactions
reflected in accordance with GAAP, and keep accurate
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and complete records of its respective assets and (b) keep materially accurate
and complete records detailing separately items representing tangible cash
exchanges and intangible and barter exchanges. Each Borrower and Subsidiary
shall maintain a fiscal year ending on June 30 unless Metro, in connection with
its electing Subchapter S status under the Code, elects to have a fiscal year
ending on December 31, whereupon, each Borrower and Subsidiary shall thereafter
maintain a fiscal year ending on December 31.
Section 5.5 Insurance. Each Borrower shall, and shall cause each
Subsidiary to, maintain insurance from responsible companies in such amounts and
against such risks as shall be customary and usual in the industry for companies
of similar size and capability, but in no event less than the amount and types
insured as of the Agreement Date. Each insurance policy shall provide for at
least 30 days' prior notice to the Administrative Lender of any proposed
termination or cancellation of such policy, whether on account of default or
otherwise.
Section 5.6 Payment of Taxes and Claims. Each Borrower shall, and shall
cause each Subsidiary to, pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or its income or properties prior
to the date on which penalties attach thereto, and all lawful material claims
for labor, materials and supplies which, if unpaid, might become a Lien upon any
of its properties; except that no such tax, assessment, charge, levy or claim
need be paid which is being diligently contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside on the
appropriate books, but only so long as no Lien (other than a Permitted Lien)
shall attach with respect thereto and no foreclosure, distraint, sale or similar
proceedings shall have been commenced. Each Borrower shall, and shall cause each
Subsidiary to, timely file all information returns required by federal, state or
local tax authorities.
Section 5.7 Visits and Inspections. Each Borrower shall, and shall cause
each Subsidiary to, promptly permit representatives of the Administrative Lender
or any Lender from time to time to (a) visit and inspect the properties of such
Borrower and Subsidiary as often as the Administrative Lender or any Lender
shall deem advisable, (b) inspect and make extracts from and copies of such
Borrower's and Subsidiary's books and records, and (c) discuss with such
Borrower's and Subsidiary's directors, officers, employees and auditors its
business, assets, liabilities, financial positions, results of operations and
business prospects.
Section 5.8 Payment of Indebtedness. Subject to Section 5.6 hereof, each
Borrower shall, and shall cause each Subsidiary to, pay its Indebtedness when
and as the same becomes due, other than amounts (other than the Obligations)
duly and diligently disputed in good faith.
Section 5.9 Use of Proceeds. Each Borrower shall use the proceeds of
Advances and Letters of Credit to make Acquisitions permitted under Section 7.6
hereof, to make Capital Expenditures, to make Investments (including advances
to Subsidiaries) permitted pursuant to Section 7.3 hereof, to repay all
outstanding Indebtedness under the Existing Loan Agreement, for working capital
and for other general corporate purposes.
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Section 5.10 Indemnity.
(a) Each Borrower jointly and severally agrees to defend, protect,
indemnify and hold harmless the Administrative Lender, each Lender, the Issuing
Bank, each of their respective Affiliates, and each of their respective
(including such Affiliates') officers, directors, employees, agents, attorneys,
shareholders and consultants (including, without limitation, those retained in
connection with the satisfaction or attempted satisfaction of any of the
conditions set forth herein) of each of the foregoing (collectively,
"Indemnitees") from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding,
whether or not such Indemnitees shall be designated a party thereto), imposed
on, incurred by, or asserted against such Indemnitees (whether direct, indirect
or consequential and whether based on any federal, state, or local laws and
regulations, under common law or at equitable cause, or on contract, tort or
otherwise, arising from or connected with the past, present or future operations
of any Borrower or its predecessors in interest, or the past, present or future
environmental condition of property of any Borrower), in any manner relating to
or arising out of this Agreement, the Loan Documents, or any act, event or
transaction or alleged act, event or transaction relating or attendant thereto,
the making of or any participations in the Advances or the Letters of Credit and
the management of the Advances and the Letters of Credit, including in
connection with, or as a result, in whole or in part, of any negligence of
Administrative Lender, the Issuing Bank or any Lender (other than those matters
raised exclusively by a participant against the Administrative Lender, the
Issuing Bank or any Lender and not the Borrowers), or the use or intended use of
the proceeds of the Advances and the Letters of Credit hereunder, or in
connection with any investigation of any potential matter covered hereby, but
excluding any claim or liability that arises as the result of the gross
negligence or willful misconduct of any Indemnitee, as finally judicially
determined by a court of competent jurisdiction, but excluding matters raised by
one Lender against another Lender or by any shareholders of a Lender against a
Lender or its management (collectively, "Indemnified Matters"); provided
however, that so long as no Event of Default shall have occurred and be
continuing, there shall be no settlement by the Indemnitees or any of them with
respect to any Indemnified Matter without prior consultation with the Borrowers.
(b) In addition, the Borrowers jointly and severally shall periodically,
upon request, reimburse each Indemnitee for its reasonable legal and other
actual out-of-pocket expenses (including the cost of any investigation and
preparation) incurred in connection with any Indemnified Matter; provided,
however, that the Indemnitees agree that they shall endeavor to use legal
counsel common to all Indemnitees in connection with any Indemnification Matter
unless any such Indemnitee shall reasonably determine, in its sole discretion,
that the use of such common legal counsel would conflict with its interests in
such Indemnification Matter. If for any reason the foregoing indemnification is
unavailable to any Indemnitee or insufficient to hold any Indemnitee harmless
with respect to Indemnified Matters, then the Borrowers jointly and severally
shall contribute to the amount paid or payable by such Indemnitee as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the
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relative benefits received by the Borrowers and the Borrowers' stockholders,
shareholders or partners, as applicable, on the one hand and such Indemnitee on
the other hand but also the relative fault of the Borrowers and such Indemnitee,
as well as any other relevant equitable considerations. The reimbursement,
indemnity and contribution obligations under this Section shall be in addition
to any liability which the Borrowers may otherwise have, shall extend upon the
same terms and conditions to each Indemnitee, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Borrowers, the Administrative Lender, the Issuing Bank,
the Lenders and all other Indemnitees. This Section shall survive any
termination of this Agreement and payment of the Obligations.
Section 5.11 Environmental Law Compliance. The use which any Borrower or
Subsidiary intends to make of any real property owned by it will not result in
the disposal or other release of any hazardous substance or solid waste on or to
such real property in any manner or quantities which would be deemed a violation
of the Applicable Environmental Laws. As used herein, the terms "hazardous
substance" and "release" as used in this Section shall have the meanings
specified in CERCLA (as defined in the definition of Applicable Environmental
Laws), and the terms "solid waste" and "disposal" shall have the meanings
specified in RCRA (as defined in the definition of Applicable Environmental
Laws); provided, however, that if CERCLA or RCRA is amended so as to broaden the
meaning of any term defined thereby, such broader meaning shall apply subsequent
to the effective date of such amendment; and provided further, to the extent
that any other law applicable to any Borrower, any Subsidiary or any of their
properties establishes a meaning for "hazardous substance", "release,"
"solid waste," or "disposal" which is broader than that specified in either
CERCLA or RCRA, such broader meaning shall apply. The Borrowers jointly and
severally agree to indemnify and hold the Administrative Lender, the Issuing
Bank and each Lender harmless from and against, and to reimburse them with
respect to, any and all claims, demands, causes of action, loss, damage,
liabilities, costs and expenses (including attorneys' fees and courts costs) of
any kind or character, known or unknown, fixed or contingent, asserted against
or incurred by any of them at any time and from time to time by reason of or
arising out of (a) the failure of any Borrower or Subsidiary to perform any
obligation hereunder regarding asbestos or Applicable Environmental Laws, (b)
any violation on or before the Release Date of any Applicable Environmental Law
in effect on or before the Release Date, and (c) any act, omission, event or
circumstance existing or occurring on or prior to the Release Date (including
without limitation the presence on such real property or release from such real
property of hazardous substances or solid wastes disposed of or otherwise
released on or prior to the Release Date), resulting from or in connection with
the ownership of the real property, regardless of whether the act, omission,
event or circumstance constituted a violation of any Applicable Environmental
Law at the time of its existence or occurrence, or whether the act, omission,
event or circumstance is caused by or relates to the negligence of any
indemnified Person; provided that, no Borrower shall be under any obligation to
indemnify the Administrative Lender, the Issuing Bank or any Lender to the
extent that any such liability arises as the result of the gross negligence or
willful misconduct of such Person, as finally judicially determined by a court
of competent jurisdiction. The provisions of this paragraph shall survive the
Release Date and shall continue thereafter in full force and effect.
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Section 5.12 Interest Rate Hedging. Within 90 days after the Agreement
Date, the Borrower will hedge its interest rate exposure pursuant to and in
accordance with Interest Hedge Agreements, in an amount not less than 50% of the
difference between outstanding Advances on any day after the Agreement Date
minus $5,000,000; provided, however, that any such Interest Hedge Agreement
shall be on terms and conditions mutually acceptable to the Borrowers and the
Lenders.
ARTICLE 6
Information Covenants
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled), the Borrowers shall furnish or cause to be furnished to
the Administrative Lender:
Section 6.1 Quarterly Financial Statements and Information.
(a) Within 45 days after the end of each fiscal quarter, cash balance
sheets of each Borrower and each Subsidiary detailing tangible cash exchanges as
at the end of such quarter and the related cash statements of income and
statements of changes in cash of each Borrower and each Subsidiary for such
quarter and for the elapsed portion of the year ended with the last day of such
quarter, all of which shall be certified by the president, vice president,
treasurer or chief financial officer of the Borrowers or of the general partner
of the Borrowers, as applicable, to be, in his or her opinion, complete and
correct in all material respects and to present fairly, the financial position
and results of operations of the Borrowers and the Subsidiaries as at the end of
and for such period, and for the elapsed portion of the year ended with the last
day of such period, subject only to normal year-end adjustments. In addition,
the Borrowers shall furnish within such time period a reconciliation of such
financial statements setting forth the difference in financial position and
results of operations between its Subsidiaries and its Subsidiaries for such
period and for the elapsed portion of the year ended with the last day on such
period, subject to sound year-end adjustments.
(b) Within 60 days after the end of each fiscal quarter, combined and
combining balance sheets of the Borrowers and the Subsidiaries as at the end of
such quarter and the related combined and combining statements of income and
combined statements of changes in cash for such quarter and for the elapsed
portion of the year ended with the last day of such quarter, all of which shall
(i) be certified by the president, vice president, treasurer or chief financial
officer of the Borrowers or of the general partner of the Borrowers, as
applicable, to be, in his or her opinion, complete and correct in all material
respects and to present fairly, in accordance with GAAP, the financial position
and results of operations of the Borrowers and the Subsidiaries as at the end of
and for such period, and for the elapsed portion of the year ended with the last
day of such period, subject only to normal year-end adjustments and (ii) detail
separately tangible cash exchange items and intangible and barter exchange
items. In addition, the Borrowers shall
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furnish within such time period a reconciliation of such financial statements
setting forth the difference in financial position and results of operations
between its Subsidiaries and its Subsidiaries for such period and for the
elapsed portion of the year ended with the last day on such period, subject to
sound year-end adjustments.
Section 6.2 Annual Financial Statements and Information; Certificate of No
Default.
(a) Within 90 days after the end of each fiscal year, a copy of (i) the
cash balance sheet of each Borrower and each Subsidiary, as of the end of the
current and prior fiscal years and (ii) cash statements of earnings, statements
of changes in shareholders' equity, and statements of changes in cash of each
Borrower and each Subsidiary as of and through the end of such fiscal year, all
of which are certified by independent certified public accountants acceptable to
the Lenders, whose opinion shall be in scope and substance in accordance with
generally accepted auditing standards and shall contain only such qualifications
as may be acceptable to the Administrative Lender. In addition, the Borrowers
shall furnish within such time period an unaudited reconciliation of such
financial statements setting forth the difference in financial portion and
results of operations between its Subsidiaries and its Subsidiaries as of and
through the end of such fiscal year.
(b) Within 120 days after the end of each fiscal year, a copy of (i) the
combined and combining balance sheet of the Borrowers and the Subsidiaries, as
of the end of the current and prior fiscal years and (ii) combined and combining
statements of earnings, statements of changes in shareholders' equity, and
statements of changes in cash as of and through the end of such fiscal year, all
of which (A) are prepared in accordance with GAAP, and certified by independent
certified public accountants acceptable to the Lenders, whose opinion shall be
in scope and substance in accordance with generally accepted auditing standards
and shall contain only such qualifications as may be acceptable to the
Administrative Lender and (B) shall detail separately tangible cash exchange
items and intangible and barter exchange items. In addition, the Borrowers shall
furnish within such time period an unaudited reconciliation of such financial
statements setting forth the difference in financial portion and results of
operations between its Subsidiaries and its Subsidiaries as of and through the
end of such fiscal year.
(c) Simultaneously with the delivery of the statements required by this
Section 6.2, a letter from the Borrowers' public accountants certifying that no
Default was detected during the examination of the Borrowers and the
Subsidiaries, and authorizing the Borrowers to deliver such financial
statements and opinion thereon to the Administrative Lender and Lenders pursuant
to this Agreement.
(d) As soon as available, but in any event within 60 days following the end
of each fiscal year, a copy of the annual combined operating budget of the
Borrowers and the Subsidiaries for the succeeding fiscal year.
Section 6.3 Compliance Certificates. At the time financial statements are
furnished pursuant to Sections 6.1 and 6.2 hereof, a certificate of an
Authorized Signatory:
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(a) setting forth at the end of such period, a calculation of the Leverage
Ratio, as well as certifications and arithmetical calculations required to
establish whether the Borrowers and the Subsidiaries were in compliance with the
requirements of Sections 7.1 (e) and (f), 7.3 (g), 7.6, 7.10, 7.11, 7.12, 7.18
and 7.19 hereof, which shall be substantially in the form of Exhibit G hereto;
(b) setting forth the aggregate amount of outstanding Advances and
Reimbursement Obligations and certifying as to compliance herewith; and
(c) stating that, to the best of his or her knowledge after due inquiry, no
Default has occurred as at the end of such period, or if a Default has occurred,
disclosing each such Default and its nature, when it occurred, whether it is
continuing and the steps being taken with respect to such Default.
Section 6.4 Copies of Other Reports and Notices.
Promptly upon their becoming available, a copy of (i) all material reports
or letters submitted to any Borrower or Subsidiary by accountants in connection
with any annual, interim or special audit, including without limitation any
report prepared in connection with the annual audit referred to in Section 6.2
hereof, and any other comment letter submitted to management in connection with
any such audit, (ii) each financial statement, report, notice or proxy statement
sent by any Borrower or Subsidiary to stockholders generally, (iii) each regular
or periodic report and any registration statement (other than statements on Form
S-8) or prospectus (or material written communication in respect of any thereof)
fried by any Borrower or Subsidiary with any securities exchange, with the
Securities and Exchange Commission or any successor agency, and (iv) all press
releases concerning material financial aspects of any Borrower or Subsidiary;
(b) Promptly upon becoming aware that (i) the holder(s) of any note(s) or
other evidence of indebtedness or other security of any Borrower or Subsidiary
in excess of $250,000 in the aggregate has given notice or taken any action with
respect to a breach, failure to perform, claimed default or event of default
thereunder, (ii) any party to any Capitalized Lease Obligations or any local
marketing agreement has given notice or taken any action with respect to a
breach, failure to perform, claimed default or event of default thereunder,
(iii) any occurrence or non-occurrence of any event which constitutes or which
with the passage of time or giving of notice or both could constitute a material
breach by any Borrower or Subsidiary under any material agreement or instrument
which could reasonably be expected to result in a liability in excess of
$250,000, other than this Agreement to which any Borrower or Subsidiary is a
party or by which any of their properties may be bound, or (iv) any event,
circumstance or condition which could reasonably be expected to have a Material
Adverse Effect, a written notice specifying the details thereof (or the nature
of any claimed default or event of default) and what action is being taken or is
proposed to be taken with respect thereto; provided, however, no notice shall be
required to be delivered hereunder with respect to any event, circumstance or
condition set forth in clause (i), (ii) or (iii) immediately preceding if, in
the opinion of counsel
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to such Borrower or Subsidiary, there is no reasonable possibility of an adverse
determination with respect to event, circumstance or condition;
(c) Promptly upon receipt thereof, information with respect to and copies
of any notices received from any federal, state or local regulatory agencies or
any tribunal relating to any order, ruling, law, information or policy that
could reasonably be expected to result in the payment of money by any Borrower
or Subsidiary in an amount of $250,000 or more in the aggregate, or otherwise
have a Material Adverse Effect, or result in the loss or suspension of any
Necessary Authorization; provided, however, no information shall be required to
be delivered hereunder if, in the opinion of counsel to such Borrower or
Subsidiary, there is no reasonable possibility of an adverse determination with
respect to such notice;
(d) Promptly upon receipt from any governmental agency, or any government,
political subdivision or other entity, any material notice, correspondence,
hearing, proceeding or order regarding or affecting any Borrower, any
Subsidiary, or any of their properties or businesses; and
(e) From time to time and promptly upon each request, such data,
certificates, reports, statements, opinions of counsel, documents or further
information regarding the assets, business, liabilities, financial position,
projections, results of operations or business prospects of any Borrowers or
Subsidiary, as the Administrative Lender or any Lender may reasonably request.
Section 6.5 Notice of Litigation, Default and Other Matters. Prompt notice
of the following events after any Borrower has knowledge or notice thereof:
(a) The commencement of all proceedings and investigations by or before any
Governmental Authority, and all actions and proceedings in any court or before
any arbitrator involving claims for damages, fines or penalties (including
punitive damages) in excess of $250,000 in aggregate (after deducting the amount
for which any Borrower or Subsidiary is insured), against or in any other way
relating directly to any Borrower, any Subsidiary, or any of their properties or
businesses; provided, however, no notice shall be required to be delivered
hereunder if, in the opinion of counsel to such Borrower or such Subsidiary,
there is no reasonable possibility of an adverse determination in such action or
proceeding;
(b) Promptly upon the happening of any condition or event which constitutes
a Default, a written notice specifying the nature and period of existence
thereof and what action is being taken or is proposed to be taken with respect
thereto; and
(c) Any material adverse change with respect to the business, assets,
liabilities financial position, results of operations or prospective business of
any Borrower or Subsidiary, other than changes in the ordinary course of
business which have not had and are not likely to have a Material Adverse
Effect.
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Section 6.6 ERISA Reporting Requirements.
(a) Promptly and in any event (i) within 30 days after any Borrower or any
member of its Controlled Group knows or has reason to know that any ERISA Event
described in clause (a) of the definition of ERISA Event or any event described
in Section 4063(a) of ERISA with respect to any Plan of any Borrower or any
member of its Controlled Group has occurred, and (ii) within 10 days after any
Borrower or any member of its Controlled Group knows or has reason to know that
any other ERISA Event with respect to any Plan of any Borrower or any member of
its Controlled Group has occurred or a request for a minimum funding waiver
under Section 412 of the Code with respect to any Plan of any Borrower or any
member of its Controlled Group, a written notice describing such event and
describing what action is being taken or is proposed to be taken with respect
thereto, together with a copy of any notice of event that is given to the PBGC;
(b) Promptly and in any event within two Business Days after receipt
thereof by any Borrower or any member of its Controlled Group from the PBGC,
copies of each notice received by such Borrower or any member of its Controlled
Group of the PBGC's intention to terminate any Plan or to have a trustee
appointed to administer any Plan;
(c) Promptly and in any event within 30 days after the filing thereof by
any Borrower or any member of its Controlled Group with the United States
Department of Labor, the Internal Revenue Service or the PBGC, copies of each
annual and other report (including Schedule B thereto) with respect to each
Plan;
(d) Promptly and in any event within 30 days after receipt thereof, a copy
of any notice, determination letter, ruling or opinion any Borrower or any
member of its Controlled Group receives from the PBGC, the United States
Department of Labor or the Internal Revenue Service with respect to any Plan;
(e) Promptly, and in any event within 10 Business Days after receipt
thereof, a copy of any correspondence any Borrower or any member of its
Controlled Group receives from the Plan Sponsor (as defined by Section
4001(a)(10) of ERISA) of any Plan concerning potential withdrawal liability
pursuant to Section 4219 or 4202 of ERISA, and a statement from the chief
financial officer of such Borrower or such member of its Controlled Group
setting forth details as to the events giving rise to such potential withdrawal
liability and the action which such Borrower or such member of its Controlled
Group is taking or proposes to take with respect thereto;
(f) Notification within 30 days of any material increases in the benefits
of any existing Plan which is not a Multiemployer Plan, or the establishment of
any new Plans, or the commencement of contributions to any Plan to which any
Borrower or any member of its Controlled Group was not previously contributing;
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(g) Notification within three Business Days after any Borrower or any
member of its Controlled Group knows or has reason to know that any Borrower or
any such member of its Controlled Group has or intends to file a notice of
intent to terminate any Plan under a distress termination within the meaning of
Section 4041(c) of ERISA and a copy of such notice; and
(h) Promptly after receipt of written notice of commencement thereof,
notice of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting any Borrower or any member of its Controlled Group with
respect to any Plan, except those which, in the aggregate, if adversely
determined could not have a Material Adverse Effect.
ARTICLE 7
Negative Covenants
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 7.1 Indebtedness. The Borrowers shall not, and shall not permit any
Subsidiary to, create, assume, incur or otherwise become or remain obligated in
respect of, or permit to be outstanding, or suffer to exist any Indebtedness,
except:
(a) Indebtedness of the Borrowers and the Subsidiaries under the Loan
Documents;
(b) Accounts payable of the Borrowers and the Subsidiaries incurred in the
ordinary course of business;
(c) Indebtedness of the Borrowers and the Subsidiaries evidenced by the
Intercompany Notes;
(d) Indebtedness of the Borrowers and the Subsidiaries set forth on
Schedule 8 hereto, and all renewals and extensions (but not increases) thereof;
(e) Subordinated Debt of the Borrowers and the Subsidiaries not to exceed
$2,500,000 in aggregate amount, provided that the Lenders shall have received at
least 10 Business Days prior to the incurrence of any Subordinated Debt a
Compliance Certificate setting forth on a pro-forma basis, taking into account
the proposed incurrence of the Subordinated Debt for the four fiscal quarters
immediately preceding the date of determination, the covenant calculations
described in Section 6.3(a) hereof; and
(f) Other Indebtedness of the Borrowers and the Subsidiaries not to exceed
$500,000 in aggregate amount;
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provided, however, the incurrence of Indebtedness otherwise permitted pursuant
to clauses (c), (e) and (f) immediately preceding shall be permitted only if
there shall exist no Default prior to or after giving effect to any such
proposed Indebtedness.
Section 7.2 Liens. The Borrowers shall not, and shall not permit any
Subsidiary to, create, assume, incur, permit or suffer to exist, directly or
indirectly, any Lien on any of their assets, whether now owned or hereafter
acquired, except Permitted Liens. The Borrowers shall not, and shall not permit
any Subsidiary to, agree with any other Person that it shall not create, assume,
incur, permit or suffer to exist or to be created, assumed, incurred or
permitted to exist, directly or indirectly, any Lien on any of its assets.
Section 7.3 Investments. The Borrowers shall not, and shall not permit any
Subsidiary to, make, own or maintain any Investment, except that the Borrowers
may purchase or otherwise acquire and own and maintain:
(a) Marketable, direct obligations of, or guaranteed by, the United States
of America and maturing within 365 days of the date of purchase;
(b) Commercial paper maturing not more than 1 year from the date of
creation having a rating of A-l/P-1 or better by Moody's Investors Service, Inc.
or Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., a New York
corporation;
(c) Certificates of deposit of domestic banks maturing within 365 days of
the date of purchase, which banks' debt obligations have one of the two highest
ratings obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc., a New York corporation;
(d) Securities issued by U.S. corporations that have one of the two highest
ratings obtainable from Moody' s Investors Service, Inc. or Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc., a New York corporation;
(e) Accounts receivable that arise in the ordinary course of business and
are payable on standard terms;
(f) Investments in existence on the Agreement Date which are described on
Schedule 7 hereto; and
(g) Other Investments primarily related to the Borrowers' Business not to
exceed $100,000 in aggregate amount provided that no Default exists prior to or
after giving effect to such an Investment.
Section 7.4 Amendment and Waiver. Except in connection with any merger or
consolidation permitted pursuant to Section 7.5(b) hereof, the Borrowers shall
not, and shall not permit any Subsidiary to, enter into any amendment of any
material term or provision of its
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articles of incorporation, by-laws, or partnership agreement, as applicable. In
addition, the Borrowers shall not, and shall not permit any Subsidiary to, enter
into any amendment of, or agree to or accept any waiver of any of the provisions
of, any Necessary Authorization, unless (a) the Determining Lenders consent to
such amendment and (b) the Lenders are provided with 10 days' written notice
prior to the execution or effectiveness of the proposed amendment or waiver.
Section 7.5 Liquidation, Disposition or Acquisition of Assets, Merger, New
Subsidiaries. The Borrowers shall not, and shall not permit any Subsidiary to,
at any time:
(a) liquidate or dissolve itself (or suffer any liquidation or dissolution)
or otherwise wind up; or sell, lease, abandon, transfer or otherwise dispose of
all or any part of its assets, properties or business, other than immaterial
assets sold in the ordinary course of business;
(b) enter into any merger or consolidation; provided, however, that, so
long as there shall exist no Default prior to or after giving effect to a
proposed transaction, any Borrower or any Subsidiary may merge or consolidate
with another Person, so long as (i) the Lenders shall have received prior
written notice at least 30 Business Days prior to the date of such transaction,
(ii) the Administrative Lender shall have received at least 10 Business Days
prior to the date of such transaction a Compliance Certificate in the form
required by Section 6.3 hereof, but setting forth the covenant calculations
described in Section 6.3(a) hereof both prior to and after giving effect to the
proposed merger or consolidation, (iii) such merger or consolidation shall be
pursuant to documentation acceptable to the Administrative Lender, (iv) the
Person with whom such merger or consolidation is being consummated with shall be
engaged in the Borrowers' Business, (v) such Borrower or Subsidiary shall be the
surviving entity, provided, that if a Borrower merges or consolidates with a
Subsidiary, either (Y) such Borrower shall be the surviving entity, or (Z) such
Subsidiary shall have become a Borrower hereunder and all of the conditions
precedent to the initial Advance to additional Borrowers set forth in Section
3.3 hereof shall have been satisfied with respect to such Subsidiary, and (vi)
the Administrative Lender shall have received copies of all documents,
instruments, opinions and other information relating to the seller and assets to
be acquired as it may reasonably request; or
(c) create or acquire any Subsidiary, except as permitted by Section 7.6.
Section 7.6 Acquisitions. The Borrowers shall not, and shall not permit any
Subsidiary to make (a) except for the Acquisition of Charlotte Traffic Control,
Inc., any single Acquisition during the period commencing on the Agreement Date
and ending on June 30, 1995, or during any fiscal year ending after June 30,
1995, the Acquisition Consideration for which exceeds $500,000; (b) any single
Acquisition during the period commencing on the Agreement Date and ending on
June 30, 1995, or during any fiscal year ending after June 30, 1995, if, during
any such period, aggregate Acquisition Consideration given by the Borrowers and
the Subsidiaries for Acquisitions prior to such Acquisition shall have equalled
or exceeded $2,500,000; and (c) any Acquisition, including, without limitation,
the Acquisition of Charlotte Traffic Control,
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Inc., unless (i) the Lenders shall have received prior written notice at least
30 Business Days prior to the date of such transaction, (ii) the Administrative
Lender shall have received at least 10 Business Days prior to the date of such
transaction a Compliance Certificate in the form required by Section 6.3 hereof,
but setting forth the covenant calculations described in Section 6.3(a) hereof
both prior to and after giving effect to the proposed transaction, (iii) no
Default or Event of Default shall exist prior to or after such Acquisition, (iv)
the Person who is, or whose assets are being, acquired is engaged in the
Borrowers' Business, (v) the capital stock, partnership interests and
Intercompany Notes, as applicable, of the Subsidiary being acquired are pledged
pursuant to the appropriate Pledge Agreement, (vi) the assets of the Subsidiary
being acquired, or the assets being acquired, are pledged pursuant to the
appropriate Security Agreement, and (vii) the Subsidiary being acquired becomes
party to a Subsidiary Guaranty.
Section 7.7 Dividends. The Borrowers shall not, and shall not permit any
Subsidiary to, directly or indirectly declare or pay any Dividend; provided,
however, (a) any Subsidiary may declare and pay Dividends to the Borrowers or to
any other Subsidiary, (b) so long as (i) there exists no Default or Event of
Default before and after such payment, (ii) the Borrowers have delivered to the
Lenders a Compliance Certificate, demonstrating such compliance after giving
effect to any such Dividend, and (iii) all the conditions precedent to the
initial Advance to MNLP set forth in Section 3.2 hereof shall have been
satisfied, a one-time payment of Dividends to David Saperstein used solely for
the purpose of capitalizing MNLP not to exceed $2,000,000 in aggregate amount,
and (c) so long as (i) there exists no Default or Event of Default before and
after such payment and the Borrowers have delivered to the Lenders a Compliance
Certificate demonstrating such compliance after giving effect to any Cash Tax
Dividends and (ii) each shareholder and partner, as applicable, of the Borrowers
delivers to the Lenders a certificate of each such shareholder and partner
executed by the President, Vice President, Treasurer, Chief Financial Officer or
auditor for such shareholder and partner, setting forth the amount of estimated
income Taxes payable by such shareholder and partner as a direct result of the
income of the Borrowers, taking into account all other Tax Benefits available to
such shareholder and partner, in detail reasonably sufficient to the Lenders,
Cash Tax Dividends payable to each shareholder and partner of the Borrowers, not
to exceed an amount per year in the aggregate equal to the aggregate income Tax
liability of such shareholder and partner set forth in the Certificates required
to be delivered by such shareholder and partner pursuant to this Section 7.7(b).
Section 7.8 Affiliate Transactions. Except for transactions between
Borrowers between any Borrower and Metro Reciprocal, Inc. and Metro Video News,
Inc. or between Metro Reciprocal, Inc. and Metro Video News, Inc., the Borrowers
shall not, and shall not permit any Subsidiary to, at any time engage in any
transaction with an Affiliate, nor make an assignment or other transfer of any
of its assets or properties to any Affiliate, on terms materially less
advantageous to the Borrowers or such Subsidiary than would be the case if such
transaction had been effected with a non-Affiliate (other than advances to
employees in the ordinary course of business). Notwithstanding the foregoing,
the Borrowers may loan the proceeds of Advances to Subsidiaries, so long as (a)
there shall exist no Default prior to or after giving effect to such
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proposed loan, (b) such advances are evidenced by Intercompany Notes that have
been pledged pursuant to the Pledge Agreements and for which entries in the
financial records of the Borrowers and the Subsidiaries are made evidencing
such loans and repayments thereof, (c) the Subsidiary to which such advance is
being made has (i) pledged its assets pursuant to the Subsidiary Security
Agreement, (ii) become a party to the SubSidiary Guaranty, and (d) the capital
and stock of the Subsidiary to which such an advance is being made has been
pledged pursuant to the appropriate Pledge Agreement.
Section 7.9 Compliance with ERISA. The Borrowers shall not, and shall not
permit any Subsidiary to, directly or indirectly, or permit any member of its
Controlled Group to directly or indirectly, (a) terminate any Plan so as to
result in any material (in the opinion of the Determining Lenders) liability to
any Borrower or any member of its Controlled Group, (b) permit to exist any
ERISA Event, or any other event or condition which presents the risk of a
material (in the opinion of the Determining Lenders) liability of any Borrower
or any member of its Controlled Group, (c) make a complete or partial withdrawal
(within the meaning of Section 4201 of ERISA) from any Multiemployer Plan so as
to result in any material (in the opinion of the Determining Lenders) liability
to any Borrower or any member of its Controlled Group, (d) enter into any new
Plan or modify any existing Plan so as to increase its obligations thereunder
except in the ordinary course of business consistent with past practice which
could result in any material (in the opinion of the Determining Lenders)
liability to any Borrower or any member of its Controlled Group, or (e) permit
the present value of all benefit liabilities, as defined in Title IV of ERISA,
under each Plan of any Borrower or any member of its Controlled Group (using the
actuarial assumptions utilized by the PBGC upon termination of a plan) to
materially (in the opinion of the Determining Lenders) exceed the fair market
value of Plan assets allocable to such benefits all determined as of the most
recent valuation date for each such Plan.
Section 7.10 Leverage Ratio. At the end of each fiscal quarter occurring
during the periods indicated below, the Borrowers, on a combined basis, shall
not permit the Leverage Ratio to be greater than:
Period Ratio
------ -----
From date hereof through June 30, 1995 2.50 to 1
September 30, 1995 through June 30, 1996 2.00 to 1
September 30, 1996 and thereafter 1.50 to 1
Section 7.11 Fixed Charges Coverage Ratio. The Borrowers, on a combined
basis shall not permit the ratio of (a) Operating Cash Flow for the four fiscal
quarters then ending to (b) Fixed Charges for such fiscal quarters to be, as of
the last day of any fiscal quarter during the term of this Agreement, to be less
than 1.35 to 1.
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Section 7.12 Debt Service Coverage Ratio. The Borrowers, on a combined
basis, shall not permit the ratio of (a) Operating Cash Flow for the four fiscal
quarters then ending, to (b) Pro-Forma Debt Service for the four succeeding
fiscal quarters, to be less than 1.75 to 1 at the end of each fiscal quarter
during the term of this Agreement.
Section 7.13 Capital Stock of the Borrowers. No Borrower shall, and no
Borrower shall permit any Subsidiary to, make or permit any issuance, transfer,
assignment, distribution, mortgage, pledge or gift of any shares of Pledged
Stock, except in connection with issuances permitted by Schedule 5 hereto and
then only if such shares are pledged and delivered to the Administrative Lender
pursuant to the Pledge Agreements.
Section 7.14 Sale and Leaseback. The Borrowers shall not, and shall not
permit any Subsidiary to, enter into any arrangement whereby it sells or
transfers any of its assets, and thereafter rents or leases such assets.
Section 7.15 Sale or Discount of Receivables. No Borrower shall, and no
Borrower shall permit any Subsidiary to, directly or indirectly sell, with or
without recourse, for discount or otherwise, any notes or accounts receivable.
Section 7.16 Conduct of Business. The Borrowers shall not, and shall not
permit any Subsidiary to, engage in any type of business except the Borrowers'
Business.
Section 7.17 Subordinated Debt. The Borrowers shall not, and shall not
permit any Subsidiary to, (a) after the occurrence and during the continuance of
a Default or Event of Default, make any payment of principal, interest, premium,
fee or otherwise with respect to Subordinated Debt, (b) prepay, redeem,
repurchase or defease, or set aside funds for the prepayment, redemption,
repurchase or defeasance of all or any portion of the Subordinated Debt or (c)
amend or change (or take any action or fail to take any action the result of
which is an effective amendment or change) or accept any waiver or consent with
respect to, any document or instrument in connection with any Subordinated Debt
that would result in (i) an increase in the outstanding principal amount of the
Subordinated Debt, (ii) a change in any principal, interest, fees, or other
amounts payable under the Subordinated Debt (including without limitation a
waiver or action that results in the waiver of any payment default under the
Subordinated Debt), (iii) a change in any date fixed for any payment of
principal, interest, fees, or other amounts payable under the Subordinated Debt
(including, without limitation, as a result of any redemption, defeasance or
otherwise), (iv) a change in any percentage of holders of the Subordinated Debt
required to take (or refrain from taking) any action, (v) a change in any
financial covenant, (vi) a change in any remedy or right of the holders of the
Subordinated Debt, (vii) a change in any covenant, term or provision which would
result in such term or provision being more restrictive than the terms of this
Agreement and the other Loan Documents, (viii) a change that grants or permits
the granting of any security interest or Lien on any asset or property of any
Borrower or any Subsidiary to secure any Subordinated Debt, or (ix) a change in
any term or provision of any document or instrument in connection with any
Subordinated Debt that could have, in any material respect, an adverse effect on
the interests of Lenders.
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Section 7.18 Executive Compensation. Total cash compensation to David
Saperstein during any fiscal year, including, without limitation, salary, bonus
and Dividends (but excluding Cash Tax Dividends) shall not exceed the sum of (i)
$950,000, plus (ii) 35% of Adjusted Excess Cash Flow.
Section 7.19 Radio Affiliate Contracts. The aggregate number of Radio
Affiliate Contracts of the Borrowers and the Subsidiaries, collectively,
existing as of the last day of any fiscal quarter of the Borrowers shall not be
less than the aggregate number of Radio Affiliate Contracts of the Borrowers and
the Subsidiaries, collectively, existing as of the last day of the immediately
preceding fiscal quarter; provided, however, that no Event of Default shall
occur as a result of a violation of this Section 7.19 unless such violation
exists for two consecutive fiscal quarters.
ARTICLE 8
Default
Section 8.1 Events of Default. Each of the following shall constitute an
Event of Default, whatever the reason for such event, and whether voluntary,
involuntary, or effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental or
non-governmental body:
(a) Any representation or warranty made under any Loan Document shall prove
to have been incorrect or misleading in any material respect when made;
(b) Any Borrower shall default in the payment of (i) any interest under any
Note or any fees payable hereunder or any other costs, fees, expenses or other
amounts payable hereunder or under the Loan Documents, when due, which Default
is not cured by the earlier of two Business Days after notice (which may be
oral) from the Administrative Agent to the Notification Agent and three days
from the date such payment became due by payment of such late amount, or (ii)
any principal under any of the Notes;
(c) If any Letter of Credit shall be then outstanding, the Administrative
Lender may (or, upon the direction of the Determining Lenders, shall) demand
upon the Borrowers through the Notification Agent to, and forthwith upon such
demand, the Borrowers jointly and severally shall, pay to the Administrative
Lender in same day funds at the office of the Administrative Lender on such
demand for deposit in the L/C Cash Collateral Account, an amount equal to the
maximum amount available to be drawn under the Letters of Credit then
outstanding;
(d) Any Borrower or Subsidiary shall default in the performance or
observance of any agreement or covenant contained in Section 5.1 or Article 7
hereof;
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(e) Any Borrower or Subsidiary shall default in the performance or
observance of any other agreement or covenant contained in this Agreement not
specifically referred to elsewhere in this Section 8.1, and such default shall
not be cured within a period of 30 days after the earlier of written notice from
the Administrative Lender thereof or actual notice thereof;
(f) There shall occur any default or breach in the performance or
observance of any agreement or covenant (after the expiration of any applicable
grace period) or breach of any representation or warranty contained in any of
the Loan Documents (other than this Agreement);
(g) There shall be entered a decree or order by a court having jurisdiction
in the premises constituting an order for relief in respect of any Borrower or
Subsidiary under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable Federal or state bankruptcy law or
other similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or similar official of any Borrower or Subsidiary, or of
any substantial part of their respective properties, or ordering the winding-up
or liquidation of the affairs of any Borrower or Subsidiary, and any such decree
or order shall continue unstayed and in effect for a period of 60 consecutive
days;
(h) Any Borrower or Subsidiary shall file a petition, answer or consent
seeking relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable Federal or state bankruptcy law or
other similar law, or any Borrower or Subsidiary shall consent to the
institution of proceedings thereunder or to the filing of any such petition or
to the appointment or taking of possession of a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of any Borrower or
Subsidiary or of any substantial part of their respective properties, or any
Borrower or Subsidiary shall fail generally to pay its debts as they become due,
or any Borrower or Subsidiary shall take any action in furtherance of any such
action;
(i) A final judgment or judgments shall be entered by any court against any
Borrower or Subsidiary for the payment of money which exceeds $250,000 in the
aggregate, or a warrant of attachment or execution or similar process shall be
issued or levied against property of any Borrower or Subsidiary which, together
with all other such property of the Borrowers and the Subsidiaries subject to
other such process, exceeds in value $250,000 in the aggregate, and if such
judgment or award is not insured or, within 30 days after the entry, issue or
levy thereof, such judgment, warrant or process shall not have been paid or
discharged or stayed pending appeal, or if, after the expiration of any such
stay, such judgment, warrant or process shall not have been paid or discharged;
(j) With respect to any Plan of the Borrowers or any member of its
Controlled Group: (i) any Borrower, any such member, or any other
party-in-interest or disqualified person shall engage in transactions which in
the aggregate would reasonably result in a direct or indirect liability to the
Borrowers or any member of their Controlled Group in excess of $250,000 under
Section 409 or 502 of ERISA or Section 4975 of the Code; (ii) the Borrowers, any
one of them, or any member of their Controlled Group shall incur any accumulated
funding deficiency, as
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defined in Section 412 of the Code, in the aggregate in excess of $250,000, or
request a funding waiver from the Internal Revenue Service for contributions in
the aggregate in excess of $250,000; (iii) the Borrowers or any member of their
Controlled Group shall incur any withdrawal liability in the aggregate in excess
of $250,000 as a result of a complete or partial withdrawal within the meaning
of Section 4203 or 4205 of ERISA; (iv) the Borrowers or any member of their
Controlled Group shall fail to make a required contribution by the due date
under Section 412 of the Code or Section 302 of ERISA which would result in the
imposition of a lien under Section 412 of the Code or Section 302 of ERISA; (v)
the Borrowers, any member of their Controlled Group or any Plan sponsor shall
notify the PBGC of an intent to terminate, or the PBGC shall institute
proceedings to terminate, or the PBGC shall institute proceedings to terminate,
any Plan; (vi) a Reportable Event shall occur with respect to a Plan, and within
15 days after the reporting of such Reportable Event to the Administrative
Lender, the Administrative Lender shall have notified the Notification Agent in
writing that the Determining Lenders have made a determination that, on the
basis of such Reportable Event, there are reasonable grounds for the termination
of such Plan by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer such Plan and as a result thereof an
Event of Default shall have occurred hereunder; (vii) a trustee shall be
appointed by a court of competent jurisdiction to administer any Plan or the
assets thereof; (viii) the benefits of any Plan shall be increased, or any
Borrower or any member of its Controlled Group shall begin to maintain, or begin
to contribute to, any Plan, without the prior written consent of the Determining
Lenders; or (ix) any ERISA Event with respect to a Plan shall have occurred, and
30 days thereafter (A) such ERISA Event, other than such event described in
clause (vi) of the definition of ERISA Event herein, (if correctable) shall not
have been corrected and (B) the then present value of such Plan's benefit
liabilities, as defined in Title IV of ERISA, shall exceed the then current
value of assets accumulated in such Plan; provided, however, that the events
listed in subsections (v) through (ix) shall constitute Events of Default only
if, as of the date thereof or any subsequent date, the maximum amount of
liability that the Borrowers or any member of their Controlled Group could incur
in the aggregate under Section 4062, 4063, 4064, 4219 or 4023 of ERISA or any
other provision of law with respect to all such Plans, computed by the actuary
of the Plan taking into account any applicable rules and regulations of the PBGC
at such time, and based on the actuarial assumptions used by the Plan,
resulting from or otherwise associated with such event exceeds $250,000;
(k) All or any material portion of the Collateral or the Loan Documents
shall be the subject of any proceeding instituted by any Person other than a
Lender (except in connection with any Lender's exercise of any remedies under
the Loan Documents), or there shall exist any litigation or threatened
litigation with respect to all or any material portion of the Collateral or the
Loan Documents, or any Borrower or Subsidiary shall challenge in any manner
whatsoever the validity or enforceability of all or any portion of the Loan
Documents or the Collateral; provided, however, that during any such time any
such circumstance shall be bonded or stayed in accordance with Applicable Law
and to the satisfaction of the Determining Lenders, such circumstance shall not
be an Event of Default;
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(1) Any Borrower or Subsidiary shall default in the payment of any
Indebtedness in an aggregate amount of $250,000 or more beyond any grace period
provided with respect thereto, or shall default in the performance of any
agreement or instrument under which such Indebtedness is created or evidenced
beyond any applicable grace period or any event shall occur under such agreement
or instrument, if the effect of such default or event is to permit or cause the
holder of such Indebtedness (or a trustee on behalf of any such holder) to cause
such Indebtedness to become due prior to its date of maturity;
(m) All of the issued and outstanding capital stock or partnership
interests of (i) the Subsidiaries shall not be owned, directly or indirectly, by
a Borrower, (ii) Metro shall not be owned directly by David Saperstein, (iii)
all of the limited partnership interests of MNLP shall not be owned by David
Saperstein and the Trusts, and (iv) all of the general partnership interest of
MNLP shall not be owned by Metro;
(n) Any material Necessary Authorization shall be revoked; or there shall
occur a material default under any material Necessary Authorization by any
Borrower or Subsidiary beyond any applicable grace period; or any proceedings
shall in any way be brought by any Person to challenge the validity or
enforceability of any material Necessary Authorization; or proceedings for the
renewal of any material Necessary Authorization shall not be commenced at least
90 days prior to the expiration thereof; or any material Necessary Authorization
shall expire due to termination, nonrenewal or for any other reason, or shall be
designated for a revocation heating;
(o) The Dividends permitted pursuant to Section 7.7(b) hereof shall not
have been used for the purpose of capitalizing MNLP within five days of the
payment of such Dividends; or
(p) Any material provision of any Loan Document shall for any reason cease
to be valid and binding on or enforceable against any party to it (other than
the Administrative Lender or any Lender) in all material respects, or any such
party shall so state in writing.
Section 8.2 Remedies. If an Event of Default shall have occurred and shall
be continuing:
(a) With the exception of an Event of Default specified in Section 8.l(g)
or (h) hereof, the Administrative Lender shall, upon the direction of the
Determining Lenders, terminate the Commitments and/or declare the principal of
and interest on the Advances and all Obligations and other amounts owed under
the Loan Documents to be forthwith due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything in the Loan Documents to the contrary notwithstanding.
(b) Upon the occurrence of an Event of Default specified in Section 8.l(g)
or (h) hereof, such principal, interest and other amounts shall thereupon and
concurrently therewith become due and payable and the Commitments shall
forthwith terminate, all without any action
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by the Administrative Lender, any Lender or any holders of the Notes and without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in the Loan Documents to the contrary
notwithstanding.
(c) If any Letter of Credit shall be then outstanding, the Administrative
Lender may (or, upon the direction of the Determining Lenders, shall) demand
upon the Borrowers through the Notification Agent to, and forthwith upon such
demand, the Borrowers jointly and severally shall pay to the Administrative
Lender in same day funds at the office of the Administrative Lender on such
demand for deposit in the L/C Cash Collateral Account, an amount equal to the
maximum amount available to be drawn under the Letters of Credit then
outstanding.
(d) The Administrative Lender, and the Lenders may exercise all of the
post-default rights granted to them under the Loan Documents or under Applicable
Law.
(e) The rights and remedies of the Administrative Lender and the Lenders
hereunder shall be cumulative, and not exclusive.
ARTICLE 9
Changes in Circumstances
Section 9.1 LIBOR Basis Determination Inadequate. If with respect to any
proposed LIBOR Advance for any Interest Period, any Lender determines that (i)
deposits in dollars (in the applicable amount) are not being offered to that
Lender in the relevant market for such Interest Period or (ii) the LIBOR Basis
for such proposed LIBOR Advance does not adequately cover the cost to such
Lender of making and maintaining such proposed LIBOR Advance for such Interest
Period, such Lender shall forthwith give notice thereof to the Notification
Agent, whereupon until such Lender notifies the Notification Agent that the
circumstances giving rise to such situation no longer exist, the obligation of
such Lender to make LIBOR Advances shall be suspended.
Section 9.2 Illegality. If any applicable law, role or regulation, or any
change therein or adoption thereof, or interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Lender (or
its LIBOR Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency,
shall make it unlawful or impossible for such Lender (or its LIBOR Lending
Office) to make, maintain or fund its LIBOR Advances, such Lender shall so
notify the Administrative Lender and the Administrative Lender shall so notify
the Notification Agent. Before giving any notice to the Administrative Lender
pursuant to this Section, the notifying Lender shall designate a different LIBOR
Lending Office or other lending office if such designation will avoid the need
for giving such notice and will not, in the sole judgment of the Lender, be
materially disadvantageous to the Lender. Upon receipt of such notice by the
Notification Agent,
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notwithstanding anything contained in Article 2 hereof, the Borrowers jointly
and severally shall repay in full the then outstanding principal amount of each
LIBOR Advance owing to the notifying Lender, together with accrued interest
thereon, on either (a) the last day of the Interest Period applicable to such
Advance, if the Lender may lawfully continue to maintain and fund such Advance
to such day, or (b) immediately, if the Lender may not lawfully continue to fund
and maintain such Advance to such day. Concurrently with repaying each affected
LIBOR Advance owing to such Lender, notwithstanding anything contained in
Article 2 hereof, the Borrowers shall borrow a Prime Rate Advance from such
Lender, and such Lender shall make such Prime Rate Advance, in an amount such
that the outstanding principal amount of the Advances owing to such Lender shall
equal the outstanding principal amount of the Advances owing immediately prior
to such repayment.
Section 9.3 Increased Costs.
(a) If any applicable law, rule or regulation, or any change in or adoption
of any law, rule or regulation, or any interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof or compliance by any Lender (or
its LIBOR Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or compatible agency:
(i) shall subject a Lender (or its LIBOR Lending Office) to any tax,
duty or other charge (net of any tax benefit engendered thereby) with
respect to its LIBOR Advances or its obligation to make such Advances, or
shall change the basis of taxation of payments to a Lender (or to its LIBOR
Lending Office) of the principal of or interest on its LIBOR Advances or in
respect of any other amounts due under this Agreement, as the case may be,
or its obligation to make such Advances (except for changes in the rate of
tax on the overall net income of the Lender or its LIBOR Lending Office and
franchise taxes imposed upon such Lender); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, a Lender's
LIBOR Lending Office or shall impose on the Lender (or its LIBOR Lending
Office) or on the United States market for certificates of deposit or the
London interbank market any other condition affecting its LIBOR Advances
or its obligation to make such Advances;
and the result of any of the foregoing is to increase the cost to a Lender (or
its LIBOR Lending Office) of making or maintaining any LIBOR Advances, or to
reduce the amount of any sum received or receivable by a Lender (or its LIBOR
Lending Office) with respect thereto, by an amount deemed by a Lender to be
material, then, within 15 days after demand by a Lender to the Notification
Agent, the Borrowers jointly and severally agree to pay to such Lender such
additional amount as will compensate such Lender for such increased costs or
reduced amounts. The affected Lender will as soon as practicable notify the
Notification Agent of any event of
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which it has knowledge, occurring after the date hereof, which will entitle such
Lender to compensation pursuant to this Section and will designate a different
LIBOR Lending Office or other lending office if such designation will avoid the
need for, or reduce the amount of, such compensation and will not, in the sole
judgment of the affected Lender made in good faith, be disadvantageous to such
Lender,
(b) A certificate of any Lender claiming compensation under this Section
and setting forth the additional amounts to be paid to it hereunder and
calculations therefor shall be conclusive in the absence of manifest error. In
determining such amount, a Lender may use any reasonable averaging and
attribution methods. If a Lender demands compensation under this Section, the
Borrowers may at any time, upon at least five Business Days' prior notice to the
Lender by the Notification Agent, after reimbursement to the Lender by the
Borrowers in accordance with this Section of all costs incurred, prepay in full
the then outstanding LIBOR Advances of the Lender, together with accrued
interest thereon to the date of prepayment, along with any reimbursement
required under Section 2.9 hereof. Concurrently with prepaying such LIBOR
Advances, the Borrowers shall borrow a Prime Rate Advance from the Lender, and
the Lender shall make such Prime Rate Advance, in an amount such that the
outstanding principal amount of the Advances owing to such Lender shall equal
the outstanding principal amount of the Advances owing immediately prior to such
prepayment.
Section 9.4 Effect On Prime Rate Advances. If notice has been given
pursuant to Section 9.1, 9.2 or 9.3 hereof suspending the obligation of a Lender
to make LIBOR Advances, or requiring LIBOR Advances of a Lender to be repaid or
prepaid, then, unless and until the Lender notifies the Notification Agent that
the circumstances giving rise to such repayment no longer apply, all Advances
which would otherwise be made by such Lender as LIBOR Advances shall be made
instead as Prime Rate Advances.
Section 9.5 Capital Adequacy. If either (a) the introduction of or any
change in or in the interpretation of any law, rule or regulation or (b)
compliance by a Lender with any law, rule or regulation or any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of capital required
or expected to be maintained by a Lender or any corporation controlling such
Lender, and such Lender determines that the amount of such capital is increased
by or based upon the existence of such Lender's Commitment or Advances hereunder
and other commitments or advances of such Lender of this type, then, upon demand
by such Lender to the Notification Agent, subject to Section 11.9, the Borrowers
jointly and severally shall immediately pay to such Lender, from time to time as
specified by such Lender, additional amounts sufficient to compensate such
Lender with respect to such circumstances, to the extent that such Lender
reasonably determines in good faith such increase in capital to be allocable to
the existence of such Lender's Commitment hereunder. A certificate as to such
amounts submitted to the Notification Agent by a Lender hereunder, shall, in the
absence of demonstrable error, be conclusive and binding for all purposes.
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ARTICLE 10
AGREEMENT AMONG LENDERS
Section 10.1 Agreement Among Lenders. The Lenders agree among themselves that:
(a) Administrative Lender. Each Lender hereby appoints the
Administrative Lender as its nominee in its name and on its behalf, to receive
all documents and items to be furnished hereunder; to act as nominee for and on
behalf of all Lenders under the Loan Documents; to take such action as may be
requested by Determining Lenders, provided that, unless and until the
Administrative Lender shall have received such requests, the Administrative
Lender may take such administrative action, or refrain from taking such
administrative action, as it may deem advisable and in the best interests of the
Lenders; to arrange the means whereby the proceeds of the Advances of the
Lenders are to be made available to the Borrowers; to distribute promptly to
each Lender information, requests and documents received from the Borrowers and
the Notification Agent, and each payment (in like funds received) with respect
to any of such Lender's Advances, fee or other amount; and to deliver to the
Borrowers and the Notification Agent requests, demands, approvals and consents
received from the Lenders. Administrative Lender agrees to promptly distribute
to each Lender, at such Lender's address set forth below information, requests,
documents and payments received from the Borrowers and the Notification Agent.
(b) Replacement of Administrative Lender. Should the Administrative Lender
or any successor Administrative Lender ever cease to to be a Lender hereunder,
or should the Administrative Lender or any successor Administrative Lender ever
resign as Administrative Lender, or should the Administrative Lender or any
successor Administrative Lender ever be removed with cause by the Determining
Lenders, then the Lender appointed by the other Lenders shall forthwith become
the Administrative Lender, and the Borrowers and the Lenders shall execute such
documents as any Lender may reasonably request to reflect such change. Any
resignation or removal of the Administrative Lender or any successor
Administrative Lender shall become effective upon the appointment by the Lenders
of a successor Administrative Lender; provided, however, that if the Lenders
fail for any reason to appoint a successor within 60 days after such removal or
resignation, the Administrative Lender or any successor Administrative Lender
(as the case may be) shall thereafter have no obligation to act as
Administrative Lender hereunder.
(c) Expenses. Each Lender shall pay its pro rata share, based on its
Specified Percentage, of any expenses paid by the Administrative Lender directly
and solely in connection with any of the Loan Documents if Administrative Lender
does not receive reimbursement therefor from other sources within 60 days after
the date incurred, unless payment of such fees is being diligently disputed by
such Lender or the Borrowers in good faith. Any amount so paid by the Lenders to
the Administrative Lender shall be returned by the Administrative Lender pro
rata to each paying Lender to the extent later paid by the Borrowers or any
other Person on the Borrowers' behalf to the Administrative Lender.
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(d) Delegation of Duties. The Administrative Lender may execute any of its
duties hereunder by or through officers, directors, employees, attorneys or
agents, and shall be entitled to (and shall be protected in relying upon) advice
of counsel concerning all matters pertaining to its duties hereunder.
(e) Reliance by Administrative Lender. The Administrative Lender and its
officers, directors, employees, attorneys and agents shall be entitled to rely
and shall be fully protected in relying on any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telex or teletype
message, statement, order, or other document or conversation reasonably believed
by it or them in good faith to be genuine and correct and to have been signed or
made by the proper Person and, with respect to legal matters, upon opinions of
counsel selected the Administrative Lender. The Administrative Lender may, in
its reasonable judgment, deem and treat the payee of any Note as the owner
thereof for all purposes hereof.
(f) Limitation of Administrative Lender's Liability. Neither the
Administrative Lender nor any of its officers, directors, employees, attorneys
or agents shall be liable for any action taken or omitted to be taken by it or
them hereunder in good faith and believed by it or them to be within the
discretion or power conferred to it or them by the Loan Documents or be
responsible for the consequences of any error of judgment, except for its or
their own gross negligence or wilful misconduct. Except as aforesaid, the
Administrative Lender shall be under no duty to enforce any rights with respect
to any of the Advances, or any security therefor. The Administrative Lender
shall not be compelled to do any act hereunder or to take any action towards the
execution or enforcement of the powers hereby created or to prosecute or defend
any suit in respect hereof, unless indemnified to its satisfaction against loss,
cost, liability and expense. The Administrative Lender shall not be responsible
in any manner to any Lender for the effectiveness, enforceability, genuineness,
validity or due execution of any of the Loan Documents, or for any
representation, warranty, document, certificate, report or statement made herein
or furnished in connection with any Loan Documents, or be under any obligation
to any Lender to ascertain or to inquire as to the performance or observation of
any of the terms, covenants or conditions of any Loan Documents on the part of
the Borrowers. To the extent not reimbursed by the Borrowers, each Lender hereby
severally, but not jointly, indemnifies and holds harmless the Administrative
Lender, pro rata according to its Specified Percentage, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses and/or disbursements of any kind or nature whatsoever
which may be imposed on, asserted against, or incurred by the Administrative
Lender in any way With respect to any Loan Documents or any action taken or
omitted by the Administrative Lender under the Loan Documents (including any
negligent action of the Administrative Lender), except to the extent the same
result from gross negligence or wilful misconduct by the Administrative Lender.
(g) Liability Among Lenders. No Lender shall incur any liability (other
than the sharing of expenses and other matters specifically set forth herein and
in the other Loan Documents) to any other Lender, except for acts or omissions
in bad faith.
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(h) Rights as Lender. With respect to its commitment hereunder, the
Advances made by it and Note issued to it, the Administrative Lender shall have
the same rights as a Lender and may exercise the same as though it were not the
Administrative Lender, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Lender in its individual
capacity. The Administrative Lender or any Lender may accept deposits from, act
as trustee under indentures of, and generally engage in any kind of business
with, any Borrower and any of its Affiliates, and any Person who may do business
with or own securities of any Borrower or any of its Affiliates, all as if the
Administrative Lender were not the Administrative Lender hereunder and without
any duty to account therefor to the Lenders.
Section 10.2 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Lender or any other
Lender and based upon the financial statements referred to in Sections 4.1(j),
6.1 and 6.2 hereof, and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon the Administrative Lender or any other Lender and based upon such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
Section 10.3 Benefits of Article. None of the provisions of this Article
shall inure to the benefit of any Person other than Lenders or the Borrowers, as
applicable; consequently, no Person other than Lenders or the Borrowers shall be
entitled to rely upon, or to raise as a defense, in any manner whatsoever, the
failure of the Administrative Lender or any Lender to comply with such
provisions.
ARTICLE 11
Miscellaneous
Section 11.1 Notices.
(a) All notices and other communications under this Agreement shall be in
writing and shall be deemed to have been given on the date personally delivered
or sent by telecopy (answerback received), or three days after deposit in the
mail, designated as certified mail, return receipt requested, postage-prepaid,
or one day after being entrusted to a reputable commercial overnight delivery
service, or one day after being delivered to the telegraph office or sent out by
telex addressed to the party to which such notice is directed at its address
determined as provided in this Section. All notices and other communications
under this Agreement shall be given to the parties hereto at the following
addresses:
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(i) If to the Borrowers or the Notification Agent, at:
Metro Traffic Control, Inc.
2700 Post Oak Boulevard, Suite 1400
Houston, Texas, 77056
Attn: Robert Greer, Chief Financial Officer
(ii) If to the Administrative Lender, at:
NationsBank of Texas, N.A.
901 Main Street, 671h Floor
Dallas, Texas 75202
Attn: Chad Coben, Assistant Vice President
(iii) If to a Lender, at its address shown below its name on the
signature pages hereof, or if applicable, set forth in its
Assignment Agreement.
(b) Any party hereto may change the address to which notices shall be
directed by giving 10 days' written notice of such change to the other parties.
Section 11.2 Expenses. The Borrowers jointly and severally shall promptly
pay:
(a) all reasonable out-of-pocket expenses of the Administrative Lender in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents, the transactions contemplated hereunder
and thereunder, and the making of Advances and the issuance of Letters of Credit
hereunder, including without limitation the reasonable fees and disbursements of
Special Counsel;
(b) all reasonable out-of-pocket expenses of the Administrative Lender in
connection with the administration of the transactions contemplated in this
Agreement and the other Loan Documents, the preparation, negotiation, execution
and delivery of any waiver, amendment or consent by the Lenders relating to this
Agreement or the other Loan Documents; and
(c) all reasonable costs, out-of-pocket expenses and attorneys' fees of the
Administrative Lender and each Lender incurred for enforcement, collection,
restructuring, refinancing and "work-out", or otherwise incurred in obtaining
performance under the Loan Documents, and all reasonable costs and out-of-pocket
expenses of collection if default is made in the payment of the Notes, which in
each case shall include without limitation reasonable fees and expenses of
consultants, counsel for the Administrative Lender and any Lender, and
administrative fees for the Administrative Lender.
Section 11.3 Waivers. The rights and remedies of the Lenders under this
Agreement and the other Loan Documents shall be cumulative and not exclusive of
any rights or remedies which they would otherwise have. No failure or delay by
the Administrative Lender or any
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Lender in exercising any right shall operate as a waiver of such right. The
Lenders expressly reserve the right to require strict compliance with the terms
of this Agreement in connection with any funding of a request for an Advance and
the Issuing Bank expressly reserves the right to require strict compliance with
the terms of this Agreement in connection with any issuance of a Letter of
Credit. In the event that any Lender decides to fund an Advance or the Issuing
Bank decides to issue a Letter of Credit at a time when the Borrowers are not in
strict compliance with the terms of this Agreement, such decision by such Lender
shall not be deemed to constitute an undertaking by the Lender to fund any
further requests for Advances or by the Issuing Bank to issue any additional
Letter of Credit or preclude the Lenders from exercising any rights available
under the Loan Documents or at law or equity. Any waiver or indulgence granted
by the Lenders shall not constitute a modification of this Agreement, except to
the extent expressly provided in such waiver or indulgence, or constitute a
course of dealing by the Lenders at variance with the terms of the Agreement
such as to require further notice by the Lenders of the Lenders' intent to
require strict adherence to the terms of the Agreement in the future. Any such
actions shall not in any way affect the ability of the Administrative Lender or
the Lenders, in their discretion, to exercise any rights available to them under
this Agreement or under any other agreement, whether or not the Administrative
Lender or any of the Lenders are a party thereto, relating to the Borrowers.
Section 11.4 Determination by the Lenders Conclusive and Binding. Any
material determination required or expressly permitted to be made by the
Administrative Lender or any Lender under this Agreement shall be made in its
reasonable judgment and in good faith, and shall when made, prima facie evidence
of the matters asserted.
Section 11.5 Set-Off. In addition to any fights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender and any subsequent holder of any
Note, and any assignee or participant in any Note is hereby authorized by the
Borrowers at any time or from time to time, without notice to the Borrowers or
any other Person, any such notice being hereby expressly waived, to set-off,
appropriate and apply any deposits (general or special (except trust and escrow
accounts), time or demand, including without limitation Indebtedness evidenced
by certificates of deposit) and any other Indebtedness at any time held or owing
by such Lender which is then due and payable or holder to or for the credit or
the account of the Borrowers, against and on account of the Obligations which
are then due and payable and other liabilities of the Borrowers to such Lender
or holder, irrespective of whether or not the Lender or holder shall have made
any demand hereunder. Any sums obtained by any Lender or by any assignee,
participant or subsequent holder of any Note shall be subject to pro rata
treatment of all Obligations and other liabilities hereunder.
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Section 11.6 Assignment.
(a) Except in connection with any merger or consolidation permitted
pursuant to Section 7.5(b) hereof, the Borrowers may not assign or transfer any
of their respective rights or obligations hereunder or under the other Loan
Documents without the prior written consent of the Lenders.
(b) No Lender shall be entitled to assign its interest in this Agreement,
its Notes or its Advances, except as hereinafter set forth.
(c) A Lender may at any time sell participations in all or any part of its
Advances (collectively, "Participations") to any banks or other financial
institutions ("Participants") provided that such Participation shall not confer
on any Person (other than the parties hereto) any right to vote on, approve or
sign amendments or waivers, or any other independent benefit or any legal or
equitable right, remedy or other claim under this Agreement or any other Loan
Documents, other than the right to vote on, approve, or sign amendments or
waivers or consents with respect to items that would result in (i) any increase
in the commitment of any Participant; or (ii) (A) the extension of the date of
maturity of, or (B) the extension of the due date for any payment of principal,
interest or fees respecting, or (C) the reduction of the amount of any
installment of principal or interest on or the change or reduction of any
mandatory reduction required hereunder, or (D) a reduction of the rate of
interest on the Advances, the Letters of Credit, or the Reimbursement
Obligations, or change in Applicable Margin; or (iii) the release of security
for the Obligations, including without limitation any guarantee or Pledged
Stock; or (iv) the reduction of any fees payable hereunder. Notwithstanding the
foregoing, the Borrowers agree that the Participants shall be entitled to the
benefits of Article 9 and Section 11.5 hereof as though they were Lenders and
the Lenders may provide copies of all financial information received from the
Borrowers to such Participants. To the fullest extent it may effectively do so
under Applicable Law, the Borrowers agree that any Participant may exercise any
and all rights of banker's lien, set-off and counterclaim with respect to this
Participation as fully as if such Participant were the holder of the Advances in
the amount of its Participation.
(d) Each Lender may assign to one or more financial institutions or funds
organized under the laws of the United States, or any state thereof, or under
the laws of any other country that is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country,
which is engaged in making, purchasing or otherwise investing in commercial
loans in the ordinary course of its business (each, an "Assignee") its rights
and obligations under this Agreement and the other Loan Documents; provided,
however, that (i) each such assignment shall be subject to the prior written
consent of the Administrative Lender and Borrowers, which approval shall not be
unreasonably withheld (provided that without the consent of the Borrowers or the
Administrative Lender, any Lender may make assignments to its Affiliates or
another Lender), (ii) each such assignment shall be of a constant, and not a
varying, percentage of the Lender' s rights and obligations under this
Agreement, (iii) the amount of the Commitment, Advances and Reimbursement
Obligations being assigned pursuant to each such assignment (determined as of
the date of the assignment with respect to such assignment)
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shall in no event be less than $5,000,000 and which is an integral multiple of
$1,000,000, (iv) the applicable Lender, Administrative Lender and applicable
Assignee shall execute and deliver to the Administrative Lender an Assignment
and Acceptance Agreement (an "Assignment Agreement") in substantially the form
of Exhibit H hereto, together with the Notes subject to such assignment, (v)
the Assignee or the Lender executing the Assignment as the case may be, shall
deliver to the Administrative Lender a processing fee of $2,500, and (vi) in no
event shall NationsBank of Texas, N.A., hold less than 51% of the aggregate
Specified Percentages outstanding at any time. Upon such execution, delivery and
acceptance from and after the effective date specified in each Assignment, which
effective date shall be at least three Business Days after the execution
thereof, (A) the Assignee thereunder shall be party hereto and, to the extent
that fights and obligations hereunder have been assigned to it pursuant to such
Assignment, have the rights and obligations of a Lender hereunder and (B) the
Administrative Lender shall, to the extent that fights and obligations hereunder
have been assigned by it pursuant to such Assignment, relinquish such rights and
be released from such obligations under this Agreement. The Borrowers shall not
be liable for any fees or expenses of the Administrative Lender, any Lender, or
any Assignee, incurred in connection with such an Assignment.
(e) Notwithstanding anything in clause (d) above to the contrary, any
Lender may assign and pledge all or any portion of its Advances and Note to any
Federal Reserve Bank as collateral security pursuant to Regulation A of F.R.S.
Board and any Operating Circular issued by such Federal Reserve Bank; provided,
however, that no such assignment under this clause (e) shall release the
assignor Lender from its obligations hereunder.
(f) Upon the Notification Agent's receipt of an Assignment Agreement
executed by a Lender and an Assignee, and any Note or Notes subject to such
assignment, each Borrower shall, within three Business Days after the
Notification Agent's receipt of such Assignment Agreement, at its own expense,
execute and deliver to the Administrative Lender in exchange for the surrendered
Notes new Notes to the order of such Assignee in an amount equal to the portion
of the Advances, Reimbursement Obligations and Commitment assigned to it
pursuant to such Assignment Agreement and new Notes to the order of the
Administrative Lender in an amount equal to the portion of the Advances and
Commitment retained by it hereunder. Such new Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Notes, shall be dated the effective date of such Assignment Agreement and shall
otherwise be in substantially the form of Exhibit H hereto.
(g) No Lender may, without the prior consent of the Notification Agent,
which shall not be unreasonably withheld, in connection with any assignment or
Participation or proposed assignment or Participation pursuant to this Section
11.6, disclose to the Assignee or Participant or proposed Assignee or
Participant, any information (which is not otherwise publicly available)
relating to the Borrowers furnished to such Lender by or on behalf of the
Borrowers. The Notification Agent may not prohibit any Participation by
withholding its consent pursuant to this Section 11.6(g).
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(h) Except as specifically set forth in this Section 11.6, nothing in this
Agreement or any other Loan Documents, expressed or implied, is intended to
or shall confer on any Person other than the respective parties hereto and
thereto and their successors and assignees permitted hereunder and thereunder
any benefit or any legal or equitable right, remedy or other claim under this
Agreement or any other Loan Documents.
Section 11.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
Section 11.8 Severability. Any provision of this Agreement which is for any
reason prohibited or found or held invalid or unenforceable by any court or
governmental agency shall be ineffective to the extent of such prohibition or
invalidity or unenforceability without invalidating the remaining provisions
hereof in such jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 11.9 Interest and Charges. It is not the intention of any parties
to this Agreement to make an agreement in violation of the laws of any
applicable jurisdiction relating to usury. Regardless of any provision in any
Loan Documents, no Lender shall ever be entitled to receive, collect or apply,
as interest on the Obligations, any amount in excess of the Maximum Amount. If
any Lender or participant ever receives, collects or applies, as interest, any
such excess, such amount which would be excessive interest shall be deemed a
partial repayment of principal and treated hereunder as such; and ff principal
is paid in full, any remaining excess shall be paid to the Borrowers. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Maximum Amount, the Borrowers and the Lenders shall, to
the maximum extent permitted under Applicable Law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest,
(b) exclude voluntary prepayments and the effect thereof, and (c) amortize,
prorate, allocate and spread in equal parts, the total amount of interest
throughout the entire contemplated term of the Obligations so that the interest
rate is uniform throughout the entire term of the Obligations; provided,
however, that if the Obligations are paid and performed in full prior to the end
of the full contemplated term thereof, and if the interest received for the
actual period of existence thereof exceeds the Maximum Amount, the Lenders shall
refund to the Borrowers the amount of such excess or credit the amount of such
excess against the total principal amount of the Obligations owing, and, in such
event, the Lenders shall not be subject to any penalties provided by any laws
for contracting for, charging or receiving interest in excess of the Maximum
Amount. This Section shall control every other provision of all agreements
pertaining to the transactions contemplated by or contained in the Loan
Documents.
Section 11.10 Headings. Headings used in this Agreement are for convenience
only and shall not be used in connection with the interpretation of any
provision hereof.
Section 11.11 Amendment and Waiver. The provisions of this Agreement may
not be amended, modified or waived except by the written agreement of the
Borrowers and the
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Determining Lenders; provided, however, that no such amendment, modification or
waiver shall be made (a) without the consent of all Lenders, if it would (i)
increase the Specified Percentage or commitment of any Lender, or (ii) extend
the date of payment or maturity of, extend the due date for any payment of
principal or interest on, reduce the amount of any installment of principal or
interest on, or reduce the rate of interest on, any Advance, the Reimbursement
Obligations, fees or other amounts owing under any Loan Documents, or (iii)
release any security for or guaranty of the Obligations (except pursuant to this
Agreement), or (iv) reduce the fees payable hereunder, or (v) revise this
Section 11.11, or (vi) waive the date for payment of any of the Obligations, or
(vii) amend the definition of Determining Lenders, (viii) revise Sections
2.5(b), (c) or (d) hereof or (ix) revise Sections 2.6(b) or (c) hereof; or (b)
without the consent of the Administrative Lender, if it would alter the rights,
duties or obligations of the Administrative Lender. Neither this Agreement nor
any term hereof may be amended orally, nor may any provision hereof be waived
orally but only by an instrument in writing signed by the Administrative Lender
and, in the case of an amendment, by the Borrowers.
Section 11.12 Exception to Covenants. Neither the Borrowers nor any
Subsidiary shall be deemed to be permitted to take any action or fail to take
any action which is permitted as an exception to any of the covenants contained
herein or which is within the permissible limits of any of the covenants
contained herein if such action or omission would result in the breach of any
other covenant contained herein.
Section 11.13 No Liability of Issuing Bank. The Borrowers assume all risks
of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither the Issuing
Bank nor any Lender nor any of their respective officers or directors shall be
liable or responsible for: (a) the use that may be made of any Letter of Credit
or any acts or omissions of any beneficiary or transferee in connection
therewith; (b) the validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (c) payment by the Issuing
Bank against presentation of documents that do not comply with the terms of a
Letter of Credit, including failure of any documents to bear any reference or
adequate reference to the Letter of Credit, except for any payment made upon the
Issuing Bank's gross negligence or willful misconduct; or (d) any other
circumstances whatsoever in making or failing to make payment under any Letter
of Credit, except that the Borrowers shall have a claim against the Issuing
Bank, and the Issuing Bank shall be liable to the Borrowers, to the extent of
any direct, but not consequential, damages suffered by the Borrowers that the
Borrowers prove were caused by (i) the Issuing Bank's willful misconduct or
gross negligence in determining whether documents presented under any Letter of
Credit comply with the terms of the Letter of Credit or (ii) the Issuing Bank's
willful failure to make lawful payment under a Letter of Credit after the
presentation to it of a draft and certificates strictly complying with the terms
and conditions of the Letter of Credit. In furtherance and not in limitation of
the foregoing, the Issuing Bank may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary.
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Section 11.14 Credit Agreement Governs. In the event of any conflict
between the terms of this Agreement and any terms of any other Loan Document,
the terms of this Agreement shall control.
SECTION 11.15 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
TEXAS; PROVIDED, HOWEVER, THAT PURSUANT TO ARTICLE 5069-15.10(b), TITLE 79,
REVISED CIVIL STATUTES OF TEXAS, 1925, AS AMENDED, IT IS AGREED THAT THE
PROVISIONS OF CHAPTER 15, TITLE 79, REVISED CIVIL STATUTES OF TEXAS, 1925, AS
AMENDED, SHALL NOT APPLY TO THE ADVANCES, THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS. WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE BORROWERS AGREE THAT
THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL HAVE
JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
SECTION 11.16 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE
ADMINISTRATIVE LENDER AND THE LENDERS HEREBY KNOWINGLY VOLUNTARILY, IRREVOCABLY
AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO
ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS
PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING INTO THIS AGREEMENT
AND MAKING ANY ADVANCES HEREUNDER.
SECTION 11.17 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH
THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Section 11.18 Joint and Several Obligations of the Borrowers. Each Borrower
and the Lenders agree that the obligations and duties of the Borrowers
hereunder, and under each of the other Loan Documents, shall be joint and
several in all instances; provided, however, that anything contained in this
Agreement or in any other Loan Document to the contrary notwithstanding, the
obligations of each Borrower hereunder or in any other Loan Document shall be
limited to a maximum aggregate amount equal to the largest amount that would not
render its obligations hereunder or in any other Loan Document subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11
of the United States Code or any applicable provisions of comparable state law
(collectively, the "Fraudulent Transfer Laws"), in each case after giving effect
to all other liabilities of such Borrower, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding, however,
any liabilities of such Borrower in respect of intercompany indebtedness to
Affiliates of such
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Borrower to the extent that such indebtedness would be discharged in an amount
equal to the amount paid by such Borrower hereunder and after giving effect as
assets to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any fights to subrogation or contribution of such
Borrower pursuant to (i) applicable law or (ii) any agreement providing for
an equitable allocation among such Borrower and Affiliates of such Borrower of
obligations arising hereunder or in any other Loan Document.
Section 11.19 Waiver of Subrogation. No Borrower shall assert, enforce, or
otherwise exercise (a) any right of subrogation to any of the rights or Liens of
Administrative Lender or any Lender or any other Person against any other
Borrower or any other obligor on all or any part of the Obligations or any
collateral or other security, or (b) any right of recourse, reimbursement,
contribution, indemnification, or similar right against any other Borrower or
any other obligor on all or any part of the Obligations or any collateral or any
security, and each Borrower hereby waives any and all of the foregoing rights
and the benefit of, and any right to participate in, any collateral or other
security given to Administrative Lender or any Lender or any other Person to
secure payment of the Obligations, however any such rights arise, whether
hereunder or any other Loan Document or by operation of law. The provisions of
this Section 11.19 shall survive the termination of this Agreement, and any
satisfaction and discharge of the Borrowers and each other Obligor by virtue of
any payment, court order, or law.
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REMAINDER OF PAGE INTENTIONALLY BLANK
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IN WITNESS WHEREOF, this Credit Agreement is executed as of the date first
set forth above.
BORROWERS: METRO TRAFFIC CONTROL, INC.
By: /s/ Robert Greer
------------------------
Robert Greer
Chief Financial Officer
ADMINISTRATIVE LENDER: NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender
By: /s/ Chad Coben
------------------------
Chad Coben
Assistant Vice President
LENDERS: NATIONSBANK OF TEXAS, N.A.,
as a Lender
Specified Percentage:
100%
By: /s/ Chad Coben
------------------------
Chad Coben
Assistant Vice President
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Chad Coben
Assistant Vice President
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FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment"), dated as
of May 22, 1995, is entered into among Metro Traffic Control, Inc., a Maryland
corporation, Metro Networks, Ltd., a Texas limited partnership (collectively,
the "Borrowers"), the banks listed on the signature pages hereto (collectively,
the "Lenders"), and NationsBank of Texas, N.A., as Administrative Lender (in
said capacity, the "Administrative Lender").
BACKGROUND
Borrowers, Lenders and Administrative Lender heretofore entered into that
certain Credit Agreement, dated as of October 21, 1994, as modified by that
certain Letter Agreement dated as of February 6, 1995 (the "Credit Agreement";
the terms defined in the Credit Agreement and not otherwise defined herein shall
be used herein as defined in the Credit Agreement).
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, Borrowers,
Lenders and Administrative Lender covenant and agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT. Upon the satisfaction of the conditions
of effectiveness set forth in Section 4 of this First Amendment, the following
provisions of the Credit Agreement shall be amended as set forth below:
(a) The definition of "Commitment" set forth in Section 1.1 of the
Credit Agreement is hereby amended to read in its entirety as follows:
"'Commitment' shall mean $19,211,000, as reduced from time to time pursuant
to Section 2.6 hereof."
(b) The definition of "Commitment Reduction Date" set forth in Section
1.1 of the Credit Agreement is hereby amended to read in its entirety as
follows:
"'Commitment Reduction Date' shall mean the last Business Day of December,
1995."
(c) Section 2.6(c) of the Credit Agreement is hereby amended to read
in its entirety as follows:
"(c) Scheduled Reductions. On each Quarterly Date, commencing on
the Commitment Reduction Date, through the last Business Day of
September 1999, the Commitment outstanding on the Commitment Reduction
Date shall automatically reduce by an amount equal to the percentage
reduction that the
<PAGE>
Commitment is to reduce on the Quarterly Date pursuant to the table
below. Notwithstanding the foregoing, on the Maturity Date, the
Commitment shall automatically reduce to zero.
Quarterly Date % Reduction
-------------- -----------
December 1995 6.25%
March 1996 6.25%
June 1996 6.25%
September 1996 6.25%
December 1996 6.25%
March 1997 6.25%
June 1997 6.25%
September 1997 6.25%
December 1997 6.25%
March 1998 6.25%
June 1998 6.25%
September 1998 6.25%
December 1998 6.25%
March 1999 6.25%
June 1999 6.25%
September 1999 6.25% and any remaining balance
such that the Commitment shall be
zero"
2. WAIVER. For a period commencing upon the satisfaction of the conditions
of effectiveness set forth in Section 4 of this First Amendment and ending on
July 21, 1995, Lenders waive the Event of Default existing as a result of
Borrowers' failure to comply with Section 5.12 of the Credit Agreement.
3. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, each Borrower represents and warrants that, as of
the date hereof and after giving effect to the amendments contemplated by the
foregoing Section 1, and the waiver contemplated by the foregoing Section 2:
(a) the representations and warranties contained in the Credit Agreement
are true and correct on and as of the date hereof as made on and as of such
date;
(b) no event has occurred and is continuing which constitutes a Default or
an Event of Default;
(c) such Borrower has full power and authority to execute and deliver this
First Amendment, and this First Amendment and the Credit Agreement, as amended
hereby,
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<PAGE>
constitute the legal, valid and binding obligations of such Borrower,
enforceable in accordance with their respective terms; and
(d) no authorization, approval consent, or other action by, notice to, or
filing with, any governmental authority or other Person, is required for the
execution, delivery or performance by such Borrower of this First Amendment or
the acknowledgement of the First Amendment by any Guarantor.
4. CONDITIONS OF EFFECTIVENESS. This First Amendment shall be effective as
of May 22, 1995, subject to the following:
(a) Administrative Lender shall have received counterparts of this First
Amendment executed by each Lender;
(b) Administrative Lender shall have received counterparts of this First
Amendment executed by each Borrower and acknowledged by each Guarantor;
(c) each Lender shall have received a duly executed Note, payable to the
order of such Lender and in an amount for such Lender equal to its Specified
Percentage of the Commitment (as amended hereby);
(d) Administrative Lender shall have received new Intercompany Notes in the
amount of the Commitment (as amended hereby) duly endorsed in favor of the
Administrative Lender;
(e) Administrative Lender shall have received a certificate of an officer
acceptable to the Lenders, certifying as to the incumbency of the officers
signing this First Amendment and the Notes and including a copy of the
resolutions of each Borrower authorizing the execution and delivery of this
First Amendment and the Notes; and
(f) Administrative Lender shall have received, in form and substance
satisfactory to Administrative Lender and its counsel, such other documents,
certificates and instruments as Administrative Lender shall require.
5. GUARANTOR'S ACKNOWLEDGMENT. By signing below, each of the Guarantors
acknowledges this First Amendment and agrees that its obligations in respect of
its Subsidiary Guaranty are not released, modified, impaired or affected in any
manner by this First Amendment or any of the provisions contemplated herein.
6. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this First Amendment, each reference in the
Credit Agreement to "this Agreement", "hereunder", or words of like import shall
mean and be a reference to the Credit Agreement, as affected and amended by this
First Amendment.
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<PAGE>
(b) The Credit Agreement, as amended by this First Amendment, and all other
Loan Documents shall remain in full force and effect and are hereby ratified and
confirmed.
7. COSTS EXPENSES AND TAXES. Each Borrower agrees, jointly and severally,
to pay on demand all costs and expenses of Administrative Lender in connection
with the preparation, reproduction, execution and delivery of this First
Amendment and the other instruments and documents to be delivered hereunder
(including the reasonable fees and out-of-pocket expenses of counsel for
Administrative Lender with respect thereto and with respect to advising
Administrative Lender as to its rights and responsibilities under the Credit
Agreement, as amended by this First Amendment).
8. EXECUTION IN COUNTERPARTS. This First Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same instrument.
9. GOVERNING LAW; BINDING EFFECT. This First Amendment shall be governed
by and construed in accordance with the laws of the State of Texas and shall be
binding upon each Borrower and each Lender and their respective successors and
assigns.
10. HEADINGS. Section headings in this First Amendment are included herein
for convenience of reference only and shall not constitute a part of this First
Amendment for any other purpose.
11. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS FIRST
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as the date first above written.
METRO TRAFFIC CONTROL, INC.
By: /s/ Curtis H. Coleman
-----------------------------------
Curtis H. Coleman
Vice President/Treasurer
METRO NETWORKS, LTD.
By: METRO TRAFFIC CONTROL, INC.,
its general partner
By: /s/ Curtis H. Coleman
-----------------------------------
Curtis H. Coleman
Vice President/Treasurer
NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender, as Lender and as
Issuing Bank
By: /s/ Chad Coben
--------------------------------
Chad Coben, Vice President
-5-
<PAGE>
ACKNOWLEDGED AND AGREED:
METRO RECIPROCAL, INC.
METRO VIDEO NEWS, INC.
TRAFFICSCAN, INCORPORATED
MTC GP, INC.
SKYVIEW BROADCASTING NETWORKS, INC.
AIRBORNE BROADCAST CONSULTANTS, INC.
By: /s/ Curtis H. Coleman
-----------------------------------
Name: Curtis H. Coleman
Title: Vice President/Treasurer
-6-
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment"), dated
as of November 22, 1995, is entered into among Metro Traffic Control, Inc., a
Maryland corporation, Metro Networks, Ltd., a Texas limited partnership
(collectively, the "Borrowers"), the banks listed on the signature pages hereto
(collectively, the "Lenders"), and NationsBank of Texas, N.A., as Administrative
Lender (in said capacity, the "Administrative, Lender").
BACKGROUND
Borrowers, Lenders and Administrative Lender heretofore entered into that
certain Credit Agreement, dated as of October 21, 1994, as modified by that
certain Letter Agreement dated as of February 6, 1995, and as amended by that
certain First Amendment to Credit Agreement dated as of May 22, 1995 (as
amended, modified or restated from time to time, the "Credit Agreement"; the
terms defined in the Credit Agreement and not otherwise defined herein shall be
used herein as defined in the Credit Agreement).
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, Borrowers,
Lenders and Administrative Lender covenant and agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT. Upon the satisfaction of the conditions
of effectiveness set forth in Section 4 of this Second Amendment, the following
provisions of the Credit Agreement shall be amended as set forth below:
(a) The definition of "Applicable Margin" set forth in Section 1.1 of
the Credit Agreement is hereby amended to read in its entirety as follows:
"Applicable Margin" shall mean the following per annum percentages,
applicable in the following situations:
Prime Rate LIBOR
Applicability Basis Basis
------------- ----- -----
(i) If the Leverage Ratio is not less than 2.5 to 1 1.000 2.000
(ii) If the Leverage Ratio is less than 2.5 to 1 but 0.875 1.875
not less than 2.0 to 1
(iii) If the Leverage Ratio is less than 2.0 to 1 but 0.750 1.750
is not less than 1.5 to 1
(iv) If the Leverage Ratio is less than 1.5 to 1 but 0.500 1.500
is not less than 1.0 to 1
<PAGE>
(v) If the Leverage Ratio is less than 1.0 to 1 0.250 1.250
The Applicable Margin payable by the Borrowers on the Advances
outstanding hereunder shall be subject to reduction or increase, as
applicable and as set forth in the table above, on a quarterly basis
according to the performance of the Borrowers as tested by the
Leverage Ratio. Except as set forth in the last sentence hereof, any
such increase or reduction in the Applicable Margin provided for
herein shall be effective three Business Days after receipt by
Administrative Lender of the financial statements required to be
delivered pursuant to Section 6.1(b) or 6.2(b) hereof, as applicable.
If financial statements of the Borrowers setting forth the Leverage
Ratio are not received by the Administrative Lender by the date
required pursuant to Section 6.1(b) or 6.2(b) hereof, as applicable,
the Applicable Margin shall be determined as if the Leverage Ratio is
not less than 2.0 to 1 until such time as such financial statements
are received. For the final quarter of any fiscal year of the
Borrowers, the Borrowers may provide their unaudited financial
statements, subject only to year-end adjustments, for the purpose of
adjusting the Applicable Margin.
(b) The definition of "Commitment" set forth in Section 1.1 of the
Credit Agreement is hereby amended to read in its entirety as follows:
"Commitment shall mean $30,000,000, as reduced from time to time
pursuant to Section 2.6 hereof.
(c) The definition of "Maturity Date" set forth in Section 1.1 of the
Credit Agreement is hereby amended to read as follows:
"Maturity Date" shall mean June 30, 2000.
(d) The definition of "Commitment Reduction Date" set forth in
Section 1.1 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"'Commitment Reduction Date' shall mean the last Business Day of June,
1996."
(e) Section 2.6(c) of the Credit Agreement is hereby amended to read
in its entirety as follows:
"(c) Scheduled Reductions. On each Quarterly Date, commencing on
the Commitment Reduction Date, through the last Business Day of June,
2000, the Commitment outstanding on the Commitment Reduction Date
shall automatically reduce by an amount equal to the percentage
reduction that the Commitment is to reduce on the Quarterly Date
pursuant to the table below.
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<PAGE>
Notwithstanding the foregoing, on the Maturity Date, the Commitment
shall automatically reduce to zero.
Quarterly Date % Reduction
-------------- -----------
June 30, 1996 5.00%
September 30, 1996 5.00%
December 31, 1996 5.00%
March 31, 1997 5.00%
June 30, 1997 5.00%
September 30, 1997 5.00%
December 31, 1997 5.00%
March 31, 1998 5.00%
June 30, 1998 5.00%
September 30, 1998 5.00%
December 31, 1998 5.00%
March 31, 1999 6.25%
June 30, 1999 6.25%
September 30, 1999 6.25%
December 31, 1999 6.25%
March 31, 2000 10.00%
June 30, 2000 10.00% and any remaining
balance such that the
Commitment shall be
zero
(f) Section 5.9 of the Credit Agreement is hereby amended to read in
its entirety as follows:
Section 5.9 Use of Proceeds. Each Borrower shall use the proceeds
of Advances and Letters of Credit to (a) make Acquisitions permitted
under Section 7.6 hereof, (b) make Capital Expenditures, (c) make
Investments (including advances to Subsidiaries) permitted pursuant to
Section 7.3 hereof, (d) to repay all outstanding Indebtedness under
the Existing Loan Agreement, and (e) for working capital and for other
general corporate purposes; provided, however, that at no time shall
the sum of the aggregate amount of outstanding Advances plus
Reimbursement Obligations used for the purposes set forth in the
foregoing subsections (b), (c), (d) and (e) exceed $25,000,000.
(g) Section 7.10 of the Credit Agreement is hereby amended to read in
its entirety as follows:
-3 -
<PAGE>
7.10 Leverage Ratio. At the end of each fiscal quarter ending
during the periods indicated below, the Borrowers, on a combined
basis, shall not permit the Leverage Ratio to be greater than:
Period Ratio
------ -----
From date hereof through March 31, 1996 3.00 to 1
June 30, 1996 through December 31, 1996 2.50 to 1
March 31, 1997 and thereafter 2.00 to 1
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, each Borrower represents and warrants that, as of
the date hereof and after giving effect to the amendments contemplated by the
foregoing Section 1:
(a) the representations and warranties contained in the Credit Agreement
are true and correct on and as of the date hereof as made on and as of such
date;
(b) no event has occurred and is continuing which constitutes a Default or
an Event of Default;
(c) such Borrower has full power and authority to execute and deliver this
Second Amendment, and this Second Amendment and the Credit Agreement, as amended
hereby, constitute the legal, valid and binding obligations of such Borrower,
enforceable in accordance with their respective terms; and
(d) no authorization, approval consent, or other action by, notice to, or
filing with, any governmental authority or other Person, is required for the
execution, delivery or performance by such Borrower of this Second Amendment or
the acknowledgement of the Second Amendment by any Guarantor or limited partners
of Metro Networks, Ltd. (the "Partnership").
3. CONDITIONS OF EFFECTIVENESS. This Second Amendment shall be effective as
of November 22, 1995, subject to the following:
(a) Administrative Lender shall have received counterparts of this Second
Amendment executed by each Lender;
(b) Administrative Lender shall have received counterparts of this Second
Amendment executed by each Borrower and acknowledged by each Guarantor and
limited partner of the Partnership;
- 4 -
<PAGE>
(c) each Lender shall have received a duly executed Note, payable to the
order of such Lender and in an amount for such Lender equal to its Specified
Percentage of the Commitment (as amended hereby);
(d) Administrative Lender shall have received new Intercompany Notes in the
amount of the Commitment (as amended hereby) duly endorsed in favor of the
Administrative Lender;
(e) Administrative Lender shall have received a certificate of an officer
acceptable to the Lenders, certifying as to the incumbency of the officers
signing this Second Amendment and the Notes and including a copy of the
resolutions of each Borrower authorizing the execution and delivery of this
Second Amendment and the Notes;
(f) Administrative Lender shall have received a fully-executed facility fee
letter evidencing the facility fee and amendment fee for its account and the
arrangement fee for the account of NationsBank Capital Markets, Inc., all as set
forth in such facility fee letter between the Borrowers and Administrative
Lender; and
(g) Administrative Lender shall have received, in form and substance
satisfactory to Administrative Lender and its counsel, such other documents,
certificates, instruments and opinion letters as Administrative Lender shall
require.
4. GUARANTOR'S ACKNOWLEDGMENT. By signing below, each of the Guarantors
acknowledges this Second Amendment and agrees that its obligations in respect of
its Subsidiary Guaranty are not released, modified, impaired or affected in any
manner by this Second Amendment or any of the provisions contemplated herein.
5. LIMITED PARTNERS' CONSENT. By signing below, each of the limited
partners of the Partnership acknowledges this Second Amendment and further
acknowledges and agrees that (a) the general partner of the Partnership has the
authority to execute and deliver this Second Amendment and a new Note evidencing
the increased Commitment on behalf of the Partnership and (b) its obligations in
respect of its Pledge Agreement are not released, modified, impaired or affected
in any manner by this Second Amendment or any of the provisions contemplated
herein.
6. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Second Amendment, each reference in the
Credit Agreement to "this Agreement", "hereunder", or words of like import shall
mean and be a reference to the Credit Agreement, as affected and amended by this
Second Amendment.
(b) The Credit Agreement, as amended by this Second Amendment, and all
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
- 5 -
<PAGE>
7. LOCAL COUNSEL OPINIONS. The Borrowers agree to deliver to Administrative
Lender, within 30 days of the effective date hereof, an opinion of local counsel
for each of Airborne Broadcast Consultants, Inc., Skyview Broadcasting Networks,
Inc. and Trafficscan, Incorporated in each such company's state of
incorporation, opining as to the enforceability of the Loan Documents to which
each such company is party, in form and substance satisfactory to Administrative
Lender.
8. COSTS, EXPENSES AND TAXES. Each Borrower agrees, jointly and severally,
to pay on demand all costs and expenses of Administrative Lender in connection
with the preparation, reproduction, execution and delivery of this Second
Amendment and the other instruments and documents to be delivered hereunder
(including the reasonable fees and out-of-pocket expenses of counsel for
Administrative Lender with respect thereto and with respect to advising
Administrative Lender as to its rights and responsibilities under the Credit
Agreement, as amended by this Second Amendment).
9. EXECUTION IN COUNTERPARTS. This Second Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same instrument.
10. GOVERNING LAW; BINDING EFFECT. This Second Amendment shall be governed
by and construed in accordance with the laws of the State of Texas and shall be
binding upon each Borrower and each Lender and their respective successors and
assigns.
11. HEADINGS. Section headings in this Second Amendment are included herein
for convenience of reference only and shall not constitute a pan of this Second
Amendment for any other purpose.
12. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS SECOND
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
as the date first above written.
METRO TRAFFIC CONTROL, INC.
By: /s/ Curtis H. Coleman
-------------------------
Curtis H. Coleman
Chief Financial Officer
METRO NETWORKS, LTD.
By: METRO TRAFFIC CONTROL, INC.,
its general partner
By: /s/ Curtis H. Coleman
-------------------------
Curtis H. Coleman
Chief Financial Officer
NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender, as Lender and as
Issuing Bank
By: _______________________________
Chad E. Coben, Vice President
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
as the date first above written.
METRO TRAFFIC CONTROL, INC.
By:
-------------------------
Curtis H. Coleman
Chief Financial Officer
METRO NETWORKS, LTD.
By: METRO TRAFFIC CONTROL, INC.,
its general partner
By:
-------------------------
Curtis H. Coleman
Chief Financial Officer
NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender, as Lender and as
Issuing Bank
By: /s/ Chad E. Coben
-------------------------------
Chad E. Coben, Vice President
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<PAGE>
ACKNOWLEDGED AND AGREED BY
THE GUARANTORS AND LIMITED PARTNERS
THIS 22 DAY OF NOVEMBER, 1995:
METRO RECIPROCAL, INC.
METRO VIDEO NEWS, INC.
TRAFFICSCAN, INCORPORATED
MTC GP, INC.
SKYVIEW BROADCASTING NETWORKS, INC.
AIRBORNE BROADCAST CONSULTANTS, INC.
By: /s/ Curtis H. Coleman
--------------------------------
Name: Curtis H. Coleman
Title: Chief Financial Officer
- 8 -
<PAGE>
/s/ David Saperstein
- ------------------------
David Saperstein
- 9 -
<PAGE>
MICHELLE JOY COPPOLA 1994 TRUST
By: /s/ Michelle J. Coppola
------------------------------------
Michelle Joy Coppola, Sole Trustee of
the Michelle Joy Coppola 1994 Trust
- 10 -
<PAGE>
JENNIFER BETH SAPERSTEIN 1994 TRUST
By: /s/ Jennifer B. Saperstein
---------------------------------------
Jennifer Beth Saperstein, Sole Trustee
of the Jennifer Beth Saperstein 1994 Trust
- 11 -
<PAGE>
JONATHAN ALEXANDER SAPERSTEIN 1994 TRUST
By: /s/ Suzanne Saperstein
-------------------------------------
Suzanne Saperstein, Sole Trustee of
the Jonathan Alexander Saperstein
1994 Trust
- 12 -
<PAGE>
ALEXIS DANIELLA SAPERSTEIN 1994 TRUST
By: /s/ Suzanne Saperstein
-------------------------------------
Suzanne Saperstein, Sole Trustee for
the Alexis Daniella Saperstein 1994 Trust
- 13 -
<PAGE>
STEPHANIE NICOLE SAPERSTEIN 1994 TRUST
By: /s/ Suzanne Saperstein
-------------------------------------
Suzanne Saperstein, Sole Trustee of
the Stephanie Nicole Saperstein
1994 Trust
- 14 -
<PAGE>
LEASE AGREEMENT
THE STATE OF TEXAS )
COUNTY OF HARRIS )
Lessor THIS LEASE AGREEMENT made and entered into on this the 15th
day of April, 1988, between Tower, Limited whose address for
purposes hereof is 2800 Post Oak Blvd., Houston, Texas 77056-6190
(hereinafter called "Lessor"), and Metro Traffic Control, Inc.
whose address for purposes hereof is 4828 Loop Central Drive,
Suite 800, Houston, Texas 77081 (hereinafter called "Lessee");
WITNESSETH:
I.
Leased 1. Subject to and upon the terms, provisions and conditions
Premises hereinafter set forth, and each in consideration of the duties,
covenants and obligations of the other hereunder, Lessor does
hereby lease, demise and let to Lessee and Lessee does hereby
lease and take from Lessor those certain premises (hereinafter
sometimes called the "leased premises") in the Building known as
Geosource Plaza located at 2700 Post Oak Blvd., Houston, Texas
77056 (hereinafter sometimes called the "Building") in the City
of Houston, Harris County, Texas, such premises being more
particularly described as follows:
Approximately 12,000 square feet of Net Rentable Area located
on Level 14.*
as reflected on the floor plan of such premises attached hereto
and made a part hereof as Exhibit A and initialed for
identification by both parties.
The term "net rentable area", as used herein, shall refer
to (i) in the case of a single tenancy floor, all floor area
measured from the inside surface of the outer glass or finished
column wall of the Building to the inside surface of the opposite
outer wall excluding only the areas ("service areas") within
the outside walls used for building stairs, fire towers, elevator
shafts, flues, vents, stacks, pipe shafts and vertical ducts, but
including any such service areas which are for the specific use
of the particular tenant such as special stairs or elevators plus
an allocation of the square footage of the Building's elevator
and main mechanical and electrical rooms, management office,
other areas necessary to provide customary services to the
Building, and public lobbies, and (ii) in the case of a floor to
be occupied by more than one tenant, all floor areas within the
inside surface of the outer glass or finished column walls
enclosing the leased premises and measured to the mid-point of
the walls separating areas leased by or held for lease to other
tenants or from areas devoted to corridors, elevator foyers, rest
rooms, mechanical rooms, janitor closets, vending areas and other
similar facilities for the use of all tenants on the particular
floor (hereinafter sometimes called "common areas"), but
including a proportionate part of the common areas located on
such floor based upon the ratio which the tenant's net rentable
area (excluding common areas) on such floor bears to the
aggregate net rentable area (excluding common areas) on such
floor plus an allocation of the square footage of the Building's
elevator and main mechanical and electrical rooms, management
office, other areas necessary to provide customary services to
the Building, and public lobbies. No deductions from net rentable
area shall be made for columns or projections necessary to the
Building. The net rentable area in the leased premises has been
calculated on the basis of the foregoing definition and is hereby
stipulated for all purposes hereof to be ______ square feet,
whether the same should be more or less as a result of minor
variations resulting from actual construction and completion of
the leased premises for occupancy so long as such work is done in
accordance with the terms and provisions hereof.
* The exact measurement of the Leased Premises shall be determined by a
licensed architect using BOMA standards. However, in no event shall the
leased premises be less than 12,000 square feet of Net Rentable Area.
1
<PAGE>
** Basic Costs used herein shall be defined as actual 1988 Operating Costs
adjusted for full occupancy.
II.
Term 1. (a) Subject to and upon the terms and conditions set
forth herein, or in any exhibit or addendum hereto, this lease
shall continue in force for a term of 120 months beginning on the
1st day of August, 1988, and ending on the 31st day of July,
1998.
(b) In the event the leased premises should not be ready for
occupancy by the commencement date stated in Paragraph 1 (a)
above for any reason, Lessor shall not be liable or responsible
for any claims, damages or liabilities in connection therewith or
by reason thereof, and the term of this Lease shall commence at
the time that the leased premises are ready for occupancy by
Lessee. Should the term of this lease commence on a date other
than that specified in Paragraph 1 (a) above, Lessor and Lessee
will, at the request of either, execute a declaration specifying
the beginning date of the term of this Lease Agreement. In such
event, rental under this Lease Agreement shall not commence until
said revised commencement date, and the stated term in this Lease
Agreement shall thereupon commence and the expiration date shall
be extended so as to give effect to the full stated term.
Use 2. The leased premises are to be used and occupied by Lessee
solely for the purpose of office space.
Base 3. Lessee hereby agrees to pay a base monthly rental (herein
Rental called "Base Rental") in the sum of Mos. 1-15 = -0- Mos. 16-50 =
$8.844.00, Mos. 51-120 = $13,240.00*. The Lessee shall also pay,
as additional rent, all such other sums of money as shall become
due from and payable by Lessee to Lessor under this lease. The
Lessor shall have the same remedies for default for the payment
of additional rent as are available to Lessor in the case of a
default in the payment of Base Rental. Such Base Rental, together
with any adjustment of rent provided for herein then in effect,
shall be due and payable in twelve (12) equal installments on the
first day of each calendar month during the initial term of this
lease and any extensions or renewals thereof, and Lessee hereby
agrees to so pay such rent to Lessor at Lessor's address as
provided herein (or such other address as may be designated by
Lessor from time to time) monthly in advance without demand. If
the term of this Lease Agreement as heretofore established
commences on other than the first day of a month or terminates on
other than the last day of a month, then the installments of Base
Rental for such month or months shall be prorated and the
installment or installments so prorated shall be paid in advance.
All past due installments of rent shall bear interest at the
maximum lawful rate per annum until paid.
Base Rental 4. (a) Lessee's Base Rental shall include a component
Adjustment applicable to Basic Costs equal to ** In the event that the Basic
Following Costs (as hereinafter defined) of Lessor's operation of the
Base Year Building, and related pedestrian walkways during the first
calendar year shall differ from ** , Lessee shall pay its
proportionate share of the year's increases in the Basic Costs
for such year in the proportion its net rentable area bears to
95% of the total net rentable area of the Building or to the
total net rentable area leased in the Building if such total is
greater than 95% of the total Building area ("Lessee's
proportionate share"). Any increase payable by Lessee under this
provision shall be deemed additional rent. Lessor shall, within
the period of one hundred fifty days (or as soon thereafter as
possible) after the close of the first calendar year, give Lessee
a statement of such year's actual Basic Costs. If such year's
Basic Costs are greater than ** , Lessee shall pay Lessor, within
thirty days of statement receipt, Lessee's proportionate share of
such increase. If Basic Costs for the year covered by such
statement are less than ** , Lessee shall not be obligated for
rental in excess of Base Rental stated in Article II, Paragraph
3.
(b) For each year during the term of this lease following
the first calendar year, Lessor shall provide Lessee a statement
of the projected Basic Costs for such year prior to January 1 of
such year, and Lessee shall thereafter pay an Adjusted Base
Rental for such year which shall include Lessee's proportionate
share of any projected increase in Lessor's Basic Costs of
operating the Building over ** . Lessor shall within the period
of one hundred fifty days (or as soon thereafter as possible),
after the close of each calendar year following the first
calendar year, provide Lessee a statement of such year's actual
Basic Costs showing the actual increase in Lessor's Basic Costs
of operating the Building. If the actual increase is greater than
that projected, Lessee shall pay Lessor, within thirty
* The Base Rental is based upon the Leased Premises being comprised of
approximately 12,000 sq. ft. of Net Rentable Area. In the event the Leased
Premises are measured to be larger than 12,000 sq. ft. of Net Rentable
Area, the Base Rental Rates shall be increased proportionately.
2
<PAGE>
days of statement receipt, Lessee's proportionate share of the
difference. If such year's projected Basic Costs are greater than
the actual Basic Costs, Lessor shall pay Lessee, within thirty
days of said statement's issuance, Lessee's proportionate share
of the difference; provided, however, the rental owed by Lessee
shall never be less than the Base Rental stated in Article II,
Paragraph 3.
(c) "Basic Costs" as said term is used herein shall consist
of all operating expenses of the Building, which shall be
computed on the accrual basis and shall consist of all
expenditures by Lessor to maintain all facilities in operation
during the Base Year and such additional facilities in subsequent
years as may be determined by Lessor to be necessary. All
operating expenses shall be determined in accordance with
generally accepted accounting principles which shall be
consistently applied. The term "operating expenses" as used
herein shall mean all expenses, costs and disbursements (but not
replacement of capital investment items nor specific costs
especially billed to and paid by specific tenants) of every kind
and nature which Lessor shall pay or become obligated to pay
because of or in connection with the ownership and operation of
the Building including but not limited to, the following:
(1) Wages and salaries of all employees engaged in
operating and maintenance, or access control, of the
Building and personnel who may provide traffic control
relating to ingress and egress to and from the Parking Area
to the adjacent public streets. All taxes, insurance and
benefits relating to employees providing these services
shall be included.
(2) All supplies, tools, equipment, and materials used
in operation and maintenance of the Building.
(3) Cost of all utilities for the Building including
the cost of water and power, heating, lighting, air
conditioning and ventilating for the Building.
(4) Cost of all maintenance and service agreements for
the Building and the equipment therein, including, but not
limited, to access control service, window cleaning and
elevator maintenance.
(5) Cost of all insurance relating to the Building
including, but not limited to. the cost of casualty and
liability insurance applicable to the Building and Lessor's
personal property used in connection therewith.
(6) All taxes and assessments and governmental charges
whether federal, state, county or municipal, and whether
they be by taxing districts or authorities presently taxing
the leased premises or by others, subsequently created or
otherwise, and any other taxes and assessments attributable
to the Building or its operation. It is agreed that Lessee
will be responsible for ad valorem taxes on its personal
property and on the value of leasehold improvements to the
extent that same exceed standard building allowances.
(7) Cost of repairs and general maintenance (excluding
repairs and general maintenance paid by proceeds of
insurance or by Lessee or other third parties, and
alterations attributable solely to tenants of the Building
other than Lessee).
(8) Amortization of the cost of installation of capital
investment items which are primarily for the purpose of
reducing operating costs or which may be required by
governmental authority. All such costs shall be amortized
over the reasonable life of the capital investment items by
an additional charge to be added to rent and paid by Lessee
as additional rent, with the reasonable life and
amortization schedule being determined in accordance with
generally accepted accounting principles and in no event to
extend beyond the reasonable life of the Building. In the
case of installations for the purpose of reducing operating
costs, Lessor shall provide a cost justification for its
practicality.
3
<PAGE>
(9) Lessor's central accounting and audit costs
applicable to the Building.
Notwithstanding any other provision herein to the contrary,
it is agreed that in the event the Building is not fully occupied
during the Base Year or any subsequent year; an adjustment shall
be made in computing the Basic Costs for such year so that the
Basic Costs shall be computed for such year as though the
Building had been fully occupied during such year and as though
the entire Building had been provided with building standard
services during such year.
Lessee at its expense shall have the right at all reasonable
times to audit Lessor's books and records relating to this lease
for the Base Year and any year or years for which additional
rental payments become due; or at Lessor's sole discretion Lessor
will provide such audit prepared by a certified public
accountant.
III.
Lessor covenants and agrees with Lessee:
1. To use its best efforts to cause public utilities to
furnish the electricity, gas and water utilized in operating any
and all facilities serving the leased premises.
Services to
be Furnished 2. To provide (as part of the Basic Costs of the Building)
by Lessor access control to the Building during weekends and after normal
working hours during the week. Lessor shall not be liable to
Lessee for losses due to theft or burglary, or for damages done
by unauthorized persons on the premises.
3. To furnish (as part of the Basic Costs of the Building)
Lessee while occupying the premises:
(a) Hot and cold water at those points of supply provided
for general use of other tenants in the Building; central heat
and air conditioning in season, at such temperatures and in such
amounts as are considered by Lessor to be standard, but such
service at times during week days other than normal business
hours for the Building, on Saturday afternoons, Sundays and
holidays to be furnished only upon the request of Lessee, who
shall bear the entire cost thereof; routine maintenance and
electric lighting service for all public areas and special
service areas of the Building in the manner and to the extent
deemed by Lessor to be standard.
(b) Janitor service on a five (5) day week basis at no extra
charge; provided, however, if Lessee's floor covering or other
improvements is other than building standard, Lessee shall pay
the additional cleaning cost attributable thereto as additional
rent. Lessee shall pay said additional rent upon presentation of
a statement therefor by Lessor, and Lessee's failure to pay shall
constitute default hereunder.
(c) Electrical facilities to furnish sufficient power for
typewriters, voice writers, calculating machines and other
machines of similar low electrical consumption (total electrical
power requirement not to exceed one watt per square foot of net
rentable area); but not including electricity required for
duplicating and electronic data processing equipment, special
lighting in excess of building standard, and any other item of
electrical equipment, the electrical power requirement of which
(singly) is more than 0.5 kilowatts at rated capacity or requires
a voltage other than 120 volts single phase; and provided that if
the installation of said electrical equipment requires additional
air conditioning capacity above that provided by the building
standard system, then the additional air conditioning
installation and operating costs will be the obligation of
Lessee.
(d) All building standard fluorescent bulb replacement in
all areas and all incandescent bulb replacement in public areas,
toilet and rest room areas and stairwells.
(e) Failure by Lessor to any extent to furnish these defined
services, or any cessation thereof, resulting from causes beyond
the reasonable control of Lessor shall not render Lessor liable
in any respect for damages to either person or property, nor be
construed as an eviction of Lessee, nor work an abatement of
rent, nor relieve Lessee from fulfillment of any covenant or
agreement hereof. Should any of the equipment or machinery break
down, or for any cause cease to function properly, Lessee shall
have no claim for rebate of rent or damages on account of an
interruption in service occasioned thereby or resulting
therefrom.
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* Lessor shall permit Lessee to install at Lessee's expense separate locks on
interior doors of corporate officers' offices provided, however, Lessor
shall install such locks and shall retain a duplicate key for Lessor's use.
Keys and 4. To furnish Lessee two (2) keys for each corridor door
Locks entering the leased premises * Additional keys will be furnished
at a charge by Lessor on an order signed by Lessee or Lessee's
authorized representative. All such keys shall remain the
property of Lessor. No additional locks shall be allowed on any
door of the leased premises without Lessor's permission, and
Lessee shall not make, or permit to be made any duplicate keys,
except those furnished by Lessor. Upon termination of this lease,
Lessee shall surrender to Lessor all keys of the leased premises,
and give to Lessor the explanation of the combination of all
locks for safes, safe cabinets and vault doors, if any, in the
leased premises.
Graphics 5. To provide and install, at Lessee's cost, all letters or
numerals on doors in the leased premises; all such letters and
numerals shall be in the building standard graphics, and no
others shall be used or permitted on the leased premises. Lessor
also agrees to provide and install, at Lessee's expense, a
listing on the Building Directory Board, ** See Page 5a.
Improvements 6. All installations now or hereafter placed on the leased
to be made premises in excess of building standard items as determined by
by Lessor Lessor shall be for Lessee's account and at Lessee's cost (and
Lessee shall pay ad valorem taxes and ***, which cost shall be
payable by Lessee to Lessor as additional rent hereunder promptly
upon being invoiced therefor, and failure by Lessee to pay same
in full within 30 days shall constitute an event of default by
Lessee hereunder giving rise to all remedies available to Lessor
under this lease and at law for nonpayment of rent. *** provide
insurance coverage as described in Article V, Paragraph 12
hereof).
Peaceful 7. That Lessee shall, and may peacefully have, hold and
Enjoyment enjoy the leased premises, subject to the other terms hereof,
provided that Lessee pays the rental and other sums herein
recited to be paid by Lessee and performs all of Lessee's
covenants and agreements herein contained. It is understood, and
agreed that this covenant and any and all other covenants of
Lessor contained in the lease shall be binding upon Lessor and
its successors only with respect to breaches occurring during its
and their respective ownerships of the Lessor's interest
hereunder.
Limitation 8. Lessee specifically agrees to look solely to Lessor's
of Lessor's interest in the Building for the recovery of any judgment from
Personal Lessor, it being agreed that Lessor shall never be personally
Liability liable for any such judgment. The provision contained in the
foregoing sentence is not intended to, and shall not, limit any
right that Lessee might otherwise have to obtain injunctive
relief against Lessor or Lessor's successors in interest, or any
other action not involving the personal liability of Lessor to
respond in monetary damages from assets other than Lessor's
interest in the Building or any suit or action in connection with
enforcement or collection of amounts which may become owing or
payable under or on account of insurance maintained by Lessor.
Parking 9. Parking shall be provided as defined in Schedule I
attached hereto and made a part hereof.
IV.
Lessee covenants and agrees with Lessor:
Payments by 1. To pay all rent and sums provided to be paid to Lessor
Lessee hereunder at the times and in the manner herein provided.
Repairs by 2. Unless otherwise stipulated herein, Lessor shall not be
Lessor required to make any improvements to or repairs of any kind or
character on the leased premises during the term of this lease,
except such repairs as may be deemed necessary by Lessor for
normal maintenance operations. The obligation of Lessor to
maintain and repair the leased premises shall be limited to
building standard items. Special leasehold improvements will, at
Lessee's written request, be maintained by Lessor at Lessee's
expense, at a cost or charge equal to the costs incurred in such
maintenance plus an additional charge to cover overhead.
Repairs by 3. At its own cost and expense, to repair or replace any
Lessee damage or injury done to the Building, or any part thereof,
caused by Lessee or Lessee's agents, employees, invitees, or
visitors; provided, however, if Lessee fails to make such repairs
or replacement promptly, Lessor may, at its option,
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** Lessor hereby grants Lessee the right to install at Lessee's expense,
Lessee's company name and logo on the double glass entrance doors to the
Leased Premises subject to Lessor's approval of an 8 1/2" x 11" scale
drawing showing the dimensions of the glass entrance doors, the letters,
and corporate logo and the type of materials to be used for said lettering
and logo which shall be attached hereto and made a part hereof as Exhibit B
and initialed for identification by both parties.
5a
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make repairs or replacements, and Lessee shall repay the cost
thereof to the Lessor on demand, subject to Article V, Paragraph
15.
Care of the 4. Not to commit or allow any waste or damage to be
Leased committed on any portion of the leased premises, and at the
Premises termination of this lease, by lapse of time or otherwise, to
deliver up said leased premises to Lessor in as good condition as
at date of possession by Lessee, ordinary wear and tear excepted,
and upon such termination of this lease, Lessor shall have the
right to re-enter and resume possession of the leased premises.
Assignment 5. In the event Lessee should desire to assign this
or Agreement or sublet the leased premises or any part thereof,
Sub-lease Lessee shall give Lessor written notice of such desire at least
sixty (60) days in advance of the date on which Lessee desires to
make such assignment or sublease. Lessor shall then have a period
of thirty (30) days following receipt of such notice within which
to notify Lessee in writing that Lessor elects either (1) to
terminate this Agreement as to the space so affected as of the
date so specified by Lessee in which event Lessee will be
relieved of all further obligation hereunder as to such space, or
(2) to permit Lessee to assign this Agreement or sublet such
space, subject, however, to written approval such approval not to
be unreasonably withheld of the proposed Assignee or Sublessee by
Lessor; and further subject to the requirement that Lessee, enter
into written agreements with Lessor, and with Assignee or
Sublessee, that any profit realized by Lessee as a result of such
assignment or sublease (meaning the consideration agreed upon
between Lessee and Assignee or the difference between the rental
rate agreed upon between Lessee and Sublessee and the rent then
required to be paid under this Agreement multiplied by the number
of months in the term of the sublease) shall, to the extent such
profit is immediate * be due and payable by Lessee to Lessor upon
the execution of an assignment or sublease, and to the extent
such profit is deferred, * be payable to Lessor by Assignee or
Sublessee as it accrues. If Lessor should fail to notify Lessee
in writing of such election within the stated thirty (30) day
period, Lessor shall be deemed to have elected option (2) above.
No consent by Lessor to any assignment or sublease shall be
deemed to be consent to a use not permitted under this Agreement,
to any act in violation of this Agreement, or to any other or
subsequent assignment or sublease, and no assignment or sublease
by Lessee shall relieve Lessee of any obligation under this
Agreement. Any attempted assignment or sublease by Lessee in
violation of the terms and covenants of this paragraph shall be
void.
* Twenty five percent (25%) of such profit shall
Alterations, 6. Not to permit the leased premises to be used for any
Additions, purpose other than that stated in the use clause hereof, or make
Improvements or allow to be made any alterations or physical additions in or
to the leased premises, or place signs on the leased premises
which are visible from outside the leased premises, without
first obtaining the written consent of Lessor. Any and all such
alterations, physical additions, or improvements, when made to
the leased premises by Lessee, shall at once become the property
of lessor and shall be surrendered to Lessor upon termination of
this lease by lapse of time or otherwise provided, however, this
clause shall not apply to movable equipment or furniture owned by
Lessee. Lessee agrees specifically that no food, soft drink or
other vending machine will be installed within the leased
premises. ** See Page 6A
Legal Use and 7. Not to occupy or use, or permit any portion of the leased
Violations premises to be occupied or used for any business or purpose which
of Insurance is unlawful, disreputable or deemed to be extra-hazardous on
Coverage account of fire, or permit anything to be done which would in any
way increase the rate of fire or liability or any other
insurance coverage on said Building and/or its contents.
Laws and 8. To comply with all laws, ordinances, rules and
Regulations; regulations (state, federal, municipal and other agencies or
Rules of bodies having any jurisdiction thereof) relating to the use,
Building condition or occupancy of the leased premises. Lessee will comply
with the rules of the Building adopted and altered by Lessor
from time to time for the safety, care and cleanliness of the
leased premises and Building and for
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** Notwithstanding anything herein to the contrary, Lessee shall have the
right to install at Lessee's expense two (2) vending machines owned by
Lessee provided that such vending machines shall be for the use of Lessee's
employees and visitors and shall not be used for commercial purposes.
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preservation of good order therein, all of which will be sent by
Lessor to Lessee in writing and shall be thereafter carried out
and observed by Lessee.
Entry for 9. To permit Lessor or its agents or representatives to
Repairs and enter into and upon any part of the leased premises at all
Inspection reasonable hours to inspect the same, clean or make repairs,
alterations or additions thereto, as Lessor may deem necessary or
desirable, and Lessee shall not be entitled to any abatement or
reduction of rent by reason thereof.
Nuisance 10. To conduct its business and control its agents,
employees, invitees, and visitors in such manner as not to create
any nuisance, or interfere with, annoy or disturb any other
tenant or Lessor in its operation of the Building.
Subordination 11. This lease is subject and subordinate to any first lien
to Mortgage mortgage or deed of trust which may now or hereafter encumber the
Building of which the leased premises form a part and to all
renewals, modifications, consolidations, replacements and
extensions thereof. This clause shall be self-operative and no
further instrument of subordination need be required by any
mortgagee. In confirmation of such subordination, however, Lessee
shall at Lessor's request execute promptly any appropriate
certificate or instrument that Lessor may request. Lessee hereby
constitutes and appoints Lessor the Lessee's attorney-in-fact to
execute any such certificate or instrument for and on behalf of
Lessee. In the event of the enforcement by the trustee or the
beneficiary under any such mortgage or deed of trust of the
remedies provided for by law or by such mortgage or deed of
trust, Lessee will, upon request of any person or party
succeeding to the interest of Lessor as a result of such
enforcement, automatically become the Lessee of such successor in
interest without change in the terms or other provisions of such
lease; provided, however, that such successor in interest shall
not be bound by (i) any payment of rent or additional rent for
more than one month in advance except prepayments in the nature
of security for the performance by Lessee of its obligations
under this lease or (ii) any amendment or modification of this
lease made without the written consent of such trustee or such
beneficiary or such successor in interest. Upon request by such
successor in interest, Lessee shall execute and deliver an
instrument or instruments confirming the attornment herein
provided for.
Estoppel 12. At Lessor's request, Lessee will execute either an
Certificate estoppel certificate addressed to Lessor's mortgagee or a
or Three Party three-party agreement among Lessor, Lessee and said mortgagee
Agreement certifying to such facts (if true) and agreeing to such notice
provisions and other matters as such mortgagee may reasonably
require in connection with Lessor's financing.
V.
Lessor and Lessee mutually covenant and agree as follows:
Condemnation 1. If the leased premises shall be taken or condemned for
and Loss or any public purpose to such an extent as to render the leased
Damage premises untenantable, this lease shall, at the option of either
party, forthwith cease and terminate. All proceeds from any
taking or condemnation of the leased premises shall belong to and
be paid to Lessor.
Damages from 2. Lessor shall not be liable or responsible to Lessee for
Certain any loss or damage to any property or person occasioned by theft,
Causes fire, act of God, public enemy, injunction, riot, strike,
insurrection, war, court order, requisition or order of
governmental body or authority, or for any damage or
inconvenience which may arise through repair or alteration of any
part of the Building, or failure to make any such repairs.
Lien for 3. In consideration of the mutual benefits arising under
Rent this Agreement, Lessee hereby grants to Lessor a lien and
security interest on all property of Lessee now or hereafter
placed in or upon the leased premises, and such property shall be
and remain subject to such lien and security interest of Lessor
for payment of all rent and other sums agreed to be paid by
Lessee herein. The provisions of this paragraph relating to said
lien and security interest shall constitute
7
<PAGE>
a security agreement under the Uniform Commercial Code so that
Lessor shall have and may enforce a security interest on all
property of Lessee now or hereafter placed in or on the leased
premises. including but not limited to all fixtures, machinery,
equipment, furnishings and other articles of personal property
now or hereafter placed in or upon the leased premises by Lessee.
Lessee agrees to execute as debtor such financing statement or
statements as Lessor may now or hereafter reasonably request in
order that such security interest or interests may be protected
pursuant to said Code. Lessor may at its election at any time
file a copy of this lease as a financing statement. Lessor, as
secured party, shall be entitled to all of the rights and
remedies afforded a secured party under said Code in addition to
and cumulative of the landlord's liens and rights provided by law
or by the other terms and provision of this lease.
Lessor's 4. In the event of default by Lessee in any of the terms or
Right to covenants of this lease or in the event the leased premises are
Relet abandoned by Lessee, Lessor shall have the right, but not the
obligation, to relet same for the remainder of the term provided
for herein, and if the rent received through reletting does not
at least equal the rent provided for herein, Lessee shall pay and
satisfy the deficiency between the amount of the rent so provided
for and that received through reletting, including, but not
limited to, the cost of renovating, altering and decorating for a
new occupant. Nothing herein shall be construed as in any way
denying Lessor the right, in the event of abandonment of said
premises or other breach of this Agreement by Lessee, to treat
the same as an entire breach and at Lessor's option to terminate
this Agreement and/or immediately seek recovery for the entire
breach of this Agreement and any and all damages which Lessor
suffers thereby.
Holding 5. In the event of holding over by Lessee after expiration
Over or termination of this lease without the written consent of
Lessor, Lessee shall pay as liquidated damages double the then
prevailing market rental rate for the entire holdover period. No
holding over by Lessee after the term of this lease shall be
construed to extend the lease; in the event of any authorized
holding over, Lessee shall indemnify Lessor against all claims
for damages by any other Lessee to whom Lessor may have leased
all or any part of the premises covered hereby effective upon the
termination of this lease. Any holding over with the consent of
Lessor in writing shall thereafter constitute this lease a lease
from month to month.
Fire 6. In the event of a fire in the leased premises, Lessee
Clause shall immediately give notice thereof to Lessor. If the leased
premises, through no fault or neglect of Lessee, its agents,
employees, invitees or visitors, shall be partially destroyed by
fire or other casualty so as to render the premises untenantable,
the rental provided for herein shall abate thereafter until such
time as the leased premises are made tenantable as determined by
Lessor (but in no event shall Lessor's obligation exceed building
standard improvements). In the event of the total destruction of
the leased premises without fault or neglect of Lessee, its
agents, employees, invitees or visitors, or if from any cause the
same shall be so damaged that Lessor shall decide not to rebuild,
then all rent owed up to the time of such destruction or
termination shall be paid by Lessee and thenceforth this lease
shall cease and come to an end.
Attorney's 7. In the event Lessee makes default in the performance of
Fees any of the terms. covenants. agreements or conditions contained
in this lease and Lessor places the enforcement of this lease, or
any part thereof, or the collection of any rent due, or to become
due hereunder or recovery of the possession of the leased
premises in the hands of an attorney, or files suit upon the
same, Lessee agrees to pay Lessor reasonable attorney's fees of
not less than 10% of the amount due to Lessor.
Alteration 8. This Agreement may not be altered, changed or amended,
except by an instrument in writing signed by both parties hereto.
Assignment 9. Lessor shall have the right to transfer and assign, in
by Lessor whole or in part, all its rights and obligations hereunder and in
the Building and property referred to herein, and in such event
and upon such transfer (any such transferee to have the benefit
of, and be subject to, the provisions of Paragraphs 6 and 7 of
Article III hereof) no further liability or obligation shall
thereafter accrue against Lessor hereunder.
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<PAGE>
Default 10. If default shall be made in the payment of any sum to be
by Lessee paid by Lessee under this lease, and default shall continue for
ten (10) days, or default shall be made, in the performance of
any of the other covenants or conditions which Lessee is required
to observe and to perform, and such default shall continue for
twenty (20) days, or if the interest of Lessee under this lease
shall be levied on under execution or other legal process, or if
any petition shall be filed by or against Lessee to declare
Lessee a bankrupt or to delay, reduce or modify Lessee's debts or
obligations, or if any petition shall be filed or other action
taken to reorganize or modify Lessee's capital structure if
Lessee be a corporation or other entity, or if Lessee be declared
insolvent according to law, or if any assignment of Lessee's
property shall be made for the benefit of creditors, or if a
receiver or trustee is appointed for Lessee or its property, or
if Lessee shall abandon the leased premises during the term of
this lease or any renewals or extensions thereof, then Lessor may
treat the occurrence of any one or more of the foregoing events
as a breach of this lease (provided that no such levy, execution,
legal process or petition filed against Lessee shall constitute a
breach of this lease if Lessee shall vigorously contest the same
by appropriate proceedings and shall remove or vacate the same
within thirty (30) days from the date of its creation, service of
filing) and thereupon, at Lessor's option, may have any one or
more of the following described remedies in addition to all other
rights and remedies provided at law or in equity:
(a) Lessor may terminate this lease and forthwith repossess
the leased premises and be entitled to recover forthwith as
damages a sum of money equal to the total of (i) the cost of
recovering the leased premises, (ii) the unpaid rent earned at
the time of termination, plus interest thereon at the maximum
lawful interest rate from the due date, (iii) the balance of the
rent for the remainder of the term less the fair market value of
the leased premises for said period and (iv) any other sum of
money and damages owed by Lessee to Lessor.
(b) Lessor may terminate Lessee's right of possession (but
not the lease) and may repossess the leased premises by forcible
entry or detainer suit or otherwise, without demand or notice of
any kind to Lessee and without terminating this lease, in which
event Lessor may, but shall be under no obligation to do so,
relet the same for the account of Lessee for such rent and upon
such terms as shall be satisfactory to Lessor. For the purpose of
such reletting Lessor is authorized to decorate or to make any
repairs, changes, alterations or additions in or to leased
premises that may be necessary or convenient, and (i) if Lessor
shall fail or refuse to relet the leased premises, or (ii) if the
same are relet and a sufficient sum shall not be realized from
such reletting after paying the unpaid basic and additional rent
due hereunder earned but unpaid at the time of reletting plus
interest thereon at the maximum lawful interest rate, the cost of
recovering possession, and all of the costs and expenses of such
decorations, repairs, changes, alterations and additions and the
expense of such reletting and of the collection of the rent
accruing therefrom to satisfy the rent provided for in this lease
to be paid, then Lessee shall pay to Lessor as damages a sum
equal to the amount of the rental reserved in this lease for such
period or periods, or if the leased premises have been relet, the
Lessee shall satisfy and pay any such deficiency upon demand
therefor from time to time and Lessee agrees that Lessor may file
suit to recover any sums falling due under the terms of this
Article V, Paragraph 10 (b) from time to time, and that no
delivery to or recovery of any portion due Lessor hereunder shall
be any defense in any action to recover any amount not
theretofore reduced to judgment in favor of Lessor, nor shall
such reletting be construed as an election on the part of Lessor
to terminate this lease unless a written notice of such intention
be given to Lessee by Lessor. Notwithstanding any such reletting
without termination, Lessor may at any time thereafter elect to
terminate this Lease for such previous breach.
Non- 11. Failure of Lessor to declare any default immediately
Waiver upon occurrence thereof, or delay in taking any action in
connection therewith, shall not waive such default, but Lessor
shall have the right to declare any such default at any time and
take such action as might be lawful or authorized hereunder,
either in law or in equity.
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Casualty 12. Lessor shall maintain fire and extended coverage
Insurance insurance on the base building portion of the Building and on
building standard improvements within the Lessee's premises. Said
insurance shall be maintained with an insurance company
authorized to do business in Texas, in amounts desired by Lessor
and at the expense of Lessor and payments for losses thereunder
shall be made solely to Lessor. Lessee shall maintain at its
expense fire and extended coverage insurance on all of its
personal property, including removable trade fixtures, located in
the leased premises and on all additions and improvements to the
leased premises which exceed building standard. If the annual
premiums to be paid by Lessor shall exceed the standard rates
because Lessee's operations, contents of the leased premises, or
improvements with respect to the leased premises beyond building
standard, result in extra-hazardous exposure, Lessee shall
promptly pay the excess amount of the premium upon request by
Lessor.
Lessor's 13. Lessor shall at its expense, maintain a policy or
Liability policies of comprehensive general liability insurance with the
Insurance premiums thereon fully paid on or before due date, issued by and
binding upon some solvent insurance company, such insurance to
afford minimum protection (such insurance to inure to the benefit
of Lessor only, and not to Lessee) of not less than $300,000.00
in respect of personal injury or death in respect of any one
occurrence and of not less than $100,000.00 for property damage
in any one occurrence.
Hold 14. Lessor shall not be liable to Lessee, or to Lessee's
Harmless agents, servants, employees, customers or invitees for any damage
to person or property caused by any act, omission or neglect of
Lessee, its agents, servants or employees, and Lessee agrees to
indemnify and hold Lessor harmless from all liability and claims
for any such damage. Lessee shall not be liable to Lessor, or to
Lessor's agents, servants, employees, customers or invitees for
any damage to person or property caused by any act, omission or
neglect of Lessor, its agents, servants or employees, and Lessor
agrees to indemnify and hold Lessee harmless from all claims for
such damage.
Waiver of 15. Anything in this lease to the contrary notwithstanding,
Subrogation Lessor and Lessee each hereby waives any and all rights of
Rights recovery, claim, action or cause of action, against the other,
its agents. officers, or employees, for any loss or damage that
may occur to the leased premises, or any improvements thereto, or
said Building of which the leased premises are a part, or any
improvements thereto, or any personal property of such party
therein, by reason of fire, the elements, or any other cause
which could be insured against under the terms of standard fire
and extended coverage insurance policies referred to in Article
V, Paragraph 12 hereof, regardless of cause or origin, including
negligence of the other party hereto, its agents, officers or
employees, and covenants that no insurer shall hold any right of
subrogation against such other party.
Construction
And Moving
Allowance 16. See Rider attached hereto and made a part hereof.
Prior Entry 17. See page 10a, attached
Expansion Option 18. See page 10b, attached
Renewal Option 19. See page 10c, attached
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17. PRIOR ENTRY
Lessee, and its contractors, subcontractors, space planners, suppliers, agents
and other representatives shall be permitted to enter the Leased Premises at any
time prior to the Commencement Date, at Lessee's risk, for the purpose of
inspecting the Leased Premises and performing all work according to the terms
and provisions of Article IV, Paragraph 6 of the Lease Agreement in connection
with Lessee's occupancy thereof, including (without limitation) installation of
any partition walls, ceilings, HVAC systems, high and low voltage electrical
outlets and switches, computer systems, and any other fixtures, equipment, wall
and floor coverings, furniture, draperies and other items of personal property
constituting or to constitute the Leasehold Improvements. In connection
therewith, Lessor hereby grants (at no cost) to Lessee and the other parties
referred to in the preceding sentence access to and the right to use all loading
docks, parking and elevator facilities (including freight elevators) and other
areas in the Building and the Garage necessary for the construction and
installation of the Leasehold Improvements. Lessor shall also in connection with
the construction of Leasehold Improvements in the Leased Premises supply to the
Leased Premises, at no cost to the Lessee, all power, water, gas, sewage,
drainage and other utility services in the capacities currently available at the
Building, without material reduction of such services to other tenants in the
Building. No entry by Lessee, its agents, employees, contractors or invitees
into the Leased Premises prior to the completion of Leasehold Improvements in
such space shall cause the Commencement Date to occur, or obligate Lessee to pay
Base Rental (or any portion thereof), or otherwise accelerate the date on which
Base Rental shall first be payable with respect to such space hereunder, or
obligate Lessee or any person which is entitled to have access to the Premises
to pay any Basic Costs during such period provided, however, the commencement
date of this Lease shall be not later than June 1, 1988. Notwithstanding
anything in this Article V, Paragraph 17 to the contrary, Lessee and such other
parties shall not be entitled to perform work in the Leased Premises unless
Lessee and such other parties are performing such work and related activities in
the Leased Premises in accordance with the Building Rules and Regulations
providing that such work and related activities do not interfere with or hinder
Lessor's work, if any, in the Leased Premises.
-10a-
<PAGE>
18. EXPANSION OPTION/FIRST RIGHT OF REFUSAL
EXPANSION OPTION
Provided the Lessee is not in default of any condition of this Lease Agreement,
Lessee shall have an expansion option on approximately 4,000 square feet of Net
Rentable Area on Level 14 as shown on Exhibit A, hereinafter referred to as the
"Expansion Space". Lessor shall have the right to lease the Expansion Space to a
third party(s) for a term not to exceed a total of five (5) years. In the event
Lessor leases the Expansion Space to a third party(s), Lessor shall notify
Lessee in writing within thirty (30) days after the third party(s) lease term
has commenced as to the expiration date of the third party(s) lease term. Lessee
shall then notify Lessor in writing twelve (12) months prior to the third
party(s) lease term expiration date of the Lessee's intention to exercise the
Expansion Option. Failure by Lessee to notify Lessor of its election to exercise
the Expansion Option twelve (12) months prior to the third party(s) lease term
expiration date will result in Lessee waiving such Expansion Option. Any such
expansion shall be upon the same terms and conditions of this Lease except that
the Base Rental shall be ninety percent (90%) of the then prevailing market rate
for similar space in the Uptown Houston Area and the space shall be accepted by
Lessee in "as-is" condition.
RIGHT OF FIRST REFUSAL
Provided Lessee is not in default of any condition of this Lease Agreement,
Lessee shall have a Right of First Refusal on the remaining contiguous square
feet on Level 14 not previously encumbered by, or leased to, an existing Lessee
and not previously leased to Lessee according to the terms and provisions of the
Expansion Option of this Lease Agreement. This Right of First Refusal shall be
in effect after Lessee has exercised its Expansion Option described herein.
Lessee shall have three (3) business days in which to exercise this right on
all, but not part, of the space Lessor offers to a third party, when presented
by Lessor with a bona fide offer from Lessor to a third party. This right ceases
if Lessee declines to exercise such right when presented by Lessor with a bona
fide offer to a third party for said space.
The Base Rental Rate for such additional space leased shall be the same offered
to the third party.
-10b-
<PAGE>
19. RENEWAL OPTION
As long as Lessee is not in default in the performance of its covenants
under this Lease, Lessee is hereby granted the option to renew the term of this
lease for one (1) successive period of five (5) years, such period ("Renewal
Term") to commence at the expiration of the initial term of this lease. Lessee
shall exercise its option to renew by delivering written notice of such election
to Landlord at least twelve (12) months prior to the expiration of the initial
term of this lease. Any such renewal of this lease shall be upon the same terms
and conditions of this lease, except (a) the Base Rental during the Renewal Term
shall be ninety percent (90%) of the prevailing Market Base Rental Rate (defined
below) for similar space in the Uptown Houston Area at the time the Renewal Term
commences, but in no event less than the Base Rental that Lessee is paying under
the terms of this lease, (b) Lessee shall have no option to renew this lease
beyond the expiration of said renewal term, (c) Lessee shall not have the right
to assign its renewal right to any sublessee of the leased premises or assignee
of the Lease, nor may any such sublessee or assignee exercise such renewal
rights, and (d) the leasehold improvements will be provided in their then
existing condition (on an "as is" basis) at the time the Renewal Term commences.
As used in this Lease, the term "Market Base Rental Rate" shall mean the
average of the annual rental rates then being charged in the Uptown Houston Area
for space comparable to the space for which the Market Base Rental Rate is being
determined (taking into consideration use, location and/or floor level within
the applicable building, definition of net rentable area, leasehold improvements
provided, quality, age and location of the applicable building, rental
concessions (such as abatements or lease assumptions) and the time the
particular rate under consideration became effective). It is agreed that bona
fide written offers to lease the relevant space made to Lessor by third parties
(at arm's-length) may be used by Lessor as an indication of Market Base Rental
Rate.
-10c-
<PAGE>
RIDER TO
ARTICLE V, PARAGRAPH 16 OF THE LEASE AGREEMENT
BETWEEN TOWER, LIMITED, AS LESSOR, AND
METRO TRAFFIC CONTROL, INC., AS LESSEE
To help offset the costs of (i) constructing Lessee's leasehold
improvements in the leased premises, and (ii) moving expenses incurred by Lessee
for moving into the leased premises, Lessor agrees to provide Lessee with an
allowance (the "Allowance") equal to $130,000.00 (one-half of the Allowance
shall be called the "Present Allowance" and one-half of the Allowance shall be
called the "Deferred Allowance"), upon the following terms and conditions:
(a) The Present Allowance shall be paid to Lessee on the date Lessee
occupies the leased premises; provided, however, that if Lessee uses Lessor or
its designated contractor to construct any of Lessee's improvements, then the
Present Allowance shall be credited against amounts owing to Lessor or its
designated contractor as such amounts become due, and any remainder of the
Present Allowance shall be paid to Lessee on the date Lessee occupies the leased
premises.
(b) In the event Lessee defaults under the terms of this lease at any time
prior to the end of the fiftieth (50th) month after the commencement of the term
hereof, in addition to all other remedies available to Lessor, Lessee shall pay
to Lessor an amount equal to the Present Allowance, payable in full on the date
of such default.
(c) The Deferred Allowance shall be placed in a Certificate of Deposit
Account ("CD Account") on the commencement date of the term of this lease, at
Texas American Bank/Galleria, in the name of Lessee. Lessor shall retain a
security interest in the CD Account pursuant to the terms of that certain Pledge
Agreement between Lessor and Lessee of even date herewith, until such time as
Lessee has paid a total amount of $65,000.00 in Base Rental under the terms of
this lease. If Lessee defaults under the terms of this lease prior to the point
in time at which Lessee has paid $65,000.00 in Base Rental, then, in addition to
all other remedies available to Lessor, Lessor shall exercise all of its rights
and remedies arising under the above-mentioned Pledge Agreement to foreclose its
security interest on the CD Account. If Lessee is
<PAGE>
not in default on the date Lessee has paid $65,000.00 in Base Rental, then
Lessor shall release its security interest in the CD Account, in accordance with
the terms of said Pledge Agreement.
(d) The parties hereto agree that the cost of constructing Lessee's
improvements in the leased premises, and moving expenses, above the amount
of the Present Allowance shall be paid by Lessee, subject to receiving the
Deferred Allowance pursuant to the terms of paragraph (c) above.
(e) Lessor agrees to encapsulate, if necessary, the existing asbestos
applied on the structure of the building within the area outlined in red as
shown on Exhibit "B" attached hereto and made a part hereof and initialed for
identification by both parties. Lessor shall not be obligated to encapsulate
and/or remove asbestos applied to the structure of the building in any other
area of the leased premises. Lessee agrees to bear any additional costs
attributable to constructing Lessee's improvements in the leased premises as a
result of Lessee's contractors, contractors representatives and installation
technicians conforming to the Building Rules and Regulations and procedures
pertaining to working in a building containing asbestos. Such Building Rules and
Regulations are attached hereto and made a part hereof and initialed for
identification by both parties.
<PAGE>
BUILDING RULES AND REGULATIONS
1. Sidewalks, doorways, vestibules, halls, stairways, and other similar areas
shall not be obstructed by tenants or used by any tenant for any purpose
other than ingress and egress to and from the leased premises and for going
from one part of the building to another part of the building.
2. Plumbing fixtures and other building facilities shall be used only for the
purpose for which designated, and no rubbish, rags or other unsuitable
material shall be thrown or placed therein. Damage resulting to any such
fixtures from misuse by a tenant shall be paid by him, and Lessor shall not
in any case be responsible.
3. No signs, advertisements or notices shall be painted or affixed on or to
any windows or doors or other part of the building except of such color,
size, and style and in such places as shall be first approved in writing by
Lessor. No nails, hooks or screws shall be driven or inserted in any part
of the building except with the express consent of Lessor.
4. Lessor will provide and maintain a directory board for all tenants in the
main lobbies of the building, and no other directory shall be permitted
unless previously consented to by Lessor in writing. All directory board
strips will be at Lessee's expense.
5. Lessor will provide at Lessee's expense all locks for doors in each
tenant's leased area, and no tenant shall place any additional lock or
locks on any door in its leased area without Lessor's written consent. All
requests for duplicate keys shall be made to the Property Management Office
and will be furnished at Lessee's expense.
6. Proposed plans for alterations affecting floors, walls, woodwork, trim,
windows, ceilings, equipment, and/or any other physical portion of the
building must be approved in writing by Lessor. Tenants will refer all
contractors, contractor's representatives and installation technicians
tendering any service to them to Lessor for Lessor's supervision, approval
and control before the performance of any contractual services. This
provision shall apply to all work performed in the building, including, but
not limited to, installations of telephones, telegraph equipment,
electrical devises and attachments, and any and all installations of every
nature affecting floors, walls, woodwork, trim, windows, ceilings,
equipment, and any other physical portion of the building.
Revised January, 1987
<PAGE>
Building Rules and Regulations
Revised January, 1987
Page 2
7. Movement in or out of the building of furniture or office equipment, or
dispatch or receipt by tenants of any bulky material, merchandise or
materials which requires use of elevators or stairways or movement through
the building entrances or lobby shall be restricted to such hours as Lessor
shall designate. All such movement shall be under the supervision of Lessor
and in the manner agreed between the tenant and Lessor by pre-arrangement
before performance. Such pre-arrangement initiated by a tenant shall
include determination by Lessor, and subject to this decision and control,
as to the time, safety or other concern which may prohibit any article,
equipment, or any other item from being brought into the building.
Lessor shall not be liable for acts of any persons engaged in, or any
damage or loss to any of said property or persons resulting from any act in
connection with such service performed for a tenant.
8. Lessor reserves the right to approve the weight and position of files,
safes and other heavy objects, prior to installation by the Lessee.
9. A tenant shall notify the Property Manager when safes or other heavy
equipment are to be taken in or out of the building, and the moving shall
be done under the supervision of the Property Manager, after receiving
written permission from Lessor. Persons employed to move such property must
be acceptable to Lessor.
10. Should a tenant require telegraphic, telephonic, annunciator or other
communications service, Lessor will direct the electricians where and how
wires are to be introduced and placed and none shall be introduced or
placed except as Lessor shall direct.
11. Corridor doors, when not in use, shall be kept closed.
12. Tenant shall not make or permit any improper noises in the building or
otherwise interfere in any way with other tenants or persons having
business.
13. No birds or animals shall be brought into or kept in, on, or about the
tenants area.
<PAGE>
Building Rules and Regulations - Geosource Plaza
Revised January, 1987
Page 3
14. This building was constructed during the era when asbestos was commonly
used in the fire-retardant insulation and in certain other isolated areas.
Inspections and tests have proven that the airborne fibre content is
substantially below federal recognized acceptance levels. Many contractors
have been notified; however, each tenant must notify the Building
Management Office in writing prior to hiring any contractor that may come
in contact with asbestos-containing materials so that the contractor can be
given proper notification to insure necessary precautions will be taken.
15. No portion of any tenant's leased area shall at any time be used or
occupied as sleeping or lodging quarters.
16. Tenants are requested to lock all office doors leading to corridors and to
turn out all lights at the close of their working day.
17. Tenant shall not tamper with or attempt to adjust temperature control
thermostats in the leased premises. Lessor shall make adjustments in
thermostats on call from tenant.
18. Tenant will comply with all requirements necessary for the security of the
premises, including all regulations established for the use of Kastle
Security System.
19. All routine deliveries to a tenant's leased premises shall be made through
the freight elevator. Passenger elevators are to be used only for the
movement of persons, unless an exception is approved by the Building
Management Office.
20. All requests for overtime air/conditioning and/or heating must be submitted
to the Management Office in writing by 3:00 pm. Requests for weekend HVAC
must be submitted in writing by 3:00 pm on Fridays.
21. Solicitation of any kind is strictly forbidden unless approved in advance
by the Management Office.
22. In complying with the City Code which was established in November, 1986,
smoking is not permitted in the common areas of the building, (i.e.,
elevators, restrooms, corridors, etc.). Smoking is permitted within the
individual tenant spaces and these areas should be set up according to your
own company policy.
<PAGE>
Building Rules and Regulations - Geosource Plaza
Revised January, 1987
Page 4
23. Lessor reserves the right to rescind any of these rules and regulations and
to make such other and further rules and regulations as in its judgement
shall, from time to time, be needed for the safety, protection, care and
cleanliness of the building, the operation thereof, the preservation of
good order therein and the protection and comfort of the tenants and their
agents, employees and invitees, which is given to a tenant, shall be
binding upon it in like manner as if originally herein prescribed.
<PAGE>
EXHIBIT "B"
GEOSOURCE PLAZA
FLOOR PLAN LEVEL 14
NORTH
<PAGE>
Geosource Plaza, like many buildings constructed prior to 1980, has asbestos in
the fire retardent insulation applied to the structure and in certain other
isolated areas.
Recent inspections and monitoring tests indicated that the level of airborne
fibres, including asbestos, is below current or proposed OSHA acceptable limits.
Should you plan to perform any construction or alterations to your lease space,
please contact the Building Manager, Jean Gardner.
Such activity may disturb the asbestos material and therefore, certain
procedures must be followed.
<PAGE>
GALLERIA COMPLEX
SCHEDULE 1 TO LEASE AGREEMENT BETWEEN
TOWER, LIMITED "Lessor" AND METRO TRAFFIC CONTROL, INC. "Lessee" dated
April 15, l988
Lessee shall at all times during the term of this Lease Agreement lease
parking rights for at least 0 vehicles in the Garage. Lessee shall have the
right to lease up to 48 additional parking rights during the lease term. No
specific spaces in the Garage are to be assigned to Lessee, but Lessor will
issue to Lessee the aforesaid number of parking stickers or tags, each of which
will authorize parking in the Garage of a vehicle on which the sticker or tag is
displayed, or Lessor will provide a reasonable alternative means of identifying
and controlling vehicles authorized to be parked in the Garage. Lessor may
designate the area within which each such vehicle may be parked, and Lessor may
change such designations from time to time. Lessor may make, modify and enforce
rules and regulations relating to the parking of vehicles in the Garage, and
Lessee will abide by such rules and regulations.
As the Basic Parking Charge, Lessee covenants and agrees to pay Lessor
during the term of this Lease, as additional rental hereunder, the sum of $ 0
per month for each of the parking stickers to be issued by Lessor as herein
provided, such sum to be payable monthly in advance on the first day of each and
every calendar month during the lease term, and a pro rata portion of such sum
shall be payable for the first partial calendar month in the event the lease
term commences on a date other than the first day of a calendar month. The Basic
Parking Charge may be adjusted annually to market value by the Galleria Parking
Manager. Lessee's obligation to pay the Parking Charge shall be considered an
obligation to pay rent for all purposes hereunder and shall be secured in like
manner as is Lessee's obligation to pay rent. Default in payment of such Parking
Charge (after notice as hereinafter provided) shall be deemed a default in
payment of rent.
IN TESTIMONY WHEREOF, the parties hereto have executed this schedule as of
the date aforesaid.
TOWER, LIMITED METRO TRAFFIC CONTROL, INC.
By: Post Oak Associates, Ltd.,
General Partner
By: Gerald D. Hines Interests, Ltd.,
General Partner By: /s/ Greg F. Walsh, III
By: Hines Consolidated Investments, Inc., --------------------------
General Partner
Lessee
By: /s/ Louis S. Sklar
------------------------------------
Louis S. Sklar, Vice President
Lessor
<PAGE>
This lease shall be binding upon and inure to the benefit of the successors
and assigns of Lessor, and shall be binding upon and inure to the benefit of
Lessee, its successors, and, to the extent assignment may be approved by Lessor
hereunder, Lessee's assigns. The pronouns of any gender shall include the other
genders, and either the singular or the plural shall include the other.
All rights and remedies of Lessor under this lease shall be cumulative and
none shall exclude any other rights or remedies allowed by law; and this lease
is declared to be a Texas contract, and all of the terms thereof shall be
construed according to the laws of the State of Texas.
IN TESTIMONY WHEREOF, the parties hereto have executed this lease as of the
date aforesaid.
TOWER, LIMITED METRO TRAFFIC CONTROL, INC.
By: Post Oak Associates, Ltd.,
General Partner
By: Gerald D. Hines Interests, Ltd.,
General Partner By: /s/ Greg F. Walsh, III
By: Hines Consolidated Investments, Inc., --------------------------
General Partner
Lessee
By: /s/ Louis S. Sklar
------------------------------------
Louis S. Sklar, Vice President
Lessor
11
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
This First Amendment to Lease Agreement is entered into as of this 1st day
of September 1988 (the "Effective Date"), by and between Tower, Limited
("Lessor") and Metro Traffic Control, Inc. ("Lessee").
RECITALS
A. Lessor and Lessee entered into that certain Lease Agreement dated April
15, 1988 (the "Lease"), covering approximately 12,000 square feet of net
rentable area on Level 14 of the building known as Geosource Plaza, located at
2700 Post Oak Blvd., Houston, Texas 77056.
B. Lessor and Lessee desire to amend the Lease as hereinafter provided.
NOW THEREFORE, for and in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Lessor and Lessee hereby agree as follows:
1. The terms used herein shall have the same meanings as defined in the
Lease, unless otherwise defined herein, and all terms defined herein are hereby
incorporated into the Lease for all pertinent purposes, unless otherwise stated.
2. Commencing on the Effective Date, and thereafter for the remainder of
the initial term of the Lease, plus any renewals or extensions thereof, the
leased premises are hereby amended to include, and Lessee hereby agrees to take
and lease, according to the terms and conditions of the Lease as hereby amended,
approximately 7,888 square feet of net rentable area (the "Additional Space") on
Level 14 of the Building, as shown on Exhibit A attached hereto.
3. Commencing on the Effective Date, the leased premises shall consist of
approximately 19,888 square feet of net rentable area on Level 14 of the
Building, as shown on Schedule I attached hereto, which is hereby substituted in
place of Exhibit A attached to the Lease.
4. Lessee hereby accepts the Additional Space in its present "as-is"
condition. Lessee agrees that Lessor has no obligation to construct any
improvements or perform
-1-
<PAGE>
other work in connection with Lessee's leasing or occupying the Additional
Space.
5. Subparagraph (e) of the Rider attached to the Lease as Article V,
Paragraph 16 thereof, is hereby deleted and in its place is inserted the
following:
"(e) Lessee hereby accepts the leased premises in their present
"as-is" condition, except for any structural or mechanical defects.
Lessor has informed Lessee as to the existence of asbestos in the
Building and that the level of airborne fibers, including asbestos, is
below current or proposed OSHA acceptable limits. The parties hereto
agree that asbestos is not a structural defect. Lessor agrees to make
necessary repairs to the mechanical systems of the Building. Lessee
agrees that Lessor shall have no obligation to construct any
improvements or perform other work in connection with Lessee's leasing
and occupying the leased premises. Lessor shall have no obligation to
encapsulate or remove the asbestos contained in the Building,
including any area within the leased premises, in connection with
Lessee constructing improvements in the leased premises. Lessee's
obligation to encapsulate or remove asbestos in the Building shall be
limited to such encapsulation or removal required by any construction
initiated by Lessee. If Lessee desires to construct any leasehold
improvements in the leased premises (subject to Lessor's prior
approval thereof*), then Lessee shall bear all costs attributable to
constructing the leasehold improvements in the leased premises,
including any additional costs resulting from Lessee's contractors,
subcontractors, or installation technicians, or their agents or
employees, complying with the Building's Rules and Regulations and
other procedures pertaining to performing construction work in a
building containing asbestos; provided, however, that Lessee shall not
be obligated to pay, and Lessor agrees to pay, any increase in such
additional costs relating to asbestos related procedures arising out
of any changes to the Building's Rules and Regulations or any changes
to such procedures pertaining to performing construction work in a
building containing asbestos. Lessee agrees to construct the leasehold
improvements in the leased premises in accordance with all such Rules
and Regulations (a copy of which has been delivered to Lessee) and
such procedures, and to cause all of its contractors, subcontractors
and their agents and employees to do the same.
* which approval shall not be unreasonably withheld
-2-
<PAGE>
6. Lessee agrees to discharge of record (either by payment or by filing of
the necessary bond, or otherwise) any mechanics', materialmens', or other lien
against any portion of the Building, the leased premises and/or the Lessor's
interest therein, within twenty (20) days after notice by Lessor, which liens
may arise out of any payment due for, or purported to be due for, any labor,
services, materials, supplies or equipment alleged to have been furnished to or
for the Lessee in, upon or about the leased premises.
7. The first sentence of Paragraph 3 of Article II of the Lease is hereby
deleted in its entirety, and in its place is inserted the following:
"Lessee hereby agrees to pay a base monthly rental (herein called
"Base Rental") in the following sums for the following months:
Period Base Rental
------ -----------
A. Months 1 through 20
following the commencement
of the term hereof: $ 0.00
B. Months 21 through 52
following the commencement
of the term hereof: $ 13,000.00
C. Months 53 through 120
following the commencement
of the term hereof: $ 20,316.00
8. (a) The words "Twenty-five percent (25%) of such profit shall" inserted
in the thirteenth (13th) line and the fifteenth (15th) line of Article IV,
Paragraph 5 of the Lease are hereby deleted.
(b) The following is hereby inserted at the end of Article IV, Paragraph 5,
of the Lease:
Notwithstanding the foregoing provisions of this Article IV, Paragraph
5, to the contrary, Lessee may retain any profit realized from any such
sublease or subleases, so long as Lessee has subleased less than fifty
percent (50%) of the net rentable area in the leased premises. If at any
time Lessee has subleased fifty percent (50%) or more of the net rentable
area in
-3-
<PAGE>
the leased premises, then twenty-five percent (25%) of all profit (as
defined above in this Article IV, Paragraph 5) realized by Lessee as a
result of any sublease or subleases covering all or any portion of the
leased premises shall be paid to Lessor as provided in the first
grammatical paragraph of this Article IV, Paragraph 5. Twenty-five percent
(25%) of any profits from any assignment of the Lease shall be payable to
Lessor as provided in the first grammatical paragraph of this Article IV,
Paragraph 5.
9. Paragraph 18 of Article V of the Lease, containing an Expansion Option
provision and a Right of First Refusal provision, is hereby deleted in its
entirety.
10. Except as expressly amended by this First Amendment, the Lease shall
continue in full force and effect.
Executed as of the date first above written.
TOWER, LIMITED
By: Post Oak Associates, Ltd.,
General Partner
By: Gerald D. Hines Interests,
Ltd., General Partner
By: Hines Consolidated
Investments, Inc.,
General Partner
By: /s/ Louis S. Sklar
----------------------------
Louis S. Sklar,
Vice President
LESSOR
METRO TRAFFIC CONTROL, INC.
By: /s/ Greg F. Walsh, III
-----------------------------
Name: Greg F. Walsh, III
Title: Vice President
LESSEE
-4-
<PAGE>
LEASE AMENDMENT NUMBER TWO
BETWEEN TOWER, LIMITED, "LESSOR" AND
METRO TRAFFIC CONTROL, INC., "LESSEE"
DATED APRIL 23, 1991
THE STATE OF TEXAS )
COUNTY OF HARRIS )
WHEREAS, Tower, Limited hereinafter called "Lessor", and Metro Traffic
Control, Inc., hereinafter called "Lessee", entered into a Lease Agreement dated
April 15, 1988, covering approximately twelve thousand (12,000) square feet of
Net Rentable Area located on Level 14 in the 2700 Post Oak Boulevard building at
2700 Post Oak Boulevard, Houston, Texas 77056; and
WHEREAS, that Lease Agreement was subsequently amended in a First Amendment
to Lease Agreement for the purpose of expanding the Leased Premises; and
WHEREAS, Lessor and Lessee mutually desire to amend said Lease Agreement
for the purpose of expanding the leased premises; and
NOW, THEREFORE, Lessor and Lessee do hereby amend said Lease Agreement as
follows:
1. Lessee hereby leases approximately 3,544 square feet of Net Rentable Area
on Level 16 (Exhibit A) effective 5/1/91.
2. This expansion of the leased premises (the 3,544 square feet of Net
Rentable Area on Level 16 only) shall have a term of approximately
twenty-eight (28) months, expiring 8/31/93.
3. The Base Annual Rental for the expanded premises under this Amendment Two
to Lease Agreement shall be $8.25 per square foot of Net Rentable Area.
The Base Year for Operating Expense Escalations shall be 1990.
4. Lessee shall have none of those rights contained within the Lease
Agreement to this space (the 3,544 square feet of Net Rentable Area on
Level 16 only) beyond 8/31/93, except an option to lease a minimum of
one-half of the floor at such time as Lessor again makes the floor
available for Lease. Lessee's intent to exercise this option must be made
known in writing to Lessor by 4/30/93. Should Lessee make Lessor aware its
intent to exercise the option by 4/30/93, Lessor will have thirty (30) days
within which to notify Lessee of the "Fair Market Value" of the space (see
definition in Exhibit B), and an approximate time at which the space can be
made available to Lessee. Lessee will then have five (5) business days to
notify Lessor of its acceptance of the offer of space.
<PAGE>
Should Lessee fail to notify Lessor of its intent to exercise the option by
4/30/93, or should Lessee fail to notify Lessor of its acceptance of the
offer of space within five (5) days of Lessor's notice of "Fair Market
Value" and space availability, then Lessee shall have waived any right to
the space beyond the term stated in this Amendment Two to Lease Agreement.
5. In the period of time between 8/31/93 and that time when the space is again
available for lease, and providing there is previously built out space
available in the building, Lessor will make an effort to provide Lessee
with space to which Lessee can relocate at Lessee's sole expense. Should
such space be available, and should Lessee elect to relocate to said space
at its own expense, the rental rate for the relocation period shall be the
same as per this Lease Amendment, plus any accrued Operating Expense
Escalations.
6. Lessor agrees to clean the carpeting and repaint the premises covered under
this Amendment to Lease Agreement (the 3,544 square feet of Net Rentable
Area on Level 16 only) using building standard materials, and that such
painting will be completed prior to Lessee's occupancy on May 1, 1991.
7. So long as Lessee is not in default of any condition of this Lease
Agreement, as amended, Lessee shall have a Right of Refusal on a contiguous
space of approximately 1,677 square feet of Net Rentable Area on Level 16
(shown as Right of Refusal space on Exhibit A) not previously encumbered
by, or leased to, an existing tenant.
Lessee shall have three (3) business days in which to exercise this right
on all, but not part, of the space Lessor offers to a third party, when
presented by Lessor with a bona fide offer from Lessor which has been
accepted in writing by a third party. This right ceases if Lessee declines
to exercise such right when presented by Lessor with a bona fide accepted
offer to a third party for said space. Lessee shall not have the right to
assign this Right of Refusal to any assignee or sublessee, nor may any
assignee or sublessee exercise this right.
The Base Rental Rate for such additional space leased, as well as term,
provisions, and conditions, shall be the same offered and accepted in
writing by the third party.
<PAGE>
EXCEPT as hereby expressly amended, Lessor and Lessee do hereby ratify and
affirm all terms, conditions and covenants of said Lease Agreement.
WITNESS the execution here this __ day of _______________,19__.
TOWER, LIMITED METRO TRAFFIC
CONTROL, INC.
by: Post Oak Associates, Ltd.,
General Partner
by: GDHI Limited Partnership,
General Partner
by: Hines Consolidated
Investments, Inc.,
General Partner
by: /s/ Louis S. Sklar by: /s/ Greg F. Walsh, III
------------------------------ ------------------------------
Louis S. Sklar, Vice President
LESSOR LESSEE
RM:AMEND:fr
42391met
<PAGE>
EXHIBIT "A"
[Floor plan depicting leased premises and and right of refusal space.]
LEVEL 16
GENSOURCE PLAZA
<PAGE>
EXHIBIT "B"
Definition of Fair Market Value:
As used in this lease the term "Market Base Rental" shall mean the rate charged
for space of comparable size and condition in comparable first-class buildings
in the Uptown Houston Area, taking into consideration the location, quality and
age of the building, floor level, extent of leasehold improvements (existing or
to be provided), rental abatements, lease takeover/assumptions, moving expenses
and other concessions, term of lease, extent of services to be provided,
distinction between "gross" and "net" lease, base year or amount allowed by
Landlord for payment of building operating expenses (expense stop), and the time
the particular rental rate under consideration became or is to become effective.
<PAGE>
LEASE AMENDMENT NUMBER THREE
BETWEEN TOWER, LIMITED, "LESSOR" AND
METRO TRAFFIC CONTROL, INC., "LESSEE"
DATED JANUARY 28, 1992
THE STATE OF TEXAS )
COUNTY OF HARRIS )
WHEREAS, Tower, Limited, hereinafter called "Lessor", and Metro Traffic
Control, Inc., hereinafter called "Lessee", entered into a Lease Agreement dated
April 15, 1988, covering approximately twelve thousand (12,000) square feet of
Net Rentable Area located on Level 14 in Geosource Plaza at 2700 Post Oak
Boulevard, Houston, Texas 77056; and
WHEREAS, Lessor and Lessee entered into that certain First Amendment to
Lease Agreement in order to increase the Net Rentable Area of the Leased
Premises approximately 7,888 square feet of Net Rentable Area on Level 14 of the
Building and to modify the Base Rental as well as certain other terms and
provisions of the Lease.
WHEREAS, Lessor and Lessee entered into that certain Lease Amendment Number
Two for the purposes of expanding the Leased Premises approximately 3,544 square
feet of Net Rentable Area on Level 16 of the Building.
WHEREAS, Lessor and Lessee mutually desire to amend said Lease Agreement
for the purpose of increasing the number of parking spaces to be leased by
Lessee and the Basic Parking Charge Lessee agrees to pay each month for such
parking spaces.
NOW, THEREFORE, Lessor and Lessee do hereby amend said Lease Agreement as
follows:
1. Lessee shall have the right to lease up to twenty (20) additional
unassigned (unreserved) parking spaces at the rate of $25.00 per space per
month and one (1) assigned (reserved) parking space on Level D of the
Garage at the rate of $125.00 per month.
<PAGE>
EXCEPT as hereby expressly amended, Lessor and Lessee do hereby ratify and
affirm all terms, conditions and covenants of said Lease Agreement.
WITNESS the execution here this 29th day of January, 1992.
TOWER, LIMITED METRO TRAFFIC CONTROL, INC.
By: Post Oak Associates,
Ltd., General Partner
By: GDHI Limited Partnership,
General Partner
By: Hines Consolidated
Investments, Inc.,
By: /s/ Louis S. Sklar By: /s/ Greg F. Walsh, III
---------------------- ------------------------
Louis S. Sklar,
Vice President
LESSOR LESSEE
<PAGE>
SUBLEASE AGREEMENT
BETWEEN
TRANSCONTINENTAL GAS PIPE LINE CORPORATION,
a Delaware corporation, as Landlord
and
METRO TRAFFIC CONTROL, INC. a Maryland corporation, as Tenant
<PAGE>
SUBLEASE AGREEMENT
BETWEEN
TRANSCONTINENTAL GAS PIPE LINE CORPORATION,
a Delaware corporation, as Landlord
and
METRO TRAFFIC CONTROL, INC., a Maryland corporation, as Tenant
TABLE OF CONTENTS
Page No.
ARTICLE I (Definitions) ........................................1
Section 1.01 Certain Definitions ..................................1
Section 1.02 Prime Lease Definitions ..............................4
ARTICLE II (Premises) ...........................................4
Section 2.01 Demise ...............................................4
Section 2.02 Prime Lease ..........................................6
Section 2.03 Condition of Demised Premises ........................6
Section 2.04 Disclaimer of Warranties .............................6
Section 2.05 Inapplicability of Deceptive Trade Practices Act .....7
ARTICLE III (Term) ...............................................8
Section 3.01 Term .................................................8
Section 3.02 Tenant's Additional Space ............................8
Section 3.03 Tenant's Right of First Refusal to Lease
Other Space .........................................10
Section 3.04 Extension Option ....................................13
(i)
<PAGE>
ARTICLE IV (Leasehold Improvements) ............................15
Section 4.01 Landlord' s Obligations .............................15
Section 4.02 Tenant's Leasehold Improvements; Improvement
Allowance ...........................................17
ARTICLE V (Basic Rent and Additional Rent) ....................20
Section 5.01 Basic Rent ..........................................20
Section 5.02 Calculation of NRA ..................................21
Section 5.03 Manner of Payment ...................................21
Section 5.04 Operating Expenses ..................................22
Section 5.05 Interest on Past Due Sums ...........................25
ARTICLE VI (Utilities and Services) ............................25
Section 6.01 Services to be Provided by Prime Landlord ...........25
Section 6.02 Electricity Capacity; Separate. Metering ............25
Section 6.03 Interruption of Services ............................27
Section 6.04 Costs of Special Leasehold Improvements
After Commencement of Term ..........................28
Section 6.05 Building Directory and Signage ......................28
Section 6.06 Visitor Security ....................................29
ARTICLE VII (Garage Parking Spaces) .............................29
Section 7.01 Garage Parking Spaces ...............................29
Section 7.02 Parking Rent ........................................30
Section 7.03 Visitor Parking .....................................31
ARTICLE VIII (Use) ...............................................31
(ii)
<PAGE>
Section 8.01 Office Use ..........................................31
ARTICLE IX (Repairs and Maintenance) ...........................31
Section 9.01 Landlord Maintenance ................................31
Section 9.02 Tenant Maintenance ..................................32
Section 9.03 Damage Provisions ...................................33
ARTICLE X (Fire or Other Casualty) ............................33
Section 10.01 Casualty Damage .....................................33
Section 10.02 Waiver of Subrogation ...............................34
Section 10.03 Tenant Insurance ....................................35
ARTICLE XI (Alterations and Fixtures) ..........................35
Section 11.01 Alterations by Tenant ...............................35
Section 11.02 Trade Fixtures ......................................37
Section 11.03 Fixtures ............................................38
ARTICLE XII (Indemnity and Liability) ...........................38
Section 12.01 Indemnity; Tenant Insurance .........................39
Section 12.02 Landlord Indemnity ..................................39
ARTICLE XIII (Eminent Domain) ....................................40
Section 13.01 Taking ..............................................40
Section 13.02 Award ...............................................41
Section 13.03 Voluntary Dedication ................................41
ARTICLE XIV (Remedies and Defaults) .............................42
Section 14.01 Tenant Default; Landlord Remedies ...................42
(iii)
<PAGE>
ARTICLE XV (Bankruptcy) ........................................45
Section 15.01 Bankruptcy of Tenant ................................45
ARTICLE XVI (Compliance with Laws; Compliance with Prime
Lease) ..............................................46
Section 16.01 Compliance with Laws ................................46
Section 16.02 Compliance with Prime Lease .........................46
ARTICLE XVII (Assignment and Subletting) .........................47
Section 17.01 Assignment and Subletting ...........................47
ARTICLE XVIII (Landlord's Access) .................................48
Section 18.01 Landlord Access .....................................48
ARTICLE XIX (Quiet Enjoyment) ...................................49
Section 19.01 Landlord Covenant of Quiet Enjoyment ................49
ARTICLE XX (Non-Waiver) ........................................49
Section 20.01 No Waiver ...........................................49
ARTICLE XXI (Holding Over) ......................................49
Section 21.01 Hold Over by Tenant .................................49
ARTICLE XXII (Notices) ...........................................50
Section 22.01 Notices; Addresses ..................................50
ARTICLE XXIII (Partial Invalidity) ................................51
Section 23.01 Severability ........................................51
ARTICLE XXIV (Landlord Transfers) ................................52
Section 24.01 Limitation of Liability .............................52
Section 24.02 Agreements Binding during Ownership .................52
(iv)
<PAGE>
ARTICLE XXV (Arbitration) .......................................53
Section 25.01 Arbitration .........................................53
ARTICLE XXVI (Miscellaneous) .....................................55
Section 26.01 Estoppel Certificates ...............................55
Section 26.02 Microwave Receivers .................................55
Section 26.03 Miscellaneous .......................................55
EXHIBIT A [Floor Plan Drawing of the Demised Premises]
EXHIBIT B [Floor Plan Drawing of Johnson & Higgins Expansion
Space]
EXHIBIT C [Location of Reserved/Assigned Parking Spaces]
EXHIBIT D [Tenant's Removable Fixtures]
(v)
<PAGE>
THE STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
THIS SUBLEASE AGREEMENT dated January 5, 1996 (hereinafter called this
"Lease"), made and entered into by and between TRANSCONTINENTAL GAS PIPE LINE
CORPORATION, a Delaware corporation (hereinafter called "Landlord") and METRO
TRAFFIC CONTROL, INC., a Maryland corporation (hereinafter called "Tenant").
WITNESSETH:
ARTICLE I
(Definitions)
Section 1.01 Certain Definitions. Landlord and Tenant agree that the
respective terms as used herein shall, unless context otherwise requires, have
the following meanings:
"Auxiliary. Garage" shall refer to any parking garage designated by
Landlord located in the Galleria shopping center complex in Houston, Texas.
"Building" shall refer to the office building (inclusive of all the bridge
at the second level connecting the office building with the Garage) on the
Project Site, all as more fully defined and described in the Prime Lease.
"Demised Premises" shall refer to approximately 22,606 square feet of Net
Rentable Area located on Floor 40 and approximately 5,610 square feet of Net
Rentable Area located on Floor 39 in the Building as more particularly shown on
Exhibit attached hereto, the Additional Space (as
<PAGE>
defined in Section 3.02) and any Expansion Space which becomes a part of the
Demised Premises pursuant to Section 3.03.
"Garage" shall refer to the multi-level parking facility on the Project
Site, all as more fully defined and described in the Prime Lease.
"Lease Year" shall mean each successive twelve (12) month period during the
term of this Lease with the first Lease Year commencing on the Commencement Date
and ending on December 31, 1996; provided, however, the final Lease Year shall
commence on January 1, 2004 and end on the Expiration Date.
"Net Rentable Area" shall have the same meaning as "Net Rentable Area" in
the Prime Lease.
"Person" shall refer to an individual, partnership, corporation, trust,
unincorporated association or other entity.
"Prime Landlord" shall refer to Transco Tower Limited, a Texas limited
partnership, the current owner of the landlord' s interest in the Prime Lease,
its successors and assigns.
"Prime Lease" shall refer to that certain Lease Agreement dated October 5,
1981 by and between Post Oak/Alabama Partnership, a Texas general partnership,
as the landlord, and Transcontinental Gas Pipe Line Corporation, a Delaware
corporation, as the tenant, as amended by First Amendment to Lease Agreement
dated December 29, 1981, Lease Amendment and Consent to License dated October
10, 1983, Third Amendment to Lease Agreement dated September 13, 1984, Fourth
Amendment to Lease Agreement dated October 1, 1985, Fifth Amendment to Lease
Agreement dated January 1, 1986, Sixth Amendment to the Lease dated April 22,
1986, and Seventh
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<PAGE>
Amendment to the Lease dated April 1, 1987, each such Amendment having been
executed by Prime Landlord, as the landlord, and Transcontinental Gas Pipe Line
Corporation, as the tenant.
"Prime Rate" shall refer to the rate as announced from time to time by
Texas Commerce Bank National Association, Houston, Texas, as its "prime rate",
and thereafter entered as such in the minutes of its Loan and Discount
Committee.
"Project" shall refer to the Project Site, together with the Building, the
Garage and other improvements now or hereafter erected thereon.
"Project Site" shall refer to the tract of land described in Exhibit B to
the Prime Lease.
"Special Leasehold Improvements" shall refer to any of Tenant' s Leasehold
Improvements (as defined in Article IV) or other leasehold improvements within
the Demised Premises which are deemed by Prime Landlord to be "Special Leasehold
Improvements" under the terms of the Prime Lease.
"Tenant's Garage Share" shall mean a fraction, the numerator of which is
the number of parking spaces leased by Tenant from time to time pursuant to
Section 7.01 of this Lease and the denominator of which is the total number of
parking spaces in the Garage.
"Tenant's Share" shall mean a fraction, the numerator of which is the
number of square feet of Net Rentable Area in the Demised Premises and the
denominator of which is the greater of (i) 97% of the Net Rentable Area in the
Building or (ii) the percentage of the Net Rentable Area in the Building which
is occupied or under leases on which rentals are currently accruing during at
least one-half of the calendar year or portion thereof involved.
"TGPL Parking Area" shall refer to the "Tenant Parking Area" as defined and
described in the Prime Lease.
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<PAGE>
Section 1.02 Prime Lease Definitions. Terms used herein which are defined
in the Prime Lease, unless otherwise defined herein or unless the context
otherwise requires, shall have the meaning ascribed to them in the Prime Lease
and such terms are incorporated herein by reference.
ARTICLE II
(Premises)
Section 2.01 Demise. Landlord sublets and subleases to Tenant, and Tenant
hereby subleases from the Landlord all the Demised Premises. In conjunction with
the subleasing of the Demised Premises, during the term of this Lease, Tenant
shall have the following rights:
(a) to the extent Landlord has such right under the Prime Lease and
such right is transferable, the non-exclusive right to use the helicopter
pad on the Building;
(b) the right to use the parking spaces in the TGPL Parking Area
leased to Tenant pursuant to Section 7.01 hereof;
(c) to the extent permitted in the Prime Lease, the right in and to
the easements and rights to use the Skybridges, the Driveways and the Park
Area, which respective easements and rights shall be non-exclusive and in
common with others as provided in and subject to the terms of the Prime
Lease and the agreements referred to therein; and
(d) subject to the terms of the following paragraph, the non-exclusive
right (in common with Landlord's employees and all other Persons to whom
Landlord grants a right of use) of (i) employees of Tenant to use
Landlord's cafeteria, dining rooms (including executive dining rooms),
lounges and meeting rooms located on Floor 5 of the Building and Landlord's
200-seat auditorium located on Floor 2 of the Building and (ii) those
employees
-4-
<PAGE>
of Tenant that are issued membership cards as provided below to use
Landlord's health club facility located on floor 5 of the Building.
The non-exclusive rights of Tenant's employees pursuant to subparagraph (c)
are subject to the following:
(1) Landlord shall have the right to establish and enforce rules and
regulations regarding the use of such facilities including, without
limitation, the nature of the use of such facilities and the times at which
such facilities are available for use.
(2) Use of Landlord's meeting rooms and auditorium shall be on an "as
available" basis and must be reserved in advance in accordance with
Landlord's reservation policies.
(3) Landlord shall have the right to cease the operation of any or all
of such facilities and in such event, the rights of Tenant and its
employees with respect to such facilities shall terminate without affecting
the Basic Rent or any other obligations of Tenant hereunder.
(4) In the event Landlord is required by the Federal Energy Regulatory
Commission or any other governmental agency to impose a fee or charge to
third parties for use of any or all of such facilities and Landlord charges
such fee to any third party subtenants of Landlord, as a condition
precedent to Tenant's use of such facilities, Tenant shall pay a fee or
charge for the use of such facilities in an amount established by Landlord
as the standard rate for all third party users.
(5) As a condition to use of such facilities, Landlord may require
execution of an instrument by any Person using such facilities releasing
Landlord from any and all liability associated with the use of such
facility by such Person.
-5-
<PAGE>
(6) With respect to Tenant's rights pursuant to subparagraph (c)(ii)
above, Landlord shall issue a membership card to all employees of Tenant
designated by Tenant permitting access to and use of such health club
facility. Such cards shall be non-transferable and may be used only by the
Person to whom such card is issued.
Section 2.02 Prime Lease. This Lease is a sublease and is therefore subject
and subordinate to the terms of the Prime Lease. In that connection, Tenant
represents that it has been provided a copy of the Prime Lease (redacted to
exclude the rental mounts therein) and represents that it has read and is
familiar with the terms and provisions of the Prime Lease (except for the
excluded rental mount provisions). Landlord shall not agree to any amendment of
the Prime Lease if such amendment would materially adversely affect Tenant' s
interest in the Demised Premises without the prior written consent of Tenant,
which consent shall not be unreasonably withheld or delayed. Landlord represents
to Tenant that Landlord has the full right, power and authority to enter into
this Lease and that Landlord will use good faith efforts to obtain, within
thirty (30) days from the date hereof, all consents required to this Lease.
Section 2.03 Condition of Demised Premises. Tenant acknowledges and agrees
that Tenant has inspected the Demised Premises and agrees to accept the Demised
Premises in its present condition, "as is" and "with all faults" except as
otherwise provided in Article IV hereof.
Section 2.04 Disclaimer of Warranties. Tenant acknowledges that neither
Landlord nor Prime Landlord has made any warranties to Tenant with respect to
the quality of construction of any leasehold improvements or tenant finish
within the Demised Premises or as to the condition of the Demised Premises,
either express or implied, and that Landlord expressly disclaims any implied
-6-
<PAGE>
warranty that the Demised Premises are or will be suitable for Tenant's intended
commercial purposes.
Section 2.05 Inapplicability of Deceptive Trade Practices Act. Each of
Landlord and Tenant acknowledges, on its behalf and on behalf of its assigns and
successors, that the Texas Deceptive Trade Practices - Consumer Protection Act,
Subchapter E of Chapter 17 of the Texas Business and Consumer Code (the "DTPA"),
save and except the provisions of Section 17.555 of the Texas Business and
Commerce Code, is not applicable to the transaction contemplated under the terms
of this Lease. Accordingly, the rights and remedies of Landlord and Tenant with
respect to all acts or practices of the other, past, present or future, in
connection with these transactions shall be governed by legal principles other
than the DTPA. In connection with the foregoing, Tenant represents to Landlord
that it is represented by legal counsel and is a business consumer (as defined
in the DTPA) and that it seeks to lease the Demised Premises for commercial or
business use. Landlord and Tenant each represent to the other than they have
knowledge and experience in financial and business matters that enable it to
evaluate the merits and risks of the transactions contemplated hereby. Further,
Landlord and Tenant each further represent to the other that they are not in a
significantly disparate bargaining position in relation to one another. Tenant
represents to Landlord that it has assets of $5,000,000 or more.
Landlord and Tenant each agrees, on its own behalf and on behalf of its
assigns and successors, that all of the rights and remedies under the DTPA, save
and except the provisions of Section 17.555 of the Texas Business and Commerce
Code, are hereby waived and released, including specifically, without
limitation, all rights and remedies resulting from or arising out of any and all
acts or practices of the other party in connection with the transactions
contemplated under
-7-
<PAGE>
this Lease, regardless of whether such acts or practices occur before or after
the execution of this Lease.
ARTICLE III
(Term)
Section 3.01 Term. Subject to and upon the terms and conditions set forth
herein, the term of this Lease shall commence on April 1, 1996 (the
"Commencement Date") and, unless sooner terminated or extended to a later date
in accordance with the terms and provisions hereof, the term of this Lease shall
expire on March 29, 2004 (the "Expiration Date").
Section 3.02 Tenant's Additional Space.
(a) Commencing on the first day of April, 1998, additional space in the
Building as designated and determined in accordance with the provisions of this
Section 3.02 (the "Additional Space") shall be added to and included in the
Demised Premises. The Additional Space shall consist of 5,214 square feet of Net
Rentable Area on the Expansion Floor (as hereinafter defined in Section 3.03).
The Additional Space shall be located adjacent to the existing Demised Premises
as set forth on Exhibit A attached hereto and incorporated herein for all
purposes.
(b) In addition, Tenant shall have the right to lease all or a portion of
the Additional Space prior to April 1, 1998 by delivering written notice to
Landlord of Tenant's desire to commence the term of all or a portion of the
Additional Space. Landlord shall then notify Tenant in writing as to the date
the Additional Space, or portion thereof, will be made available to Tenant,
which date shall not be later than sixty (60) days after the date Tenant desires
to commence the term of the Additional Space.
-8-
<PAGE>
(c) The Available Date for the Additional Space (or any portion thereof)
shall occur on the earlier to occur of the date specified by Landlord that the
Additional Space is available as described in the immediately preceding
paragraph or April 1, 1998. In either event, the term "Available Date" shall
mean, with respect to the Additional Space (or any portion thereof), the date
sixty (60) days after such space is delivered to Tenant in the condition
specified in Section 4.01 hereof and further provided that Tenant shall be
entitled to be paid an allowance for the construction of leasehold improvements
in the Additional Space in an amount equal to the amount hereinafter set forth
(the "Additional Improvement Allowance"). The Additional Improvement Allowance
shall be equal to Sixteen and 50/100 Dollars ($16.50) per square foot of Net
Rentable Area in the Additional Space if the Available Date is April 1, 1998. If
the Available Date is prior to April 1, 1998, the Additional Improvement
Allowance for the portion of the Additional Space leased prior to March 1, 1998
shall be increased by an amount equal to the product of $0.14 per square foot of
Net Rentable Area in the Additional Space (or portion thereof) times the number
of months (or portion thereof) from the Available Date until April 1, 1998,
provided in no event shall the Additional Improvement Allowance exceed $20.00
per square foot of Net Rentable Area in the Additional Space. The Additional
Improvement Allowance shall be paid, and the improvements in the Additional
Space constructed, on the same terms and conditions as are contained in Section
4.02 with respect to the Tenant's Leasehold Improvements and the Improvement
Allowance.
(d) The Additional Space shall become a part of the Demised Premises as of
the Available Date therefor, and all Basic Rent, Parking Rent and additional
rent with respect thereto shall commence (and thereupon become a part of the
Basic Rent, Parking Rent and additional rent). The Additional Space shall be
governed by the same terms and conditions of this Lease as applicable
-9-
<PAGE>
to the remainder of the Demised Premises, except that (1) the Basic Rent Rate
for such Additional Space to be used for purposes of calculating the Basic Rent
pursuant to Section 5.01 hereof shall be at the Rate set forth below, (2) the
term of this Lease as to the Additional Space shall commence as above provided
and shall continue for the balance of the Term of this Lease, and (3) except for
the Additional Improvement Allowance, in no event shall any rental credit,
allowance or other concession provided for in this Lease be applicable to the
leasing of the Additional Space. Landlord and Tenant agree to execute an
amendment to this Lease evidencing the leasing of such Additional Space and the
exact Net Rentable Area contained in the Additional Space.
(e) If the Available Date is April 1, 1998, then the Basic Rent for the
Additional Space shall be as follows:
Lease Year(s) Annual Basic Rent
------------- -----------------
Three (3) $6.05 per square foot of Net Rentable Area
Four (4) through Six (6) $7.05 per square foot of Net Rentable Area
Seven (7) through Last $8.05 per square foot of Net Rentable Area
Lease Year
If the Available Date is prior to April 1, 1998, then the annual Basic Rent
shall be $6.05 per square foot of Net Rentable Area of Additional Space.
(f) Notwithstanding anything to the contrary set forth in this Section
3.02, the Additional Space shall not, at Landlord's option, be leased to Tenant
if, as of the Available Date, there exists an Event of Default by Tenant under
this Lease.
Section 3.03 Tenant's Right of First Refusal to Lease Other Space. Subject
to the further provisions of this Lease and to the currently existing expansion
rights of Johnson & Higgins of
-10-
<PAGE>
Texas, Inc., Tenant is hereby granted the right of first refusal (the "Expansion
Right") to expand the Demised Premises and to include and sublease space on the
Expansion Floor (hereinafter defined) subject to and in accordance with the
terms of this Section 3.03. Landlord represents and warrants that the only
currently existing expansion rights of Johnson & Higgins of Texas, Inc. apply
only to the space outlined on Exhibit B attached hereto and incorporated herein
for all purposes. For purposes hereof, the following terms shall have the
following definitions:
"Expansion Floor" shall mean the thirty-ninth (39th) floor of the
Building save and except the portion of the 39th floor to which Johnson &
Higgins of Texas, Inc. has a currently existing expansion option (the "J&H
Expansion Space"); provided, however, at such time as Johnson & Higgins of
Texas, Inc. no longer has any expansion rights with respect to the J&H
Expansion Space, the J&H Expansion Space shall become part of the Expansion
Floor as such term is used in this Lease.
"Offer" shall mean an offer or proposal by a third party (a
"Prospective Subtenant") to sublease all or any portion of the Expansion
Floor, which offer or proposal may be in the form of a letter of intent,
written proposal, lease agreement or other binding or non-binding agreement
evidencing the agreement or intent of a Prospective Subtenant to sublease
all or a portion of the Expansion Floor.
In the event Landlord receives an Offer which Landlord desires to accept,
Landlord shall give written notice (the "Expansion Space Notice") to Tenant of
the Basic Terms of the Offer. The "Basic Terms" shall include (i) all
appropriate information regarding the portion of the Expansion Floor which is
the subject of such Offer (the "Offered Space"), including the area, floor plan
and condition thereof, (ii) the term of the sublease contemplated by the Offer
and the commencement
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<PAGE>
and expiration dates thereof, (iii) the annual basic rent, tenant's share of
operating expenses, parking rent and other rental amounts to be paid pursuant to
the sublease contemplated by the Offer, (iv) any rental abatements, improvement
allowances, relocation allowances and other tenant inducements contemplated by
the Offer, (v) all renewal options and expansion rights contemplated by the
Offer, and (vi) all other pertinent terms and conditions contained in the Offer
which would normally be contained in a letter of intent or proposal letter;
provided, however, Landlord shall not be obligated to include in the Expansion
Space Notice the identity of the Prospective Subtenant or any guarantor of the
Prospective Subtenant's obligations. Landlord shall provide Tenant with
sufficient evidence of the Offer to allow Tenant to confirm the validity of the
Offer, in its reasonable discretion.
Tenant shall have a period of ten (10) business days after receipt of the
Expansion Space Notice in which to exercise by written notice (the "Expansion
Exercise Notice") its Expansion Right to sublease all (but not less than all) of
the Offered Space on the terms and conditions set forth in the Expansion Space
Notice. If Tenant fails to deliver the Expansion Exercise Notice exercising its
Expansion Right within such ten (10) business days, it shall be conclusively
deemed that Tenant has elected not to exercise its Expansion Right only as to
that particular Offer. Tenant's Expansion Right pursuant to this Section 3.03
shall continue, subject only to any lease entered into by Landlord and the
Prospective Subtenant pursuant to the terms of the Offer. Upon the termination
of any such lease, the space covered thereby shall again become subject to the
Expansion Right.
If Tenant timely gives the Expansion Exercise Notice, Tenant shall be
deemed to have elected to sublease the Offered Space on the terms and conditions
set out in the Expansion Space Notice. In such event, Landlord and Tenant shall
enter into an amendment to this Lease evidencing
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<PAGE>
the sublease by Tenant of the Offered Space and the terms, covenants and
conditions thereof as herein set out.
Tenant' s Expansion Right shall be subject to the rights of tenants under
leases of space on the Expansion Floor including, without limitation, renewal
and extension options, expansion options, and rights of first refusal contained
in such existing leases.
Section 3.04 Extension Option. The "Prime Lease Renewal Option" shall mean
the right and option by Landlord to renew and extend the term of the Prime Lease
for the five (5) year period after the expiration of the initial term of the
Prime Lease in accordance with the terms of Section 24.01 of the Prime Lease.
Provided that Landlord has exercised the Prime Lease First Renewal Option with
respect to the Demised Premises and the term of the Prime Lease is actually
renewed and extended for the period contemplated by the Prime Lease First
Renewal Option, Tenant shall have the option (the "Extension Option") to renew
this Lease and extend the term of this Lease as to all (but not less than all)
of the Demised Premises for a period of five (5) years (the "Extended Term")
commencing on the expiration of the initial term of this Lease. Tenant may
exercise the Extension Option by written notice thereof (the "Exercise Notice")
to Landlord on or before that date (the "Exercise Date") which is thirty (30)
days after delivery by Landlord or Tenant of the Renewal Information (as
hereinafter defined), in which event the term of this Lease shall be extended
for the Extended Term on the terms and conditions set out below. If Tenant is
considering exercising the Extension Option, Tenant shall notify Landlord of
such interest by delivering written notice (the "Notice of Interest") to
Landlord on or before the date which is twelve (12) months prior to the
expiration of the initial term of this Lease. Should Tenant timely give the
Notice of Interest, then Landlord shall, within thirty (30) days thereafter,
deliver to Tenant a notice advising Tenant of
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<PAGE>
(i) whether landlord has exercised the Prime Lease First Renewal Option and (ii)
the Prime Lease Established Market Rate for the Demised Premises (the "Renewal
Information"). Tenant shall then have until the Exercise Date in which to elect
to exercise the Extension Option by giving the Exercise Notice; provided,
however, Tenant shall not be permitted to exercise the Extension Option if, at
the time of such exercise, there exists a monetary default or uncured
nonmonetary default by Tenant under the terms of this Lease. If Landlord does
not exercise the Prime Lease First Renewal Option or the Prime Lease is not
actually renewed and extended for the period contemplated by the Prime Lease
First Renewal Option, Tenant shall not be entitled to exercise the Extension
Option and this Lease shall terminate on the expiration of the initial term. If
Tenant falls to timely give either the Notice of Interest or Exercise Notice,
Tenant shall be deemed to have elected not to exercise the Extension Option and
this Lease shall terminate on the expiration of the initial term hereof.
In the event that Tenant exercises the Extension Option, this Lease shall
continue on all of the same terms and conditions except that (a) the Basic Rent
payable during the Extended Term for the Demised Premises shall be an amount
equal to the amount obtained by multiplying the Prime Lease Established Market
Rate times the number of square feet of Net Rentable Area in the Demised
Premises, (b) the leasehold improvements shall be provided in their then
existing condition as of the commencement of the Extended Term and Landlord
shall have no obligation to construct or install any improvements in the Demised
Premises or provide any allowance therefor, (c) in no event shall Tenant be
entitled to any rental abatement, credit or concession for the rentals due and
payable during the Extended Term, (d) Tenant shall pay, as additional rent
hereunder, a monthly Parking Rent for each Garage Parking Space provided by
Landlord hereunder in an amount equal to the then standard rate in the Garage
charged by Prime Landlord for reserved or unreserved (as applicable)
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parking spaces, and (e) in no event shall Tenant be entitled to extend the term
of this Lease beyond the Extended Term unless subsequently agreed to in writing
by Landlord.
For purposes of this Section 3.04, the term "Prime Lease Established Market
Rate" shall mean the "Market Rate" (as defined in the Prime Lease) for the
Demised Premises during the period covered by the Prime Lease First Renewal
Option as agreed upon by Prime Landlord and Landlord or determined in accordance
with he appraisal provisions of the Prime Lease, all as provided in Section 6.01
of the Prime Lease.
In the event Tenant exercises the Extension Option, Landlord and Tenant
agree to execute an amendment to this Lease evidencing the extension of the term
of this Lease for the Extended Term and the terms, covenants and rentals to be
paid as herein set out.
Landlord shall not be under any obligation to Tenant to exercise the Prime
Lease First Renewal Option and the election to exercise the Prime Lease First
Renewal Option shall be within the sole discretion of the Landlord. Further, at
the end of the initial term of the Prime Lease, Landlord may elect to execute a
new lease (or renew and extend the term of the Prime Lease) covering space in
the Building which may not include the Demised Premises and Landlord shall be
entitled to do so and such election by Landlord shall not violate any obligation
of Landlord to Tenant under this provision or elsewhere in this Sublease.
ARTICLE IV
(Leasehold Improvements)
Section 4.01 Landlord' s Obligations. Except as hereinafter expressly
provided, Landlord shall deliver and Tenant shall accept the Demised Premises in
their present condition and Landlord
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shall not be obligated to make any improvements or alterations thereto;
provided, however, Landlord, at its expense (except as otherwise provided
below), within ten (10) business days after receipt of Tenant's demolition plan
for the Demised Premises, agrees to remove the following items from the Demised
Premises to the extent requested to do so under Tenant's demolition plan
delivered to Landlord:
(a) Remove from the Demised Premises all furniture, carpeting and
plants currently located therein;
(b) Remove from the Demised Premises all existing demountable
partitions and associated electrical and telephone wiring in such
partitions. Landlord shall not be responsible for replacing any ceiling
tiles damaged in connection with the removal of such partitions and
associated wiring but shall stack the reusable ceiling tiles within the
Demised Premises and such reusable ceiling tiles shall be available for use
by Tenant in connection with the construction and installation of the
Tenant's Leasehold Improvements (hereinbelow defined); and
(c) Remove from the Demised Premises any HVAC equipment (including air
handling and/or fan coil units), piping and controls not located within the
Building's mechanical rooms on Floor 40 of the Building. All ductwork
associated with such equipment shall not be removed by Landlord. Such HVAC
equipment, piping, controls and ductwork shall be available for use by
Tenant in connection with the construction and installation of the Tenant's
Leasehold Improvements.
All improvements removed by Landlord pursuant to the Tenant's demolition
plan, or that remain within the Demised Premises after such demolition, shall
remain the property of Landlord
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and all such improvements shall remain upon and be surrendered with the Demised
Premises at the termination of this Sublease.
Section 4.02 Tenant's Leasehold Improvements: Improvement Allowance.
Reference is here made to the fact that Tenant intends to construct and install
leasehold improvements within the Demised Premises (the "Tenant's Leasehold
Improvements"). All such construction and installation work shall constitute
alterations to the Demised Premises and shall be subject to the provisions of
this Lease and the Prime Lease relative to the alteration of the Demised
Premises including, without limitation, the provisions of Section 11.01 hereof
and Section 12.01 of the Prime Lease. Accordingly, all plans and specifications
for such Tenant's Leasehold Improvements must be approved by Landlord and Prime
Landlord prior to the installation or construction thereof. To the extent any
further consent of Landlord is required, Landlord will provide such consent, or
denial thereof, within thirty (30) days after receipt of the request therefore
and the information necessary to evaluate such request. The approval by Landlord
or Prime Landlord of such plans and specifications shall not constitute a
representation or warranty by Landlord or Prime Landlord that the plans and
specifications comply with applicable building codes, ordinances or regulations.
Tenant shall be solely responsible for compliance with all building codes,
ordinances and regulations and shall be solely responsible for obtaining all
permits, authorizations, consents and approvals to the construction and
installation of Tenant's Leasehold Improvements which may be required by
applicable governmental authorities.
Subject to the approval of the Tenant's Leasehold Improvements in
accordance with the applicable sections of this Lease and the Prime Lease,
Landlord shall provide to Tenant an allowance (the "Improvement Allowance") in
the amount of up to Five Hundred Sixty-Four Thousand Three
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Hundred Twenty and No/100 Dollars ($564,320.00) for the purpose of paying
Improvements Costs to be disbursed as hereinafter provided. For purposes hereof,
the term "Improvements Costs" shall mean (i) all costs and fees paid to
governmental authorities to obtain the appropriate authorizations to construct
and complete the Tenant's Leasehold Improvements, (ii) all amounts paid to
Tenant's contractors for the construction and installation of the Tenant's
Leasehold Improvements including all costs for materials furnished and labor
performed, and the amount of all profit, overhead and general conditions paid to
such contractor, (iii) all sales, use and similar taxes associated with the
construction and installation of the Tenant's Leasehold Improvements, (iv) all
testing and inspection fees relating to the Tenant's Leasehold Improvements paid
to governmental authorities, (v) the fees and expenses of all architects and
engineers in connection with providing construction drawings and designing the
Tenant's Leasehold Improvements and inspection thereof during the construction
and installation process, (vi) all expenses of relocating Tenant, including
moving Tenant' s furniture and fixtures into the Demised Premises upon
completion of the Tenant's Leasehold Improvements, (vii) all costs associated
with installing all voice and data cabling (a) within the Demised Premises and
(b) from Tenant's telephone switch or telephone equipment room located within
the Demised Premises to the telephone demarcation room located on Basement Level
B-l, (viii) all costs associated with relocating any demountable partitions (and
associated electrical and telephone wiring) or costs associated with removing,
replacing or relocating all existing ceiling tile, light fixtures, sprinkler
heads, HVAC, electrical and plumbing improvements, and (ix) all costs associated
with relocating the HVAC equipment, piping controls and ductwork described in
Section 4.01(c) above.
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Landlord shall advance portions of the Improvement Allowance as the
Tenant's Leasehold Improvements are constructed and the Improvements Costs
related thereto are incurred by Tenant but only after Tenant shall have
submitted a Request for Advance which shall (i) itemize all work performed
through the date of the Request for Advance and (ii) contain a certification by
Tenant and its architect that all work for which an advance of the Improvement
Allowance is requested has been satisfactorily performed in accordance with the
plans and specifications approved by Landlord and Prime Landlord and that all
costs included in the Request for Advance are valid Improvements Costs. Landlord
shall not be obligated to advance portions of the Improvement Allowance unless
and until the Tenant's Leasehold Improvements comply with the plans and
specifications approved by Landlord and Prime Landlord, comply with all
applicable building codes, ordinances and regulations and any defects in the
Tenant's Leasehold Improvements have been corrected to the satisfaction of
Landlord and Prime Landlord.
For each advance of Improvements Costs made to Tenant hereunder, Landlord,
at its option, may retain a sum equal to ten percent (10%) thereof so that, for
a period of thirty days after completion of Tenant's Leasehold Improvements,
Landlord shall have in its possession a sum equal to ten percent (10%) of the
cost of such Tenant' s Leasehold Improvements.
In no event shall Landlord be obligated to disburse to Tenant in respect of
such Improvements Costs an amount exceeding the Improvement Allowance. In the
event the Improvements Costs exceed the Improvement Allowance, Tenant shall be
solely responsible for such excess. The proceeds of the Improvement Allowance
shall be used by Tenant solely to pay Improvements Costs and upon request by
Landlord from time to time, Tenant shall provide to Landlord reasonable
supporting evidence that the proceeds of the Improvement Allowance have been
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expended by Tenant for Improvements Costs. Any portion of the Improvement
Allowance not expended for Improvements Costs shall be applied to the payment of
Basic Rent due under this Lease.
ARTICLE V
(Basic Rent and Additional Rent)
Section 5.01 Basic Rent. Notwithstanding any provision herein to the
contrary, it is specifically agreed and understood that Tenant shall not be
obligated to pay (and shall not accrue any obligation to pay) any Basic Rent,
Actual Operating Expenses or Management Fees (defined below) during the period
of time commencing on the Commencement Date and ending on July 31, 1996 (the
"Rental Abatement Period"). The foregoing sentence shall not affect Tenant's
obligation to pay Tenant's Share of any other sums (other than Basic Rent,
Actual Operating Expenses or Management Fees) due and payable hereunder by
Tenant. After the Rental Abatement Period, as "Basic Rent" for this Lease and
use of the Demised Premises, Tenant covenants and agrees to pay Landlord at its
offices in Houston, Harris County, Texas, or such other address in Houston,
Harris County, Texas, as Landlord may from time to time designate in writing,
payable in advance in equal monthly installments, on the first day of each full
calendar month commencing on August 1, 1996 in legal tender for the payment of
public and private debts, without set-off or deduction except as specifically
provided in this Lease, an amount for each Lease Year equal to the following:
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Lease Year Annual Basic Rent Monthly Basic Rent
---------- ----------------- ------------------
One (1) through Three (3) $170,706.80 $ 14,225.57
Four (4) through Six (6) $198,922.80 $ 16,576.90
Seven (7) through Last $227,138.80 $ 18,928.23
Lease Year
It is the agreement and intention of Landlord and Tenant that all Basic Rent
herein provided to be paid by Tenant during the term hereof and any extensions
or renewals shall be absolutely net to Landlord of all Actual Operating
Expenses.
Section 5.02 Calculation of NRA. The Basic Rent has been established based
on 28,216 square feet of Net Rentable Area in the Demised Premises. Landlord and
Tenant have agreed to the foregoing square footage specification for purposes of
calculating the Basic Rent, regardless of whether the same should be more or
less as a result of minor variations resulting from measurement of the Demised
Premises or actual construction and completion of leasehold improvements for
occupancy or otherwise.
Section 5.03 Manner of Payment. All payments of Basic Rent and Parking Rent
(defined below) and other amounts becoming due and payable from Tenant to
Landlord under and in connection with this Lease may be made (and shall be
deemed to have been timely and properly made) by delivering or mailing to
Landlord or Landlord's assignee at the then applicable address provided for
herein Tenant's check or draft in the amount of such payment, on or before the
due date thereof under the term of this Lease; provided that if such check or
draft shall not be paid and honored upon the presentation thereof duly endorsed
and in due course the delivery or mailing of such check or draft shall not
constitute payment by Tenant hereunder, and that acceptance of any
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such check or draft by Landlord or Landlord's assignee shall be subject to
payment thereof upon presentation in due course.
Section 5.04 Operating Expenses.
(a) "Actual Operating Expenses", as that term is used herein, shall mean
"Actual Operating Expenses" as defined, calculated and determined in accordance
with the terms of the Prime Lease except that, for purposes hereof, the
"Management Fee" which is a component of the Actual Operating Expenses shall be
equal to three percent (3%) of Tenant's Basic Rent for the Demised Premises plus
three percent (3%) of Tenant's Share of Computed Operating Expenses, as defined
below (but excluding any amounts included therein on account of the Management
Fee).
(b) "Tenant's Share of Forecast Operating Expenses", as that term is used
herein, shall mean the Tenant's Share of Computed Operating Expenses as
reasonably projected by Landlord for any calendar year (based on Prime
Landlord's projection under the terms of the Prime Lease). The term "Computed
Operating Expenses" shall mean, with respect to each calendar year, the Actual
Operating Expenses for said year computed in accordance with the provisions of
the Prime Lease, but excluding the Management Fee. The term "Tenant' s Share of
Computed Operating Expenses" shall mean with respect to any calendar year, the
sum of (i) the Computed Operating Expenses for such year, exclusive of the
Computed Operating Expenses attributable to the Garage and the land on which the
Garage is located, multiplied by Tenant' s Share, (ii) the Computed Operating
Expenses for such year attributable to the Garage and the land on which the
Garage is located multiplied by Tenant's Garage Share, and (iii) the Management
Fee for such year. For each calendar year, the projected amount of Tenant's
Share of Forecast Operating Expenses shall be presented by Landlord to Tenant
within five (5) days after presentation to Landlord of the corresponding
statement
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presented to Landlord by Prime Landlord under the terms of the Prime Lease (or
for the calendar year in which the term of this Lease commences, thirty (30)
days prior to the Commencement Date). Commencing on August 1, 1996 and on the
first day of each full calendar month thereafter, Tenant shall pay to Landlord
one-twelfth (1/12th) of Tenant's Share of Forecast Operating Expenses for said
calendar year.
If Tenant's Share of Computed Operating Expenses for any calendar year is
greater than Tenant' s Share of Forecast Operating Expenses, Tenant shall pay to
Landlord within thirty (30) days after Tenant's receipt of the annual statements
referred to in (c) below the amount of such excess. However, if Tenant's Share
of Computed Operating Expenses for such calendar year is less than Tenant's
Share of Forecast Operating Expenses, Landlord shall credit the amount of such
overpayment against the next ensuing installment(s) of Tenant's Share of
Forecast Operating Expenses except that with respect to any overpayment
attributable to the last Lease Year, Landlord shall pay to Tenant within thirty
(30) days after Tenant's receipt of such statement the amount of such
overpayment; provided, however, to the extent Landlord receives cash from Prime
Landlord for any overpayment of Operating Expenses related to the Demised
Premises, Landlord shall pay such amount to Tenant (up to the amount of the
overpayment) instead of crediting the amount of such overpayment as described
above.
(c) Within twenty (20) days after receipt by Landlord of the corresponding
statement delivered to Landlord by Prime Landlord under the terms of the Prime
Lease, Landlord shall deliver to Tenant a written statement itemized in
reasonable detail showing Computed Operating Expenses for the calendar year in
question. The annual statements by Landlord shall include said statement
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of Computed Operating Expenses and a comparison of Tenant's Share of Forecast
Operating Expenses with Tenant's Share of Computed Operating Expenses.
(d) With respect to the calendar years in which the term of this Lease
commences and expires, Tenant's Share of Computed Operating Expenses referred to
in this Section 5.04 shall be calculated by the following formula:
Days after August 1, 1996 Tenant's Share of Adjusted Tenant's Share
or prior to Termination x Computed Operating = Share of Computed
- ------------------------- Expenses Operating Expenses
365
(e) Subject to the express exclusion from Actual Operating Expenses
hereinabove provided, but controlling over any other provision herein to the
contrary, it is agreed that in the event all of the Building is not fully
occupied (or leased under leases on which rentals are currently accruing) during
any calendar year or in the event all of the Building is not provided with
building standard services during calendar year, an adjustment shall be made in
computing Tenant's Share of Forecast Operating Expenses and Actual Operating
Expenses for such year so that Tenant's Share of Forecast Operating Expenses
and Actual Operating Expenses shall be computed for such year as though the
greater of 97% of the Building or the percentage thereof actually occupied (or
leased under leases on which rentals are currently accruing) had been fully
occupied (or leased under leases on which rentals are currently accruing) during
such year and as though 97% of the Building or the percentage thereof actually
provided with building standard services had been provided with building
standard services during such year. As provided in the Prime Lease, any space in
the Building rented by Gerald D. Hines Interests under lease agreement of even
date with the Prime
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Lease shall be considered occupied and provided with building standard services
for all the period involved for the purposes of this subsection (e).
(f) All amounts payable by Tenant to Landlord under this Section 5.04 shall
constitute additional rent.
Section 5.05 Interest on Past Due Sums. All past due rent and other sums
due Landlord hereunder shall bear interest from the last day provided herein for
Tenant to cure any default in timely paying such sums at the lesser of (i) the
maximum lawful rate or (ii) a varying annual rate equal to the sum of the Prime
Rate plus five percent (5%).
ARTICLE VI
(Utilities and Services)
Section 6.01 Services to be Provided by Prime Landlord. Tenant shall be
entitled to all of the services to be provided to the Demised Premises by Prime
Landlord under the terms of Section 7.01 of the Prime Lease and Item 15 of
Section 6.05(a) of the Prime Lease. Landlord shall not be liable or responsible
for the failure of Prime Landlord to provide such services; provided, however,
Landlord agrees to use due diligence to cause Prime Landlord to furnish such
services in accordance with and subject to the terms of the Prime Lease.
Section 6.02 Electricity Capacity: Separate Metering. Landlord shall
provide all electrical distribution equipment, including without limitation the
bus ducts, feeders, transformers and panelboards that are currently located in
the Demised Premises in their current "as is" conditions (the "Electrical
Equipment"). Any modifications to the Electrical Equipment deemed necessary by
Tenant shall be paid from the Improvement Allowance. In the event that the final
construction plans
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and specifications indicate (i) that the total connected high voltage (480/277v)
electrical load is in excess of 2 watts per square foot of Net Rentable Area, or
(ii) the total connected low voltage (208/120v) electrical load is in excess of
4 watts per square foot of Net Rentable Area, or if there is any item of
electrical equipment which singly consumes more than .5 kilowatts per hour at
rated capacity or requires a voltage of more than 120 volts, single phase, then
Tenant shall install a separate meter on each of the electrical panels in excess
of the above described wattage and Tenant shall pay for the actual electrical
use, if any, in excess of 2 watts per square foot of Net Rentable Area for high
voltage, 4 watts per square foot of Net Rentable Area for low voltage and in
excess of .5 kilowatts per hour at rated capacity or 120 volts, single phase (as
invoiced therefor by Landlord). The extent to which Tenant's consumption of
electricity (or other energy) exceeds the amount stated in the foregoing
sentence (and therefore, requires the installation of a separated meter or
meters) shall be conclusively determined by Prime Landlord's Electrical Engineer
for the Building. If separate metering is required, such separate meter or
meters shall be installed in accordance with the specifications therefor
prepared by Prime Landlord's Electrical Engineer for the Building and the costs
of installing such separate meter or meters, the associated wiring and cables
shall be paid from the Improvement Allowance. Landlord and its agents may enter
the Demised Premises from time to time in order to read such separate meters in
connection with preparing an invoice to Tenant for the electrical (or other
energy) costs indicated thereon.
If Landlord is ever obligated, under the terms of Section 7.02 of the Prime
Lease, to separately meter or "check" meter the premises covered by the Prime
Lease, Landlord and Tenant agree that the Demised Premises shall be separately
metered or "check" metered in a manner similar to the premises covered by the
Prime Lease. In such event, Tenant shall pay (i) the cost of installing
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all separate and/or "check" meters and all associated wiring and cables, and
(ii) the cost of such separately metered or "check" metered utility service
directly to the utility or public authority providing such service or to Prime
Landlord, as applicable, in accordance with the terms of the Prime Lease.
Section 6.03 Interruption of Services. Temporary failure by Prime Landlord
to any extent to furnish the above referred to services, or any temporary
cessation thereof, resulting from causes beyond the reasonable control of Prime
Landlord shall not be construed as an eviction or constructive eviction of
Tenant nor cause or result in any abatement of rent nor relieve Tenant from
fulfillment of any covenant or agreement herein contained, unless and until an
eviction or constructive eviction or abatement of rent or release of Landlord
with respect to the Demised Premises occurs under the terms of the Prime Lease.
Should any of the equipment or machinery serving the Demised Premises break down
or for any cause cease to function properly, Landlord shall use reasonable
diligence to cause Prime Landlord to repair the same in accordance with the
terms of the Prime Lease after receipt of notice from Tenant, but Tenant shall
have no claim against Landlord on account of any interruptions in service
occasioned by or resulting therefrom. Notwithstanding the foregoing, in the
event of a cessation in the above referred to services that prevents Tenant from
being able to use the Demised Premises for the conduct of Tenant's business, in
Landlord's and Tenant's reasonable judgment, and such cessation of services was
not the result of an act mission of Tenant (a "Substantial Interruption"), and
Landlord or Prime Landlord has not commenced, within thirty (30) days after
cessation of the services causing the Substantial Interruption, and diligently
pursued, repair of the services causing the Substantial Interruption and the
Substantial Interruption has continued for ninety (90) consecutive days, then
Tenant shall have
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the right to terminate this Lease and upon Landlord's receipt of written notice
of termination from Tenant, this Lease shall terminate and neither party shall
have any further liability hereunder except as otherwise expressly provided for
herein. As long as Landlord or Prime Landlord has commenced the repair of the
service causing the Substantial Interruption within the time period required
above, and is diligently pursuing same, Tenant shall have no right to terminate
this Lease pursuant to this Section 6.03. If a Substantial Interruption
continues after seven (7) days, Tenant shall be entitled to an abatement of
Basic Rent, Actual Operating Expenses or Management Fees attributable to the
portion of the Demised Premises affected by the Substantial Interruption for the
period commencing seven (7) days after the Substantial Interruption until
repaired.
Section 6.04 Costs of Special Leasehold Improvements After Commencement of
Term. From time to time after the Commencement Date and during the term of this
Lease, Tenant will pay to Landlord (in addition to all Basic Rent and other
amounts payable by Tenant hereunder), in each instance within ten (10) days
after receipt of reasonably itemized statements from Landlord therefor (not more
frequently than once each month), all actual, direct, and unreimbursed (on
account of warranty, insurance or otherwise) costs, if any, incurred by Landlord
or Prime Landlord in operating, maintaining and repairing any Special Leasehold
Improvements.
Section 6.05 Building Directory and Signage. Landlord shall provide, at
Landlord's cost and expense, identification in the building directory board for
the name of the Tenant. In addition, Landlord shall provide, at Landlord's cost
and expense, identification on the subtenant directory board located on Floor 2
of the Building for the name of the Tenant and eight (8) spaces for the names of
corporate officers and/or affiliated companies of Tenant. Such identification
shall be in compliance with the requirements of the Prime Lease. Any signage
requested by Tenant for the
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Demised Premises shall comply with the terms of the Prime Lease and shall be
paid for from the Improvement Allowance.
Section 6.06 Visitor Security. All visitors to the Demised Premises shall
register with employees of the Landlord and be issued security badges on the
second (2nd) floor of the Building prior to being allowed access to the elevator
lobby serving the Demised Premises.
ARTICLE VII
(Garage Parking Spaces)
Section 7.01 Garage Parking Spaces. During the Lease term, Landlord agrees
to furnish to Tenant and Tenant agrees to pay the Parking Rent (defined below)
for five (5) reserved/assigned spaces and eighty (80) unreserved/unassigned
spaces (the "Garage Parking Spaces") for the parking of automobiles in the TGPL
Parking Area of the Garage by Tenant's employees. The location of the five (5)
reserved/assigned spaces shall be as set forth on Exhibit C attached hereto.
Notwithstanding anything to the contrary contained herein, Landlord shall have
the option, at any time, to relocate twenty-eight (28) of the unreserved Garage
Parking Spaces to any portion of the Auxiliary Garage as designated by Landlord.
Should Tenant lease any additional space other than the Additional Space,
additional parking spaces will be provided at the Prevailing Rate (defined
below) at the same ratio of parking spaces to Net Rentable Area as is provided
above.
Landlord shall have the right to control assignment of spaces within the
TGPL Parking Area, as well as access to such area by gates operated by an
electronic system, or in such other manner as Landlord shall decide. Landlord
agrees that it will issue parking stickers or tags, each of which will authorize
parking of a car on which the sticker or tag is displayed in the TGPL Parking
Area of the
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Garage. Tenant covenants and agrees to use its best efforts and reasonable
diligence to maintain and enforce parking within the designated areas by its
employees. The driver of the car with the sticker shall have the responsibility
for parking his car, and Landlord shall not be obligated to furnish personnel to
perform the parking service. The driver of the car with the sticker shall have
so-called "in-and-out" privileges for purposes of leaving the Garage and
returning to same, at any time and from time to time, without payment of any
additional fees or charges to Landlord other than the Parking Rent (defined
below). Tenant and Landlord shall not be liable or responsible for any loss of
or to any car or vehicle or equipment or other property therein or damage to
property or equipment or other property therein or damage to property or
injuries (fatal or non-fatal) to persons occurring within the Garage, unless
such loss, damage or injury be proximately caused by the negligence of Tenant or
Tenant's employees or representatives or Landlord or Landlord's employees or
representatives, as applicable.
Section 7.02 Parking Rent. Tenant shall pay to Landlord a monthly parking
rent (the "Parking Rent") equal to (i) for the five reserved and fifty-two of
the unreserved spaces:
Parking Rent for
Lease Year Each Garage Parking Space
---------- -------------------------
One (1) through Three (3) -0-
Four (4) through Five (5) $20.00
Six (6) through Last Lease Year The greater of $40.00 or the
Prevailing Rate (defined below);
and (ii) for twenty-eight of the unreserved Garage Parking Spaces the amount of
$40.00 plus applicable sales taxes for each space.
For purposes hereof, the "Prevailing Rate" shall be the rate charged by Prime
Landlord for reserved/assigned and unreserved/unassigned parking spaces, as
applicable, in the Garage, which
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rate may fluctuate from time to time. Parking Rent shall be paid in the manner
provided in Section 5.03 hereof. Fifteen (15) additional unreserved parking
spaces shall be provided for the Additional Space upon the same terms and
conditions contained herein.
Section 7.03 Visitor Parking. Landlord shall not be obligated to provide
parking for Tenant' s invitees and visitors and the parking spaces leased to
Tenant pursuant to Section 7.01 above shall not be used for such purpose.
Visitor parking is available in designated portions of the Garage subject to
payment of the short term parking rates from time to time applicable in the
Garage.
ARTICLE VIII
(Use)
Section 8.01 Office Use. Tenant shall have the right to use the Demised
Premises for business office purposes and any other use consented to in writing
by the Prime Landlord and for no other purpose or use without prior written
consent of Landlord. For the purposes of the foregoing sentence, the term
"business office purposes" shall mean business offices and also: storage space
for office supplies, records, equipment and furnishings and other materials
useful or convenient in connection with any other of the uses herein authorized,
facilities for accounting and business machines and computers and other
electronic and communications equipment used in Tenant's business, and
conference room.
ARTICLE IX
(Repairs and Maintenance)
Section 9.01 Landlord Maintenance. Landlord shall not be required to make
any repairs to or perform any maintenance to the Building, Garage or Demised
Premises; provided, however,
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Landlord agrees to use due diligence to cause Prime Landlord to perform its
repair and maintenance obligations in accordance with and subject to the terms
of the Prime Lease.
Section 9.02 Tenant Maintenance. Tenant covenants and agrees that it will
not injure the Demised Premises but will take the same care thereof which a
reasonably prudent person would take of his own property, and upon termination
of this Lease, Tenant will surrender and deliver up the Demised Premises to
Landlord in the same condition in which they existed at the commencement of this
Lease, except for ordinary wear and tear, repairs and maintenance assumed by
Prime Landlord under the terms of the Prime Lease, and damage arising from fire,
casualty, Act of God or unavoidable accident. Tenant agrees, at its sole cost
and expense, to repair or replace any part of the Building or Garage damaged as
a proximate result of negligent or wrongful acts or omissions of Tenant or
Tenant's agents, employees, or representatives or Tenant's sublessees; provided,
however, that if Tenant should fail or refuse to make such repairs or
replacements with reasonable promptness after written notice from Landlord or
Prime Landlord (having due regard to the nature of the required repairs or
replacements and the effect of delay in making same and the appearance of the
Building or danger of injury to or interferences with other tenants and
occupants of the Building), then Landlord or Prime Landlord may, at their option
but without any obligation to do so, enter the Demised Premises and make such
repairs or replacements, and Tenant shall repay to Landlord or Prime Landlord
the reasonable cost thereof on demand. Landlord or Prime Landlord shall further
have the right (but without any obligation to do so) to enter the Demised
Premises at all reasonable hours for the purpose of inspecting the same,
provided that such inspection does not unreasonably interfere with the operation
of Tenant's business.
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Section 9.03 Damage Provisions. Notwithstanding the foregoing provisions
hereof, however, this Article IX shall not apply in the case of damage or
destruction by an Insurable Risk under insurance to be maintained by Prime
Landlord on the Building as set out in Section 11.03 of the Prime Lease (as to
which Article X hereof shall apply).
ARTICLE X
(Fire or Other Casualty)
Section 10.01 Casualty Damage. If at any time or times during the term of
this Lease, the Building, the Garage or the Demised Premises should be destroyed
or damaged by any cause, then in such event (i) if the Prime Lease is terminated
pursuant to the provisions thereof as a result of such damage or destruction,
this Lease shall be terminated in all respects effective as of the date of such
termination of the Prime Lease, and any unused prepaid rent shall be refunded to
Tenant; or (ii) if the Prime Lease is not terminated pursuant to the provisions
of the Prime Lease as a result of such damage or destruction, then this Lease
shall continue in full force and effect, provided, however, that during the
period of repair and reconstruction of the Demised Premises by Prime Landlord
under the terms of the Prime Lease all rental sums shall abate in the same
proportion that rent for the Demised Premises abates under the terms of the
Prime Lease. If the Prime Lease is not terminated as set forth above, in the
event the Demised Premises are substantially destroyed so that Tenant cannot
continue to use the Demised Premises to operate its business, Landlord shall
have ninety (90) days (or, with respect to the portion of the Demised Premises
being 5,610 square feet of Net Rentable Area located on Floor 39 of the Building
and used for broadcasting purposes (the "Broadcasting Premises"), forty-five
(45) days) after Landlord is notified of such destruction to notify Tenant of
the time table for
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reconstruction of the Demised Premises. If Landlord does not agree to repair, or
is not able to repair, (i) the Demised Premises within 180 days from the date
Landlord is notified of such destruction or (ii) the Broadcasting Premises
within ninety (90) days from the date Landlord is notified of such destruction,
in the event of the occurrence of the event described in (i), Tenant shall have
the option to terminate this Lease as to all of the Demised Premises, or in the
event of the occurrence of the event described in (ii), Tenant shall have the
option to terminate this Lease as to the Broadcasting Premises only.
In connection with the foregoing, the Prime Lease provides that, in certain
instances, Prime Landlord may provide, during the period of repair and
reconstruction of the Demised Premises by Prime Landlord, "reasonably adequate
and suitable substitute space in Houston, Texas" as determined in accordance
with the terms of the Prime Lease. If such reasonably adequate and suitable
substitute space is provided by Prime Landlord, Landlord shall provide to Tenant
during the period of repair and reconstruction of the Demised Premises by
Landlord, a portion of such reasonably adequate and suitable substitute space
comparable to the Demised Premises. In such event, all rental sums payable
hereunder by Tenant during the period while such substitute space is provided by
Landlord shall be abated or suspended only in the same proportion that rental
sums for the Demised Premises are abated or suspended in accordance with the
terms of the Prime Lease, but in any event Tenant shall not be required to pay
rent for such substitute space in excess of the rent which it would have paid
for the Demised Premises while occupying such substitute space had such damage
or destruction not occurred and any additional rent for or cost of supplying
such substitute space and preparing the same for occupancy by Tenant shall be
borne by Prime Landlord in accordance with the terms of the Prime Lease.
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Section 10.02 Waiver of Subrogation. In the event either Landlord or Tenant
sustains a loss by reason of (i) an Insurable Risk, or (ii) other risk which is
covered by insurance maintained by the party suffering such loss, and such fire
or other casualty is caused, in whole or in part, by acts or omissions of the
other party or his or its agents, employees or representatives, then the party
incurring such loss agrees to look solely to the fire and extended coverage
insurance proceeds (if any), and such party shall have no right of action
against the other party to this Lease or the agents, employees or
representatives of such other party, and no third party (including any insurance
carrier) shall have any such right by way of assignment, subrogation or
otherwise. If the inclusion in this Lease of this Section 10.02 results in an
increase in the insurance premium of either party or Prime Landlord, then the
other party, within ten (10) days after written request, will either pay the
amount of such increase or be deemed to have waived the benefits of this Section
insofar only as to the insurance carrier on such particular insurance policy.
Section 10.03 Tenant Insurance. Tenant covenants and agrees to maintain in
full force and effect insurance against Insurable Risks in amounts equal to not
less than eighty percent (80%) of the insurable value of the insurable portions
of its Special Leasehold Improvements. Additionally, Tenant shall pay (to the
extent only Prime Landlord or Landlord can reasonably demonstrate the same) all
increase in premiums in insurance carried by Prime Landlord or Landlord payable
on account of Special Leasehold Improvements.
ARTICLE XI
(Alterations and Fixtures)
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Section 11.01 Alterations by Tenant. Except as specifically provided
herein, Tenant shall not make any alterations in or additions to the Building,
without the prior written consent of Prime Landlord and Landlord in each
instance. Landlord shall not unreasonably withhold its consent; however,
Landlord shall not be obligated to grant its consent unless and until Prime
Landlord's consent is obtained and any withholding of Landlord's consent
resulting from the inability or failure to obtain Prime Landlord's consent shall
be deemed to be reasonable. The following provisions shall apply with respect to
all alterations or additions made by Tenant in the Demised Premises:
(a) Such alterations shall be constructed and completed in a good and
workmanlike manner at Tenant's sole cost and expense and at Tenant's risk,
and shall be made in such manner as not to unreasonably interfere with the
use and enjoyment of other space in the Building by other tenants and
occupants, and so as not to unreasonably interfere with any work then being
done by Prime Landlord or Landlord in or on the Building. Tenant shall be
solely responsible for constructing and installing any such alterations or
additions in compliance with all building codes, ordinances and regulations
and for obtaining all permits, authorizations, consents and approvals
required by applicable governmental authorities.
(b) Such work shall not structurally damage the Building; will be
performed in strict accordance with the plans and specifications
theretofore submitted to Prime Landlord and Landlord by Tenant and approved
by Prime Landlord and Landlord (Landlord agreeing not unreasonably to
withhold such approval); will be in general conformity and harmony with the
architecture of the Building and will not decrease the value of the
Building, and will not alter the exterior appearance of the Building.
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(c) Tenant shall pay all bills for labor and materials which might be
the foundation for assertion of any claim or any mechanic's or
materialman's lien or other encumbrance upon any interest of the Prime
Landlord or Landlord in the Demised Premises. All materialmen, contractors,
artisans, mechanics, laborers and other parties hereafter contracting with
Tenant for the furnishing of any labor, services, materials, supplies or
equipment with respect to any portion of the Demised premises are hereby
charged with notice that they must look solely to Tenant for payment for
same.
(d) Tenant will carry and maintain, or cause to be carried and
maintained by its contractors appropriate (as determined by Prime Landlord)
workmen's compensation and public liability and property damage insurance
policies covering all such alterations and additions and certified copies
of all such policies or certificates thereof shall be delivered to Prime
Landlord and Landlord prior to commencement of such work and provide that
each such policy shall not be canceled, except upon ten days' prior written
notice to Prime Landlord and Landlord.
(e) Tenant will provide accurate as-built drawings of the Demised
Premises as altered pursuant to this Section 11.01, within sixty (60) days
following completion of the alterations.
Section 11.02 Trade Fixtures. Tenant may remove its trade fixtures,
equipment, furniture and furnishings, including also its signs purchased and
installed at its own cost and expense, at any time or times, provided:
(a) Such removal must be made at or prior to the termination of this
Lease and must be performed in such manner as to minimize to the extent
reasonably possible any
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interference with or disturbance of other tenants or occupants of the
Building or any work then being performed by Prime Landlord or Landlord in
or on the Building;
(b) Tenant is not in default in performance or observance of any
obligation or covenant of this Lease at the time of such removal; and
(c) Such removal may be and is effected without substantial damage to
the Demised Premises or the Building, and Tenant promptly repairs all
damage caused by such removal and pays all cost of clearing and removal of
debris caused by or resulting from such removal and/or repair work.
Landlord and Tenant hereby agree that the fixtures, equipment and property
listed on Exhibit D entitled "Tenant's Removable Fixtures", which is
attached hereto and incorporated by reference herein, shall be deemed to be
removable trade fixtures which Tenant shall have a right to remove upon
compliance with the provisions of paragraphs (a), (b) and (c) of this
Section 11.02; of the enumeration of certain fixtures, equipment and
property on said Exhibit D shall not be deemed to exclude other fixtures,
equipment and property from constituting removable trade fixtures if same
would be otherwise so considered under the applicable provisions of this
Lease.
Section 11.03. Fixtures. All fixtures and equipment of every description
which are not removable and removed by Tenant in accordance with Section 11.02,
and any alteration or additions to the Demised Premises, including those made
with the written consent of Landlord and Prime Landlord in accordance with
Section 11.01 of this Article, and any other article incorporated in or
permanently affixed to the floor, wall or ceiling (or above said ceiling, below
said floor or behind said wall) of the Demised Premises, shall become the
property of Prime Landlord and shall be and remain upon and be surrendered with
the Demised Premises as a part thereof at the termination of
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this Lease, Tenant hereby waiving all rights to any payment or compensation
therefor. In the event Landlord requests that Tenant remove any of Tenant's
removable fixtures, equipment or property (as defined in Section 11.02) located
in or about the Demised Premises or the Building at the termination of this
Lease, Tenant shall remove same at its sole risk, cost and expense, and upon
Tenant's failure to remove same, Landlord or Prime Landlord may remove same at
Tenant's expense.
ARTICLE XII
(Indemnity and Liability)
Section 12.01 Indemnity; Tenant Insurance. Tenant agrees to indemnify and
save Landlord harmless from all claims of any nature whatsoever which may be
asserted against Landlord (including costs and expenses of investigating and
defending against such claims) arising (or alleged to arise) from any act or
omission of Tenant or of Tenant's agents, employees, representatives or invitees
which causes any injury (fatal or non-fatal) or damage to any person or the
property of any person occurring during the term (or any extension) of this
Lease in or about the Demised Premises or in or about the Building or Garage. At
all times while Tenant is using or occupying any part of the Demised Premises
under this Lease or any extension hereof, Tenant will carry and maintain public
liability and property damage insurance with limits of not less than $500,000.00
for injury (fatal or non-fatal) to or death of any one person, $5,000,000.00 for
injury to or death of more than one person in any one occurrence, and
$1,000,000.00 for damage to or destruction of property for any one occurrence.
Tenant shall not be responsible or liable to Landlord for any loss or damage to
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the extent occasioned or caused by the acts or omissions of Landlord or its
agents, employees or representatives.
Section 12.02 Landlord Indemnity. Landlord agrees to indemnify and save
Tenant harmless from all claims of any nature whatsoever which may be asserted
against Tenant (including costs and expenses of investigating and defending
against such claims) arising from any act or omission of Landlord or Landlord's
agents, employees or representatives, which causes any injury (fatal or
non-fatal) or damage to any person or the property of any person occurring
during the term (or any extension) of this Lease in or about the Demised
Premises or in or about the Building or Garage. Landlord shall not be
responsible or liable to Tenant for any loss or damage that may be occasioned or
caused by the acts or omissions of persons other than Landlord or its agents,
employees or representatives.
ARTICLE XIII
(Eminent Domain)
Section 13.01 Taking. If there shall be taken during the term of this Lease
by eminent domain or condemnation proceedings or for public or quasi-public use
any portion of the Demised Premises, then this Lease shall terminate as to the
portion of the Demised Premises so taken; and, subject to the provisions set out
hereinafter, this Lease shall continue, unabated in full force and effect as to
those portions of the Demised Premises not so taken, but Basic Rent, as same may
have been adjusted, attributable to such portion of the Demised Premises shall
abate and shall no longer be payable or accrue as to the portion of the Demised
Premises so taken, from and after the date of taking possession thereof by the
condemning authority or condemnor. If only a part of the Demised Premises should
be so taken, then (i) if the Prime Lease is terminated pursuant to the
provisions
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thereof as a result of such taking, this Lease shall be terminated in its
entirety (and no rent will thereafter accrue or be payable by Tenant hereunder)
as of the date of such taking of possession by said condemning authority or
condemnor; or (ii) if the Prime Lease is not terminated pursuant to the
provisions of the Prime Lease as a result of such taking, then this Lease shall
continue in full force and effect subject to the following provisions hereof
regarding abatement of rent. If a portion only of the Demised Premises shall be
so taken or condemned and this Lease is not terminated as to the remainder of
the Demised Premises, the Basic Rent accruing hereunder with respect to the
remainder of the Demised Premises not taken by said condemnor shall be abated or
reduced partially in the same proportion that rent for the Demised Premises
abates under the terms of the Prime Lease, pending completion by Prime Landlord
of the work of restoring such remainder of the Demised Premises to an
architectural unit as provided in the Prime Lease. If all the Demised Premises
should be taken by eminent domain or condemnation proceedings or for public or
quasi-public use, then this Lease shall terminate in its entirety. In each event
in which this Lease is terminated, in part or in its entirety, under this
Section 13.01, all unused prepaid rent (or the appropriate portion thereof in
the case of partial termination) theretofore paid by Tenant to Landlord shall
promptly be refunded to Tenant.
Section 13.02 Award. All sums awarded or agreed upon between Prime Landlord
and the condemning authority for the taking of all or any portion of the Demised
Premises or of all or any portion of the Building or Garage or any part of the
Project Site, whether as damages or as compensation, will be the property of
Prime Landlord. Tenant shall have the right, however, to appear and file its
claim for damages in such proceedings, to participate in any and all hearings,
trials and appeals thereon, and to receive the share of any condemnation award
adjudged to be owing to
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Tenant for the taking of Tenant's trade fixtures or equipment or for Tenant's
loss of business or for the value of the leasehold estate under this Lease, to
the extent such sums shall not operate as a credit against or to reduce the sums
to be the property of Prime Landlord under the terms of the Prime Lease.
Section 13.03 Voluntary Dedication. For the purposes of this Article, a
transfer of property for public use, made in lieu of an order or judgment of
condemnation, following the commencement of an action or proceeding for taking
of property under a power of eminent domain or negotiations therefor, shall be
deemed to be an eminent domain or condemnation proceeding taking.
ARTICLE XIV
(Remedies and Defaults)
Section 14.01 Tenant Default; Landlord Remedies. If (a) Tenant should fail
to pay any rent or other charges payable hereunder and such failure to pay
should continue and remain unremedied for a period of ten (10) days after notice
thereof given by Landlord to Tenant, or (b) except as provided in subparagraph
(c) below, Tenant should fail to perform or observe any other covenant, term,
provision or condition of this Lease and such failure to perform should continue
and remain unremedied for a period of twenty (20) days (or such additional
reasonable time as may be required for failure to perform which, by their
nature, cannot be cured in twenty (20) days) after written notice thereof given
by Landlord to Tenant or (c) any event occurs as a result of any act or omission
of Tenant or its agents, employees or contractors which with the passage of time
or giving of notice or both would constitute a default under the Prime Lease and
Tenant fails to cure such event within five (5) days prior to the expiration of
the time period provided in the Prime Lease for the cure thereof,
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provided that Landlord shall have given to Tenant a copy of the notice of
default (if any) received by Landlord from Prime Landlord under the terms of the
Prime Lease, then on expiration of the applicable aforementioned period in which
to cure any such failure to pay or perform, Tenant shall be deemed to be in
default hereunder and Landlord lawfully may, immediately or at any time
thereafter, and without further demand or notice, enter into or upon the Demised
Premises or any part thereof and repossess same and remove all persons and
property therefrom, using such force as may be necessary (Tenant hereby waiving
any claim by reason of such re-entry, repossession or removal or by issuance of
any distress warrant or writ of sequestration) and without prejudice to any
remedies which Landlord may have for arrears of rent or breach of covenant, and
upon such re-entry, Tenant's right to possession of the Demised Premises and
leasehold estate and options hereunder shall immediately cease and terminate.
Notwithstanding such re-entry and termination of Tenant's rights of possession,
Tenant agrees that Tenant shall remain liable for the rent due and to become due
hereunder, and the same shall be paid by Tenant to Landlord on the regular days
stipulated herein for payment of rent; however, if the Demised Premises be relet
in whole or in part, Tenant shall be entitled to a credit in the net amount of
the rent received by the Landlord as a result of such reletting (after deducting
all reasonable costs incurred by Landlord in finding a new tenant and paying any
brokerage fees or agent's commissions in connection therewith, in remodeling
costs, attorney's fees and other costs and expenses incident to the aforesaid
repossession of the Demised Premises and reletting of same); Tenant will remain
obligated to pay the amount of any deficiency of the rent obtained on such
reletting below the rent reserved, but if the rent obtained on such reletting is
greater than the rent herein reserved, Tenant shall not be entitled to any
portion of such excess. Landlord shall have the right to collect from Tenant
amounts equal to said deficiencies and
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damages provided for above by suits or proceedings brought from time to time on
one or more occasions without Landlord being obligated to wait until the
expiration of the term of this Lease. Tenant shall not be deemed in default
under this Lease, and an event of default shall not be deemed to have occurred,
until the expiration of the period described above during which Tenant shall
have the opportunity to cure any failure to pay or perform hereunder.
In the alternative, in the event of default by Tenant, Landlord may elect
to accelerate all rent due hereunder and to treat the default of Tenant as an
entire breach of this Lease, whereupon Tenant will immediately become liable, as
damages for such entire breach, for an amount equal to the excess, if any, of
(1) the total rent for the balance of the term then remaining, over (2) the fair
market rental value of the Demised Premises for the balance of the term as of
the time of default, such excess amount to be discounted at the rate of eight
percent (8%) per annum to the then present value thereof, and such discounted
amount shall thereupon bear interest at the lesser of the maximum lawful rate or
a varying annual rate equal to the Prime Rate plus five percent (5%).
In addition to the foregoing, Landlord will also have all other remedies
provided by law or in equity for default by Tenant. In addition, Landlord shall
have the right to take such action as Landlord deems appropriate to prevent a
default from occurring under the terms of the Prime Lease as a result of any act
or omission of Tenant or its agents, employees or contractors if Tenant fails to
cure the same within the time period provided above. Tenant will pay on demand
therefor Landlord's reasonable costs and expenses incurred in taking any action
pursuant to the foregoing sentence and/or enforcing any of the remedies for
default by Tenant, including reasonable attorney's fees, if this Lease is
placed in the hands of attorneys for enforcement after actual default by Tenant,
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or after wrongful or erroneous assertion by Tenant that Landlord is in default
hereunder. Interest shall accrue on such amounts in accordance with the terms of
Section 5.05 hereof.
ARTICLE XV
(Bankruptcy)
Section 15.01 Bankruptcy of Tenant. Any adjudication by a federal court of
competent jurisdiction that the Tenant is a bankrupt automatically shall
terminate this Lease and all rights of the Tenant under this Lease, except as
otherwise expressly limited by applicable law. If this Lease is terminated
because of Tenant's bankruptcy, the Landlord shall have the right, in addition
to all other remedies to which it may be entitled by law for default, to hold
the Tenant liable for rental as such rental accrues, or, alternatively, for
damages for the entire breach of the Lease, and interest and attorneys' fees as
aforesaid.
If (i) a receiver or similar functionary is appointed to take possession of
all or substantially all of the assets of the Tenant, or (ii) the Tenant makes a
general assignment for the benefit of creditors, or (iii) the leasehold estate
under this Lease or any portion thereof shall be taken by execution or other
process, or (iv) Tenant should become insolvent, or (v) a petition for
reorganization or rearrangement or other relief is filed by or against the
Tenant under the bankruptcy laws or any similar law, and if in these
circumstances such appointment, assignment, reorganization or rearrangement or
other proceeding continues for a period of thirty (30) days without being
dismissed or stayed, then the Landlord shall have the right, at its election, to
terminate this Lease either immediately or within a period of thirty (30) days
after Landlord first becomes so entitled to terminate this Lease, and Landlord
shall have the right, in addition to all other remedies to which it
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may be entitled by law for default to hold Tenant liable for rental deficiencies
and damages as same accrue or for the entire breach of this Lease and interest
and attorneys fees as specified in Section 14.01 above.
ARTICLE XVI
(Compliance with Laws; Compliance with Prime Lease)
Section 16.01 Compliance with Laws. Tenant will at its own cost and expense
comply with (to the same extent that Landlord is obligated to comply with under
the terms of the Prime Lease) all laws, ordinances, orders, rules and
regulations (State, Federal, municipal or promulgated by other agencies or
bodies having jurisdiction thereof) relating to the use, condition or occupancy
of the Demised Premises; will install, remove or alter such of Tenant's
fixtures, equipment and facilities in the Demised Premises as may be necessary
so to comply; will not engage in any activity which would cause Prime Landlord's
or Landlord's fire and extended coverage insurance to be canceled or the rate
therefor to be increased over the rate which would have been charged had such
activity not been engaged in by Tenant (or in such event, at Tenant's option,
Tenant will pay the amount of any such increase).
Section 16.02 Compliance with Prime Lease. With the exception of the
obligation to pay Basic Rent pursuant to Section 6.01 of the Prime Lease and
additional rent pursuant to Section 6.04 of the Prime Lease, Tenant hereby
covenants and agrees to comply with and perform all obligations of the Landlord
(as tenant) under the Prime Lease insofar as they apply to the Demised Premises,
as fully and to the same extent as if Tenant were the tenant therein. Tenant
shall neither do nor permit anything to be done which would cause a default in
the Prime Lease, and Tenant shall indemnify and hold Landlord harmless from and
against all claims of any kind whatsoever by reason
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of any act or omission of Tenant, its agents, employees or contractors, which
causes a default to occur under the terms of the Prime Lease.
Tenant agrees that whenever the consent of Prime Landlord is required under
the terms of the Prime Lease with respect to any action, Tenant shall obtain the
consent of Landlord and of Prime Landlord prior to taking such action. Tenant
agrees to promptly deliver to Landlord copies of any and all notices or other
correspondence received by Tenant from Prime Landlord that might affect Landlord
in any manner and further agrees to deliver the same in the manner most
appropriate to insure that Landlord will be able to respond to any of such
notices or other correspondence from Prime Landlord within any time period set
forth in the Prime Lease.
ARTICLE XVII
(Assignment and Subletting)
Section 17.01 Assignment and Subletting. Notwithstanding anything to the
contrary elsewhere contained in this Lease, Tenant shall not sublet the Demised
Premises or any part thereof, nor assign, encumber or otherwise dispose of this
Lease or any interest herein, nor grant concessions or licenses for the
occupancy of the Demised Premises, or any part thereof, without Landlord's
prior written consent in each of the foregoing cases and in every instance
thereof, which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, Tenant shall have the right to assign or sublet this Lease to an
Affiliate of Tenant or a purchaser of substantially all of the assets of Tenant
without Landlord's consent, provided, however, the consent of the Prime Landlord
shall still be required if required pursuant to the Prime Lease. Landlord agrees
not to unreasonably withhold its consent to any requested sublease or assignment
by Tenant and shall use reasonable efforts to obtain
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the consent of the Prime Landlord. In the event Prime Landlord refuses consent
(if such consent is required), Tenant shall not sublet or assign this Lease. Any
attempt to sublease the Demised Premises or assign, encumber or otherwise
dispose of this Lease in violation of the foregoing shall be void. Consent by
Landlord to a particular assignment, sublease or other transaction shall not (i)
release or relieve Tenant of any liability hereunder or (ii) be deemed a consent
to any other sublease, assignment or other transaction. As used herein, the term
Affiliate shall mean any entity owned and controlled by Tenant or any entity
that owns and controls Tenant.
ARTICLE XVIII
(Landlord's Access)
Section 18.01 Landlord Access. Landlord, Prime Landlord and their
respective agents shall have the right to enter upon the Demised Premises (save
and except the President's office and the equipment storage room except in the
event of an emergency if required to make repairs or if required under the Prime
Lease) at all reasonable hours and in a reasonable manner (and in emergencies at
all times) (a) to examine the Demised Premises, (b) to show the Demised Premises
to prospective purchasers, mortgagees or insurers, (c) to enter the Demised
Premises for the purpose of making repairs, improvements, additions or
alterations to the Demised Premises or the Building, to the extent required or
authorized under the provisions of this Lease or the Prime Lease. Such entry
shall not be used for any unlawful purpose. Prime Landlord and Landlord shall
have the right to retain keys (and any other devices necessary to gain entrance
to all portions of the Demised Premises) to all doors of the Demised Premises.
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ARTICLE XIX
(Quiet Enjoyment)
Section 19.01 Landlord Covenant of Quiet Enjoyment. Landlord covenants and
agrees, provided Tenant pays all rent and performs the terms and conditions of
this Lease, to take all necessary steps to secure to Tenant and to maintain for
the benefit of Tenant the quiet and peaceful possession of the Demised Premises
and the Garage Parking Spaces leased by Tenant in the TGPL Parking Area pursuant
to Section 7.01, for the respective terms hereof, without hindrance by Landlord
or any other person lawfully claiming by, through or under Landlord.
ARTICLE XX
(Non-Waiver)
Section 20.01 No Waiver. Neither payment of rent by Tenant, nor acceptance
of rent by Landlord, nor failure by either party to complain of any action,
non-action or default of the other party shall constitute a waiver of any
aggrieved party's rights hereunder. Waiver by either party of any right for any
default of the other party shall not constitute a waiver of any right for either
a subsequent default of the same obligation or for any other default.
ARTICLE XXI
(Holding Over)
Section 21.01 Hold Over by Tenant. If Tenant should remain in possession of
the Demised Premises (or any portion thereof) after the termination or
expiration of the term of this Lease without the execution of a new lease,
provided the Prime Lease is then in effect, then Tenant shall be deemed to be
occupying such Demised Premises as a tenant from month to month, subject to all
the
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covenants and obligation of this Lease and at a monthly rental rate equal to one
hundred twenty-five percent (125%) of the Basic Rent and all other charges due
from Tenant to Landlord hereunder which would have been applicable had the term
of this Lease continued through the period of such holding over with respect to
all of the space then being occupied by Tenant for the first 30 days of such
hold-over period and one hundred fifty percent (150%) of said amounts as to
space being occupied by Tenant thereafter. Tenant shall indemnify and hold
Landlord harmless from any and all losses, liabilities, damages and attorney's
fees which may be incurred or sustained by Landlord under the terms of the Prime
Lease as a result of Tenant remaining in possession of the Demised Premises (or
any portion thereof) after the expiration or termination of this Lease.
ARTICLE XXII
(Notices)
Section 22.01 Notices; Addresses. Any notice or other communications to
Landlord or Tenant required or permitted to be given under this Lease shall be
effectively given only if in writing and sent by United States Registered or
Certified Mail, postage prepaid, return receipt requested, addressed as follows:
If to Landlord:
Transcontinental Gas Pipe Line Company
Attn: Vice President - Finance
2800 Post Oak Boulevard, Suite 2100
Houston, Texas 77056
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<PAGE>
or if to Tenant:
Prior to Commencement Date:
Metro Traffic Control, Inc.
Attn: Chief Financial Officer
2700 Post Oak Blvd., Suite 1400
Houston, Texas 77056
After the Commencement Date:
Metro Traffic Control, Inc.
Attn: Chief Financial Officer
2800 Post Oak Blvd., Suite 4000
Houston, Texas 77056
Either party shall have the right to change the address to which notices shall
thereafter be sent by giving notice to the other party as aforesaid, but only
one address shall be in effect at any given time for each of Landlord and Tenant
hereunder.
ARTICLE XXIII
(Partial Invalidity)
Section 23.01 Severability. If any term, covenant, condition or provision
of this Lease, or the application thereof to any person or circumstance, shall
ever be held to be invalid or unenforceable, then in each such event the
remainder of this Lease or the application of such term, covenant, condition or
provision to any other person or any other circumstance (other than those as to
which it shall have been invalid or unenforceable) shall not be thereby
affected, and each term, covenant, condition and provision hereof shall remain
valid and enforceable to the fullest extent permitted by law.
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<PAGE>
ARTICLE XXIV
(Landlord Transfers)
Section 24.01 Limitation of Liability. Notwithstanding anything to the
contrary contained in this Lease, Tenant specifically agrees that the exclusive
remedies of Tenant for the failure of Landlord to perform any of its obligations
under this Lease shall be limited to proceeding against the interest of Landlord
under this Lease and the Prime Lease. Should Landlord fail to pay any sum
required to be paid by Landlord hereunder, or fail to perform any obligation
required to be performed by Landlord hereunder, any proceedings brought by
Tenant against Landlord shall be limited to proceeding against Landlord's fights
and interests under this Lease and the Prime Lease and no attachment, execution,
or other writ or process shall be sought, issued, or levied upon any assets,
properties, or funds of Landlord, or any partner of Landlord, its successors or
assigns, other than against Landlord's interest under this Lease and the Prime
Lease. Without limiting the generality of the foregoing, no deficiency or other
monetary judgment shall ever be sought or obtained by Tenant against Landlord.
Section 24.02 Agreements Binding during Ownership. The term "Landlord" as
used in this Lease so far as covenants or obligations on the part of the
Landlord are concerned shall be limited to mean and include only the owner or
owners at the time in question of the interest of the tenant under the Prime
Lease and in the event of any assignment by Landlord of its interest in the
Prime Lease, the Landlord herein named (and in case of any subsequent
assignment, the then transferor) shall from and after the effective date thereof
be automatically freed and relieved from and after the date of such assignment
of all liability and obligation as respects the performance of any covenants or
obligations on the part of the Landlord contained in this Lease thereafter to be
performed;
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<PAGE>
provided that any funds in the hands of such Landlord or the then transferor at
the time of such transfer in which the Tenant has an interest shall be turned
over to the transferee and any amount then due and payable to Tenant by Landlord
or the then transferor under any provision of this Lease, shall be paid to the
Tenant; and provided further that upon any such transfer, the transferee shall
assume, subject to the limitations of this Section and Section 24.01, all of the
terms, covenants and conditions in this Lease contained to be performed on the
part of the Landlord, it being intended that the covenants and obligations
contained in this Lease on the part of the Landlord shall, subject to aforesaid,
be binding on the Landlord, its successors and assigns, only during and in
respect to their respective successive period of ownership. In the event of any
assignment or other transfer by Landlord pursuant to the provisions of this
Article, Landlord shall be relieved of all liabilities or obligations under this
Lease except as otherwise provided in this Section 24.02.
ARTICLE XXV
(Arbitration)
Section 25.01 Arbitration. Except for any dispute regarding the
determination of Market Rate (which shall be resolved in accordance with the
applicable provisions of Section 3.05), either Landlord or Tenant may require
that any dispute hereunder be submitted to arbitration as herein provided. In
each case specified in this Lease in which it shall become necessary to resort
to arbitration, such arbitration shall be determined as provided in this Article
XXV. The party desiring such arbitration shall give written notice to the effect
to the other party, specifying in said notice the name and address of the person
designated to act as arbitrator on its behalf. Within fifteen (15) days after
the service of such notice, the other party shall give written notice to the
first party specifying
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<PAGE>
the name and address of the person designated to act as arbitrator on its
behalf. If the second party fails to notify the first party of the appointment
of its arbitrator, as aforesaid, within or by the time above specified, then the
appointment of the second arbitrator shall be made in the same manner as
hereinafter provided for the appointment of a third arbitrator in a case where
two arbitrators are appointed hereunder and the parties are unable to agree upon
such third appointment. The arbitrators so chosen shall meet within ten (10)
days after the second arbitrator is appointed and if, within thirty (30) days
after the second arbitrator is appointed, the said two arbitrators shall not
agree upon the question in dispute, they shall themselves appoint a third
arbitrator who shall be a competent and impartial person; and in the event of
their being unable to agree upon such appointment within ten (10) days after the
time aforesaid, the third arbitrator shall be selected by the parties themselves
if they can agree thereon within a further period of fifteen (15) days. If the
parties do not so agree, then either party, on behalf of both may request such
appointment by the Presiding United States District Judge for the Southern
District of Texas, Houston Division acting in his individual, non-judicial
capacity to the extent he is willing to act in such capacity, or if he refuses
to act in such capacity, then in his official judicial capacity. In the event of
the failure, refusal or inability of any arbitrator to act, a new arbitrator
shall be appointed in his stead, which appointment shall be made in the same
manner as hereinbefore provided for the appointment of such arbitrator so
failing, refusing or unable to act. The decision of the arbitrators so chosen
shall be given within a period of thirty (30) days after the appointment of such
third arbitrator. The decision in which any two arbitrators so appointed and
acting hereunder concur shall in all cases be binding and conclusive upon the
parties. Each party shall pay the fees and expenses of the one of the two
original arbitrators appointed by such party,
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<PAGE>
or in whose stead, as above provided, such arbitrator was appointed, and the
fees and expenses of the third arbitrator, if any, shall be borne equally by
both parties.
ARTICLE XXVI
(Miscellaneous)
Section 26.01 Estoppel Certificates. Assuming such facts are true, upon the
request of any Mortgagee of Prime Landlord, Tenant will sign an instrument
acknowledging that this Lease is in full force and effect; that rent has not
been prepaid and certifying to such other true information regarding this Lease
as such Mortgagee may reasonably request.
Section 26.02 Microwave Receivers. Subject to the prior written consent of
prime Landlord, Tenant, at Tenant's expense, shall have the right to remove one
(1) of Landlord's microwave dishes located on the south side of Floor 65 and
replace it with a new microwave dish and Tenant shall pay to Landlord the amount
that Landlord is obligated to pay Prime Landlord pursuant to Section 20.04(b) of
the Prime Lease for the microwave dish to be maintained by Tenant. Such rental
shall be payable at the same time and subject to the same provisions as set
forth in the case of other rentals hereunder (but without adjustments).
Section 26.03 Miscellaneous. The Section headings or titles appearing in
this Lease are inserted and included solely for convenience and shall never be
considered or given any effect in construing this agreement.
All personal pronouns used in this agreement shall include the other
genders whether used in the masculine or feminine or neuter gender, and the
singular shall include the plural whenever and as often as may be appropriate.
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<PAGE>
The covenants and agreements herein contained shall inure to and be binding
upon Landlord, its or their heirs, devisee, legal representatives, successors
and assigns, and Tenant, its successors and assigns (but reference to Tenant's
assigns is not intended to imply or grant any right on the part of Tenant to
assign this Lease except as granted in Article XVII hereof) and any party
succeeding to or acquiring any part of or interest in the interest of any party
"Landlord" hereunder shall automatically take such interest subject to and be
and become liable for all liability and indebtedness to Tenant of such party
"Landlord" which has accrued or arisen under or as provided for in this Lease
prior to such acquisition or succession, subject, of course, to any valid
defenses or offsets which would have been available to such party "Landlord" and
subject, also, to the other provisions of this Lease.
This Lease contains the entire agreement of the parties hereto with respect
to the subleasing of the Demised Premises and the rights of Tenant under this
Lease, and this Lease supersedes all prior negotiations between Landlord and
Tenant relating to the subject matter of this Lease.
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<PAGE>
This Lease is hereby executed and delivered effective as of the date and
year first above written.
METRO TRAFFIC CONTROL, INC.
a Maryland corporation
By: /s/Curtis M. Coleman
--------------------------
Name: Curtis M. Coleman
Title: Chief Financial Officer
"Tenant"
TRANSCONTINENTAL GAS PIPE LINE
CORPORATION, a Delaware corporation
By: /s/Cuba Wallingston, Jr.
-----------------------------
Name: Cuba Wallingston, Jr.
Title: Senior Vice President and
General Manager
"Landlord"
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<PAGE>
[Floor Plan Drawing of the Demised Premises]
Exhibit A
Floor 40
<PAGE>
[Floor Plan Drawing of the Demised Premises]
Exhibit A
Floor 39
<PAGE>
[Floor Plan Drawing of Johnson & Higgins Expansion Space]
Exhibit B
<PAGE>
Exhibit C
Transco Tower Garage
Reserved Parking Spaces
Tower Entrance Garage Level
[Location of Reserved/Assigned Parking Spaces]
<PAGE>
[Logo}
METRO NETWORKS
[Tenant's Removable Fixtures]
<PAGE>
[Logo: Transco Tower]
LEASE AGREEMENT
THE STATE OF TEXAS ss.
COUNTY OF HARRIS ss.
THIS LEASE AGREEMENT made and entered into on this the 18th day
of April, 1988 between TRANSCO TOWER LIMITED, whose address for
purposes hereof is 2100 Post Oak Tower, 5051 Westheimer, Houston,
Texas 77056 prior to December 1, 1983 and thereafter 2600 Post
Oak Boulevard, Houston, Texas 77056 (hereinafter called
"Lessor"), and Metro Traffic Control, Inc. whose address for
purposes hereof is 4828 Loop Central Drive, Suite 800, Houston,
Texas 77081 prior to the commencement of the lease term and
thereafter shall be the leased premises in the Building
(hereinafter called "Lessee");
WITNESSETH:
I.
Leased 1. Subject to and upon the terms, provisions and conditions
Premises hereinafter set forth, and each in consideration of the
duties, covenants and obligations of the other hereunder, Lessor
does hereby lease, demise and let to Lessee and Lessee does
hereby lease and take from Lessor those certain premises
(hereinafter sometimes called the "leased premises") in the
building known as Transco Tower located at 2800 Post Oak
Boulevard (hereinafter sometimes called the "Building") in the
City of Houston, Harris County, Texas, such premises being more
particularly described as follows:
Approximately 772 square feet of Net Rentable Area located
on Level 52.
as reflected on the floor plan of such premises attached hereto
and made a part hereof as Exhibit A and initialed for
identification by both parties.
Net The term "net rentable area", as used herein, shall refer to
Rentable (i) in the case of a single tenant floor, all Rentable floor area
Area measured from the inside surface of the inner glass or (with
respect to the basements) exterior wall of the Building to
the inside surface of the opposite outer wall excluding only the
areas ("service areas") within the outside walls on the
particular floor used for building stairs, fire towers, elevator
shafts, flues, vents, stacks, vertical pipe shafts and vertical
ducts, but including any such service areas which are for the
specific use of the particular tenant such as special stairs or
elevators, plus a proportionate part of the areas ("extra areas")
used for building elevator, mechanical, electrical and plumbing
rooms and the central plant serving the Building, the truck dock,
the bridge connecting the Building with the Garage, fire control
stations, and ground floor, basement, and 51st floor lobbies, and
(ii) in the case of a floor to be occupied by more than one
tenant, all floor areas within the demising walls (measured from
the mid-point of the demising walls and in the case of exterior
walls, measured as defined in (i) above), plus a proportionate
part of areas ("common areas") devoted to lobbies, corridors,
elevator foyers, restrooms, electrical, telephone and mechanical
rooms, janitor closets, vending areas and other similar
facilities for the use of all tenants on the particular floor
plus a proportionate part of the extra areas. The Lessee's
proportionate part of extra areas shall be based upon the ratio
of the Lessee's net rentable area (excluding "extra areas") to
the aggregate net rentable area (excluding "extra areas") of
<PAGE>
the Building. The Lessee's proportionate part of common areas
shall be based upon the ratio of the Lessee's net rentable area
(excluding "common" and "extra areas") to the aggregate net
rentable area (excluding "common" and "extra areas") on such
floor. No deductions shall be made in determining net rentable
area for columns or projections necessary to the Building. The
net rentable area in the leased premises has been calculated on
the basis of the foregoing definition and is hereby stipulated
for all purposes hereof to be 772 square feet, whether the same
shall be more or less as a result of variations resulting from
actual construction and completion of the leased premises for
occupancy so long as such work is done substantially in
accordance with the terms and provisions hereof.
II.
Term 1. (a) Subject to and upon the terms and conditions set
forth herein, or in any exhibit or addendum hereto, this lease
shall continue in force for a term of one hundred twenty (120)
months beginning on the 1st day of August 1988, and ending on the
31st day of July 1998.
(b) As more fully defined in Schedule 1 hereto, in the event
the Leased Premises should not be ready for occupancy by the
commencement date stated in Paragraph l(a) above for any reason,
Lessor shall not be liable or responsible for any claims, damages
or liabilities in connection therewith or by reason thereof, and
the term of this lease shall commence at the time that the Leased
Premises are ready for occupancy by Lessee. Should the term of
this lease commence on a date other than that specified in
Paragraph l(a) above of Article II, Lessor and Lessee will, at
the request of either, execute a declaration specifying the
beginning date of the term of this lease. In such event, rental
under this lease shall not commence until said revised
commencement date, and the stated term in this lease shall
thereupon commence and the expiration date shall be extended so
as to give effect to the full stated term.
Use 2. The leased premises are to be used and occupied by Lessee
solely for the purpose of office space.
Base 3. Lessee hereby agrees to pay a base annual rental (herein
Rental called "Base Rental") in the sum of
Years 1 - 5 = $7,720.00
Years 6 - 10 = $11,580.00
(________________________) per year. The Lessee shall also pay,
as additional rent, all such other sums of money as shall become
due from and payable by Lessee to Lessor under this lease. The
Lessor shall have the same remedies for default in the payment of
additional rent as are available to Lessor in the case of a
default in the payment of Base Rental. Such Base Rental together
with Lessee's share of Forecast Operating Expenses (hereinafter
defined) shall be due and payable in twelve (12) equal
installments on the first day of each calendar month during the
Initial term of this lease and any extensions or renewals
thereof, and Lessee hereby agrees to so pay such rent to Lessor
at Lessor's address as provided herein (or such other address as
may be designated by Lessor from time to time) monthly in advance
without demand. If the term of this lease commences on other
than the first day of a month or terminates on other than the
last day of a month, then the installments of Base Rental and
additional rent for such month or months shall be prorated and
the installment or installments so prorated shall be paid in
advance. All past due installments of rent shall bear interest at
the maximum non-usurious rate per annum from the due date until
paid.
Net Lease 4. This shall be a net lease and Base Rental shall be paid
to Lessor absolutely net of all costs and expenses. The
provisions for payment of Actual Operating Expenses by means of
periodic payment of Lessee's Share of Forecast Operating
Expenses and the Operating Expense Adjustment are intended to
pass on to Lessee and reimburse Lessor for all costs and expenses
of the nature described in Section 5 incurred in connection with
ownership, management and operation of the Project and such
additional
<PAGE>
facilities now and in subsequent years as may be determined by
Lessor to be included within the Project.
Operating 5. (a) Actual Operating Expenses as said term is used herein
Expenses shall consist of all operating expenses of the Project
(which term for purposes hereof means and includes the Building,
Garage, Skybridge connecting the Building to other structures),
Project Site (being the tract or tracts of land on which the
Building and the Garage are located) and related amenities
(whether located on the Project Site or adjacent property)
which shall be computed on the accrual basis and shall consist of
all costs by Lessor to maintain all facilities in operation
during any year and such additional facilities in subsequent
years as may be determined by Lessor to be necessary or generally
beneficial for the Project. All operating expenses shall be
determined in accordance with generally accepted accounting
principles which shall be consistently applied. The term
"operating expenses" as used herein shall mean all expenses,
costs and disbursements (but not replacement of capital
investment items except as specifically provided below nor
specific costs especially billed to and paid by specific tenants)
of every kind and nature which Lessor shall pay or become
obligated to pay because of or in connection with the ownership,
management and operation of the Project including but not limited
to the following:
(1) Wages and salaries and related expenses and benefits of
all on-site and off-site employees engaged in the
supervision, operation and maintenance, or access
control, of the Project and personnel who may provide
traffic control relating to ingress and egress to and
from the Project to the adjacent public streets and the
costs (based upon fair market rental rates) of a
management office in the Project.
(2) All supplies, tools, equipment and materials used in
operation and maintenance of the Project.
(3) Cost of all utilities for the Project including the
cost of water and power, heating, lighting, air
conditioning and ventilating for the Project (excluding
those costs separately paid by specific tenants).
(4) Cost of all maintenance and service agreements for the
Project and the equipment therein, including, but not
limited to, access control service, window cleaning,
elevator maintenance, landscaping and janitorial
services.
(5) Cost of all insurance relating to the Project
including, but not limited to, the cost of casualty and
liability insurance and rental abatement insurance
applicable to the Project and Lessor's personal
property used in connection therewith.
(6) All taxes and assessments and governmental charges with
respect to the Project whether federal, state, county
or municipal, and whether they be by taxing districts
or authorities presently taxing the leased premises or
by others, subsequently created or otherwise, and any
other taxes and assessments attributable to the Project
or its operation. It is agreed that Lessee shall be
responsible for ad valorem taxes on its personal
property and on the value of leasehold improvements to
the extent that same exceed building standard
allowances.
(7) Cost of repairs and general maintenance of the Project
(excluding repairs and general maintenance paid by
proceeds of insurance or by Lessee or other third
parties, and alterations attributable solely to
preparation of space for occupancy by tenants of the
Building other than Lessee).
<PAGE>
(8) Amortization (together with reasonable financing
charges) of the cost of supplying and installation of
capital investment items which are intended for the
purpose of reducing operating costs or which may be
required by governmental authority. All such costs
shall be amortized over the reasonable life of the
capital investment items with the reasonable life and
amortization schedule being determined in accordance
with generally accepted accounting principles and in no
event to extend beyond the reasonable life of the
Building. In the case of installations for the purpose
of reducing operating costs, Lessor shall, upon
request, provide a cost justification for its
practicality.
(9) Lessor's central accounting costs and audit fees
attributable to the Project.
(10) The cost of payment and performance of the Lessor's
obligations with respect to all of the above expenses
In connection with the park adjacent to the Project,
the Skybridge connecting the Project to other
structures and the driveways serving the Project.
(11) A management cost recovery equal to three percent (3%)
of Lessee's Base Rental and Basic Parking Charge plus
three percent (3%) of Lessee's Share of Actual
Operating Expenses (net of the management cost
recovery).
Notwithstanding the inclusion of the entire Garage in the
definition of the Project above, operating expenses shall exclude
such expenses attributable to the portion of the Garage reserved
for parking by Transcontinental Gas Pipe Line Corporation under
the terms of its lease.
(b) "Lessee's Share of Forecast Operating Expenses", as that
term is used herein, shall mean the Lessee's Share of Actual
Operating Expenses as reasonably projected by Lessor for any
calendar year. "Lessee's Share" as that term is used herein,
shall mean (i) with respect to all operating expenses other than
operating expenses of the garage, a fraction, the numerator of
which is the number of net rentable square feet in the Leased
Premises and the denominator of which is the greater of 95% of
the net rentable area in the Building or the total net rentable
area leased to and occupied by tenants of the Building, and (ii)
with respect to operating expenses of the Garage, a fraction, the
numerator of which is the number of net rentable square feet in
the Leased Premises and the denominator of which is the greater
of 95% of the net rentable area in the Building less the net
rentable area leased to Transcontinental Gas Pipe Line
Corporation or the total net rentable area leased in the Building
less the net rentable area leased to Transcontinental Gas Pipe
Line Corporation. For each calendar year, a statement of the
projected amount of Lessee's Share of Forecast Operating Expenses
shall be furnished by Lessor to Lessee no less than thirty (30)
days prior to the beginning of said calendar year (or for the
calendar year in which the term of this Lease commences, thirty
(30) days prior to the first Rental Accrual Date). Concurrently
with each installment payment of Base Rental, Lessee shall pay to
Lessor one-twelfth (1/12th) of Lessee's Share of Forecast
Operating Expenses for said calendar year.
If Lessee's Share of Actual Operating Expenses for any
calendar year is greater than payments theretofore made by Lessee
on account of Lessee's Share of Forecast Operating Expenses,
Lessee shall pay to Lessor within thirty (30) days after Lessee's
receipt of the annual statements referred to in (c) below the
amount of such excess. However, if Lessee's Share of Actual
Operating Expenses for such calendar year is less than payments
theretofore made by Lessee on account of Lessee's Share of
Forecast Operating Expenses, Lessor shall pay to Lessee within
thirty (30) days after Lessee's receipt of such statement the
amount of such difference.
Any sums payable by Lessee under this Section 5 shall be
deemed additional rent.
(c) Within one hundred fifty (150) days (or as seen
thereafter as reasonably practicable) after the expiration of a
calendar year all or any portion of which is within the term
hereof, Lessor shall deliver to
<PAGE>
Lessee a written statement itemized in reasonable detail and
certified to by Lessor, showing Actual Operating Expenses for the
calendar year in question and a statement of Lessee's Share of
Actual Operating Expenses.
(d) Should the term of this lease begin or terminate as to
any portion of the Leased Premises at any time other than the
first day of a calendar year, Lessee's Share of Actual Operating
Expenses referred to in this Section shall be prorated
accordingly.
Notwithstanding any other provision herein to the contrary,
it is agreed that in the event the Building is not fully occupied
during any year or in the event all of the Building is not
provided with building standard services during any year, an
adjustment shall be made in computing the Actual Operating
Expenses for such year so that the Actual Operating Expenses
shall be computed for such year as though the building had been
fully occupied during such year.
Lessee at its expense shall have the right at any reasonable
time within 24 months after the end of a calendar year to audit
Lessors books and records relating to operating expenses for any
calendar year, or at Lessor's sole discretion, Lessor will
provide such audit prepared by a certified public accountant.
6. Lessee hereby agrees to pay Lessor a security deposit
of $0.00 ($0.00) payable on the date this lease is executed by
Lessee. Upon the occurrence of any event of default by Lessee,
Lessor may, from time to time, without prejudice to any other
remedy, use the security deposit paid to Lessor by Lessee as
herein provided to the extent necessary to make good any arrears
of rent or any additional rent, or any other damage, injury,
expense or liability caused to Lessor by such event of default,
any remaining balance of such security deposit to be returned by
Lessor to Lessee within a reasonable period of time after the
termination of this lease. However, the security deposit shall
not be considered an advance payment of rental or a measure of
Lessors damages in case of default by Lessee.
III.
Services Lessor covenants and agrees with Lessee:
To
Be 1. To use reasonable efforts to cause public utilities to
Furnished furnish the electricity, gas and water utilized in operating any
By and all facilities serving the leased premises.
Lessor
2. To provide (the cost of which is part of operating
expenses of the Project) access control to the Building during
weekends and after normal working hours during the week. Lessor
shall not be liable to Lessee for losses due to theft or
burglary, or for damages done by unauthorized persons on the
Project or within the leased premises.
3. To furnish (the cost of which is part of operating
expenses of the Project) Lessee while occupying the leased
premises:
(a) Hot and cold water at those points of supply provided
for general use of other Lessees in the Building; central heat
and air conditioning in season, at such temperatures and in such
amounts as are considered by Lessor to be standard, but such
service at times during week days other than normal business
hours for the Building, on Saturday afternoons, Sundays and
holidays to be furnished only upon the request of Lessee, who
shall bear the entire cost thereof; routine maintenance and
elected lighting service for all extra areas, service areas, and
common areas of the Building in the manner and to the extent
deemed by Lessor to be standard.
(b) Janitor services on a five (5) day week basis; provided,
however, if any of Lessee's floor
<PAGE>
coverings or other improvements are other than building standard,
Lessee shall pay the additional cleaning cost attributable
thereto plus fifteen percent (15%) for management cost recovery
as additional rent. Lessee shall pay said additional rent upon
presentation of a statement therefor by Lessor, and Lessee's
failure to pay shall constitute default hereunder.
(c) Electrical facilities to furnish sufficient power
for typewriters, voice writers, calculating machines and other
machines of similar low electrical consumption (total electrical
power requirement not to exceed one watt per square foot of net
rentable area); but not including electricity required for
duplicating and electronic data processing equipment, special
lighting in excess of building standard, and any other item of
electrical equipment, the electrical power requirement of which
(singly) is more than 0.5 kilowatts at rated capacity or
requires a voltage other than 120 volts single phase; and
provided that if the installation or operation of said
electrical equipment requires additional air conditioning
capacity above that provided by the building standard system,
then the additional air conditioning installation and operating
costs will be the obligation of Lessee.
(d) All building standard fluorescent bulb replacement in
all areas and all incandescent bulb replacement in public areas,
toilet and rest room areas and stairwells.
To the extent that the services described above require
electricity, gas or water supplied by public utilities, Lessor's
obligations shall require only that Lessor use reasonable efforts
to cause the utilities to furnish the same and shall be subject
to any curtailment of utilities supplied. Failure by Lessor to
any extent to furnish the foregoing defined services, or any
cessation thereof, shall not render Lessor liable in any respect
for damages to either person or property, nor be construed as an
eviction of Lessee, nor work an abatement of rent, nor relieve
Lessee from fulfillment of any covenant or agreement hereof.
Additionally, should any of the equipment or machinery used in
connection with the Project break down, or for any cause cease to
function properly, Lessee shall have no claim for rebate or
abatement of rent or damages on account of an interruption in
service occasioned thereby or resulting therefrom.
4. To furnish, at Lessee's cost, two (2) keys for each
corridor door entering the leased premises. Additional keys will
be furnished at a charge by Lessor on an order signed by Lessee
or Lessee's authorized representative. All such keys shall remain
the property of Lessor. No additional locks shall be allowed on
any door of the leased premises without Lessor's permission, and
Lessee shall not make, or permit to be made any duplicate keys,
except those furnished by Lessor. Upon termination of this lease,
Lessee shall surrender to Lessor all keys of the leased premises,
and give Lessor the explanation of the combination of all locks
for sales, safe cabinets and vault doors, if any, in the leased
premises.
5. To provide and install, at Lessee's cost, all letters or
numerals at the entrance to the leased premises. Lessor also
agrees to provide and install, at Lessee's expense, a listing of
Lessee's name and office number on the Building Directory Board.
No signs, numerals, letters or other graphics shall be used or
permitted on the exterior of, or which may be visible from
outside the leased premises unless approved in writing by Lessor.
6. That Lessee shall, and may peacefully have, hold and
enjoy the leased premises, subject to the other terms hereof,
provided that Lessee pays the rental and other sums herein
recited to be paid by Lessee and performs all of Lessee's
covenants and agreements herein contained. It is understood and
agreed that this covenant and any and all other covenants of
Lessor contained in this lease shall be binding upon Lessor and
its successors only with respect to breaches occurring during its
and their respective ownerships of the Lessor's interest
hereunder.
7. Unless otherwise stipulated herein, Lessor shall not be
required to make any improvements to or repairs of any kind or
character on the leased premises during the term of this lease,
except such repairs
<PAGE>
as may be deemed necessary by Lessor for normal maintenance
operations. The obligation of Lessor to maintain and repair the
leased premises shall be limited to building standard items.
Special leasehold improvements shall, at Lessee's written
request, be maintained by Lessor at Lessee's expense, at a cost
or charge equal to the costs incurred in such maintenance plus an
additional charge to cover overhead.
IV.
Lessee covenants and agrees with Lessor:.
Payments 1. To pay all rent and sums provided to be paid to Lessor
By hereunder at the times and in the manner herein provided.
Lessee
Repairs 2. Subject to Article V, Paragraph 15 hereof, at its own
By cost and expense, to repair or replace any damage or injury
Lessee done to the Building, or any part thereof, caused by Lessee or
Lessee's agents, Lessee contractors, employees, invitees, or
visitors, provided, however, if Lessee fails to make such repairs
or replacement promptly, Lessor may, at its option, make repairs
or replacements, and Lessee shall repay the cost thereof to the
Lessor on demand, subject to Article V, Paragraph 15.
Care 3. Not to commit or allow any waste or damage to be
Of committed on any portion of the leased premises and at the
Leased termination of this lease, by lapse of time or otherwise, to
Premises deliver up said leased Leased premises to Lessor in as good
condition as at date of possession by Lessee, ordinary wear and
tear excepted, and upon such termination of this lease, Lessor
shall have the fight to re-enter and resume possession of the
leased premises.
Assignment 4. In the event Lessee should desire to assign this
Or Agreement or sublet the leased premises or any or part thereof,
Sublease Lessee shall give Lessor written notice of such desire (and the
proposed effective date Sublease thereof) at least sixty (60)
days in advance of the date on which Lessee desires to make such
assignment or sublease. Lessor shall then have a period of thirty
(30) days following receipt of such notice within which to notify
Lessee in writing that Lessor elects either (i) to terminate this
Agreement as to the space so affected as of the date so specified
by Lessee in which event Lessee will be relieved of all further
obligation hereunder as to such space, or (ii) to permit Lessee
to assign this Agreement or sublet such space, subject, however,
to written approval of the proposed assignee or sublessee by
Lessor, and further subject to the requirement that Lessee enter
into written agreements with Lessor, and with Assignee or
Sublessee, that any profit realized by Lessee as a result of such
assignment or sublease (meaning the consideration agreed upon
between Lessee and Assignee or the difference between the rental
rate agreed upon between Lessee and Sublessee and the rent then
required to be paid under this Agreement multiplied by the number
of months in the term of the sublease) shall, to the extent such
profit is immediate, be due and payable by Lessee to Lessor upon
the execution of an assignment or sublease, and, to the extent
such profit is deferred, be payable to Lessor by Assignee or
Sublessee as it accrues, or (iii) to refuse to consent to
Lessee's assignment of this Agreement or sublease of such space
and to continue this Agreement in full force and effect as to the
entire leased premises. If Lessor should fail to notify Lessee in
writing of such election within the stated thirty (30) day
period, Lessor shall be deemed to have elected option (iii)
above. No consent by Lessor to any assignment or sublease shall
be deemed to be consent to a use not permitted under this
Agreement, to any act in violation of this Agreement, or to any
other or subsequent assignment or sublease, and no assignment or
sublease by Lessee shall relieve Lessee of any obligation under
this Agreement. Any attempted assignment or sublease by Lessee in
violation of the terms and covenants of this paragraph shall be
void.
<PAGE>
Use, 5. Not to permit the leased premises to be used for any
Alterations, purpose other than that stated in the use clause hereof, or make
Additions, or allow to be made any alterations or physical additions in or
Improvements to the leased premises, or place signs on the leased premises
which are visible from outside the leased premises, or
improvements place safes, vaults or other heavy furniture or
equipment within the leased premises, without first obtaining the
written consent of Lessor. Any and all such alterations, physical
additions, or improvements, when made to the leased premises by
Lessee, shall at once become the property of Lessor and shall be
surrendered to Lessor upon termination of this lease by lapse of
time or otherwise; provided, however, this clause shall not apply
to movable equipment or furniture owned by Lessee. Lessee agrees
specifically that no food, soft drink or other vending machine or
cooking equipment will be installed within the leased premises
without the written consent of Lessor.
Legal Use 6. Not to occupy or use, or permit any portion of the leased
And Violations premises to be occupied or used for any business or purpose which
Of Insurance is unlawful, disreputable or deemed to be extra-hazardous on
Coverage account of fire, or permit anything to be done which would in any
way increase the rate of fire or liability or any other coverage
insurance coverage on said Building and/or its contents.
Laws, 7. To comply with all laws, ordinances, rules and (state,
Regulations federal, municipal and other agencies or bodies having any
And Rules jurisdiction thereof) relating to the use, condition or occupancy
Of The of the leased premises. Lessee will comply with the rules adopted
Building and altered by Lessor from time to time for the safety, care and
cleanliness of the leased premises and Building and Project and
for preservation of good order therein, all of which will be sent
by Lessor to Lessee in writing and shall be thereafter carried
out and observed by Lessee.
Entry For 8. To permit Lessor or its agents or representatives to
Repair And enter into and upon any part of the leased premises at all
Inspection reasonable hours to inspect the same, clean or make repairs,
alterations or additions thereto, as Lessor may deem necessary or
desirable, and Lessee shall not be entitled to any abatement or
reduction of rent by reason thereof.
Nuisance 9. To conduct its business and control its agents,
employees, invites, and visitors in such manner as not to create
any nuisance, or interfere with, annoy or disturb any other
tenant or Lessor in its operation of the Building.
Subordination 10. This lease is subject and subordinate to any lien
To mortgage or deed of trust which may now or hereafter encumber the
Mortgage Building of which the leased premises form a part and to all
renewals, modifications, consolidations, replacements and
extensions thereof. This clause shall be self-operative and no
further instrument of subordination need be required by any
mortgagee. In confirmation of such subordination, however, Lessee
shall at Lessor's request execute promptly any appropriate
certificate or instrument that Lessor may request. Lessee hereby
constitutes and appoints Lessor the Lessor's attorney-in-fact to
execute any such certificate or instrument for and on behalf of
Lessee. In the event of the enforcement by the trustee or the
beneficiary under any such mortgage or deed of trust of the
remedies provided for by law or by such mortgage or deed of
trust, Lessee will, upon request of any person or party
succeeding to the interest of Lessor as a result of such
enforcement, automatically become the Lessee of such successor in
interest without change in the terms of other provisions of such
lease; provided, however, that such successor in interest shall
not be bound by (i) any payment of rent or additional rent for
more than one month in advance except prepayments in the nature
of security for the performance by Lessee of its obligations
under this lease or (ii) any amendment or modification of this
lease made without the written consent of such trustee or such
beneficiary or such successor in interest. Upon request by such
successor in interest, Lessee shall execute and deliver an
instrument or instruments confirming the attornment herein
provided for.
<PAGE>
Estoppel 11. At Lessor's request, Lessee will execute either an
Certificate estoppel certificate addressed to Lessor's mortgagee or a
three-party agreement among Lessor, Lessee and said mortgagee
certifying to such facts (if true) and agreeing to such notice
provisions and other matters as such mortgagee may reasonably
require in connection with Lessor's financing.
Lessee 12. Lessee shall comply with the Lessee improvement schedule
Improvements attached hereto and made a part hereof as Schedule 2. After
receipt of the approved tenant pricing letter described in said
Schedule 2, Lessor will partition and prepare said leased
premises in accordance therewith; however, Lessor shall not be
required to install any partitions or improvements which are not
in conformity with the plans and specifications for the Building
or which are not approved by Lessor or Lessor's architect, and
Lessor shall be required to bear the expense of installing only
the items listed in Schedule 3 hereto and only to the extent that
they do not exceed the respective allowances indicated in
Schedule 3. All installations in excess thereof shall be for
Lessee's account, and Lessee shall pay, as additional rent
hereunder, to Lessor an amount equal to Lessor's actual cost
therefor, including associated architectural and engineering
fees, if any, plus a management cost recovery fee of fifteen
percent (15%) to cover overhead within ten (10) days after being
invoiced therefor. Additionally, Lessee shall pay all ad valorem
taxes and increased insurance premiums that are payable on
account of any of Lessee's improvements that are in addition to
those items (or the quantities thereof) described on Schedule 3
hereto. Failure by Lessee to pay any sums described in this
Paragraph or the Schedules hereto in full within ten (10) days
after its receipt of an invoice therefor will constitute failure
to pay rent when due and an event of default by Lessee hereunder,
giving rise to all remedies available to Lessor under this lease
and at law for nonpayment of rent. Lessee shall deliver to Lessor
a copy of the "as-built" plans and specifications made in or to
the leased premises. It is stipulated that time is of the
essence in connection with Lessee's compliance with the terms of
Schedule 2.
Limitation 13. Lessee specifically agrees to look solely to Lessor's
Of interest in the Building for the recovery of any judgment from
Lessor's Lessor, it being agreed that Lessor (and its partners and
Personal shareholders) shall never be personally liable for any such
Liability judgment. The provision contained in the foregoing sentence is
not intended to, and shall not, limit any right that Lessee might
otherwise have to obtain injuncttve relief liability against
Lessor or Lessor's successors in interest, or any other action
not involving the personal liability of Lessor to respond in
monetary damages or from assets of Lessor or any partner of
Lessor other than Lessor's interest in the Building or any suit
or action in connection with enforcement or collection of amounts
which may become owing or payable under insurance policies
maintained by Lessor.
Parking 14. Lessee shall at all times during the term of this
lease agreement lease parking rights for 0 vehicles in the
parking garage adjacent to the Building (the "Garage"). Lessee
shall have the right to lease up to 2 additional parking spaces
during the lease term at the then prevailing market rate for
parking spaces in the Garage. No specific spaces in the Garage
are to be assigned to Lessee, but Lessor will issue to Lessee
the aforesaid number of parking stickers, each of which will
authorize parking in the Garage of a vehicle on which the
sticker is displayed, or Lessor will provide a reasonable
alternative means of identifying and controlling vehicles
authorized to park in the Garage. Lessor may designate the area
or areas of the Garage within which each such vehicle may be
parked, and Lessor may change such designations from time to
time. Lessor may make, modify and enforce rules and regulations
relating to the parking of vehicles in the Garage, and Lessee
will abide by and cause its agents, employees and invitees to
comply with such rules and regulations. Lessor may provide
parking for visitors to the Building in an area designated by
Lessor and in a capacity determined by Lessor to be appropriate
for the Building. Lessor reserves the right to charge and
collect a fee for parking in the visitor parking area in an
amount determined by Lessor to be appropriate. Lessor, at its
sole discretion, may change the designated area for the visitor
parking and the fee to be charged for its use.
<PAGE>
As the Basic Parking Charge, Lessee covenants and agrees to
pay Lessor during the initial term of this Lease, as additional
rental hereunder, $50.00 for each of the parking rights leased
hereunder, such sum to be payable monthly in advance on the first
day of each and every calendar month during the lease term, and a
pro rata portion of such sum shall be payable for the first and
last partial calendar month of the term of this lease in the
event the lease term commences on a date other than the first day
of a calendar month. Lessee's obligation to pay the Basic Parking
Charge shall be considered an obligation to pay rent for all
purposes hereunder and shall be secured in like manner as is
Lessee's obligation to pay rent. Default in payment of such Basic
Parking Charge (after notice as hereinafter provided) shall be
deemed a default in payment of rent.
V.
Lessor and Lessee mutually covenant and agree as follows:
Condemnation 1. If the leased premises shall be taken or condemned for
any public purpose to such an extent as to render the leased
premises untenantable, this lease shall, at the option of either
party, forthwith cease and terminate. All proceeds from any
taking or condemnation of the leased premises shall belong to and
be paid to Lessor.
Damages 2. Lessor shall not be liable or responsible to Lessee for
From any loss or damage to any property or person occasioned by
Certain theft, fire, act of God, public enemy, injunction, riot, strike,
Causes insurrection, war, court order, requisition or order of
governmental body or authority, or any cause beyond Lessor's
reasonable control, or for any damage or inconvenience
which may arise through repair or alteration of any part of the
Building, or failure to make any such repairs.
Lien 3. In consideration of the mutual benefits arising under
For this lease, Lessee hereby grants to Lessor a lien and security
Rent interest on all property of Lessee now or hereafter placed in or
upon the leased premises, and such property shall be and
remain subject to such lien and security interest of Lessor for
payment of all rent and other sums agreed to be paid by Lessee
herein. The provisions of this paragraph relating to said lien
and security interest shall constitute a security agreement under
the Uniform Commercial Code so that Lessor shall have and may
enforce a security interest on all property of Lessee now or
hereafter placed in or on the leased premises, including but not
limited to all fixtures, machinery, equipment, furnishings and
other articles of personal property now or hereafter placed in or
upon the leased premises by Lessee. Lessee agrees to execute as
debtor such financing statement or statements as Lessor may now
or hereafter reasonably request in order that such security
interest or interests may be protected pursuant to said Code.
Lessor may at its election at any time file a copy of this lease
as a financing statement. Lessor, as secured party, shall be
entitled to all of the rights and remedies afforded a secured
party under said Code in addition to and cumulative of the
Lessor's liens and rights provided by law or by the other terms
and provisions of this lease.
Lessor's 4. In the event of default by Lessee in any of the terms or
Right covenants of this Lease or in the event the leased premises are
To abandoned or vacated for thirty consecutive days by Lessee,
Relet Lessor shall have the right, but not the obligation, to relet
same for the remainder of the term provided for herein, and if
the rent received through reletttng does not at least equal the
rent provided for herein, Lessee shall pay and satisfy the
deficiency between the amount of the rent so provided for and
that received through reletting, including, but not limited to,
the cost of reletting and related commissions, renovating,
altering and decorating for a new occupant. Nothing herein shall
be construed as in any way denying Lessor the right, in the event
of abandonment of said premises or other breach of this Agreement
by Lessee, to treat the same as an entire breach and at Lessors
option to terminate this Agreement and/or immediately seek
recovery for the entire breach of this Agreement and any and all
damages which Lessor suffers thereby.
<PAGE>
Holding 5. In the event of holding over by Lessee after expiration
Over or termination of this lease without the written consent of
Lessor, Lessee shall pay as liquidated damages double the then
existing base rental and additional rental. No holding over by
Lessee after the term of this lease shall be construed to extend
the lease; in the event of any unauthorized holding over, Lessee
shall indemnify Lessor against all claims for damages by any
other tenant to whom Lessor may have leased all or any part of
the premises covered hereby effective upon the termination of
this lease. Any holding over with the consent of Lessor in
writing shall thereafter constitute this lease a lease from month
to month.
Fire 6. In the event of a fire in the leased premises, Lessee
Clause shall immediately give notice thereof to Lessor. If the leased
premises, through no fault or neglect of Lessee, its agents,
employees, invitees or visitors, shall be partially destroyed by
fire or other casualty so as to render the premises untenantable,
the rental provided for herein shall abate thereafter until such
time as the leased premises are made tenantable as determined by
Lessor (but in no event shall Lessor's obligation exceed building
standard improvements). In the event of the destruction of the
leased premises without fault or neglect of Lessee, its agents,
employees, invitees or visitors, or if from any cause the same
shall be so damaged that Lessor shall decide not to rebuild, then
Lessor or Lessee may terminate this lease and all rent owed up to
the time of such damage, destruction or termination shall be paid
by Lessee and thenceforth this lease shall cease and come to an
end.
Attorneys 7. In the event Lessee defaults in the performance of any of
Fees the terms, covenants, agreements or conditions contained in this
lease and Lessor places the enforcement of this lease, or any
part thereof, or the collection of any rent due, or to become due
hereunder or recovery of the possession of the leased premises in
the hands of an attorney, or files suit upon the same, Lessee
agrees to pay Lessor's reasonable attorney'S fees.
Amendments 8. This Agreement may not be altered, changed or amended,
except by an instrument in writing signed by both parties hereto.
Assignment 9. Lessor shall have the right to transfer and assign, in
By whole or in part, all its rights and obligations hereunder and in
Lessor the Building and property referred to herein, and in such event
and upon such transfer(any such transferee to have the benefit
of, and be subject to, the provisions of Paragraphs 6 of Article
III and Paragraph 13 of Article IV hereof) no further liability
or obligation shall thereafter accrue against Lessor hereunder or
under any agreement relating to this lease.
Default 10. If default shall be made in the payment of any sum to be
By paid by Lessee under this lease, and default shall continue for
Lessee ten (10) days, or default shall be made in the performance of any
of the other covenants or conditions which Lessee is required to
observe and to perform, and such default shall continue for
twenty (20) days, or if the interest of Lessee under this lease
shall be levied on under execution or other legal process, or if
any petition shall be filed by or against Lessee to declare
Lessee a bankrupt or to delay, reduce or modify Lessor's debts or
obligations, or if any petition shall be filed or other action
taken to reorganize or modify Lessee's capital structure if
Lessee be a corporation or other entity, or if Lessee be declared
insolvent according to law, or if any assignment of Lessee's
property shall be made for the benefit of creditors, or if a
receiver or trustee is appointed for Lessee or its property, or
if Lessee shall abandon or vacate the leased premises during the
term of this lease or any renewals or extensions thereof, or if
Lessee is a corporation and Lessee shall cease to exist as a
corporation in good standing under the laws of the State of Texas
or if Lessee is a partnership or other entity and shall be
dissolved or otherwise liquidated, then Lessor may treat the
occurrence of any one or more of the foregoing events as a breach
of this lease (provided that no such levy, execution, legal
process or petition filed against Lessee shall constitute a
breach of this lease if Lessee shall vigorously contest the same
by appropriate proceedings and shall remove or vacate the same
within thirty (20) days from the date of its
<PAGE>
creation, service or filing) and thereupon, at Lessor's option,
may have any one or more of the following described remedies in
addition to all other rights and remedies available at law or in
equity:
(a) Lessor may terminate this lease and forthwith repossess
the leased premises and be entitled to recover forthwith as
damages a sum of money equal to the total of (i) the cost of
recovering the leased premises, (ii) the unpaid rent earned at
the time of termination, plus interest thereon at the maximum
non-usurious rate per annum from the due date, (iii) the
balance of the rent for the remainder of the term less the fair
market rental value of the leased premises for said period and
(iv) any other sum of money and damages owed by Lessee to Lessor.
(b) Lessor may terminate Lessee's right of possession (but
not the lease) and may repossess the leased premises by forcible
entry or detainer suit or otherwise, without demand or notice of
any kind to Lessee and without terminating this lease, in which
event Lessor may, but shall be under no obligation to do so,
relet the same for the account of Lessee for such rent and upon
such terms as shall be satisfactory to Lessor. For the purpose of
such reletting Lessor is authorized to decorate or to make any
repairs, changes, alterations or additions in or to the leased
premises that may be necessary or convenient, and (i) if Lessor
shall fail or refuse to relet the leased premises, or (ii) if
the same are relet and a sufficient sum shall not be realized
from such reletting after paying the unpaid basic and additional
rent due hereunder plus interest at the maximum non-usurious rate
thereon, the cost of recovering possession, and all of the costs
and expenses of such decorations, repairs, changes, alterations
and additions and the expense of such reletting and of the
collection of the rent accruing therefrom to satisfy the rent
provided for in this lease to be paid, then Lessee shall pay to
Lessor as damages a sum equal to the amount of the rental
reserved in this lease for such period or periods, or if the
leased premises have been relet, the Lessee shall satisfy and pay
any such deficiency upon demand therefor from time to time and
Lessee agrees that Lessor may file suit to recover any sums
falling due under the terms of this Article V, Paragraph 10 (b)
from time to time, and that no delivery to or recovery of any
portion due Lessor hereunder shall be any defense in any action
to recover any amount not theretofore reduced to judgment in
favor of Lessor, nor shall such reletting be construed as an
election on the part of Lessor to terminate this lease unless a
written notice of such intention be given to Lessee by Lessor.
Notwithstanding any such reletting without termination, Lessor
may at any time thereafter elect to terminate this Lease for such
previous breach.
Non-Waiver 11. Failure of Lessor to declare any default immediately
upon occurrence thereof, or delay in taking any action in
connection therewith, shall not waive such default, but Lessor
shall have the right to declare any such default at any time and
take such action as might be lawful or authorized hereunder,
either in law or in equity.
Casualty 12. Lessor shall maintain fire and extended coverage
Insurance insurance on the base building portion of the Building and on
building standard improvements within the Lessee's premises. Said
insurance shall be maintained with an insurance company
authorized to do business in Texas, in amounts desired by Lessor
and at the expense of Lessor and payments for losses thereunder
shall be made solely to Lessor and Lessor's mortgagees. Lessee
shall maintain at its expense fire and extended coverage
insurance on all of its personal property, including removable
trade fixtures, located in the leased premises and on all
additions and improvements to the leased premises which exceed
building standard. If the annual premiums to be paid by Lessor
shall exceed the standard rates because Lessee's operations,
contents of the leased premises, or improvements with respect to
the leased premises beyond building standard, result in
extra-hazardous exposure or increased costs, Lessee shall
promptly pay the excess amount of the premium upon request by
Lessor.
Liability 13. Lessor shall at its expense, maintain a policy or
Insurance policies of comprehensive general liability insurance with the
premiums thereon fully paid on or before due date, issued by and
binding upon some
<PAGE>
solvent insurance company, such insurance to afford minimum
protection (such insurance to inure to the benefit of Lessor
only, and not to Lessee) of not less than $300,000.00 In respect
of personal injury or death in respect of any one occurrence and
of not less than $100,000.00 for property damage in any one
occurrence. Lessee shall at its expense, maintain a policy or
policies of comprehensive general liability insurance with the
premiums thereon fully paid on or before due date, issued by and
binding upon some so1vent insurance company, such insurance to
afford Lessee minimum protection of not less than $300,000.00 in
respect of personal injury or death in respect of any one
occurrence and of not less than $100,000.00 for property damage
in any one occurrence.
Lessee shall furnish to Lessor and maintain on deposit with
Lessor, duplicate insurance policies or certificates of insurance
evidencing Lessees compliance with the insurance provisions
hereof.
Hold 14. Lessor shall not be liable to Lessee, or to Lessee's
Harmless agents, servants, employees, customers or invitees for any injury
or damage to person or property caused by any act, omission or
neglect of Lessee, its agents, servants, or employees, and
Lessee agrees to indemnify and hold Lessor harmless from all
liability and claims for any such damage or injury. Lessee shall
not be liable to Lessor, or to Lessor's agents, servants,
employees, customers or invitees for any damage to person or
property caused by any act, omission or neglect of Lessor, its
agents, servants or employees, and Lessor agrees to indemnify and
hold Lessee harmless from all claims for such damage.
Waiver 15. Anything in this lease to the contrary notwithstanding,
Of Lessor and Lessee each hereby waive any and all rights of
Subrogation recovery, claim, action or cause of action, against the other,
Rights its agents, officers, or employees, for any loss or damage that
may occur to the leased premises, or any improvements thereto, or
said Building of which the leased premises are a part, or any
improvements thereto, or any personal property of such party
therein, by reason of fire, the elements, or any other cause
which could be insured against under the terms of standard fire
and extended coverage insurance policies referred to in Article
V, Paragraph 12 hereof, regardless of cause or origin, including
negligence of the other party hereto, its agents, officers or
employees, and agrees that no insurer under such policies shall
hold any right of subrogation against such other party.
Name 16. Lessor may change the name of the Building at any time
Of without notice to Lessee and Lessee shall not use the name of the
Building Building for any purpose other than its mailing address.
This lease shall be binding upon and inure to the benefit of
the successors and assigns of Lessor, and shall be binding upon
and inure to the benefit of Lessee, its successors, and, to the
extent assignment may be approved by Lessor hereunder, Lessee's
assigns. The pronouns of any gender shall include the other
genders, and either the singular or the plural shall include the
other.
All rights and remedies of Lessor under this lease shall
be cumulative and none shall exclude any other rights or remedies
allowed by law; and this lease is a Texas contract, and all of
the terms hereof shall be construed according to the laws of the
State of Texas.
<PAGE>
PRIOR 17. Lessee, and its contractors, subcontractors, space
ENTRY planners, suppliers, agents and other representatives shall be
permitted to enter the Leased Premises at any time prior to the
Commencement Date, at Lessee's risk, for the purpose of
inspecting the Leased Premises and performing all work according
to the terms and provisions of Article IV, Paragraph 6 of the
Lease Agreement in connection with Lessee's occupancy thereof,
including (without limitation) installation of any partition
walls, ceilings, HVAC systems, high and low voltage electrical
outlets and switches, computer systems, and any other fixtures,
equipment, wall and floor coverings, furniture, draperies and
other items of personal property constituting or to constitute
the Leasehold Improvements. In connection therewith, Lessor
hereby grants (at no cost) to Lessee and the other parties
referred to in the preceding sentence access to and the right to
use all loading docks, parking and elevator facilities
(including freight elevators) and other areas in the Building
and the Garage necessary for the construction and installation
of the Leasehold Improvements. Lessor shall also in connection
with the construction of Leasehold Improvements in the Leased
Premises supply to the Leased Premises, at no cost to the
Lessee, all power, water, gas, sewage, drainage and other
utility services in the capacities currently available at the
Building, without material reduction of such services to other
tenants in the Building. No entry by Lessee, its agents,
employees, contractors or invitees into the Leased Premises
prior to the completion of Leasehold Improvements in such space
shall cause the Commencement Date to occur, or obligate Lessee
to pay Base Rental (or any portion thereof), or otherwise
accelerate the date on which Base Rental shall first be payable
with respect to such space hereunder, or obligate Lessee or any
person which is entitled to have access to the Premises to pay
any Basic Costs during such period provided, however the
commencement date of this Lease shall be not later than June 1,
1988. Notwithstanding anything in this Article V, Paragraph 17
to the contrary, Lessee and such other parties shall not be
entitled to perform work in the Leased Premises unless Lessee
and such other parties are performing such work and related
activities in the Leased Premises in accordance with the
Building Rules and Regulations providing that such work and
related activities do not interfere with or hinder Lessor's
work, if any, in the Leased Premises.
-13a-
<PAGE>
RENEWAL 18. As long as Lessee is not in default in the
OPTION performance of its covenants under this Lease, Lessee is hereby
granted the option to renew the term of this lease for one (1)
successive period of five (5) years, such period ("Renewal
Term") to commence at the expiration of the initial term of this
lease. Lessee shall exercise its option to renew by delivering
written notice of such election to Landlord at least twelve (12)
months prior to the expiration of the initial term of this
lease. Any such renewal of this lease shall be upon the same
terms and conditions of this lease, except (a) the Base Rental
during the Renewal Term shall be ninety percent (90%) of the
prevailing Market Base Rental Rate (defined below) for similar
space in the Uptown Houston Area at the time the Renewal Term
commences, but in no event less than the Base Rental that Lessee
is paying under the terms of this lease, (b) Lessee shall have
no option to renew this lease beyond the expiration of said
renewal term, (c) Lessee shall not have the right to assign its
renewal right to any sublessee of the leased premises or
assignee of the Lease, nor may any such sublessee or assignee
exercise such renewal rights, and (d) the leasehold improvements
will be provided in their then existing condition (on an "as is"
basis) at the time the Renewal Term commences.
As used in this Lease, the term "Market Base Rental
Rate" shall mean the average of the annual rental rates then
being charged in the Uptown Houston Area for space comparable to
the space for which the Market Base Rental Rate is being
determined (taking into consideration use, location and/or floor
level within the applicable building, definition of net rentable
area, leasehold improvements provided, quality, age and location
of the applicable building, rental concessions (such as
abatements or lease assumptions) and the time the particular
rate under consideration became effective). It is agreed that
bona fide written offers to lease the relevant space made to
Lessor by third parties (at arm's-length) may be used by Lessor
as an indication of Market Base Rental Rate.
-13b-
<PAGE>
CROSS 19. A default under the Lease between Tower, Limited,
DEFAULT Lessor, and Metro Traffic Control, Inc., Lessee, dated April 15,
1988, by Lessee shall constitute an event of default under the
terms of Article V, Paragraph 10 hereof, entitling Lessor to all
of its remedies as provided in said Article V, Paragraph 10.
In the event Lessee leases less than 12,000 square feet
of Net Rentable Area in the building known as Geosource Plaza,
located at 2700 Post Oak Blvd., Houston, Texas 77056, Lessor
shall have the option to terminate this Lease.
-13c-
<PAGE>
ANTENNA 20. Lessor hereby agrees that Lessee, at Lessee's sole cost
AGREEMENT and expense, may install, operate, and maintain three (3)
antennae on Level 65 of the building provided the following
conditions are met:
a. At any such time, giving sixty (60) day prior notice,
Lessee shall submit for Lessor's approval (which approval may be
given or withheld in Lessor's sole discretion) an 8 1/2 inch by
11 inch engineer's scale drawing and specifications describing in
detail the type of antenna and antenna equipment Lessee desires
to install;
b. Lessee shall pay Lessor in addition to the base rental
stated in Article II, paragraph 3 of this Lease $350.00 per month
for (each) antenna installed;
c. Such antenna must be installed so as to meet or exceed
Lessor's requirements for wind load, safety and aesthetics;
d. Lessee's contractor for the installation of such antenna
shall be approved by Lessor prior to any entry into the Building
for such installation, which approval may be given or withheld in
Lessor's sole discretion and conditioned on such contractor
agreeing to indemnify Lessor and maintain insurance in a manner
satisfactory to Lessor.
e. Such antenna may not interfere with the operation of any
existing antenna, microwave systems, or other communication
equipment existing in the Building at the time of installation of
such antenna.
f. Notwithstanding anything in this lease to the contrary,
Lessee's rights under this paragraph 20 are in all respects
subject and subordinate to the prior rights of Transcontinental
Gas Pipeline Company ("Transco") with respect to the 65th floor
under its lease with Lessor in the Building. In connection
therewith, Transco's approval to the placement of such antenna
must be obtained.
g. Should Lease be denied the right to install, operate and
maintain such antenna by Lessor, or as a result of the prior
rights of Transco, then Lessee has the right to terminate the
lease in Transco Tower, upon giving Lessor thirty (30) days
notice.
-13d-
<PAGE>
IN TESTIMONY WHEREOF, the parties hereto have executed this lease as
of the date aforesaid.
LESSOR: LESSEE:
TRANSCO TOWER LIMITED
By: Post Oak/Alabama, General Partner
By: Post Oak Associates II, Ltd.,
General Partner
By: Gerald D. Hines Interests, Ltd.,
General Partner By: /s/ Greg F. Walsh, III
By: Hines Consolidated Investments, Inc., ----------------------------
General Partner Greg F. Walsh, III
/s/Louis S. Sklar, Vice President
By:---------------------------------
Louis S. Sklar, Vice President
<PAGE>
SCHEDULE 1
TERM-SUBSTANTIAL COMPLETION
The term shall commence upon the first to occur of (i)
Substantial Completion of the leased premises, (ii) occupancy of
the leased premises by Lessee or (iii) the date the leased
premises would have been substantially complete had not any
Lessee delays as defined in Part IV of Schedule 2 hereof occurred
(the first of such date being herein called the "Term
Commencement Date"), and, except as otherwise provided herein or
in any exhibit or addendum hereto, shall continue in full force
for a period of one hundred twenty (120) months thereafter (the
last day of the term of this lease being herein referred to as
the "Term Expiration Date"). The parties estimate that the Term
Commencement Date will occur on or about June 1, 1988 (the
"Scheduled Term Commencement Date"). If the leased premises are
not Substantially Complete by the Scheduled Term Commencement
Date for any reason, Lessor shall not be liable for any claims,
damages or liabilities in connection therewith or by reason
thereof, but the Term Commencement Date shall be determined as
provided above. If Substantial Completion occurs prior to the
Scheduled Term Commencement Date, Lessee shall take occupancy at
that time and the Term shall commence. In either circumstance the
Term Expiration Date shall be determined as provided above to
provide for the lease being effective for its full term of
months. Lessor shall provide Lessee with as much notice as
circumstances allow of the date when Lessor expects to achieve
Substantial Completion, based upon the progress of the work.
Should the Term Commencement Date be a date other than the
Scheduled Term Commencement Date, either Lessor or Lessee, at the
request of the other, shall execute a declaration specifying the
Term Commencement Date. Lessee's obligation to pay Base Rental
and its other obligations for payment under this Lease shall
commence upon the Term Commencement Date (except as expressly
otherwise provided herein with respect to obligations arising
earlier).
"Substantial Completion" shall mean (and the leased premises
shall be deemed "Substantially Complete") when (i) installation
of all tenant improvements to be performed by the Lessor or the
Lessor's contractors has occurred, (ii) Lessee has access to the
elevator lobby on the floor where the leased premises are
located, and (iii) Building services are ready to be furnished to
the leased premises (or could be furnished to the leased premises
if all the tenant improvements were completed). Substantial
Completion shall be deemed to have occurred notwithstanding a
requirement to complete "punchlist" or similar corrective work.
The existence of construction work in other portions of the
Building or the Project shall not affect the determination of the
date of Substantial Completion of the leased premises.
<PAGE>
SCHEDULE 2
CONSTRUCTION OF INITIAL LEASEHOLD IMPROVEMENTS
PART I. SCHEDULE OF CRITICAL DATES
Set forth below is a schedule of certain critical dates relating to Lessor's and
Lessee's respective obligations with respect to construction of the leasehold
improvements for the leased premises. These dates and the respective obligations
of Lessor and Lessee are more fully described in Part II below. The purpose of
the following schedule is to make certain that the Bid Acceptance Date occurs,
and thereby Lessor is released by Lessee to commence construction of Lessor's
Work (defined below), not later than April 29, 1988 (herein called the "Target
Bid Acceptance Date").
Due Date Responsible Party
A. Space Plan April 22, 1988 Lessee
Delivery Date
B. Lessor Within seven (7) days after Lessor Lessor
Review Date receives the Lessee Space Plan
C. Space Plan Within seven (7) days after Lessor Lessor
Revision Date meets with Lessee pursuant to
Paragraph 2 of Part II and Lessee
submits Lessee's Instructions.
D. Working Within twenty-eight (28) days after Lessor
Drawings Lessor receives the mutually
Delivery Date approved Lessee Space Plan
E. Working Within seven (7) days after Lessor Lessee
Drawings submits to Lessee the Lessee
Approval Date Working Drawings
F. Bid Date Within twenty-eight (28) days after Lessor
Lessee approves the Lessee Working
Drawings and submits Lessee's
Instructions
G. Bid Acceptance Within seven (7) days after Lessor Lessee
Date submits to Lessee the Tenant
Construction Agreement
All references to days mean calendar days, not working or business days. If
Lessee delivers the Lessee Space Plan prior to the Space Plan Delivery Date, the
Lessee Space Plan nevertheless shall be deemed delivered on the Space Plan
Delivery Date for purposes of the foregoing schedule.
PART II. LESSOR AND LESSEE PRE-CONSTRUCTION OBLIGATIONS
1. Lessee will deliver to Lessor no later than the Space Plan Delivery Date
(described in Part I above) a detailed space plan containing the
information described in Part V below, together with other relevant
information and written instructions relating thereto which are required by
Lessor to prepare the Lessee Working Drawings (defined below) for any and
all improvements desired by Lessee in the leased premises (said space plan
and other information and instructions being called the "Lessee Space
Plan").
2. Lessor will review the Lessee Space Plan to confirm that it conforms to the
requirements listed in Part V below, and Lessor shall report any
non-conformity to Lessee, on or before the Lessor Review Date (described in
Part I above). Additionally, on or before the Lessor Review Date, Lessor
shall meet with Lessee and advise Lessee informally of estimated potential
costs and time delays associated with (i) work in excess of the quantities
of Building standard items shown in Schedule 3 hereto; or (ii) improvements
that are not Building Standard Improvements (the matters described in (i)
and (ii) being called "Lessee Extra Work").
<PAGE>
3. In the event the Lessee Space Plan does not conform to the requirements of
Part V below, or Lessee determines to make revisions to the Lessee Space
Plan, Lessee will deliver a corrected Lessee Space Plan to Lessor no later
than the Space Plan Revision Date (described in Part I above). Also, on or
before the Space Plan Revision Date, Lessee shall advise (by so marking on
the Lessee Space Plan and summarizing same in an accompanying memorandum)
Lessor in writing (hereinafter called "Lessee's Instructions") of what will
constitute the Outside Contract Items (as those terms are defined in Part
IV below)
4. After Lessor has received the final, mutually approved Lessee Space Plan,
Lessor shall promptly cause working drawings (herein called "Lessee Working
Drawings") of the improvements to the leased premises shown on the Lessee
Space Plan to be prepared and shall deliver to Lessee the Lessee Working
Drawings no later than the Working Drawings Delivery Date (described in
Part I above) or such later date as may be reasonable in light of the
complexity of Lessee's leasehold improvements or the nature of Lessee Extra
Work.
5. In the event the Lessee Working Drawings vary in design from the Lessee
Space Plan due to the fault of the Lessor or the architect engaged by the
Lessor to prepare the Lessee Working Drawings, and if Lessee promptly gives
Lessor written notice thereof at least prior to the Working Drawings
Approval Date (described in Part I above), Lessor at its expense promptly
shall correct the Lessee Working Drawings.
Otherwise, Lessee shall deliver to Lessor written approval of the Lessee
Working Drawings no later than the Working Drawings Approval Date
(described in Part I above), and by said approval Lessee shall acknowledge
that said drawings correctly depict the proper layout and design for any
and all improvements desired by the Lessee for the leased premises.
6. Upon receipt of Lessee's Instructions and Lessee's approval of the Lessee
Working Drawings, Lessor agrees to submit for pricing by its contractors
and subcontractors the Lessor's Work. Lessor then shall furnish to Lessee a
Tenant Construction Agreement, which shall cover the Lessor's Work and
shall contain the results of said pricing, on or before the Bid Date
(described in Part I above) or such later date as may be reasonable in
light of the complexity of Lessee's leasehold improvements or the nature of
Lessee Extra Work.
7. Lessee agrees to promptly review the Tenant Construction Agreement and to
deliver the Tenant Construction Agreement to Lessor, approved and executed
by Lessee, on or before the Bid Acceptance Date (described in Part I
above). Such delivery shall constitute Lessee's release of Lessor to
commence construction of the Lessor's Work.
PART III. CERTAIN PROVISIONS RELATING TO CONSTRUCTION
1. Upon approval of the Tenant Construction Agreement Lessor agrees to use
diligence to attempt to install the Lessor's Work within the time specified
in the Tenant Construction Agreement. Lessee shall pay all costs incurred
in connection with Lessee Extra Work, including the costs of the materials
and labor therefor and associated architectural and engineering fees, if
any, plus an additional charge equal to the Applicable Amount (defined
below).
2. Lessee may make changes in the work to be done on or for its leasehold
improvements both before and during construction of the same, provided,
however, that no changes may be made within 30 days prior to the Scheduled
Substantial Completion Date for the Lessor's Work. However, Lessee shall be
responsible for all costs relating thereto (plus the Applicable Amount),
which costs shall include those resulting from any delays incurred by
Lessor as a result of the changes.
3. As contemplated by Schedule 1, unless Lessee occupies the leased premises
prior thereto, Lessee shall not be required to pay rent and the term of
this lease shall not commence until Lessee's leasehold improvements are
substantially completed, unless such substantial completion is delayed
beyond the date Building standard improvements in the quantities described
in Schedule 3 would have been completed and unless delays are caused by
Lessee. The following are examples of such delays which shall be referred
to as Lessee Delays:
<PAGE>
A. If Lessee's leasehold improvements involve Lessee Extra Work which
requires more time to complete than is required for Building Standard
Improvements;
B. Failure by Lessee or its architects, engineers, space planners or others
employed by Lessee to timely comply with the provisions of Part III above (but
only if the failure results in Lessee's leasehold improvements being
substantially completed later than they would have been substantially completed
absent said failure);
C. If Lessee makes changes either before or during construction of its
leasehold improvements as described in Paragraph 2 of this Part III (but only if
the changes result in Lessee's leasehold improvements being substantially
completed later than they would have been substantially completed absent said
changes).
4. Any failure of Lessee to use best efforts, in good faith, to comply with
the requirements of this Schedule 2 shall constitute a default by Lessee,
giving Lessor all of the remedies described in Section V of the lease,
notwithstanding any provision hereof to the contrary.
5. Lessor shall pay and be responsible for the architectural and engineering
fees incurred in preparing those portions of the Lessee Working Drawings
which relate to the Building standard improvements to the leased premises.
All other architectural and engineering fees incurred in connection with
the preparation of the Lessee Working Drawings or changes thereto or in
making any improvements to the leased premises shall be paid by Lessee upon
receipt of an invoice therefor.
6. As used in this lease, the term "Applicable Amount" shall mean fifteen
percent (15%) of the "Special Improvements Costs". The term "Special
Improvements Costs" shall mean all costs incurred by Lessor (including
architectural and engineering fees and any contractors' fees and fees for
general conditions) in installing Lessee's leasehold improvements less and
except the costs incurred for installing that portion of said leasehold
improvements which constitute Building Standard Improvements to the extent
that the same do not exceed the respective quantity allowances indicated in
Schedule 3.
PART IV. OUTSIDE CONTRACTOR
With the written approval of Lessor, Lessee may elect to use a contractor
(the "Outside Contractor") other than Lessor to install certain portions of the
improvements shown on the Lessee Working Drawings. As used herein, "Outside
Contract Items" means all work to be performed by the Outside Contractor and
thereby not included in Lessor's Work. "Lessor's Work" means the work Lessor is
requested to bid on by the Lessee's Instructions, or if Lessee is not using an
Outside Contractor, all work shown on the Lessee Working Drawings; provided,
however, the Lessor's Work, as designated by Lessee, must be such that it can be
substantially completed in full prior to the Outside Contractor commencing the
Outside Contract Items; provided further, however, if the Lessor's Work does not
include all of the leasehold improvements for the leased premises, Lessor may
refuse to bid on (and thereby Lessor shall not be required to perform) all or
any part of the Lessor's Work as so designated by Lessee. If Lessee so elects to
use the Outside Contractor, then Lessee, in the Lessee's Instructions shall
notify Lessor what items shown on the Lessee Working Drawings will constitute
the Outside Contract Items (which Lessor's bid shall not cover and Lessor shall
not be required to bid on or install the Outside Contract Items) and the
Lessor's Work. If Lessee so elects to use the Outside Contractor, then the
following shall apply:
(1) Lessee shall obtain (in sufficient time to allow timely commencement of
construction of its leasehold improvements and so as not to interfere with the
orderly construction of the Building but in any event prior to the Bid Date),
the prior written consent of Lessor as to the Outside Contractor to be used by
Lessee and of the scope of the work to be performed by the Outside Contractor.
Examples of when Lessor's consent may be refused include Lessee's use of any
contractor which may be expected to cause a delay in the completion of the
Building or otherwise unreasonably interfere with said completion.
<PAGE>
(2) The Outside Contractor shall: (i) conduct its work in such a manner so
as not to unreasonably interfere with any other construction occurring on or in
the Building or the leased premises; (ii) comply with all rules and regulations
relating to the construction activities in or on the Building, as may be
reasonably promulgated from time to time by Lessor, any contractor or
subcontractor Lessor selects to perform the Lessor's Work (hereinafter called
the "General Contractor"), or the base Building contractor, (iii) maintain such
insurance and bonds in force and effect as may be reasonably requested by Lessor
or as required by applicable law (but in any event said insurance shall be in
amounts at least equal to those required of the General Contractor and the base
Building contractor and said bonds shall be in amounts equal to the full value
or cost of the work being done by the Outside Contractor); and (iv) be
responsible for reaching agreement with Lessor, the General Contractor and the
base Building contractor as to the terms and conditions for all contractor items
relating to conducting its work, including but not limited to those matters
(including costs to be paid by the Outside Contractor) relating to hoisting,
systems interfacing, use of temporary utilities, storage of materials and access
to the leased premises. As a condition precedent to Lessor's approving the
Outside Contractor under Paragraph (1) above, Lessee and the Outside Contractor
shall deliver to Lessor such assurances or instruments to evidence the Outside
Contractor's compliance or agreement to comply with the provisions of this
Paragraph (2) as may be reasonably requested by Lessor.
(3) Lessee shall indemnify and hold harmless Lessor, the General Contractor
and the base Building contractor from and against any and all losses, damages,
costs (including costs of suit and attorney's fees), liabilities, or causes of
action arising out of or relating to the work of the Outside Contractor,
including but not limited to mechanics', materialmen's or other liens or claims
(and all costs or expenses associated therewith) asserted, filed or arising out
of any such work and all damages arising from defective work of the Outside
Contractor. All materialmen, contractors, artisans, mechanics, laborers and
other parties hereafter contracting with Lessee for the furnishing of any labor,
services, materials, supplies or equipment with respect to any portion of the
leased premises are hereby charged with notice that they must look solely to
Lessee for payment for same. Without limiting the generality of the foregoing,
Lessee shall repair or cause to be repaired at its expense all damage caused by
the Outside Contractor, its subcontractors or their employees.
(4) Without Lessor's consent, the Outside Contractor shall not have access
to the leased premises, nor be allowed to commence work therein, until Lessee
acknowledges in writing that the substantial completion of the Lessor's Work has
occurred, Lessor and Lessee have documented any minor deficiencies or incomplete
items, if any, in the Lessor's Work, and Lessor releases the leased premises to
Lessee.
PART V. MINIMUM INFORMATION REQUIRED OF LESSEE SPACE PLAN
Floor Plans (not less than 1/8 inch scale) indicating:
1. Location and type of all partitions.
2. Location and types of all doors - indicate hardware and provide keying
schedule.
3. Location and type of glass partitions, windows and doors indicate framing
if not building standard
4. Location of telephone equipment room accompanied by a signed approval of
the telephone company.
5. Indicate critical dimensions necessary for construction.
6. Location of all building standard electrical items - outlets, switches,
telephone outlets. (Building standard lighting will be determined by
building architect).
7. Location and type of all non-building standard electrical items including
lighting.
8. Location and type of equipment that will require special electrical
requirements. Provide manufacturers specifications for use and operation.
9. Location, weight per square foot and description of any exceptionally heavy
equipment or filing system exceeding 50 psf live load.
10. Requirements for special air conditioning or ventilation.
11. Type and color of floor covering.
12. Location, type and color of wall covering.
13. Location, type and color of building standard and non-building standard
paint or finishes.
<PAGE>
14. Location and type of plumbing.
15. Location and type of kitchen equipment.
Details (not less than 1/4 inch scale) Showing:
1. All millwork with verified dimensions and dimensions of all equipment to be
built-in.
2. Corridor entrances.
3. Bracing or support of special walls, glass partitions, etc. if desired. If
not included with the space plan the building architect will design, at
Lessee's expense, all support or bracing required.
<PAGE>
SCHEDULE 3
BUILDING STANDARD ALLOWANCES
Lessee shall have allowances in the quantities provided below for the
Building Standard Improvements ("Building Standard Improvements")
identified as building standard in Lessor's plans and specifications for
the Building and listed as follows:
1. Building Standard air-conditioning throughout the leased premises.
2. Building Standard ceiling throughout the leased premises.
3. Building Standard parabolic light fixtures as required, not to exceed one
per seventy-five (75) square foot of net rentable area (NRA).
4. One (1) linear foot of Building Standard partitioning per twelve (12)
square feet of net rentable area (NRA).
5. One (1) Building Standard door, door frame and latch set per three hundred
(300) square feet of net rentable area (NRA).
6. One (1) Building Standard telephone wall outlet per two hundred ten (210)
square feet of net rentable area (NRA).
7. One (1) Building Standard electrical wall outlet per one-hundred twenty
(120) square feet of net rentable area (NRA).
8. One (1) wall toggle switch per door allowed.
9. Building Standard carpet throughout the leased premises.
10. Building Standard architectural blinds on all window openings on exterior
perimeter of the leased premises.
11. Building Standard sprinkling for initial partition layout, which shall be
pursuant to the National Fire Protection Association standard for the
installation of sprinkler systems for light hazard occupancy.
If Lessee does not use all quantities allowed under (3) through (9) above,
Lessee shall receive a credit (against the cost of any non-standard items)
therefor to the extent Lessor actually receives a credit from its contractors or
suppliers for the Building. Any credit for Building Standard carpet shall not
exceed $10.00 per square yard of net usable area.
Notwithstanding anything herein to the contrary, Lessor shall demise the Leased
Premises at no cost to Lessee. Lessor shall provide:
1. A Building Standard Door
2. Building Standard Paint
3. Building Standard Carpet
4. Building Standard Lighting, Electrical & Mechanical.
<PAGE>
TRANSCO TOWER
TYPICAL FLOORPLAN
LEVEL 2
EXHIBIT "A"
[A graphic image of a floorplan appears here in the printed material.]
Approx.
772 sf
Net Rentable
Area
<PAGE>
TRANSCO TOWER
BUILDING RULES AND REGULATIONS
1. Sidewalks, doorways, skyways, vestibules, halls, stairways and other
similar areas shall not be obstructed by tenants or used by any tenant
for any purpose other than ingress and egress to and from the leased
premises and for going from one part of the building to another part
of the building.
2. Plumbing fixtures and appliances shall be used only for the purpose
for which designated, and no sweeping, rubbish, rags, or other
unsuitable material including toxic or flammable products shall be
thrown or placed therein. Damage resulting to any such fixtures or
appliances from misuse by a tenant shall be paid by him, and Landlord
shall not in any case be responsible therefor.
3. No sign, advertisements or notices shall be painted or affixed on or
to any windows or doors or other part of the building visible from the
exterior or any common area or public areas of the building. No part
of the building may be defaced by tenants.
4. Landlord will provide and maintain an alphabetical directory board for
all tenants of the Building, in the first floor (main lobby) of the
Building, the size, design and location to be subject to Landlord's
review and consent, and no other directory shall be allowed.
5. No tenant shall place any additional lock or locks on any door in its
leased area without Landlord's written consent. Keys to the locks on
the doors in each tenant's leased area shall be furnished to each
tenant per the lease agreement. Additional keys can only be obtained
through the Gerald D. Hines Interests management office.
6. All tenants will refer all contractors, contractors' representatives
and installation technicians tendering any service to them to Land-
lord for Landlord's supervision, approval and control before the
performance of any contractual services. This provision shall apply to
all work performed in the building, including, but not limited to,
installations of telephones, telegraph equipment, electrical
devices and attachments, and any and all installations of every nature
affecting floors, walls, woodwork, trim, windows, ceilings, equipment
and any other physical portion of the building.
7. After initial occupancy, movement in or out of the building of
furniture or office equipment, or dispatch or receipt of tenants of
any bulky material, merchandise or material which requires use of
elevators shall be restricted to the use of freight elevators only.
Absolutely no carts or dollies are allowed through the main entrances
or on passenger elevators. All non-hand carried items must be
delivered via the appropriate loading dock and freight elevator.
<PAGE>
Deliveries requiring multiple hoists, such as the movement of
quantities of furniture or office equipment shall be under the
supervision of Landlord and in the manner agreed between the tenant
and Landlord by prearrangement before performance. Such prearrangement
initiated by a tenant will include after hours scheduling by Landlord,
and subject to his decision and control, as to the exact time, method,
and routing of movement and as to limitations for safety or other
concern which may prohibit any article, equipment or any other item
from being brought into the building. The tenants are to assume all
risks as to the damage to articles moved and injury to persons or
public engaged or not engaged in such movement, including equipment,
property and personnel of Landlord if damaged or injured as a result
of an act in connection with carrying out this service for a tenant
from time of entering property to completion of work; and Landlord
shall not be liable for an act of any persons engaged in, or any
damage or loss of any of said property or persons resulting from any
act in connection with such service performed for a tenant.
8. Landlord shall have the power to prescribe the weight and position of
safes and other heavy equipment, which shall in all cases, to
distribute weight, stand on supporting devices approved by Landlord.
All damages done to the building by taking in or putting out any
property of a tenant, or done by a tenant's property while in the
building, shall be repaired at the expense of such tenant.
9. A tenant shall notify the building manager when safes or other heavy
equipment are to be taken in or out of the building, and the moving
shall be done under the supervision of the building manager, after
written permit from Landlord. Persons employed to move such property
must be acceptable to Landlord.
10. Corridor doors, when not in use, shall be kept closed.
11. Each tenant shall cooperate with Landlord's employees in keeping its
leased area neat and clean. No tenant shall employ any person for the
purpose of such cleaning other than the building's cleaning and
maintenance personnel without prior approval by Landlord. Landlord
shall be in no way responsible to the tenants, their agents,
employees, or invitees for any loss of property from the Premises or
public areas or for any damages to any property thereon from any cause
whatsoever.
12. To insure orderly operation of the building, no ice, mineral or water,
towels, newspapers, etc. shall be delivered to any leased area except
by persons appointed or approved by Landlord in writing.
13. Should a Tenant require telegraphic, telephonic, annunciator or other
communication service, Landlord will direct the electricians where and
how wires are to be introduced and placed and none shall be introduced
or placed except as Landlord shall approve, which approval will not be
unreasonably withheld. Electric current shall not be used for power or
heating without Landlord's prior written permission.
<PAGE>
14. Tenants shall not make or permit any improper noises in the building
or otherwise interfere in any way with other tenants or persons having
business with them.
15. Nothing shall be swept or thrown into the corridors, halls, elevator
shafts or stairways. No birds or animals (except seeing eye dogs)
shall be brought into or kept in, on or about any tenant's area.
16. No machinery of any kind other than normal office equipment shall be
operated by any tenant on its leased area without the prior written
consent of Landlord, nor shall any tenant use, or keep in the
building, any flammable or explosive fluid or substance, except in
accordance with local fire codes and procedures approved by Landlord.
17. No portion of any tenant's lease area shall at any time be used or
occupied as sleeping or lodging quarters.
18. Landlord will not be responsible for lost or stolen personal property,
money or jewelry from tenant's leased area or public areas regardless
of whether such loss occurs when area is locked against entry or not.
19. Tenant will not tamper with or attempt to adjust temperature control
thermostats in the Premises.
20. Landlord reserves the right to rescind any of these rules and
regulations and to make such other and further rules and regulations
as in its judgment shall, from time to time, be needful for the
safety, protection, care and cleanliness of the building, the
operation thereof, the preservation of good order therein and the
protection and comfort of the tenants and their agents, employees and
invitees, which rules and regulations, when made and written notice
thereof is given to a tenant, shall be binding upon it in like manner
as if originally herein prescribed.
<PAGE>
ANTENNA 20(a). Lessor hereby grants Lessee the right to install on
AGREEMENT level 65 of the Building three (3) antenna subject to Lessor's
approval of the antenna equipment to be installed in the Leased
Premises and/or on level 65 and an 8 1/2" by 11" engineer's scale
drawing and specifications describing in adequate detail the type
of antenna and antenna equipment which Lessee desires to install.
Such approved list of equipment, engineer's drawing, and
specifications shall be attached hereto and made a part hereof as
Exhibit C and Exhibit D respectively and initialed for
identification by both parties. Such antenna will be installed so
as to meet or exceed building requirements for windload, safety,
and aesthetic purposes. Lessee agrees that it will bear the
expense of installation and maintenance of the same. The
construction, installation and maintenance of Lessee's antenna
will be in all respects subject to the approval of the Lessor
(which approval will not be unreasonably withheld or delayed).
Lessor shall have the right to approve all plans for the
installation of Lessee's antenna, the contractor which shall
install said antenna, and the roof access thereto, none of which
approvals shall be unreasonably withheld, delayed or conditioned.
In any one instance should Lessee's antenna be determined to have
caused direct interference with a pre-existing Lessee's antenna
or other communication equipment, Lessee shall have a reasonable
period to cure the problem or be cause to remove Lessee's
antenna. Lessee shall pay to Lessor in addition to the Base
Rental stated in Article II, Paragraph 3 of this lease ________
per month for the right to install Lessee's antenna on level 65
of the Building.
<PAGE>
SCHEDULE 1
TERM-SUBSTANTIAL COMPLETION
The term shall commence upon the first to occur of (i)
Substantial Completion of the leased premises, (ii) occupancy of
the leased premises by Lessee or (iii) the date the leased
premises would have been substantially complete had not any
Lessee delays as defined in Part IV of Schedule 2 hereof occurred
(the first of such date being herein called the "Term
Commencement Date"), and, except as otherwise provided herein or
in any exhibit or addendum hereto, shall continue in full force
for a period of one hundred twenty (120) months thereafter (the
last day of the term of this lease being herein referred to as
the "Term Expiration Date"). The parties estimate that the Term
Commencement Date will occur on or about June 1, 1988 (the
"Scheduled Term Commencement Date"). If the leased premises are
not Substantially Complete by the Scheduled Term Commencement
Date for any reason, Lessor shall not be liable for any claims,
damages or liabilities in connection therewith or by reason
thereof, but the Term Commencement Date shall be determined as
provided above. If Substantial Completion occurs prior to the
Scheduled Term Commencement Date, Lessee shall take occupancy at
that time and the Term shall commence. In either circumstance the
Term Expiration Date shall be determined as provided above to
provide for the lease being effective for its full term of
months. Lessor shall provide Lessee with as much notice as
circumstances allow of the date when Lessor expects to achieve
Substantial Completion, based upon the progress of the work.
Should the Term Commencement Date be a date other than the
Scheduled Term Commencement Date, either Lessor or Lessee, at the
request of the other, shall execute a declaration specifying the
Term Commencement Date. Lessee's obligation to pay Base Rental
and its other obligations for payment under this Lease shall
commence upon the Term Commencement Date (except as expressly
otherwise provided herein with respect to obligations arising
earlier).
"Substantial Completion" shall mean (and the leased premises
shall be deemed "Substantially Complete") when (i) installation
of all tenant improvements to be performed by the Lessor or the
Lessor's contractors has occurred, (ii) Lessee has access to the
elevator lobby on the floor where the leased premises are
located, and (iii) Building services are ready to be furnished to
the leased premises (or could be furnished to the leased premises
if all the tenant improvements were completed). Substantial
Completion shall be deemed to have occurred notwithstanding a
requirement to complete "punchlist" or similar corrective work.
The existence of construction work in other portions of the
Building or the Project shall not affect the determination of the
date of Substantial Completion of the leased premises.
<PAGE>
SCHEDULE 2
CONSTRUCTION OF INITIAL LEASEHOLD IMPROVEMENTS
PART I. SCHEDULE OF CRITICAL DATES
Set forth below is a schedule of certain critical dates relating to Lessor's and
Lessee's respective obligations with respect to construction of the leasehold
improvements for the leased premises. These dates and the respective obligations
of Lessor and Lessee are more fully described in Part II below. The purpose of
the following schedule is to make certain that the Bid Acceptance Date occurs,
and thereby Lessor is released by Lessee to commence construction of Lessor's
Work (defined below), not later than April 29, 1988 (herein called the "Target
Bid Acceptance Date").
Due Date Responsible Party
A. Space Plan April 22, 1988 Lessee
Delivery Date
B. Lessor Within seven (7) days after Lessor Lessor
Review Date receives the Lessee Space Plan
C. Space Plan Within seven (7) days after Lessor Lessor
Revision Date meets with Lessee pursuant to
Paragraph 2 of Part II and Lessee
submits Lessee's Instructions.
D. Working Within twenty-eight (28) days after Lessor
Drawings Lessor receives the mutually
Delivery Date approved Lessee Space Plan
E. Working Within seven (7) days after Lessor Lessee
Drawings submits to Lessee the Lessee
Approval Date Working Drawings
F. Bid Date Within twenty-eight (28) days after Lessor
Lessee approves the Lessee Working
Drawings and submits Lessee's
Instructions
G. Bid Acceptance Within seven (7) days after Lessor Lessee
Date submits to Lessee the Tenant
Construction Agreement
All references to days mean calendar days, not working or business days. If
Lessee delivers the Lessee Space Plan prior to the Space Plan Delivery Date, the
Lessee Space Plan nevertheless shall be deemed delivered on the Space Plan
Delivery Date for purposes of the foregoing schedule.
PART II. LESSOR AND LESSEE PRE-CONSTRUCTION OBLIGATIONS
1. Lessee will deliver to Lessor no later than the Space Plan Delivery Date
(described in Part I above) a detailed space plan containing the
information described in Part V below, together with other relevant
information and written instructions relating thereto which are required by
Lessor to prepare the Lessee Working Drawings (defined below) for any and
all improvements desired by Lessee in the leased premises (said space plan
and other information and instructions being called the "Lessee Space
Plan").
2. Lessor will review the Lessee Space Plan to confirm that it conforms to the
requirements listed in Part V below, and Lessor shall report any
non-conformity to Lessee, on or before the Lessor Review Date (described in
Part I above). Additionally, on or before the Lessor Review Date, Lessor
shall meet with Lessee and advise Lessee informally of estimated potential
costs and time delays associated with (i) work in excess of the quantities
of Building standard items shown in Schedule 3 hereto; or (ii) improvements
that are not Building Standard Improvements (the matters described in (i)
and (ii) being called "Lessee Extra Work").
<PAGE>
3. In the event the Lessee Space Plan does not conform to the requirements of
Part V below, or Lessee determines to make revisions to the Lessee Space
Plan, Lessee will deliver a corrected Lessee Space Plan to Lessor no later
than the Space Plan Revision Date (described in Part I above). Also, on or
before the Space Plan Revision Date, Lessee shall advise (by so marking on
the Lessee Space Plan and summarizing same in an accompanying memorandum)
Lessor in writing (hereinafter called "Lessee's Instructions") of what will
constitute the Outside Contract Items (as those terms are defined in Part
IV below)
4. After Lessor has received the final, mutually approved Lessee Space Plan,
Lessor shall promptly cause working drawings (herein called "Lessee Working
Drawings") of the improvements to the leased premises shown on the Lessee
Space Plan to be prepared and shall deliver to Lessee the Lessee Working
Drawings no later than the Working Drawings Delivery Date (described in
Part I above) or such later date as may be reasonable in light of the
complexity of Lessee's leasehold improvements or the nature of Lessee Extra
Work.
5. In the event the Lessee Working Drawings vary in design from the Lessee
Space Plan due to the fault of the Lessor or the architect engaged by the
Lessor to prepare the Lessee Working Drawings, and if Lessee promptly gives
Lessor written notice thereof at least prior to the Working Drawings
Approval Date (described in Part I above), Lessor at its expense promptly
shall correct the Lessee Working Drawings.
Otherwise, Lessee shall deliver to Lessor written approval of the Lessee
Working Drawings no later than the Working Drawings Approval Date
(described in Part I above), and by said approval Lessee shall acknowledge
that said drawings correctly depict the proper layout and design for any
and all improvements desired by the Lessee for the leased premises.
6. Upon receipt of Lessee's Instructions and Lessee's approval of the Lessee
Working Drawings, Lessor agrees to submit for pricing by its contractors
and subcontractors the Lessor's Work. Lessor then shall furnish to Lessee a
Tenant Construction Agreement, which shall cover the Lessor's Work and
shall contain the results of said pricing, on or before the Bid Date
(described in Part I above) or such later date as may be reasonable in
light of the complexity of Lessee's leasehold improvements or the nature of
Lessee Extra Work.
7. Lessee agrees to promptly review the Tenant Construction Agreement and to
deliver the Tenant Construction Agreement to Lessor, approved and executed
by Lessee, on or before the Bid Acceptance Date (described in Part I
above). Such delivery shall constitute Lessee's release of Lessor to
commence construction of the Lessor's Work.
PART III. CERTAIN PROVISIONS RELATING TO CONSTRUCTION
1. Upon approval of the Tenant Construction Agreement Lessor agrees to use
diligence to attempt to install the Lessor's Work within the time specified
in the Tenant Construction Agreement. Lessee shall pay all costs incurred
in connection with Lessee Extra Work, including the costs of the materials
and labor therefor and associated architectural and engineering fees, if
any, plus an additional charge equal to the Applicable Amount (defined
below).
2. Lessee may make changes in the work to be done on or for its leasehold
improvements both before and during construction of the same, provided,
however, that no changes may be made within 30 days prior to the Scheduled
Substantial Completion Date for the Lessor's Work. However, Lessee shall be
responsible for all costs relating thereto (plus the Applicable Amount),
which costs shall include those resulting from any delays incurred by
Lessor as a result of the changes.
3. As contemplated by Schedule 1, unless Lessee occupies the leased premises
prior thereto, Lessee shall not be required to pay rent and the term of
this lease shall not commence until Lessee's leasehold improvements are
substantially completed, unless such substantial completion is delayed
beyond the date Building standard improvements in the quantities described
in Schedule 3 would have been completed and unless delays are caused by
Lessee. The following are examples of such delays which shall be referred
to as Lessee Delays:
<PAGE>
A. If Lessee's leasehold improvements involve Lessee Extra Work which
requires more time to complete than is required for Building Standard
Improvements;
B. Failure by Lessee or its architects, engineers, space planners or others
employed by Lessee to timely comply with the provisions of Part III above (but
only if the failure results in Lessee's leasehold improvements being
substantially completed later than they would have been substantially completed
absent said failure);
C. If Lessee makes changes either before or during construction of its
leasehold improvements as described in Paragraph 2 of this Part Ill (but only if
the changes result in Lessee's leasehold improvements being substantially
completed later than they would have been substantially completed absent said
changes).
4. Any failure of Lessee to use best efforts, in good faith, to comply with
the requirements of this Schedule 2 shall constitute a default by Lessee,
giving Lessor all of the remedies described in Section V of the lease,
notwithstanding any provision hereof to the contrary.
5. Lessor shall pay and be responsible for the architectural and engineering
fees incurred in preparing those portions of the Lessee Working Drawings
which relate to the Building standard improvements to the leased premises.
All other architectural and engineering fees incurred in connection with
the preparation of the Lessee Working Drawings or changes thereto or in
making any improvements to the leased premises shall be paid by Lessee upon
receipt of an invoice therefor.
6. As used in this lease, the term "Applicable Amount" shall mean fifteen
percent (15%) of the "Special Improvements Costs". The term "Special
Improvements Costs" shall mean all costs incurred by Lessor (including
architectural and engineering fees and any contractors' fees and fees for
general conditions) in installing Lessee's leasehold improvements less and
except the costs incurred for installing that portion of said leasehold
improvements which constitute Building Standard Improvements to the extent
that the same do not exceed the respective quantity allowances indicated in
Schedule 3.
PART IV. OUTSIDE CONTRACTOR
With the written approval of Lessor, Lessee may elect to use a contractor
(the "Outside Contractor") other than Lessor to install certain portions of the
improvements shown on the Lessee Working Drawings. As used herein, "Outside
Contract Items" means all work to be performed by the Outside Contractor and
thereby not included in Lessor's Work. "Lessor's Work" means the work Lessor is
requested to bid on by the Lessee's Instructions, or if Lessee is not using an
Outside Contractor, all work shown on the Lessee Working Drawings; provided,
however, the Lessor's Work, as designated by Lessee, must be such that it can be
substantially completed in full prior to the Outside Contractor commencing the
Outside Contract Items; provided further, however, if the Lessor's Work does not
include all of the leasehold improvements for the leased premises, Lessor may
refuse to bid on (and thereby Lessor shall not be required to perform) all or
any part of the Lessor's Work as so designated by Lessee. If Lessee so elects to
use the Outside Contractor, then Lessee, in the Lessee's Instructions shall
notify Lessor what items shown on the Lessee Working Drawings will constitute
the Outside Contract Items (which Lessor's bid shall not cover and Lessor shall
not be required to bid on or install the Outside Contract Items) and the
Lessor's Work. If Lessee so elects to use the Outside Contractor, then the
following shall apply:
(1) Lessee shall obtain (in sufficient time to allow timely commencement of
construction of its leasehold improvements and so as not to interfere with the
orderly construction of the Building but in any event prior to the Bid Date),
the prior written consent of Lessor as to the Outside Contractor to be used by
Lessee and of the scope of the work to be performed by the Outside Contractor.
Examples of when Lessor's consent may be refused include Lessee's use of any
contractor which may be expected to cause a delay in the completion of the
Building or otherwise unreasonably interfere with said completion.
<PAGE>
LEASE AMENDMENT NUMBER ONE
BETWEEN TRANSCO TOWER, LIMITED, "LESSOR" AND
METRO TRAFFIC CONTROL, INC., "LESSEE"
DATED OCTOBER 19, 1988
THE STATE OF TEXAS ss.
COUNTY OF HARRIS ss.
WHEREAS, TRANSCO TOWER, LIMITED, hereinafter called "Lessor", and METRO
TRAFFIC CONTROL, INC., hereinafter called "Lessee", entered into a Lease
Agreement dated April 18, 1988, covering approximately seven hundred seventy-two
(772) square feet of Net Rentable Area located on Level 52 in Transco Tower at
2800 Post Oak Boulevard, Houston, Texas 77056; and
WHEREAS, Lessor and Lessee mutually desire to amend said Lease Agreement as
set forth below:
NOW, THEREFORE, Lessor and Lessee do hereby amend said Lease Agreement as
follows:
1. The terms used herein shall have the same meanings as defined in the Lease,
unless otherwise defined herein, and all terms defined herein are hereby
incorporated into the Lease for all pertinent purposes, unless otherwise
stated.
2. The term of the Lease as stated in Article II, Paragraph 1. (a) of the
Lease is hereby amended to continue in force for a term of nine (9) years
nine (9) months and fourteen (14) days beginning on the 1st day of
November, 1988 and ending on the 14th day of August, 1998.
3. The Base Rental stated in Article II, Paragraph 3 is hereby increased for
years 1 thru 5 from $7,720.00 per year to $8,521.00 per year and for years
6 thru 10 from $11,580.00 per year to $12,381.00 per year. The purpose for
the increased Base Rental is to amortize at an annual percentage rate of
ten percent (10%) $5,000.00 attributable to the cost of a fan coil unit
installed in the Leased Premises.
4. Except as expressly amended by the First Amendment, the Lease shall
continue in full force and effect.
<PAGE>
EXCEPT as hereby expressly amended, Lessor and Lessee do hereby ratify and
affirm all of the terms, conditions and covenants of said Lease Agreement.
WITNESS the execution here this ____ day of ____________________, 19__.
TRANSCO TOWER, LIMITED METRO TRAFFIC CONTROL, INC.
By: Post Oak/Alabama, General Partner
By: Post Oak Associates II, Ltd.,
General Partner
By: Gerald D. Hines Interests, Ltd.
General Partner
By: Hines Consolidated Investments, Inc.,
General Partner
By: /s/ Louis S. Sklar By: /s/ Greg F. Walsh, III
------------------------------ ------------------------------
Louis S. Sklar, Vice President
LESSOR LESSEE
<PAGE>
LEASE AMENDMENT NUMBER TWO
BETWEEN TRANSCO TOWER, LIMITED, "LESSOR" AND
METRO TRAFFIC CONTROL, INC., "LESSEE"
DATED JANUARY 29, 1992
THE STATE OF TEXAS )
COUNTY OF HARRIS )
WHEREAS, Transco Tower, Limited, hereinafter called "Lessor", and Metro
Traffic Control, Inc., hereinafter called "Lessee", entered into a Lease
Agreement dated April 18, 1988, covering approximately seven hundred seventy-two
(772) square feet of Net Rentable Area located on Level 52 in Transco Tower at
2800 Post Oak Boulevard, Houston, Texas 77056; and
WHEREAS, Lessor and Lessee entered into that certain Lease Amendment Number
One dated October 19, 1988, in order to modify the term of the Lease and to
increase the Base Rental to amortize the cost of one (1) fan coil unit installed
in the Leased Premises.
WHEREAS, Lessor and Lessee mutually desire to amend said Lease Agreement as
set forth below:
NOW, THEREFORE, Lessor and Lessee do hereby amend said Lease Agreement as
follows:
1. The terms used herein shall have the same meanings as defined in the Lease,
unless otherwise defined herein, and all terms defined herein are hereby
incorporated into the Lease for all pertinent purposes, unless otherwise
stated.
2. The Leased Premises is hereby expanded by 827 net rentable square feet (the
"Expansion Space") as shown in Exhibit "A" attached hereto and made a part
hereof for all purposes. The Leased Premises shall be comprised of 1,599
square feet of Net Rentable Area.
3. The Base Rental stated in Article II, Paragraph 3 is hereby increased from
$8,521.00 per year to $17,618.00 per year commencing upon the first to
occur of (i) substantial completion of the Expansion Space or (ii)
occupancy of the Leased Premises by the Lessee thru October 31, 1993 and
from $12,381.00 per year to $25,613.00 per year commencing on November 1,
1993 thru August 14, 1998.
4. Lessor at Lessor's expense shall build out the Expansion Space with
Building Standard Improvements including the removal of the existing
demising wall in accordance with final working drawings approved by Lessee
and Lessor.
<PAGE>
EXCEPT as hereby expressly amended, Lessor and Lessee do hereby ratify and
affirm all terms, conditions and covenants of said Lease Agreement.
WITNESS the execution here this 29th day of January, 1992.
TRANSCO TOWER, LIMITED METRO TRAFFIC CONTROL, INC.
By: Post Oak/Alabama,
General Partner
By: Post Oak Associates II,
Ltd., General Partner
By: GDHI Limited Partnership,
General Partner
By: Hines Consolidated
Investments, Inc.,
General Partner
By: /s/ Louis S. Sklar By: /s/ Greg F. Walsh, III
------------------------- -------------------------
Louis S. Sklar,
Vice President
LESSOR LESSEE
<PAGE>
[Floor plan of net rentable area.]
LEVEL 52
TRANSCO TOWER
EXHIBIT A
<PAGE>
LEASE AMENDMENT NUMBER THREE
BETWEEN TRANSCO TOWER, LIMITED, "LESSOR" AND
METRO TRAFFIC CONTROL, INC., "LESSEE"
DATED MAY 28, 1992
THE STATE OF TEXAS )
COUNTY OF HARRIS )
WHEREAS, Transco Tower, Limited, hereinafter called "Lessor", and Metro
Traffic Control, Inc., hereinafter called "Lessee", entered into a Lease
Agreement dated April 18, 1988, covering approximately seven hundred seventy-two
(772) square feet of Net Rentable Area located on Level 52 in Transco Tower at
2800 Post Oak Boulevard, Houston, Texas 77056; and
WHEREAS, Lessor and Lessee entered into that certain Lease Amendment Number
One dated October 19, 1988, in order to modify the term of the Lease and to
increase the Base Rental to amortize the cost of one (1) fan coil unit installed
in the Leased Premises.
WHEREAS, Lessor and Lessee entered into that certain Lease Amendment Number
Two dated January 29, 1992 in order to expand the Leased Premises by 827 net
rentable square feet thereby increasing the total area of the Leased Premises to
1,599 square feet of Net Rentable Area.
WHEREAS, Lessor and Lessee mutually desire to amend said Lease Agreement as
set forth below:
NOW, THEREFORE, Lessor and Lessee do hereby amend said Lease Agreement as
follows:
1. The terms used herein shall have the same meanings as defined in the Lease,
unless otherwise defined herein, and all terms defined herein are hereby
incorporated into the Lease for all pertinent purposes, unless otherwise
stated.
2. Lessor shall provide an above building standard allowance of up to
$3,861.00.
3. The Base Rental stated in Article II, Paragraph 3 of the Lease Agreement as
amended in Amendment Number Two is hereby increased from $17,618.00 per
year to $18,461.00 per year commencing on July 15, 1992 thru October 31,
1993 and from $25,613.00 per year to $26,456.00 per year commencing on
November 1, 1993 thru August 14, 1998. The increased base rental is to
amortize said allowance described in paragraph 2 herein at an annual
compounded interest rate of ten percent (10%) per annum.
4. Lessee acknowledges that a separate electrical meter shall be installed in
the Leased Premises for the purpose of monitoring Lessee's electrical
useage. The cost of such electrical meter is included in the allowance
described in paragraph 2 herein. Lessee hereby agrees to pay for the
electricity which exceeds one watt per square foot as specified in Article
III, Paragraph 3(c) of the Lease Agreement upon receipt of Lessor's
invoice.
<PAGE>
EXCEPT as hereby expressly amended, Lessor and Lessee do hereby ratify and
affirm all terms, conditions and covenants of said Lease Agreement.
WITNESS the execution here this ____ day of ___________,19__.
TRANSCO TOWER, LIMITED METRO TRAFFIC CONTROL, INC.
By: Post Oak/Alabama,
General Partner
By: Post Oak Associates II,
Ltd., General Partner
By: GDHI Limited Partnership,
General Partner
By: Hines Consolidated
Investments, Inc.,
General Partner
By: /s/ Louis S. Sklar By: /s/ Greg F. Walsh, III
------------------------- -------------------------
Louis S. Sklar,
Vice President
LESSOR LESSEE
MJM:AMEND:fr
42092met
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
AUDITED FINANCIAL STATEMENTS FOR DECEMBER 31, 1995
UNAUDITED FINANCIAL STATEMENTS FOR MARCH 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 3,049,946 3,450,031
<SECURITIES> 0 0
<RECEIVABLES> 12,662,716 12,909,159
<ALLOWANCES> 0 0
<INVENTORY> 399,606 643,858
<CURRENT-ASSETS> 21,710,726 22,468,531
<PP&E> 9,212,472 9,801,660
<DEPRECIATION> (4,234,972) (4,597,497)
<TOTAL-ASSETS> 42,436,614 47,755,420
<CURRENT-LIABILITIES> 13,810,242 14,830,606
<BONDS> 21,877,156 25,136,306
0 0
0 0
<COMMON> 3,015 3,615
<OTHER-SE> 4,023,811 4,023,811
<TOTAL-LIABILITY-AND-EQUITY> 42,436,614 47,755,411
<SALES> 72,432,951 23,030,197
<TOTAL-REVENUES> 72,432,951 23,030,197
<CGS> 41,285,973 12,468,213
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1,123,073 292,810
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,260,185 322,109
<INCOME-PRETAX> 4,345,729 1,611,676
<INCOME-TAX> 1,036,352 502,948
<INCOME-CONTINUING> 3,309,377 1,108,728
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,309,377 1,108,728
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
