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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended MARCH 31, 1998 Commission File No. 000-22513
AMAZON.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1646860
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1516 Second Avenue, Seattle, Washington 98101
(Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: (206) 622-2335
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
49,451,496 shares of $0.01 par value common stock outstanding as of April 30,
1998 (after adjusting for the Company's 2-for-1 stock split payable on June 1,
1998)
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Exhibit Index on Page 20
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AMAZON.COM, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
Exhibit Index 20
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMAZON.COM, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
1998 1997
- -----------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................ $ 98,600 $ 109,810
Short-term investments ........................... 18,220 15,256
Inventories ...................................... 11,674 8,971
Prepaid expenses and other ....................... 4,399 3,298
--------- ---------
Total current assets ......................... 132,893 137,335
Fixed assets, net .................................. 9,773 9,265
Deposits ........................................... 293 166
Deferred charges ................................... 2,048 2,240
--------- ---------
Total assets ................................. $ 145,007 $ 149,006
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................. $ 34,374 $ 32,697
Accrued advertising .............................. 5,349 3,454
Other liabilities and accrued expenses ........... 8,071 6,167
Current portion of long-term debt ................ 684 1,500
--------- ---------
Total current liabilities .................... 48,478 43,818
Long-term portion of debt .......................... 76,521 76,521
Long-term portion of capital lease obligation ...... 181 181
Stockholders' equity:
Preferred stock, $0.01 par value:
Authorized shares -- 10,000,000
Issued and outstanding shares -- none ......... -- --
Common stock, $0.01 par value:
Authorized shares -- 100,000,000
Issued and outstanding shares -- 48,325,864
and 47,874,338 shares at March 31, 1998
and December 31, 1997, respectively ......... 483 479
Additional paid-in capital ....................... 63,711 63,552
Deferred compensation ............................ (1,493) (1,930)
Accumulated deficit .............................. (42,874) (33,615)
--------- ---------
Total stockholders' equity ................... 19,827 28,486
--------- ---------
Total liabilities and stockholders' equity . $ 145,007 $ 149,006
========= =========
</TABLE>
See accompanying notes.
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AMAZON.COM, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31,
------------------------
1998 1997
-------- --------
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Net sales ............................................... $ 87,375 $ 16,005
Cost of sales ........................................... 68,054 12,484
-------- --------
Gross profit ............................................ 19,321 3,521
Operating expenses:
Marketing and sales .................................. 19,503 3,906
Product development .................................. 6,729 1,575
General and administrative ........................... 1,963 1,142
-------- --------
Total operating expenses .......................... 28,195 6,623
Loss from operations .................................... (8,874) (3,102)
Interest income ......................................... 1,640 64
Interest expense ........................................ (2,025) --
-------- --------
Net loss ................................................ $ (9,259) $ (3,038)
======== ========
Pro forma basic and diluted loss per share .............. $ (0.20) $ (0.08)
======== ========
Shares used in computation of pro forma basic and diluted
loss per share ....................................... 46,622 38,804
======== ========
</TABLE>
See accompanying notes.
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AMAZON.COM, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1997
--------- -------
- ----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss .................................................. $ (9,259) $(3,038)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization ......................... 1,790 420
Amortization of unearned compensation related
to stock options .................................... 185 263
Changes in operating assets and liabilities:
Inventories ......................................... (2,703) (368)
Prepaid expenses and other .......................... (1,101) (616)
Deposits ............................................ (127) (47)
Accounts payable .................................... 1,677 2,798
Accrued advertising ................................. 1,895 656
Other liabilities and accrued expenses .............. 1,088 1,135
--------- -------
Net cash provided by (used in) operating
activities....................................... (6,555) 1,203
INVESTING ACTIVITIES:
Maturities of short-term investments ..................... 4,500 --
Purchases of short-term investments ...................... (7,499) --
Purchases of fixed assets ................................ (2,071) (926)
--------- -------
Net cash used in investing activities ............. (5,070) (926)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options .................. 415 437
Proceeds from sale of preferred stock .................... -- 200
--------- -------
Net cash provided by financing activities ......... 415 637
Net increase (decrease) in cash and cash equivalents ........ (11,210) 914
Cash and cash equivalents at beginning of period ............ 109,810 6,248
--------- -------
Cash and cash equivalents at end of period .................. $ 98,600 $ 7,162
========= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Common stock issued for fixed assets and accrued
product development ......................................... $ -- $ 1,500
</TABLE>
See accompanying notes.
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AMAZON.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ACCOUNTING POLICIES
Description of Business
Amazon.com, Inc. ("Amazon.com" or the "Company") was incorporated on July 5,
1994. The Company is the leading online retailer of books and offers a catalog
of approximately three million titles, easy-to-use search and browse features,
email services, personalized shopping services, secure Web-based credit card
payment and direct shipping to customers. The Company currently offers other
information-based products, such as music, and intends over time to expand its
catalog into other product categories.
Unaudited Interim Financial Information
The financial statements as of March 31, 1998 and 1997 have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC"). These statements are unaudited and, in the opinion of
management, include all adjustments (consisting of normal recurring adjustments
and accruals) necessary to present fairly the results for the periods presented.
The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
SEC rules and regulations. Operating results for the quarter ended March 31,
1998 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1998. These financial statements should be read in
conjunction with the audited financial statements and the accompanying notes
included in the Company's annual report on Form 10-K for the year ended December
31, 1997. Certain prior period balances have been reclassified to conform to the
current period presentation.
As of January 1, 1998, the Company adopted SFAS No. 130, Reporting Comprehensive
Income, which establishes standards for the reporting and display of
comprehensive income and its components. The adoption of this Statement had no
impact on the Company's net loss or stockholders' equity.
NOTE 2 - FIXED ASSETS
Fixed assets, at cost, consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
Computers and equipment $ 8,416 $ 7,118
Purchased software 4,993 4,505
Leasehold improvements 1,199 914
Leased assets 362 362
------- -------
14,970 12,899
Less accumulated depreciation
and amortization 5,197 3,634
------- -------
Fixed asssets, net $ 9,773 $ 9,265
======= =======
</TABLE>
NOTE 3 - SUBSEQUENT EVENTS
On April 27, 1998, the Company announced that its Board of Directors approved a
2-for-1 stock split of the common stock effected in the form of a dividend.
Shareholders will receive an additional share of common stock for every share
held on the
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record date of May 20, 1998. The additional shares will be payable on June 1,
1998. Accordingly, the accompanying financial statements have been restated to
reflect the stock split effected in the form of a dividend.
On April 27, 1998, the Company announced the acquisition of three Internet
companies: Bookpages Limited ("Bookpages"), Telebook, Inc. ("Telebook") and
Internet Movie Database Limited ("IMDB"). Bookpages and Telebook are online
booksellers. Bookpages has operations in the United Kingdom and Telebook has
operations primarily in Germany through its ABC Bucherdienst subsidiary. IMDB
operates a comprehensive repository for movie information on the Internet. Each
of the acquisitions will be accounted for under the purchase method of
accounting. The Company will incur charges of approximately $55 million in the
aggregate in connection with the three transactions. The consideration for the
acquisitions was comprised of cash and common stock. The Company issued an
aggregate of approximately 540,000 shares of common stock to effect the
transactions. The Company expects to amortize the intangibles resulting from the
acquisitions over approximately two years.
On May 8, 1998, the Company completed an offering of approximately $326 million
gross proceeds of 10% Senior Discount Notes due 2008 (the "Senior Discount
Notes"). The Senior Discount Notes will mature on May 1, 2008. The Senior
Discount Notes were sold at a substantial discount from their principal amount
at maturity of $530 million. There will not be any payment of interest on the
Senior Discount Notes prior to November 1, 2003. From and after May 1, 2003, the
Senior Discount Notes will bear interest, which will be payable in cash, at a
rate of 10% per annum on each May 1 and November 1, commencing November 1, 2003.
The net proceeds from the offering have and will be used to retire approximately
$75 million of existing indebtedness, and for general corporate purposes,
including working capital to fund anticipated operating losses, the expansion of
the Company's core business, investments in new business segments and markets,
including the Company's planned sales of music products and international
expansion, and capital expenditures. The Company expects, if the opportunity
arises, to use an unspecified portion of the net proceeds to acquire or invest
in complementary businesses, products and technologies. See Item 2.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains forward-looking statements based on current
expectations, estimates and projections about the Company's industry,
management's beliefs and certain assumptions made by management. All statements,
trends, analyses and other information contained in this report relative to
trends in net sales, gross margin, anticipated expense levels, liquidity and
capital resources, as well as other statements, including, but not limited to,
words such as "anticipate," "believe," "plan," "estimate," "expect," "seek" and
"intend," and other similar expressions, constitute forward-looking statements.
These forward-looking statements involve risks and uncertainties, and actual
results may differ materially from those anticipated or expressed in such
statements. Potential risks and uncertainties include, among others, those set
forth under "Overview," "Liquidity and Capital Resources," and "Additional
Factors That May Affect Future Results" included in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and in
the "Risk Factors" section of the Company's annual report on Form 10-K for the
year ended December 31, 1997, as filed with the SEC. Particular attention should
be paid to the cautionary statements involving the Company's limited operating
history, the unpredictability of its future revenues, the unpredictable and
evolving nature of its business model, the intensely competitive online commerce
and retail book and music industries, and the risks associated with capacity
constraints, systems development, management of growth, acquisitions, any new
products and international or domestic business expansion. Except as required by
law, the Company undertakes no obligation to update any forward-looking
statement, whether as a result of new information, future events or otherwise.
Readers, however, should carefully review the factors set forth in other reports
or documents that the Company files from time to time with the SEC.
OVERVIEW
Amazon.com is the leading online retailer of books. The Company also sells CDs,
videotapes, audiotapes and other products. All of these products are sold
through the Company's Web site. The Company was incorporated in July 1994 and
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commenced offering products for sale on its Web site in July 1995. Accordingly,
the Company has a limited operating history on which to base an evaluation of
its business and prospects. The Company's prospects must be considered in light
of the risks, expenses and difficulties frequently encountered by companies in
their early stage of development, particularly companies in new and rapidly
evolving markets such as online commerce. Such risks for the Company include,
but are not limited to, an evolving and unpredictable business model and the
management of growth. To address these risks, the Company must, among other
things, maintain and increase its customer base, implement and successfully
execute its business and marketing strategy and its expansion into new product
or geographic markets, continue to develop and upgrade its technology and
transaction-processing systems, improve its Web site, provide superior customer
service and order fulfillment, respond to competitive developments, and attract,
retain and motivate qualified personnel. There can be no assurance that the
Company will be successful in addressing such risks, and the failure to do so
could have a material adverse effect on the Company's business, prospects,
financial condition and results of operations.
Since inception, the Company has incurred significant losses and as of March 31,
1998, had an accumulated deficit of $42.9 million. The Company believes that its
success will depend in large part on its ability to (i) extend its brand
position, (ii) provide its customers with outstanding value and a superior
shopping experience and (iii) achieve sufficient sales volume to realize
economies of scale. Accordingly, the Company intends to continue to invest
heavily in marketing and promotion, product development and technology, and
operating infrastructure development. The Company also offers attractive pricing
programs, which have reduced its gross margins. Because the Company has
relatively low product gross margins, achieving profitability given planned
investment levels depends upon the Company's ability to generate and sustain
substantially increased revenue levels. As a result, the Company believes that
it will continue to incur substantial operating losses for the foreseeable
future and that the rate at which such losses will be incurred may increase
significantly from current levels. In addition, expenses associated with the
amortization of intangibles resulting from the Company's recent acquisitions and
interest expenses related to the Senior Discount Notes (as defined below) will
further affect the Company's net loss. Although the Company has experienced
significant revenue growth in recent periods, such growth rates are not
sustainable and will decrease in the future. In view of the rapidly evolving
nature of the Company's business and its limited operating history, the Company
believes that period-to-period comparisons of its operating results, including
the Company's gross profit and operating expenses as a percentage of net sales,
are not necessarily meaningful and should not be relied upon as an indication of
future performance.
As a result of the Company's limited operating history and the emerging nature
of the markets in which it competes, the Company is unable to accurately
forecast its revenues. The Company's current and future expense levels are based
largely on its investment plans and estimates of future revenues and are to a
large extent fixed. Sales and operating results generally depend on the volume
of, timing of and ability to fulfill orders received, which are difficult to
forecast. The Company may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, any significant
shortfall in revenues in relation to the Company's planned expenditures would
have an immediate adverse effect on the Company's business, prospects, financial
condition and results of operations. Further, as a strategic response to changes
in the competitive environment, the Company may from time to time make certain
pricing, service, marketing or acquisition decisions that could have a material
adverse effect on its business, prospects, financial condition and results of
operations. For example, the Company has agreed in certain of its promotional
arrangements with Internet aggregators to make significant fixed payments. There
can be no assurance that these arrangements will generate adequate revenues to
cover the associated expenditures, and any significant shortfall would have a
material adverse effect on the Company's financial condition and results of
operations.
The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of factors, many of which are
outside the Company's control. Factors that may adversely affect the Company's
quarterly operating results include (i) the Company's ability to retain existing
customers, attract new customers at a steady rate and maintain customer
satisfaction, (ii) the Company's ability to acquire product, to maintain
appropriate inventory levels and to manage fulfillment operations, (iii) the
Company's ability to maintain gross margins in its existing business and in
future product lines and markets, (iv) the development, announcement or
introduction of new sites, services and products by the Company and its
competitors, (v) price competition or higher wholesale prices in the industry,
(vi) the level of use of the Internet and online services and increasing
consumer acceptance of the Internet and other online services for the purchase
of consumer products such as those offered by the Company, (vii) the Company's
ability to upgrade and develop its systems and infrastructure, (viii) the
Company's ability to attract new personnel in a timely and effective manner,
(ix) the level of traffic on the Company's Web site, (x) the Company's ability
to manage effectively its development of new business segments and markets, (xi)
the Company's ability to successfully manage the integration of operations and
technology of acquisitions and other business combinations, (xii) technical
difficulties, system downtime or Internet brownouts, (xiii) the amount and
timing
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of operating costs and capital expenditures relating to expansion of the
Company's business, operations and infrastructure, (xiv) the number of popular
books introduced during the period, (xv) the level of merchandise returns
experienced by the Company, (xvi) governmental regulation and taxation policies,
(xvii) disruptions in service by common carriers due to strikes or otherwise and
(xviii) general economic conditions and economic conditions specific to the
Internet, online commerce and the book industry.
The Company expects that it will experience seasonality in its business,
reflecting a combination of seasonal fluctuations in Internet usage and
traditional retail seasonality patterns. Internet usage and the rate of Internet
growth may be expected to decline during the summer. Further, sales in the
traditional retail book industry are generally significantly higher in the
fourth calendar quarter of each year.
Due to the foregoing factors, in one or more future quarters the Company's
operating results may fall below the expectations of securities analysts or
investors. In such event, the trading price of the common stock would likely be
materially adversely affected.
RESULTS OF OPERATIONS
Net Sales
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------
1998 1997 % Change
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Net sales.............................. $87,375 $16,005 446%
</TABLE>
Net sales are composed of the selling price of books and other merchandise sold
by the Company, net of returns, as well as outbound shipping and handling
charges. Growth in net sales reflects a significant increase in units sold due
to the growth of the Company's customer base and repeat purchases from the
Company's existing customers. This increase was partially offset by a decrease
in prices. International sales represented 21% and 28% of net sales for the
quarters ended March 31, 1998 and 1997, respectively.
Gross Profit
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------
1998 1997 % Change
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Gross profit............................ $19,321 $ 3,521 449%
Gross margin............................ 22.1% 22.0%
</TABLE>
Gross profit is sales less the cost of sales, which consists of the cost of
merchandise sold to customers, and outbound and inbound shipping costs. Gross
profit increased in absolute dollars, reflecting the Company's increased sales
volume. Gross margin increased slightly as improvements in product costs and
other sourcing activities were largely offset by lower prices and lower overall
shipping margins.
The Company believes that offering its customers attractive prices is an
essential component of its business strategy. Accordingly, the Company offers
20% and 30% discounts on more than 400,000 titles, with featured titles
discounted at 40% and certain "special value" editions discounted up to 89%. The
Company may in the future expand or increase the discounts it offers to its
customers and may otherwise alter its pricing structure and policies.
The Company over time intends to expand its operations by promoting new or
complementary products or sales formats and by expanding the breadth and depth
of its product or service offerings. Gross margins attributable to new business
areas may be lower than those associated with the Company's existing business
activities. In particular, the Company has announced plans to offer music to
customers, and anticipates that music product gross margin, which is expected to
be lower than book gross margin, will affect overall gross margin
proportionately to its impact on product mix.
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Marketing and Sales
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------
1998 1997 % Change
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Marketing and sales..................... $19,503 $ 3,906 399%
Percentage of net sales................. 22.3% 24.4%
</TABLE>
Marketing and sales expenses consist primarily of advertising, public relations
and promotional expenditures, as well as payroll and related expenses for
personnel engaged in marketing, selling and fulfillment activities. All
fulfillment costs not included in cost of sales, including the cost of operating
and staffing distribution centers and customer service, are included in
marketing and sales. Marketing and sales expenses increased primarily due to
increases in the Company's advertising and promotional expenditures (including
expenses associated with Internet aggregator promotional relationships),
increased payroll and related costs associated with fulfilling customer demand
and increased credit card merchant fees resulting from higher sales. Such
expenses decreased as a percentage of net sales due to the significant increase
in net sales. The Company intends to continue to pursue its aggressive branding
and marketing campaign and expects its costs of fulfillment to increase based on
anticipated sales growth. Therefore, the Company expects marketing and sales
expenses to increase significantly in absolute dollars.
Product Development
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------
1998 1997 % Change
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Product development..................... $ 6,729 $ 1,575 327%
Percentage of net sales................. 7.7% 9.8%
</TABLE>
Product development expenses consist principally of payroll and related expenses
for development, editorial, systems and telecommunications operations personnel
and consultants, systems and telecommunications infrastructure, and costs of
acquired content. The increases in product development expenses were primarily
attributable to increased staffing and associated costs related to enhancing the
features, content and functionality of the Company's Web site and
transaction-processing systems, as well as increased investment in systems and
telecommunications infrastructure. Such expenses decreased as a percentage of
net sales due to the significant increase in net sales. To date, all product
development costs have been expensed as incurred. The Company believes that
continued investment in product development is critical to attaining its
strategic objectives and, as a result, expects product development expenses to
increase significantly in absolute dollars.
General and Administrative
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------
1998 1997 % Change
------- ------- --------
(in thousands)
<S> <C> <C> <C>
General and administrative............. $ 1,963 $ 1,142 72%
Percentage of net sales................ 2.2% 7.1%
</TABLE>
General and administrative expenses consist of payroll and related expenses for
executive, accounting and administrative personnel, recruiting, professional
fees and other general corporate expenses. The increase in general and
administrative expenses was primarily due to increased salaries and related
expenses associated with the hiring of additional personnel. Such expenses
decreased as a percentage of net sales due to the significant increase in net
sales. The Company expects general and administrative expenses to increase in
absolute dollars as the Company expands its staff and incurs additional costs
related to the growth of its business.
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Interest Income and Expense
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------
1998 1997 % Change
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Interest income...................... $ 1,640 $ 64 2,463%
Interest expense..................... (2,025) -- N/A
</TABLE>
Interest income on cash, cash equivalents and short-term investments increased
due to higher cash, cash equivalents and short-term investment balances
resulting from the Company's financing activities. Interest expense for the
quarter ended March 31, 1998 consists of interest and amortization of deferred
charges related to the Company's three-year senior secured term loan (the
"Senior Loan") and interest on asset acquisitions financed through loans and
capital leases. The Company expects interest income and interest expense to
increase in the future as a result of the Senior Discount Notes (as defined
below).
Income Taxes
The Company has not generated any taxable income to date and therefore has not
paid any federal income taxes since inception. Utilization of the Company's net
operating loss carryforwards, which begin to expire in 2011, may be subject to
certain limitations under Section 382 of the Internal Revenue Code of 1984, as
amended. The Company has provided a full valuation allowance on the deferred tax
asset, consisting primarily of net operating loss carryforwards, because of
uncertainty regarding its realizability.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998 the Company's cash and cash equivalents were $98.6 million,
compared to $109.8 million at December 31, 1997.
Net cash used in operating activities of $6.6 million for the quarter ended
March 31, 1998 was primarily attributable to the net loss and increases in
inventories and prepaid expenses and other, partially offset by depreciation and
amortization, as well as increases in accrued advertising, accounts payable and
other liabilities and accrued expenses. For the quarter ended March 31, 1997,
cash provided by operating activities was $1.2 million and resulted from
increases in accounts payable and other liabilities and accrued expenses, as
well as depreciation and amortization, partially offset by the net loss and
increases in prepaid expenses and other and in inventories.
Net cash used in investing activities was $5.1 million for the quarter ended
March 31, 1998 and consisted of purchases of short-term investments and fixed
assets, partially offset by maturities of short-term investments. For the
quarter ended March 31, 1997, net cash used in investing activities consisted of
$926,000 for the purchase of fixed assets.
Net cash provided by financing activities of $415,000 for the quarter ended
March 31, 1998 resulted from net proceeds from the exercise of stock options.
Net cash provided by financing activities of $637,000 for the quarter ended
March 31, 1997 resulted from net proceeds from the exercise of stock options and
from the issuance of preferred stock.
As of March 31, 1998, the Company's principal sources of liquidity consisted of
$98.6 million of cash and cash equivalents and $18.2 million of short-term
investments. As of that date, the Company's principal commitments consisted of
obligations outstanding under its Senior Loan, obligations in connection with
the acquisition of fixed assets, operating leases and commitments for
advertising and promotional arrangements. Although the Company has no material
commitments for capital expenditures, it anticipates a substantial increase in
its capital expenditures and lease commitments consistent with anticipated
growth in operations, infrastructure and personnel. The Company may establish
one or more additional distribution centers within the next 12 months, which
would require it to commit to lease obligations, stock inventories, purchase
fixed assets and install leasehold improvements. In addition, the Company has
announced plans to continue to increase its merchandise inventory in order to
provide better availability to customers and achieve purchasing efficiencies.
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On April 27, 1998, the Company announced the acquisition of three Internet
companies: Bookpages Limited ("Bookpages"), Telebook, Inc. ("Telebook") and
Internet Movie Database Limited ("IMDB"). Bookpages and Telebook are online
booksellers. Bookpages has operations in the United Kingdom, and Telebook has
operations primarily in Germany through its ABC Bucherdienst subsidiary. IMDB
operates a comprehensive repository for movie information on the Internet. Each
of the acquisitions will be accounted for under the purchase method of
accounting. The Company will incur charges of approximately $55 million in the
aggregate in connection with the three transactions. The consideration for the
acquisitions was comprised of cash and common stock. The Company issued an
aggregate of approximately 540,000 shares of common stock to effect the
transactions. The Company expects to amortize the intangibles resulting from the
acquisitions over approximately two years.
On May 8, 1998, the Company completed an offering of approximately $326 million
gross proceeds of 10% Senior Discount Notes due 2008 ("Senior Discount Notes").
The Senior Discount Notes will mature on May 1, 2008. The Senior Discount Notes
were sold at a substantial discount from their principal amount at maturity of
$530 million. There will not be any payment of interest on the Senior Discount
Notes prior to November 1, 2003. From and after May 1, 2003, the Senior Discount
Notes will bear interest, which will be payable in cash, at a rate of 10% per
annum on each May 1 and November 1, commencing November 1, 2003.
The Senior Discount Notes are redeemable, at the option of the Company, in
whole or in part, at any time on or after May 1, 2003, at the redemption
prices set forth in the Indenture for the Senior Discount Notes (the
"Indenture"), plus accrued interest, if any, to the date of redemption. At any
time prior to May 1, 2001, the Company also may redeem up to 35% of the
aggregate principal amount at maturity of the Senior Discount Notes with the
proceeds of one or more sales of Capital Stock (as defined in the Indenture)
(other than Disqualified Stock (as defined in the Indenture)), at 110 % of
their Accreted Value (as defined in the Indenture) on the redemption date, plus
accrued and unpaid interest, if any, to the date of redemption; provided that
after any such redemption at least 65% of the aggregate principal amount at
maturity of Senior Discount Notes originally issued remains outstanding. In
addition, at any time prior to May 1, 2003, the Company may redeem all, but not
less than all, of the Senior Discount Notes at a redemption price equal to the
sum of (i) the Accreted Value (as defined in the Indenture) on the redemption
date, plus (ii) accrued and unpaid interest, if any, to the redemption date,
plus (iii) the Applicable Premium (as defined in the Indenture).
Upon a Change of Control (as defined in the Indenture), the Company will be
required to make an offer to purchase the Senior Discount Notes at a purchase
price equal to 101% of their Accreted Value on the date of purchase, plus
accrued interest, if any. There can be no assurance that the Company will have
sufficient funds available at the time of any Change of Control to make any
required debt repayment (including repurchases of the Senior Discount Notes).
The Senior Discount Notes are and will be senior unsecured indebtedness of the
Company ranking pari passu with the Company's existing and future
unsubordinated, unsecured indebtedness and senior in right of payment to all
subordinated indebtedness of the Company. The Senior Discount Notes are and will
be effectively subordinated to all secured indebtedness and to all existing and
future liabilities of the Company's subsidiaries, including trade payables. As
of December 31, 1997, as adjusted for the offering of the Senior Discount Notes
and application of the net proceeds therefrom, the Company would have had $3.2
million of indebtedness outstanding (other than the Senior Discount Notes), all
of which would have been secured indebtedness.
The Indenture contains certain covenants that, among other things, limit the
ability of the Company and its Restricted Subsidiaries (as defined in the
Indenture) to incur indebtedness, pay dividends, prepay subordinated
indebtedness, repurchase capital stock, make investments, create liens, engage
in transactions with stockholders and affiliates, sell assets and engage in
mergers and consolidations. However, these limitations are subject to a number
of important qualifications and exceptions.
The net proceeds from the offering of the Senior Discount Notes have and will be
used to retire approximately $75 million of existing indebtedness and for
general corporate purposes, including working capital to fund anticipated
operating losses, the expansion of the Company's core business, investments in
new business segments and markets, including the Company's planned sales of
music products and international expansion, and capital expenditures. The
Company expects, if the opportunity arises, to use an unspecified portion of the
net proceeds to acquire or invest in complementary businesses, products and
technologies.
On December 23, 1997, the Company borrowed $75 million pursuant to the Senior
Loan. The Company has repaid the Senior Loan in full with a portion of the net
proceeds of the Senior Discount Notes. In connection with the Senior Loan, the
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<PAGE> 13
Company issued warrants to purchase a total of 750,000 shares of the Company's
common stock. All of the warrants were canceled when the Company repaid the
Senior Loan.
The Company believes that current cash and cash equivalent balances and
short-term investments will be sufficient to meet its anticipated cash needs for
at least 12 months. However, any projections of future cash needs and cash flows
are subject to substantial uncertainty. If current cash and cash equivalents,
the net proceeds of the offering of the Senior Discount Notes (see Item 1.
"Financial Statements" - Note 3 - Subsequent Events) and cash generated from
operations are insufficient to satisfy the Company's liquidity requirements, the
Company may seek to sell additional equity or debt securities or to obtain a
line of credit. The sale of additional equity or convertible debt securities
could result in additional dilution to the Company's stockholders. There can be
no assurance that financing will be available in amounts or on terms acceptable
to the Company, if at all. In addition, the Company will, from time to time,
consider the acquisition of or investment in complementary businesses, products
and technologies, which might increase the Company's liquidity requirements or
cause the Company to issue additional equity or debt securities.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
In addition to the factors discussed in the "Overview" section of this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's annual report on Form 10-K for the year ended
December 31, 1997, as filed with the SEC, including among others, the Company's
limited operating history, the unpredictability of its future revenues and the
unpredictable and evolving nature of its business model, the following
additional factors may affect the Company's future results.
The online commerce market, particularly over the Web, is new, rapidly evolving
and intensely competitive. In addition, the retail book and music industries are
intensely competitive. The Company's current or potential competitors include
(i) various online booksellers and vendors of other products such as CDs and
videotapes, including entrants into narrow specialty niches, (ii) a number of
indirect competitors that specialize in online commerce or derive a substantial
portion of their revenues from online commerce, through which retailers other
than the Company may offer products and (iii) publishers, distributors and
retail vendors of books, music and other products, including Barnes & Noble,
Inc., Bertelsmann AG and other large specialty booksellers and integrated media
corporations, many of which possess significant brand awareness, sales volume
and customer bases. The Company believes that the principal competitive factors
in its market are brand recognition, selection, personalized services,
convenience, price, accessibility, customer service, quality of search tools,
quality of editorial and other site content, and reliability and speed of
fulfillment. Many of the Company's competitors have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than the Company. Certain of the
Company's competitors may be able to secure merchandise from vendors on more
favorable terms, devote greater resources to marketing and promotional
campaigns, adopt more aggressive pricing or inventory availability policies and
devote substantially more resources to Web site and systems development than the
Company. Increased competition may result in reduced operating margins, loss of
market share and a diminished brand franchise. There can be no assurance that
the Company will be able to compete successfully against current and future
competitors.
The Company expects that competition in the online commerce market will
intensify in the future. For example, as various market segments obtain large,
loyal customer bases, participants in those segments may seek to leverage their
market power to the detriment of participants in other market segments. In
addition, new technologies and the expansion of existing technologies may
increase the competitive pressures on online retailers, including the Company.
For example, "shopping agent" technologies will permit customers to quickly
compare the Company's prices with those of its competitors. Competitive
pressures created by any one of the Company's competitors, or by the Company's
competitors collectively, could have a material adverse effect on the Company's
business, prospects, financial condition and results of operations.
The Company's revenues depend on the number of visitors who shop on its Web site
and the volume of orders it fulfills. Any system interruptions that result in
the unavailability of the Company's Web site or reduced order fulfillment
performance would reduce the volume of goods sold and the attractiveness of the
Company's product and service offerings. The Company has experienced periodic
system interruptions, which it believes will continue to occur from time to
time. The Company uses an internally developed system for its Web site, search
engine and substantially all aspects of transaction processing, including order
management, cash and credit card processing, purchasing, inventory management
and shipping. The Company will be required to add additional software and
hardware and further develop and upgrade its existing technology,
transaction-processing systems and network infrastructure to accommodate
increased traffic on its Web site and increased
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<PAGE> 14
sales volume through its transaction-processing systems. Any inability to do so
may cause unanticipated system disruptions, slower response times, degradation
in levels of customer service, impaired quality and speed of order fulfillment,
or delays in reporting accurate financial information. There can be no assurance
that the Company will be able to accurately project the rate or timing of
increases, if any, in the use of its Web site or in a timely manner to
effectively upgrade and expand its transaction-processing systems or to
integrate smoothly any newly developed or purchased modules with its existing
systems. Any inability to do so could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
Substantially all of the Company's computer and communications hardware is
located at a single leased facility in Seattle, Washington. The Company's
systems and operations are vulnerable to damage or interruption from fire,
flood, power loss, telecommunications failure, break-ins, earthquake and similar
events. The Company does not currently have redundant systems or a formal
disaster recovery plan and does not carry sufficient business interruption
insurance to compensate it for losses that may occur. Despite the implementation
of network security measures by the Company, its servers are vulnerable to
computer viruses, physical or electronic break-ins and similar disruptions,
which could lead to interruptions, delays, loss of critical data or the
inability to accept and fulfill customer orders. The occurrence of any of the
foregoing events could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
The Company has rapidly and significantly expanded its operations and
anticipates that further expansion will be required to address potential growth
in its customer base, to expand its product and service offerings and its
international operations, and to pursue other market opportunities. The
expansion of the Company's operations and employee base has placed, and is
expected to continue to place, a significant strain on the Company's management,
operational and financial resources. To manage the expected growth of its
operations and personnel, the Company will be required to improve existing and
implement new transaction-processing, operational and financial systems,
procedures and controls, as well as to expand, train and manage its growing
employee base. There can be no assurance that the Company's current and planned
personnel, systems, procedures and controls will be adequate to support the
Company's future operations, that management will be able to hire, train,
retain, motivate and manage required personnel or that Company management will
be able to successfully identify, manage and exploit existing and potential
market opportunities. If the Company is unable to manage growth effectively,
such inability could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
The Company over time intends to expand its operations by promoting new or
complementary products or sales formats and by expanding the breadth and depth
of its product or service offerings. Expansion of the Company's operations in
this manner would require significant additional expenses and development,
operations and editorial resources and would strain the Company's management,
financial and operational resources. Furthermore, the Company may not benefit
from the first-mover advantage that it experienced in the online book market,
and gross margins attributable to new business areas may be lower than those
associated with the Company's existing business activities. There can be no
assurance that the Company will be able to expand its operations in a
cost-effective or timely manner. Furthermore, any new business launched by the
Company that is not favorably received by consumers could damage the Company's
reputation or the Amazon.com brand. The lack of market acceptance of such
efforts or the Company's inability to generate satisfactory revenues from such
expanded services or products to offset their cost could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations.
The Company expects to expand its presence in foreign markets and has recently
acquired two international online booksellers to accelerate this expansion. To
date, the Company has only limited experience in sourcing, marketing and
distributing products on an international basis and in developing localized
versions of its Web site and other systems. The Company expects to incur
significant costs in establishing international facilities and operations, in
promoting its brand internationally, in developing localized versions of its Web
site and other systems and in sourcing, marketing and distributing products in
foreign markets. There can be no assurance that the Company's international
efforts will be successful. If the revenues resulting from international
activities are inadequate to offset the expense of establishing and maintaining
foreign operations, such inadequacy could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations. In
addition, there are certain risks inherent in doing business on an international
level, such as unexpected changes in regulatory requirements, export and import
restrictions, tariffs and other trade barriers, difficulties in staffing and
managing foreign operations, longer payment cycles, political instability,
fluctuations in currency exchange rates, seasonal reductions in business
activity in other parts of the world and potentially adverse tax consequences,
any of which could adversely effect the success of the Company's international
operations. Furthermore, it is possible that governments in certain foreign
jurisdictions may have or enact legislation with respect to the Internet or
other online services
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<PAGE> 15
in such areas as content, network security, encryption or distribution that may
effect the Company's ability to conduct business abroad. There can be no
assurance that one or more of such factors would not have a material adverse
effect on the Company's future international operations and, consequently, on
the Company's business, prospects, financial condition and results of
operations.
The Company may choose to expand its operations or market presence by entering
into business combinations, investments, joint ventures or other strategic
alliances with third parties, such as the Company's recent acquisition of three
Internet companies. Any such transaction would be accompanied by risks commonly
encountered in such transactions, which could include, among others, the
difficulty of assimilating the operations, technology and personnel of the
combined companies, the potential disruption of the Company's ongoing business,
the inability to retain key technical and managerial personnel, the inability of
management to maximize the financial and strategic position of the Company
through the successful integration of acquired businesses, additional expenses
associated with amortization of acquired intangible assets, the maintenance of
uniform standards, controls and policies and the impairment of relationships
with existing employees and customers. There can be no assurance that the
Company would be successful in overcoming these risks or any other problems
encountered in connection with such business combinations, investments, joint
ventures or other strategic alliances, or that such transactions would not have
a material adverse effect on the Company's business, prospects, financial
condition and results of operations.
The Company has significant indebtedness outstanding, principally the Senior
Discount Notes (see Item 1. "Financial Stetements" - Note 3 - Subsequent Events
and " - Liquidity and Capital Resources"), capitalized lease obligations and
other equipment financing. The Company may incur substantial additional
indebtedness in the future. The level of the Company's indebtedness, among other
things, could (i) make it difficult for the Company to make payments on the
Senior Discount Notes, (ii) make it difficult for the Company to obtain any
necessary financing in the future for working capital, capital expenditures,
debt service requirements or other purposes, (iii) limit the Company's
flexibility in planning for, or reacting to changes in, its business, and (iv)
make it more vulnerable in the event of a downturn in its business. There can be
no assurance that the Company will be able to improve its earnings before fixed
charges or that the Company will be able to meet its debt service obligations,
including its obligations under the Senior Discount Notes. In the event the
Company's cash flow is inadequate to meet its obligations, the Company could
face substantial liquidity problems. If the Company is unable to generate
sufficient cash flow or otherwise obtain funds necessary to make required
payments, or if the Company otherwise fails to comply with the various covenants
in its indebtedness, it would be in default under the terms thereof, which would
permit the holders of such indebtedness to accelerate the maturity of such
indebtedness and could cause defaults under other indebtedness of the Company.
Any such default could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is subject to legal proceedings and claims in the
ordinary course of business, including claims of alleged infringement of
trademarks and other intellectual property rights. The Company currently is not
aware of any legal proceedings or claims that it believes will have,
individually or in the aggregate, a material adverse effect on the its business,
prospects, financial condition and results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Sale of Senior Discount Notes
On May 8, 1998, the Company sold $530 million aggregate principal amount at
maturity (approximately $326 million aggregate initial Accreted Value (as
defined in the Indenture referred to below)) of 10% Senior Discount Notes due
2008 (the "Senior Discount Notes"). The Senior Discount Notes mature on May 1,
2008. The Senior Discount Notes were sold at a
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<PAGE> 16
substantial discount from their principal amount at maturity. There will not be
any payment of interest on the Senior Discount Notes prior to November 1, 2003.
From and after May 1, 2003, the Senior Discount Notes will bear interest, which
will be payable in cash, at a rate of 10% per annum on each May 1 and November
1, commencing November 1, 2003.
The Senior Discount Notes will be redeemable, at the option of the Company, in
whole or in part, on or after May 1, 2003 and prior to maturity, at the
redemption prices (expressed in percentages of principal amount at maturity) set
forth below, plus accrued interest, if any, to the date of redemption, if
redeemed during the 12-month period commencing May 1 of the years set forth
below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
<S> <C>
2003 105.000%
2004 103.333
2005 101.667
2006 and thereafter 100.000
</TABLE>
At any time prior to May 1, 2001, the Company also may redeem up to 35% of the
aggregate principal amount at maturity of the Senior Discount Notes with the
proceeds of one or more sales of Capital Stock (as defined in the Indenture)
(other than Disqualified Stock (as defined in the Indenture)), at 110% of their
Accreted Value on the redemption date, plus accrued and unpaid interest, if any,
to the date of redemption; provided that after any such redemption at least 65%
of the aggregate principal amount at maturity of Senior Discount Notes
originally issued remains outstanding. In addition, at any time prior to May 1,
2003, the Company may redeem all, but not less than all, of the Senior Discount
Notes at a redemption price equal to the sum of (i) the Accreted Value on the
redemption date, plus (ii) accrued and unpaid interest, if any, to the
redemption date, plus (iii) the Applicable Premium (as defined in the
Indenture).
Upon a Change of Control (as defined in the Indenture), the Company will be
required to make an offer to purchase the Senior Discount Notes at a purchase
price equal to 101% of their Accreted Value on the date of purchase, plus
accrued interest, if any.
The Senior Discount Notes are and will be senior unsecured indebtedness of the
Company ranking pari passu with the Company's existing and future
unsubordinated, unsecured indebtedness and senior in right of payment to all
subordinated indebtedness of the Company. The Senior Discount Notes are and will
be effectively subordinated to all secured indebtedness and to all existing and
future liabilities of the Company's subsidiaries, including trade payables.
The Senior Discount Notes were issued pursuant to an Indenture dated as of
May 8, 1998 between the Company and the Bank of New York, as trustee. The
Indenture for the Senior Discount Notes contains certain covenants that, among
other things, limit the ability of the Company and its Restricted Subsidiaries
(as defined in the Indenture) to incur indebtedness, pay dividends, prepay
subordinated indebtedness, repurchase capital stock, make investments, create
liens, engage in transactions with stockholders and affiliates, sell assets and
engage in mergers and consolidations. These limitations are, however, subject
to a number of important qualifications and exceptions.
Recent Sales of Unregistered Equity Securities
The Company issued 540,066 shares of its common stock (the "Common Stock") in
connection with the acquisition of the following companies: Bookpages on April
17, 1998; Telebook on April 24, 1998; and IMDB on April 24, 1998. The form of
the transactions for Bookpages and IMDB was an exchange of the Company's Common
Stock plus, in the case of IMDB, cash for the entire issued share capital of the
acquired businesses. For Telebook, the form of the transaction was a merger,
whereby Telebook was merged into a wholly-owned subsidiary of the Company in
exchange for shares of the Company's Common Stock. No underwriters were used and
the recipients of the Company's Common Stock were the shareholders of the
acquired companies.
Twenty-one of the former shareholders of the acquired companies are non-U.S.
residents who collectively received 351,324 shares of the Company's Common
Stock. The shares were not registered under the Securities Act of 1933, as
amended (the "Securities Act") pursuant to the safe harbor contained in
Regulation S thereunder. The shares issued to non-U.S. residents were sold in
offshore transactions in accordance with the offering restrictions of Regulation
S and no directed selling efforts were made in the United States.
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Five of the former shareholders of the acquired companies are U.S. residents who
collectively received 188,742 shares of the Company's Common Stock. The shares
were not registered under the Securities Act pursuant to the exemption set forth
in Section 4(2) thereof. All U.S. residents who received shares of the Company's
Common Stock made certain representations to the Company as to investment
intent, possessed a sufficient level of financial sophistication and received or
had access to information about the Company. The shares issued in the
transactions are subject to restrictions on transfer absent registration under
the Securities Act, and no offers to sell the securities were made by any form
of general solicitation or general advertisement.
Use of Proceeds
The Company's registration statement (No. 333-23795) under the Securities Act
for its initial public offering (the "Registration Statement") became effective
on May 14, 1997. Offering proceeds, net of aggregate expenses of approximately
$4.9 million, were $49.1 million. The Company has used approximately $16.1
million of the net offering proceeds for working capital paid directly or
indirectly to third parties, approximately $9.3 million for the purchase or
installation of machinery and equipment and approximately $23.7 million for the
purchase of temporary investments consisting of cash, cash equivalents and
short-term investments. The Company has not used any of the net offering
proceeds for construction of plant, building or facilities, purchases of real
estate, acquisition of other businesses, or repayment of indebtedness. None of
the net offering proceeds were paid directly or indirectly to directors,
officers or general partners of the Company or their associates, persons owning
10% or more of any class of the Company's securities, or affiliates of the
Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
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<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
3.1 Restated Bylaws of Amazon.com, Inc.
4.1 Indenture, dated as of May 8, 1998, between Amazon.com, Inc. and
the Bank of New York, as Trustee.
4.2 Form of 10% Senior Discount Note Due 2008.
4.3 Registration Rights Agreement entered into on May 8, 1998,
between Amazon.com, Inc. and Morgan Stanley & Co. Incorporated
10.1 Lease Agreement, dated March 20, 1998, as amended on April 21,
1998, by and between Amazon.com, Inc. and Pacific NW Title
Building, Inc.
10.2 Lease Agreement, dated April 17, 1998, by and between
Amazon.com, Inc. and 1100 Second Avenue Limited Partnership.
27.1 Financial Data Schedule for the quarter ended March 31, 1998.
27.2 Financial Data Schedule, restated to show the effect of the
stock split, for the years ended December 31, 1996 and 1997,
and for the quarters ended March 31, 1997, June 30, 1997, and
September 30, 1997.
</TABLE>
(b) Reports on Form 8-K
None
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<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMAZON.COM, INC.
(REGISTRANT)
DATED: May 15, 1998
By: /s/ Joy D. Covey
-----------------
Joy D. Covey
Chief Financial Officer,
Vice President of Finance and Administration
and Secretary
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<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Title
- -------------- -------------------------------------------------------------
<S> <C>
3.1 Restated Bylaws of Amazon.com, Inc.
4.1 Indenture, dated as of May 8, 1998, between Amazon.com, Inc. and
the Bank of New York, as Trustee.
4.2 Form of 10% Senior Discount Note Due 2008.
4.3 Registration Rights Agreement entered into on May 8, 1998,
between Amazon.com, Inc. and Morgan Stanley & Co. Incorporated
10.1 Lease Agreement, dated March 20, 1998, as amended on April 21,
1998, by and between Amazon.com, Inc. and Pacific NW Title
Building, Inc.
10.2 Lease Agreement, dated April 17, 1998, by and between
Amazon.com, Inc. and 1100 Second Avenue Limited Partnership.
27.1 Financial Data Schedule for the quarter ended March 31, 1998.
27.2 Financial Data Schedule, restated to show the effect of the
stock split, for the years ended December 31, 1996 and 1997,
and for the quarters ended March 31, 1997, June 30, 1997, and
September 30, 1997.
</TABLE>
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<PAGE> 1
BYLAWS
OF
AMAZON.COM, INC.
Originally adopted on May 28, 1996
Amendments are listed on p. i
<PAGE> 2
AMAZON.COM, INC.
AMENDMENTS
<TABLE>
<CAPTION>
Date of
Section Effect of Amendment Amendment
------- ------------------- ---------
<S> <C> <C>
6.4 Add paragraph regarding Regulation S 4/24/98
</TABLE>
-i-
<PAGE> 3
CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. OFFICES ......................................................... 1
SECTION 2. STOCKHOLDERS .................................................... 1
2.1 Annual Meeting .................................................. 1
2.2 Special Meetings ................................................ 1
2.3 Place of Meeting ................................................ 1
2.4 Notice of Meeting ............................................... 2
2.5 Business for Stockholders' Meetings ............................. 2
2.5.1 Business at Annual Meetings .......................... 2
2.5.2 Business at Special Meetings ......................... 3
2.5.3 Notice to Corporation ................................ 3
2.6 Waiver of Notice ................................................ 3
2.6.1 Waiver in Writing .................................... 3
2.6.2 Waiver by Attendance ................................. 3
2.7 Fixing of Record Date for Determining Stockholders .............. 4
2.7.1 Meetings ............................................. 4
2.7.2 Consent to Corporate Action Without a Meeting ........ 4
2.7.3 Dividends, Distributions and Other Rights ............ 4
2.8 Voting List ..................................................... 5
2.9 Quorum .......................................................... 5
2.10 Manner of Acting ................................................ 5
2.11 Proxies ......................................................... 6
2.11.1 Appointment .......................................... 6
2.11.2 Delivery to Corporation; Duration .................... 6
2.12 Voting of Shares ................................................ 6
2.13 Voting for Directors ............................................ 6
2.14 Action by Stockholders Without a Meeting ........................ 7
2.15 Inspectors of Election .......................................... 7
2.15.1 Appointment .......................................... 7
2.15.2 Duties ............................................... 8
SECTION 3. BOARD OF DIRECTORS .............................................. 8
3.1 General Powers .................................................. 8
3.2 Number and Tenure ............................................... 8
3.3 Nomination and Election. ........................................ 9
3.3.1 Nomination ........................................... 9
3.3.2 Election ............................................. 10
3.4 Annual and Regular Meetings ..................................... 10
3.5 Special Meetings ................................................ 10
3.6 Meetings by Telephone ........................................... 10
</TABLE>
-i-
<PAGE> 4
<TABLE>
<S> <C> <C>
3.7 Notice of Special Meetings ...................................... 10
3.7.1 Personal Delivery .................................... 10
3.7.2 Delivery by Mail ..................................... 11
3.7.3 Delivery by Private Carrier .......................... 11
3.7.4 Facsimile Notice ..................................... 11
3.7.5 Delivery by Telegraph ................................ 11
3.7.6 Oral Notice .......................................... 11
3.8 Waiver of Notice ................................................ 11
3.8.1 In Writing ........................................... 11
3.8.2 By Attendance ........................................ 12
3.9 Quorum .......................................................... 12
3.10 Manner of Acting ................................................ 12
3.11 Presumption of Assent ........................................... 12
3.12 Action by Board or Committees Without a Meeting ................. 12
3.13 Resignation ..................................................... 12
3.14 Removal ......................................................... 13
3.15 Vacancies ....................................................... 13
3.16 Committees ...................................................... 13
3.16.1 Creation and Authority of Committees ................. 13
3.16.2 Audit Committee ...................................... 14
3.16.3 Compensation Committee ............................... 14
3.16.4 Nominating and Organization Committee ................ 14
3.16.5 Minutes of Meetings .................................. 15
3.16.6 Quorum and Manner of Acting .......................... 15
3.16.7 Resignation .......................................... 15
3.16.8 Removal .............................................. 15
3.17 Compensation .................................................... 15
SECTION 4. OFFICERS ........................................................ 16
4.1 Number .......................................................... 16
4.2 Election and Term of Office ..................................... 16
4.3 Resignation ..................................................... 16
4.4 Removal ......................................................... 16
4.5 Vacancies ....................................................... 16
4.6 Chairman of the Board ........................................... 17
4.7 Chief Executive Officer ......................................... 17
4.8 President ....................................................... 17
4.9 Vice President .................................................. 17
4.10 Secretary ....................................................... 18
4.11 Treasurer ....................................................... 18
4.12 Salaries ........................................................ 18
SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS ........................... 18
5.1 Contracts ....................................................... 18
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C>
5.2 Loans to the Corporation ........................................ 18
5.3 Checks, Drafts, Etc. ............................................ 18
5.4 Deposits ........................................................ 19
SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER ...................... 19
6.1 Issuance of Shares .............................................. 19
6.2 Certificates for Shares ......................................... 19
6.3 Stock Records ................................................... 19
6.4 Restriction on Transfer ......................................... 20
6.5 Transfer of Shares .............................................. 20
6.6 Lost or Destroyed Certificates .................................. 20
6.7 Shares of Another Corporation ................................... 21
SECTION 7. BOOKS AND RECORDS ............................................... 21
SECTION 8. ACCOUNTING YEAR ................................................. 21
SECTION 9. SEAL ............................................................ 21
SECTION 10. INDEMNIFICATION ................................................. 21
10.1 Right to Indemnification ........................................ 21
10.2 Right of Indemnitee to Bring Suit ............................... 22
10.3 Nonexclusivity of Rights ........................................ 23
10.4 Insurance, Contracts and Funding ................................ 23
10.5 Indemnification of Employees and Agents of the
Corporation ..................................................... 23
10.6 Persons Serving Other Entities .................................. 23
10.7 Procedures for the Submission of Claims ......................... 24
SECTION 11. AMENDMENTS OR REPEAL ............................................ 24
</TABLE>
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<PAGE> 6
BYLAWS
OF
AMAZON.COM, INC.
SECTION 1. OFFICES
The principal office of the corporation shall be located at its
principal place of business or such other place as the Board of Directors (the
"Board") may designate. The corporation may have such other offices, either
within or without the state of Delaware, as the Board may designate or as the
business of the corporation may require from time to time.
SECTION 2. STOCKHOLDERS
2.1 ANNUAL MEETING
The annual meeting of the stockholders shall be held the second Thursday
of May in each year at the principal office of the corporation or such other
place designated by the Board for the purpose of electing Directors and
transacting such other business as may properly come before the meeting. If the
day fixed for the annual meeting is a legal holiday at the place of the meeting,
the meeting shall be held on the next succeeding business day. If the annual
meeting is not held on the date designated therefor, the Board shall cause the
meeting to be held as soon thereafter as may be convenient. At any time prior to
the commencement of the annual meeting, the Board may postpone the annual
meeting for a period of up to 120 days from the date fixed for such meeting in
accordance with this subsection 2.1.
2.2 SPECIAL MEETINGS
The Chairman of the Board, the President, the Board or the holders of
not less than 30 percent of all the outstanding shares of the corporation
entitled to vote on any issue proposed to be considered at the meeting may call
special meetings of the stockholders for any purpose.
2.3 PLACE OF MEETING
All meetings shall be held at the principal office of the corporation or
at such other place within or without the State of Delaware designated by the
Board, by any persons entitled to call a meeting hereunder or in a waiver of
notice signed by all of the stockholders entitled to notice of the meeting.
<PAGE> 7
2.4 NOTICE OF MEETING
The Chairman of the Board, the President, the Secretary, the Board, or
stockholders calling an annual or special meeting of stockholders as provided
for herein, shall cause to be delivered to each stockholder entitled to notice
of or to vote at the meeting either personally or by mail, not less than 10 nor
more than 60 days before the meeting, written notice stating the place, day and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Upon written request by the holders of
not less than the number of outstanding shares of the corporation specified in
subsection 2.2 hereof and entitled to vote at the meeting, it shall be the duty
of the Secretary to give notice of a special meeting of stockholders to be held
on such date and at such place and hour as the Secretary may fix, not less than
10 nor more than 60 days after receipt of said request, and if the Secretary
shall neglect or refuse to issue such notice, the person making the request may
do so and may fix the date for such meeting. If such notice is mailed, it shall
be deemed delivered when deposited in the official government mail properly
addressed to the stockholder at such stockholder's address as it appears on the
stock transfer books of the corporation with postage prepaid. If the notice is
telegraphed, it shall be deemed delivered when the content of the telegram is
delivered to the telegraph company. Notice given in any other manner shall be
deemed delivered when dispatched to the stockholder's address, telephone number
or other number appearing on the stock transfer records of the corporation.
2.5 BUSINESS FOR STOCKHOLDERS' MEETINGS
2.5.1 BUSINESS AT ANNUAL MEETINGS
In addition to the election of directors, other proper business may be
transacted at an annual meeting of stockholders, provided that such business
must be properly brought before such meeting. To be properly brought before an
annual meeting, business must be (a) brought by or at the direction of the Board
or (b) brought before the meeting by a stockholder pursuant to written notice
thereof, in accordance with subsection 2.5.3 hereof, and received by the
Secretary not fewer than 60 nor more than 90 days prior to the date specified in
subsection 2.1 hereof for such annual meeting (or if less than 60 days' notice
or prior public disclosure of the date of the annual meeting is given or made to
the stockholders, not later than the tenth day following the day on which the
notice of the date of the annual meeting was mailed or such public disclosure
was made). No business shall be conducted at any annual meeting of stockholders
except in accordance with this subsection 2.5.1, unless the application of this
subsection 2.5.1 to a particular matter is waived in writing by the Board of
Directors. If the facts warrant, the Board, or the chairman of an annual meeting
of stockholders, may determine and declare that (a) a proposal does not
constitute proper business to be transacted at the meeting or (b) business was
not properly brought before the meeting in accordance with the provisions of
this subsection 2.5.1 and, if, it is so determined in either case, any such
business shall not be transacted. The procedures set forth in this subsection
2.5.1 for business to be properly
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<PAGE> 8
brought before an annual meeting by a stockholder are in addition to, and not
in lieu of, the requirements set forth in Rule 14a-8 under Section 14 of the
Securities Exchange Act of 1934, as amended, or any successor provision.
2.5.2 BUSINESS AT SPECIAL MEETINGS
At any special meeting of the stockholders, only such business as is
specified in the notice of such special meeting given by or at the direction of
the person or persons calling such meeting, in accordance with subsection 2.4
hereof, shall come before such meeting.
2.5.3 NOTICE TO CORPORATION
Any written notice required to be delivered by a stockholder to the
corporation pursuant to subsection 2.2, subsection 2.4, subsection 2.5.1 or
subsection 2.5.2 hereof must be given, either by personal delivery or by
registered or certified mail, postage prepaid, to the Secretary at the
corporation's executive offices. Any such stockholder notice shall set forth (i)
the name and address of the stockholder proposing such business; (ii) a
representation that the stockholder is entitled to vote at such meeting and a
statement of the number of shares of the corporation that are beneficially owned
by the stockholder; (iii) a representation that the stockholder intends to
appear in person or by proxy at the meeting to propose such business; and (iv)
as to each matter the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting, the language of the
proposal (if appropriate), and any material interest of the stockholder in such
business.
2.6 WAIVER OF NOTICE
2.6.1 WAIVER IN WRITING
Whenever any notice is required to be given to any stockholder under the
provisions of these Bylaws, the Certificate of Incorporation or the General
Corporation Law of the State of Delaware, as now or hereafter amended (the
"DGCL"), a waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
2.6.2 WAIVER BY ATTENDANCE
The attendance of a stockholder at a meeting shall constitute a waiver
of notice of such meeting, except when a stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
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<PAGE> 9
2.7 FIXING OF RECORD DATE FOR DETERMINING STOCKHOLDERS
2.7.1 MEETINGS
For the purpose of determining stockholders entitled to notice of and to
vote at any meeting of stockholders or any adjournment thereof, the Board may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which record date
shall not be more than 60 (or the maximum number permitted by applicable law)
nor less than 10 days before the date of such meeting. If no record date is
fixed by the Board, the record date for determining stockholders entitled to
notice of and to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of and to vote at the meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
2.7.2 CONSENT TO CORPORATE ACTION WITHOUT A MEETING
For the purpose of determining stockholders entitled to consent to
corporate action in writing without a meeting, the Board may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board, and which date shall not be more than
10 (or the maximum number permitted by applicable law) days after the date upon
which the resolution fixing the record date is adopted by the Board. If no
record date has been fixed by the Board, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board is required by Chapter 1 of the DGCL,
shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the corporation by delivery
to its registered office in the State of Delaware, its principal place of
business, or an officer or agent of the corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made to
the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board and prior action by the Board is required by Chapter 1 of the DGCL,
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of business on the day
on which the Board adopts the resolution taking such prior action.
2.7.3 DIVIDENDS, DISTRIBUTIONS AND OTHER RIGHTS
For the purpose of determining stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted, and which record
date shall be not more than 60 (or the maximum number permitted by
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<PAGE> 10
applicable law) days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board adopts the resolution relating
thereto.
2.8 VOTING LIST
At least 10 days before each meeting of stockholders, a complete list of
the stockholders entitled to vote at such meeting, or any adjournment thereof,
shall be made, arranged in alphabetical order, with the address of and number of
shares held by each stockholder. This list shall be open to examination by any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of 10 days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. This list shall also be produced and kept at such meeting for
inspection by any stockholder who is present.
2.9 QUORUM
A majority of the outstanding shares of the corporation entitled to
vote, present in person or represented by proxy at the meeting, shall constitute
a quorum at a meeting of the stockholders; provided, that where a separate vote
by a class or classes is required, a majority of the outstanding shares of such
class or classes, present in person or represented by proxy at the meeting,
shall constitute a quorum entitled to take action with respect to that vote on
that matter. If less than a majority of the outstanding shares entitled to vote
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. If a quorum is
present or represented at a reconvened meeting following such an adjournment,
any business may be transacted that might have been transacted at the meeting as
originally called. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
2.10 MANNER OF ACTING
In all matters other than the election of Directors, if a quorum is
present, the affirmative vote of the majority of the outstanding shares present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless the vote of a
greater number is required by these Bylaws, the Certificate of Incorporation or
the DGCL. Where a separate vote by a class or classes is required, if a quorum
of such class or classes is present, the affirmative vote of the majority of
outstanding shares of such class or classes present in person or represented by
proxy at the meeting shall be the act of such class or classes, unless the vote
of a greater number is required by these Bylaws, the Certificate of
Incorporation or the DGCL. Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of Directors.
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<PAGE> 11
2.11 PROXIES
2.11.1 APPOINTMENT
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by proxy. Such
authorization may be accomplished by (a) the stockholder or such stockholder's
authorized officer, director, employee or agent executing a writing or causing
his or her signature to be affixed to such writing by any reasonable means,
including facsimile signature or (b) by transmitting or authorizing the
transmission of a telegram, cablegram or other means of electronic transmission
to the intended holder of the proxy or to a proxy solicitation firm, proxy
support service or similar agent duly authorized by the intended proxy holder to
receive such transmission; provided, that any such telegram, cablegram or other
electronic transmission must either set forth or be accompanied by information
from which it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the stockholder. Any copy, facsimile
telecommunication or other reliable reproduction of the writing or transmission
by which a stockholder has authorized another person to act as proxy for such
stockholder may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
2.11.2 DELIVERY TO CORPORATION; DURATION
A proxy shall be filed with the Secretary before or at the time of the
meeting or the delivery to the corporation of the consent to corporate action in
writing. A proxy shall become invalid three years after the date of its
execution unless otherwise provided in the proxy. A proxy with respect to a
specified meeting shall entitle the holder thereof to vote at any reconvened
meeting following adjournment of such meeting but shall not be valid after the
final adjournment thereof.
2.12 VOTING OF SHARES
Each outstanding share entitled to vote with respect to the subject
matter of an issue submitted to a meeting of stockholders shall be entitled to
one vote upon each such issue.
2.13 VOTING FOR DIRECTORS
Each stockholder entitled to vote at an election of Directors may vote,
in person or by proxy, the number of shares owned by such stockholder for as
many persons as there are Directors to be elected and for whose election such
stockholder has a right to vote; provided, however, that no cumulative voting
shall be permitted in the election of Directors.
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<PAGE> 12
2.14 ACTION BY STOCKHOLDERS WITHOUT A MEETING
Subject to the following paragraph, any action that is properly brought
before the stockholders by or at the direction of the Board of Directors and
that could be taken at an annual or special meeting of stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall (a) be signed by
the holders of outstanding shares of capital stock entitled to be voted with
respect to the subject matter thereof having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted (as determined
in accordance with subsection 2.6.2 hereof) and (b) be delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the corporation having
custody of the records of proceedings of meetings of stockholders. Delivery made
to the corporation's registered office shall be by hand or by certified mail or
registered mail, return receipt requested. Every written consent shall bear the
date of signature of each stockholder who signs the consent, and no written
consent shall be effective to take the corporate action referred to therein
unless written consents signed by the requisite number of stockholders entitled
to vote with respect to the subject matter thereof are delivered to the
corporation, in the manner required by this Section 2, within 60 (or the maximum
number permitted by applicable law) days of the earliest dated consent delivered
to the corporation in the manner required by this Section 2. The validity of any
consent executed by a proxy for a stockholder pursuant to a telegram, cablegram
or other means of electronic transmission transmitted to such proxy holder by or
upon the authorization of the stockholder shall be determined by or at the
direction of the Secretary. A written record of the information upon which the
person making such determination relied shall be made and kept in the records of
the proceedings of the stockholders. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing. Any such
consent shall be inserted in the minute book as if it were the minutes of a
meeting of the stockholders.
2.15 INSPECTORS OF ELECTION
2.15.1 APPOINTMENT
In advance of any meeting of stockholders after this corporation has
become a Public Company (as defined below), the Board shall appoint one or more
persons to act as inspectors of election at such meeting and to make a written
report thereof. The Board may designate one or more persons to serve as
alternate inspectors to serve in place of any inspector who is unable or fails
to act. If no inspector or alternate is able to act at a meeting of
stockholders, the chairman of such meeting shall appoint one or more persons to
act as inspector of elections at such meeting. This corporation shall be a
"Public Company" upon the earliest of (a) a vote by the Board of Directors of
the corporation designating the corporation a Public Company, (b) when a
registration statement filed by the corporation
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<PAGE> 13
under the Securities Act of 1933, as amended, in connection with an offering of
the corporation's securities to the public first becomes effective or (c) upon
the effective date of the registration of the corporation's securities pursuant
to Section 12 of the Securities Exchange Act of 1934, as amended.
2.15.2 DUTIES
The inspectors of election shall:
(a) ascertain the number of shares of the corporation
outstanding and the voting power of each such share;
(b) determine the shares represented at the meeting and the
validity of proxies and ballots;
(c) count all votes and ballots;
(d) determine and retain for a reasonable period of time a
record of the disposition of any challenges made to any determination by
them; and
(e) certify their determination of the number of shares
represented at the meeting and their count of the votes and ballots.
The validity of any proxy or ballot shall be determined by the
inspectors of election in accordance with the applicable provisions of these
Bylaws and the DGCL as then in effect. In determining the validity of any proxy
transmitted by telegram, cablegram or other electronic transmission, the
inspectors shall record in writing the information upon which they relied in
making such determination. Each inspector of elections shall, before entering
upon the discharge of his or her duties, take and sign an oath to faithfully
execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors of election may appoint or retain
other persons or entities to assist them in the performance of their duties.
SECTION 3. BOARD OF DIRECTORS
3.1 GENERAL POWERS
The business and affairs of the corporation shall be managed by the
Board.
3.2 NUMBER AND TENURE
The Board shall be composed of not less than one nor more than nine
Directors, the specific number to be set by resolution of the Board. No decrease
in the number of Directors shall have the effect of shortening the term of any
incumbent Director. Each Director shall serve for the term he or she was
elected, or until his or her successor shall have been elected and qualified, or
until his or her death, resignation or removal from
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<PAGE> 14
office. Directors need not be stockholders of the corporation or residents of
the State of Delaware.
3.3 NOMINATION AND ELECTION.
3.3.1 NOMINATION
Only persons who are nominated in accordance with the following
procedures shall be eligible for election as Directors. Nominations for the
election of Directors may be made (a) by or at the direction of the Board or (b)
by any stockholder of record entitled to vote for the election of Directors at
such meeting; provided, however, that a stockholder may nominate persons for
election as Directors only if written notice (in accordance with subsection
2.5.3 hereof) of such stockholder's intention to make such nominations is
received by the Secretary not later than (i) with respect to an election to be
held at an annual meeting of stockholders, not fewer than 60 nor more than 90
days prior to the date specified in subsection 2.1 hereof for such annual
meeting (or if less than 60 days' notice or prior public disclosure of the date
of the annual meeting is given or made to the stockholders, not later than the
tenth day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made) and (ii) with respect to
an election to be held at a special meeting of stockholders for the election of
Directors, the close of business on the seventh business day following the date
on which notice of such meeting is first given to stockholders. Any such
stockholder's notice shall set forth (a) the name and address of the stockholder
who intends to make a nomination; (b) a representation that the stockholder is
entitled to vote at such meeting and a statement of the number of shares of the
corporation that are beneficially owned by the stockholder; (c) a representation
that the stockholder intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (d) as to each person
the stockholder proposes to nominate for election or re-election as a Director,
the name and address of such person and, if the corporation is then a Public
Company, such other information regarding such nominee as would be required in a
proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had such nominee been nominated by the Board, and a description of
any arrangements or understandings, between the stockholder and such nominee and
any other persons (including their names), pursuant to which the nomination is
to be made; and (e) the consent of each such nominee to serve as a Director if
elected. If the facts warrant, the Board, or the chairman of a stockholders'
meeting at which Directors are to be elected, may determine and declare that a
nomination was not made in accordance with the foregoing procedure and, if it is
so determined, the defective nomination shall be disregarded. The procedures set
forth in this subsection 3.3 for nomination for the election of Directors by
stockholders are in addition to, and not in limitation of, any procedures now in
effect or hereafter adopted by or at the direction of the Board or any committee
thereof.
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<PAGE> 15
3.3.2 ELECTION
At each election of Directors, the persons receiving the greatest number
of votes shall be the Directors.
3.4 ANNUAL AND REGULAR MEETINGS
An annual Board meeting shall be held without notice immediately after
and at the same place as the annual meeting of stockholders. By resolution, the
Board or any committee designated by the Board may specify the time and place
either within or without the State of Delaware for holding regular meetings
thereof without other notice than such resolution.
3.5 SPECIAL MEETINGS
Special meetings of the Board or any committee appointed by the Board
may be called by or at the request of the Chairman of the Board, the Chief
Executive Officer, the President, the Secretary or, in the case of special Board
meetings, any Director, and, in the case of any special meeting of any committee
appointed by the Board, by the Chairman thereof. The person or persons
authorized to call special meetings may fix any place either within or without
the State of Delaware as the place for holding any special meeting called by
them.
3.6 MEETINGS BY TELEPHONE
Members of the Board or any committee designated by the Board may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation by such means
shall constitute presence in person at a meeting.
3.7 NOTICE OF SPECIAL MEETINGS
Notice of a special Board or committee meeting stating the place, day
and hour of the meeting shall be given to a Director in writing or orally by
telephone or in person. Neither the business to be transacted at, nor the
purpose of, any special meeting need be specified in the notice of such meeting.
3.7.1 PERSONAL DELIVERY
If notice is given by personal delivery, the notice shall be effective
if delivered to a Director at least two days before the meeting.
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<PAGE> 16
3.7.2 DELIVERY BY MAIL
If notice is delivered by mail, the notice shall be deemed effective if
deposited in the official government mail properly addressed to a Director at
his or her address shown on the records of the corporation with postage prepaid
at least five days before the meeting.
3.7.3 DELIVERY BY PRIVATE CARRIER
If notice is given by private carrier, the notice shall be deemed
effective when dispatched to a Director at his or her address shown on the
records of the corporation at least three days before the meeting.
3.7.4 FACSIMILE NOTICE
If notice is delivered by wire or wireless equipment that transmits a
facsimile of the notice, the notice shall be deemed effective when dispatched at
least two days before the meeting to a Director at his or her telephone number
or other number appearing on the records of the corporation.
3.7.5 DELIVERY BY TELEGRAPH
If notice is delivered by telegraph, the notice shall be deemed
effective if the content thereof is delivered to the telegraph company at least
two days before the meeting for delivery to a Director at his or her address
shown on the records of the corporation.
3.7.6 ORAL NOTICE
If notice is delivered orally, by telephone or in person, the notice
shall be deemed effective if personally given to the Director at least two days
before the meeting.
3.8 WAIVER OF NOTICE
3.8.1 IN WRITING
Whenever any notice is required to be given to any Director under the
provisions of these Bylaws, the Certificate of Incorporation or the DGCL, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the Board or any
committee appointed by the Board need be specified in the waiver of notice of
such meeting.
3.8.2 BY ATTENDANCE
The attendance of a Director at a Board or committee meeting shall
constitute a waiver of notice of such meeting, except when a Director attends a
meeting for the express
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<PAGE> 17
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
3.9 QUORUM
A majority of the total number of Directors fixed by or in the manner
provided in these Bylaws or, if vacancies exist on the Board, a majority of the
total number of Directors then serving on the Board, provided, however, that
such number may be not less than one-third of the total number of Directors
fixed by or in the manner provided in these Bylaws, shall constitute a quorum
for the transaction of business at any Board meeting. If less than a majority
are present at a meeting, a majority of the Directors present may adjourn the
meeting from time to time without further notice.
3.10 MANNER OF ACTING
The act of the majority of the Directors present at a Board or committee
meeting at which there is a quorum shall be the act of the Board or committee,
unless the vote of a greater number is required by these Bylaws, the Certificate
of Incorporation or the DGCL.
3.11 PRESUMPTION OF ASSENT
A Director of the corporation present at a Board or committee meeting at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless his or her dissent is entered in the minutes of the
meeting, or unless such Director files a written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof, or
forwards such dissent by registered mail to the Secretary of the corporation
immediately after the adjournment of the meeting. A Director who voted in favor
of such action may not dissent.
3.12 ACTION BY BOARD OR COMMITTEES WITHOUT A MEETING
Any action that could be taken at a meeting of the Board or of any
committee appointed by the Board may be taken without a meeting if a written
consent setting forth the action so taken is signed by each of the Directors or
by each committee member. Any such written consent shall be inserted in the
minute book as if it were the minutes of a Board or a committee meeting.
3.13 RESIGNATION
Any Director may resign at any time by delivering written notice to the
Chairman of the Board, the Chief Executive Officer, the President, the Secretary
or the Board, or to the registered office of the corporation. Any such
resignation shall take effect at the time specified therein, or if the time is
not specified, upon delivery thereof and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
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3.14 REMOVAL
At a meeting of stockholders called expressly for that purpose, or
without a meeting pursuant to Section 2.14 of these Bylaws, one or more members
of the Board (including the entire Board) may be removed, with or without cause,
by the holders of not less than a majority of the shares entitled to elect the
Director or Directors whose removal is sought in the manner provided by these
Bylaws.
3.15 VACANCIES
Any vacancy occurring on the Board may be filled only by the affirmative
vote of a majority of the remaining Directors, whether or not they constitute a
quorum of the Board. A Director elected to fill a vacancy shall be elected for
the unexpired term of his or her predecessor in office, if any. Any directorship
to be filled by reason of an increase in the number of Directors may be filled
by the Board for a term of office continuing only until the next election of
Directors, and until his or her successor shall be elected and qualify.
3.16 COMMITTEES
3.16.1 CREATION AND AUTHORITY OF COMMITTEES
The Board may, by resolution passed by a majority of the number of
Directors fixed by or in the manner provided in these Bylaws, appoint standing
or temporary committees, each committee to consist of one or more Directors of
the corporation. The Board may designate one or more Directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board establishing
such committee or as otherwise provided in these Bylaws, shall have and may
exercise all the powers and authority of the Board in the management of the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers that require it; but no such committee
shall have the power or authority in reference to (a) amending the Certificate
of Incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board as provided in Section 151(a) of the DGCL, fix the designations,
preferences or rights of such shares to the extent permitted under Section 141
of the DGCL), (b) adopting an agreement of merger or consolidation under
Sections 251 or 252 of the DGCL, (c) recommending to the stockholders the sale,
lease or exchange or other disposition of all or substantially all of the
property and assets of the corporation, (d) recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or (e) amending
these Bylaws; and, unless expressly provided by resolution of the Board, no such
committee shall have the power or authority to declare a dividend, to authorize
the
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issuance of stock or to adopt a certificate of ownership and merger pursuant to
Section 253 of the DGCL.
3.16.2 AUDIT COMMITTEE
In addition to any committees appointed pursuant to this subsection
3.16, no later than such time as this corporation may become a Public Company
there shall be an Audit Committee, appointed annually by the Board, consisting
of at least two Directors who are not members of management. It shall be the
responsibility of the Audit Committee, if and when appointed, to review the
scope and results of the annual independent audit of books and records of the
corporation, to review compliance with all corporate policies which have been
approved by the Board and to discharge such other responsibilities as may from
time to time be assigned to it by the Board. The Audit Committee shall meet at
such times and places as the members deem advisable, and shall make such
recommendations to the Board as they consider appropriate.
3.16.3 COMPENSATION COMMITTEE
The Board may, in its discretion, designate a Compensation Committee
consisting of one or more Directors as it may from time to time determine. The
duties of the Compensation Committee shall consist of the following: (a) to
establish and review periodically, but not less than annually, the compensation
of the officers of the corporation and to make recommendations concerning such
compensation to the Board; (b) to consider incentive compensation plans for the
employees of the corporation; (c) to carry out the duties assigned to the
Compensation Committee under any stock option plan or other plan approved by the
corporation; (d) to consult with the Chief Executive Officer or the President
concerning any compensation matters deemed appropriate by the Chief Executive
Officer or the President or the Compensation Committee; and (e) to perform such
other duties as shall be assigned to the Compensation Committee by the Board.
3.16.4 NOMINATING AND ORGANIZATION COMMITTEE
The Board may, in its discretion, designate a Nominating and
Organization Committee consisting of one or more Directors as it may from time
to time determine. The duties of the Nominating and Organization Committee shall
consist of the following: (a) to report and make recommendations to the Board on
the size and composition of the Board and nominees for Directors; (b) to
evaluate the performance of the officers of the corporation and together with
management, select and recommend to the Board appropriate individuals for
election, appointment and promotion as officers of the corporation and ensure
the continuity of capable management; (c) to report and make recommendations to
the Board on the organization of the corporation; and (d) to perform such other
duties as shall be assigned to the Nominating and Organization Committee by the
Board.
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3.16.5 MINUTES OF MEETINGS
All committees so appointed shall keep regular minutes of their meetings
and shall cause them to be recorded in books kept for that purpose.
3.16.6 QUORUM AND MANNER OF ACTING
A majority of the number of Directors composing any committee of the
Board, as established and fixed by resolution of the Board, shall constitute a
quorum for the transaction of business at any meeting of such committee but, if
less than a majority are present at a meeting, a majority of such Directors
present may adjourn the meeting from time to time without further notice. The
act of a majority of the members of a committee present at a meeting at which a
quorum is present shall be the act of such committee.
3.16.7 RESIGNATION
Any member of any committee may resign at any time by delivering written
notice to the Chairman of the Board, the Chief Executive Officer, the President,
the Secretary, the Board or the Chairman of such committee. Any such resignation
shall take effect at the time specified therein or, if the time is not
specified, upon delivery thereof and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
3.16.8 REMOVAL
The Board may remove from office any member of any committee elected or
appointed by it, but only by the affirmative vote of not less than a majority of
the number of Directors fixed by or in the manner provided in these Bylaws.
3.17 COMPENSATION
By Board resolution, Directors and committee members may be paid their
expenses, if any, of attendance at each Board or committee meeting, a fixed sum
for attendance at each Board or committee meeting, or a stated salary as
Director or a committee member, or a combination of the foregoing. No such
payment shall preclude any Director or committee member from serving the
corporation in any other capacity and receiving compensation therefor.
SECTION 4. OFFICERS
4.1 NUMBER
The officers of the corporation shall be a Chief Executive Officer, a
President, a Secretary and a Treasurer, each of whom shall be elected by the
Board. One or more Vice Presidents and such other officers and assistant
officers, including a Chairman of the Board, may be elected or appointed by the
Board, such officers and assistant officers to
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hold office for such period, have such authority and perform such duties as are
provided in these Bylaws or as may be provided by resolution of the Board. Any
officer may be assigned by the Board any additional title that the Board deems
appropriate. The Board may delegate to any officer or agent the power to appoint
any such subordinate officers or agents and to prescribe their respective terms
of office, authority and duties. Any two or more offices may be held by the same
person.
4.2 ELECTION AND TERM OF OFFICE
The officers of the corporation shall be elected annually by the Board
at the Board meeting held after the annual meeting of the stockholders. If the
election of officers is not held at such meeting, such election shall be held as
soon thereafter as a Board meeting conveniently may be held. Unless an officer
dies, resigns or is removed from office, he or she shall hold office until the
next annual meeting of the Board or until his or her successor is elected.
4.3 RESIGNATION
Any officer may resign at any time by delivering written notice to the
Chairman of the Board, the Chief Executive Officer, the President, a Vice
President, the Secretary or the Board. Any such resignation shall take effect at
the time specified therein or, if the time is not specified, upon delivery
thereof and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
4.4 REMOVAL
Any officer or agent elected or appointed by the Board may be removed by
the Board whenever in its judgment the best interests of the corporation would
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
4.5 VACANCIES
A vacancy in any office because of death, resignation, removal,
disqualification, creation of a new office or any other cause may be filled by
the Board for the unexpired portion of the term, or for a new term established
by the Board.
4.6 CHAIRMAN OF THE BOARD
If elected, the Chairman of the Board shall perform such duties as shall
be assigned to him or her by the Board from time to time and shall preside over
meetings of the Board and stockholders unless another officer is appointed or
designated by the Board as chairman of such meeting.
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4.7 CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall be the chief executive officer of the
corporation, shall preside over meetings of the Board and stockholders in the
absence of a Chairman of the Board and, subject to the Board's control, shall
supervise and control all of the assets, business and affairs of the
corporation. The Chief Executive Officer may sign certificates for shares of the
corporation, deeds, mortgages, bonds, contracts or other instruments, except
when the signing and execution thereof have been expressly delegated by the
Board or by these Bylaws to some other officer or agent of the corporation or
are required by law to be otherwise signed or executed by some other officer or
in some other manner. In general, the Chief Executive Officer shall perform all
duties incident to the office of Chief Executive Officer and such other duties
as are prescribed by the Board from time to time.
4.8 PRESIDENT
In the event of the death of the Chief Executive Officer or his
inability to act, the President shall perform the duties of the Chief Executive
Officer, except as may be limited by resolution of the Board, with all the
powers of and subject to all the restrictions upon the Chief Executive Officer.
The President may sign with the Secretary or any Assistant Secretary
certificates for shares of the corporation. The President shall have, to the
extent authorized by the Chief Executive Officer or the Board, the same powers
as the Chief Executive Officer to sign deeds, mortgages, bonds, contracts or
other instruments. The President shall perform such other duties as from time to
time may be assigned to him or her by the Chief Executive Officer or the Board.
4.9 VICE PRESIDENT
In the event of the death of the President or his or her inability to
act, the Vice President (or if there is more than one Vice President, the Vice
President who was designated by the Board as the successor to the President, or
if no Vice President is so designated, the Vice President first elected to such
office) shall perform the duties of the President, except as may be limited by
resolution of the Board, with all the powers of and subject to all the
restrictions upon the President. Any Vice President may sign with the Secretary
or any Assistant Secretary certificates for shares of the corporation. Vice
Presidents shall have, to the extent authorized by the President or the Board,
the same powers as the President to sign deeds, mortgages, bonds, contracts or
other instruments. Vice Presidents shall perform such other duties as from time
to time may be assigned to them by the President or the Board.
4.10 SECRETARY
The Secretary shall be responsible for preparation of minutes of
meetings of the Board and stockholders, maintenance of the corporation's records
and stock registers, and authentication of the corporation's records and shall
in general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him
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or her by the President or the Board. In the absence of the Secretary, an
Assistant Secretary may perform the duties of the Secretary.
4.11 TREASURER
The Treasurer shall have charge and custody of and be responsible for
all funds and securities of the corporation; receive and give receipts for
moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in banks, trust companies
or other depositories selected in accordance with the provisions of these
Bylaws; sign certificates for shares of the corporation; and in general perform
all of the duties incident to the office of Treasurer and such other duties as
from time to time may be assigned to him or her by the President or by the
Board. In the absence of the Treasurer, an Assistant Treasurer may perform the
duties of the Treasurer.
4.12 SALARIES
The salaries of the officers shall be fixed from time to time by the
Board or by any person or persons to whom the Board has delegated such
authority. No officer shall be prevented from receiving such salary by reason of
the fact that he or she is also a Director of the corporation.
SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.1 CONTRACTS
The Board may authorize any officer or officers, or agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation. Such authority may be general or confined to
specific instances.
5.2 LOANS TO THE CORPORATION
No loans for borrowed money shall be contracted on behalf of the
corporation and no evidences of indebtedness for borrowed money shall be issued
in its name unless authorized by a resolution of the Board. Such authority may
be general or confined to specific instances.
5.3 CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation shall be
signed by such officer or officers, or agent or agents, of the corporation and
in such manner as is from time to time determined by resolution of the Board.
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5.4 DEPOSITS
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositories as the Board may select.
SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 ISSUANCE OF SHARES
No shares of the corporation shall be issued unless authorized by the
Board, which authorization shall include the maximum number of shares to be
issued and the consideration to be received for each share.
6.2 CERTIFICATES FOR SHARES
Certificates representing shares of the corporation shall be signed by
the Chief Executive Officer or the President, or a Vice President, and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary,
any of whose signatures may be a facsimile. The Board may in its discretion
appoint responsible banks, trust companies or other professionals from time to
time to act as transfer agents and registrars of the stock of the corporation;
and, when such appointments shall have been made, no stock certificate shall be
valid until countersigned by one of such transfer agents and registered by one
of such registrars. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if such person was such officer, transfer agent or registrar at the date of
issue. All certificates shall include on their face written notice of any
restrictions that may be imposed on the transferability of such shares and shall
be consecutively numbered or otherwise identified.
6.3 STOCK RECORDS
The stock transfer books shall be kept at the registered office or
principal place of business of the corporation or at the office of the
corporation's transfer agent or registrar. The name and address of each person
to whom certificates for shares are issued, together with the class and number
of shares represented by each such certificate and the date of issue thereof,
shall be entered on the stock transfer books of the corporation. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
6.4 RESTRICTION ON TRANSFER
Except to the extent that the corporation has obtained an opinion of
counsel acceptable to the corporation that transfer restrictions are not
required under applicable
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securities laws, or has otherwise satisfied itself that such transfer
restrictions are not required, all certificates representing shares of the
corporation shall bear a legend on the face of the certificate, or on the
reverse of the certificate if a reference to the legend is contained on the
face, that reads substantially as follows:
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933 or any applicable state law, and no
interest therein may be sold, distributed, assigned, offered, pledged or
otherwise transferred unless (a) there is an effective registration
statement under such Act and applicable state securities laws covering
any such transaction involving said securities or (b) this corporation
receives an opinion of legal counsel for the holder of these securities
(concurred in by legal counsel for this corporation) stating that such
transaction is exempt from registration or this corporation otherwise
satisfies itself that such transaction is exempt from registration.
Neither the offering of the securities nor any offering materials have
been reviewed by any administrator under the Securities Act of 1933 or
any applicable state law."
[AMENDMENT ADOPTED BY THE BOARD ON APRIL 24, 1998] If any securities of
the corporation are issued pursuant to Regulation S ("Regulation S") of the
Securities Act of 1933, as amended (the "1933 Act"), the corporation will refuse
to register any subsequent transfer of such securities if such transfer is not
made in accordance with Regulation S, pursuant to registration under the 1933
Act or pursuant to an available exemption from registration under the 1933 Act.
6.5 TRANSFER OF SHARES
The transfer of shares of the corporation shall be made only on the
stock transfer books of the corporation pursuant to authorization or document of
transfer made by the holder of record thereof or by his or her legal
representative, who shall furnish proper evidence of authority to transfer, or
by his or her attorney-in-fact authorized by power of attorney duly executed and
filed with the Secretary of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificates for a like number of shares shall have been
surrendered and canceled.
6.6 LOST OR DESTROYED CERTIFICATES
In the case of a lost, destroyed or mutilated certificate, a new
certificate may be issued therefor upon such terms and indemnity to the
corporation as the Board may prescribe.
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6.7 SHARES OF ANOTHER CORPORATION
Shares owned by the corporation in another corporation, domestic or
foreign, may be voted by such officer, agent or proxy as the Board may determine
or, in the absence of such determination, by the Chief Executive Officer, the
President or any Vice President of the corporation.
SECTION 7. BOOKS AND RECORDS
The corporation shall keep correct and complete books and records of
account, stock transfer books, minutes of the proceedings of its stockholders
and Board and such other records as may be necessary or advisable.
SECTION 8. ACCOUNTING YEAR
The accounting year of the corporation shall be the calendar year,
provided that if a different accounting year is at any time selected for
purposes of federal income taxes, the accounting year shall be the year so
selected.
SECTION 9. SEAL
The seal of the corporation, if any, shall consist of the name of the
corporation, the state of its incorporation and the year of its incorporation.
SECTION 10. INDEMNIFICATION
10.1 RIGHT TO INDEMNIFICATION
Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved (including, without limitation, as a witness)
in any actual or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she is or was a Director or officer of the corporation or that,
being or having been such a Director or officer of the corporation, he or she is
or was serving at the request of the corporation as a Director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan (hereinafter an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as such a Director or officer or in any
other capacity while serving as such a Director or officer, shall be indemnified
and held harmless by the corporation to the full extent permitted by the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the corporation to provide broader indemnification rights than
permitted prior thereto), or by other applicable law as then in effect, against
all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid in settlement) actually and
reasonably incurred or suffered by
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such indemnitee in connection therewith and such indemnification shall continue
as to an indemnitee who has ceased to be a Director or officer and shall inure
to the benefit of the indemnitee's heirs, executors and administrators;
provided, however, that except as provided in subsection 10.2 hereof with
respect to proceedings seeking to enforce rights to indemnification, the
corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized or ratified by the Board. The right to indemnification
conferred in this subsection 10.1 shall be a contract right and shall include
the right to be paid by the corporation the expenses incurred in defending any
such proceeding in advance of its final disposition (hereinafter an "advancement
of expenses"); provided, however, that if the DGCL requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a Director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that such indemnitee is
not entitled to be indemnified for such expenses under this subsection 10.1 or
otherwise.
10.2 RIGHT OF INDEMNITEE TO BRING SUIT
If a claim under subsection 10.1 hereof is not paid in full by the
corporation within 60 days after a written claim has been received by the
corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, the indemnitee may at any
time thereafter bring suit against the corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. The indemnitee shall be presumed
to be entitled to indemnification under this Section 10 upon submission of a
written claim (and, in an action brought to enforce a claim for an advancement
of expenses, where the required undertaking, if any is required, has been
tendered to the corporation), and thereafter the corporation shall have the
burden of proof to overcome the presumption that the indemnitee is not so
entitled. Neither the failure of the corporation (including its Board,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances nor an actual determination by the corporation
(including its Board, independent legal counsel or its stockholders) that the
indemnitee is not entitled to indemnification shall be a defense to the suit or
create a presumption that the indemnitee is not so entitled.
10.3 NONEXCLUSIVITY OF RIGHTS
The rights to indemnification and to the advancement of expenses
conferred in this Section 10 shall not be exclusive of any other right that any
person may have or hereafter
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acquire under any statute, agreement, vote of stockholders or disinterested
Directors, provisions of the Certificate of Incorporation or Bylaws of the
corporation or otherwise. Notwithstanding any amendment to or repeal of this
Section 10, any indemnitee shall be entitled to indemnification in accordance
with the provisions hereof with respect to any acts or omissions of such
indemnitee occurring prior to such amendment or repeal.
10.4 INSURANCE, CONTRACTS AND FUNDING
The corporation may maintain insurance, at its expense, to protect
itself and any Director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the corporation would
have the power to indemnify such person against such expense, liability or loss
under the DGCL. The corporation, without further stockholder approval, may enter
into contracts with any Director, officer, employee or agent in furtherance of
the provisions of this Section 10 and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Section 10.
10.5 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION
The corporation may, by action of the Board, grant rights to
indemnification and advancement of expenses to employees or agents or groups of
employees or agents of the corporation with the same scope and effect as the
provisions of this Section 10 with respect to the indemnification and
advancement of expenses of Directors and officers of the corporation; provided,
however, that an undertaking shall be made by an employee or agent only if
required by the Board.
10.6 PERSONS SERVING OTHER ENTITIES
Any person who is or was a Director or officer of the corporation who is
or was serving (a) as a Director or officer of another corporation of which a
majority of the shares entitled to vote in the election of its Directors is held
by the corporation or (b) in an executive or management capacity in a
partnership, joint venture, trust or other enterprise of which the corporation
or a wholly owned subsidiary of the corporation is a general partner or has a
majority ownership shall be deemed to be so serving at the request of the
corporation and entitled to indemnification and advancement of expenses under
subsection 10.1 hereof.
10.7 PROCEDURES FOR THE SUBMISSION OF CLAIMS
The Board may establish reasonable procedures for the submission of
claims for indemnification pursuant to this Section 10, determination of the
entitlement of any person thereto and review of any such determination. Such
procedures shall be set forth in an appendix to these Bylaws and shall be deemed
for all purposes to be a part hereof.
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SECTION 11. AMENDMENTS OR REPEAL
The Board of Directors shall have the power to adopt, amend or repeal
the Bylaws of this corporation; provided, however, the Board of Directors may
not repeal or amend any bylaw that the stockholders have expressly provided may
not be amended or repealed by the Board of Directors. The stockholders shall
also have the power to adopt, amend or repeal the Bylaws of this corporation.
Notwithstanding any amendment to Section 10 hereof or repeal of these
Bylaws, or of any amendment or repeal of any of the procedures that may be
established by the Board pursuant to Section 10 hereof, any indemnitee shall be
entitled to indemnification in accordance with the provisions hereof and thereof
with respect to any acts or omissions of such indemnitee occurring prior to such
amendment or repeal.
The foregoing Bylaws were adopted by the Board of Directors on May 28,
1996 and amended by the Board on April 24, 1998.
/s/ Jeffrey P. Bezos /s/
---------------------------
Jeffrey P. Bezos, Secretary
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<PAGE> 1
EXECUTION COPY
AMAZON.COM, INC.,
AS ISSUER
AND
THE BANK OF NEW YORK,
AS TRUSTEE
INDENTURE
DATED AS OF MAY 8, 1998
10% SENIOR DISCOUNT NOTES DUE 2008
<PAGE> 2
CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 - DEFINITIONS AND INCORPORATION BY REFERENCE ............................ 2
SECTION 1.01 Definitions .................................................. 2
SECTION 1.02 Incorporation by Reference of Trust Indenture Act ............ 25
SECTION 1.03 Rules of Construction ........................................ 25
ARTICLE 2 - THE NOTES ............................................................. 26
SECTION 2.01 Form and Dating .............................................. 26
SECTION 2.02 Restrictive Legends .......................................... 27
SECTION 2.03 Execution, Authentication and Denominations .................. 29
SECTION 2.04 Registrar and Paying Agent ................................... 30
SECTION 2.05 Paying Agent to Hold Money in Trust .......................... 31
SECTION 2.06 Transfer and Exchange ........................................ 31
SECTION 2.07 Book-Entry Provisions for Global Notes ....................... 32
SECTION 2.08 Special Transfer Provisions .................................. 34
SECTION 2.09 Replacement Notes ............................................ 37
SECTION 2.10 Outstanding Notes ............................................ 38
SECTION 2.11 Temporary Notes .............................................. 38
SECTION 2.12 Cancellation ................................................. 39
SECTION 2.13 CUSIP Numbers ................................................ 39
SECTION 2.14 Defaulted Interest ........................................... 39
SECTION 2.15 Issuance of Additional Notes ................................. 40
ARTICLE 3 - REDEMPTION ............................................................ 40
SECTION 3.01 Right of Redemption .......................................... 40
SECTION 3.02 Notices to Trustee ........................................... 41
SECTION 3.03 Selection of Notes to Be Redeemed ............................ 41
SECTION 3.04 Notice of Redemption ......................................... 41
SECTION 3.05 Effect of Notice of Redemption ............................... 43
SECTION 3.06 Deposit of Redemption Price .................................. 43
SECTION 3.07 Payment of Notes Called for Redemption ....................... 43
SECTION 3.08 Notes Redeemed in Part ....................................... 43
ARTICLE 4 - COVENANTS ............................................................. 44
SECTION 4.01 Payment of Notes ............................................. 44
SECTION 4.02 Maintenance of Office or Agency .............................. 44
SECTION 4.03 Limitation on Indebtedness ................................... 45
</TABLE>
-ii-
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.04 Limitation on Restricted Payments ............................ 48
SECTION 4.05 Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries .................................. 52
SECTION 4.06 Limitation on the Issuance and Sale of Capital Stock
of Restricted Subsidiaries ......................................... 53
SECTION 4.07 Limitation on Issuances of Guarantees by Restricted
Group Members ...................................................... 54
SECTION 4.08 Limitation on Transactions with Shareholders and
Affiliates ......................................................... 54
SECTION 4.09 Limitation on Liens .......................................... 55
SECTION 4.10 Limitation on Asset Sales .................................... 56
SECTION 4.11 Repurchase of Notes upon a Change of Control ................. 57
SECTION 4.12 Existence .................................................... 57
SECTION 4.13 Payment of Taxes and Other Claims ............................ 58
SECTION 4.14 Maintenance of Properties and Insurance ...................... 58
SECTION 4.15 Notice of Defaults ........................................... 59
SECTION 4.16 Compliance Certificates ...................................... 59
SECTION 4.17 Commission Reports and Reports to Holders .................... 60
SECTION 4.18 Waiver of Stay, Extension or Usury Laws ...................... 60
SECTION 4.19 Limitation on Sale-Leaseback Transactions .................... 61
SECTION 4.20 Calculation of Original Issue Discount ....................... 61
ARTICLE 5 - SUCCESSOR CORPORATION ................................................. 61
SECTION 5.01 When Company May Merge, Etc. ................................. 61
SECTION 5.02 Successor Substituted ........................................ 63
ARTICLE 6 - DEFAULT AND REMEDIES .................................................. 63
SECTION 6.01 Events of Default ............................................ 63
SECTION 6.02 Acceleration ................................................. 64
SECTION 6.03 Other Remedies ............................................... 65
SECTION 6.04 Waiver of Past Defaults ...................................... 66
SECTION 6.05 Control by Majority .......................................... 66
SECTION 6.06 Limitation on Suits .......................................... 66
SECTION 6.07 Rights of Holders to Receive Payment ......................... 67
SECTION 6.08 Collection Suit by Trustee ................................... 67
SECTION 6.09 Trustee May File Proofs of Claim ............................. 68
SECTION 6.10 Priorities ................................................... 68
SECTION 6.11 Undertaking for Costs ........................................ 69
SECTION 6.12 Restoration of Rights and Remedies ........................... 69
SECTION 6.13 Rights and Remedies Cumulative ............................... 69
SECTION 6.14 Delay or Omission Not Waiver ................................. 69
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 7 - TRUSTEE ............................................................... 70
SECTION 7.01 General ...................................................... 70
SECTION 7.02 Certain Rights of Trustee .................................... 70
SECTION 7.03 Individual Rights of Trustee ................................. 71
SECTION 7.04 Trustee's Disclaimer ......................................... 72
SECTION 7.05 Notice of Default ............................................ 72
SECTION 7.06 Reports by Trustee to Holders ................................ 72
SECTION 7.07 Compensation and Indemnity ................................... 72
SECTION 7.08 Replacement of Trustee ....................................... 73
SECTION 7.09 Successor Trustee by Merger, Etc. ............................ 74
SECTION 7.10 Eligibility .................................................. 74
SECTION 7.11 Money Held in Trust .......................................... 74
SECTION 7.12 Withholding Taxes ............................................ 75
SECTION 7.13 Trustee's Application for Instructions from the
Company ............................................................ 75
ARTICLE 8 - DISCHARGE OF INDENTURE ................................................ 75
SECTION 8.01 Termination of Company's Obligations ......................... 75
SECTION 8.02 Defeasance and Discharge of Indenture ........................ 76
SECTION 8.03 Defeasance of Certain Obligations ............................ 79
SECTION 8.04 Application of Trust Money; Miscellaneous .................... 81
SECTION 8.05 Repayment to Company ......................................... 81
SECTION 8.06 Reinstatement ................................................ 82
SECTION 8.07 Defeasance and Certain Other Events of Default ............... 82
ARTICLE 9 - AMENDMENTS, SUPPLEMENTS AND WAIVERS ................................... 82
SECTION 9.01 Without Consent of Holders ................................... 82
SECTION 9.02 With Consent of Holders ...................................... 83
SECTION 9.03 Revocation and Effect of Consent ............................. 84
SECTION 9.04 Notation on or Exchange of Notes ............................. 85
SECTION 9.05 Trustee to Sign Amendments, Etc. ............................. 85
SECTION 9.06 Conformity with Trust Indenture Act .......................... 85
ARTICLE 10 - MISCELLANEOUS ........................................................ 86
SECTION 10.01 Trust Indenture Act of 1939 ................................. 86
SECTION 10.02 Notices ..................................................... 86
SECTION 10.03 Certificate and Opinion as to Conditions Precedent .......... 87
SECTION 10.04 Statements Required in Certificate or Opinion ............... 87
SECTION 10.05 Rules by Trustee, Paying Agent or Registrar ................. 88
SECTION 10.06 Payment Date Other Than a Business Day ...................... 88
</TABLE>
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<TABLE>
<S> <C>
SECTION 10.07 Governing Law ............................................... 88
SECTION 10.08 No Adverse Interpretation of Other Agreements ............... 88
SECTION 10.09 No Recourse Against Others .................................. 88
SECTION 10.10 Successors .................................................. 89
SECTION 10.11 Duplicate Originals ......................................... 89
SECTION 10.12 Separability ................................................ 89
SECTION 10.13 Table of Contents, Headings, Etc. ........................... 89
</TABLE>
EXHIBITS:
EXHIBIT A Form of Note
EXHIBIT B Form of Certificate
EXHIBIT C Form of Certificate to Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors
EXHIBIT D Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S D-1
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<PAGE> 6
INDENTURE, dated as of May 8, 1998, between AMAZON.COM, INC., a Delaware
corporation (the "Company"), and THE BANK OF NEW YORK, a New York banking
corporation (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance initially of up to $530,000,000 aggregate
principal amount at maturity of the Company's 10% Senior Discount Notes due 2008
(the "Notes") issuable as provided in this Indenture. The Notes will become
freely transferable upon the consummation of an exchange offer for the Notes or
upon the effectiveness of a shelf registration statement with respect to the
Notes. All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done, and the Company has done
all things necessary to make the Notes, when executed by the Company and
authenticated and delivered by the Trustee hereunder and duly issued by the
Company, the valid obligations of the Company as hereinafter provided.
This Indenture is subject to, and shall be governed by, the provisions
of the Trust Indenture Act of 1939, as amended, that are required to be a part
of and to govern indentures qualified under the Trust Indenture Act of 1939, as
amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders, as follows.
ARTICLE 1 - DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS
"Accreted Value" means, for any Specified Date, the amount provided
below for each $1,000 principal amount at maturity of Notes:
(i) if the Specified Date occurs on one of the following dates
(each, a "Semiannual Accrual Date"), the Accreted Value shall equal the amount
set forth below for such Semiannual Accrual Date:
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<TABLE>
<CAPTION>
SEMIANNUAL ACCRUAL DATE ACCRETED VALUE
- ---------------------------------------------
<S> <C>
November 1, 1998 $ 644.60
May 1, 1999 $ 676.83
November 1, 1999 $ 710.68
May 1, 2000 $ 746.21
November 1, 2000 $ 783.52
May 1, 2001 $ 822.70
November 1, 2001 $ 863.83
May 1, 2002 $ 907.02
November 1, 2002 $ 952.38
May 1, 2003 $1,000.00
</TABLE>
(ii) if the Specified Date occurs before the first Semiannual
Accrual Date, the Accreted Value shall equal the sum of (a) $615.07 and (b) an
amount equal to the product of (1) the Accreted Value for the first Semiannual
Accrual Date less $615.07 multiplied by (2) a fraction, the numerator of which
is the number of days from the Closing Date to the Specified Date, using a
360-day year of twelve 30-day months, and the denominator of which is the number
of days from the Closing Date to the first Semiannual Accrual Date, using a
360-day year of twelve 30-day months;
(iii) if the Specified Date occurs between two Semiannual Accrual
Dates, the Accreted Value shall equal the sum of (a) the Accreted Value for the
Semiannual Accrual Date immediately preceding such Specified Date and (b) an
amount equal to the product of (1) the Accreted Value for the immediately
following Semiannual Accrual Date less the Accreted Value for the immediately
preceding Semiannual Accrual Date multiplied by (2) a fraction, the numerator of
which is the number of days from the immediately preceding Semiannual Accrual
Date to the Specified Date, using a 360-day year of twelve 30-day months, and
the denominator of which is 180; or
(iv) if the Specified Date occurs after the last Semiannual
Accrual Date, the Accreted Value shall equal $1,000.
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Restricted Subsidiary or assumed in connection with
an Asset Acquisition and not Incurred in connection with, or in anticipation of,
such Person becoming a Restricted Subsidiary or such Asset Acquisition.
"Adjusted Consolidated Net Income" means, for any period, the aggregate
net income (or loss) of the Company and its Subsidiaries for such period
determined in conformity with GAAP; provided that the following items shall be
excluded in computing Adjusted Consolidated Net Income (without duplication):
(i) the net income (or loss) of any Person that is not a Restricted Subsidiary,
except to the extent of the amount of dividends or other distributions actually
paid to the Company or any of its Restricted Subsidiaries by such Person during
such period; (ii) solely for the
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<PAGE> 8
purposes of calculating the amount of Restricted Payments that may be made
pursuant to clause (C) of the first paragraph of Section 4.04 (and, in such
case, except to the extent includable pursuant to clause (i) above), the net
income (or loss) of any Person accrued prior to the date it becomes a Restricted
Subsidiary or is merged into or consolidated with the Company or any of its
Restricted Subsidiaries or all or substantially all of the property and assets
of such Person are acquired by the Company or any of its Restricted
Subsidiaries; (iii) the net income of any Restricted Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by the
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Restricted Subsidiary; provided that, for the purpose of determining whether a
Restricted Subsidiary may Incur Indebtedness under the first paragraph of
Section 4.03(a) only, the total net income of such Restricted Subsidiary shall
be included; (iv) any gains or losses (on an after-tax basis) attributable to
Asset Sales; (v) except for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
Section 4.04, any amount paid or accrued as dividends on Preferred Stock of the
Company or any Restricted Subsidiary owned by Persons other than the Company and
any of its Restricted Subsidiaries; (vi) all extraordinary gains and
extraordinary losses; and (vii) any compensation expense paid or payable solely
with Capital Stock (other than Disqualified Stock) of the Company or any
options, warrants or other rights to acquire Capital Stock (other than
Disqualified Stock) of the Company.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most recent quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the SEC.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to
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<PAGE> 9
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Paying Agent, authenticating agent or
co-Registrar.
"Agent Members" has the meaning provided in Section 2.07(a).
"Applicable Premium" means, with respect to a Note at any Redemption
Date, the greater of (i) 1.0% of the Accreted Value of such Note on such
Redemption Date and (ii) the excess of (A) the present value at such Redemption
Date of the redemption price of such Note on May 1, 2003, computed using a
discount rate equal to the Treasury Rate plus 50 basis points, over (B) the
Accreted Value of such Note on such Redemption Date. Calculation of the
Applicable Premium shall be made by the Company or on behalf of the Company by
such Person as the Company shall designate; provided that such calculation shall
not be a duty or obligation of the Trustee.
"Asset Acquisition" means (i) an investment by the Company or any of its
Restricted Subsidiaries in any other Person or the acquisition of Capital Stock
of any other Person, in each case pursuant to which such Person shall become a
Restricted Subsidiary or shall be merged into or consolidated with the Company
or any of its Restricted Subsidiaries; provided that such Person's business or
the business or assets acquired are related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
investment or (ii) an acquisition by the Company or any of its Restricted
Subsidiaries of the property and assets of any Person other than the Company or
any of its Restricted Subsidiaries that constitute substantially all of a
division or line of business of such Person; provided that the property and
assets acquired are related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the Company
or any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transaction) in one transaction
or a series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the
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<PAGE> 10
property and assets of an operating unit or business of the Company or any of
its Restricted Subsidiaries or (iii) any other property and assets (other than
the Capital Stock or other Investment in an Unrestricted Subsidiary) of the
Company or any of its Restricted Subsidiaries outside the ordinary course of
business of the Company or such Restricted Subsidiary and, in each case, that is
not governed by the provisions of this Indenture applicable to mergers,
consolidations and sales of all or substantially all of the assets of the
Company; provided that "Asset Sale" shall not include (a) sales or other
dispositions of inventory, receivables and other current assets, (b) sales,
transfers or other dispositions of assets constituting a Restricted Payment
permitted to be made under Section 4.04, (c) sales, transfers or other
dispositions of assets with a fair market value (as certified in an Officers'
Certificate) not in excess of $10.0 million in any transaction or series of
related transactions, (d) sales, transfers or other dispositions of obsolete or
damaged assets, (e) sales of Capital Stock of a New Business Subsidiary if the
proceeds therefrom are used in the business of such New Business Subsidiary or
(f) sales or other dispositions of assets for consideration at least equal to
the fair market value of the assets sold or disposed of, to the extent that the
consideration received consists of (x) property or assets (other than current
assets) of a nature or type or that are used in a business (or Capital Stock or
Indebtedness of a company having property or assets of a nature or type or used
in a business) similar or related to the nature or type of the property and
assets of, or business of, the Company and its Restricted Subsidiaries existing
on the date of such sale or other disposition or (y) Capital Stock or
Indebtedness of the Person to whom such assets are sold or disposed.
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Board of Directors" means the Board of Directors of the Company or any
committee of such Board of Directors duly authorized to act under this
Indenture.
"Board Resolution" means a copy of a resolution, certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the principal
Corporate Trust Office of the Trustee, are authorized by law to close.
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<PAGE> 11
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or nonvoting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of
the rental obligations under a Capitalized Lease.
"Change of Control" means such time as (i) a "person" or "group" (within
the meaning of Section 13(d) or 14(d)(2) under the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 50% of the total voting power of the Voting Stock of the Company on a
fully diluted basis and such ownership represents a greater percentage of the
total voting power of the Voting Stock of the Company, on a fully diluted basis,
than is beneficially owned by the Existing Stockholders on such date; or (ii)
individuals who on the Closing Date constitute the Board of Directors (together
with any new directors whose election by the Board of Directors or whose
nomination by the Board of Directors for election by the Company's stockholders
was approved by a vote of at least a majority of the members of the Board of
Directors then in office who either were members of the Board of Directors on
the Closing Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of the
Board of Directors then in office.
"Closing Date" means the date on which the Notes are originally issued
under this Indenture.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or nonvoting) of such Person's equity, other than Preferred Stock of such
Person, whether outstanding on the Closing Date or issued thereafter, including,
without limitation, all series and classes of such common stock.
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"Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces it pursuant to Article Five of this
Indenture and thereafter means the successor.
"Company Order" means a written request or order signed in the name of
the Company (i) by its Chairman, a Vice Chairman, its President or a Vice
President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary and delivered to the Trustee; provided, however, that such
written request or order may be signed by any two of the officers or directors
listed in clause (i) above in lieu of being signed by one of such officers or
directors listed in such clause (i) and one of the officers listed in clause
(ii) above.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest
Expense, (ii) income taxes (other than income taxes (either positive or
negative) attributable to extraordinary and nonrecurring gains or losses or
sales of assets), (iii) depreciation expense, (iv) amortization expense and (v)
all other noncash items reducing Adjusted Consolidated Net Income (other than
items that will require cash payments and for which an accrual or reserve is, or
is required by GAAP to be, made), less all noncash items increasing Adjusted
Consolidated Net Income, all as determined on a consolidated basis for the
Company and its Restricted Subsidiaries in conformity with GAAP; provided that,
if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to (A) the amount of the Adjusted
Consolidated Net Income attributable to such Restricted Subsidiary multiplied by
(B) the percentage ownership interest in the income of such Restricted
Subsidiary not owned on the last day of such period by the Company or any of its
Restricted Subsidiaries.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; and the net costs associated with Interest Rate Agreements),
Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries and all but the principal component of rentals in
respect of Capitalized Lease Obligations, in each case paid, accrued or
scheduled to be paid or to be accrued by the Company and its Restricted
Subsidiaries during such period; excluding, however, (i) any amount of such
interest of any
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<PAGE> 13
Restricted Subsidiary if the net income of such Restricted Subsidiary is
excluded in the calculation of Adjusted Consolidated Net Income pursuant to
clause (iii) of the definition thereof (but only in the same proportion as the
net income of such Restricted Subsidiary is excluded from the calculation of
Adjusted Consolidated Net Income pursuant to clause (iii) of the definition
thereof); and (ii) any premiums, fees and expenses (and any amortization
thereof) payable in connection with the offering of the Notes, all as determined
on a consolidated basis (without taking into account Unrestricted Subsidiaries)
in conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio
of (i) the aggregate amount of Indebtedness of the Company and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) the aggregate amount of Consolidated EBITDA for the then most recent four
fiscal quarters for which financial statements of the Company have been filed
with the SEC (such four-fiscal-quarter-period being the "Four-Quarter Period");
provided that, in making the foregoing calculation, (A) pro forma effect shall
be given to any Indebtedness that is to be Incurred or repaid on the Transaction
Date; (B) pro forma effect shall be given to Asset Dispositions and Asset
Acquisitions (including giving pro forma effect to the application of proceeds
of any Asset Disposition) that occur during the period beginning on the first
day of the Four-Quarter Period and ending on the Transaction Date (the
"Reference Period"), as if they had occurred and such proceeds had been applied
on the first day of such Reference Period; and (C) pro forma effect shall be
given to asset dispositions and asset acquisitions (including giving pro forma
effect to the application of proceeds of any asset disposition) that have been
made by any Person that has become a Restricted Subsidiary or has been merged
with or into the Company or any Restricted Subsidiary during such Reference
Period and that would have constituted Asset Dispositions or Asset Acquisitions
had such transactions occurred when such Person was a Restricted Subsidiary as
if such asset dispositions or asset acquisitions were Asset Dispositions or
Asset Acquisitions that occurred on the first day of such Reference Period;
provided that to the extent that clause (B) or (C) of this sentence requires
that pro forma effect be given to an Asset Acquisition or Asset Disposition,
such pro forma calculation shall be based upon the four full fiscal quarters
immediately preceding the Transaction Date and for which financial information
is available of the Person, or division or line of business of the Person, that
is acquired or disposed of.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attention: Corporate Trust Trustee Administration.
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<PAGE> 14
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Depositary" shall mean The Depository Trust Company, its nominees, and
their respective successors.
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in Sections 4.10 and 4.11 and such
Capital Stock, or the agreements or instruments governing the redemption rights
thereof, specifically provides that such Person will not repurchase or redeem
any such stock pursuant to such provision prior to the Company's repurchase of
such Notes as are required to be repurchased pursuant to Sections 4.10 and 4.11.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.10.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means any securities of the Company containing terms
identical to the Notes (except that such Exchange Notes shall be registered
under the Securities Act) that are issued and exchanged for the Notes pursuant
to the Registration Rights Agreement and this Indenture.
"Existing Stockholders" means Jeffrey P. Bezos, members of his immediate
family and their transferees by will or intestacy, trusts for the benefit of any
of them or any of their lineal descendants and any of their estates; L. John
Doerr; Kleiner Perkins Caufield & Byers; and any Affiliate of any of the
foregoing.
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"Fair market value" means the price that would be paid in an
arm's-length transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer under no compulsion to buy,
as determined in good faith by the Board of Directors, whose determination shall
be conclusive if evidenced by a Board Resolution; provided that, for purposes of
clause (vii) of the second paragraph of Section 4.03(a), (x) the fair market
value of any security registered under the Exchange Act shall be the average of
the closing prices, regular way, of such security for the 20 consecutive trading
days immediately preceding the sale of Capital Stock and (y) in the event the
aggregate fair market value of any other property (other than cash or cash
equivalents) received by the Company exceeds (i) $10.0 million, the fair market
value of such property shall be determined by the directors of the Company who
are not officers or employees of the Company, whose determination shall be
conclusive and evidenced by a Board Resolution and (ii) $100.0 million, the fair
market value of such property shall be determined by a nationally recognized
accounting or investment banking firm and set forth in their written opinion
which shall be delivered to the Trustee.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession. All ratios and computations contained or referred
to in this Indenture shall be computed in conformity with GAAP applied on a
consistent basis, except that calculations made for purposes of determining
compliance with the terms of the covenants and with other provisions of this
Indenture shall be made without giving effect to (i) the amortization of any
expenses incurred in connection with the offering of the Notes and (ii) except
as otherwise provided, the amortization of any amounts required or permitted by
Accounting Principles Board Opinion Nos. 16 and 17.
"Global Notes" has the meaning provided in Section 2.01.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to
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<PAGE> 16
maintain financial statement conditions or otherwise) or (ii) entered into for
purposes of assuring in any other manner the obligee of such Indebtedness of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Guaranteed Indebtedness" has the meaning provided in Section 4.07.
"Holder" or "Noteholder" means the registered holder of any Note.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an "Incurrence" of Indebtedness by reason of a Person
becoming a Restricted Subsidiary; provided that neither the accrual of interest
nor the accretion of original issue discount shall be considered an Incurrence
of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of placing such property in service or taking delivery and title thereto or
the completion of such services, except Trade Payables, (v) all obligations of
such Person as lessee under Capitalized Leases, (vi) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness, (vii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person and (viii) to the extent not otherwise
included in this definition, obligations under Currency Agreements and Interest
Rate Agreements. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and, with respect to
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contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, provided (A) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP, (B) that money borrowed and set aside at the time of the
Incurrence of any Indebtedness in order to prefund the payment of the interest
on such Indebtedness shall not be deemed to be "Indebtedness" so long as such
money is held to secure the payment of such interest and (C) that Indebtedness
shall not include any liability for federal, state, local or other taxes.
"Indenture" means this Indenture as originally executed or as it may be
amended or supplemented from time to time by one or more indentures supplemental
to this Indenture entered into pursuant to the applicable provisions of this
Indenture.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" means each semiannual interest payment date on
May 1 and November 1, of each year, commencing November 1, 2003.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances to customers in the ordinary course
of business that are, in conformity with GAAP, recorded as accounts receivable
on the balance sheet of the Company or its Restricted Subsidiaries) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, bonds, notes, debentures or other
similar instruments issued by, such Person and shall include (i) the designation
of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair
market value of the Capital Stock (or any other Investment), held by the Company
or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to
be a Restricted Subsidiary, including without limitation, by reason of any
transaction permitted by clause (iii) of Section 4.06. For purposes of the
definition of "Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall
include the fair market value of the assets (net of liabilities (other than
liabilities to the
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<PAGE> 18
Company or any of its Restricted Subsidiaries)) of any Restricted Subsidiary at
the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary, (ii) the fair market value of the assets (net of liabilities (other
than liabilities to the Company or any of its Restricted Subsidiaries)) of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary shall be considered a reduction in
outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof or any agreement
to give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent corresponding
to the principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are financed
or sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP and (b) with respect
to any issuance or sale of Capital Stock, the proceeds of such issuance or sale
in the form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary) and
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<PAGE> 19
proceeds from the conversion of other property received when converted to cash
or cash equivalents, net of attorney's fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"New Business Subsidiary" means a Restricted Subsidiary of the Company
whose primary business and operations do not include any of the U.S.-based book
sales and distribution business and operations conducted by the Company and its
Restricted Subsidiaries on the Closing Date.
"Non-U.S. Person" means a person who is not a U.S. person, as defined in
Regulation S.
"Note Register" has the meaning provided in Section 2.04.
"Notes" means any of the securities, as defined in the first paragraph
of the recitals hereof, that are authenticated and delivered under this
Indenture. For all purposes of this Indenture, the term "Notes" shall include
the Notes initially issued on the Closing Date, any Exchange Notes to be issued
and exchanged for any Notes pursuant to the Registration Rights Agreement and
this Indenture and any other Notes issued after the Closing Date under this
Indenture. For purposes of this Indenture, all Notes shall vote together as one
class of securities under this Indenture.
"Offer to Purchase" means an offer by the Company to purchase Notes from
the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant to which the offer is being made and that all
Notes validly tendered will be accepted for payment on a pro rata basis; (ii)
the purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is mailed)
(the "Payment Date"); (iii) that any Note not tendered will continue to accrue
interest (or accrete original issue discount) pursuant to its terms; (iv) that,
unless the Company defaults in the payment of the purchase price, any Note
accepted for payment pursuant to the Offer to Purchase shall cease to accrue
interest (or accrete original issue discount) on and after the Payment Date; (v)
that Holders electing to have a Note purchased pursuant to the Offer to Purchase
will be required to surrender the Note, together with the form entitled "Option
of the Holder to Elect Purchase" on the reverse side of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the Business Day immediately preceding the Payment Date; (vi) that
Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the third Business Day
immediately preceding the Payment Date, a telegram, facsimile transmission or
letter setting forth the name of such Holder, the
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<PAGE> 20
principal amount at maturity of Notes delivered for purchase and a statement
that such Holder is withdrawing its election to have such Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered; provided that each Note purchased and each new Note issued shall be
in a principal amount at maturity of $1,000 or an integral multiple thereof. On
the Payment Date, the Company shall (i) accept for payment on a pro rata basis
Notes or portions thereof validly tendered pursuant to an Offer to Purchase;
(ii) deposit with the Paying Agent money sufficient to pay the purchase price of
all Notes or portions thereof so accepted; and (iii) deliver, or cause to be
delivered, to the Trustee all Notes or portions thereof so accepted together
with an Officers' Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the Holders
of Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Note equal in
principal amount at maturity to any unpurchased portion of the Note surrendered;
provided that each Note purchased and each new Note issued shall be in a
principal amount at maturity of $1,000 or an integral multiple thereof. The
Company shall publicly announce the results of an Offer to Purchase as soon as
practicable after the Payment Date. The Trustee shall act as the Paying Agent
for an Offer to Purchase. The Company shall comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that the Company
is required to repurchase Notes pursuant to an Offer to Purchase.
"Officer" means, with respect to the Company, (i) the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President and the
Chief Financial Officer and (ii) the Treasurer or any Assistant Treasurer, or
the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by one Officer listed
in clause (i) of the definition thereof and one Officer listed in clause (ii) of
the definition thereof or two Officers listed in clause (i) of the definition
thereof. Each Officers' Certificate (other than certificates provided pursuant
to TIA Section 314(a)(4)) shall include the statements provided for in TIA
Section 314(e).
"Offshore Global Note" has the meaning provided in Section 2.01.
"Offshore Physical Notes" has the meaning provided in Section 2.01.
"Opinion of Counsel" means a written opinion signed by legal counsel who
may be an employee of or counsel to the Company. Each such Opinion of Counsel
shall include the statements provided for in TIA Section 314(e).
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<PAGE> 21
"Paying Agent" has the meaning provided in Section 2.04, except that,
for the purposes of Article Eight, the Paying Agent shall not be the Company or
a Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.
"Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that such person's primary business or the
assets to be transferred or conveyed are related, ancillary or complementary to
the businesses of the Company and its Restricted Subsidiaries on the date of
such Investment; (ii) Temporary Cash Investments; (iii) payroll, travel,
relocation and similar advances to cover matters that are expected at the time
of such advances ultimately to be treated as expenses in accordance with GAAP;
(iv) stock, obligations or securities received (x) in satisfaction of judgments
or (y) in connection with the sale or disposition of a Person, assets or
business; (v) Investments in prepaid expenses, negotiable instruments held for
collection and lease, utility and worker's compensation, performance and other
similar deposits; (vi) Interest Rate Agreements and Currency Agreements designed
solely to protect the Company or its Restricted Subsidiaries against
fluctuations in interest rates or foreign currency exchange rates; (vii)
Strategic Investments; (viii) loans or advances to officers or employees of the
Company or any Restricted Subsidiary (other than loans or advances made pursuant
to clause (ix) below) that do not in the aggregate exceed $10.0 million at any
time outstanding; and (ix) loans or advances to Persons who own Indebtedness or
Capital Stock (other than any Affiliate of the Company or any Restricted
Subsidiary) of any Person if such loans or advances are made as part of, or in
connection with, a transaction pursuant to which such Person becomes a
Restricted Subsidiary of the Company or any other Restricted Subsidiary or
substantially all of the assets of such Person are acquired by the Company or
any Restricted Subsidiary, in an aggregate amount not to exceed 20% of the total
consideration paid in connection with such acquisition. Any such loans or
advances made within three months after completion of such transaction shall be
deemed to be part of or in connection with such transaction for purposes of this
definition.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory and common law Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens
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arising in the ordinary course of business and with respect to amounts not yet
delinquent or being contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights-of-way,
municipal and zoning ordinances and similar charges, encumbrances, title defects
or other irregularities that do not materially interfere with the ordinary
course of business of the Company or any of its Restricted Subsidiaries; (vi)
Liens (including extensions and renewals thereof) upon real or personal property
acquired after the Closing Date; provided that (a) such Lien is created solely
for the purpose of securing Indebtedness Incurred, in accordance with Section
4.03, (1) to finance the cost (including the cost of design, development,
acquisition, construction, installation, improvement, transportation or
integration) of the item of property or assets subject thereto and such Lien is
created prior to, at the time of or within six months after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property or (2) to refinance any Indebtedness previously so
secured, (b) the principal amount of the Indebtedness secured by such Lien does
not exceed 100% of such cost and (c) any such Lien shall not extend to or cover
any property or assets other than such item of property or assets and any
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property
or assets under construction arising from progress or partial payments by a
customer of the Company or its Restricted Subsidiaries relating to such property
or assets; (ix) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; (x) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xi) Liens on property
of, or on shares of Capital Stock or Indebtedness of, any Person existing at the
time such Person becomes, or becomes a part of, any Restricted Subsidiary;
provided that such Liens do not extend to or cover any property or assets of the
Company or any Restricted Subsidiary other than the property or assets acquired;
(xii) Liens in favor of the Company or any Restricted Subsidiary; (xiii) Liens
arising from the rendering of a final judgment or order against the Company or
any Restricted Subsidiary that does not give rise to an Event of Default; (xiv)
Liens securing reimbursement obligations with respect to letters of credit that
encumber documents and other property relating to such letters of credit and the
products and
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proceeds thereof; (xv) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods; (xvi) Liens encumbering customary initial deposits and
margin deposits, and other Liens that are within the general parameters
customary in the industry and incurred in the ordinary course of business, in
each case, securing Indebtedness under Interest Rate Agreements and Currency
Agreements and forward contracts, options, future contracts, futures options or
similar agreements or arrangements designed solely to protect the Company or any
of its Restricted Subsidiaries from fluctuations in interest rates, currencies
or the price of commodities; (xvii) Liens arising out of conditional sale, title
retention, consignment or similar arrangements for the sale of goods entered
into by the Company or any of its Restricted Subsidiaries in the ordinary course
of business in accordance with the past practices of the Company and its
Restricted Subsidiaries prior to the Closing Date; (xviii) Liens on or sales of
receivables; (xix) Liens that secure Indebtedness Incurred under clause (ix) or
(x) of the second paragraph of Section 4.03(a); and (xx) Liens that secure
Indebtedness with an aggregate principal amount not in excess of $100.0 million
at any time outstanding.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or nonvoting) of such Person's preferred or preference equity, whether
outstanding on the Closing Date or issued thereafter, including, without
limitation, all series and classes of such preferred stock or preference stock.
"Principal" of a debt security, including the Notes, means the principal
amount due on the Stated Maturity as shown on such debt security.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.02.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Redemption Date", when used with respect to any Note to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Note to be redeemed,
means the price at which such Note is to be redeemed pursuant to this Indenture.
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"Registrar" has the meaning provided in Section 2.04.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated May 8, 1998, between the Company and Morgan Stanley & Co. Incorporated and
certain permitted assigns specified therein.
"Registration Statement" means the Registration Statement as defined and
described in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the April 15 or October 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee, means any
vice president, any assistant vice president, any assistant secretary, any
assistant treasurer, any trust officer or assistant trust officer, the
controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Restricted Payments" has the meaning provided in Section 4.04.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
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"S&P" means Standard & Poor's, Division of the McGraw Hill Companies,
and its successors.
"Specified Date" means any Redemption Date, any Payment Date for an
Offer to Purchase or any date on which the Notes first become due and payable
after an Event of Default.
"Stated Maturity" means (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"Strategic Investment" means an Investment in any Person (other than an
Unrestricted Subsidiary of the Company) whose primary business is related,
ancillary or complementary to, and such Investment is determined in good faith
by the Board of Directors (or senior officers of the Company to whom the Board
of Directors has duly delegated the authority to make such a determination),
whose determination shall be conclusive and evidenced by a Board Resolution, to
promote or significantly benefit the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment.
"Strategic Subordinated Indebtedness" means Indebtedness of the Company
Incurred to finance an Asset Acquisition which Indebtedness by its terms, or by
the terms of any agreement or instrument pursuant to which such Indebtedness is
Incurred, (i) is expressly made subordinate in right of payment to the Notes and
(ii) provides that no payment of principal or premium, or interest on or any
other payment with respect to, such Indebtedness may be made prior to the
payment in full of all of the Company's obligations under the Notes; provided
that such Indebtedness may provide for and be repaid at any time from the
proceeds of a capital contribution or the sale of Capital Stock (other than
Disqualified Stock) of the Company after the Incurrence of such Indebtedness.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits
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maturing within one year of the date of acquisition thereof issued by a bank or
trust company which is organized under the laws of the United States of America,
any state thereof or any foreign country recognized by the United States of
America, and which bank or trust company has capital, surplus and undivided
profits aggregating in excess of $50.0 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
commercial paper, maturing not more than two years after the date of
acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America, any
state thereof or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is made of "P-1"
(or higher) according to Moody's or "A-1" (or higher) according to S&P, (v)
securities with maturities of six months or less from the date of acquisition
issued or fully and unconditionally guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or Moody's, (vi) with
respect to security or collateral required to be provided by the Company under
the terms of any lease or in connection with any capital expenditure,
Indebtedness issued by any corporation (other than the Company or an Affiliate
of the Company) incorporated and in existence in any state of the United States
or the District of Columbia and having a rating, at the time as of which such
Investment is made, of "AA" (or higher) according to S&P or "Aa1" (or higher)
according to Moody's and (vii) funds that do not utilize Indebtedness in order
to make investments and that invest solely in any of the Investments described
in clauses (i) through (vi) above.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbb), as in effect on the date this
Indenture was executed, except as provided in Section 9.06.
"Trade Payables" means, with respect to any Person, any accounts payable
or any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to
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be Incurred and, with respect to any Restricted Payment, the date such
Restricted Payment is to be made.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) that
has become publicly available at least two Business Days prior to the Redemption
Date (or, if such Statistical Release is no longer published, any publicly
available source or similar market data)) most nearly equal to the period from
the Redemption Date to May 1, 2003; provided, however, that if the period from
the Redemption Date to May 1, 2003 is not equal to the constant maturity of the
United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
securities for which such yields are given, except that if the period from the
Redemption Date to May 1, 2003 is less than one year, the weekly average yield
on actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article Seven of this Indenture and thereafter means such successor.
"United States Bankruptcy Code" means the Bankruptcy Reform Act of 1978,
as amended and as codified in Title 11 of the United States Code, as amended
from time to time hereafter, or any successor federal bankruptcy law.
"U.S. Global Note" has the meaning provided in Section 2.01.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
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respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"U.S. Physical Notes" has the meaning provided in Section 2.01.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (i) the Subsidiary to be so designated has total
assets of $1,000 or less or (ii) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under Section 4.04 and (C) if
applicable, the Incurrence of Indebtedness and the Investment referred to in
clause (A) of this proviso would be permitted under Sections 4.03 and 4.04. The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that (i) no Default or Event of Default shall have occurred
and be continuing at the time of or after giving effect to such designation and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately after such designation would, if Incurred at such time, have been
permitted to be Incurred (and shall be deemed to have been Incurred) for all
purposes of this Indenture. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"Voting Stock" means with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
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SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder or a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the indenture securities means the Company or any
other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. RULES OF CONSTRUCTION
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the
plural include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or other
subdivision;
(vii) all ratios and computations based on GAAP contained in this
Indenture shall be computed in accordance with the definition of GAAP set forth
in Section 1.01; and
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(viii) all references to Sections or Articles refer to Sections
or Articles of this Indenture unless otherwise indicated.
ARTICLE 2 - THE NOTES
SECTION 2.01. FORM AND DATING
The Notes and the Trustee's certificate of authentication shall be
substantially in the form annexed hereto as Exhibit A with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture. The Notes may have notations, legends or
endorsements required by law, usage, stock exchange or securities depository
agreements to which the Company is subject. The Company shall approve the form
of the Notes and any notation, legend or endorsement on the Notes. Each Note
shall be dated the date of its authentication.
The terms and provisions contained in the form of the Notes annexed
hereto as Exhibit A shall constitute, and are hereby expressly made, a part of
this Indenture. To the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in definitive, fully
registered form without interest coupons, substantially in the form set forth in
Exhibit A (collectively, the "U.S. Global Notes"), deposited with the Trustee,
as custodian for the Depositary, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. The aggregate principal amount at
maturity of the U.S. Global Notes may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, in accordance with the instructions given by the
Holder thereof as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Notes in definitive, fully registered form without interest coupons,
substantially in the form set forth in Exhibit A (the "Offshore Global Notes")
deposited with the Trustee, as custodian for the Depositary, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount at maturity of the Offshore Global Notes may from
time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Notes offered and sold in reliance to Institutional Accredited Investors
under the Securities Act shall be issued in the form of permanent certificated
Notes in
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registered form without interest coupons in substantially the form set forth in
Exhibit A (the "U.S. Physical Notes"). Notes issued pursuant to Section 2.07 in
exchange for interests in the Offshore Global Note shall be in the form of
permanent certificated Notes in registered form substantially in the form set
forth in Exhibit A (the "Offshore Physical Notes").
The Offshore Physical Notes and U.S. Physical Notes are sometimes
collectively herein referred to as the "Physical Notes". The U.S. Global Notes
and the Offshore Global Notes are sometimes collectively referred to herein as
the "Global Notes".
The definitive Notes shall be typed, printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Notes may
be listed, all as determined by the Officers executing such Notes, as evidenced
by their execution of such Notes.
SECTION 2.02. RESTRICTIVE LEGENDS
Except as set forth in Section 2.08(e), unless and until a Note is
exchanged for an Exchange Note or sold in connection with an effective
Registration Statement pursuant to the Registration Rights Agreement, (i) each
U.S. Global Note and each U.S. Physical Note shall bear the legend, set forth
below on the face thereof and (ii) each Offshore Physical Note and each Offshore
Global Note shall bear the legend set forth below on the face thereof until at
least the 41st day after the Closing Date and receipt by the Company and the
Trustee of a certificate substantially in the form of Exhibit B hereto:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
INVESTOR WHICH IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO
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UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE
TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE), AND, IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE ACCRETED VALUE AT THE TIME OF TRANSFER OF NOTES OF LESS THAN $100,000,
AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO
ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE
TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
Each Global Note, whether or not an Exchange Note, shall also bear the
following legend on the face thereof:
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UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.08 OF THE INDENTURE.
SECTION 2.03. EXECUTION, AUTHENTICATION AND DENOMINATIONS
Subject to Article Four, the aggregate principal amount at maturity of
Notes which may be authenticated and delivered under this Indenture is
unlimited. The Notes shall be executed by two Officers of the Company. The
signature of any of these Officers on the Notes may be by facsimile or manual
signature in the name and on behalf of the Company.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee or authenticating agent authenticates the Note, the Note
shall be valid nevertheless.
A Note shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
At any time and from time to time after the execution of this Indenture,
the Trustee or an authenticating agent shall upon receipt of a Company Order
authenticate for original issue Notes in the aggregate principal amount
specified in such Company
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Order; provided that the Trustee shall be entitled to receive an Officers'
Certificate and an Opinion of Counsel of the Company in connection with such
authentication of Notes. Such Company Order shall specify the amount of Notes to
be authenticated and the date on which the original issue of Notes is to be
authenticated, and, in case of an issuance of Notes pursuant to Section 2.15,
shall certify that such issuance is in compliance with Article Four.
The Trustee may appoint an authenticating agent to authenticate Notes.
An authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the Company.
The Notes shall be issuable only in registered form without coupons and
only in denominations of $1,000 in principal amount at maturity and any integral
multiple of $1,000 in excess thereof.
SECTION 2.04. REGISTRAR AND PAYING AGENT
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange (the "Registrar"), an
office or agency where Notes may be presented for payment (the "Paying Agent")
and an office or agency where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served, which shall be in the
Borough of Manhattan, The City of New York. The Company shall cause the
Registrar to keep a register of the Notes and of their transfer and exchange
(the "Note Register"). The Company may have one or more co-Registrars and one or
more additional Paying Agents.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall give
prompt written notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent. If the Company fails to maintain a
Registrar, Paying Agent and/or agent for service of notices and demands, the
Trustee shall act as such Registrar, Paying Agent and/or agent for service of
notices and demands. The Company may remove any Agent upon written notice to
such Agent and the Trustee; provided that no such removal shall become effective
until (i) the acceptance of an appointment by a successor Agent to such Agent as
evidenced by an appropriate agency agreement entered into by the Company and
such successor Agent and delivered to the Trustee or (ii) notification to the
Trustee that the Trustee shall serve as such Agent until the appointment of a
successor Agent in accordance with clause (i) of this proviso. The Company, any
Subsidiary of the Company, or any Affiliate of any of them may act as
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Paying Agent, Registrar or co-Registrar, and/or agent for service of notice and
demands.
The Company initially appoints the Trustee as Registrar, Paying Agent,
authenticating agent and agent for service of notice and demands. The Trustee
shall preserve in as current a form as is reasonably practicable the most recent
list available to it of the names and addresses of Holders and shall otherwise
comply with TIA Section 312(a). If, at any time, the Trustee is not the
Registrar, the Company shall furnish to the Trustee, as of each Regular Record
Date and at such other times as the Trustee may reasonably request, the names
and addresses of the Holders as they appear in the Note Register.
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST
Not later than 10:00 a.m., New York City time, on each due date of the
principal, premium, if any, and interest on any Notes, the Company shall deposit
with the Paying Agent money in immediately available funds sufficient to pay
such principal, premium, if any, and interest so becoming due. The Company shall
require each Paying Agent other than the Trustee to agree in writing that such
Paying Agent shall hold in trust for the benefit of the Holders or the Trustee
all money held by the Paying Agent for the payment of principal of, premium, if
any, and interest on the Notes (whether such money has been paid to it by the
Company or any other obligor on the Notes), and such Paying Agent shall promptly
notify the Trustee of any default by the Company (or any other obligor on the
Notes) in making any such payment. The Company at any time may require a Paying
Agent to pay all money held by it to the Trustee and account for any funds
disbursed, and the Trustee may at any time during the continuance of any payment
default, upon written request to a Paying Agent, require such Paying Agent to
pay all money held by it to the Trustee and to account for any funds disbursed.
Upon doing so, the Paying Agent shall have no further liability for the money so
paid over to the Trustee. If the Company or any Subsidiary of the Company or any
Affiliate of any of them acts as Paying Agent, it shall, on or before each due
date of any principal of, premium, if any, or interest on the Notes, segregate
and hold in a separate trust fund for the benefit of the Holders a sum of money
sufficient to pay such principal, premium, if any, or interest so becoming due
until such sum of money shall be paid to such Holders or otherwise disposed of
as provided in this Indenture, and shall promptly notify the Trustee of its
action or failure to act.
SECTION 2.06. TRANSFER AND EXCHANGE
The Notes are issuable only in registered form. A Holder may transfer a
Note only by written application to the Registrar stating the name of the
proposed
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transferee and otherwise complying with the terms of this Indenture. No such
transfer shall be effected until, and such transferee shall succeed to the
rights of a Holder only upon, final acceptance and registration of the transfer
by the Registrar in the Note Register. Prior to the registration of any transfer
by a Holder as provided herein, the Company, the Trustee, and any agent of the
Company shall treat the person in whose name the Note is registered as the owner
thereof for all purposes whether or not the Note shall be overdue, and neither
the Company, the Trustee, nor any such agent shall be affected by notice to the
contrary. Furthermore, any Holder of a Global Note shall, by acceptance of such
Global Note, agree that transfers of beneficial interests in such Global Note
may be effected only through a book entry system maintained by the Holder of
such Global Note (or its agent) and that ownership of a beneficial interest in
the Note shall be required to be reflected in a book entry. When Notes are
presented to the Registrar or a co-Registrar with a request to register the
transfer or to exchange them for an equal principal amount of Notes of other
authorized denominations (including an exchange of Notes for Exchange Notes),
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided that no exchanges of
Notes for Exchange Notes shall occur until a Registration Statement shall have
been declared effective by the Commission and that any Notes that are exchanged
for Exchange Notes shall be canceled by the Trustee. To permit registrations of
transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar's request. No service charge shall be made
for any registration of transfer or exchange or redemption of the Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer taxes or other similar governmental charge payable upon exchanges
pursuant to Section 2.11, 3.08 or 9.04).
The Registrar shall not be required (i) to issue, register the transfer
of or exchange any Note during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Notes selected
for redemption under Section 3.03 and ending at the close of business on the day
of such mailing or (ii) to register the transfer of or exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part.
SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES
(a) The U.S. Global Note and Offshore Global Note initially shall
(i) be registered in the name of the Depositary for such Global Notes or the
nominee of such Depositary, (ii) be delivered to the Trustee as custodian for
such Depositary and (iii) bear legends as set forth in Section 2.02.
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Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Note, and the Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers of
such Global Note in whole, but not in part, to the Depositary, its successors or
their respective nominees. Interests of beneficial owners in a Global Note may
be transferred in accordance with the rules and procedures of the Depositary and
the provisions of Section 2.08. In addition, U.S. Physical Notes and Offshore
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in the U.S. Global Note or the Offshore Global Note,
respectively, if (i) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for the U.S. Global Note or the Offshore Global
Note, as the case may be, and a successor depositary is not appointed by the
Company within 90 days of such notice, (ii) an Event of Default has occurred and
is continuing and the Registrar has received a request therefor from the
Depositary or (iii) in accordance with the rules and procedures of the
Depositary and the provisions of Section 2.08.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Note shall, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, shall
thereafter be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(d) In connection with any transfer of a portion of the
beneficial interests in the U.S. Global Note or Offshore Global Note to
beneficial owners pursuant to paragraph (b) of this Section, the Registrar shall
reflect on its books and records the date and a decrease in the principal amount
at maturity of the U.S. Global Note or Offshore Global Note in an amount equal
to the principal amount at maturity of the beneficial interest in the U.S.
Global Note or Offshore Global Note to be transferred, and the Company shall
execute, and the Trustee shall authenticate and deliver, one or more U.S.
Physical Notes or Offshore Physical Notes, as the case may be, of like tenor and
amount.
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(e) In connection with the transfer of the entire U.S. Global
Note or Offshore Global Note to beneficial owners pursuant to paragraph (b) of
this Section, the U.S. Global Note or Offshore Global Note, as the case may be,
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the U.S. Global Note or Offshore Global Note, as the case may be, an
equal aggregate principal amount at maturity of U.S. Physical Notes or Offshore
Physical Notes, as the case may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an interest
in the U.S. Global Note pursuant to paragraph (b), (d) or (e) of this Section
shall, except as otherwise provided by paragraph (e) of Section 2.08, bear the
legend regarding transfer restrictions applicable to the U.S. Physical Note set
forth in Section 2.02.
(g) Any Offshore Physical Note delivered in exchange for an
interest in the Offshore Global Note pursuant to paragraph (b), (d) or (e) of
this Section shall, except as otherwise provided by paragraph (e) of Section
2.08, bear the legend regarding transfer restrictions applicable to the Offshore
Physical Note set forth in Section 2.02.
(h) The registered holder of a Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
SECTION 2.08. SPECIAL TRANSFER PROVISIONS
Unless and until a Note is exchanged for an Exchange Note or sold in
connection with an effective Registration Statement pursuant to the Registration
Rights Agreement, the following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of a Note to any Institutional Accredited Investor which is
not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any
Note, whether or not such Note bears the Private Placement Legend, if (x) the
requested transfer is after the time period referred to in Rule 144(k) under the
Securities Act or (y) the proposed transferee has delivered to the Registrar (A)
a certificate substantially in the form of Exhibit C hereto and (B) if the
aggregate Accreted Value of the Notes
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at the time of transfer is less than $100,000, an opinion of counsel acceptable
to the Company that such transfer is in compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding
a beneficial interest in the U.S. Global Note, upon receipt by the Registrar of
(x) the documents, if any, required by paragraph (i) and (y) instructions given
in accordance with the Depositary's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date and a decrease in the
principal amount at maturity of the U.S. Global Note in an amount equal to the
principal amount at maturity of the beneficial interest in the U.S. Global Note
to be transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more U.S. Physical Notes of like tenor and
amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a U.S. Physical Note, an
interest in the U.S. Global Note or an interest in an Offshore Global Note prior
to the removal of the Private Placement Legend to a QIB (excluding Non-U.S.
Persons):
(i) If the Note to be transferred consists of (x) either
(A) an interest in an Offshore Global Note prior to the removal of the Private
Placement Legend or (B) U.S. Physical Notes, the Registrar shall register the
transfer if such transfer is being made by a proposed transferor who has checked
the box provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has otherwise advised
the Company and the Registrar in writing, that it is purchasing the Note for its
own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a QIB within the meaning of Rule
144A, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
it has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A or (y) an interest in the U.S. Global Note, the transfer
of such interest may be effected only through the book entry system maintained
by the Depositary.
(ii) If the proposed transferee is an Agent Member, and
the Note to be transferred consists of U.S. Physical Notes, upon receipt by the
Registrar of the documents referred to in clause (i) and instructions given in
accordance with the Depositary's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and an increase in the principal
amount at maturity of the U.S. Global Note in an amount equal to the principal
amount at maturity of the U.S.
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Physical Notes, to be transferred, and the Trustee shall cancel the U.S.
Physical Note so transferred.
(c) Transfers of Interests in the Offshore Global Note or
Offshore Physical Notes. The following provisions shall apply with respect to
registration of any proposed transfer of interests in the Offshore Global Note
or Offshore Physical Notes:
(i) prior to the removal of the Private Placement Legend
from a Offshore Global Note or Offshore Physical Note pursuant to Section 2.02,
the Registrar shall refuse to register such transfer unless such transfer
complies with Section 2.08(b) or Section 2.08(d), as the case may be; and
(ii) after such removal, the Registrar shall register the
transfer of any such Note without requiring any additional certification.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of a Note to a Non-U.S.
Person:
(i) The Registrar shall register any proposed transfer to
any Non-U.S. Person if the Note to be transferred is a U.S. Physical Note or an
interest in the U.S. Global Note, upon receipt of a certificate substantially in
the form of Exhibit D attached hereto from the proposed transferor.
(ii) (a) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Note, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i) and (y)
instructions in accordance with the Depositary's and the Registrar's procedures,
the Registrar shall reflect on its books and records the date and a decrease in
the principal amount at maturity of the U.S. Global Note in an amount equal to
the principal amount at maturity of the beneficial interest in the U.S. Global
Note to be transferred, and (b) if the proposed transferee is an Agent Member,
upon receipt by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall reflect on its
books and records the date and an increase in the principal amount at maturity
of the Offshore Global Note in an amount equal to the principal amount at
maturity of the U.S. Physical Notes or the U.S. Global Note, as the case may be,
to be transferred, and the Trustee shall cancel the Physical Note, if any, so
transferred or decrease the principal amount at maturity of the U.S. Global
Note.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer,
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exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless either (i) the circumstances contemplated by paragraphs (a)(i)(x) or
(c)(ii) of this Section 2.08 exist or (ii) there is delivered to the Registrar
an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to
the effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(f) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it shall transfer such Note only as provided in this
Indenture. The Registrar shall not register a transfer of any Note unless such
transfer complies with the restrictions on transfer of such Note set forth in
this Indenture. In connection with any transfer of Notes, each Holder agrees by
its acceptance of the Notes to furnish the Registrar or the Company such
certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act; provided that the Registrar shall not be required to
determine (but may rely on a determination made by the Company with respect to)
the sufficiency of any such certifications, legal opinions or other information.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.07 or this Section 2.08.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
SECTION 2.09. REPLACEMENT NOTES
If a mutilated Note is surrendered to the Trustee or if the Holder
claims that the Note has been lost, destroyed or wrongfully taken, the Company
shall issue and the Trustee shall authenticate a replacement Note of like tenor
and amount and bearing a number not contemporaneously outstanding; provided that
the requirements of this Section 2.09 are met. An indemnity bond must be
furnished that is sufficient in the judgment of both the Trustee and the Company
to protect the Company, the Trustee or any Agent from any loss that any of them
may suffer if a Note is replaced. The Company may charge such Holder for its
expenses and the expenses of the Trustee in replacing a Note. In case any such
mutilated, lost, destroyed or wrongfully taken Note has become or is about to
become due and payable, the Company in its discretion may pay such Note instead
of issuing a new Note in replacement thereof.
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Every replacement Note is an additional obligation of the Company and
shall be entitled to the benefits of this Indenture.
SECTION 2.10. OUTSTANDING NOTES
Notes outstanding at any time are all Notes that have been authenticated
by the Trustee except for those canceled by it, those delivered to it for
cancellation and those described in this Section 2.10 as not outstanding.
If a Note is replaced pursuant to Section 2.09, it ceases to be
outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Note is held by a bona fide purchaser.
If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on the maturity date money sufficient to pay Notes payable on
that date, then on and after that date such Notes cease to be outstanding and
interest on them shall cease to accrue.
A Note does not cease to be outstanding because the Company or one of
its Affiliates holds such Note; provided, however, that, in determining whether
the Holders of the requisite principal amount of the outstanding Notes have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes owned by the Company or any other obligor upon the Notes or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which a Responsible Officer of
the Trustee actually knows to be so owned shall be so disregarded. Notes so
owned which have been pledged in good faith may be regarded as outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Notes and that the pledgee is not the Company or
any other obligor upon the Notes or any Affiliate of the Company or of such
other obligor.
SECTION 2.11. TEMPORARY NOTES
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have insertions,
substitutions, omissions and other variations determined to be appropriate by
the Officers executing the temporary Notes, as evidenced by their execution of
such temporary Notes. If temporary Notes are issued, the Company shall cause
definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes
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shall be exchangeable for definitive Notes upon surrender of the temporary Notes
at the office or agency of the Company designated for such purpose pursuant to
Section 4.02, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Notes the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Notes of authorized denominations. Until so exchanged, the temporary
Notes shall be entitled to the same benefits under this Indenture as definitive
Notes.
SECTION 2.12. CANCELLATION
The Company at any time may deliver to the Trustee for cancellation any
Notes previously authenticated and delivered hereunder which the Company may
have acquired in any manner whatsoever, and may deliver to the Trustee for
cancellation any Notes previously authenticated hereunder which the Company has
not issued and sold. The Registrar and the Paying Agent shall forward to the
Trustee any Notes surrendered to them for transfer, exchange or payment. The
Trustee shall cancel all Notes surrendered for transfer, exchange, payment or
cancellation and shall return such Notes to the Company.
SECTION 2.13. CUSIP NUMBERS
The Company in issuing the Notes may use "CUSIP," "CINS" or "ISIN"
numbers (if then generally in use), and the Trustee shall use CUSIP, CINS or
ISIN numbers, as the case may be, in notices of redemption or exchange as a
convenience to Holders; provided that any such notice shall state that no
representation is made as to the correctness of such numbers either as printed
on the Notes or as contained in any notice of redemption or exchange and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Company shall promptly notify the Trustee of any change in any of
such numbers.
SECTION 2.14. DEFAULTED INTEREST
If the Company defaults in a payment of interest on the Notes, it shall
pay, or shall deposit with the Paying Agent money in immediately available funds
sufficient to pay the defaulted interest, plus (to the extent lawful) any
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date. A special record date, as used in this Section
2.14 with respect to the payment of any defaulted interest, shall mean the 15th
day next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day. At least 15 days before the
subsequent special record date, the Company shall mail to each Holder and to the
Trustee a notice that states the subsequent special record date, the payment
date and the amount of defaulted interest to be paid.
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SECTION 2.15. ISSUANCE OF ADDITIONAL NOTES
The Company may, subject to Article Four of this Indenture, issue
additional Notes under this Indenture. The Notes issued on the Closing Date and
any additional Notes subsequently issued shall be treated as a single class for
all purposes under this Indenture.
ARTICLE 3 - REDEMPTION
SECTION 3.01. RIGHT OF REDEMPTION
(a) The Notes shall be redeemed, at the Company's option, in whole or in
part, at any time or from time to time, on or after May 1, 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address as it appears in the Note
Register, at the following Redemption Prices (expressed in percentages of
principal amount at maturity), plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is prior to the Redemption Date to receive interest due
on an Interest Payment Date), if redeemed during the 12-month period commencing
May 1, of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
----------- ------
<S> <C>
2003 105.000%
2004 103.333%
2005 101.667%
2006 and thereafter 101.000%
</TABLE>
(b) In addition, at any time prior to May 1, 2001, the Company may
redeem up to 35% of the aggregate principal amount at maturity of the Notes with
the Net Cash Proceeds of one or more sales of Capital Stock of the Company
(other than Disqualified Stock), at any time as a whole or from time to time in
part, at a Redemption Price (expressed as a percentage of Accreted Value on the
Redemption Date) of 110%, plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is prior to the Redemption Date to receive interest due
on an Interest Payment Date); provided that at least 65% of the aggregate
principal amount at maturity of Notes originally issued remains outstanding
after each such redemption and notice of such redemption is mailed to Holders of
the Notes within 60 days after the related sale of Capital Stock.
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(c) At any time prior to May 1, 2003, the Company may redeem all, but
not less than all, of the Notes at a Redemption Price equal to the sum of (i)
the Accreted Value on the Redemption Date, plus (ii) accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is prior to the Redemption Date
to receive interest due on an Interest Payment Date), plus (iii) the Applicable
Premium.
SECTION 3.02. NOTICES TO TRUSTEE
If the Company elects to redeem Notes pursuant to Section 3.01(a),
3.01(b) or 3.01(c), it shall notify the Trustee in writing of the Redemption
Date and the principal amount of Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.02 in
an Officers' Certificate at least 45 days before the Redemption Date (unless a
shorter period shall be satisfactory to the Trustee).
SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed in compliance with the
requirements, as certified to it by the Company, of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not listed on a national securities exchange, by lot or by such other method as
the Trustee in its sole discretion shall deem fair and appropriate; provided
that no Notes of $1,000 in principal amount at maturity or less shall be
redeemed in part.
The Trustee shall make the selection from the Notes outstanding and not
previously called for redemption. Notes in denominations of $1,000 in principal
amount at maturity may only be redeemed in whole. The Trustee may select for
redemption portions (equal to $1,000 in principal amount at maturity or any
integral multiple thereof) of Notes that have denominations larger than $1,000
in principal amount at maturity. Provisions of this Indenture that apply to
Notes called for redemption also apply to portions of Notes called for
redemption. The Trustee shall notify the Company and the Registrar promptly in
writing of the Notes or portions of Notes to be called for redemption.
SECTION 3.04. NOTICE OF REDEMPTION
With respect to any redemption of Notes pursuant to Section 3.01(a),
3.01(b) or 3.01(c), at least 30 days but not more than 60 days before a
Redemption Date, the
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Company shall mail a notice of redemption by first class mail to each Holder
whose Notes are to be redeemed.
The notice shall fully identify the Notes (including CUSIP, CINS or ISIN
number(s)) to be redeemed and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to the
Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the Redemption Date and the only remaining right of the Holders is to receive
payment of the Redemption Price plus accrued interest to the Redemption Date
upon surrender of the Notes to the Paying Agent;
(vi) that, if any Note is being redeemed in part, the portion of
the principal amount (equal to $1,000 in principal amount at maturity or any
integral multiple thereof) of such Note to be redeemed, and that, on and after
the Redemption Date, upon surrender of such Note, a new Note or Notes in
principal amount at maturity equal to the unredeemed portion thereof shall be
reissued; and
(vii) that, if any Note contains a CUSIP, CINS or ISIN number as
provided in Section 2.13, no representation is being made as to the correctness
of the CUSIP, CINS or ISIN number either as printed on the Notes or as contained
in the notice of redemption and, that reliance may be placed only on the other
identification numbers printed on the Notes.
At the Company's request (which request may be revoked by the Company at
any time prior to the time at which the Trustee shall have given such notice to
the Holders), made in writing to the Trustee at least 30 days (or such shorter
period as shall be satisfactory to the Trustee) before a Redemption Date, the
Trustee shall give the notice of redemption in the name and at the expense of
the Company. If, however, the Company gives such notice to the Holders, the
Company shall concurrently deliver to the Trustee an Officers' Certificate
stating that such notice has been given.
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SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed, Notes called for redemption become
due and payable on the Redemption Date and at the Redemption Price. Upon
surrender of any Notes to the Paying Agent, such Notes shall be paid at the
Redemption Price, plus accrued interest, if any, to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed, whether or
not the Holder receives the notice. In any event, failure to give such notice,
or any defect therein, shall not affect the validity of the proceedings for the
redemption of Notes held by Holders to whom such notice was properly given.
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE
On or prior to 10:00 a.m., New York City time, on any Redemption Date,
the Company shall deposit with the Paying Agent (or, if the Company is acting as
its own Paying Agent, shall segregate and hold in trust as provided in Section
2.05) money sufficient to pay the Redemption Price of and accrued interest on
all Notes to be redeemed on that date other than Notes or portions thereof
called for redemption on that date that have been delivered by the Company to
the Trustee for cancellation.
SECTION 3.07. PAYMENT OF NOTES CALLED FOR REDEMPTION
If notice of redemption has been given in the manner provided above, the
Notes or portion of Notes specified in such notice to be redeemed shall become
due and payable on the Redemption Date at the Redemption Price stated therein,
together with accrued interest to such Redemption Date, and on and after such
date (unless the Company shall default in the payment of such Notes at the
Redemption Price and accrued interest to the Redemption Date, in which case the
principal, until paid, shall bear interest from the Redemption Date at the rate
prescribed in the Notes), such Notes shall cease to accrue interest. Upon
surrender of any Note for redemption in accordance with a notice of redemption,
such Note shall be paid and redeemed by the Company at the Redemption Price,
together with accrued interest, if any, to the Redemption Date; provided that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders registered as such at the close of business
on the relevant Regular Record Date.
SECTION 3.08. NOTES REDEEMED IN PART
Upon surrender of any Note that is redeemed in part, the Company shall
execute and the Trustee shall authenticate and deliver to the Holder a new Note
equal in principal amount to the unredeemed portion of such surrendered Note.
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ARTICLE 4 - COVENANTS
SECTION 4.01. PAYMENT OF NOTES
The Company shall pay the principal of, premium, if any, and interest on
the Notes on the dates and in the manner provided in the Notes and this
Indenture. An installment of principal, premium, if any, or interest shall be
considered paid on the date due if the Trustee or Paying Agent (other than the
Company, a Subsidiary of the Company or any Affiliate of any of them) holds on
that date money designated for and sufficient to pay the installment. If the
Company or any Subsidiary of the Company, or any Affiliate of any of them, acts
as Paying Agent, an installment of principal, premium, if any, or interest shall
be considered paid on the due date if the entity acting as Paying Agent complies
with the last sentence of Section 2.05. As provided in Section 6.09, upon any
bankruptcy or reorganization procedure relative to the Company, the Trustee
shall serve as the Paying Agent and conversion agent, if any, for the Notes.
The Company shall pay interest on overdue principal, premium, if any,
and interest on overdue installments of interest, to the extent lawful, at the
rate per annum specified in the Notes.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency where Notes may be surrendered for registration of
transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 10.02.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
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<PAGE> 49
The Company hereby initially designates the Corporate Trust Office of
the Trustee, located in the Borough of Manhattan, The City of New York, as such
office of the Company in accordance with Section 2.04.
SECTION 4.03. LIMITATION ON INDEBTEDNESS
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, Incur any Indebtedness (other than the Notes and
Indebtedness existing on the Closing Date); provided that (x) the Company may
Incur Indebtedness if, after giving effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom, the
Consolidated Leverage Ratio would be greater than zero and less than 6:1 and (y)
any Restricted Subsidiary may Incur Indebtedness if, after giving effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
therefrom, the Consolidated Leverage Ratio would be greater than zero and less
than 4:1.
Notwithstanding the foregoing, the Company and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following:
(i) Indebtedness outstanding at any time in an
aggregate principal amount not to exceed $300.0 million;
(ii) Indebtedness owed (A) to the Company evidenced by a
promissory note or (B) to any of its Restricted Subsidiaries; provided that any
event which results in any such Restricted Subsidiary's ceasing to be a
Restricted Subsidiary or any subsequent transfer of such Indebtedness (other
than to the Company or another Restricted Subsidiary) shall be deemed, in each
case, to constitute an Incurrence of such Indebtedness not permitted by this
clause (ii);
(iii) Indebtedness issued in exchange for, or the net
proceeds of which are used to refinance or refund, then outstanding Indebtedness
(other than Indebtedness Incurred under clause (i), (ii), (iv), (vi), (vii),
(ix), (x) or (xii) of this paragraph; it being understood that Indebtedness
Incurred pursuant to any of such clauses may be refinanced or refunded pursuant
to such clauses) and any refinancings thereof in an amount not to exceed the
amount so refinanced or refunded (plus premiums, accrued interest, fees and
expenses); provided that Indebtedness the proceeds of which are used to
refinance or refund the Notes or Indebtedness that is pari passu with, or
subordinated in right
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<PAGE> 50
of payment to, the Notes shall only be permitted under this clause (iii) if (A)
in case the Notes are refinanced in part or the Indebtedness to be refinanced is
pari passu with the Notes, such new Indebtedness, by its terms or by the terms
of any agreement or instrument pursuant to which such new Indebtedness is
outstanding, is expressly made pari passu with, or subordinate in right of
payment to, the remaining Notes, (B) in case the Indebtedness to be refinanced
is subordinated in right of payment to the Notes, such new Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which such new
Indebtedness is issued or remains outstanding, is expressly made subordinate in
right of payment to the Notes at least to the extent that the Indebtedness to be
refinanced is subordinated to the Notes and (C) such new Indebtedness,
determined as of the date of Incurrence of such new Indebtedness, does not
mature prior to the Stated Maturity of the Indebtedness to be refinanced or
refunded, and the Average Life of such new Indebtedness is at least equal to the
remaining Average Life of the Indebtedness to be refinanced or refunded; and
provided further that in no event may Indebtedness of the Company be refinanced
by means of any Indebtedness of any Restricted Subsidiary pursuant to this
clause (iii);
(iv) Indebtedness (A) in respect of performance, surety or
appeal bonds provided in the ordinary course of business, (B) under Currency
Agreements and Interest Rate Agreements; provided that such agreements (x) are
designed solely to protect the Company or its Subsidiaries against fluctuations
in foreign currency exchange rates or interest rates and (y) do not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by reason
of fees, indemnities and compensation payable thereunder; or (C) arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted Subsidiary
(other than Guarantees of Indebtedness Incurred by any Person acquiring all or
any portion of such business, assets or Restricted Subsidiary for the purpose of
financing such acquisition), in a principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted Subsidiary in
connection with such disposition;
(v) Indebtedness of the Company, to the extent the net
proceeds thereof are promptly (A) used to purchase Notes tendered in an Offer to
Purchase made as a result of a Change of Control or (B) deposited to defease the
Notes under Article Eight;
(vi) Guarantees of the Notes, Guarantees of Indebtedness
of Restricted Subsidiaries by the Company or by any Restricted Subsidiary if the
Restricted Subsidiary is permitted to Incur such Indebtedness under this
Indenture and Guarantees of Indebtedness of the Company by any Restricted
Subsidiary provided
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<PAGE> 51
the Guarantee of such Indebtedness is permitted by and made in accordance with
Section 4.07;
(vii) Indebtedness of the Company not to exceed, at any
one time outstanding, two times (A) the Net Cash Proceeds received by the
Company after the Closing Date as a capital contribution or from the issuance
and sale of its Capital Stock (other than Disqualified Stock) to a Person that
is not a Subsidiary of the Company, to the extent (I) such capital contribution
or Net Cash Proceeds have not been used pursuant to clause (C)(2) of the first
paragraph or clause (iii), (iv), (vi) or (vii) of the second paragraph of
Section 4.04 to make a Restricted Payment; and (II) if such capital contribution
or Net Cash Proceeds are used to consummate a transaction pursuant to which the
Company Incurs Acquired Indebtedness, the amount of such Net Cash Proceeds
exceeds one-half of the amount of Acquired Indebtedness so Incurred and (B) 80%
of the fair market value of property (other than cash and cash equivalents)
received by the Company after the Closing Date from the sale of its Capital
Stock (other than Disqualified Stock) to a Person that is not a Subsidiary of
the Company, to the extent (I) such capital contribution or sale of Capital
Stock has not been used pursuant to clause (iii), (iv), (vi) or (vii) of Section
4.04 to make a Restricted Payment and (II) if such capital contribution or
Capital Stock is used to consummate a transaction pursuant to which the Company
Incurs Acquired Indebtedness, 80% of the fair market value of the property
received exceeds one-half of the amount of Acquired Indebtedness so Incurred;
provided that such Indebtedness (other than Indebtedness Incurred under a
working capital or revolving credit facility) does not mature prior to the
Stated Maturity of the Notes and has an Average Life longer than the Notes;
(viii) Acquired Indebtedness;
(ix) Indebtedness of the Company Incurred to finance
capital expenditures of the Company or any Restricted Subsidiary in an aggregate
principal amount not to exceed $100.0 million in any fiscal year; provided that
amounts not so Incurred in any fiscal year may be accumulated and Incurred by
the Company in any subsequent fiscal year;
(x) Indebtedness of the Company Incurred to finance
seasonal or working capital requirements of the Company and its Restricted
Subsidiaries;
(xi) Strategic Subordinated Indebtedness; and
(xii) subordinated Indebtedness of the Company (in
addition to Indebtedness permitted under clauses (i) through (xi) above) in an
aggregate principal amount outstanding at any time not to exceed $300.0 million.
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(b) Notwithstanding any other provision of this Section 4.03, the
maximum amount of Indebtedness that the Company or a Restricted Subsidiary may
Incur pursuant to this Section 4.03 shall not be deemed to be exceeded, with
respect to any outstanding Indebtedness due solely to the result of fluctuations
in the exchange rates of currencies.
(c) For purposes of determining any particular amount of
Indebtedness under this Section 4.03, (1) Guarantees, Liens or obligations with
respect to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (2) any Liens
granted pursuant to the equal and ratable provisions referred to in Section 4.09
shall not be treated as Indebtedness. For purposes of determining compliance
with this Section 4.03, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, the Company, in its sole discretion, shall classify, and from time to
time may reclassify, such item of Indebtedness and only be required to include
the amount and type of such Indebtedness in one of such clauses.
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly: (i) declare or pay any dividend or make any
distribution on or with respect to its Capital Stock (other than (x) dividends
or distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire shares of
such Capital Stock and (y) pro rata dividends or distributions on Common Stock
of Restricted Subsidiaries held by minority stockholders) held by Persons other
than the Company or any of its Restricted Subsidiaries, (ii) purchase, redeem,
retire or otherwise acquire for value any shares of Capital Stock of (A) the
Company or an Unrestricted Subsidiary (including options, warrants or other
rights to acquire such shares of Capital Stock) held by any Person or (B) a
Restricted Subsidiary (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Affiliate of the Company (other than a
Wholly Owned Restricted Subsidiary) or any holder (or any Affiliate of such
holder) of 5% or more of the Capital Stock of the Company, (iii) make any
voluntary or optional principal payment, or voluntary or optional redemption,
repurchase, defeasance, or other acquisition or retirement for value, of
Indebtedness of the Company that is subordinated in right of payment to the
Notes or (iv) make any Investment, other than a Permitted Investment, in any
Person (such payments or any other actions described in clauses (i) through (iv)
above being collectively "Restricted Payments") if, at the time of, and after
giving effect to, the proposed Restricted Payment: (A) a Default or Event of
Default shall have occurred
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and be continuing, (B) the Company could not Incur at least $1.00 of
Indebtedness under the first paragraph of Section 4.03(a) or (C) the aggregate
amount of all Restricted Payments (the amount, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution) made after the Closing Date
shall exceed the sum of: (1) 50% of the aggregate amount of the Adjusted
Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss,
minus 100% of the amount of such loss) (determined by excluding income resulting
from transfers of assets by the Company or a Restricted Subsidiary to an
Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken
as one accounting period) beginning on the first day of the fiscal quarter
immediately following the Closing Date and ending on the last day of the last
fiscal quarter preceding the Transaction Date for which reports have been filed
with the Commission, plus (2) the aggregate Net Cash Proceeds received by the
Company after the Closing Date from the issuance and sale permitted by this
Indenture of its Capital Stock (other than Disqualified Stock) to a Person who
is not a Subsidiary of the Company, including an issuance or sale permitted by
this Indenture of Indebtedness of the Company for cash subsequent to the Closing
Date upon the conversion of such Indebtedness into Capital Stock (other than
Disqualified Stock) of the Company, or from the issuance to a Person who is not
a Subsidiary of the Company of any options, warrants or other rights to acquire
Capital Stock of the Company (in each case, exclusive of any Disqualified Stock
or any options, warrants or other rights that are redeemable at the option of
the holder, or are required to be redeemed, prior to the Stated Maturity of the
Notes), in each case except to the extent such Net Cash Proceeds are used to
Incur Indebtedness pursuant to clause (vii) of the second paragraph under
Section 4.03(a), plus (3) an amount equal to the net reduction in Investments
(other than reductions in Permitted Investments) in any Person resulting from
payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to the Company or any
Restricted Subsidiary or from the Net Cash Proceeds from the sale of any such
Investment (except, in each case, to the extent any such payment or proceeds are
included in the calculation of Adjusted Consolidated Net Income), or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued
in each case as provided in the definition of "Investments"), not to exceed, in
each case, the amount of Investments previously made by the Company or any
Restricted Subsidiary in such Person or Unrestricted Subsidiary.
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date of
declaration thereof if, at said date of declaration, such payment would comply
with the foregoing paragraph;
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(ii) the redemption, repurchase, defeasance or other acquisition
or retirement for value of Indebtedness that is subordinated in right of payment
to the Notes including premium, if any, and accrued and unpaid interest, with
the proceeds of, or in exchange for, Indebtedness Incurred under clause (iii) of
the second paragraph of Section 4.03(a);
(iii) the repurchase, redemption or other acquisition of Capital
Stock of the Company or a Subsidiary of the Company (or options, warrants or
other rights to acquire such Capital Stock) in exchange for, or out of the
proceeds of a capital contribution or a substantially concurrent offering of,
shares of Capital Stock (other than Disqualified Stock) of the Company (or
options, warrants or other rights to acquire such Capital Stock);
(iv) the making of any principal payment or the repurchase,
redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company which is subordinated in right of payment to the
Notes in exchange for, or out of the proceeds of, a capital contribution or a
substantially concurrent offering of, shares of the Capital Stock (other than
Disqualified Stock) of the Company (or options, warrants or other rights to
acquire such Capital Stock);
(v) payments or distributions, to dissenting stockholders
pursuant to applicable law, pursuant to or in connection with a consolidation,
merger or transfer of assets that complies with the provisions of this Indenture
applicable to mergers, consolidations and transfers of all or substantially all
of the property and assets of the Company;
(vi) Investments in any Person; provided that the aggregate
amount of Investments made pursuant to this clause (vi) does not exceed the sum
of (a) $50 million, plus (b) the amount of Net Cash Proceeds received by the
Company after the Closing Date from the sale of its Capital Stock (other than
Disqualified Stock) to a Person who is not a Subsidiary of the Company, except
to the extent such Net Cash Proceeds are used to Incur Indebtedness pursuant to
clause (vii) under the second paragraph of Section 4.03(a) or to make Restricted
Payments pursuant to clause (C)(2) of the first paragraph, or clauses (iii) or
(iv) of this paragraph, of this Section 4.04, plus (c) the net reduction in
Investments made pursuant to this clause (vi) resulting from distributions on or
repayments of such Investments or from the Net Cash Proceeds from the sale of
any such Investment (except in each case to the extent any such payment or
proceeds is included in the calculation of Adjusted Consolidated Net Income) or
from such Person becoming a Restricted Subsidiary (valued in each case as
provided in the definition of "Investments"), provided that the net reduction in
any Investment shall not exceed the amount of such Investment;
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(vii) Investments acquired in exchange for Capital Stock (other
than Disqualified Stock) of the Company;
(viii) the payment of dividends on (x) Preferred Stock issued by
a New Business Subsidiary and (y) Preferred Stock (other than Disqualified
Stock) issued by the Company that is convertible into Common Stock of the
Company;
(ix) the purchase, redemption or other acquisition or retirement
of Common Stock of the Company or any option or other right to acquire shares of
Common Stock of the Company (i) if such Common Stock, option or other right was
issued pursuant to a plan or arrangement approved by the Company's Board of
Directors, and such purchase, redemption or other acquisition or retirement (x)
occurs in accordance with the terms of such plan or arrangement, from former
employees of the Company and its Subsidiaries or their estates or (y) is from an
employee of the Company (other than Jeffrey P. Bezos and his Affiliates) and the
price paid by the Company to such employee is equal to the exercise or purchase
price paid by such employee and (ii) from employees of the Company or its
Subsidiaries in an amount not to exceed $2.0 million in any fiscal year;
provided that in the case of clause (ii) amounts not paid for any such purchase,
redemption or other acquisition or retirement in any fiscal year may be
accumulated and paid in any subsequent fiscal year; and
(x) other Restricted Payments in an aggregate amount not
to exceed $30.0 million;
provided that, except in the case of clauses (i) and (iii), no Default or Event
of Default shall have occurred and be continuing or occur as a consequence of
the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (ii) thereof and an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof), and the Net Cash Proceeds from any issuance of
Capital Stock referred to in clauses (iii), (iv) and (vi), shall be included in
calculating whether the conditions of clause (C) of the first paragraph of this
Section 4.04 have been met with respect to any subsequent Restricted Payments.
In the event the proceeds of an issuance of Capital Stock of the Company are
used for the redemption, repurchase or other acquisition of the Notes, or
Indebtedness that is pari passu with the Notes, then the Net Cash Proceeds of
such issuance shall be included in clause (C) of the first paragraph of this
Section 4.04 only to the extent such proceeds are not used for such redemption,
repurchase or other acquisition of Indebtedness.
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SECTION 4.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES
The Company shall not, and shall not permit any Restricted Subsidiary
other than a New Business Subsidiary to, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (i) pay dividends or make any
other distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(i) existing on the Closing Date in this Indenture or any other
agreements in effect on the Closing Date, and any amendments, extensions,
refinancings, renewals or replacements of such agreements; provided that the
amendments, encumbrances and restrictions in any such extensions, refinancings,
renewals or replacements are no less favorable in any material respect to the
Holders than those encumbrances or restrictions that are then in effect and that
are being extended, refinanced, renewed or replaced;
(ii) existing under or by reason of applicable law;
(iii) existing with respect to any Person or the property or
assets of such Person acquired by the Company or any Restricted Subsidiary,
existing at the time of such acquisition and not incurred in contemplation
thereof, which encumbrances or restrictions are not applicable to any Person or
the property or assets of any Person other than such Person or the property or
assets of such Person so acquired;
(iv) in the case of clause (iv) of the first paragraph of this
Section 4.05, (A) that restrict in a customary manner the subletting, assignment
or transfer of any property or asset that is a lease, license, conveyance or
contract or similar property or asset, (B) existing by virtue of any transfer
of, agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any Restricted Subsidiary not otherwise
prohibited by this Indenture or (C) arising or agreed to in the ordinary course
of business, not relating to any Indebtedness, and that do not, individually or
in the aggregate, detract from the value of property or assets of the Company or
any Restricted Subsidiary in any manner material to the Company or any
Restricted Subsidiary;
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(v) with respect to a Restricted Subsidiary and imposed pursuant
to an agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary; or
(vi) contained in the terms of any Indebtedness or any agreement
pursuant to which such Indebtedness was issued if (A) the encumbrance or
restriction applies only in the event of a payment default or a default with
respect to a financial covenant contained in such Indebtedness or agreement, (B)
the encumbrance or restriction is not materially more disadvantageous to the
Holders of the Notes than is customary in comparable financings (as determined
by the Company) and (C) the Company determines that any such encumbrance or
restriction will not materially affect the Company's ability to make principal
or interest payments on the Notes.
Nothing contained in this Section 4.05 shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in Section 4.09 or (2) restricting the sale
or other disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any of its
Restricted Subsidiaries.
SECTION 4.06. LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
The Company shall not sell, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell, any shares of Capital
Stock of a Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) except (i) to the Company or a Wholly
Owned Restricted Subsidiary; (ii) issuances of director's qualifying shares or
sales to foreign nationals of shares of Capital Stock of foreign Restricted
Subsidiaries, to the extent required by applicable law; (iii) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect to such issuance or sale would have been permitted
to be made under Section 4.04 if made on the date of such issuance or sale; or
(iv) issuances or sales of (x) Common Stock of a Restricted Subsidiary; provided
that the Company or such Restricted Subsidiary applies the Net Cash Proceeds, if
any, of any such sale (other than any sale of Common Stock of a New Business
Subsidiary) in accordance with clause (A) or (B) of the first paragraph of
Section 4.10 and (y) Preferred Stock of a New Business Subsidiary.
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SECTION 4.07. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED GROUP MEMBERS
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to this Indenture providing for a
Guarantee (a "Subsidiary Guarantee") of payment of the Notes by such Restricted
Subsidiary and (ii) such Restricted Subsidiary waives and shall not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any Guarantee of any Restricted Subsidiary (x) that existed
at the time such Person became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary or (y) Indebtedness Incurred under a working capital or revolving
credit facility. If the Guaranteed Indebtedness is (A) pari passu with the
Notes, then the Guarantee of such Guaranteed Indebtedness shall be pari passu
with, or subordinated to, the Subsidiary Guarantee or (B) subordinated to the
Notes, then the Guarantee of such Guaranteed Indebtedness shall be subordinated
to the Subsidiary Guarantee at least to the extent that the Guaranteed
Indebtedness is subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by this Indenture) or (ii) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any holder (or any
Affiliate of such holder) of 5% or more of any
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class of Capital Stock of the Company or with any Affiliate of the Company or
any Restricted Subsidiary, except upon fair and reasonable terms no less
favorable to the Company or such Restricted Subsidiary than could be obtained,
at the time of such transaction or, if such transaction is pursuant to a written
agreement, at the time of the execution of the agreement providing therefor, in
a comparable arm's-length transaction with a Person that is not such a holder or
an Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(i) transactions (A) approved by a majority of the disinterested
members of the Board of Directors or (B) for which the Company or a Restricted
Subsidiary delivers to the Trustee a written opinion of a nationally recognized
investment banking firm stating that the transaction is fair to the Company or
such Restricted Subsidiary from a financial point of view;
(ii) any transaction solely between the Company and any of its
Restricted Subsidiaries or solely between Restricted Subsidiaries;
(iii) the payment of reasonable and customary regular fees to
directors of the Company who are not employees of the Company;
(iv) any payments or other transactions pursuant to any
tax-sharing agreement between the Company and any other Person with which the
Company files a consolidated tax return or with which the Company is part of a
consolidated group for tax purposes; or
(v) any Restricted Payments not prohibited by Section 4.04.
Notwithstanding the foregoing, any transaction or series of related
transactions covered by the first paragraph of this Section 4.08 and not covered
by clauses (ii) through (v) of this paragraph, the aggregate amount of which
exceeds $5.0 million in value, must be approved or determined to be fair in the
manner provided for in clause (i)(A) or (B) above.
SECTION 4.09. LIMITATION ON LIENS
The Company shall not, and shall not permit any Restricted Subsidiary
to, create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character (including, without limitation, licenses), or any
shares of Capital Stock or Indebtedness of any Restricted Subsidiary, without
making effective provision for all of the Notes and all other amounts due under
this Indenture to be directly secured equally and ratably with (or, if the
obligation or liability to be secured by such Lien is
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subordinated in right of payment to the Notes, prior to) the obligation or
liability secured by such Lien for so long as such obligation or liability is so
secured.
The foregoing limitation does not apply to:
(i) Liens existing on the Closing Date;
(ii) Liens granted after the Closing Date on any assets or
Capital Stock of the Company or its Restricted Subsidiaries created in favor of
the Holders;
(iii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to the Company or such other
Restricted Subsidiary;
(iv) Liens securing Indebtedness which is Incurred to refinance
secured Indebtedness which is permitted to be Incurred under clause (iii) of the
second paragraph of Section 4.03(a); provided that such Liens do not extend to
or cover any property or assets of the Company or any Restricted Subsidiary
other than the property or assets securing the Indebtedness being refinanced;
(v) Liens on the Capital Stock of, or any property or assets of,
a Restricted Subsidiary securing Indebtedness of such Restricted Subsidiary
permitted under Section 4.03; or
(vi) Permitted Liens.
SECTION 4.10. LIMITATION ON ASSET SALES
The Company shall not, and shall not permit any Restricted Subsidiary
to, consummate any Asset Sale, unless (i) the consideration received by the
Company or such Restricted Subsidiary is at least equal to the fair market value
of the assets sold or disposed of and (ii) at least 85% of the consideration
received consists of cash or Temporary Cash Investments. In the event and to the
extent that the Net Cash Proceeds received by the Company or any of its
Restricted Subsidiaries from one or more Asset Sales occurring on or after the
Closing Date in any period of 12 consecutive months exceed 10% of Adjusted
Consolidated Net Tangible Assets (determined as of the date closest to the
commencement of such 12-month period for which a consolidated balance sheet of
the Company and its Subsidiaries has been filed with the Commission), then the
Company shall or shall cause the relevant Restricted Subsidiary to (i) within 18
months after the date Net Cash Proceeds so received exceed 10% of Adjusted
Consolidated Net Tangible Assets (A) apply an amount equal to such excess Net
Cash Proceeds to permanently repay unsubordinated Indebtedness
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of the Company, or any Restricted Subsidiary providing a Subsidiary Guarantee
pursuant to Section 4.07 or Indebtedness of any other Restricted Subsidiary, in
each case owing to a Person other than the Company or any of its Restricted
Subsidiaries or (B) invest an equal amount, or the amount not so applied
pursuant to clause (A) (or enter into a definitive agreement committing to so
invest within 18 months after the date of such agreement), in property or assets
(other than current assets) of a nature or type or that are used in a business
(or in a company having property and assets of a nature or type, or engaged in a
business) similar or related to the nature or type of the property and assets
of, or the business of, the Company and its Restricted Subsidiaries existing on
the date of such investment (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) and (ii) apply (no later than the end of the 18-month period
referred to in clause (i)) such excess Net Cash Proceeds (to the extent not
applied pursuant to clause (i)) as provided in the following paragraph of this
Section 4.10. The amount of such excess Net Cash Proceeds required to be applied
(or to be committed to be applied) during such 18-month period as set forth in
clause (i) of the preceding sentence and not applied as so required by the end
of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section 4.10 totals at least $10.0 million, the Company must commence, not later
than the fifteenth Business Day of such month, and consummate an Offer to
Purchase from the Holders on a pro rata basis an aggregate Accreted Value of
Notes equal to the Excess Proceeds on such date, at a purchase price equal to
100% of the Accreted Value of the Notes on the relevant Payment Date, plus, in
each case, accrued interest (if any) to the Payment Date.
SECTION 4.11. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
The Company shall commence, within 30 days of the occurrence of a Change
of Control, and consummate an Offer to Purchase for all Notes then outstanding,
at a purchase price equal to 101% of the Accreted Value thereof on the relevant
Payment Date, plus accrued interest (if any) to the Payment Date.
SECTION 4.12. EXISTENCE
Subject to Articles Four and Five of this Indenture, the Company shall
do or cause to be done all things necessary to preserve and keep in full force
and effect its existence and the existence of each Restricted Subsidiary in
accordance with the respective organizational documents of the Company and each
Restricted Subsidiary and the rights (whether pursuant to charter, partnership
certificate, agreement, statute
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or otherwise), material licenses and franchises of the Company and each
Restricted Subsidiary; provided that the Company shall not be required to
preserve any such right, license or franchise, or the existence of any
Restricted Subsidiary, if the maintenance or preservation thereof is no longer
desirable in the conduct of the business of the Company and its Restricted
Subsidiary taken as a whole.
SECTION 4.13. PAYMENT OF TAXES AND OTHER CLAIMS
The Company shall pay or discharge and shall cause each of its
Restricted Subsidiaries to pay or discharge, or cause to be paid or discharged,
before the same shall become delinquent (i) all material taxes, assessments and
governmental charges levied or imposed upon (a) the Company or any such
Restricted Subsidiary, (b) the income or profits of any such Restricted
Subsidiary which is a corporation or (c) the property of the Company or any such
Restricted Subsidiaries and (ii) all material lawful claims for labor, materials
and supplies that, if unpaid, might by law become a lien upon the property of
the Company or any such Restricted Subsidiary; provided that the Company shall
not be required to pay or discharge, or cause to be paid or discharged, any such
tax, assessment, charge or claim the amount, applicability or validity of which
is being contested in good faith by appropriate proceedings and for which
adequate reserves have been established.
SECTION 4.14. MAINTENANCE OF PROPERTIES AND INSURANCE
The Company shall cause all properties used or useful in the conduct of
its business or the business of any of its Restricted Subsidiaries to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment, and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly conducted at all times; provided that
nothing in this Section 4.14 shall prevent the Company or any such Restricted
Subsidiary from discontinuing the use, operation or maintenance of any of such
properties or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Company, desirable in the conduct of the business of the
Company or such Restricted Subsidiary.
The Company shall provide or cause to be provided, for itself and its
Restricted Subsidiary, insurance (including appropriate self-insurance) against
loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, with reputable insurers or with
the government of the United States of America, or an agency or instrumentality
thereof, in such amounts, with such deductibles and by such methods as shall be
customary for corporations similarly
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situated in the industry in which the Company or such Restricted Subsidiary, as
the case may be, is then conducting business.
SECTION 4.15. NOTICE OF DEFAULTS
In the event that the Company becomes aware of any Default or Event of
Default, the Company, promptly after it becomes aware thereof, shall give
written notice thereof to the Trustee.
SECTION 4.16. COMPLIANCE CERTIFICATES
(a) The Company shall deliver to the Trustee, within 45 days after the
end of each fiscal quarter (90 days after the end of the last fiscal quarter of
each year), an Officers' Certificate stating whether or not the signers know of
any Default or Event of Default that occurred during such fiscal quarter. In the
case of the Officers' Certificate delivered within 90 days of the end of the
Company's fiscal year, such certificate shall contain a certification from the
principal executive officer, principal financial officer or principal accounting
officer that a review has been conducted of the activities of the Company and
its Restricted Subsidiaries and the Company's performance under this Indenture
and that, to the knowledge of such Officers, the Company has complied with all
conditions and covenants under this Indenture. For purposes of this Section
4.16, such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Indenture. If they do know of such
a Default or Event of Default, the certificate shall describe any such Default
or Event of Default and its status. The first certificate to be delivered
pursuant to this Section 4.16(a) shall be for the first fiscal quarter beginning
after the execution of this Indenture.
(b) So long as (and to the extent) not prohibited by the then current
recommendations of the American Institute of Certified Public Accountants, the
Company shall deliver to the Trustee, within 90 days after the end of the
Company's fiscal year, a certificate signed by the Company's independent
certified public accountants stating (i) that their audit examination has
included a review of the terms of this Indenture and the Notes as they relate to
accounting matters, (ii) that they have read the most recent Officers'
Certificate delivered to the Trustee pursuant to paragraph (a) of this Section
4.16 and (iii) whether, in connection with their audit examination, anything
came to their attention that caused them to believe that the Company was not in
compliance with any of the terms, covenants, provisions or conditions of Article
Four and Section 5.01 of this Indenture as they pertain to accounting matters
and, if any Default or Event of Default has come to their attention, specifying
the nature and period of existence thereof; provided that such independent
certified public accountants shall not be liable in respect of such statement by
reason
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of any failure to obtain knowledge of any such Default or Event of Default that
would not be disclosed in the course of an audit examination conducted in
accordance with generally accepted auditing standards in effect at the date of
such examination.
SECTION 4.17. COMMISSION REPORTS AND REPORTS TO HOLDERS
Whether or not the Company is required to file reports with the
Commission, for so long as any Notes are outstanding the Company shall file with
the Commission all such reports and other information as it would be required to
file with the Commission by Sections 13(a) or 15(d) under the Securities
Exchange Act of 1934 if it were subject thereto. The Company shall supply the
Trustee and each Holder or shall supply to the Trustee for forwarding to each
such Holder, without cost to such Holder, copies of such reports and other
information. Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates). The Company also shall
comply with the other provisions of TIA Section 314(a).
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates.
SECTION 4.18. WAIVER OF STAY, EXTENSION OR USURY LAWS
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law that would prohibit or forgive the Company from paying all or any
portion of the principal of, premium, if any, or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
that may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law and covenants that it shall not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
had been enacted.
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SECTION 4.19. LIMITATION ON SALE-LEASEBACK TRANSACTIONS
The Company shall not, and shall not permit any Restricted Subsidiary
to, enter into any sale-leaseback transaction involving any of its assets or
properties whether now owned or hereafter acquired, whereby the Company or a
Restricted Subsidiary sells or transfers such assets or properties and then or
thereafter leases such assets or properties or any part thereof or any other
assets or properties which the Company or such Restricted Subsidiary, as the
case may be, intends to use for substantially the same purpose or purposes as
the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback
transaction if:
(i) the lease is for a period, including renewal rights, of not
in excess of three years;
(ii) the lease secures or relates to industrial revenue or
pollution control bonds;
(iii) the transaction is solely between the Company and any
Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted
Subsidiaries; or
(iv) the Company or such Restricted Subsidiary, within 12 months
after the sale or transfer of any assets or properties is completed, applies an
amount not less than the net proceeds received from such sale in accordance with
clause (A) or (B) of the first paragraph of Section 4.10.
SECTION 4.20. CALCULATION OF ORIGINAL ISSUE DISCOUNT
The Company shall file with the Trustee promptly at the end of each
calendar year (i) a written notice specifying the amount of original issue
discount (including daily rates and accrual periods) accrued on outstanding
Notes as of the end of such year and (ii) such other specific information
relating to such original issue discount as may then be relevant under the
Internal Revenue Code of 1986, as amended from time to time.
ARTICLE 5 - SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC.
The Company shall not consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
property and assets
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(as an entirety or substantially an entirety in one transaction or a series of
related transactions) to, any Person or permit any Person to merge with or into
the Company unless:
(i) the Company shall be the continuing Person, or the Person (if
other than the Company) formed by such consolidation or into which the Company
is merged or that acquired or leased such property and assets of the Company
shall be a corporation organized and validly existing under the laws of the
United States of America or any jurisdiction thereof and shall expressly assume,
by a supplemental indenture, executed and delivered to the Trustee, all of the
obligations of the Company on all of the Notes and under this Indenture;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a
pro forma basis the Company, or any Person becoming the successor obligor of the
Notes, as the case may be, could Incur at least $1.00 of Indebtedness under the
first paragraph of Section 4.03; provided that this clause (iii) shall not apply
to a consolidation, merger or sale of all (but not less than all) of the assets
of the Company if all Liens and Indebtedness of the Company or any Person
becoming the successor obligor on the Notes, as the case may be, and its
Restricted Subsidiaries outstanding immediately after such transaction would, if
Incurred at such time, have been permitted to be Incurred (and all such Liens
and Indebtedness, other than Liens and Indebtedness of the Company and its
Restricted Subsidiaries outstanding immediately prior to the transaction, shall
be deemed to have been Incurred) for all purposes of this Indenture; and
(iv) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with clause
(iii) above) and Opinion of Counsel, in each case stating that such
consolidation, merger or transfer and such supplemental indenture complies with
this provision and that all conditions precedent provided for herein relating to
such transaction have been complied with;
provided, however, that clause (iii) above does not apply if, in the good faith
determination of the Board of Directors of the Company, whose determination
shall be evidenced by a Board Resolution, the principal purpose of such
transaction is to change the state of incorporation of the Company and any such
transaction shall not have as one of its purposes the evasion of the foregoing
limitations.
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SECTION 5.02. SUCCESSOR SUBSTITUTED
Upon any consolidation or merger, or any sale, conveyance, transfer,
lease or other disposition of all or substantially all of the property and
assets of the Company in accordance with Section 5.01 of this Indenture, the
successor Person formed by such consolidation or into which the Company is
merged or to which such sale, conveyance, transfer, lease or other disposition
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein and thereafter the
predecessor corporation shall be relieved of all obligations and covenants under
this Indenture and the Notes; provided that the Company shall not be released
from its obligation to pay the principal of, premium, if any, or interest on the
Notes in the case of a lease of all or substantially all of its property and
assets.
ARTICLE 6 - DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT
An "Event of Default" shall occur with respect to the Notes if:
(a) the Company defaults in the payment of principal of (or
premium, if any, on) any Note when the same becomes due and payable at maturity,
upon acceleration, redemption or otherwise;
(b) the Company defaults in the payment of interest on any Note
when the same becomes due and payable, and such default continues for a period
of 30 days;
(c) the Company defaults in the performance or breach of the
provisions of Article Five or the failure to make or consummate an Offer to
Purchase in accordance with Section 4.10 or Section 4.11;
(d) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company in this Indenture or under the Notes
(other than a default specified in clause (a), (b) or (c) above) and such
default or breach continues for a period of 30 consecutive days after written
notice by the Trustee or the Holders of 25% or more in aggregate principal
amount at maturity of the Notes;
(e) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an outstanding
principal amount of $10.0 million or more in the aggregate for all such issues
of all such Persons, whether
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such Indebtedness now exists or shall hereafter be created, (I) an event of
default that has caused the holder thereof to declare such Indebtedness to be
due and payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 60 days of such acceleration and/or (II) the failure to make a principal
payment at the final (but not any interim) fixed maturity and such defaulted
payment shall not have been made, waived or extended within 60 days of such
payment default;
(f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Company or any Significant Subsidiary and shall not be paid or discharged, and
there shall be any period of 60 consecutive days following entry of the final
judgment or order that causes the aggregate amount for all such final judgments
or orders outstanding and not paid or discharged against all such Persons to
exceed $10 million during which a stay of enforcement of such final judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree
or order for (A) relief in respect of the Company or any Significant Subsidiary
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, (B) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any Significant Subsidiary or for all or substantially all of the
property and assets of the Company or any Significant Subsidiary or (C) the
winding up or liquidation of the affairs of the Company or any Significant
Subsidiary and, in each case, such decree or order shall remain unstayed and in
effect for a period of 30 consecutive days; or
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consents to the entry of an order for relief in
an involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the benefit of
creditors.
SECTION 6.02. ACCELERATION
If an Event of Default (other than an Event of Default specified in
clause (g) or (h) above that occurs with respect to the Company) occurs and is
continuing under
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this Indenture, the Trustee or the Holders of at least 25% in aggregate
principal amount at maturity of the Notes, then outstanding, by written notice
to the Company (and to the Trustee if such notice is given by the Holders), may,
and the Trustee at the request of such Holders shall, declare the Accreted Value
of, premium, if any, and accrued interest on the Notes to be immediately due and
payable. Upon a declaration of acceleration, such Accreted Value of, premium, if
any, and accrued interest shall be immediately due and payable. In the event of
a declaration of acceleration because an Event of Default set forth in clause
(e) above has occurred and is continuing, such declaration of acceleration shall
be automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured by the
Company or the relevant Significant Subsidiary or waived by the holders of the
relevant Indebtedness within 60 days after the declaration of acceleration with
respect thereto. If an Event of Default specified in clause (g) or (h) above
occurs with respect to the Company, the Accreted Value of, premium, if any, and
accrued interest on the Notes then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
At any time after such a declaration of acceleration, but before a
judgment or decree for the payment of the money due has been obtained by the
Trustee, the Holders of at least a majority in principal amount of the
outstanding Notes by written notice to the Company and to the Trustee, may waive
all past Defaults and rescind and annul such declaration of acceleration and its
consequences if (i) all existing Events of Default, other than the non-payment
of the Accreted Value of, premium, if any, and accrued interest on the Notes
that have become due solely by such declaration of acceleration, have been cured
or waived and (ii) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction.
SECTION 6.03. OTHER REMEDIES
If an Event of Default occurs and is continuing, the Trustee may, and at
the direction of the Holders of at least a majority in aggregate principal
amount at maturity of the outstanding Notes shall pursue any available remedy by
proceeding at law or in equity to collect the payment of the Accreted Value of,
premium, if any, or interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding.
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SECTION 6.04. WAIVER OF PAST DEFAULTS
Subject to Sections 6.02, 6.07 and 9.02, the Holders of at least a
majority in aggregate principal amount at maturity of the outstanding Notes, by
notice to the Company and the Trustee, may waive an existing Default or Event of
Default and its consequences, except a Default in the payment of principal of,
premium, if any, or interest on any Note as specified in clause (a) or (b) of
Section 6.01 or in respect of a covenant or provision of this Indenture which
cannot be modified or amended without the consent of the holder of each
outstanding Note affected. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereto.
SECTION 6.05. CONTROL BY MAJORITY
The Holders of at least a majority in aggregate principal amount at
maturity may direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that may involve the Trustee in personal
liability, or that the Trustee determines in good faith may be unduly
prejudicial to the rights of Holders of Notes not joining in the giving of such
direction and may take any other action it deems proper that is not inconsistent
with any such direction received from Holders of Notes.
SECTION 6.06. LIMITATION ON SUITS
A Holder may not institute any proceeding, judicial or otherwise, with
respect to this Indenture or the Notes, or for the appointment of a receiver or
trustee, or for any other remedy hereunder unless:
(i) such Holder has previously given the Trustee written notice
of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount at
maturity of outstanding Notes shall have made a written request to the Trustee
to institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(iii) such Holder or Holders have offered the Trustee indemnity
reasonably satisfactory to the Trustee against any costs, liabilities or
expenses to be incurred in compliance with such request;
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(iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity and has failed to
institute any such proceeding; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount at maturity of the outstanding Notes do not give the
Trustee a direction that is inconsistent with such written request.
For purposes of Section 6.05 of this Indenture and this Section 6.06,
the Trustee shall comply with TIA Section 316(a) in making any determination of
whether the Holders of the required aggregate principal amount of outstanding
Notes have concurred in any request or direction of the Trustee to pursue any
remedy available to the Trustee or the Holders with respect to this Indenture or
the Notes or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
The limitations set forth in this Section 6.06 shall not apply to the
right of any Holder of a Note to receive payment of the Accreted Value of,
premium, if any, or interest on, such Note or to bring suit for the enforcement
of any such payment, on or after the due date expressed in the Notes, which
right shall not be impaired or affected without the consent of the Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of the principal of, premium, if any, or
interest on, such Note or to bring suit for the enforcement of any such payment,
on or after the due date expressed in the Notes, shall not be impaired or
affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE
If an Event of Default in payment of principal, premium or interest
specified in clause (a), (b) or (c) of Section 6.01 occurs and is continuing,
the Trustee may recover judgment in its own name and as trustee of an express
trust against the Company or any other obligor of the Notes for the whole amount
of principal, premium, if any, and accrued interest remaining unpaid, together
with interest on overdue principal, premium, if any, and, to the extent that
payment of such interest is lawful, interest on overdue installments of
interest, in each case at the rate specified in the Notes, and such further
amount as shall be sufficient to cover the costs and expenses of
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collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07) and the Holders allowed in any judicial
proceedings relative to the Company (or any other obligor of the Notes), its
creditors or its property and shall be entitled and empowered to collect and
receive any monies, securities or other property payable or deliverable upon
conversion or exchange of the Notes or upon any such claims and to distribute
the same, and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to empower the Trustee to authorize or consent
to, or accept or adopt on behalf of any Holder, any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the claim of
any Holder in any such proceeding.
SECTION 6.10. PRIORITIES
If the Trustee collects any money pursuant to this Article Six, it shall
pay out the money in the following order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to Holders for amounts then due and unpaid for Accreted
Value, premium, if any, and interest on the Notes in respect of
which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to
the amounts due and payable on such Notes for principal, premium,
if any, and interest, respectively; and
Third: to the Company.
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The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may require any party litigant in such suit to file an
undertaking to pay the costs of the suit, and the court may assess reasonable
costs, including reasonable attorneys' fees and expenses, against any party
litigant in the suit having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 of this
Indenture, or a suit by Holders of more than 10% in principal amount of the
outstanding Notes.
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then, and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Company, Trustee and the Holders shall
continue as though no such proceeding had been instituted.
SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or wrongfully taken Notes in Section 2.09, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 6.14. DELAY OR OMISSION NOT WAIVER
No delay or omission of the Trustee or of any Holder to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or
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constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Six or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
ARTICLE 7 - TRUSTEE
SECTION 7.01. GENERAL
The duties and responsibilities of the Trustee shall be as provided by
the TIA and as set forth herein. Notwithstanding the foregoing, no provision of
this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Article Seven.
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE
Subject to TIA Sections 315(a) through (d):
(i) the Trustee may rely, and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document (whether in its
original or facsimile form) believed by it to be genuine and to have been signed
or presented by the proper person. The Trustee need not investigate any fact or
matter stated in any such document;
(ii) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, which shall conform
to Section 10.04. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such certificate or opinion;
(iii) the Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care;
(iv) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders, unless such Holders shall have offered to the Trustee
reasonable security or
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indemnity against the costs, expenses and liabilities that might be incurred by
it in compliance with such request or direction;
(v) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers or for any action it takes or omits to take in accordance with
the direction of the Holders of a majority in principal amount at maturity of
the outstanding Notes relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture; provided that the
Trustee's conduct does not constitute gross negligence or bad faith;
(vi) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of wilful misconduct on
its part, conclusively rely upon an Officers' Certificate; and
(vii) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Company personally or by agent or
attorney at the sole cost of the Company and shall incur no liability or
additional liability of any kind by reason of such inquiry or investigation.
(viii) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE
The Trustee, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not the Trustee. Any
Agent may do the same with like rights. However, the Trustee is subject to TIA
Sections 310(b) and 311.
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SECTION 7.04. TRUSTEE'S DISCLAIMER
The Trustee (i) makes no representation as to the validity or adequacy
of this Indenture or the Notes, (ii) shall not be accountable for the Company's
use or application of the proceeds from the Notes and (iii) shall not be
responsible for any statement in the Notes other than its certificate of
authentication.
SECTION 7.05. NOTICE OF DEFAULT
If any Default or any Event of Default occurs and is continuing and if
such Default or Event of Default is known to the Trustee, the Trustee shall mail
to each Holder in the manner and to the extent provided in TIA.
Section 313(c) notice of the Default or Event of Default within 45 days
after it occurs, unless such Default or Event of Default has been cured;
provided, however, that, except in the case of a default in the payment of the
principal of, premium, if any, or interest on any Note, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interest of the Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS
Within 60 days after each May 15, beginning with May 15, 1999, the
Trustee shall mail to each Holder as provided in TIA Section 313(c) a brief
report dated as of such May 15, if required by TIA Section 313(a).
SECTION 7.07. COMPENSATION AND INDEMNITY
The Company shall pay to the Trustee such compensation as shall be
agreed upon in writing for its services. The compensation of the Trustee shall
not be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses and advances incurred or made by the Trustee. Such
expenses shall include the reasonable compensation and expenses of the Trustee's
agents and counsel.
The Company shall indemnify each of the Trustee and any predecessor
Trustee for, and hold it harmless against, any and all loss, claim, damage or
liability or expense, including taxes (other than taxes based upon, measured by
or determined by the income of the Trustee) incurred by it without negligence or
wilful misconduct on its part in connection with the acceptance or
administration of this Indenture and its duties under this Indenture and the
Notes, including the costs and expenses of
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defending itself against any claim or liability and of complying with any
process served upon it or any of its officers in connection with the exercise or
performance of any of its powers or duties under this Indenture and the Notes.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay principal of, premium, if any, and interest on particular
Notes.
If the Trustee incurs expenses or renders services after the occurrence
of an Event of Default specified in clause (g) or (h) of Section 6.01, the
expenses and the compensation for the services shall be intended to constitute
expenses of administration under Title 11 of the United States Bankruptcy Code
or any applicable federal or state law for the relief of debtors.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 7.08. REPLACEMENT OF TRUSTEE
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign at any time by so notifying the Company in
writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Trustee in writing and may appoint a successor
Trustee with the consent of the Company. The Company may remove the Trustee if:
(i) the Trustee is no longer eligible under Section 7.10; (ii) the Trustee is
adjudged bankrupt or insolvent; (iii) a receiver or other public officer takes
charge of the Trustee or its property; or (iv) the Trustee becomes incapable of
acting.
If the Trustee resigns or is removed, or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not deliver its written acceptance required by the
next succeeding paragraph of this Section 7.08 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the Holders
of a majority in principal amount of the outstanding Notes may petition, at the
expense of the Company, any court of competent jurisdiction for the appointment
of a successor Trustee.
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A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, (ii) the resignation or removal of the retiring
Trustee shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder.
If the Trustee is no longer eligible under Section 7.10, any Holder who
satisfies the requirements of TIA Section 310(b) may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
The Company shall give notice of any resignation and any removal of the
Trustee and each appointment of a successor Trustee to all Holders. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligation under Section 7.07 shall continue for the benefit
of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another corporation
or national banking association, the resulting, surviving or transferee
corporation or national banking association without any further act shall be the
successor Trustee with the same effect as if the successor Trustee had been
named as the Trustee herein.
SECTION 7.10. ELIGIBILITY
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee shall have a combined capital
and surplus of at least $25,000,000 as set forth in its most recent published
annual report of condition.
SECTION 7.11. MONEY HELD IN TRUST
The Trustee shall not be liable for interest on any money received by it
except as the Trustee may agree in writing with the Company. Money held in trust
by the Trustee need not be segregated from other funds except to the extent
required by law and except for money held in trust under Article Eight of this
Indenture.
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SECTION 7.12. WITHHOLDING TAXES
The Trustee, as agent for the Company, shall exclude and withhold from
each payment of principal and interest and other amounts due hereunder or under
the Notes any and all withholding taxes applicable thereto as required by law.
The Trustee agrees to act as such withholding agent and, in connection
therewith, whenever any present or future taxes or similar charges are required
to be withheld with respect to any amounts payable in respect of the Notes, to
withhold such amounts and timely pay the same to the appropriate authority in
the name of and on behalf of the Holders of the Notes, that it shall file any
necessary withholding tax returns or statements when due. The Company or the
Trustee shall, as promptly as possible after the payment of the taxes described
above, deliver to each Holder of a Note appropriate documentation showing the
payment thereof, together with such additional documentary evidence as such
holders may reasonably request from time to time.
SECTION 7.13 TRUSTEE'S APPLICATION FOR INSTRUCTIONS FROM THE COMPANY
Any application by the Trustee for written instructions from the Company
may, at the option of the Trustee, set forth in writing any action proposed to
be taken or omitted by the Trustee under this Indenture and the date on and/or
after which such action shall be taken or such omission shall be effective. The
Trustee shall not be liable to the Company for any action taken by, or omission
of, the Trustee in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less than
three Business Days after the date any officer of the Company actually receives
such application, unless any such officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken or omitted.
ARTICLE 8 - DISCHARGE OF INDENTURE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS
Except as otherwise provided in this Section 8.01, the Company may
terminate its obligations under the Notes and this Indenture if:
(i) all Notes previously authenticated and delivered (other than
destroyed, lost or stolen Notes that have been replaced or Notes that are paid
pursuant to Section 4.01 or Notes for whose payment money or securities have
theretofore been held in trust and thereafter repaid to the Company, as provided
in Section 8.05) have
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been delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder; or
(ii) (A) the Notes mature within one year or all of them are to
be called for redemption within one year under arrangements satisfactory to the
Trustee for giving the notice of redemption, (B) the Company irrevocably
deposits in trust with the Trustee during such one-year period, under the terms
of an irrevocable trust agreement in form and substance satisfactory to the
Trustee, as trust funds solely for the benefit of the Holders for that purpose,
money or U.S. Government Obligations sufficient (in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee), without consideration of any
reinvestment of any interest thereon, to pay principal, premium, if, any, and
interest on the Notes to maturity or redemption, as the case may be, and to pay
all other sums payable by it hereunder, (C) no Default or Event of Default with
respect to the Notes shall have occurred and be continuing on the date of such
deposit, (D) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or instrument
to which the Company is a party or by which it is bound and (E) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in
each case stating that all conditions precedent provided for herein relating to
the satisfaction and discharge of this Indenture have been complied with.
With respect to the foregoing clause (i), the Company's obligations
under Section 7.07 shall survive. With respect to the foregoing clause (ii), the
Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the
Notes are no longer outstanding. Thereafter, only the Company's obligations in
Sections 7.07, 8.05 and 8.06 shall survive. After any such irrevocable deposit,
the Trustee upon request shall acknowledge in writing the discharge of the
Company's obligations under the Notes and this Indenture except for those
surviving obligations specified above.
SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE
The Company shall be deemed to have paid and shall be discharged from
any and all obligations in respect of the Notes on the 123rd day after the date
of the deposit referred to in clause (A) of this Section 8.02, and the
provisions of this Indenture shall no longer be in effect with respect to the
Notes, and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same, except as to (i) rights of registration of
transfer and exchange, (ii) substitution of apparently mutilated, defaced,
destroyed, lost or stolen Notes, (iii) rights of Holders to receive payments of
principal thereof and interest thereon, (iv) the Company's obligations under
Section 4.02, (v) the rights, obligations and immunities of the
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Trustee hereunder and (vi) the rights of the Holders as beneficiaries of this
Indenture with respect to the property so deposited with the Trustee payable to
all or any of them; provided that the following conditions shall have been
satisfied:
(A) with reference to this Section 8.02, the Company has
irrevocably deposited or caused to be irrevocably deposited with the Trustee (or
another trustee satisfying the requirements of Section 7.10 of this Indenture)
and conveyed all right, title and interest for the benefit of the Holders, under
the terms of an irrevocable trust agreement in form and substance satisfactory
to the Trustee as trust funds in trust, specifically pledged to the Trustee for
the benefit of the Holders as security for payment of the principal of, premium,
if any, and interest, if any, on the Notes, and dedicated solely to, the benefit
of the Holders, in and to (1) money in an amount, (2) U.S. Government
Obligations that, through the payment of interest, premium, if any, and
principal in respect thereof in accordance with their terms, will provide, not
later than one day before the due date of any payment referred to in this clause
(A), money in an amount or (3) a combination thereof in an amount sufficient, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
and discharge, without consideration of the reinvestment of such interest and
after payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and accrued interest on the outstanding Notes at the Stated
Maturity of such principal or interest or any date on which the Notes may be
redeemed at the option of the Company, in each case, in accordance with the
terms of this Indenture and the Notes; provided that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such U.S.
Government Obligations to the payment of such principal, premium, if any, and
interest with respect to the Notes;
(B) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or instrument
to which the Company is a party or by which it is bound;
(C) immediately after giving effect to such deposit on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on the 123rd
day after such date of deposit; and such deposit shall not result in a breach or
violation of, or constitute a default under any other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound;
(D) the Company shall have delivered to the Trustee (1) either
(x) a ruling directed to the Trustee received from the Internal Revenue Service
to the effect that the Holders will not recognize income, gain or loss for
federal income tax
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purposes as a result of the Company's exercise of its option under this Section
8.02 and will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred or (y) an Opinion of Counsel to the
same effect as the ruling described in clause (x) above accompanied by a ruling
to that effect published by the Internal Revenue Service, unless there has been
a change in the applicable federal income tax law since the Closing Date such
that a ruling from the Internal Revenue Service is no longer required and (2) an
Opinion of Counsel to the effect that (x) the creation of the defeasance trust
does not violate the Investment Company Act of 1940 and (y) after the passage of
123 days following the deposit (except, with respect to any trust funds for the
account of any Holder who may be deemed to be an "insider" for purposes of the
United States Bankruptcy Code, after one year following the deposit), the trust
funds will not be subject to the effect of Section 547 of the United States
Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law in a case
commenced by or against the Company under either such statute, and either (I)
the trust funds will no longer remain the property of the Company (and therefore
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally) or (II) if
a court were to rule under any such law in any case or proceeding that the trust
funds remained property of the Company, (a) assuming such trust funds remained
in the possession of the Trustee prior to such court ruling to the extent not
paid to the Holders, the Trustee will hold, for the benefit of the Holders, a
valid and perfected security interest in such trust funds that is not avoidable
in bankruptcy or otherwise except for the effect of Section 552(b) of the United
States Bankruptcy Code on interest on the trust funds accruing after the
commencement of a case under such statute and (b) the Holders will be entitled
to receive adequate protection of their interests in such trust funds if such
trust funds are used in such case or proceeding;
(E) if the Notes are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that such deposit, defeasance and discharge will not cause the
Notes to be delisted; and
(F) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by this
Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day (or one
year) period referred to in clause (D)(2)(y) of this Section 8.02, none of the
Company's obligations under this Indenture shall be discharged. Subsequent to
the end of such 123-day (or one year) period with respect to this Section 8.02,
the Company's
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obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14,
4.01, 4.02, 7.07, 7.08, 8.05 and 8.06 shall survive until the Notes are no
longer outstanding. Thereafter, only the Company's obligations in Sections 7.07,
8.05 and 8.06 shall survive. If and when a ruling from the Internal Revenue
Service or an Opinion of Counsel referred to in clause (D)(1) of this Section
8.02 is able to be provided specifically without regard to, and not in reliance
upon, the continuance of the Company's obligations under Section 4.01, then the
Company's obligations under such Section 4.01 shall cease upon delivery to the
Trustee of such ruling or Opinion of Counsel and compliance with the other
conditions precedent provided for herein relating to the defeasance contemplated
by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.03. DEFEASANCE OF CERTAIN OBLIGATIONS
The Company may omit to comply with any term, provision or condition set
forth in clause (iii) under Section 5.01 and Sections 4.03 through 4.17 and
Section 4.19, and clause (c) under Section 6.01 with respect to such clause
(iii) under Section 5.01, clause (d) under Section 6.01 with respect to Sections
4.03 through 4.17 and Section 4.19, and clauses (e) and (f) under Section 6.01
shall be deemed not to be Events of Default, in each case with respect to the
outstanding Notes if:
(i) with reference to this Section 8.03, the Company has
irrevocably deposited or caused to be irrevocably deposited with the Trustee (or
another trustee satisfying the requirements of Section 7.10) and conveyed all
right, title and interest to the Trustee for the benefit of the Holders, under
the terms of an irrevocable trust agreement in form and substance satisfactory
to the Trustee as trust funds in trust, specifically pledged to the Trustee for
the benefit of the Holders as security for payment of the principal of, premium,
if any, and interest, if any, on the Notes, and dedicated solely to, the benefit
of the Holders, in and to (A) money in an amount, (B) U.S. Government
Obligations that, through the payment of interest and principal in respect
thereof in accordance with their terms, will provide, not later than one day
before the due date of any payment referred to in this clause (i), money in an
amount or (C) a combination thereof in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge,
without consideration of the reinvestment of such interest and after payment of
all federal, state and local taxes or other charges and assessments in respect
thereof payable by the Trustee, the principal of, premium, if any, and interest
on the outstanding Notes on the Stated Maturity of
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such principal or interest or any date on which the Notes may be redeemed at the
option of the Company, in each case, in accordance with the terms of this
Indenture and the Notes; provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to the payment of such principal, premium, if any, and interest with
respect to the Notes;
(ii) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or instrument
to which the Company is a party or by which it is bound;
(iii) immediately after giving effect to such deposit on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on the 123rd
day after such date of deposit;
(iv) the Company has delivered to the Trustee an Opinion of
Counsel to the effect that (A) the creation of the defeasance trust does not
violate the Investment Company Act of 1940, (B) the Trustee, for the benefit of
the Holders has a valid first-priority security interest in the trust funds, (C)
the Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and defeasance of certain obligations and
will be subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such deposit and defeasance
had not occurred and (D) after the passage of 123 days following the deposit
(except, with respect to any trust funds for the account of any Holder who may
be deemed to be an "insider" for purposes of the United States Bankruptcy Code,
after one year following the deposit), the trust funds will not be subject to
the effect of Section 547 of the United States Bankruptcy Code or Section 15 of
the New York Debtor and Creditor Law in a case commenced by or against the
Company under either such statute, and either (1) the trust funds will no longer
remain the property of the Company (and therefore will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally) or (2) if a court were to rule under any
such law in any case or proceeding that the trust funds remained property of the
Company, (x) assuming such trust funds remained in the possession of the Trustee
prior to such court ruling to the extent not paid to the Holders, the Trustee
will hold, for the benefit of the Holders, a valid and perfected security
interest in such trust funds that is not avoidable in bankruptcy or otherwise
(except for the effect of Section 552(b) of the United States Bankruptcy Code on
interest on the trust funds accruing after the commencement of a case under such
statute), (y) the Holders will be entitled to receive adequate protection of
their interests in such trust funds if such trust funds are used in such case or
proceeding and (z) no property, rights in property or other
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interests granted to the Trustee or the Holders in exchange for, or with respect
to, such trust funds will be subject to any prior rights of holders of other
Indebtedness of the Company or any of its Subsidiaries;
(v) if the Notes are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that such deposit defeasance and discharge will not cause the
Notes to be delisted; and
(vi) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by this
Section 8.03 have been complied with.
SECTION 8.04. APPLICATION OF TRUST MONEY; MISCELLANEOUS
Subject to Section 8.06, the Trustee or Paying Agent shall hold in trust
money or U.S. Government Obligations deposited with it pursuant to Section 8.01,
8.02 or 8.03, as the case may be, and shall apply the deposited money and the
money from U.S. Government Obligations in accordance with the Notes and this
Indenture to the payment of principal of, premium, if any, and interest on the
Notes; but such money need not be segregated from other funds except to the
extent required by law. The Company shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 8.01, 8.02 or 8.03 or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Notes.
SECTION 8.05. REPAYMENT TO COMPANY
Subject to Sections 7.07, 8.01, 8.02 and 8.03, the Trustee and the
Paying Agent shall promptly pay to the Company upon request set forth in an
Officers' Certificate any excess money held by them at any time and thereupon
shall be relieved from all liability with respect to such money. The Trustee and
the Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal, premium, if any, or interest that remains
unclaimed for two years; provided that the Trustee or such Paying Agent before
being required to make any payment may cause to be published at the expense of
the Company once in a newspaper of general circulation in the City of New York
or mail to each Holder entitled to such money at such Holder's address (as set
forth in the Note Register) notice that such money remains unclaimed and that
after a date specified therein (which shall be at least 30 days from the date of
such publication or mailing) any unclaimed balance of such money then remaining
will be repaid to the Company. After payment to the
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Company, Holders entitled to such money must look to the Company for payment as
general creditors unless an applicable law designates another Person, and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
SECTION 8.06. REINSTATEMENT
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.01, 8.02 or 8.03, as the
case may be, by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.01, 8.02 or 8.03, as the case may be, until such
time as the Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with Section 8.01, 8.02 or 8.03, as the
case may be; provided that, if the Company has made any payment of principal of,
premium, if any, or interest on any Notes because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money or U.S. Government Obligations
held by the Trustee or Paying Agent.
SECTION 8.07. DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT
If, in the event the Company exercises its option to omit compliance
with certain covenants and provisions of this Indenture with respect to the
Notes pursuant to Section 8.03 and such Notes are declared due and payable
because of an Event of Default that remains applicable, and the amount of money
and/or U.S. Government Obligations on deposit with the Trustee is insufficient
to pay amounts due on such Notes due to a declaration of acceleration under
Section 6.02, the Company shall remain liable for such payments.
ARTICLE 9 - AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS
The Company, when authorized by a resolution of its Board of Directors,
and the Trustee may amend or supplement this Indenture or the Notes without
notice to or the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency in this
Indenture; provided that such amendments or supplements shall not, in the good
faith opinion of
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the Board of Directors as evidenced by a Board Resolution, adversely affect the
interests of the Holders in any material respect;
(2) to comply with Article Five;
(3) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee; or
(5) to make any change that, in the good faith opinion of the
Board of Directors as evidenced by a Board Resolution, does not materially and
adversely affect the rights of any Holder.
SECTION 9.02. WITH CONSENT OF HOLDERS
Subject to Sections 6.04 and 6.07 and without prior notice to the
Holders, the Company, when authorized by its Board of Directors (as evidenced by
a Board Resolution), and the Trustee may amend this Indenture and the Notes with
the written consent of the Holders of a majority in aggregate principal amount
at maturity of the Notes then outstanding, and the Holders of a majority in
aggregate principal amount at maturity of the Notes then outstanding by written
notice to the Trustee may waive future compliance by the Company with any
provision of this Indenture and the Notes.
Notwithstanding the provisions of this Section 9.02, without the consent
of each Holder affected, an amendment or waiver, including a waiver pursuant to
Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note,
(ii) reduce the Accreted Value of, or premium, if any, or
interest on, any Note,
(iii) change the place or currency of payment of principal of, or
premium, if any, or interest on, any Note,
(iv) impair the right to institute suit for the enforcement of
any payment on or after the Stated Maturity (or, in the case of a redemption, on
or after the Redemption Date) of any Note,
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(v) reduce the above-stated percentage of outstanding Notes the
consent of whose Holders is necessary to modify or amend this Indenture,
(vi) waive a Default in the payment of principal of, premium, if
any, or interest on the Notes, or
(vii) reduce the percentage or aggregate principal amount at
maturity of outstanding Notes the consent of whose Holders is necessary for
waiver of compliance with certain provisions of this Indenture or for waiver of
certain defaults.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. The Company shall mail
supplemental indentures to Holders upon request. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. REVOCATION AND EFFECT OF CONSENT
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of a
Note or portion of a Note that evidences the same debt as the Note of the
consenting Holder, even if notation of the consent is not made on any Note.
However, any such Holder or subsequent Holder may revoke the consent as to its
Note or portion of its Note. Such revocation shall be effective only if the
Trustee receives the notice of revocation before the date the amendment,
supplement or waiver becomes effective. An amendment, supplement or waiver shall
become effective on receipt by the Trustee of written consents from the Holders
of the requisite percentage in principal amount of the outstanding Notes.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those persons who were
Holders at such record date (or their duly designated proxies) and only those
persons shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be Holders after such
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record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it is of the type described in any of clauses (i)
through (vii) of Section 9.02. In case of an amendment or waiver of the type
described in clauses (i) through (vii) of Section 9.02, the amendment or waiver
shall bind each Holder who has consented to it and every subsequent Holder of a
Note that evidences the same indebtedness as the Note of the consenting Holder.
Failure to make the appropriate notation, or issue a new Note, shall not affect
the validity and effectiveness of such amendment, supplement or waiver.
SECTION 9.04. NOTATION ON OR EXCHANGE OF NOTES
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder to deliver it to the Trustee. The Trustee may
place an appropriate notation on the Note about the changed terms and return it
to the Holder and the Trustee may place an appropriate notation on any Note
thereafter authenticated. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms.
SECTION 9.05. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall receive, and shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article Nine is authorized or permitted by
this Indenture. Subject to the preceding sentence, the Trustee shall sign such
amendment, supplement or waiver if the same does not adversely affect the rights
of the Trustee. The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT
Every supplemental indenture executed pursuant to this Article Nine
shall conform to the requirements of the TIA as then in effect.
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ARTICLE 10 - MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT OF 1939
Prior to the effectiveness of the Registration Statement, this Indenture
shall incorporate and be governed by the provisions of the TIA that are required
to be part of and to govern indentures qualified under the TIA. After the
effectiveness of the Registration Statement, this Indenture shall be subject to
the provisions of the TIA that are required to be a part of this Indenture and
shall, to the extent applicable, be governed by such provisions.
SECTION 10.02. NOTICES
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first class mail addressed as follows:
if to the Company: Amazon.com, Inc.
1516 Second Avenue
Seattle, Washington 98101
Attention: Chief Financial Officer
if to the Trustee: The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee
Administration
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to such
Holder at such person's address as it appears on the Note Register by first
class mail and shall be sufficiently given to such person if so mailed within
the time prescribed. Copies of any such communication or notice to a Holder
shall also be mailed to the Trustee and each Agent at the same time.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. Except for a
notice to the Trustee, which is deemed given only when received, and except as
otherwise provided in this Indenture, if a notice or communication is mailed in
the manner provided in this Section 10.02, it is duly given, whether or not the
addressee receives it.
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Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason
of any other cause it shall be impracticable to give such notice by mail, then
such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 10.03. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of such
Counsel, all such conditions precedent have been complied with.
SECTION 10.04. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion contained in
such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(iv) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with; provided,
however, that,
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with respect to matters of fact, an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.
SECTION 10.05. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 10.06. PAYMENT DATE OTHER THAN A BUSINESS DAY
If an Interest Payment Date, Redemption Date, Payment Date, Stated
Maturity or date of maturity of any Note shall not be a Business Day, then
payment of principal of, premium, if any, or interest on such Note, as the case
may be, need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, Payment Date, or Redemption Date, or at the Stated Maturity or date of
maturity of such Note; provided that no interest shall accrue for the period
from and after such Interest Payment Date, Payment Date, Redemption Date, Stated
Maturity or date of maturity, as the case may be.
SECTION 10.07. GOVERNING LAW
The laws of the State of New York shall govern this Indenture and the
Notes. The Trustee, the Company and the Holders agree to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Indenture or the Notes.
SECTION 10.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any Subsidiary of the Company. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 10.09. NO RECOURSE AGAINST OTHERS
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Notes, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company contained in this Indenture, or in any of the Notes, or
because of the creation of any Indebtedness represented thereby, shall be had
against any incorporator, stockholder, officer, director, employee or
controlling person, as such, of the Company or of any successor Person, either
directly or through the Company or any successor Person, whether by virtue of
any constitution, statute or rule of law, or by the enforcement of
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any assessment or penalty or otherwise; it being expressly understood that all
such liability is hereby expressly waived and released as a condition of, and as
a consideration for, the execution of this Indenture and the issue of the Notes.
SECTION 10.10. SUCCESSORS
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successor.
SECTION 10.11. DUPLICATE ORIGINALS
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 10.12. SEPARABILITY
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms and provisions hereof.
SIGNATURES
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
AMAZON.COM, INC.
By:_____________________________________
Name:
Title:
THE BANK OF NEW YORK
By:_____________________________________
Name:
Title:
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EXHIBIT A
[FACE OF NOTE]
AMAZON.COM, INC.
10% Senior Discount Note due 2008
[CUSIP] [CINS] __________
No. $_________
The following information is supplied for purposes of Sections 1273 and
1275 of the Internal Revenue Code:
Issue Date:
Yield to maturity for period from Issue Date to May 1, 2008: 10.0%,
compounded semi-annually on May 1 and November 1, commencing May 1, 1998
(computed without giving effect to the additional payments of interest in the
event the issuer fails to commence the exchange offer or cause the registration
statement to be declared effective, each as described on the reverse hereof)
Original issue discount under Section 1273 of the Internal Revenue Code
(for each $1,000 principal amount): $884.93
Issue Price (for each $1,000 principal amount): $615.07
AMAZON.COM, INC., a Delaware corporation (the "Company", which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to , or its registered assigns, the principal sum of
($ ) on May 1, 2008.
Interest Payment Dates: May 1 and November 1, commencing November, 1,
2003.
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Regular Record Dates: April 15 and October 15.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
AMAZON.COM, INC.
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the 10% Senior Discount Notes due 2008 described in the
within-mentioned Indenture.
Date:
THE BANK OF NEW YORK,
as Trustee
By:_____________________________________
Authorized Signatory
[REVERSE SIDE OF NOTE]
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AMAZON.COM, INC.
10% Senior Discount Note due 2008
1. Principal and Interest.
The Company will pay the principal of this Note on May 1, 2008.
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate per annum
shown above.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the April 15 or October 15 immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
November 1, 2003; provided that no interest will accrue on the principal amount
of this Note prior to May 1, 2003 and no interest will be paid on this Note
prior to November 1, 2003, except as provided in the next paragraph.
If an exchange offer registered under the Securities Act is not
consummated and a shelf registration statement under the Securities Act with
respect to resales of the Notes is not declared effective by the Commission, on
or before November 8, 1998 in accordance with the terms of the Registration
Rights Agreement dated May 8, 1998 between the Company and Morgan Stanley & Co.
Incorporated, interest (in addition to the accrual of original issue discount
during the period ending May 1, 2003 and in addition to the interest otherwise
due on the Notes after such date) will accrue, at a rate of 0.5% per annum of
the Accreted Value of the Notes on the preceding Semi-Annual Accrual Date, from
November 8, 1998, and be payable in cash, semi-annually in arrears on May 1 and
November 1 of each year, commencing May 1, 1999, until (i) the exchange offer is
consummated, (ii) the shelf registration statement is declared effective or
(iii) the date that the Notes become freely tradeable without registration under
the Securities Act, provided that upon the request of any Holder of the Notes,
the Company shall, in accordance with the terms of the Indenture, deliver to
such Holder certificates evidencing such Holder's Notes without the legends
restricting the transfer thereof. The Holder of this Note is entitled to the
benefits of such Registration Rights Agreement.
From and after May 1, 2003, interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from May 1, 2003; provided that, if there is no existing default in the
payment of interest and this Note is authenticated between a Regular Record Date
referred to on the face
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hereof and the next succeeding Interest Payment Date, interest will accrue from
such Interest Payment Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if any,
and interest on overdue installments of interest, to the extent lawful, at a
rate per annum that is 2% in excess of the rate otherwise payable.
2. Method of Payment.
The Company shall pay interest (except defaulted interest) on the
principal amount of the Notes as provided above on each May 1 and November 1 to
the persons who are Holders (as reflected in the Note Register at the close of
business on such April 15 and October 15 immediately preceding the Interest
Payment Date), in each case, even if the Note is canceled on registration of
transfer or registration of exchange after such record date; provided that, with
respect to the payment of principal, the Company shall make payment to the
Holder that surrenders this Note to a Paying Agent on or after May 1, 2008.
The Company shall pay principal, premium, if any, and as provided above,
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal, premium, if any, and interest by its check payable in such money or
by wire transfer of immediately available funds to the accounts of Holders which
have provided wire transfer instructions to the Company. It may mail an interest
check to a Holder's registered address (as reflected in the Note Register). If a
payment date is a date other than a Business Day at a place of payment, payment
may be made at that place on the next succeeding day that is a Business Day and
no interest will accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee shall act as authenticating agent, Paying Agent
and Registrar. The Company may change any authenticating agent, Paying Agent or
Registrar without notice. The Company, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of May 8, 1998
(the "Indenture"), between the Company and The Bank of New York (the "Trustee").
Capitalized terms herein are used as defined in the Indenture unless otherwise
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indicated. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act. The
Notes are subject to all such terms, and Holders are referred to the Indenture
and the Trust Indenture Act for a statement of all such terms. To the extent
permitted by applicable law, in the event of any inconsistency between the terms
of this Note and the terms of the Indenture, the terms of the Indenture shall
control.
The Notes are general unsecured obligations of the Company.
5. Redemption.
The Notes shall be redeemable, at the Company's option, in whole or in
part, at any time on or after May 1, 2003 and prior to maturity, upon not less
than 30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's last address as it appears in the Note Register, at the following
Redemption Prices (expressed in percentages of their principal amount at
maturity), plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is prior to the
Redemption Date) if redeemed during the 12-month period commencing on May 1 of
the applicable year set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
------------------------------------------
<S> <C>
2003 105.000%
2004 103.333%
2005 101.667%
2006 and thereafter 100.000%
</TABLE>
In addition, at any time prior to May 1, 2001, the Company may redeem up
to 35% of the aggregate principal amount at maturity of the Notes with the Net
Cash Proceeds of one or more sales of Capital Stock of the Company (other than
Disqualified Stock) at any time as a whole or from time to time in part, at a
Redemption Price (expressed as a percentage of Accreted Value on the Redemption
Date) of 110%, plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date); provided that at least 65%
of the aggregate principal amount at maturity of Notes remains outstanding after
each such redemption and notice of such redemption is mailed to Holders of the
Notes within 60 days after the related sale of Capital Stock.
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At any time prior to May 1, 2003, the Company may redeem all, but not
less than all, of the Notes at a Redemption Price equal to the sum of (i) the
Accreted Value on the Redemption Date, plus (ii) accrued and unpaid interest, if
any, to the Redemption Date (subject to the right of Holders of record on the
relevant Regular Record Date that is prior to the Redemption Date to receive
interest due on an Interest Payment Date), plus (iii) the Applicable Premium.
Notice of any optional redemption shall be mailed at least 30 days but
not more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at such Holder's last address as it appears in the Note Register. Notes
in original denominations larger than $1,000 may be redeemed in part. On and
after the Redemption Date, interest ceases to accrue and the original issue
discount ceases to accrete on Notes or portions of Notes called for redemption,
unless the Company defaults in the payment of the Redemption Price.
6. Repurchase upon Change in Control.
Upon the occurrence of any Change of Control, the Company will be
obligated to make an offer to purchase all outstanding Notes pursuant to the
offer described in the Indenture at a purchase price equal to 101% of the
Accreted Value thereof plus accrued and unpaid interest, if any, to the date of
purchase (the "Change of Control Payment").
A notice of such Change of Control shall be mailed within 30 days after
any Change of Control occurs to each Holder at such Holder's last address as it
appears in the Note Register. Notes in original denominations larger than $1,000
in principal amount at maturity may be sold to the Company in part. On and after
the Change of Control Payment Date, interest ceases to accrue and the original
issue discount ceases to accrete on Notes or portions of Notes surrendered for
purchase by the Company, unless the Company defaults in the payment of the
Change of Control Payment.
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in denominations of
$1,000 of principal amount at maturity and multiples of $1,000 in excess
thereof. A Holder may register the transfer or exchange of Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer or exchange of any Notes selected for redemption. Also, it
need not register the transfer or exchange of any Notes for a period of 15 days
before the mailing of a notice of redemption of Notes to be redeemed is made.
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8. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent shall pay the
money back to the Company at its written request. After that, Holders entitled
to the money must look to the Company for payment, unless an abandoned property
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to redemption or maturity, the
Company shall be discharged from the Indenture and the Notes, except in certain
circumstances for certain sections thereof, and (b) to redemption or the Stated
Maturity, the Company shall be discharged from certain covenants set forth in
the Indenture.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the Notes then outstanding, and any existing default or
compliance with any provision may be waived with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding. Without
notice to or the consent of any Holder, the parties thereto may amend or
supplement the Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency and make any change that does not materially
and adversely affect the rights of any Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the Company
and its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, use the proceeds from Asset Sales,
engage in transactions with Affiliates or merge, consolidate or transfer
substantially all of its assets. Within 45 days after the end of each fiscal
quarter (90 days after the end of the last fiscal quarter of each year), the
Company must report to the Trustee on compliance with such limitations.
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13. Successor Persons.
When a successor person or other entity assumes all the obligations of
its predecessor under the Notes and the Indenture, the predecessor person shall
be released from those obligations.
14. Defaults and Remedies.
The following events constitute "Events of Default" under the Indenture:
(a) default in the payment of principal of (or premium, if any, on) any Note
when the same becomes due and payable at maturity, upon acceleration, redemption
or otherwise; (b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days; (c)
default in the performance or breach of the provisions of Article Five or the
failure to make or consummate an Offer to Purchase in accordance with Section
4.10 or Section 4.11 of the Indenture; (d) the Company defaults in the
performance of or breaches any other covenant or agreement of the Company in
this Indenture or under the Notes (other than a default specified in clause (a),
(b) or (c) above) and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25% or
more in aggregate principal amount at maturity of the Notes; (e) there occurs
with respect to any issue or issues of Indebtedness of the Company or any
Significant Subsidiary having an outstanding principal amount of $10 million or
more in the aggregate for all such issues of all such Persons, whether such
Indebtedness now exists or shall hereafter be created, (I) an event of default
that has caused the holder thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 60 days of such acceleration and/or (II) the failure to make a principal
payment at the final (but not any interim) fixed maturity and such defaulted
payment shall not have been made, waived or extended within 60 days of such
payment default; (f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $10.0 million in the aggregate for all such
final judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Company or any Significant Subsidiary and shall not be paid or discharged, and
there shall be any period of 60 consecutive days following entry of the final
judgment or order that causes the aggregate amount for all such final judgments
or orders outstanding and not paid or discharged against all such Persons to
exceed $10.0 million during which a stay of enforcement of such final judgment
or order, by reason of a pending appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree or order for (A)
relief in respect of the Company or any Significant Subsidiary in an involuntary
case under any applicable bankruptcy,
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insolvency or other similar law now or hereafter in effect, (B) appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any Significant
Subsidiary or (C) the winding up or liquidation of the affairs of the Company or
any Significant Subsidiary and, in each case, such decree or order shall remain
unstayed and in effect for a period of 30 consecutive days; or (h) the Company
or any Significant Subsidiary (A) commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary case
under any such law, (B) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any Significant
Subsidiary or (C) effects any general assignment for the benefit of creditors.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Notes may declare all the Notes to be due and payable. If a bankruptcy or
insolvency default with respect to the Company occurs and is continuing, the
Notes automatically become due and payable. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the Indenture or the
Notes. Subject to certain limitations, Holders of at least a majority in
principal amount of the Notes then outstanding may direct the Trustee in its
exercise of any trust or power.
15. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
16. No Recourse Against Others.
No incorporator, stockholder, director, employee or controlling person
as such, of the Company or of any successor Person, shall have any liability for
any obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
17. Authentication.
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This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
18. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company shall furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to Amazon.com, Inc., 1516
Second Avenue, Seattle, Washington 98101, Attention: Chief Financial Officer.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.:
Please print or typewrite name and address including zip code of assignee
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing ______________________ attorney to transfer said Note on the books of
the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL NOTES OTHER THAN EXCHANGE
NOTES, UNLEGENDED OFFSHORE GLOBAL NOTES AND UNLEGENDED OFFSHORE PHYSICAL NOTES]
In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date the shelf registration statement with
respect to resales of the Notes is declared effective or (ii) the end of the
period referred to in Rule 144(k) under the Securities Act, the undersigned
confirms that without utilizing any general solicitation or general advertising
that:
[Check One]
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[ ] (a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided by Rule
144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other
Registrar shall not be obligated to register this Note in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.08 of the Indenture
shall have been satisfied.
Date:___________________
NOTICE: The signature to this assignment must correspond with the name
as written upon the face of the within-mentioned instrument in every particular,
without alteration or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:___________________________
NOTICE: To be executed by an executive officer
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.10 or Section 4.11 of the Indenture, check the Box: _
-100-
<PAGE> 106
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.10 or Section 4.11 of the Indenture, state the amount (in
principal amount at maturity): $___________________.
Date:_______________________
Your Signature:__________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: ______________________________
-101-
<PAGE> 107
EXHIBIT B
FORM OF CERTIFICATE
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Amazon.com, Inc.
1516 Second Avenue
Seattle, Washington 98101
Attention: Chief Financial Officer
Re: Amazon.com, Inc. (the "Company") 10% Senior Discount Notes due
2008 (the "Notes")
Dear Sirs:
This letter relates to U.S. $________ principal amount at maturity of
Notes represented by a Note (the "Legended Note") which bears a legend outlining
restrictions upon transfer of such Legended Note. Pursuant to Section 2.01 of
the Indenture (the "Indenture") dated as of May 8, 1998 relating to the Notes,
we hereby certify that we are (or we will hold such securities on behalf of) a
person outside the United States to whom the Notes could be transferred in
accordance with Rule 904 of Regulation S promulgated under the U.S. Securities
Act of 1933, as amended. Accordingly, you are hereby requested to exchange the
legended certificate for an unlegended certificate representing an identical
principal amount at maturity of Notes, all in the manner provided for in the
Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
-102-
<PAGE> 108
Very truly yours,
[Name of Holder]
By:_____________________________________
Authorized Signature
-103-
<PAGE> 109
EXHIBIT C
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
The Bank of New York
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Amazon.com, Inc.
1516 Second Avenue
Seattle, Washington 98101
Attention: Chief Financial Officer
Re: Amazon.com, Inc. (the "Company") 10% Senior Discount Notes due
2008 (the "Notes")
Dear Sirs:
In connection with our proposed purchase of $__________ aggregate
principal amount at maturity of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture dated
as of May 8, 1998, relating to the Notes (the "Indenture") and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes
except in compliance with, such restrictions and conditions and the Securities
Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we sell any Notes, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to
a "qualified institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S.
-104-
<PAGE> 110
broker-dealer) to you and to the Company a signed letter substantially in the
form of this letter, (D) outside the United States in accordance with Rule 904
of Regulation S under the Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act, or (F) pursuant to
an effective registration statement under the Securities Act, and we further
agree to provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein.
3. We understand that, on any proposed resale of any Notes, we
will be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Notes purchased by us will bear a legend to the
foregoing effect.
4. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes purchased by us for our own account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:_____________________________________
Authorized Signature
-105-
<PAGE> 111
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Amazon.com, Inc.
1516 Second Avenue
Seattle, Washington 98101
Attention: Chief Financial Officer
Re: Amazon.com, Inc. (the "Company") 10% Senior Discount Notes due
2008 (the "Notes")
Dear Sirs:
In connection with our proposed sale of U.S. $________ aggregate
principal amount at maturity of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the
United States in contravention of the requirements of Rule 903(b) or Rule 904(b)
of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933.
-106-
<PAGE> 112
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:_____________________________________
Authorized Signature
-107-
<PAGE> 1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL INVESTOR WHICH IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE
OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A)
TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE ACCRETED VALUE AT THE TIME OF TRANSFER
OF NOTES OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE
IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
<PAGE> 2
SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.08 OF
THE INDENTURE.
AMAZON.COM, INC.
10% Senior Discount Note due 2008
[CUSIP] [CINS] __________
-2-
<PAGE> 3
No. $_________
The following information is supplied for purposes of Sections 1273 and
1275 of the Internal Revenue Code:
Issue Date:
Yield to maturity for period from Issue Date to May 1, 2008: 10.0%,
compounded semi-annually on May 1 and November 1, commencing May 1, 1998
(computed without giving effect to the additional payments of interest in the
event the issuer fails to commence the exchange offer or cause the registration
statement to be declared effective, each as described on the reverse hereof)
Original issue discount under Section 1273 of the Internal Revenue Code
(for each $1,000 principal amount): $884.93
Issue Price (for each $1,000 principal amount): $615.07
AMAZON.COM, INC., a Delaware corporation (the "Company", which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to ________, or its registered assigns, the principal
sum of ($______) on May 1, 2008.
Interest Payment Dates: May 1 and November 1, commencing November, 1,
2003.
Regular Record Dates: April 15 and October 15.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
AMAZON.COM, INC.
By:
------------------------------------
Name:
Title:
-3-
<PAGE> 4
By:
------------------------------------
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the 10% Senior Discount Notes due 2008 described in the
within-mentioned Indenture.
Date: __________________
THE BANK OF NEW YORK,
as Trustee
By:
---------------------------------
Authorized Signatory
[REVERSE SIDE OF NOTE]
-4-
<PAGE> 5
AMAZON.COM, INC.
10% Senior Discount Note due 2008
1. Principal and Interest.
The Company will pay the principal of this Note on May 1, 2008.
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate per annum
shown above.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the April 15 or October 15 immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
November 1, 2003; provided that no interest will accrue on the principal amount
of this Note prior to May 1, 2003 and no interest will be paid on this Note
prior to November 1, 2003, except as provided in the next paragraph.
If an exchange offer registered under the Securities Act is not
consummated and a shelf registration statement under the Securities Act with
respect to resales of the Notes is not declared effective by the Commission, on
or before November 8, 1998 in accordance with the terms of the Registration
Rights Agreement dated May 8, 1998 between the Company and Morgan Stanley & Co.
Incorporated, interest (in addition to the accrual of original issue discount
during the period ending May 1, 2003 and in addition to the interest otherwise
due on the Notes after such date) will accrue, at a rate of 0.5% per annum of
the Accreted Value of the Notes on the preceding Semi-Annual Accrual Date, from
November 8, 1998, and be payable in cash, semi-annually in arrears on May 1 and
November 1 of each year, commencing May 1, 1999, until (i) the exchange offer is
consummated, (ii) the shelf registration statement is declared effective or
(iii) the date that the Notes become freely tradeable without registration under
the Securities Act, provided that upon the request of any Holder of the Notes,
the Company shall, in accordance with the terms of the Indenture, deliver to
such Holder certificates evidencing such Holder's Notes without the legends
restricting the transfer thereof. The Holder of this Note is entitled to the
benefits of such Registration Rights Agreement.
From and after May 1, 2003, interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from May 1, 2003; provided that, if there is no existing default in the
payment of interest and this Note is authenticated between a Regular Record Date
referred to on the face
-5-
<PAGE> 6
hereof and the next succeeding Interest Payment Date, interest will accrue from
such Interest Payment Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if any,
and interest on overdue installments of interest, to the extent lawful, at a
rate per annum that is 2% in excess of the rate otherwise payable.
2. Method of Payment.
The Company shall pay interest (except defaulted interest) on the
principal amount of the Notes as provided above on each May 1 and November 1 to
the persons who are Holders (as reflected in the Note Register at the close of
business on such April 15 and October 15 immediately preceding the Interest
Payment Date), in each case, even if the Note is canceled on registration of
transfer or registration of exchange after such record date; provided that, with
respect to the payment of principal, the Company shall make payment to the
Holder that surrenders this Note to a Paying Agent on or after May 1, 2008.
The Company shall pay principal, premium, if any, and as provided above,
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal, premium, if any, and interest by its check payable in such money or
by wire transfer of immediately available funds to the accounts of Holders which
have provided wire transfer instructions to the Company. It may mail an interest
check to a Holder's registered address (as reflected in the Note Register). If a
payment date is a date other than a Business Day at a place of payment, payment
may be made at that place on the next succeeding day that is a Business Day and
no interest will accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee shall act as authenticating agent, Paying Agent
and Registrar. The Company may change any authenticating agent, Paying Agent or
Registrar without notice. The Company, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of May 8, 1998
(the "Indenture"), between the Company and The Bank of New York (the "Trustee").
Capitalized terms herein are used as defined in the Indenture unless otherwise
-6-
<PAGE> 7
indicated. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act. The
Notes are subject to all such terms, and Holders are referred to the Indenture
and the Trust Indenture Act for a statement of all such terms. To the extent
permitted by applicable law, in the event of any inconsistency between the terms
of this Note and the terms of the Indenture, the terms of the Indenture shall
control.
The Notes are general unsecured obligations of the Company.
5. Redemption.
The Notes shall be redeemable, at the Company's option, in whole or in
part, at any time on or after May 1, 2003 and prior to maturity, upon not less
than 30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's last address as it appears in the Note Register, at the following
Redemption Prices (expressed in percentages of their principal amount at
maturity), plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is prior to the
Redemption Date) if redeemed during the 12-month period commencing on May 1 of
the applicable year set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
------------------------- ----------
<S> <C>
2003 105.000%
2004 103.333%
2005 101.667%
2006 and thereafter 100.000%
</TABLE>
In addition, at any time prior to May 1, 2001, the Company may redeem up
to 35% of the aggregate principal amount at maturity of the Notes with the Net
Cash Proceeds of one or more sales of Capital Stock of the Company (other than
Disqualified Stock) at any time as a whole or from time to time in part, at a
Redemption Price (expressed as a percentage of Accreted Value on the Redemption
Date) of 110%, plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date); provided that at least 65%
of the aggregate principal amount at maturity of Notes remains outstanding after
each such redemption and notice of such redemption is mailed to Holders of the
Notes within 60 days after the related sale of Capital Stock.
-7-
<PAGE> 8
At any time prior to May 1, 2003, the Company may redeem all, but not
less than all, of the Notes at a Redemption Price equal to the sum of (i) the
Accreted Value on the Redemption Date, plus (ii) accrued and unpaid interest, if
any, to the Redemption Date (subject to the right of Holders of record on the
relevant Regular Record Date that is prior to the Redemption Date to receive
interest due on an Interest Payment Date), plus (iii) the Applicable Premium.
Notice of any optional redemption shall be mailed at least 30 days but
not more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at such Holder's last address as it appears in the Note Register. Notes
in original denominations larger than $1,000 may be redeemed in part. On and
after the Redemption Date, interest ceases to accrue and the original issue
discount ceases to accrete on Notes or portions of Notes called for redemption,
unless the Company defaults in the payment of the Redemption Price.
6. Repurchase upon Change in Control.
Upon the occurrence of any Change of Control, the Company will be
obligated to make an offer to purchase all outstanding Notes pursuant to the
offer described in the Indenture at a purchase price equal to 101% of the
Accreted Value thereof plus accrued and unpaid interest, if any, to the date of
purchase (the "Change of Control Payment").
A notice of such Change of Control shall be mailed within 30 days after
any Change of Control occurs to each Holder at such Holder's last address as it
appears in the Note Register. Notes in original denominations larger than $1,000
in principal amount at maturity may be sold to the Company in part. On and after
the Change of Control Payment Date, interest ceases to accrue and the original
issue discount ceases to accrete on Notes or portions of Notes surrendered for
purchase by the Company, unless the Company defaults in the payment of the
Change of Control Payment.
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in denominations of
$1,000 of principal amount at maturity and multiples of $1,000 in excess
thereof. A Holder may register the transfer or exchange of Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer or exchange of any Notes selected for redemption. Also, it
need not register the transfer or exchange of any Notes for a period of 15 days
before the mailing of a notice of redemption of Notes to be redeemed is made.
-8-
<PAGE> 9
8. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent shall pay the
money back to the Company at its written request. After that, Holders entitled
to the money must look to the Company for payment, unless an abandoned property
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to redemption or maturity, the
Company shall be discharged from the Indenture and the Notes, except in certain
circumstances for certain sections thereof, and (b) to redemption or the Stated
Maturity, the Company shall be discharged from certain covenants set forth in
the Indenture.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the Notes then outstanding, and any existing default or
compliance with any provision may be waived with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding. Without
notice to or the consent of any Holder, the parties thereto may amend or
supplement the Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency and make any change that does not materially
and adversely affect the rights of any Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the Company
and its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, use the proceeds from Asset Sales,
engage in transactions with Affiliates or merge, consolidate or transfer
substantially all of its assets. Within 45 days after the end of each fiscal
quarter (90 days after the end of the last fiscal quarter of each year), the
Company must report to the Trustee on compliance with such limitations.
-9-
<PAGE> 10
13. Successor Persons.
When a successor person or other entity assumes all the obligations of
its predecessor under the Notes and the Indenture, the predecessor person shall
be released from those obligations.
14. Defaults and Remedies.
The following events constitute "Events of Default" under the Indenture:
(a) default in the payment of principal of (or premium, if any, on) any Note
when the same becomes due and payable at maturity, upon acceleration, redemption
or otherwise; (b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days; (c)
default in the performance or breach of the provisions of Article Five or the
failure to make or consummate an Offer to Purchase in accordance with Section
4.10 or Section 4.11 of the Indenture; (d) the Company defaults in the
performance of or breaches any other covenant or agreement of the Company in
this Indenture or under the Notes (other than a default specified in clause (a),
(b) or (c) above) and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25% or
more in aggregate principal amount at maturity of the Notes; (e) there occurs
with respect to any issue or issues of Indebtedness of the Company or any
Significant Subsidiary having an outstanding principal amount of $10 million or
more in the aggregate for all such issues of all such Persons, whether such
Indebtedness now exists or shall hereafter be created, (I) an event of default
that has caused the holder thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 60 days of such acceleration and/or (II) the failure to make a principal
payment at the final (but not any interim) fixed maturity and such defaulted
payment shall not have been made, waived or extended within 60 days of such
payment default; (f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $10.0 million in the aggregate for all such
final judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Company or any Significant Subsidiary and shall not be paid or discharged, and
there shall be any period of 60 consecutive days following entry of the final
judgment or order that causes the aggregate amount for all such final judgments
or orders outstanding and not paid or discharged against all such Persons to
exceed $10.0 million during which a stay of enforcement of such final judgment
or order, by reason of a pending appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree or order for (A)
relief in respect of the Company or any Significant Subsidiary in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary and, in
each case, such decree or order shall remain unstayed and in effect for a period
of 30 consecutive days; or (h) the Company or any Significant Subsidiary (A)
commences a voluntary case under any applicable bankruptcy,
-10-
<PAGE> 11
insolvency or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case under any such law, (B)
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Company or
any Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) effects any general
assignment for the benefit of creditors.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Notes may declare all the Notes to be due and payable. If a bankruptcy or
insolvency default with respect to the Company occurs and is continuing, the
Notes automatically become due and payable. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the Indenture or the
Notes. Subject to certain limitations, Holders of at least a majority in
principal amount of the Notes then outstanding may direct the Trustee in its
exercise of any trust or power.
15. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
16. No Recourse Against Others.
No incorporator, stockholder, director, employee or controlling person
as such, of the Company or of any successor Person, shall have any liability for
any obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
17. Authentication.
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<PAGE> 12
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
18. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company shall furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to Amazon.com, Inc., 1516
Second Avenue, Seattle, Washington 98101, Attention: Chief Financial Officer.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.: _________________________________________
Please print or typewrite name and address including zip code of assignee
______________________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing ______________________ attorney to transfer said Note on the books of
the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL NOTES OTHER THAN EXCHANGE
NOTES, UNLEGENDED OFFSHORE GLOBAL NOTES AND UNLEGENDED OFFSHORE PHYSICAL NOTES]
In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date the shelf registration statement with
respect to resales of the Notes is declared effective or (ii) the end of the
period referred to in Rule 144(k) under the Securities Act, the undersigned
confirms that without utilizing any general solicitation or general advertising
that:
[Check One]
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<PAGE> 13
[ ] (a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided by Rule
144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other
Registrar shall not be obligated to register this Note in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.08 of the Indenture
shall have been satisfied.
Date: ___________________
NOTICE: The signature to this assignment must correspond with the name
as written upon the face of the within-mentioned instrument in every particular,
without alteration or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: ____________________
NOTICE: To be executed by an executive officer
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.10 or Section 4.11 of the Indenture, check the Box: [ ]
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<PAGE> 14
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.10 or Section 4.11 of the Indenture, state the amount (in
principal amount at maturity): $___________________.
Date: _________________________
Your Signature: _____________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: ______________________________
-14-
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
BETWEEN
AMAZON.COM, INC.
AND
MORGAN STANLEY & CO. INCORPORATED
DATED MAY 8, 1998
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into May 8, 1998, between AMAZON.COM, INC., a Delaware corporation (the
"Company"), and MORGAN STANLEY & CO. INCORPORATED (the "Placement Agent").
This Agreement is made pursuant to the Placement Agreement dated May 5,
1998, between the Company and the Placement Agent (the "Placement Agreement"),
which provides for the sale by the Company to the Placement Agent of an
aggregate of $530,000,000 principal amount at maturity ($325,987,100 initial
accreted value) of the Company's 10% Senior Discount Notes Due 2008 (the
"Securities"). In order to induce the Placement Agent to enter into the
Placement Agreement, the Company has agreed to provide to the Placement Agent
and its direct and indirect transferees the registration rights set forth in
this Agreement. The execution of this Agreement is a condition to the closing
under the Placement Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Accreted Value" shall mean the Accreted Value as defined in the
Indenture.
"Closing Date" shall mean the Closing Date as defined in the Placement
Agreement.
"Company" shall have the meaning set forth in the preamble and shall
also include the Company's successors.
"Exchange Offer" shall mean the exchange offer by the Company of
Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof.
-2-
<PAGE> 3
"Exchange Offer Registration" shall mean a registration under the 1933
Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form) and all amendments and supplements to such registration statement, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchange Securities" shall mean securities issued by the Company under
the Indenture containing terms identical to the Securities (except that the
Exchange Securities will not contain restrictions on transfer) and to be offered
to Holders of Securities in exchange for Securities pursuant to the Exchange
Offer.
"Holder" shall mean the Placement Agent, for so long as it owns any
Registrable Securities, and each of its successors, assigns and direct and
indirect transferees who become registered owners of Registrable Securities
under the Indenture; provided that for purposes of Sections 4 and 5 of this
Agreement, the term "Holder" shall include Participating Broker-Dealers (as
defined in Section 4(a)).
"Indenture" shall mean the Indenture relating to the Securities dated as
of May 8, 1998 between the Company and The Bank of New York, as trustee, and as
the same may be amended or supplemented from time to time in accordance with the
terms thereof.
"Majority Holders" shall mean the Holders of a majority of the aggregate
principal amount at maturity of outstanding Registrable Securities; provided
that whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by the
Company or any of its affiliates (as such term is defined in Rule 405 under the
1933 Act) (other than the Placement Agent or subsequent Holders of Registrable
Securities if such subsequent holders are deemed to be such affiliates solely by
reason of their holding of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage or amount.
"Person" shall mean an individual, partnership, limited liability
company, corporation, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"Placement Agent" shall have the meaning set forth in the preamble.
"Placement Agreement" shall have the meaning set forth in the preamble.
-3-
<PAGE> 4
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement, and by all
other amendments and supplements to such prospectus, and in each case including
all material incorporated by reference therein.
"Registrable Securities" shall mean the Securities (but shall not
include any Exchange Securities); provided, however, that the Securities shall
cease to be Registrable Securities (i) when a Registration Statement with
respect to such Securities shall have been declared effective under the 1933 Act
and such Securities shall have been disposed of pursuant to such Registration
Statement, (ii) when such Securities may be sold to the public pursuant to Rule
144(k) (or any similar provision then in force, but not Rule 144A) under the
1933 Act, (iii) upon consummation of the Exchange Offer, if such Securities were
not exchanged for Exchange Securities and are not held by the Placement Agent;
or (iv) when such Securities shall have ceased to be outstanding.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees and
expenses incurred in connection with compliance with state securities or blue
sky laws (including, in the case of an underwritten offering, reasonable fees
and disbursements of counsel for any underwriters or Holders in connection with
blue sky qualification of any of the Exchange Securities or Registrable
Securities), (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, any amendments or supplements thereto, any
underwriting agreements, securities sales agreements and other documents
relating to the performance of and compliance with this Agreement, (iv) all
rating agency fees, (v) all fees and disbursements relating to the qualification
of the Indenture under applicable securities laws, (vi) the fees and
disbursements of the Trustee and its counsel, (vii) the fees and disbursements
of counsel for the Company and, in the case of a Shelf Registration Statement,
the fees and disbursements of one counsel for the Holders (which counsel shall
be selected by the Majority Holders and which counsel may also be counsel for
the Placement Agent) and (viii) the fees and disbursements of the independent
public accountants of the Company, including the expenses of any special audits
or "cold comfort" letters required by or incident to such performance and
compliance, but excluding fees and expenses of counsel to the underwriters
(other than fees and expenses set forth in clause (ii) above) or the Holders and
underwriting
-4-
<PAGE> 5
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement of the
Company that covers any of the Exchange Securities or Registrable Securities
pursuant to the provisions of this Agreement and all amendments and supplements
to any such Registration Statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Semi-Annual Accrual Date" shall mean the Semi-Annual Accrual Date as
defined in the Indenture.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) of this
Agreement which covers all of the Registrable Securities (but no other
securities unless approved by the Holders whose Registrable Securities are
covered by such Shelf Registration Statement) on an appropriate form under Rule
415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and
all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Trustee" shall mean the trustee with respect to the Securities under
the Indenture.
"Underwriter" shall have the meaning set forth in Section 3 hereof.
"Underwritten Registration" or "Underwritten Offering" shall mean a
registration in which Registrable Securities are sold to an Underwriter for
reoffering to the public.
2. REGISTRATION UNDER THE 1933 ACT
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the Staff of the SEC, the Company shall use
commercially reasonable efforts to cause to be filed an Exchange Offer
Registration Statement covering the offer by the Company to the Holders to
exchange all of the Registrable Securities for
-5-
<PAGE> 6
Exchange Securities and to have such Registration Statement remain effective
until the closing of the Exchange Offer. The Company shall commence the Exchange
Offer promptly after the Exchange Offer Registration Statement has been declared
effective by the SEC and use its best efforts to have the Exchange Offer
consummated not later than 180 days after the Closing Date. The Company shall
commence the Exchange Offer by mailing the related exchange offer Prospectus and
accompanying documents to each Holder stating, in addition to such other
disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Securities validly
tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be
a period of at least 20 business days from the date such notice is mailed) (the
"Exchange Dates");
(iii) that any Registrable Security not tendered will
remain outstanding and continue to accrete in value until May 1, 2003 and
thereafter will accrue interest, but will not retain any rights under this
Registration Rights Agreement;
(iv) that Holders electing to have a Registrable Security
exchanged pursuant to the Exchange Offer will be required to surrender such
Registrable Security, together with the enclosed letters of transmittal, to the
institution and at the address (located in the Borough of Manhattan, The City of
New York) specified in the notice prior to the close of business on the last
Exchange Date; and
(v) that Holders will be entitled to withdraw their
election, not later than the close of business on the last Exchange Date, by
sending to the institution and at the address (located in the Borough of
Manhattan, The City of New York) specified in the notice a telegram, telex,
facsimile transmission or letter setting forth the name of such Holder, the
principal amount at maturity of Registrable Securities delivered for exchange
and a statement that such Holder is withdrawing his election to have such
Securities exchanged.
As soon as practicable after the last Exchange Date, the Company shall:
(i) accept for exchange Registrable Securities or portions
thereof tendered and not validly withdrawn pursuant to the Exchange Offer; and
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<PAGE> 7
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so accepted for
exchange by the Company and issue, and cause the Trustee to promptly
authenticate and mail to each Holder, an Exchange Security equal in principal
amount at maturity to the principal amount at maturity of the Registrable
Securities surrendered by such Holder.
The Company shall use commercially reasonable efforts to complete the
Exchange Offer as provided above and shall comply with the applicable
requirements of the 1933 Act, the 1934 Act and other applicable laws and
regulations in connection with the Exchange Offer. The Exchange Offer shall not
be subject to any conditions, other than that the Exchange Offer does not
violate applicable law or any applicable interpretation of the Staff of the SEC.
The Company shall inform the Placement Agent of the names and addresses of the
Holders to whom the Exchange Offer is made, and the Placement Agent shall have
the right, subject to applicable law, to contact such Holders and otherwise
facilitate the tender of Registrable Securities in the Exchange Offer.
(b) In the event that (i) the Company determines that the
Exchange Offer Registration provided for in Section 2(a) above is not available
or may not be consummated as soon as practicable after the last Exchange Date
because it would violate applicable law or the applicable interpretations of the
Staff of the SEC, (ii) the Exchange Offer is not for any other reason
consummated by November 8, 1998 or (iii) the Exchange Offer has been completed
and in the opinion of counsel for the Placement Agent a Registration Statement
must be filed and a Prospectus must be delivered by the Placement Agent in
connection with any offering or sale of Registrable Securities by the Placement
Agent, the Company shall use commercially reasonable efforts to cause to be
filed as soon as practicable after such determination, date or notice of such
opinion of counsel is given to the Company, as the case may be, a Shelf
Registration Statement providing for the sale by the Holders of all of the
Registrable Securities and to have such Shelf Registration Statement declared
effective by the SEC. In the event the Company is required to file a Shelf
Registration Statement solely as a result of the matters referred to in clause
(iii) of the preceding sentence, the Company shall use commercially reasonable
efforts to file and have declared effective by the SEC both an Exchange Offer
Registration Statement pursuant to Section 2(a) with respect to all Registrable
Securities and a Shelf Registration Statement (which may be a combined
Registration Statement with the Exchange Offer Registration Statement) with
respect to offers and sales of Registrable Securities held by the Placement
Agent after completion of the Exchange Offer. Except as set forth in Section 3,
the Company agrees to use commercially reasonable efforts to keep the Shelf
Registration Statement continuously effective until the expiration of the period
referred to in Rule 144(k) with respect to the Registrable
-7-
<PAGE> 8
Securities or such shorter period that will terminate when all of the
Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement. The Company further agrees to
supplement or amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the 1933 Act or by any other
rules and regulations thereunder for shelf registration or if reasonably
requested by a Holder with respect to information relating to such Holder, and
to use commercially reasonable efforts to cause any such amendment to become
effective and such Shelf Registration Statement to become usable as soon as
thereafter practicable. The Company agrees to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly after
its being used or filed with the SEC.
(c) The Company shall pay all Registration Expenses in connection
with the registration pursuant to Section 2(a) or Section 2(b). Each Holder
shall pay all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to Section
2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof
will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that, if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have become effective during the
period of such interference until the offering of Registrable Securities
pursuant to such Registration Statement may legally resume. As provided for in
the Indenture, in the event the Exchange Offer is not consummated and the Shelf
Registration Statement is not declared effective on or prior to November 8,
1998, interest on the Securities (in addition to the accrual of original issue
discount during the period ending May 1, 2003 and in addition to interest
otherwise due on the Securities after such date) will accrue from November 8,
1998, at an annual rate of 0.5% of the Accreted Value on the preceding
Semi-Annual Accrual Date, and be payable in cash semi-annually in arrears on May
1 and November 1 of each year, commencing May 1, 1999, until the earliest of (i)
the consummation of the Exchange Offer, (ii) the date the Shelf Registration
Statement is declared effective by the SEC or (iii) such time as the Securities
become freely transferable under the Securities Act.
-8-
<PAGE> 9
3. REGISTRATION PROCEDURES
In connection with the obligations of the Company with respect to the
Registration Statements pursuant to Section 2(a) and Section 2(b) hereof, the
Company shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the 1933 Act, which form (x) shall be selected by the
Company and (y) shall, in the case of a Shelf Registration, be available for the
sale of the Registrable Securities by the selling Holders thereof and (z) shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the SEC to be
filed therewith, and use commercially reasonable efforts to cause such
Registration Statement to become effective and remain effective in accordance
with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement effective for the applicable period and cause
each Prospectus to be supplemented by any required prospectus supplement and, as
so supplemented, to be filed pursuant to Rule 424 under the 1933 Act;
(c) in the case of a Shelf Registration, furnish to each Holder
of Registrable Securities, to counsel for the Placement Agent, to counsel for
the Holders and to each Underwriter of an Underwritten Offering of Registrable
Securities, if any and in the case of Shelf Registration Statement, furnish to
each Participating Broker-Dealer, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder, Underwriter or
Participating Broker-Dealer may reasonably request, in order to facilitate the
public sale or other disposition of the Registrable Securities or Exchange
Securities, as the case may be; and the Company consents to the use of such
Prospectus and any amendment or supplement thereto in accordance with applicable
law by each of the selling Holders of Registrable Securities and any such
Underwriters and Participating Broker-Dealer in connection with the offering and
sale of the Registrable Securities or Exchange Securities, as the case may be,
covered by and in the manner described in such Prospectus or any amendment or
supplement thereto in accordance with applicable law;
(d) use its best efforts to register or qualify the Registrable
Securities under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Securities covered by a Registration
Statement shall reasonably request in writing by the time the applicable
Registration Statement is declared effective by the SEC, to cooperate with such
Holders in connection with any filings
-9-
<PAGE> 10
required to be made with the National Association of Securities Dealers, Inc.
and do any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder; provided,
however, that the Company shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (ii) file any
general consent to service of process or (iii) subject itself to taxation in any
such jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities included therein, each Participating Broker-Dealer,
counsel for the Holders and counsel for the Placement Agent promptly and, if
requested by any such Holder or counsel, confirm such advice in writing (i) when
a Registration Statement has become effective and when any post-effective
amendment thereto has been filed and becomes effective, (ii) of any request by
the SEC or any state securities authority for amendments and supplements to a
Registration Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending the effectiveness of
a Registration Statement or the initiation of any proceedings for that purpose,
(iv) if, between the effective date of a Registration Statement and the closing
of any sale of Registrable Securities covered thereby, the representations and
warranties of the Company contained in any underwriting agreement, securities
sales agreement or other similar agreement, if any, relating to the offering
cease to be true and correct in all material respects or if the Company receives
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (v) of the happening of any event during the period
a Shelf Registration Statement is effective which makes any statement made in
such Registration Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such Registration
Statement or Prospectus in order to make the statements therein not misleading
and (vi) of any determination by the Company that a post-effective amendment to
a Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the earliest
possible moment and provide immediate notice to each Holder of the withdrawal of
any such order;
(g) in the case of a Shelf Registration, furnish to each Holder
of Registrable Securities included therein, and in the case of an Exchange Offer
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<PAGE> 11
Registration statement, furnish to each Participating Broker-Dealer without
charge, at least one conformed copy of each Registration Statement and any
post-effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends and enable such Registrable Securities to be
in such denominations (consistent with the provisions of the Indenture) and
registered in such names as the selling Holders may reasonably request at least
two business day prior to the closing of any sale of Registrable Securities;
(i) in the case of a Shelf Registration, upon the occurrence of
any event contemplated by Section 3(e)(v) hereof, use commercially reasonable
efforts to prepare and file with the SEC a supplement or post-effective
amendment to a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company agrees to
notify the Holders of Registrable Securities included in such Registration
Statement to suspend use of the Prospectus as promptly as practicable after the
occurrence of such an event, and the Holders hereby agree to suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus after
initial filing of a Registration Statement, provide copies of such document to
the Placement Agent and its counsel (and, in the case of a Shelf Registration
Statement, the Holders and their counsel) and make such of the representatives
of the Company as shall be reasonably requested by the Placement Agent or its
counsel (and, in the case of a Shelf Registration Statement, the Holders or
their counsel) available for discussion of such document, and shall not at any
time file or make any amendment to the Registration Statement, any Prospectus or
any amendment of or supplement to a Registration Statement or a Prospectus or
any document which is to be incorporated by reference into a Registration
Statement or a Prospectus, of which the Placement Agent and its counsel (and, in
the case of a Shelf Registration Statement, the Holders and their
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<PAGE> 12
counsel) shall not have previously been advised and furnished a copy or to
which the Placement Agent or its counsel (and, in the case of a Shelf
Registration Statement, the Holders or their counsel) shall object;
(k) obtain CUSIP numbers for the Exchange Securities and, if
required to file a Shelf Registration Statement, the Registrable Securities, in
each case, not later than the effective date of a Registration Statement;
(l) cause the Indenture to be qualified under the Trust Indenture
Act of 1939, as amended (the "TIA"), in connection with the registration of the
Exchange Securities or Registrable Securities, as the case may be, cooperate
with the Trustee and the Holders to effect such changes to the Indenture as may
be required for the Indenture to be so qualified in accordance with the terms of
the TIA and execute, and use its reasonable efforts to cause the Trustee to
execute, all documents as may be required to effect such changes and all other
forms and documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(m) in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of a majority the Registrable
Securities, any Underwriter participating in any disposition pursuant to such
Shelf Registration Statement, and attorneys and accountants designated by such
Holders, at reasonable times and in a reasonable manner, all financial and other
records, pertinent documents and properties of the Company, and cause the
respective officers, directors and employees of the Company to supply all
information reasonably requested by any such representative, Underwriter,
attorney or accountant in connection with a Shelf Registration Statement;
(n) in the case of a Shelf Registration, enter into such
customary agreements and take all such other reasonable actions in connection
therewith (including those reasonably requested by the Holders of a majority of
the Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities including, but not limited to, an
Underwritten Offering and in such connection, (i) to the extent possible, make
such representations and warranties to the Holders and any Underwriters of such
Registrable Securities with respect to the business of the Company and its
subsidiaries, the Registration Statement, Prospectus and documents incorporated
by reference or deemed incorporated by reference, if any, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when requested, (ii) obtain
opinions of counsel to the Company (which counsel and opinions, in form, scope
and substance, shall be reasonably satisfactory to the Holders and such
Underwriters and their respective counsel) addressed to each selling Holder and
Underwriter of Registrable Securities, covering the matters customarily covered
in
-12-
<PAGE> 13
opinions requested in underwritten offerings, (iii) obtain "cold comfort"
letters from the independent certified public accountants of the Company (and,
if necessary, any other certified public accountant of any subsidiary of the
Company, or of any business acquired by the Company for which financial
statements and financial data are or are required to be included in the
Registration Statement) addressed to each selling Holder and Underwriter of
Registrable Securities, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings, and (iv) deliver such documents and certificates as
may be reasonably requested by the Holders of a majority of the Registrable
Securities being sold or the Underwriters, and which are customarily delivered
in underwritten offerings, to evidence the continued validity of the
representations and warranties of the Company made pursuant to clause (i) above
and to evidence compliance with any customary conditions contained in an
underwriting agreement.
In the case of a Shelf Registration Statement, the Company may require
each Holder of Registrable Securities to furnish to the Company such information
regarding the Holder and the proposed distribution by such Holder of such
Registrable Securities as the Company may from time to time reasonably request
in writing for inclusion in such Registration Statement, and the Company may
exclude from such registration the Securities of any Holder that unreasonably
fails to furnish such information within a reasonable time after receiving such
request.
In the case of a Shelf Registration Statement, each Holder, and in the
case of an Exchange Offer Registration Statement, each Participating
Broker-Dealer, agrees that, upon the happening of any event of the kind
described in Section 3(e)(ii), (iii), (iv), (v) or (vi) hereof, the Company may
postpone or suspend the effectiveness of the Shelf Registration Statement or the
Exchange Offer Registration Statement, as the case may be, or suspend the right
to make sales pursuant to the Prospectus related thereto, and upon receipt of
notice from the company to that effect, such Holder, or such Participating
Broker-Dealer will forthwith discontinue disposition of Registrable Securities
pursuant to such Registration Statement until such Holder's or such
Participating Broker-Dealer's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(i) hereof or until it is advised in
writing by Company that the use of the applicable prospectus may be resumed,
and, if so directed by the Company, such Holder will deliver to the Company (at
its expense) all copies in its possession, other than permanent file copies then
in such Holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. Any such suspensions
may not exceed 90 days during any 365 day period.
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<PAGE> 14
The Holders of Registrable Securities covered by a Shelf Registration
Statement who desire to do so may sell such Registrable Securities in an
Underwritten Offering. In any such Underwritten Offering, the investment banker
or investment bankers and manager or managers (the "Underwriters") that will
administer the offering will be selected by the Majority Holders of the
Registrable Securities included in such offering, subject to the consent of the
Company (which will not be unreasonably withheld or delayed).
4. PARTICIPATION OF BROKER-DEALERS IN EXCHANGE OFFER
(a) The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Securities for its own account in the
Exchange Offer in exchange for Securities that were acquired by such
broker-dealer as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), may be deemed to be an "underwriter" within the
meaning of the 1933 Act and must deliver a prospectus meeting the requirements
of the 1933 Act in connection with any resale of such Exchange Securities.
The Company understands that it is the Staff's position that if the
Prospectus contained in the Exchange Offer Registration Statement includes a
plan of distribution containing a statement to the above effect and the means by
which Participating Broker-Dealers may resell the Exchange Securities, without
naming the Participating Broker-Dealers or specifying the amount of Exchange
Securities owned by them, such Prospectus may be delivered by Participating
Broker-Dealers to satisfy their prospectus delivery obligation under the 1933
Act in connection with resales of Exchange Securities for their own accounts, so
long as the Prospectus otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other provisions
of this Agreement, the Company agrees that the provisions of this Agreement as
they relate to a Shelf Registration shall also apply to an Exchange Offer
Registration to the extent, and with such reasonable modifications thereto as
may be, reasonably requested by the Placement Agent or by one or more
Participating Broker-Dealers, in each case as provided in clause (ii) below, in
order to expedite or facilitate the disposition of any Exchange Securities by
Participating Broker-Dealers consistent with the positions of the Staff recited
in Section 4(a) above; provided that:
(i) the Company shall not be required to amend or
supplement the Prospectus contained in the Exchange Offer Registration
Statement, as would otherwise be contemplated by Section 3(i), for a period
exceeding 180 days after the last Exchange Date (as such period may be extended
by the number of days of any suspension permitted by the penultimate paragraph
of Section 3 of this
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<PAGE> 15
Agreement) and Participating Broker-Dealers shall not be authorized by the
Company to deliver and shall not deliver such Prospectus after such period in
connection with the resales contemplated by this Section 4; and
(ii) the application of the Shelf Registration procedures
set forth in Section 3 of this Agreement to an Exchange Offer Registration, to
the extent not required by the positions of the Staff of the SEC or the 1933 Act
and the rules and regulations thereunder, will be in conformity with the
reasonable request to the Company by the Placement Agent or with the reasonable
request in writing to the Company by one or more broker-dealers who certify to
the Placement Agent and the Company in writing that they anticipate that they
will be Participating Broker-Dealers; and provided further that, in connection
with such application of the Shelf Registration procedures set forth in Section
3 to an Exchange Offer Registration, the Company shall be obligated (x) to deal
only with one entity representing the Participating Broker-Dealers, which shall
be Morgan Stanley & Co. Incorporated unless it elects not to act as such
representative, (y) to pay the fees and expenses of only one counsel
representing the Participating Broker-Dealers, which shall be counsel to the
Placement Agent unless such counsel elects not to so act and (z) to cause to be
delivered only one, if any, "cold comfort" letter with respect to the Prospectus
in the form existing on the last Exchange Date and with respect to each
subsequent amendment or supplement, if any, effected during the period specified
in clause (i) above.
(c) The Placement Agent shall have no liability to the Company or
any Holder with respect to any request that it may make pursuant to Section 4(b)
above.
5. INDEMNIFICATION AND CONTRIBUTION
(a) The Company agrees to indemnify and hold harmless the
Placement Agent, each Holder and each Person, if any, who controls the Placement
Agent or any Holder within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act, or is under common control with, or is controlled
by, the Placement Agent or any Holder, from and against all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred by the Placement Agent, any Holder or any such
controlling or affiliated Person in connection with defending or investigating
any such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (or any
amendment thereto) pursuant to which Exchange Securities or Registrable
Securities were registered under the 1933 Act, including all documents
incorporated therein by reference, or caused by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
-15-
<PAGE> 16
make the statements therein not misleading, or caused by any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, except (i) insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to the Placement Agent or any Holder furnished to the
Company in writing by Morgan Stanley & Co. Incorporated or any selling Holder
expressly for use therein and (ii) that the Company shall not be liable to any
indemnified party under the provisions of this Section 5 with respect to any
preliminary Prospectus, or any other Prospectus if the Company shall have
furnished amendments or supplements thereto, to the extent that any such loss,
claim, damage or liability results from the fact that such indemnified party
sold securities to a person to whom there was not sent or given, at or prior to
the written confirmation of such sale, a final Prospectus or such Prospectus so
amended or supplemented (if the Company had previously furnished copies thereof
to the indemnified party), if the loss, claim, damage or liability or such
indemnified party results from an untrue statement or alleged untrue statement
or an omission or alleged omission contained in the preliminary Prospectus or
other Prospectus that was corrected in the final Prospectus or such Prospectus
so amended or supplemented. In connection with any Underwritten Offering
permitted by Section 3, the Company will also indemnify the Underwriters, if
any, selling brokers, dealers and similar securities industry professionals
participating in the distribution, their officers and directors and each Person
who controls such Persons (within the meaning of the 1933 Act and the 1934 Act)
to the same extent as provided above with respect to the indemnification of the
Holders, if requested in connection with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Placement Agent and the other selling
Holders, and each of their respective directors, officers who sign the
Registration Statement and each Person, if any, who controls the Company, the
Placement Agent and any other selling Holder within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as
the foregoing indemnity from the Company to the Placement Agent and the Holders,
but only with reference to information relating to such Holder furnished to the
Company in writing by such Holder expressly for use in any Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in respect of which
indemnity
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<PAGE> 17
may be sought pursuant to either paragraph (a) or paragraph (b) above, such
Person (the "indemnified party") shall promptly notify the Person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the fees and expenses of more than one separate
firm (in addition to any local counsel) for the Placement Agent and all Persons,
if any, who control the Placement Agent within the meaning of either Section 15
of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and expenses of more
than one separate firm (in addition to any local counsel) for the Company, its
directors, its officers who sign the Registration Statement and each Person, if
any, who controls the Company within the meaning of either such Section and (c)
the fees and expenses of more than one separate firm (in addition to any local
counsel) for all Holders and all Persons, if any, who control any Holders within
the meaning of either such Section, and that all such fees and
expenses shall be reimbursed as they are incurred. In such case involving the
Placement Agent and Persons who control the Placement Agent, such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated. In such case
involving the Holders and such Persons who control Holders, such firm shall be
designated in writing by the Majority Holders. In all other cases, such firm
shall be designated by the Company. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent but,
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 60 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party for such fees and
-17-
<PAGE> 18
expenses of counsel in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which such indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) If the indemnification provided for in paragraph (a) or
paragraph (b) of this Section 5 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company and the Holders (including the Placement Agent, for so long as it owns
any Registrable Securities) shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Holders' respective obligations to contribute
pursuant to this Section 5(d) are several in proportion to the respective
principal amount at maturity of Registrable Securities or Exchange Securities of
such Holder that were registered pursuant to a Registration Statement.
(e) The Company and each Holder agree that it would not be just
or equitable if contribution pursuant to this Section 5 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in paragraph (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 5, no Holder shall be required to indemnify or contribute any amount in
excess of the amount by which the total price at which Registrable Securities or
Exchange Securities were sold by such Holder exceeds the amount of any damages
that such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged
-18-
<PAGE> 19
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 5 are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any indemnified party at law or
in equity.
The indemnity and contribution provisions contained in this Section 5
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
the Placement Agent, any Holder or any Person controlling the Placement Agent or
any Holder, or by or on behalf of the Company, its officers or directors or any
Person controlling the Company, (iii) acceptance of any of the Exchange
Securities and (iv) any sale of Registrable Securities pursuant to a Shelf
Registration Statement.
6. MISCELLANEOUS
(a) No Inconsistent Agreements. The Company has not entered into,
and on or after the date of this Agreement will not enter into, any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
other issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or consent; provided, however, that no amendment, modification,
supplement, waiver or consent to any departure from the provisions of Section 5
hereof shall be effective as against any Holder of Registrable Securities unless
consented to in writing by such Holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to the Placement Agent,
the address set forth in the Placement Agreement; and (ii) if to the Company,
initially at the Company's address set forth in
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<PAGE> 20
the Placement Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 6(c).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Placement Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such Person shall be entitled to receive the benefits hereof. The
Placement Agent (in its capacity as Placement Agent) shall have no liability or
obligation to the Company with respect to any failure by a Holder to comply
with, or any breach by any Holder of, any of the obligations of such Holder
under this Agreement.
(e) Purchases and Sales of Securities. During the period of two
years after the Closing Date, the Company will not, and will not permit any of
its affiliates (as defined in Rule 144A under the Securities Act) to resell any
of the Securities which constitute "restricted securities" under Rule 144A that
have been reacquired by any of them.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Placement Agent, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
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<PAGE> 21
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by the laws
of the State of New York.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
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<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AMAZON.COM, INC.
By_____________________________________
Name:
Title:
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO.
INCORPORATED
By_____________________________________
Name:
Title:
-22-
<PAGE> 1
MARTIN SMITH INC
500 WATERMARK TOWER OFFICE LEASE
1109 FIRST AVENUE
SEATTLE, WA 98101-2988 215 COLUMBIA BUILDING
TEL 682-3300 FAX 340-1283
THIS LEASE is made this 20th day of March 1998 by and between PACIFIC NW
TITLE BUILDING, INC., a WASHINGTON CORPORATION ("Landlord"), and AMAZON.COM,
INC., a DELAWARE CORPORATION ("Tenant"), who agree as follows:
1. FUNDAMENTAL TERMS. As used in this Lease, the following capitalized terms
shall have the following meanings:
(a) "Land" means the land on which the Building is located, situated in the
City of Seattle, County of King, State of Washington, which is described on
Exhibit A.
(b) "Building" means the building in which the Premises are located,
commonly known as the 215 Columbia Building, the street address of which is 215
Columbia Street, Seattle, Washington 98104.
(c) "Premises" means that certain space outlined in red in Exhibit B and
located on the third and fourth floors of the Building designated as Suite 400.
(d) "Agreed Areas" means the agreed amount of rentable square feet of space
in the Building and the Premises. Landlord and Tenant stipulate and agree for
all purposes under this Lease that the Building contains approximately 43,840
rentable square feet of space (the "Building Area") and that the Premises
contain approximately 22,820 rentable square feet of space (the "Premises
Area"). Landlord and Tenant further agree that the Building Area may exclude
portions of the Building which are used for other than office purposes, such as
areas used for retail purposes or for storage purposes.
(e) "Tenant's Share" means the Premises Area divided by the Building Area,
expressed as a percentage, which is fifty-two and five one-hundredths percent
(52.05%).
If a portion of the Building is damaged or condemned, or any other
event occurs which alters the number of rentable square feet of space in the
Premises or the Building, then Landlord shall adjust Tenant's Share to equal the
number of rentable square feet of space then existing in the Premises (as
altered by such event) divided by the number of rentable square feet of space
then existing in the Building (as altered by such event).
(f) "Commencement Date" means May 1, 1998, or such earlier date as
provided in Section 4 hereof.
(g) "Expiration Date" means May 31, 1999.
(h) "Term" means the period of time commencing on the Commencement Date and
ending on the Expiration Date, unless sooner terminated pursuant to this Lease.
(i) "Minimum Monthly Rent" means Twenty-eight Thousand Five Hundred
Twenty-five and 00/100ths Dollars ($28,525.00) per month during the Term of this
Lease:
(j) "Permitted Use" means use for purposes of general business/
administrative offices for an internet-based bookseller.
(k) "Base Year" means the calendar year 1998.
(l) "Prepaid Rent" means Twenty-eight Thousand Five Hundred Twenty-five and
00/100ths Dollars ($28,525.00).
(m) "Security Deposit" means Twenty-eight Thousand Five Hundred Twenty-five
and no/100ths Dollars ($28,525.00).
(n) "Landlord's Address for Notice" means 215 Columbia Building, c/o Martin
Smith Inc, 1109 First Avenue, Suite 500, Seattle, Washington 98101-2988.
(o) "Landlord's Address for Payment of Rent" means 215 Columbia Building,
c/o Martin Smith Inc, 1109 First Avenue, Suite 500, Seattle, Washington
98101-2988.
(p) "Tenant's Address for Notice" means Amazon.com, Inc., Attn: General
Counsel, 1516 Second Avenue, Suite 400, Seattle, Washington 98104.
(q) "Landlord's Agent" means Martin Smith Inc or such other agent as
Landlord may appoint from time to time.
1
<PAGE> 2
(r) "Broker(s)" means Martin Smith Inc representing the Landlord and
Washington Partners, Inc. representing the Tenant.
(s) "Exhibits" means the following Exhibits to this Lease:
Exhibit A - Legal Description of the Property
Exhibit B - Outline Drawing of the Premises
Exhibit C - Work Letter
Exhibit D - Rules and Regulations
(t) "Rider" means the following Rider which is attached hereto: Rider dated
March 20, 1998 by and between PACIFIC NW TITLE BUILDING, INC., A WASHINGTON
CORPORATION ("Landlord"), and AMAZON.COM, INC., A DELAWARE CORPORATION
("Tenant").
(u) "Definitions" means the words and phrases defined in Section 42
captioned "Definitions".
2. PREMISES. Landlord leases to Tenant and Tenant leases from Landlord the
Premises for the Term.
3. APPURTENANCES. Tenant, and its authorized representatives, shall have the
right to use, in common with others and subject to the Rules and Regulations,
the Common Areas of the Building. Landlord shall have the right, in Landlord's
sole discretion, from time to time to (i) make changes to the Building interior
and exterior and Common Areas, including without limitation, changes in the
location, size, shape, number and appearance thereof, (ii) to close temporarily
any of the Common Areas for maintenance purposes so long as reasonable access to
the Premises remains available, and (iii) to use the Common Areas while engaged
in making additional improvements, repairs or alterations to the Building. All
of the windows and exterior walls of the Premises and any space in the Premises
used for shafts, stacks, pipes, conduits, ducts, electrical equipment or other
utilities or Building facilities are reserved solely to Landlord and Landlord
shall have rights of access through the Premises for the purpose of operating,
maintaining and repairing the same, provided, however, that such changes shall
not materially affect Tenant's access to, or use and occupancy of, the Premises.
4. TERM.
(a) COMMENCEMENT DATE. This Lease shall become legally binding as of the
earlier of the date Landlord and Tenant execute this Lease or the date Tenant
enters onto the Premises or any portion thereof with Landlord's consent, and
shall remain in full force and effect thereafter until the expiration of the
Term, unless sooner terminated pursuant to this Lease. The Term shall commence
on the Commencement Date and expire on the Expiration Date, unless sooner
terminated pursuant to this Lease. The Commencement Date shall be the date
specified in Section 1.
(i) Notwithstanding anything to the contrary in this Section, Tenant
shall have the right to enter onto the Premises at any time after full execution
of this Lease by Landlord and Tenant solely for the purpose of installation of
cabling, communications equipment, office equipment and office furniture. No
Rent shall be due for such early access to the Premises.
(ii) If Tenant shall occupy the Premises or any portion thereof for
the Permitted Use prior to the Commencement Date specified in Section 1 then
Tenant shall pay Minimum Monthly Rent for such occupancy from and after the date
of such early occupancy. Landlord acknowledges that Tenant intends to occupy the
third floor in the Premises for the operation of its business as soon as
possible, and Tenant may so occupy the third floor prior to the Commencement
Date.
(b) TENANT TERMINATION RIGHTS. If Landlord is unable to deliver possession
of the Premises to Tenant on the Commencement Date as a result of causes beyond
its reasonable control, Landlord shall not be liable for any damage caused by
failing to deliver possession and this Lease shall not be void or voidable.
Tenant shall not be liable for Rent until Landlord delivers possession of the
Premises to Tenant. No delay in delivery of possession of the Premises to Tenant
shall change the Expiration Date or operate to extend the Term. If Landlord does
not deliver possession of the Premises to Tenant within thirty (30) days of the
Commencement Date, then Tenant may elect to terminate this Lease by giving
notice to Landlord within thirty (30) days following the end of such thirty (30)
day period.
(c) CONFIRMATION OF COMMENCEMENT DATE. When the Commencement Date as
provided herein has been established as an earlier or later date than the
Commencement Date specified in Section 1, Landlord shall confirm the
Commencement Date by notice to Tenant.
5. MINIMUM MONTHLY RENT; LATE CHARGE.
(a) MINIMUM MONTHLY RENT. Tenant shall pay to Landlord the Minimum Monthly
Rent without deduction, offset, prior notice or demand, in advance on the first
day of each month during the Term. Minimum Monthly Rent for any partial month
shall be prorated at the rate of 1/30th of the Minimum Monthly Rent per day.
Minimum Monthly Rent is exclusive of any sales, franchise, business or
occupation or other tax based on rents (other than Landlord's general income
taxes) and should such taxes apply during the Term, the Minimum Monthly Rent
shall be increased by the amount of such taxes. All Rent shall be paid to
Landlord at Landlord's Address for Payment of Rent or at such other address as
Landlord may specify by notice to Tenant.
(b) LATE CHARGE. Tenant acknowledges that the late payment by Tenant of any
Rent will cause Landlord to incur administrative, collection, processing and
accounting costs and expenses not contemplated under this Lease, the exact
amount of which are extremely difficult or impracticable to fix. Therefore, if
any
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Rent is not received by Landlord from Tenant by the fifth (5th) business day
after such Rent is due, Tenant shall immediately pay to Landlord a late charge
equal to five percent (5%) of the amount of such Rent or Seventy-five and
No/100th Dollars ($75.00), whichever is greater. Landlord and Tenant agree that
this late charge represents a reasonable estimate of such costs and expenses and
is fair compensation to Landlord for its loss caused by Tenant's nonpayment.
Should Tenant pay said late charge but fail to pay contemporaneously therewith
all unpaid amounts of Rent, Landlord's acceptance of this late charge shall not
constitute a waiver of Tenant's default with respect to Tenants nonpayment nor
prevent Landlord from exercising all other rights and remedies available to
Landlord under this Lease or under law.
6. PREPAID RENT AND SECURITY DEPOSIT. On execution of this Lease, Tenant shall
deposit with Landlord the Prepaid Rent, as monthly rent for the first full month
of the Term for which Rent is payable, and the Security Deposit, as a Security
Deposit for the performance by Tenant of the provisions of this Lease. If Tenant
is in default, Landlord may use the Security Deposit, or any portion of it, to
cure the default, including without limitation, paying for the cost of any work
necessary to restore the Premises, the Tenant improvements and any alterations
to good condition or to compensate Landlord for all damage sustained by Landlord
resulting from Tenant's default. Tenant shall within five (5) days of demand pay
to Landlord a sum equal to the portion of the Security Deposit expended or
applied by Landlord as provided in this Section so as to maintain the Security
Deposit in the sum initially deposited with Landlord. If Tenant is not in
default as of the expiration or termination of the Term, including without
limitation, in default in payment of the Rent for the last month of the Term,
then Landlord shall return the Security Deposit, without interest, to Tenant
within a reasonable period of time after the expiration or termination of the
Term. Landlord's obligations with respect to the Security Deposit are those of a
debtor and not a trustee. Landlord may commingle the Security Deposit with
Landlord's general and other funds.
7. REAL PROPERTY TAXES.
(a) PAYMENT OF TENANT'S SHARE OF INCREASES IN REAL PROPERTY TAXES.
Commencing January 1, 1999, Tenant shall pay to Landlord, as Additional Rent,
monthly, in advance on the first day of each month during the Term, an amount
equal to one-twelfth (1/12th) of Tenant's Share of all increases in Real
Property Taxes that are or will be levied or assessed against the Property
during each calendar year during the Term over and above the Real Property Taxes
that are levied or assessed against the Property during the Base Year as
reasonably estimated by Landlord. Such Additional Rent is exclusive of any
sales, franchise, business or occupation or other tax based on rents and should
such taxes apply during the Term, such Additional Rent shall be increased by the
amount of such taxes. Within one hundred twenty (120) days after the end of each
calendar year during the Term, Landlord shall furnish to Tenant a statement of
the Real Property Taxes for the preceding calendar year and Tenant's Share of
the increase in Real Property Taxes. If Tenant's Share of the increase in such
Real Property Taxes for that calendar year over such Real Property Taxes for the
Base Year exceeds the monthly payments made by Tenant, then Tenant shall pay
Landlord the deficiency within thirty (30) days after receipt of the statement.
If Tenant's payments made during that calendar year exceed Tenant's Share of the
increase in such Real Property Taxes for that calendar year over such Real
Property Taxes for the Base Year, then, at Landlord's option, either Landlord
shall pay Tenant the excess at the time Landlord furnishes the statement to
Tenant, or Tenant shall be entitled to offset the excess against the next
installment(s) of Minimum Monthly Rent and Additional Rent, provided, however,
that at the end of the Term Landlord shall pay Tenant the excess at the time
Landlord furnishes the statement to Tenant.
(b) GENERAL AND SPECIAL ASSESSMENTS. With respect to any general or special
assessments which may be levied against or upon the Property, or which under the
laws then in force may be evidenced by improvement or other bonds or may be paid
in annual installments, only the amount of such annual installment, and interest
due thereon, shall be included in the computation of Real Property Taxes.
(c) PRORATION. Tenant's Share of Real Property Taxes shall be prorated on
the basis of a 360-day year to account for any fractional portion of a tax year
included in the Term at its commencement and expiration.
(d) NO EFFECT ON MINIMUM MONTHLY RENT. Notwithstanding anything to the
contrary in this Section, the Minimum Monthly Rent payable by Tenant shall in no
event be less than the Minimum Monthly Rent specified in Section 1.
8. PERSONAL PROPERTY TAXES. Tenant shall pay prior to delinquency all personal
property taxes assessed against and levied upon trade fixtures, furnishings,
equipment and all other personal property of Tenant contained in the Premises or
elsewhere. If possible, Tenant shall cause such trade fixtures, furnishings,
equipment and all other personal property of Tenant to be assessed and billed
separately from the Property.
9. OPERATING COSTS.
(a) PAYMENT OF TENANT'S SHARE OF INCREASES IN OPERATING COSTS. Commencing
January 1, 1999, Tenant shall pay to Landlord, as Additional Rent, monthly, in
advance on the first day of each month during the Term, an amount equal to
one-twelfth (1/12th) of Tenant's Share of the increase in the Operating Costs of
the Property for each calendar year during the Term over the Operating Costs for
the Base Year as reasonably estimated by Landlord. Landlord shall reasonably
estimate the Operating Costs for the Base Year and for each calendar year during
the Term based on the Operating Costs that would have been incurred if the
Building had been 95% occupied during the Base Year or each such calendar year,
as the case may be, taking into account historical operating costs for the
Building. Such Additional Rent is exclusive of any sales, franchise, business or
occupation or other tax based on rents and should such taxes apply during the
Term, such Additional Rent shall be increased by the amount of such taxes.
Within one hundred twenty (120) days after the end of each calendar year during
the Term, Landlord shall furnish to Tenant a statement of the Operating Costs
for the preceding calendar year and Tenants Share of the increase in the
Operating Costs. If Tenant's Share of the
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increase in the Operating Costs for that calendar year over the Operating Costs
for the Base Year exceeds the monthly payments made by Tenant, then Tenant shall
pay Landlord the deficiency within thirty (30) days after receipt of the
statement. If Tenant's payments made during that calendar year exceed Tenant's
Share of the increase in the Operating Costs for that calendar year over the
Operating Costs for the Base Year, then, at Landlord's option, either Landlord
shall pay Tenant the excess at the time Landlord furnishes the statement to
Tenant, or Tenant shall be entitled to offset the excess against the next
installment(s) of Minimum Monthly Rent and Additional Rent, provided, however,
that at the end of the Term Landlord shall pay Tenant the excess at the time
Landlord furnishes the statement to Tenant.
(b) PRORATION. Tenant's Share of Operating Costs shall be prorated on the
basis of a 360 day year to account for any fractional portion of a year included
in the Term at its commencement and expiration.
(c) NO EFFECT ON MINIMUM MONTHLY RENT. Notwithstanding anything to the
contrary in this Section, the Minimum Monthly Rent payable by Tenant shall in no
event be less than the Minimum Monthly Rent specified in Section 1.
(d) RIGHT TO EXAMINE LANDLORD'S BOOKS AND RECORDS. Tenant or its authorized
representative shall have the right to examine Landlord's books and records
relating to Operating Costs of the Property upon reasonable prior notice
specifying such records Tenant desires to examine, during normal business hours
at the place or places where such records are normally kept by sending such
notice no later than ninety (90) days following the furnishing of the Landlord's
statement of the Operating Costs for the preceding calendar year and Tenant's
Share of the increase in the Operating Costs. Tenant may take exception to
matters included in Operating Costs, or Landlord's computation of Tenant's
Share, by sending notice specifying such exception and the reasons therefor to
Landlord no later than thirty (30) days after Landlord makes such records
available for examination. Landlord's statement of the Operating Costs for the
preceding calendar year and Tenant's Share of the increase in the Operating
Costs shall be considered final, except as to matters to which exception is
taken after examination of Landlord's books and records relating to Operating
Costs of the Property in the foregoing manner and within the foregoing times.
Tenant acknowledges that Landlord's ability to budget and incur expenses depends
on the finality of such statement, and accordingly agrees that time is of the
essence of this Section. If Tenant takes exception to any matter contained in
such statement as provided herein, Landlord shall refer the matter to an
independent certified public accountant, whose certification as to the proper
amount shall be final and conclusive as between Landlord and Tenant. Tenant
shall promptly pay the cost of such certification unless such certification
determines that Landlord's statement of the Operating Costs overstated the
Operating Costs by more than five percent (5%). Pending resolution of any such
exceptions in the foregoing manner, Tenant shall continue paying Tenant's Share
of Operating Costs in the amounts determined by Landlord, subject to adjustment
after any such exceptions are so resolved. If such certification determines that
Landlord's statement of the Operating Costs overstated the Operating Costs, then
Tenant shall receive a credit for Tenant's Share of the amount of such
overstatement against payments of Rent next due.
10. USE. Tenant shall use the Premises for the Permitted Use and for no other
use without Landlord's prior consent. Tenant agrees that it has determined to
its satisfaction that the Premises can be used for the Permitted Use. Tenant
waives any right to terminate this Lease if the Premises cannot be used for the
Permitted Use during the Term unless the prohibition on use is the result of
actions taken by Landlord. Tenant's use of the Premises shall be in accordance
with the following:
(a) INSURANCE. Tenant shall not do, bring, or keep anything in or about the
Premises or the Property that will cause a cancellation of any insurance
covering the Property. If the rate of any insurance carried by Landlord on the
Property as published by the Washington Survey and Rating Bureau, or any
successor rating bureau or agency, is increased as a result of Tenant's use,
then Tenant shall pay to Landlord not less than ten (10) days before the date
Landlord is obligated to pay a premium on the Insurance, a sum equal to the
difference between the original premium and the Increased premium.
(b) COMPLIANCE WITH LAWS. Tenant shall comply with all Laws concerning the
Premises and Tenant's use of the Premises. Landlord shall comply with all Laws
concerning the Building and the Building common areas and the operation and
maintenance thereof.
(c) WASTE, NUISANCE AND IMPROPER USE. Tenant shall not use the Premises in
any manner that will constitute waste, nuisance or unreasonable annoyance to
other tenants in the Building, including without limitation, (i) the use of
loudspeakers or sound or light apparatus that can be heard or seen outside the
Premises, (ii) for cooking or other activities that cause odors that can be
detected outside the Premises, or (iii) for lodging or sleeping rooms.
(d) DAMAGE TO PROPERTY. Tenant shall not do anything in, on or about the
Premises that will cause damage to the Property.
(e) RULES AND REGULATIONS. Tenant and its authorized representatives shall
comply with the Rules and Regulations set forth on Exhibit D attached hereto.
Landlord shall have the right to amend, on thirty (30) days advance written
notice, the Rules and Regulations from time to time. In the event of a conflict
between this Lease and the Rules and Regulations, as amended, this Lease shall
control. Landlord shall have the right to enforce the Rules and Regulations.
Landlord shall have no liability or responsibility whatsoever with respect to
the noncompliance by other tenants or their authorized representatives with any
of such Rules and Regulations.
11. HAZARDOUS SUBSTANCES. Tenant shall not dispose of or otherwise allow the
release of any Hazardous Substances in, on or under the Premises, or the
Property, or in any tenant improvements or alterations placed on the Premises by
Tenant. Tenant represents and warrants to Landlord that Tenant's intended use of
the
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Premises does not involve the use, production, disposal or bringing on to the
Premises of any Hazardous Substances, except for products normally used in
general business offices which constitute Hazardous Substances, provided that
such products are used, stored and disposed of in accordance with applicable
laws and manufacturers and supplier's guidelines. Tenant shall promptly comply
with all laws and with all orders, decrees or judgments of governmental
authorities or courts having jurisdiction, relating to the use, collection,
treatment, disposal, storage, control, removal or cleanup of Hazardous
Substances, on or under the Premises or the Property, or incorporated in any
tenant Improvements or alterations, at Tenant's expense.
(a) COMPLIANCE; NOTIFICATION. After notice to Tenant and a reasonable
opportunity for Tenant to effect such compliance, Landlord may, but is not
obligated to, enter upon the Premises and take such actions and incur such costs
and expenses to effect such compliance as it deems advisable to protect its
interest in the Premises and the Property, provided, however that Landlord shall
not be obligated to give Tenant notice and an opportunity to effect such
compliance if (i) such delay might result in material adverse harm to the
Premises, or the Property, or (ii) an emergency exists. Tenant shall reimburse
Landlord for the full amount of all costs and expenses incurred by Landlord in
connection with such compliance activities, and such obligation shall continue
even after expiration or termination of the Term. Tenant shall notify Landlord
immediately of any release of any Hazardous Substances on the Premises or the
Property.
(b) INDEMNITY BY TENANT. Tenant agrees to hold Landlord harmless from and
against any and all damages, charges, cleanup costs, remedial actions, costs and
expenses, which may be imposed on, incurred or paid by, or asserted against
Landlord, the Premises or the Property by reason of, or in connection with (1)
any misrepresentation, breach of warranty or other default by Tenant under this
Lease, or (2) the acts or omissions of Tenant, its authorized representatives,
or any subtenant or other person for whom Tenant would otherwise be liable,
resulting in the release of any Hazardous Substances on the Premises or the
Property.
(c) INDEMNITY BY LANDLORD. Landlord agrees to hold Tenant harmless from and
against any and all damages, charges, cleanup costs, remedial actions, costs and
expenses, which may be imposed on, incurred or paid by, or asserted against
Tenant, the Premises or the Property by reason of, or in connection with (i) any
misrepresentation, breach of warranty or other default by Landlord under this
Lease or (ii) the acts or omissions of Landlord, its authorized representatives,
or any other person for whom Landlord would otherwise be liable, resulting in
the release of any Hazardous Substances on the Premises or the Property.
(d) ACKNOWLEDGMENT AS TO HAZARDOUS SUBSTANCES. Tenant acknowledges that the
Premises may contain Hazardous Substances, and Tenant accepts the Premises and
the Building notwithstanding such Hazardous Substances. Landlord represents to
Tenant that, to the best of Landlord's knowledge without independent
investigation or inquiry, as of the date of execution of this Lease; (i) there
has been no release in the Premises or the Building of any Hazardous Substances
in violation of any applicable Laws, and (ii) the Premises and the Building
contain no asbestos-containing materials. The term "Landlord's knowledge" means
and includes only the actual knowledge of Landlord, without giving effect to any
principles of imputed or constructive knowledge and without any duty of inquiry.
If Landlord is required by any law to take any action to remove or abate any
Hazardous Substances, or if Landlord deems it necessary to conduct special
maintenance or testing procedures with regard to any Hazardous Substances, or to
remove or abate any Hazardous Substances, Landlord may take such action or
conduct such procedures at times and in a manner that Landlord deems appropriate
under the circumstances, and Tenant shall permit the same.
(e) SURVIVAL. The provisions of this Section shall survive the expiration
or sooner termination of the Term. No subsequent modification or termination of
this Lease by agreement of the parties or otherwise shall be construed to waive
or to modify any provisions of this Section unless the termination or
modification agreement or other document expressly so states in writing.
12. LANDLORD'S MAINTENANCE; INCLUSION IN OPERATING COSTS.
(a) LANDLORD'S MAINTENANCE. Except as provided in Section 13 captioned
"Tenant's Maintenance; Remedies", Section 23 captioned "Destruction" and Section
24 captioned "Condemnation" and except for damage caused by any negligent or
intentional act or omission of Tenant or its authorized representatives,
Landlord shall maintain in good condition and repair the following:(i) the
structural parts of the Building, which structural parts include only the
foundations, bearing and exterior walls (excluding glass and doors), subflooring
and roof, (ii) the building standard lighting fixtures, window coverings and
ceiling tiles and the unexposed electrical, plumbing and sewage systems,
including without limitation, those portions lying outside the Premises, (iii)
the heating, ventilating and air-conditioning system, if any, servicing the
Building, (iv) the lobbies, corridors, elevators, public or common restrooms and
other common areas of the Building, and (v) the sidewalks, grounds, landscaping,
parking and loading areas, if any, and other common areas of the Property.
(b) INCLUSION IN OPERATING COSTS. The cost of maintaining, repairing,
replacing or servicing the portions of the Building that Landlord is required to
maintain pursuant to this Section shall be included in Operating Costs to the
extent provided in Section 9 captioned "Operating Costs".
13. TENANT'S MAINTENANCE; REMEDIES.
(a) TENANT'S MAINTENANCE. Except as provided in Section 12 captioned
"Landlord's Maintenance; Inclusion in Operating Costs", Section 23 captioned
"Destruction" and Section 24 captioned "Condemnation" and except for damage
caused by any negligent or intentional act or omission of Landlord or its
authorized representatives, Tenant, at its cost, shall maintain in good
condition and repair the Premises (ordinary wear and tear excepted), including
without limitation, all of the Tenant Improvements (except for latent defects),
Tenant's alterations, Tenant's trade fixtures, Tenant's personal property,
signs, walls, interior partitions, wall coverings, windows, non-building
standard window coverings, glass, doors, carpeting and resilient flooring,
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non-building standard ceiling tiles, plumbing fixtures and non-building standard
lighting fixtures. Tenant shall be liable for any damage to the Premises and the
Building resulting from the acts or omissions of Tenant or its authorized
representatives.
(b) LANDLORD'S REMEDIES. If Tenant fails to maintain the Premises in good
condition and repair as required by Subsection 13(a) and if such failure is not
cured within thirty (30) days after notice of such failure is given by Landlord
to Tenant, then Landlord may, at its option, cause the Premises to be maintained
in good condition and repair and Tenant shall promptly reimburse Landlord for
all costs incurred by Landlord in performance of Tenant's obligation to maintain
the Premises.
14. TENANT IMPROVEMENTS AND ALTERATIONS; TRADE FIXTURES.
(a) TENANT IMPROVEMENTS AND ALTERATIONS. Tenant accepts the Premises in "AS
IS" condition without any obligations for the performance of improvements or
other work by Landlord. Tenant shall not make any improvements or alterations
(other than cabling) to the Premises without Landlord's prior written consent,
which consent shall not be unreasonably withheld. If Tenant desires to make any
improvements or alterations to the Premises and obtains Landlord's consent as
described herein, Tenant shall pay for such improvements and alterations as
described in the Work Letter attached hereto as Exhibit C. If Tenant's
improvements and alterations coincide with Landlord's long-term plans for the
building, Landlord may, in Landlord's sole discretion, pay for all or a portion
of such improvements and alterations made to the Premises. Tenant shall not make
any other improvements or alterations to the Premises without Landlord's prior
consent. Any improvements and alterations made by either party shall remain on
and be surrendered with the Premises on expiration or termination of the Term,
except that Landlord can elect, at the time Landlord gives it consent, to
require Tenant to remove any improvements and alterations that Tenant has made
to the Premises. If Landlord so elects, Tenant, at its cost, shall restore the
Premises to the condition designated by Landlord in its election, before the
last day of the Term. Any improvements and alterations that remain on the
Premises on expiration or termination of the Term shall automatically become the
property of Landlord and title to such improvements and alterations shall
automatically pass to Landlord at such time without any payment therefor by
Landlord to Tenant. If Tenant or its authorized representatives make any
improvements or alterations to the Premises as provided in this Section, then
such improvements and alterations (i) shall be made in a first class manner in
conformity with then building standard improvements, (ii) shall be made
utilizing then building standard materials, (iii) shall be made in compliance
with the Rules and Regulations and the reasonable directions of Landlord, (iv)
shall be made pursuant to a valid building permit to be obtained by Tenant, at
its cost, (v) shall be made in conformity with then applicable Laws, including
without limitation, building codes, and (vi) shall not be commenced until five
(5) days after Landlord has received notice from Tenant stating the date the
installation of such improvements and alterations is to commence so that
Landlord can post and record an appropriate notice of nonresponsibility.
(b) TRADE FIXTURES. Tenant may install any trade fixtures in or on the
Premises with Landlord's prior consent, which shall not be unreasonably
withheld.
15. MECHANICS' LIENS. Tenant shall pay, or cause to be paid, all costs of labor,
services and/or materials supplied in connection with any Work. Tenant shall
keep the Property free and clear of all mechanics' liens and other liens
resulting from any Work. Prior to the commencement of any Work or the supply or
furnishing of any labor, services and/or materials in connection with any Work,
Tenant shall provide Landlord with a labor and material payment bond in an
amount equal to one hundred percent (100%) of the aggregate price of all
contracts therefor, with release of the bond conditioned on Tenant's payment in
full of all claims of lien claimants for such labor, services and/or materials
supplied in the prosecution of the Work. Said payment bond shall name Landlord
as a primary obligee, shall be given by a surety which is satisfactory to
Landlord, and shall be in such form as Landlord shall approve in its sole
discretion. Tenant shall have the right to contest the correctness or validity
of any such lien if, immediately on demand by Landlord, it procures and records
a lien release bond issued by a responsible corporate surety in an amount
sufficient to satisfy statutory requirements therefor in the State of
Washington. Tenant shall promptly pay or cause to be paid all sums awarded to
the claimant on its suit, and, in any event, before any execution is issued with
respect to any judgment obtained by the claimant in its suit or before such
judgment becomes a lien on the Premises, whichever is earlier. If Tenant shall
be in default under this Section, by failing to provide security for or
satisfaction of any mechanic's or other liens, then Landlord may (but shall not
be obligated to), in addition to any other rights or remedies it may have,
discharge said lien by (i) paying the claimant an amount sufficient to settle
and discharge the claim, (ii) procuring and recording a lien release bond, or
(iii) taking such other action as Landlord shall deem necessary or advisable,
and, in any such event, Tenant shall pay as Additional Rent, on Landlord's
demand, all costs (including reasonable attorney fees) incurred by Landlord in
settling and discharging such lien together with interest thereon in accordance
with Section 39 captioned "Interest on Unpaid Rent" from the date of Landlord's
payment of said costs. Landlord's payment of such costs shall not waive any
default of Tenant under this Section.
16. UTILITIES AND SERVICES.
(a) UTILITIES AND SERVICES FURNISHED BY LANDLORD. Landlord shall furnish
the Premises with:
(i) Electricity for lighting and power suitable for the use of the
Premises for ordinary general office purposes; provided, however, that Tenant
shall not at any time have a connected electrical load for lighting purposes in
excess of the wattage per square foot of Premises Area required for building
standard amounts of lighting, or a connected load for all other power
requirements in excess of four (4) watts per square foot of Premises Area as
determined by Landlord, and the electricity so provided for lighting and power
shall not exceed such limits, subject to any lower limits set by any
governmental authority with respect thereto;
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(ii) Subject to the reasonable limitations of the existing building
systems, heating, ventilating and air-conditioning to maintain a temperature
range in the Premises which is customary for similar office space in the
Seattle, Washington area (but in compliance with any applicable governmental
regulations with respect thereto). Tenant agrees to keep closed, when necessary,
blinds, draperies and windows which must be closed to provide for the efficient
operation of the heating and air conditioning systems, if any, and Tenant agrees
to cooperate with Landlord and to abide by the regulations and requirements
which Landlord may prescribe for the proper functioning and protection of the
heating, ventilating and air-conditioning system, if any. If Tenant requires
heating, ventilating and air-conditioning to the Premises other than during
normal business hours from 7:00 A.M. to 6:00 P.M. Mondays through Fridays and
from the hours of 9:00 A.M. to 1:00 P.M. on Saturdays, except other than the
stated Saturday hours, Sundays and those legal holidays generally observed in
the State of Washington, Landlord shall, upon Tenant's request made not less
than 24 hours before the time Tenant requires the after hour service, and not
later than Noon on the Friday before any Saturday or Sunday on which Tenant
requires such service, and not later than Noon of the day before any holiday on
which Tenant requires such service (except as otherwise provided in the Rules
and Regulations), furnish such heating, ventilating and air-conditioning. If
Tenant receives such services, then Tenant shall pay, upon demand, an amount
equal to Tenant's proportionate share of the actual direct cost to Landlord in
providing the heating, ventilating and air-conditioning outside of normal
business hours;
(iii) Water for restroom and drinking purposes and access to restroom
facilities;
(iv) Elevator service for general office pedestrian usage if the
Building is serviced by elevators;
(v) Relamping of building-standard light fixtures;
(vi) Washing of interior and exterior surfaces of exterior windows
with reasonable frequency; and
(vii) Janitorial service five (5) times per week, except holidays.
(b) PAYMENT FOR EXCESS UTILITIES AND SERVICES. All services and utilities
for the Premises not required to be furnished by Landlord pursuant to Section
16(a) shall be paid for by Tenant. If Tenant requires, on a regular basis,
water, heat, air conditioning, electric current, elevator or janitorial service
in excess of that provided for in Section 16(a), then Tenant shall first obtain
the consent of Landlord which consent shall not be unreasonably withheld. If
Landlord consents to such excess use, Landlord may install an electric current
or water meter (including, without limitation, any additional wiring, conduit or
panel required therefor) to measure the excess electric current or water
consumed by Tenant or may cause the excess usage to be measured by other
reasonable methods (e.g. by temporary "check" meters or by survey). Tenant shall
pay to Landlord upon demand (i) the cost of any and all water, heat, air
conditioning, electric current, janitorial, elevator or other services or
utilities required to be furnished to Tenant in excess of the services and
utilities required to be furnished by Landlord as provided in Section 16(a);
(ii) the cost of installation, maintenance and repair of any meter installed in
the Premises; (iii) the cost of all electricity and water consumed by Tenant in
connection with any dedicated heating, ventilating and/or air-conditioning,
computer power and/or air-conditioning, telecommunications or other special
systems of Tenant, including any power usage other than through existing
standard 110-volt AC outlets; and (iv) any cost incurred by Landlord in keeping
account of or determining such excess utilities or services furnished to Tenant.
Landlord's failure to bill Tenant for any such excess utilities or services
shall not waive Landlord's right to bill Tenant for the excess at a later time.
(c) TEMPERATURE BALANCE. Landlord makes no representation to Tenant
regarding the adequacy or fitness of the heating, ventilating and
air-conditioning systems, if any, in the Building to maintain temperatures that
may be required for, or because of, any of Tenant's equipment which uses other
than the fractional horsepower normally required for office equipment, and
Landlord shall have no liability for loss or damage suffered by Tenant or others
in connection therewith. If the temperature otherwise maintained in any portion
of the Premises by the heating, air-conditioning or ventilation system is
affected as a result of (i) any lights, machines or equipment (including without
limitation electronic data processing machines) used by Tenant in the Premises,
(ii) the occupancy of the Premises by more than one person per two hundred (200)
square feet of rentable area therein, (iii) an electrical load for lighting or
power in excess of the limits per square foot of rentable area of the Premises
specified in Section 16(a), or (iv) any rearrangement of partitioning or other
improvements, Landlord may install any equipment, or modify any existing
equipment (including the standard air-conditioning equipment) Landlord deems
necessary to restore the temperature balance. The cost of any such equipment,
including without limitation, the cost of design and installation thereof, and
the cost of operating, metering, maintaining or repairing the same, shall be
paid by Tenant to Landlord upon demand. Tenant shall not install or operate
window-mounted heating or air-conditioning units.
(d) SPECIAL ELECTRICAL OR WATER CONNECTIONS; ELECTRICITY USE. Tenant will
not, without the prior consent of Landlord, which shall not be unreasonably
withheld, connect or use any apparatus or device in the Premises (i) using
current in excess of 110 volts or (ii) which will cause the amount of
electricity, water, heating, air-conditioning or ventilation furnished to the
Premises to exceed the amount required for use of the Premises for ordinary
general office purposes during normal business hours or (iii) which would cause
Tenant's connected load to exceed any limits established in Section 16(a).
Tenant shall not connect with electric current except through existing outlets
in the Premises and shall not connect with water pipes except through existing
plumbing fixtures in the Premises. In no event shall Tenant's use of electricity
exceed the capacity of existing feeders to the Building or the risers or wiring
installation, and Landlord may prohibit the use of any electrical equipment
which in Landlord's opinion will overload such wiring or interfere with the use
thereof by other tenants in the Building. If Landlord consents to the use of
equipment requiring such changes, Tenant shall pay the cost of installing any
additional risers, panels or other facilities that may be necessary to furnish
energy to the Premises.
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Landlord will not permit additional coring of the floor of the Premises in
order to install new electric outlets in the Premises unless Tenant furnishes
Landlord with X-ray scans of the floor area where the Tenant wishes to place
additional electrical outlets and Landlord, in its absolute discretion, is
satisfied, on the basis of such X-ray scans and other information obtained by
Landlord, that coring of the floor in order to install such additional outlets
will not weaken the structure of the floor.
(e) LANDLORD'S DUTIES. Landlord shall not be in default under this Lease or
liable for any damages resulting from, or incidental to, any of the following,
nor shall any of the following be an actual or constructive eviction of Tenant,
nor shall the Rent be abated by reason of: (i) failure to furnish or delay in
furnishing any of the services described in this Section when such failure or
delay is caused by accident or any condition beyond the reasonable control of
Landlord, including the making of necessary repairs or improvements to the
Premises or to the Building, (ii) any electrical surges or spikes, or (iii)
failure to make any repair or to perform any maintenance, unless such failure
shall persist for an unreasonable time after notice of the need for such repair
or maintenance is given to Landlord by Tenant. Landlord shall use reasonable
efforts to remedy any interruption in the furnishing of such services.
(f) GOVERNMENTAL REGULATIONS. Any other provisions of this Section
notwithstanding, if any governmental authority or utility supplier imposes any
laws, controls, conditions, or other restrictions upon Landlord, Tenant, or the
Building, relating to the use or conservation of energy or utilities, mandated
changes in temperatures to be maintained in the Premises or the Building or the
reduction of automobile or other emissions (collectively, the "Controls"), or in
the event Landlord is required or elects to make alterations to the Building in
order to comply with the Controls, Landlord may, in its reasonable discretion,
comply and may require Tenant to comply with the Controls or make such
alterations to the Building in order to comply with the Controls. Such
compliance and the making of such alterations shall not constitute an actual or
constructive eviction of Tenant, impose on Landlord any liability whatsoever, or
entitle Tenant to any abatement of Rent.
17. INDEMNITY.
(a) GENERALLY. Tenant shall hold Landlord harmless from and against any and
all damages arising out of any damage to any persons or property occurring in,
on or about the Premises or the Property resulting from the acts or omissions
of Tenant or its authorized representatives. Landlord shall hold Tenant harmless
from and against any and all damages arising out of any damage to any persons or
property occurring in, on or about the Premises or the Property resulting from
the acts or omissions of Landlord or its authorized representatives. A party's
obligation under this Section to indemnity and hold the other party harmless
shall be limited to the sum that exceeds the amount of insurance proceeds, if
any, received by the party being indemnified.
(b) CONCURRENT NEGLIGENCE OF LANDLORD AND TENANT. Notwithstanding Section
17(a) above, in the event of concurrent negligence of Tenant, or its authorized
representatives, on the one hand, and that of Landlord, or its authorized
representatives, on the other hand, which concurrent negligence results in
damage to any persons or property occurring in, on or about the Premises or the
Property, either party's obligation to indemnify the other party as set forth in
Section 17(a) shall be limited to the extent of the negligence of the
indemnifying party, or its authorized representatives, including the
indemnifying party's proportional share of costs and attorneys' fees incurred in
connection with any claims, actions or proceedings brought with respect to such
damage.
(c) WAIVER OF WORKER'S COMPENSATION IMMUNITY. The indemnification
obligations contained in this Section shall not be limited by any worker's
compensation, benefit or disability laws, and each indemnifying party hereby
waives (solely for the benefit of the indemnified party) any immunity that said
indemnifying party may have under the Industrial Insurance Act, Title 51 RCW and
similar worker's compensation, benefit or disability laws.
(d) PROVISIONS SPECIFICALLY NEGOTIATED. LANDLORD AND TENANT ACKNOWLEDGE BY
THEIR EXECUTION OF THIS LEASE THAT EACH OF THE INDEMNIFICATION PROVISIONS OF
THIS LEASE (SPECIFICALLY INCLUDING BUT NOT LIMITED TO THOSE RELATING TO WORKER'S
COMPENSATION BENEFITS AND LAWS) WERE SPECIFICALLY NEGOTIATED AND AGREED TO BY
LANDLORD AND TENANT.
18. EXEMPTION OF LANDLORD FROM LIABILITY. Landlord and Landlord's Agent shall
not be liable for injury to Tenant's business or loss of income therefrom or for
damage which may be sustained by the person, goods, wares, merchandise or
property of Tenant, its authorized representatives, or any other person in or
about the Premises, caused by or resulting from fire, steam, electricity, gas,
water or rain, which may leak or flow from or into any part of the Premises, or
from the breakage, leakage, obstruction or other defects of the pipes,
sprinklers, wires, appliances, plumbing, air-conditioning or lighting fixtures
of the same, whether the said damage or injury resulting from conditions arising
upon the Premises or upon other portions of the Building or the Property unless
such injury or damage is caused by the negligence or willful misconduct of
Landlord or its authorized representatives.
19. COMMERCIAL GENERAL LIABILITY AND PROPERTY DAMAGE INSURANCE. Tenant, at its
cost, shall maintain commercial general liability insurance (including
contractual liability and products and completed operations liability) with
liability limits of not less than $1,000,000 per occurrence and $2,000,000
annual aggregate, insuring against all liability of Tenant and its authorized
representatives arising out of or in connection with Tenant's use and occupancy
of the Premises and property damage insurance with liability limits of not less
than $500,000. All such commercial general liability and property damage
insurance shall insure performance by Tenant of the indemnity provisions of
Section 17 captioned "Indemnity". Landlord and Landlord's Agent shall be
additional named insureds on such insurance policy.
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20. TENANT'S FIRE INSURANCE. Tenant, at its cost, shall maintain on all of
Tenant's Alterations, Trade Fixtures and Personal Property in, on or about the
Premises, a policy of standard All Risk fire insurance, in an amount equal to at
least their full replacement cost. The proceeds of any such policy shall be
used by Tenant for the restoration of Tenant's Alterations and Trade Fixtures
and the replacement of its Personal Property. Any portion of such proceeds not
used for such restoration shall belong to Tenant.
21. WAIVER OF SUBROGATION. Landlord and Tenant release each other, and their
respective authorized representatives, from any claims for damage to any person
or to the Premises and the Building and to Tenant's Alterations, Trade Fixtures
and Personal Property that are caused by or result from risks insured against
under any insurance policies carried by the parties, in force at the time of any
such damage and collectible. Landlord and Tenant shall cause each insurance
policy obtained by it to provide that the insurance company waives all right of
recovery by way of subrogation against either party in connection with any
damage covered by any insurance policy. Neither party shall be liable to the
other for any damage caused by fire or any of the risks insured against under
any insurance policy required by this Lease.
22. OTHER INSURANCE MATTERS. All insurance required to be carried by Tenant
under this Lease shall: (i) be issued by insurance companies authorized to do
business in the State of Washington with a rating of A/VI or better as rated in
the most recent edition of Best's Insurance Reports; (ii) be issued as a primary
policy, and (iii) contain an endorsement requiring thirty (30) days' prior
written notice from the insurance company to both parties, to Landlord's Agent,
and, if requested by Landlord, to Landlord's lender, before cancellation or
change in the coverage, scope, or amount of any policy. Each policy or a
certificate of the policy, together with evidence of payment of premiums, shall
be deposited with Landlord on or before the Commencement Date, and on renewal of
the policy not less than ten (10) days before expiration of the term of the
policy.
23. DESTRUCTION.
(a) INSURED DAMAGE. If during the Term the Premises or the Building are
partially or totally destroyed by any casualty that is covered by any insurance
carried by Landlord covering the Building, rendering the Premises partially or
totally inaccessible or unusable, Landlord shall restore the Premises or the
Building to substantially the same condition as they were in immediately before
such destruction, if (i) the insurance proceeds available to Landlord equal or
exceed the cost of such restoration, (ii) in the opinion of a registered
architect or engineer appointed by Landlord such restoration can be completed
within one hundred eighty (180) days after the date of destruction, and (iii)
such restoration is permitted under then existing laws to be done in such a
manner as to return the Premises, or the Building, as the case may be, to
substantially the same condition as they were in immediately before such
destruction. To the extent that the insurance proceeds must be paid to a
mortgagee under, or must be applied to reduce any debt secured by, a mortgage
covering the Property, the insurance proceeds shall be deemed not to be
available to Landlord unless such mortgagee permits Landlord to use the
insurance proceeds for such restoration. Such destruction shall not terminate
this Lease.
(b) MAJOR OR UNINSURED DAMAGE. If during the Term the Premises or the
Building are partially or totally destroyed by any casualty and Landlord is not
obligated under Section 23(a) captioned "Insured Damage" to restore the Premises
or the Building, as the case may be, then (i) Landlord may, at its election,
restore the Premises or the Building to substantially the same condition as they
were in immediately before such destruction, or (ii) either party may terminate
this Lease effective as of the date of such destruction on notice to the other
party within sixty (60) days after the date of destruction. If Landlord does not
give Tenant notice within sixty (60) days after the date of such destruction of
its election to restore the Premises or the Building, as the case may be,
Landlord shall be deemed to have elected to terminate this Lease. If Landlord
elects to restore the Premises or the Building, as the case may be, Landlord
shall use commercially reasonable efforts to complete such restoration within
one hundred eighty (180) days after the date on which Landlord obtains all
permits necessary for such restoration, provided, however, that such one hundred
eighty (180) day period shall be extended by a period equal to any delays caused
by Force Majeure, and such destruction shall not terminate this Lease.
(c) DAMAGE TO THE BUILDING. If during the Term the Building is partially
destroyed by any casualty and if in the opinion of Landlord the Building should
be restored in such a way as to materially alter the Premises, then Landlord
may, at Landlord's election, terminate this Lease by giving notice to Tenant of
Landlord's election to do so within sixty (60) days after the date of such
destruction.
(d) EXTENT OF LANDLORD'S OBLIGATION TO RESTORE. If Landlord is required or
elects to restore the Premises as provided in this Section, Landlord shall not
be required to restore alterations made by Tenant, Tenant's trade fixtures and
Tenant's personal property, such excluded items being the sole responsibility of
Tenant to restore.
(e) ABATEMENT OR REDUCTION OF RENT. In case of damage to, or destruction
of, the Premises or the Building the Rent shall be abated or reduced, between
the date of destruction and the date of completion of restoration, by an amount
that is in the same ratio to the Rent as the total number of square feet of the
Premises that are so damaged or destroyed bears to the total number of square
feet in the Premises.
24. CONDEMNATION. If during the Term there is any taking of part or all of the
Premises or the Building by condemnation, then the rights and obligations of the
parties shall be as follows:
(a) MINOR TAKING. If there is a taking of less than ten percent(10%) of the
Premises, this Lease shall remain in full force and effect.
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(b) MAJOR TAKING. If there is a taking of ten percent (10%) or more of the
Premises and if the remaining portion of the Premises is of such size or
configuration that Tenant is unable to conduct its business in the Premises,
then the Term shall terminate as of the date of taking.
(c) TAKING OF PART OF THE BUILDING. If there is a taking of a part of the
Building other than the Premises and if in the opinion of Landlord the Building
should be restored in such a way as to materially alter the Premises, then
Landlord may terminate the Term by giving notice to such effect to Tenant within
sixty (60) days after the date of vesting of title in the condemnor and the Term
shall terminate as of the date specified in such notice, which date shall not be
less than sixty (60) days after the giving of such notice.
(d) AWARD. The entire award for the Premises, the Building and the
Property, shall belong to and be paid to Landlord, Tenant hereby assigning to
Landlord Tenant's interest therein, if any, provided, however, that Tenant shall
have the right to claim and recover from the condemnor compensation for the loss
of any alterations made by Tenant, Tenant's trade fixtures, Tenant's personal
property, moving expenses and business interruption.
(e) ABATEMENT OF RENT. If any part of the Premises is taken by condemnation
and this Lease remains in full force and effect, on the date of taking the Rent
shall be reduced by an amount that is in the same ratio to the Rent as the total
number of square feet in the Premises taken bears to the total number of square
feet in the Premises immediately before the date of taking.
25. ASSIGNMENT AND SUBLETTING.
(a) LANDLORD'S CONSENT; DEFINITIONS. Tenant acknowledges that the Building
is a multi-tenant office building, occupied by tenants specifically selected by
Landlord, and that Landlord has a legitimate interest in the type and quality of
such tenants, the location of tenants in the Building and in controlling the
leasing of space in the Building so that Landlord can better meet the particular
needs of its tenants and protect and enhance the relative image, position and
value of the Building in the office building market. Tenant further acknowledges
that the rental value of the Premises may fluctuate during the Term in
accordance with market conditions, and, as a result, the Rent paid by Tenant
under the Lease at any particular time may be higher or lower than the then
market rental value of the Premises. Landlord and Tenant agree, and the
provisions of this Section are intended to so provide, that, if Tenant
voluntarily assigns its interest in this Lease or in the Premises or subleases
any part or all of the Premises, one-half (1/2) of the net profits from any
increase in the market rental value of the Premises shall belong solely to
Landlord. Tenant acknowledges that, if Tenant voluntarily assigns this Lease or
subleases any part or all of the Premises, Tenant's investment in the subject
portion of the Premises (specifically including, but not limited to, tenant
improvements, good will or other assets) may be lost or reduced as a result of
such action.
(b) CONSENT REQUIRED. Tenant shall not voluntarily assign or encumber its
interest in this Lease or in the Premises, or sublease any part or all of the
Premises, without Landlord's prior consent, which consent shall not be
unreasonably withheld. Any assignment, encumbrance or sublease without
Landlord's consent shall be voidable and, at Landlord's election, shall
constitute a default by Tenant under this Lease. In determining whether to
approve a proposed assignment or sublease, Landlord shall place primary emphasis
on the proposed transferee's reputation and creditworthiness, the character of
the business to be conducted by the proposed transferee at the Premises and the
affect of such assignment or subletting on the tenant mix in the Building. In
addition, Landlord shall have the right to approve the specific form of any
assignment or sublease agreement. In no event shall Landlord be obligated to
consent to any assignment or subletting which increases (i) the Operating Costs,
(ii) the burden on the Building services, or (iii) the foot traffic, elevator
usage or security concerns in the Building, or creates an increased probability
of the comfort and/or safety of the Landlord and other tenants in the Building
being unreasonably compromised or reduced (for example, but not exclusively,
Landlord may deny consent to an assignment or subletting where the space will be
used for a school or training facility, an entertainment, sports or recreation
facility, retail sales to the public (unless Tenant's permitted use is retail
sales), a personnel or employment agency, a medical office, or an embassy or
consulate or similar office. Landlord shall not be obligated to approve an
assignment or subletting to (x) a current tenant of the Building or (y) a
prospective tenant of the Building with whom Landlord is then negotiating.
Landlord's foregoing rights and options shall continue throughout the entire
term of this Lease. No consent to any assignment, encumbrance or sublease shall
constitute a waiver of the provisions of this Section and no other or subsequent
assignment, encumbrance or sublease shall be made without Landlord's prior
consent. Neither an assignment or subletting nor the collection of Rent by
Landlord from any person other than Tenant, nor the application of any such Rent
as provided in this Section shall be deemed a waiver of any of the provisions of
this Section or release Tenant from its obligation to comply with the terms and
provisions of this Lease and Tenant shall remain fully and primarily liable for
all of Tenant's obligations under this Lease, including the obligation to pay
Rent under this Lease. Any personal guarantee(s) of Tenant's obligations under
this Lease shall remain in full force and effect following any such assignment
or subletting. Landlord may condition approval of an assignment or subletting
hereunder on an increase in the amount of the Security Deposit or on receipt of
personal guarantees of the assignee's or sublessee's obligations under this
Lease. If Landlord approves of an assignment or subletting hereunder and this
Lease contains any renewal options, expansion options, rights of first refusal,
rights of first negotiation or any other rights or options pertaining to
additional space in the Building, such rights and/or options shall not run to
the assignee or subtenant, it being agreed by the parties hereto that any such
rights and options are personal to Tenant named herein and may not be
transferred.
(c) CONDITIONS TO ASSIGNMENT OR SUBLEASE. Tenant agrees that any instrument
by which Tenant assigns or sublets all or any portion of the Premises shall
expressly provide that the assignee or subtenant may not further assign or
sublet the assigned or sublet space without Landlord's prior consent (which
consent shall not, subject to Landlord's rights under Section 25(b), be
unreasonably withheld or delayed), and that the
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assignee or subtenant will comply with all of the provisions of this Lease and
that Landlord may enforce the Lease provisions directly against such assignee or
subtenant. If this Lease is assigned, whether or not in violation of the terms
and provisions of this Lease, Landlord may collect Rent from the assignee. If
the Premises, or any part thereof, is sublet, Landlord may, upon a default under
this Lease, collect rent from the subtenant. In either event, Landlord may apply
the amount collected from the assignee or subtenant to Tenant's obligation to
pay Rent under this Lease.
(d) EVENTS CONSTITUTING AN ASSIGNMENT OR SUBLEASE. For purposes of this
Section, the following events shall be deemed an assignment or sublease, as
appropriate: (i) the issuance of equity interests (whether stock, partnership
interests or otherwise) in Tenant, or any assignee or subtenant, if applicable,
or any entity controlling any of them, to any person or group of related
persons, in a single transaction or a series of related or unrelated
transactions, such that, following such issuance, such person or group shall
have Control (as defined below) of Tenant, or any assignee or subtenant, if
applicable; or (ii) a transfer of Control of Tenant, or any assignee or
subtenant, if applicable, or any entity controlling any of them, in a single
transaction or a series of related or unrelated transactions (including, without
limitation, by consolidation, merger, acquisition or reorganization), except
that the transfer of outstanding capital stock or other listed equity interests
by persons or parties other than "insiders" within the meaning of the Securities
Exchange Act of 1934, as amended, through the "over-the-counter" market or any
recognized national or international securities exchange, shall not be included
in determining whether Control has been transferred. "Control" shall mean direct
or indirect ownership of fifty percent (50%) or more of all the legal and
equitable interest in any business entity.
Notwithstanding anything to the contrary in this Section, Tenant may
assign this Lease or sublet the whole or any part of the Premises, including the
Right of First Offer granted to Tenant by Landlord as set forth in Section 43 of
the Rider, to: (a) any corporation in whom or with which Tenant may be merged or
consolidated, provided that the net worth of the resulting corporation is at
least equal to the greater of (i) the net worth of Tenant on the date hereof, or
(ii) the net worth of Tenant immediately prior to such merger or consolidation,
or (b) any entity to whom Tenant sells all of its assets; provided that such
corporation or such entity described in (a) and (b) above expressly assumes all
of Tenant's obligation hereunder and otherwise complies with the provisions of
Subsection 25(c) entitled "Conditions to Assignment or Sublease."
(e) PROCESSING EXPENSES. Tenant shall pay to Landlord the amount of
Landlord's cost of processing each proposed assignment or subletting, including
without limitation, attorneys' and other professional fees, and the cost of
Landlord's administrative, accounting and clerical time (collectively,
"Processing Costs"), and the amount of all direct and indirect expense incurred
by Landlord arising from the assignee or sublessee taking occupancy of the
subject space, including without limitation, costs of freight elevator operation
for moving of furnishings and trade fixtures, security service, janitorial and
cleaning service, rubbish removal service, costs of changing signage, and costs
of changing locks and making new keys (collectively, "Occupancy Costs").
Notwithstanding anything to the contrary herein, Landlord shall not be required
to process any request for Landlord's consent to an assignment or subletting
until Tenant has paid to Landlord the amount of Landlord's estimate of the
Processing Costs and the Occupancy Costs.
(f) CONSIDERATION TO LANDLORD. In the event of any assignment or sublease,
whether or not requiring Landlord's consent, Landlord shall be entitled to
receive, as Additional Rent, one-half (1/2) of any net consideration, including
without limitation, payment for leasehold improvements owned by Landlord, paid
by the assignee or subtenant for the assignment or sublease and, in the case of
sublease, one-half (1/2) of the excess of the amount of rent paid for the sublet
space by the subtenant over the total amount of Minimum Monthly Rent under
Section 5 and Additional Rent under Sections 7 and 9. Upon Landlord's request,
Tenant shall assign to Landlord all amounts to be paid to Tenant by the assignee
or subtenant and shall direct such assignee or subtenant to pay the same
directly to Landlord. If there is more than one sublease under this Lease, the
amounts (if any) to be paid by Tenant to Landlord pursuant to the preceding
sentence shall be separately calculated for each sublease and amounts due
Landlord with regard to any one sublease may not be offset against rental and
other consideration pertaining due under any other sublease.
With regard to an approved assignment or subletting, Tenant
acknowledges that Landlord's agreement to deal directly with the assignee or
subtenant with regard to such party's occupancy of the Premises and the
administration of the Lease, without requiring Tenant to monitor or become
directly involved in such matters, constitutes appropriate and acceptable
consideration for the capture by Landlord of any rent or consideration paid by
the assignee or subtenant in excess of that required to be paid by Tenant under
the Lease.
(g) PROCEDURES. If Tenant desires to assign this Lease or any interest
therein or sublet all or part of the Premises, Tenant shall give Landlord
written notice thereof designating the space proposed to be sublet and the terms
proposed. Landlord shall have the prior right and option (to be exercised by
written notice to Tenant given within fifteen (15) days after receipt of
Tenant's notice) (i) to sublet from Tenant any portion of the Premises proposed
by Tenant to be sublet, for the term for which such portion is proposed to be
sublet, but at the same Rent (including Additional Rent as provided for in
Sections 7 and 9) as Tenant is required to pay to Landlord under this Lease for
the same space, computed on a pro rata square footage basis, and during the term
of such sublease Tenant shall be released of its obligations under the Lease
with regard to the subject space, (ii) if the term of the sublease (including
any renewal terms) will expire during the final eighteen (18) months of the Term
(or if Tenant has exercised a renewal option, if any, then during the final
eighteen (18) months of the subject renewal period), to terminate this Lease as
it pertains to the portion of the Premises so proposed by Tenant to be sublet,
or (iii) to approve Tenant's proposal to sublet conditional upon Landlord's
subsequent written approval of the specific sublease obtained by Tenant and the
specific subtenant named therein. If Landlord exercises its option in (i) above,
then Landlord may, at Landlord's sole cost, construct improvements in the
subject space and, so long as the improvements are suitable for general office
purposes, Landlord shall have no obligation to restore the subject space to its
original condition following the termination of the sublease. If Landlord
exercises its option described in (iii) above, Tenant shall submit to Landlord
for
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Landlord's written approval Tenant's proposed sublease agreement (in which the
proposed subtenant shall be named) together with a current reviewed or audited
financial statement prepared by a certified public accountant for such proposed
subtenant and a credit report on such proposed subtenant prepared by a
recognized credit reporting agency. If Landlord falls to exercise any aforesaid
option to sublet or to terminate, this shall not be construed as or constitute a
waiver of any of the provisions of this Section. If Landlord exercises any such
option to sublet or to terminate, Landlord shall not have any liability for any
real estate brokerage commission(s) or with respect to any of the costs and
expenses that Tenant may have incurred in connection with its proposed
subletting, and Tenant agrees to hold Landlord harmless from and against any and
all claims (including, without limitation, claims for commissions) arising from
such proposed subletting. Landlord's foregoing rights and options shall continue
throughout the Term. For purposes of this Section, a proposed assignment of this
Lease in whole or in part shall be deemed a proposed subletting of such space.
(h) DOCUMENTATION. No permitted subletting by Tenant shall be effective
until there has been delivered to Landlord a counterpart of the sublease in
which the subtenant agrees to be and remain jointly and severally liable with
Tenant for the payment of Rent pertaining to the sublet space and for the
performance of all of the terms and provisions of this Lease; provided, however,
that the subtenant shall be liable to Landlord for rent only in the amount set
forth in the sublease. No permitted assignment shall be effective unless and
until there has been delivered to Landlord a counterpart of the assignment in
which the assignee assumes all of Tenant's obligations under this Lease arising
on or after the date of the assignment. The failure or refusal of a subtenant or
assignee to execute any such instrument shall not release or discharge the
subtenant or assignee from its liability as set forth above.
(i) NO MERGER. Without limiting any of the provisions of this Section, if
Tenant has entered into any subleases of any portion of the Premises, the
voluntary or other surrender of this Lease by Tenant, or a mutual cancellation
by Landlord and Tenant, shall not work a merger, and shall, at the option of
Landlord, terminate all or any existing subleases or subtenancies or, at the
option of Landlord, operate as an assignment to Landlord of any or all such
subleases or subtenancies.
26. DEFAULT. The occurrence of any of the following shall constitute a default
by Tenant under this Lease:
(a) FAILURE TO PAY RENT. Failure to pay Rent when due, if the failure
continues for a period of three (3) days after notice of such default has been
given by Landlord to Tenant.
(b) FAILURE TO COMPLY WITH RULES AND REGULATIONS. Failure to comply with
the Rules and Regulations, if the failure continues for a period of ten (10)
days after notice of such default is given by Landlord to Tenant. If the failure
to comply cannot reasonably be cured within ten (10) days, then Tenant shall
not be in default under this Lease if Tenant commences to cure the failure to
comply within ten (10) days and diligently and in good faith continues to cure
the failure to comply.
(c) OTHER DEFAULTS. Failure to perform any other provision of this Lease,
if the failure to perform is not cured within thirty (30) days after notice of
such default has been given by Landlord to Tenant. If the default cannot
reasonably be cured within thirty (30) days, then Tenant shall not be in default
under this Lease if Tenant commences to cure the default within thirty (30) days
and diligently and in good faith continues to cure the default.
(d) APPOINTMENT OF TRUSTEE OR RECEIVER. The appointment of a trustee or
receiver to take possession of substantially all of the Tenant's assets located
at the Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within sixty (60) days; or the attachment, execution or other
judicial seizure of substantially all of Tenant's assets located at the Premises
or of Tenant's interest in this Lease, where such seizure is not discharged
within sixty (60) days.
27. REMEDIES. If Tenant commits a default, Landlord shall have the following
alternative remedies, which are in addition to any remedies now or later allowed
by law:
(a) MAINTAIN LEASE IN FORCE. Maintain this Lease in full force and effect
and recover the Rent and other monetary charges as they become due, without
terminating Tenant's right to possession, irrespective of whether Tenant shall
have abandoned the Premises. If Landlord elects to not terminate the Lease,
Landlord shall have the right to attempt to re-let the Premises at such rent and
upon such conditions and for such a term, and to do all acts necessary to
maintain or preserve the Premises as Landlord deems reasonable and necessary
without being deemed to have elected to terminate the Lease including removal of
all persons and property from the Premises; such property may be removed and
stored in a public warehouse or elsewhere at the cost of and for the account of
Tenant. In the event any such re-letting occurs, this Lease shall terminate
automatically upon the new Tenant taking possession of the Premises.
Notwithstanding that Landlord fails to elect to terminate the Lease initially,
Landlord at any time during the term of this Lease may elect to terminate this
Lease by virtue of such previous default of Tenant.
(b) TERMINATE LEASE. Terminate Tenant's right to possession by any lawful
means, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Premises to Landlord. In such event Landlord shall
be entitled to recover from Tenant all damages incurred by Landlord by reason of
Tenant's default including without limitation thereto, the following: (i) The
worth at the time of award of any unpaid Rent which had been earned at the time
of such termination; plus (ii) the worth at the time of award of the amount by
which the unpaid Rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; plus (iii) the worth at the time of award of the
amount by which the unpaid Rent for the balance of the Term after the time of
award exceeds the amount of such rental loss that is proved could be reasonably
avoided; plus (iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to
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perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, including without limitation, any
costs or expenses incurred by Landlord in (A) retaking possession of the
Premises, including reasonable attorney fees therefor, (B) maintaining or
preserving the Premises after such default, (C) preparing the Premises for
reletting to a new tenant, including repairs or necessary alterations to the
Premises for such reletting, (D) leasing commissions, and (E) any other costs
necessary or appropriate to relet the Premises; plus (v) at Landlord's election,
such other amounts in addition to or in lieu of the foregoing as may be
permitted from time to time by applicable state law. Upon any such re-entry
Landlord shall have the right to make any reasonable repairs, alterations or
modifications to the Premises, which Landlord in its sole discretion deems
reasonable and necessary. As used in Subsection 27(b)(i) the "worth at the time
of award" is computed by allowing interest at the rate of eighteen percent (18%)
per year from the date of default. As used in Subsections 27(b)(ii) and
27(b)(iii) the "worth at the time of award" is computed by discounting such
amounts at the discount rate of eight percent (8%) per year.
28. BANKRUPTCY.
(a) ASSUMPTION OF LEASE. If Tenant becomes a Debtor under Chapter 7 of the
Bankruptcy Code ("Code") or a petition for reorganization or adjustment of debts
is filed concerning Tenant under Chapters 11 or 13 of the Code, or a proceeding
is filed under Chapter 7 of the Code and is transferred to Chapters 11 or 13 of
the Code, the Trustee or Tenant, as Debtor and as Debtor-In-Possession, may not
elect to assume this Lease unless, at the time of such assumption, the Trustee
or Tenant has:
(i) Cured all defaults under the Lease and paid all sums due and owing
under the Lease or provided Landlord with "Adequate Assurance" (as defined
below) that:(i) within ten (10) days from the date of such assumption, the
Trustee or Tenant will completely pay all sums due and owing under this Lease
and compensate Landlord for any actual pecuniary loss resulting from any
existing default or breach of this Lease, including without limitation,
Landlord's reasonable costs, expenses, accrued interest, and attorneys' fees
incurred as a result of the default or breach; (ii) within twenty (20) days from
the date of such assumption, the Trustee or Tenant will cure all non-monetary
defaults and breaches under this Lease, or, if the nature of such non-monetary
defaults is such that more than twenty (20) days are reasonably required for
such cure, that the Trustee or Tenant will commence to cure such non-monetary
defaults within twenty (20) days and thereafter diligently prosecute such cure
to completion; and (iii) the assumption will be subject to all of the provisions
of this Lease.
(ii) For purposes of this Section, Landlord and Tenant acknowledge
that, in the context of a bankruptcy proceeding involving Tenant, at a minimum,
"Adequate Assurance" shall mean:(i) the Trustee or Tenant has and will continue
to have sufficient unencumbered assets after the payment of all secured
obligations and administrative expenses to assure Landlord that the Trustee or
Tenant will have sufficient funds to fulfill the obligations of Tenant under
this Lease; (ii) the Bankruptcy Court shall have entered an Order segregating
sufficient cash payable to Landlord and/or the Trustee or Tenant shall have
granted a valid and perfected first lien and security interest and for mortgage
in or on property of Trustee or Tenant acceptable as to value and kind to
Landlord, to secure to Landlord the obligation of the Trustee or Tenant to cure
the monetary and/or non-monetary defaults and breaches under this Lease within
the time periods set forth above; and (iii) the Trustee or Tenant, at the very
minimum, shall deposit a sum equal to two (2) month's Minimum Monthly Rent to be
held by Landlord (without any allowance for interest thereon) to secure Tenant's
future performance under the Lease.
(b) ASSIGNMENT OF LEASE. If the Trustee or Tenant has assumed the Lease
pursuant to the provisions of this Section for the purpose of assigning Tenant's
interest hereunder to any other person or entity, such interest may be assigned
only after the Trustee, Tenant or the proposed assignee have complied with all
of the terms, covenants and conditions of this Lease, including, without
limitation, those with respect to Additional Rent. Landlord and Tenant
acknowledge that such terms, covenants and conditions are commercially
reasonable in the context of a bankruptcy proceeding of Tenant. Any person or
entity to which this Lease is assigned pursuant to the provisions of the Code
shall be deemed without further act or deed to have assumed all of the
obligations arising under this Lease on and after the date of such assignment.
Any such assignee shall upon request execute and deliver to Landlord an
instrument confirming such assignment.
(c) ADEQUATE PROTECTION. Upon the filing of a petition by or against Tenant
under the Code, Tenant, as Debtor and as Debtor-In-Possession, and any Trustee
who may be appointed agree to adequately protect Landlord as follows:(i) to
perform each and every obligation of Tenant under this Lease until such time as
this Lease is either rejected or assumed by Order of the Bankruptcy Court, (ii)
to pay all monetary obligations required under this Lease, including without
limitation, the payment of Minimum Monthly Rent, Tenant's Share of Real Property
Taxes, Tenant's Share of Operating Costs and any other sums payable by Tenant to
Landlord under this Lease which is considered reasonable compensation for the
use and occupancy of the Premises; (iii) provide Landlord a minimum of thirty
(30) days prior written notice, unless a shorter period is agreed to in writing
by the parties, of any proceeding relating to any assumption of this Lease or
any intent to abandon the Premises, which abandonment shall be deemed a
rejection of this Lease; and (iv) to perform to the benefit of Landlord as
otherwise required under the Code. The failure of Tenant to comply with the
above shall result in an automatic rejection of this Lease.
29. LIMITATION OF ACTIONS. Any claim, demand, right or defense of any kind by
Tenant which is based upon or arises in connection with this Lease or the
negotiations prior to its execution, shall be barred unless Tenant commences an
action thereon, or interposes in a legal proceeding a defense by reason thereof,
within one (1) year after the date of the act or omission on which such claim,
demand, right or defense is based.
30. LIMITATION ON LANDLORD'S LIABILITY. Anything in this Lease to the contrary
notwithstanding, covenants, undertakings and agreements herein made on the part
of Landlord are made and intended not as personal
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covenants, undertakings and agreements or for the purpose of binding Landlord
personally or the assets of Landlord except Landlord's interest in the
Property, but are made and intended for the purpose of binding only the
Landlord's interest in the Property. No personal liability or personal
responsibility is assumed by, nor shall at any time be asserted or enforceable
against Landlord or its partners and their respective heirs, legal
representatives, successors and assigns on account of this Lease or on account
of any covenant, undertaking or agreement of Landlord contained in this Lease.
31. SIGNS. Tenant shall not have the right to place, construct or maintain any
sign, advertisement, awning, banner or other exterior decoration without
Landlord's consent, which shall not be unreasonably withheld. Any sign that
Tenant has Landlord's consent to place, construct and maintain shall comply with
all laws, and Tenant shall obtain any approval required by such laws. Landlord
makes no representation with respect to Tenant's ability to obtain such
approval.
32. LANDLORD'S RIGHT TO ENTER THE PREMISES. Landlord and its authorized
representatives shall have the right to enter the Premises at reasonable times
and upon reasonable prior notice (except in an emergency when no such notice
shall be required) for any of the following purposes: (i) to determine whether
the Premises are in good condition and whether Tenant is complying with its
obligations under this Lease, (ii) to do any maintenance; to make any
restoration to the Premises or the Building that Landlord has the right or the
obligation to perform, and to make any improvements to the Premises or the
Building that Landlord deems necessary, (iii) to serve, post or keep posted any
notices required or allowed under the provisions of this Lease, (iv) to post any
ordinary "For Sale" signs at any time during the Term and to post any ordinary
"For Lease" signs during the last ninety (90) days of the Term, and (v) to show
the Premises to prospective brokers, agents, purchasers, tenants or lenders, at
any time during the Term.
Landlord shall not be liable in any manner for any inconvenience,
annoyance, disturbance, loss of business, nuisance, or other damage arising out
of Landlord's entry on the Premises as provided in this Section, except damage
resulting from the negligent or willful acts of Landlord or its authorized
representatives. Tenant shall not be entitled to an abatement or reduction of
Rent if Landlord exercises any right reserved in this Section. Landlord shall
conduct its activities on the Premises as allowed in this Section in a
reasonable manner so as to cause minimal inconvenience, annoyance or disturbance
to Tenant.
33. SUBORDINATION. This Lease is and shall be prior to any mortgage recorded
after the date of this Lease affecting the Property. If, however, a lender
requires that this Lease be subordinate to any mortgage, this Lease shall be
subordinate to that mortgage if Landlord first obtains from the lender a written
agreement that provides substantially the following:
"As long as Tenant performs its obligations under this Lease, no
foreclosure of, deed given in lieu of foreclosure of, or sale under the
mortgage, and no steps or procedures taken under the mortgage, shall
affect Tenant's rights under this Lease. "
Tenant shall attorn to, any purchaser at any foreclosure sale, or to any
grantee or transferee designated in any deed given in lieu of foreclosure.
Tenant shall execute the written agreement and any other documents required by
the lender to accomplish the purposes of this Section.
34. RIGHT TO ESTOPPEL CERTIFICATES. Tenant, within ten (10) days after notice
from Landlord, shall execute and deliver to Landlord, in recordable form, a
certificate stating that this Lease is unmodified and in full force and effect,
or in full force and effect as modified and stating the modifications. The
certificate shall also state the amount of Minimum Monthly Rent, the dates to
which Rent has been paid in advance, and the amount of any Prepaid Rent or
Security Deposit and such other matters as Landlord may reasonably request.
Failure to deliver the certificate within such ten (10) day period shall be
conclusive upon Tenant for the benefit of Landlord and any successor to
Landlord, that this Lease is in full force and effect and has not been modified
except as may be represented by Landlord requesting the certificate.
35. TRANSFER OF LANDLORD'S INTEREST. If Landlord sells or transfers the
Property, Landlord, on consummation of the sale or transfer, shall be released
from any liability thereafter accruing under this Lease if Landlord's successor
has assumed in writing, for the benefit of Tenant, Landlord's obligations under
this Lease. If any Security Deposit or Prepaid Rent has been paid by Tenant,
Landlord shall transfer such Security Deposit or Prepaid Rent to Landlord's
successor and on such transfer Landlord shall be discharged from any further
liability with respect to such Security Deposit or Prepaid Rent.
36. ATTORNEYS' FEES. If either party shall bring any action for relief against
the other party, declaratory or otherwise, arising out of this Lease, including
any action by Landlord for the recovery of Rent or possession of the Premises,
the losing party shall pay the successful party a reasonable sum for attorneys'
fees which shall be deemed to have accrued on the commencement of such action
and shall be paid whether or not such action is prosecuted to judgment.
37. SURRENDER; HOLDING OVER.
(a) SURRENDER. On expiration or ten (10) days after termination of the
Term, Tenant shall surrender the Premises and all Tenant's improvements and
alterations to Landlord broom clean and in good condition. Tenant shall remove
all of its trade fixtures and personal property within the time period stated in
this Section. Tenant, at its cost, shall perform all restoration made necessary
by, and repair any damage to the Premises caused by, the removal of its trade
fixtures, personal property and signs to Landlord's reasonable satisfaction
within the time period stated in this Section. Landlord may, at its election,
retain or dispose of in any manner any of Tenant's trade fixtures or personal
property that Tenant does not remove from the Premises on expiration or within
ten (10) days after termination of the Term as allowed or required by the
provisions of this
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Lease by giving ten (10) days notice to Tenant. Title to any such trade fixtures
and personal property that Landlord elects to retain or dispose of on expiration
of such ten (10) day period shall vest in Landlord. Tenant waives all claims
against Landlord for any damage to Tenant resulting from Landlord's retention or
disposition of any such trade fixtures and personal property. Tenant shall be
liable to Landlord for Landlord's costs for storing, removing and disposing of
Tenant's trade fixtures and personal property. If Tenant fails to surrender the
Premises to Landlord on expiration or ten (10) days after termination of the
Term as required by this Section, Tenant shall pay Landlord Rent in an amount
equal to one and one-half (1-1/2) times the Minimum Monthly Rent applicable for
the month immediately prior to the expiration or termination of the Term for the
entire time Tenant thus remains in possession and Tenant shall hold Landlord
harmless from all damages resulting from Tenant's failure to timely surrender
the Premises, including without limitation, (i) any Rent payable by, or any
damages claimed by, any prospective tenant of any part or all of the Premises,
and (ii) Landlord's damages resulting from such prospective tenant rescinding or
refusing to enter into the prospective lease of part or all of the Premises by
reason of Tenant's failure to timely surrender the Premises. If Tenant, without
Landlord's prior consent, remains in possession of the Premises after expiration
or termination of the Term, or after the date in any notice given by Landlord to
Tenant terminating this Lease, such possession by Tenant shall be deemed to be a
tenancy at sufferance terminable at any time by either party.
(b) HOLDING OVER WITH LANDLORD'S CONSENT. If Tenant, with Landlord's prior
consent, remains in possession of the Premises after expiration or termination
of the Term, or after the date in any notice given by Landlord to Tenant
terminating this Lease, such possession by Tenant shall be deemed to be a
month-to-month tenancy terminable by Landlord by a notice given to Tenant at
least twenty (20) days prior to the end of any such monthly period or by Tenant
by a notice given to Landlord at least thirty (30) days prior to the end of any
such monthly period. During such month-to-month tenancy, Tenant shall pay Rent
in the amount then agreed to in writing by Landlord and Tenant. All provisions
of this Lease, except those pertaining to term, shall apply to the
month-to-month tenancy.
38. AGENCY DISCLOSURE; BROKER.
(a) AGENCY DISCLOSURE. Martin Smith Inc hereby discloses that it represents
the Landlord in this transaction.
(b) BROKER. Landlord and Tenant each represent to the other that neither is
represented by any broker, agent or finder with respect to this Lease in any
manner, except the Broker(s). The commission due to the Broker(s) shall be paid
by Landlord pursuant to a separate agreement. Each party agrees to indemnify and
hold the other party harmless from and against any and all liability, costs,
damages, causes of action or other proceedings instituted by any broker, agent
or finder, licensed or otherwise, claiming through, under or by reason of the
conduct of the indemnifying party in any manner whatsoever in connection with
this Lease. If Tenant engages a broker, agent or finder other than Washington
Partners, Inc. to represent Tenant in connection with any renewal of this Lease,
then the commission or any fee of such broker, agent or finder shall be paid by
Tenant.
39. INTEREST ON UNPAID RENT. In addition to the Late Charge as provided in
Section 5(b), Rent not paid when due shall bear interest from the date due until
paid at the rate of eighteen percent (18%) per year, or the maximum legal rate
of interest, whichever is less.
40. CONSENT. Whenever the consent of either Landlord or Tenant is required under
this Lease, such consent shall not be effective unless given in writing and
shall not be unreasonably withheld or delayed, provided, however, that such
consent may be conditioned as provided in this Lease.
41. DEFINITIONS. As used in this Lease, the following words and phrases, whether
or not capitalized, shall have the following meanings:
(a) "Additional Rent" means pass-throughs of increases in Operating Costs
and Taxes, as defined in this Lease, and other monetary sums to be paid by
Tenant to Landlord under the provisions of this Lease.
(b) "Alteration" means any addition or change to, or modification of, the
Premises made by Tenant, including without limitation, fixtures, but excluding
trade fixtures as defined in this Section.
(c)"Authorized representatives" means any officer, agent, employee,
independent contractor or invitee of either party.
(d)"Award" means all compensation, sums or anything of value awarded, paid
or received on a total or partial condemnation.
(e) "Common Areas" means all areas outside the Premises and within the
Building or on the Land that are provided and designated by Landlord from time
to time for the general, non-exclusive use of Landlord, Tenant and other tenants
of the Building and their authorized representatives, including without
limitation, common entrances, lobbies, corridors, stairways and stairwells,
elevators, escalators, public restrooms and other public portions of the
Building.
(f) "Condemnation" means the exercise of any governmental power, whether by
legal proceedings or otherwise, by a condemnor and a voluntary sale or transfer
by Landlord to any condemnor, either under threat of condemnation or while legal
proceedings for condemnation are pending.
(g) "Condemnor" means any public or quasi-public authority or entity having
the power of condemnation.
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(h) "Damage" means any injury, deterioration, or loss to a person,
property, the Premises or the Building caused by another person's acts or
omissions or by Acts of God. Damage includes death.
(i) "Damages" means a monetary compensation or indemnity that can be
recovered in the courts by any person who has suffered damage to his person,
property or rights through another's acts or omissions.
(j) "Date of taking" means the date the condemnor has the right to
possession of the property being condemned.
(k) "Encumbrance" means any mortgage, deed of trust or other written
security device or agreement affecting the Premises, and the note or other
obligation secured by it, that constitutes security for the payment of a debt or
performance of an obligation.
(l) "Expiration" means the coming to an end of the time specified in the
Lease as its duration, including any extension of the Term.
(m) "Force majeure" means strikes, lockouts, labor disputes, shortages of
labor or materials, fire or other casualty, Acts of God or any other cause
beyond the reasonable control of a party.
(n) "Good condition" means the good physical condition of the Premises and
each portion of the Premises, including without limitation, all of the Tenant
Improvements, Tenant's alterations, Tenant's trade fixtures, Tenant's Personal
Property, all as defined In this Section, signs, walls, interior partitions,
windows, window coverings, glass, doors, carpeting and resilient flooring,
ceiling files, plumbing fixtures and lighting fixtures, all of which shall be in
conformity with building standard finishes, ordinary wear and tear, damage by
fire or other casualty and taking by condemnation excepted.
(o) "Hazardous substances" means any industrial waste, toxic waste,
chemical contaminant or other substance considered hazardous, toxic or lethal to
persons or property or designated as hazardous, toxic or lethal to persons or
property under any laws, including without limitation, asbestos material or
materials containing asbestos.
(p) "Hold harmless" means to defend and indemnify from all liability,
losses, penalties, damages as defined in this Section, costs, expenses
(including without limitation, attorneys' fees), causes of action, claims or
judgments arising out of or related to any damage, as defined in this Section,
to any person or property.
(q) "Law" means any constitution, statute, ordinance, regulation, rule,
resolution, judicial decision, administrative order or other requirement of any
federal, state, county, municipal or other governmental agency or authority
having jurisdiction over the parties or the Property, or both, in effect either
at the time of execution of this Lease or at any time during the Term, including
without limitation, any regulation or order of a quasi-official entity or body
(e.g. board of fire examiners or public utilities) and any legally effective
conditions, covenants or restrictions affecting the Property.
(r) "Lender" means the mortgagee, beneficiary, secured party or other
holder of an encumbrance, as defined in this Section.
(s) "Lien" means a charge imposed on the Premises by someone other than
Landlord, by which the Premises are made security for the performance of an act.
(t) "Maintenance" means repairs, replacement, repainting and cleaning.
(u) "Mortgage" means any deed of trust, mortgage or other written security
device or agreement affecting the Premises, and the note or other obligation
secured by it, that constitutes security for the payment of a debt or
performance of an obligation.
(v) "Mortgagee" means the beneficiary under a deed of trust or mortgagee
under a mortgage.
(w) "Mortgagor" means the grantor or trustor under a deed of trust or
mortgagor under a mortgage.
(x) "Operating Costs" means all costs of any kind incurred by Landlord in
operating, cleaning, equipping, protecting, lighting, repairing, replacing,
heating, air-conditioning, maintaining and insuring the Property. Operating
Costs shall include, without limitation, the following costs: (i) salaries,
wages, bonuses and other compensation (including hospitalization, medical,
surgical, retirement plan, pension plan, union dues, life insurance, including
group life insurance, welfare and other fringe benefits, and vacation, holidays
and other paid absence benefits) relating to employees of Landlord or its agents
directly engaged in the operation, repair, or maintenance of the Property; (ii)
payroll, social security, workers' compensation, unemployment and similar taxes
with respect to such employees of Landlord or its authorized representatives,
and the cost of providing disability or other benefits imposed by law or
otherwise, with respect to such employees; (iii) uniforms (including the
cleaning, replacement and pressing thereof) provided to such employees; (iv)
premiums and other charges incurred by Landlord with respect to fire,
earthquake, other casualty, all risk, rent loss and liability insurance, any
other insurance as is deemed necessary or advisable in the reasonable judgment
of Landlord and, after the Base Year, costs of repairing an insured casualty to
the extent of the deductible amount under the applicable insurance policy; (v)
water charges and sewer rents or fees; (vi) license, permit and inspection fees;
(vii) sales, use and excise taxes on goods and services purchased by Landlord in
connection with the operation, maintenance or repair of the Property and
Building systems and equipment; (viii) telephone, facsimile, messenger, express
delivery service, postage, stationery supplies and other expenses incurred in
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connection with the operation, management, maintenance, or repair of the
Property; (ix) property management fees and expenses; (x) repairs to and
physical maintenance of the Property, including building systems and
appurtenances thereto and normal repair and replacement of worn-out equipment,
facilities and installations, but excluding the replacement of major building
systems (except to the extent provided in (xvi) and (xvii) below); (xi)
janitorial, window cleaning, security, extermination, water treatment, rubbish
removal, plumbing and other services and inspection or service contracts for
elevator, electrical, HVAC, mechanical and other building equipment and systems
or as may otherwise be necessary or proper for the operation or maintenance of
the Property; (xii) supplies, tools, materials, and equipment used in connection
with the operation, maintenance or repair of the Property; (xiii) accounting,
legal and other professional fees and expenses; (xiv) painting the exterior or
the public or common areas of the Building and the cost of maintaining the
sidewalks, landscaping and other common areas of the Property; (xv) all costs
and expenses for electricity, chilled water, air conditioning, water for
heating, gas, fuel, steam, heat, lights, power and other energy related
utilities required in connection with the operation, maintenance and repair of
the Property; (xvi) the cost of any improvements which Landlord elects to
capitalize made by Landlord to the Property during the Term in compliance with
the requirements of any laws or regulation or insurance requirement with which
the Property was not required to comply during the Base Year, as reasonably
amortized by Landlord, with interest on the unamortized balance at the rate of
twelve percent (12%) per year, or the maximum legal rate of interest, whichever
is less; (xvii) the cost of any improvements which Landlord elects to capitalize
made by Landlord to the Property during the term of this Lease for the
protection of the health and safety of the occupants of the Property or that are
intended to reduce other Operating Costs, as reasonably amortized by Landlord,
with interest on the unamortized balance at the rate of twelve percent (12%) per
year, or the maximum legal rate of interest, whichever is less; (xviii) a
reasonable reserve for repair or replacement of equipment used in the
maintenance or operation of the Property; (xix) the cost of furniture,
draperies, carpeting, landscaping and other customary and ordinary items of
personal property (excluding paintings, sculptures and other works of art)
provided by Landlord for use in common areas of the Building or in the Building
office (to the extent that such Building office is dedicated to the operation
and management of the Property), such costs to be amortized over the useful life
thereof; (xx) any such expenses and costs resulting from substitution of work,
labor, material or services in lieu of any of the above itemizations, or for any
such additional work, labor, services or material resulting from compliance with
any laws or orders applicable to the Property; (xxi) Building office rent or
rental value; and (xxii) all other costs which, in accordance with generally
accepted accounting principles used by Landlord, as applied to the maintenance
and operation of office and/or retail buildings, are property chargeable to the
operation and maintenance of the Property,
Operating Costs shall not include the following: (i) depreciation on the
Building; (ii) debt service; (iii) capital improvements, except as otherwise
provided in clauses (xvi) and (xvii) above, (iv) rental under any ground or
underlying leases; (v) Real Property Taxes, (vi) attorneys' fees and expenses
incurred in connection with lease negotiations with prospective tenants; (vii)
the cost of tenant improvements; (viii) advertising expenses; or (ix) real
estate broker's or other leasing commissions.
(y) "Parties" means Landlord and Tenant.
(z) "Party" means Landlord or Tenant.
(aa) "Person" means one or more human beings, or legal entities or other
artificial persons, including without limitation, partnerships, corporations,
trusts, estates, associations and any combination of human beings and legal
entities.
(bb) "Property" means the Premises, Building and Land.
(cc) "Provision" means any term, agreement, covenant, condition, clause,
qualification, restriction, reservation, or other stipulation in the Lease that
defines or otherwise controls, establishes, or limits the performance required
or permitted by either party.
(dd)"Real Property Taxes" means any form of tax, assessment, general
assessment, special assessment, lien, levy, bond obligation, license fee,
license tax, tax or excise on rent, or any other levy, charge or expense,
together with any statutory interest thereon, (individually and collectively,
the "Impositions"), now or hereafter imposed or required by any authority having
the direct or indirect power to tax, including any federal, state, county or
city government or any school, agricultural, lighting, drainage or other
improvement or special assessment district thereof, (individually and
collectively, the "Governmental Agencies") on any interest of Landlord or Tenant
or both (including any legal or equitable interest of Landlord or its mortgagee,
if any) in the Premises or the Property, including without limitation:
(i) any Impositions upon, allocable to or measured by the area of the
Premises or the Property, or the rental payable hereunder, including without
limitation, any gross income tax or excise tax levied by any Governmental
Agencies with respect to the receipt of such rental; or
(ii) any Impositions upon or with respect to the possession, leasing,
operation, management, maintenance, alteration, repair or use or occupancy by
Tenant of the Premises or any portion thereof; or
(iii) any Impositions upon or with respect to the building equipment
and personal property used in connection with the operation and maintenance of
the Property or upon or with respect to the furniture, fixtures and decorations
in the common areas of the Property.
(iv) any Impositions upon this Lease or this transaction or any
document to which Tenant is a party creating or transferring an interest or an
estate in the Premises; or
17
<PAGE> 18
(v) any Impositions by Governmental Agencies (whether or not such
Impositions constitute tax receipts) in substitution, partially or totally, of
any impositions now or previously included within the definition of real
property taxes, including those calculated to increase tax increments to
Governmental Agencies and to pay for such services as fire protection, water
drainage, street, sidewalk and road maintenance, refuse removal or other
government all services formerly provided without charge to property owners or
occupants; or
(vi) any and all costs, including without limitation, the fees of
attorneys, tax consultants and experts, incurred by Landlord should Landlord
elect to negotiate or contest the amount of such real property taxes in formal
or informal proceedings before the Governmental Agency imposing such real
property taxes; provided, however, that real property taxes shall in no event
include Landlord's general income, inheritance, estate, gift or franchise taxes.
(ee) "Rent" means Minimum Monthly Rent, as adjusted from time to time under
this Lease, Additional Rent, Prepaid Rent, Security Deposit, all as defined in
this Section, payments of Tenant's Share of increases in Real Property Taxes and
Operating Costs, insurance, utilities and other charges payable by Tenant to
Landlord.
(ff) "Rentable square feet of space" as to the Premises or the Building, as
the case may be, means the number of usable square feet of space times the
applicable R/U Ratio(s) as defined in this Section.
(gg) "Restoration" means the reconstruction, rebuilding, rehabilitation and
repairs that are necessary to return damaged portions of the Premises and the
Building to substantially the same physical condition as they were in
immediately before the damage,
(hh) "R/U Ratio" means the rentable area of a floor of the Building divided
by the usable area of such floor, both of which shall be computed in accordance
with American National Standard Z65.1-1996 Method of Measuring Floor Space in
Office Buildings as published by the Building Owners and Managers Association,
as amended from time to time.
(ii) "Substantially complete" or "substantially completed" or "substantial
completion" means the completion of Landlord's construction obligation, subject
to completion or correction of "punch list" items, that is, minor items of
incomplete or defective work or materials or mechanical maladjustments that are
of such a nature that they do not materially interfere with or impair Tenant's
use of the Premises for the Permitted Use.
(jj) "Successor" means assignee, transferee, personal representative, heir,
or other person or entity succeeding lawfully, and pursuant to the provisions of
this Lease, to the rights or obligations of either party.
(kk) "Tenant Improvements" means (i) the improvements and alterations set
forth in Exhibit C, (ii) window coverings, lighting fixtures, plumbing fixtures,
cabinetry and other fixtures installed by either Landlord or Tenant at any time
during the Term, and (iii) any improvements and alterations of the Premises made
for Tenant by Landlord at any time during the Term.
(11) "Tenant's personal property" means Tenant's equipment, furniture, and
movable property placed in the Premises by Tenant.
(mm) "Tenant's trade fixtures" means any property attached to the Premises
by Tenant.
(nn) "Termination" means the ending of the Term for any reason before
expiration, as defined in this Section.
(oo) "Work" means the construction of any improvements or alterations or
the performance of any repairs done by Tenant or caused to be done by Tenant on
the Premises as permitted by this Lease.
42. MISCELLANEOUS PROVISIONS.
(a) ENTIRE AGREEMENT. This Lease sets forth the entire agreement of the
parties as to the subject matter hereof and supersedes all prior discussions and
understandings between them. This Lease may not be amended or rescinded in any
manner except by an instrument in writing signed by a duly authorized officer or
representative of each party hereto.
(b) GOVERNING LAW. This Lease shall be governed by, and construed and
enforced in accordance with, the laws of the State of Washington.
(c) SEVERABILITY. Should any of the provisions of this Lease be found to be
invalid, illegal or unenforceable by any court of competent jurisdiction, such
provision shall be stricken and the remainder of this Lease shall nonetheless
remain in full force and effect unless striking such provision shall materially
alter the intention of the parties.
(d) JURISDICTION. In the event any action is brought to enforce any of the
provisions of this Lease, the parties agree to be subject to exclusive in
personam jurisdiction in the Superior Court, King County, for the State of
Washington or in the United States District Court for the Western District of
Washington and agree that in any such action venue shall lie exclusively at
Seattle, Washington.
(e) WAIVER. No waiver of any right under this Lease shall be effective
unless contained in a writing signed by a duly authorized officer or
representative of the party sought to be charged with the waiver and no
18
<PAGE> 19
waiver of any right arising from any breach or failure to perform shall be
deemed to be a waiver of any future right or of any other right arising under
this Lease.
(f) CAPTIONS. Section captions contained in this Lease are included for
convenience only and form no part of the agreement between the parties.
(g) NOTICES. All notices or requests required or permitted under this Lease
shall be in writing. If given by Landlord such notices or requests may be
personally delivered or sent by certified mail, return receipt requested,
postage prepaid. If given by Tenant such notices or requests may be personally
delivered or sent by certified mail, return receipt requested, postage prepaid.
Such notices or requests shall be deemed given when so delivered or mailed,
irrespective of whether such notice or request is actually received by the
addressee. All notices or requests to Landlord shall be sent to Landlord at
Landlord's Address for Notice and all notices or requests to Tenant shall be
sent to Tenant at Tenant's Address for Notice. Either party may change the
address to which notices shall be sent by notice to the other party.
(h) BINDING EFFECT. Subject to the provisions of Section 25 captioned
"Assignment and Subletting", this Lease shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors and assigns. No
permitted assignment of this Lease or Tenant's rights hereunder shall be
effective against Landlord unless and until an executed counterpart of the
instrument of assignment shall have been delivered to Landlord and Landlord
shall have been furnished with the name and address of the assignee. The term
"Tenant" shall be deemed to include the assignee under any such permitted
assignment.
(i) EFFECTIVENESS. This Lease shall not be binding or effective until
properly executed and delivered by Landlord and Tenant.
(j) GENDER AND NUMBER. As used in this Lease, the masculine shall include
the feminine and neuter, the feminine shall include the masculine and neuter,
the neuter shall include the masculine and feminine, the singular shall include
the plural and the plural shall include the singular, as the context may
require.
(k) TIME OF THE ESSENCE. Time is of the essence in the performance of all
covenants and conditions in this Lease for which time is a factor.
Dated the date first above written.
LANDLORD: TENANT:
Pacific NW Title Building, Inc., Amazon.com, Inc., a Delaware corporation
a Washington corporation
By /s/ PETER MURPHY By /s/ OSWALDO DUENAS
--------------------------------- ----------------------------------
Its PRES. Its VP OPERATIONS
--------------------------------- ----------------------------------
By By
--------------------------------- ----------------------------------
Its Its
--------------------------------- ----------------------------------
This Lease has been prepared for submission to you and your attorney. Martin
Smith Inc is not authorized to give legal or tax advice. Neither Landlord nor
Martin Smith Inc makes any representations or recommendations as to the legal
sufficiency, legal effect or tax consequences of this document or any
transaction relating thereto. These are questions for your attorney with whom
you should consult before signing the document to determine whether your legal
rights are adequately protected.
[Notary attached]
19
<PAGE> 20
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that OSWALDO DUENAS is the
person who appeared before me, and said person acknowledged that he/she signed
this instrument, on oath stated that he/she was authorized to execute the
instrument, and acknowledged it as the (title) VP OPERATIONS of (entity)
AMAZON.COM a DELAWARE CORP. to be the free and voluntary act of such party for
the uses and purposes mentioned in the instrument.
Witness my hand seal this 23 day March 1998.
/s/ LAURA LEE ELDER
---------------------------------------------
[SEAL] Notary Public
(Print Name) LAURA LEE ELDER
--------------------------------
Residing at MTLK TERR, WA
--------------------------------
My Commission Expires: 11-20-01
----------------------
STATE 0F _____________)
) ss.
COUNTY OF ____________)
I certify that I know or have satisfactory evidence that
__________________________________ is the person who appeared before me, and
said person acknowledged that he/she signed this instrument, on oath stated that
he/she was authorized to execute the instrument, and acknowledged it as the
(title)____________________________ of (entity)______________________ , a
_____________________ to be the free and voluntary act of such party for the
uses and purposes mentioned in the instrument.
Witness my hand and official seal this day 19__ .
---------------------------------------------
Notary Public
(Print Name)
--------------------------------
Residing at
--------------------------------
My Commission Expires:
----------------------
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that PETER MURPHY is the
person who appeared before me, and said person acknowledged that he/she signed
this instrument, on oath stated that he/she was authorized to execute the
instrument, and acknowledged it as the (title) President of (entity) PACIFIC NW
TITLE BUILDING, INC., A WASHINGTON CORPORATION to be the free and voluntary act
of such party for the uses and purposes mentioned in the instrument.
Witness my hand seal this 27 day March 1998.
/s/ MAURINE A. MCCORMICK
---------------------------------------------
[SEAL] Notary Public
(Print Name) MAURINE A. MCCORMICK
--------------------------------
Residing at SEATTLE
--------------------------------
My Commission Expires: 4-20-01
----------------------
STATE OF _____________)
) ss.
COUNTY OF ____________)
I certify that I know or have satisfactory evidence that
__________________________________ is the person who appeared before me, and
said person acknowledged that he/she signed this instrument, on oath stated that
he/she was authorized to execute the instrument, and acknowledged it as the
(title)____________________________ of (entity)______________________ , a
_____________________ to be the free and voluntary act of such party for the
uses and purposes mentioned in the instrument.
Witness my hand and official seal this day 19__ .
---------------------------------------------
Notary Public
(Print Name)
--------------------------------
Residing at
--------------------------------
My Commission Expires:
----------------------
<PAGE> 21
RIDER
THIS RIDER is part of that certain Lease dated March 9, 1998 by and between
PACIFIC NORTHWEST TITLE BUILDING COMPANY, INC, A WASHINGTON CORPORATION
("Landlord"), and AMAZON.COM, INC., A DELAWARE CORPORATION ("Tenant"), who
further agree as follows:
43. RIGHT OF FIRST OFFER. Provided Tenant is not then in default under this
Lease, Landlord hereby grants to Tenant the right of first offer, subject to any
pre-existing rights of other tenants, with respect to any space in the Building
that is or becomes vacant and available for lease during the Term. If any space
in the Building (the "RFO Space") is or becomes vacant and available for lease
during the term, then Landlord shall give Tenant notice of the availability of
the RFO Space (the "Offer Notice"). To exercise the right of first offer, Tenant
must within five (5) days after receipt of the Offer Notice give Landlord notice
of its acceptance of Landlord's offer to lease the RFO Space (the "Acceptance
Notice"). If Tenant gives the Acceptance Notice within such five (5) day period,
then the RFO Space shall be added to the Premises after the end of such five (5)
day period (the "RFO Space Commencement Date"), the Minimum Monthly Rent shall
be increased as of the RFO Space Commencement Date by an amount equal to the
rental rate per rentable square foot of space then applicable under the Lease
times the number of rentable square feet of space in the RFO Space and Tenant's
Share shall be appropriately adjusted as of the RFO Space Commencement Date. If
Tenant fails to give the Acceptance Notice within such five (5) day period, then
the right of first offer shall immediately terminate as to the RFO Space, and
Landlord shall be free to lease the RFO Space, or portions thereof, to third
parties.
44. RIGHT OF FIRST REFUSAL. Provided Tenant is not then in default under this
Lease, Landlord hereby grants to Tenant the ongoing right of first refusal
during the Term of this Lease, subject to any pre-existing rights of other
tenants, with respect to any space in the Building that is or becomes vacant and
available for lease during the Term. If any space in the Building is or becomes
vacant and available for lease during the Term and if Landlord receives an offer
to lease part or all of such space from a third party which offer is acceptable
to Landlord (the "Third Party Offer"), then Landlord shall offer to lease the
space covered by the Third Party Offer (the "Third Party Offer Space") to Tenant
by giving notice thereof to Tenant (the "Offer Notice"). The Rent payable by
Tenant for the Third Party Offer Space shall be Fifteen and 00/100ths Dollars
($15.00) per rentable square foot of space leased. Tenant shall have five (5)
days after receipt of the Offer Notice to give Landlord notice of its acceptance
of Landlord's offer to lease the Third Party Offer Space (the "Acceptance
Notice"). If Tenant gives the Acceptance Notice within such five (5) day period,
then Landlord shall lease the Third Party Offer Space to Tenant on the terms set
forth in the Offer Notice. If Tenant fails to give the Acceptance Notice within
such five (5) day period, then Landlord shall be free to lease the Third Party
Offer Space, or portions thereof, to third parties. If a third party fails to
lease the Third Party Offer Space, then this right of first refusal shall
continue as described herein throughout the Term.
45. PARKING. Tenant acknowledges that no parking arrangements are associated
with the Building nor available under this Lease. Landlord and its Agent agree
to diligently assist Tenant in procuring monthly parking in the area in which
the Building is located; however, neither Landlord nor Its Agent have control
over the availability of monthly parking in the area and make no representations
to Tenant in this regard.
DATED the date first above written.
LANDLORD: TENANT:
Pacific Northwest Title Building Amazon.com, Inc., a Delaware corporation
Company, Inc., a Washington
corporation
By /s/ PETER MURPHY By /s/ OSWALDO DUENAS
--------------------------------- ----------------------------------
Its PRES. Its VP OPERATIONS
--------------------------------- ----------------------------------
By By
--------------------------------- ----------------------------------
Its Its
--------------------------------- ----------------------------------
RIDER
<PAGE> 22
EXHIBIT A
LEGAL DESCRIPTION
215 Columbia Building
Lots 2 & 3 TOGETHER WITH the Easterly one-half of vacated alley lying
immediately westward and adjoining said lots, ALL in Block 6 of Boren and
Denny's Addition to the City of Seattle, as per plat recorded in Volume 1 of
Plats, on page 27, records of King County; EXCEPT the Easterly 9 feet condemned
under City of Seattle, Ordinance No. 14345 for the widening of Third Avenue,
situate in the City of Seattle, County of King, State of Washington.
Initials: ________
________
________
________
LEGAL DESCRIPTION
EXHIBIT A
<PAGE> 23
EXHIBIT B
FLOOR PLAN
[DIAGRAM]
Initials: ________
________
________
________
Third Floor
Approximately 11,720 rentable square feet. Interior Improvements may not be
exactly as shown.
FLOOR PLAN
EXHIBIT B
Page 1
<PAGE> 24
EXHIBIT B
FLOOR PLAN
[DIAGRAM]
Initials: ________
________
________
________
Fourth Floor
Approximately 11,100 rentable square feet. Interior Improvements may not be
exactly as shown.
FLOOR PLAN
EXHIBIT B
Page 2
<PAGE> 25
EXHIBIT C
WORK LETTER
THIS WORK LETTER Is made and entered Into this 5th day of March 1998 by and
between PACIFIC NW Title BUILDING, INC., A WASHINGTON CORPORATION ("Landlord")
and AMAZON.COM, Inc., A DELAWARE CORPORATION ("Tenant").
Landlord and Tenant have entered into a Lease dated of even date herewith
covering certain Premises located in the 215 Columbia Building in Seattle,
Washington (the "Lease"). Under the Lease, Tenant has accepted the Premises in
"AS IS" condition without any obligations for the performance of improvements or
other work by Landlord, and Tenant may not make any improvements to the Premises
without first obtaining Landlord's written consent, which consent may be
withheld in Landlord's sole discretion. Landlord and Tenant agree that should
Tenant desire to make improvements to the Premises, such improvements and
alterations shall be in accordance with plans and specifications to be mutually
agreed upon between the parties.
Any and all improvements or alterations to the Premises shall be made at
Tenant's sole cost and expense, unless Landlord, in its sole discretion, agrees
to contribute to the cost of such improvements or alterations as set forth in
Section 14(a) of the Lease.
This Work Letter, together with the Lease, contains the entire agreement of
the parties with respect to any matters covered or mentioned in this Work Letter
and no prior agreements or understandings pertaining to any such matter shall be
effective for any purpose. No provision of this Work Letter may be amended or
added to except in writing signed by the parties hereto or their respective
successors and assigns in interest. This Work Letter shall not be effective or
binding upon any party until fully executed by both parties hereto.
DATED the date first above written.
LANDLORD: TENANT:
Pacific NW Title Building, Inc., Amazon.com, Inc., a Delaware corporation
a Washington corporation
By /s/ PETER MURPHY By /s/ OSWALDO DUENAS
--------------------------------- ----------------------------------
Its PRES. Its VP OPERATIONS
--------------------------------- ----------------------------------
By By
--------------------------------- ----------------------------------
Its Its
--------------------------------- ----------------------------------
WORK LETTER
EXHIBIT C
<PAGE> 26
EXHIBIT D
RULES AND REGULATIONS
1. No sign, placard, picture, advertisement, name or notice shall be installed
or displayed on any part of the exterior or in any area visible from the
exterior of the Building without the prior written consent of the Landlord,
which consent shall not be unreasonably withheld or delayed. Landlord shall have
the right to remove, at Tenant's expense and without notice, any sign installed
or displayed in violation of this rule. All signs or lettering on doors and
walls shall be printed, painted, affixed or inscribed at the expense of Tenant.
At the expiration or termination of Tenant's Lease, Tenant, at Tenant's sole
cost and expense, shall remove all tenant-installed signage and repair and paint
any and all damage resulting from installation and/or removal of said signage.
2. Tenant shall not install any curtains, blinds, shades, screens or hanging
plants or other similar objects attached to or used in connection with any
window or door of the Premises except building-standard drapes approved by
Landlord. No awning shall be permitted on any part of the Premises. Tenant shall
not place anything against or near glass partitions or doors or windows which
may appear unsightly from outside the Premises.
3. Tenant shall not obstruct any sidewalks, lobbies, halls, passages, exits,
entrances, elevators, or stairways of the Building. The halls, passages, exits,
entrances, lobbies, elevators, and stairways are not open to the general public.
Landlord shall in all cases retain the right to control and prevent access
thereto of all persons whose presence in the judgment of Landlord would be
prejudicial to the safety, character, reputation and interest of the Building
and its Tenants; provided that nothing herein contained shall be construed to
prevent such access to persons with whom any Tenant normally deals in the
ordinary course of its business, unless such persons are engaged in illegal
activities. No Tenant and no employee or invitee of any tenant shall go upon the
roof of the Building without Landlord's prior written consent.
4. The directory of the Building will be provided exclusively for the display of
the name and location of tenants' business only, and Landlord reserves the
right to exclude any other names therefrom.
5. All cleaning and janitorial services for the Building and the Premises,
unless otherwise provided in the Lease, shall be provided exclusively through
Landlord, and except with the written consent of Landlord, no person or persons
other than those approved by Landlord shall be employed by Tenant or permitted
to enter the Building for the purpose of cleaning the same. Tenant shall not
cause any unnecessary labor by carelessness or indifference to the good order
and cleanliness of the Premises. Landlord shall not in any way be responsible to
any tenant for any loss of property on the Premises, however occurring, or for
any damage to any tenant's property by the janitor or any other employee or any
other person.
6. Landlord shall furnish Tenant with appropriate number of keys to each door
lock in the Premises and to the main entrance door of the Building. Landlord may
make a reasonable charge for any additional keys. Tenant shall not make or have
made additional keys, and Tenant shall not alter any lock or install a new
additional lock or bolt on any door of its Premises. Tenant, upon termination of
its tenancy, shall deliver to Landlord all keys to all doors which have been
furnished to Tenant, and in the event of loss of any keys so furnished, shall
reimburse Landlord for the cost of any new lock(s) required due to such loss.
7. Freight elevator(s), if any, shall be available for use by all tenants in the
Building, subject to such reasonable scheduling as Landlord in its discretion
shall deem appropriate. No equipment, materials, furniture, packages, supplies,
merchandise or other property will be received in the Building or carried in the
passenger elevators except between such hours and in such elevators as may be
designated by Landlord.
8. Tenant shall not place a load upon any floor of the Premises which exceeds
the load per square foot which such floor was designed to carry and which is
allowed by law. Landlord shall have the right to prescribe the weight, size and
position of all equipment, materials, furniture or other property brought into
the Building. Heavy objects shall, if considered necessary by Landlord, stand on
such platforms as determined by Landlord to be necessary to properly distribute
the weight of such objects. Business machines and mechanical equipment belonging
to Tenant which cause noise or vibration that may be transmitted to the
structure of the Building or to any space therein or to any tenants in the
Building shall be placed and maintained by Tenant, at Tenant's sole cost and
expense, on vibration eliminators or other devices sufficient to eliminate noise
or vibration. Landlord will not be responsible for loss of, or damage to, any
such equipment or other property from any cause, and all damage done to the
Building by maintaining or moving such equipment or other property shall be
repaired at the expense of Tenant.
9. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited quantities
necessary for the operation or maintenance of office equipment. Tenant shall not
use or permit to be used in the Premises any foul or noxious gas or substance,
or permit or allow the Premises to be occupied or used In a manner offensive or
objectionable to Landlord or other occupants of the Building by reason of noise,
odors, or vibrations, nor shall Tenant bring into or keep in or about the
Premises any animals, including dogs (except seeing-eye dogs).
10. Tenant shall not use any method of heating or air conditioning other than
that supplied by Landlord.
11. Tenant shall not waste electricity, water or air conditioning, and Tenant
agrees to cooperate fully with Landlord to assure the most effective operation
of the Building's heating and air-conditioning system and to comply with any
governmental energy-saving rules, laws or regulations, of which Tenant has
actual notice, and shall refrain from attempting to adjust controls. Tenant
shall keep corridor and exterior doors closed and shall close window coverings
at the end of each business day.
RULES AND REGULATIONS
EXHIBIT D
Page 1
<PAGE> 27
12. The name of the Building is the 215 Columbia Building. Landlord reserves the
right, exercisable without notice and without liability to Tenant, to change the
name of the Building.
13. Landlord reserves the right to exclude from the Building between the hours
of 6:00 p.m. and 7:00 a.m. the following day, or such other hours as may be
established from time to time by Landlord, and on Sundays and legal holidays any
person, unless that person is known to the person or employee in charge of the
Building and has a pass or is properly Identified. Tenant shall be responsible
for all persons for whom it requests passes and shall be liable to Landlord for
all acts of such persons. Landlord shall not be liable for damages for any error
with regard to the admission to or exclusion from the Building of any person.
Landlord reserves the right to prevent access to the Building in case of
invasion, mob, riot, public excitement or other commotion by closing the doors
or by other appropriate action.
14. Tenant shall close and lock the doors of its Premises and entirely shut off
all water faucets or other water apparatus, electricity, copiers and other
office equipment, including coffee pots, etc., before Tenant and its employees
leave the Premises. Tenant shall be responsible for any damage or injuries
sustained by other tenants or occupants of the Building or by Landlord for
noncompliance with this rule.
15. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed, and no
foreign substance of any kind whatsoever shall be thrown therein. The expense of
any breakage, stoppage or damage resulting from the violation of this rule shall
be borne by the tenant, or employees or invitees of the tenant, who shall have
caused it.
16, Tenant shall not make any room-to-room solicitation of business from other
tenants in the Building. Tenant shall not use the Premises for any business or
activity other than that specifically provided for in Tenant's Lease.
17. Canvassing, soliciting and distribution of handbills or any other written
material, and peddling in the Building are prohibited, and each tenant shall
cooperate to prevent same.
18. Tenant shall not install any radio or television antenna, loudspeaker or
other device on the roof or exterior walls of the Building except as permitted
in the Lease. Tenant shall not interfere with radio or television broadcasting
or reception from or in the Building or elsewhere.
19. Landlord reserves the right to direct electricians as to where and how
telephone, computer or other wiring or cabling are to be introduced to the
Premises. Tenant shall not cut nor bore holes for wiring or cabling without
Landlord's prior written consent, said consent shall not be unreasonably
withheld. Tenant shall not affix any floor covering to the floor of the Premises
in any manner except as approved by Landlord. Tenant shall repair any damage
resulting from noncompliance with this rule.
20. Landlord reserves the right to exclude or expel from the Building any person
who, in Landlord's judgment, is intoxicated or under the influence of alcohol or
drugs or who is in violation of any of the Rules and Regulations of the
Building.
21. Tenant shall store all its trash and garbage within its Premises. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of trash and garbage disposal.
All garbage and refuse disposal shall be made in accordance with directions
issued from time to time by Landlord. All garbage over and above normal (i.e.,
major-delivery wrappings, etc.) shall be at Tenants sole cost and expense.
Tenant agrees to cooperate with Landlord in recycling programs as may be
established from time to time by Landlord.
22. The Premises shall not be used for lodging nor for manufacturing of any
kind, nor shall the Premises be used for any improper, immoral or objectionable
purpose. No cooking shall be done or permitted by Tenant on the Premises, except
that use by Tenant of Underwriters Laboratory approved equipment for brewing
coffee, tea, hot chocolate and similar beverages, and microwave ovens shall be
permitted; provided that such equipment and use is in accordance with all
applicable federal, state, county and city laws, codes, ordinances, rules and
regulations and does not cause objectionable odor.
23. Without the written consent of Landlord, Tenant shall not use the name of
the Building in connection with or in promoting or advertising the business of
Tenant except as Tenant's address.
24. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
25. Tenant assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
26. The requirements of Tenant will be attended to only upon appropriate
application to the office of the Building by an authorized individual. Employees
of Landlord shall not perform any work or do anything outside their regular
duties unless under special instructions from Landlord, and no employee of
Landlord will admit any person (Tenant or otherwise) to any office of the
Building without specific instructions from Landlord.
27. Tenant and Tenants employees shall not park vehicles in any parking areas
designated by Landlord as reserved parking areas or as visitor parking areas.
Tenant shall not park any vehicles in the Building parking areas other than
automobiles, motorcycles, motor-driven or nonmotor-driven bicycles or
four-wheeled trucks.
28. Tenant and Tenant's delivery personnel shall utilize loading zones and
delivery entrances for all deliveries. Any damage to the Building or Premises
resulting from Tenant's deliveries shall be repaired at the sole cost and
expense of the Tenant.
RULES AND REGULATIONS
EXHIBIT D
Page 2
<PAGE> 28
29. Tenant and Tenant's delivery personnel shall not use in any space or in the
common areas of the Building any hand truck except those equipped with rubber
tires and side guards or such other material-handling equipment as Landlord may
approve. Tenant shall not bring vehicles of any other kind into the Building.
30. All moving of furniture or other equipment shall be done so as to have
minimal impact on other tenants' and visitors' use of elevators, common areas,
and parking facilities.
31. The Building is a nonsmoking building.
32. Landlord may waive any one or more of these Rules and Regulations for the
benefit of Tenant or any other tenant, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of Tenant or any
other tenant, nor prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the tenants of the Building.
33. These Rules and Regulations are in addition to and shall not be construed to
in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of any lease of any premises in the Building.
34. Landlord reserves the right to make such other and reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for safety and
security, for care and cleanliness of the Building and for the preservation of
good order therein. Tenant agrees to abide by all such Rules and Regulations
hereinabove stated and any additional reasonable Rules and Regulations which are
adopted.
35. Tenant shall be responsible for the observance of all of the foregoing Rules
and Regulations by Tenant's employees, agents, clients, customers, invitees and
guests.
Initials: ________
________
________
________
RULES AND REGULATIONS
EXHIBIT D
Page 3
<PAGE> 29
LEASE AMENDMENT NO. 1
THIS LEASE AMENDMENT NO. 1 is made and entered into this 21st day of April 1998
by and between PACIFIC NW TITLE BUILDING, INC., A WASHINGTON CORPORATION
("Landlord"), and AMAZON.COM, INC., A DELAWARE CORPORATION ("Tenant").
RECITALS: Landlord and Tenant entered into a written Lease dated March 20, 1998
(the "Lease"), whereby Landlord leased to Tenant and Tenant leased from Landlord
certain Premises consisting of approximately 22,820 rentable square feet of
space located on the third and fourth floors in the 215 Columbia Building,
Seattle, Washington, designated as Suite 400. Landlord and Tenant desire to
amend the Lease to increase the number of rentable square feet leased, to revise
Tenant's Share, to adjust the Minimum Monthly Rent, and to add a provision
allowing use of the Building lobby by Tenant.
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Landlord and Tenant agree to amend the Lease as follows:
1. Section 1(c) is hereby deleted in its entirety and replaced with the
following:
"Premises" means that certain space outlined in red in Exhibit B and
located on the basement level, mezzanine level, first, second, third, and fourth
floors of the Building, designated as Suite 400.
2. The second sentence of Section 1(d) is hereby deleted in its entirety and
replaced with the following:
Landlord and Tenant stipulate and agree for all purposes under this Lease
that the Building contains approximately 51,249 rentable square feet of space
(the "Building Area"") and that the Premises contain approximately 40,384
rentable square feet of space (the "Premises Area").
3. The first paragraph is hereby deleted in its entirety and replaced with the
following:
"Tenant's Share" means the Premises Area divided by the Building Area,
expressed as a percentage, which is seventy-eight and eighty one-hundredths
percent (78.80%).
4. Section 1(i) is hereby deleted in its entirety and replaced with the
following:
"Minimum Monthly Rent" means Fifty-two Thousand Twenty-six and no/100ths
Dollars ($52,026.00) per month.
5. Section 1(I) is hereby deleted in its entirety and replaced with the
following:
"Prepaid Rent" means Fifty-two Thousand Twenty-six and no/100ths Dollars
($52,026.00).
6. Section 1(m) is hereby deleted in its entirety and replaced with the
following:
"Security Deposit" means Fifty-two Thousand Twenty-six and no/100ths
Dollars ($52,026.00).
7. The following paragraph is hereby added to the Lease as Section 46:
46. USE OF BUILDING LOBBY/ENTRANCE AREA. Tenant shall have the right during
the Term to use the lobby/entrance area (the "Lobby"), identified as "BC-3" and
crosshatched in green in Exhibit B, located on the first floor of the Building
as a reception area and for no other purpose without Landlord's prior written
consent. All the terms and conditions of the Lease shall apply to Tenant's use
of the Lobby, except rent shall not be charged for such use. Tenant acknowledges
that the visual appearance of the Lobby is important to the overall image and
value of the Building. Proper cleanliness and a professional appearance of the
Lobby are each important considerations for granting this right. Tenant hereby
agrees (i) to keep the Lobby in neat, clean, and good condition at all time
during the Term; and (ii) that neither it nor its employees or invitees will
interfere with
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<PAGE> 30
the rights of other tenants of the Building nor create any undue disturbance
that annoys or disturbs other tenants in the Building. Any furniture placed in
the Lobby by Tenant shall be subject to Landlord's prior written approval, which
approval may be withheld in Landlord's sole discretion. If during the Term
hereof, Landlord, in Landlord's sole discretion, has reason to feel that the
visual appearance of the Lobby does not meet reasonable standards and/or that
other occupants of or visitors to the Building are being annoyed or disturbed by
Tenant's conduct or that of its employees or invitees, Landlord may so notify
Tenant in writing giving Landlord's specific objections concerning the visual
appearance or disturbance. Tenant shall correct the unsatisfactory item or items
called to its attention within twenty-four (24) hours. If Tenant fails to
satisfy Landlord's concerns within said twenty-four (24) hour period, Landlord
may exercise its remedies under this Lease.
8. Improvements. Tenant hereby accepts the Premises in "AS IS" condition. The
provisions of the Work Letter (Exhibit C to the Lease) have been completed and
shall no longer apply; Landlord shall not be required to make additional
improvements to the Premises.
9. Agency Disclosure. Martin Smith Inc hereby discloses that it represents the
Landlord and Washington Partners, Inc. represents the Tenant in this
transaction.
Except as set forth in this Lease Amendment No. 1, all the provisions of the
Lease shall remain unchanged and in full force and effect.
DATED the date first above written.
LANDLORD: TENANT:
Pacific Northwest Title Building Amazon.com, Inc., a Delaware corporation
Company, Inc., a Washington
corporation
By /s/ PETER MURPHY By /s/ RICK DALZELL
--------------------------------- ----------------------------------
Its PRES. & GM Its CIO/VP
--------------------------------- ----------------------------------
By By
--------------------------------- ----------------------------------
Its Its
--------------------------------- ----------------------------------
2
<PAGE> 31
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that RICK DALZELL is the
person who appeared before me, and said person acknowledged that he/she signed
this instrument, on oath stated that he/she was authorized to execute the
instrument, and acknowledged it as the (title) CIO/VP of (entity)
AMAZON.COM a DELAWARE CORP. to be the free and voluntary act of such party for
the uses and purposes mentioned in the instrument.
Witness my hand seal this 24 day March 1998.
/s/ LAURA LEE ELDER
---------------------------------------------
[SEAL] Notary Public
(Print Name) LAURA LEE ELDER
--------------------------------
Residing at MOUNTLAKE TERRACE, WA
--------------------------------
My Commission Expires: 11-20-01
----------------------
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that PETER MURPHY is the
person who appeared before me, and said person acknowledged that he/she signed
this instrument, on oath stated that he/she was authorized to execute the
instrument, and acknowledged it as the (title) VP OPERATIONS of (entity) PACIFIC
NW TITLE BUILDING, INC., A WASHINGTON CORPORATION to be the free and voluntary
act of such party for the uses and purposes mentioned in the instrument.
Witness my hand seal this 29 day March 1998.
/s/ VANESSA D. MORGAN
---------------------------------------------
[SEAL] Notary Public
(Print Name) VANESSA D. MORGAN
--------------------------------
Residing at LYNNWOOD
--------------------------------
My Commission Expires: 7-29-99
----------------------
STATE 0F _____________)
) ss.
COUNTY OF ____________)
I certify that I know or have satisfactory evidence that
__________________________________ is the person who appeared before me, and
said person acknowledged that he/she signed this Instrument, on oath stated that
he/she was authorized to execute the instrument, and acknowledged it as the
(title)____________________________ of (entity)______________________ , a
_____________________ to be the free and voluntary act of such party for the
uses and purposes mentioned in the instrument.
Witness my hand and official seal this day 19__ .
---------------------------------------------
Notary Public
(Print Name)
--------------------------------
Residing at
--------------------------------
My Commission Expires:
----------------------
<PAGE> 32
EXHIBIT B
FLOOR PLAN
[DIAGRAM]
Initials: ________
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FLOOR PLAN
EXHIBIT B
<PAGE> 33
EXHIBIT B
FLOOR PLAN
[DIAGRAM]
Initials: ________
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________
FLOOR PLAN
EXHIBIT B
<PAGE> 34
EXHIBIT B
FLOOR PLAN
[DIAGRAM]
Initials: ________
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________
________
FLOOR PLAN
EXHIBIT B
<PAGE> 35
EXHIBIT B
FLOOR PLAN
[DIAGRAM]
Initials: ________
________
________
________
FLOOR PLAN
EXHIBIT B
<PAGE> 36
EXHIBIT B
FLOOR PLAN
[DIAGRAM]
Initials: ________
________
________
________
FLOOR PLAN
EXHIBIT B
<PAGE> 37
EXHIBIT B
FLOOR PLAN
[DIAGRAM]
Initials: ________
________
________
________
FLOOR PLAN
EXHIBIT B
<PAGE> 1
SECOND & SPRING BUILDING
LEASE
LEASE, dated April 17, 1998, between 1100 SECOND AVENUE LIMITED
PARTNERSHIP, a Washington limited partnership ("Landlord"), and AMAZON.COM,
INC., a Delaware corporation ("Tenant").
Landlord and Tenant agree as follows:
1. Premises; Expansion.
1.1 Landlord agrees to lease to Tenant and Tenant agrees to
lease from Landlord approximately 11,358 rentable square feet ("rsf")
(including 10,208 gross square feet of usable area and a load factor of
11.13%, as measured by current BOMA standards for multi-tenant
buildings, in the lower level of the 2nd & Spring Building, 1100 Second
Avenue, Seattle, Washington ("Building"). A legal description of the
property on which such building is situated ("Property") is attached
hereto as Exhibit A. A floor plan showing the approximate location of
the premises on the lower floor of the Building ("Premises") is attached
hereto as Exhibit B. Landlord and Tenant have agreed on the exact usable
area of the Premises for the purpose of calculating the rsf of the
Premises, and such agreed area shall be binding on the parties and be
deemed to be the actual usable area of the Premises without regard to
any subsequent re-measurement of the Premises.
1.2 During the Term, Tenant shall have the right of first
refusal to lease any space in the north half of Floor 1 of the Building,
totaling approximately 12,000 rsf. In the event Landlord is prepared to
accept or has conditionally accepted an offer from any third party to
lease any of such space, Landlord shall so notify Tenant, which notice
shall include a copy of the offered terms. Tenant shall have five
business days after receipt of such notice in which to notify Landlord
of Tenant's exercise of it's right of first refusal as to the affected
portion of the north half of Floor 1, whereupon Tenant shall be bound to
lease such space on the same terms and conditions as are set forth in
the offer (including the lease term in such offer, even if different
from the Term hereunder) , and this Lease shall be amended to include
such space in the Premises and to incorporate such terms and conditions
herein as to such space. The right of first refusal in this Section 1.2
is subject to the rights of Central Puget Sound Regional Transit
Authority ("RTA") as to Floor 1 under its lease of space in the
Building, as amended from time to time. An offer to lease any space in
Floor 1 by the RTA shall not trigger Tenant's rights under this Section
1.2. Landlord shall, however, promptly inform Tenant of the execution of
any lease on Floor 1 to the RTA.
2. Term
2.1 The term of this Lease ("Term") shall commence on the date
of occupancy, or on May 1, 1998, whichever occurs first. In this Lease,
the "Lease Commencement Date" shall be deemed to be May 1, 1998, even if
the Lease actually commences before such date. The parties shall have a
landlord-tenant relationship, however, from and after the date of
execution of this Lease. Tenant shall have access to the Premises and,
to the extent necessary, to the Building generally, from the date of
execution of this Lease, for the purposes of tenant improvements
construction, equipment set-up and move-in activities. Such activities
shall not be deemed "occupancy" for purposes of determining the Rent
Commencement Date, and "occupancy" shall occur when Tenant is conducting
business in the Premises.
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<PAGE> 2
2.2 The Term shall expire on the Expiration Date, which shall be
April 30, 2003 ("Initial Term"), unless extended as provided in this
Lease.
2.3 Tenant shall have the option to extend the Term for one
period of up to 60 months ("Extension"). Tenant shall exercise such
option only by written notice to Landlord on or before nine months
before the Expiration Date, which notice shall include the number of
months of the Extension. All the terms and conditions of this Lease
shall apply during the Extension except for Base Rent, which shall be
adjusted as provided in Section 4.
2.4 In this Lease, unless the context otherwise requires, a
"month" shall be a calendar month, and Month 1 shall begin on the
Commencement Date and end on the last day of the same calendar month.
2.5 Tenant shall have an ongoing right to terminate this Lease,
effective on the second, third, and fourth anniversaries of the Lease
Commencement Date. Such right may be exercised by Tenant only by notice
to Landlord on or before 90 days before the subject such anniversary
date. As a condition of such termination, Tenant shall pay Landlord the
unamortized portion of Landlord's actual payment for seismic upgrades,
as described in Section 3. Such payment shall be amortized for purposes
of this Section 2.5 over 60 months, including interest at the rate of
10% per annum.
3. Tenant Improvements.
3.1 Landlord shall carry out certain seismic upgrades to the
Building, in substantial accordance with the recommendations of Skilling
Ward Magnusson attached hereto as Exhibit C. Landlord shall commence
such upgrades during the first five months of the Term, and thereafter
shall prosecute such work diligently and continuously and in accordance
with all laws and legal requirements. Landlord shall only be obligated
to pay up to $150,000 for the direct third-party cost of such work. Any
additional cost of such work shall be paid by Tenant, as a condition on
Landlord's obligation to complete such work. Landlord's work, ongoing on
the date of this Lease, on the exterior facade of the Building is not
included in such seismic work, and Tenant shall not be responsible for
the cost of such exterior facade work. Landlord shall enter into a
construction contract for the seismic upgrade work ("Construction
Contract") on either a fixed price or guaranteed maximum price basis,
and the Construction Contract shall be subject to Tenant's prior written
approval (such approval not to be unreasonably withheld). Landlord shall
not authorize any change orders or other modifications under the
Construction Contract without Tenant's prior written approval, and
Landlord shall send Tenant copies of all invoices under, and all
material correspondence and documents relating to, the Construction
Contract. Tenant shall pay such excess cost from time to time as it is
incurred, within ten business days of a request for payment from
Landlord setting forth in reasonable detail the basis for such request.
In addition, Landlord shall pay up to $92,192 of the direct third-party
cost incurred by Tenant to install a new electrical vault in the
Building. Tenant shall construct such vault substantially in accordance
with the plans prepared by Sparling Electric, a copy of which has been
furnished to Landlord and Tenant and in accordance with all laws and
legal requirements. Landlord shall pay such cost concurrently with
Tenant's payment of Rent for Month 1 or, if the work is performed later,
upon receipt of Tenant's invoice. Landlord shall not be required to
carry out any other tenant improvements to the Premises for Tenant.
Alterations to the Premises by Tenant shall be subject to Section 11.
3.2 Tenant shall perform various tenant improvements to the
Premises ("Initial Improvements"), including without limitation space
divisions, electrical upgrades to the Building, the installation of a
fire-rated corridor to allow ingress and egress through the southeast
door of the Premises to the outside of the Building (if required by
code), all as
2
<PAGE> 3
provided in Tenant's plans for such improvements provided to Landlord
and the City of Seattle ("Tenant Improvement Plans"). Tenant shall carry
out and complete its improvements lien-free, substantially in accordance
with the Tenant Improvements Plans and in accordance with all applicable
laws and legal requirements.
3.3 Concurrently with the execution of this Lease, Tenant and
Landlord are agreeing on a schedule of Tenant's Property, identifying
which general categories of the Initial Improvements shall be deemed
Tenant's trade fixtures. The schedule is attached hereto as Exhibit D.
All Initial Improvements not included on such schedule shall become
Landlord's property upon the expiration or earlier termination of this
Lease; provided, however, that Tenant's personal property and those
improvements which are not permanently attached to the Premises and can
be removed without significant damage and reused shall not become
Landlord's property upon the expiration or earlier termination of this
Lease.
4. Rent.
4.1 Tenant shall pay Rent to Landlord in the form of Base
Monthly Rent, Additional Rent in the form of Operating Expenses, as
provided in Section 7, and any Additional Rent as set forth in elsewhere
in this Lease.
4.2 Base Rent during the Initial Term shall be $8.00 per rsf, or
$7,572 per month.
4.3 Base Rent for the Extension shall be the fair market rental
rate as of the commencement of such Extension, by reference to
comparable space in the Seattle Central Business District, but in no
event less than the Base Rent in effect immediately before such
Extension. "Fair market rent" means the rent per rsf that a willing,
non-equity tenant would pay in a arms-length transaction for comparable
space in a building located in the Seattle Central Business District for
a five-year lease. The comparability of particular other space or rents
shall be determined through a consideration of all reasonably pertinent
factors. Such market rate shall be determined by agreement of the
parties or by appraisal as provided below:
4.3.1 Landlord shall propose a Base Rent for such Extension
within 30 days after Tenant's Extension notice. The parties
shall negotiate in good faith, but If they are unable to agree
upon such Base Rent by 30 days after the delivery of Landlord's
proposal, then either party may elect to cause such Base Rent to
be determined by reference to the appraised fair market rent.
Such election shall be made by such party by notice to the other
party, including in such notice the designation of an appraiser.
The other party may accept such appraiser or designate another
appraiser within 10 days of such notice. If it does not
designate another appraiser in such period, it shall be deemed
to have accepted the first appraiser. If a second appraiser is
designated, the two appraisers shall promptly appoint a third
appraiser. If the two appraisers do not appoint a third
appraiser within ten business days of the appointment of the
second appraiser or acceptance of the first appraiser, either
party may cause the third appraiser to be appointed by the King
County Superior Court.
4.3.2 Each appraiser shall determine the fair market rent
for the Premises for such Extension by reference to all factors
deemed appropriate in his or her professional opinion, and
notify the parties within 20 days of the date of appointment of
the last appraiser of such fair market rent. The Base Rent for
such Extension shall be the fair market monthly rent determined
by the single appraiser
3
<PAGE> 4
or, if there are three appraisers, the arithmetic mean of the
two closest fair market monthly rents.
4.3.3 All appraisers under this appraisal provision shall be
independent certified M.A.I. professional appraisers with at
least five years' experience appraising properties in the
Seattle Central Business District or licensed commercial real
estate agents with at least ten years of real estate practice
and at least five years of substantial office leasing practice
in the Seattle Central Business District. If there are three
appraisers, each party shall pay for the cost of its designated
appraiser and 50% of the cost of the third appraiser. If there
is only one appraiser, each party shall pay 50% of the cost of
such appraiser.
4.4 Rent shall be paid in advance, on or before the first day of
each month of the Term.
4.5 Rent shall be paid without prior notice, demand, set off,
counterclaim, deduction or defense and, except as otherwise expressly
provided in this Lease, without abatement or suspension.
4.6 The Rent Commencement Date shall be the Lease Commencement
Date. Rent for any period during the Lease term that is for less than
one month shall be prorated for the actual number of days in such
period.
4.7 All Rent shall be paid to Landlord at the address for
notices set forth in this Lease, in lawful money of the United States of
America, or to such other person or at such other place as Landlord may
from time to time designate in writing.
4.8 Concurrently with the execution of this Lease, Tenant shall
pay to Landlord a security deposit equal to $7,572, the amount of one
month's Rent ("Deposit"). Landlord shall have the right to all or any
part of the Deposit to cure any Default by Tenant under this Lease or to
compensate Landlord for any damage sustained by it resulting from such
Default. In the event of any such application of the Deposit, Tenant
shall, on demand, immediately pay to Landlord the amount necessary to
replenish the Deposit to the amount set forth above. If Tenant is not in
Default at the expiration or termination of this Lease, Landlord shall
return the remaining Deposit to Tenant, less any amounts necessary to
return the Premises to the condition in which the Premises are required
to be surrendered, reasonable wear and tear excepted. Landlord's
obligations with respect to the Deposit are those of a debtor and not a
trustee. Landlord may maintain the Deposit separate from Landlord's
general funds or may commingle the Deposit with other funds of Landlord.
No interest shall accrue for Tenant on the Deposit.
5. Use of Premises.
5.1 Tenant shall use the Premises only for general office
purposes, a data center, and other uses incident to the operation of a
data center.
5.2 The Premises may not be used for any other purpose without
Landlord's written consent which shall not be unreasonably withheld,
conditioned or delayed.
5.3 Tenant shall not do or permit anything to be done in or
about the Premises or bring or keep anything therein which will in any
way increase the cost of or cause the cancellation of any fire or other
insurance upon the Building or any part thereof or any of its contents.
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<PAGE> 5
5.4 Tenant shall not do or permit anything to be done in or
about the Premises that will obstruct or interfere with the rights of
other tenants or occupants of the Building or Business Park or injure
them or their property, or use or allow the Premises to be used for any
unlawful purpose or in any way constituting a nuisance.
6. Additional Rent for Operating Expenses.
6.1 Tenant shall pay, as Additional Rent, Tenant's Share, as set
forth below, of Operating Expenses.
6.2 Tenant's Share shall be 9.63%, being the percentage that the
rsf of the occupied Premises (11,358) bears to the rsf of the Building
(117,937).
6.3 "Operating Expenses" means all expenses and charges incurred
by Landlord in the operation of the Building, Property and Common Areas,
as a first-class facility, including without limitation the following
costs by way of illustration: (i) all real property taxes, assessments
and other general or special charges levied during the Term by any
public, governmental or quasi-governmental authority against the real or
personal property included in the Building or the Property, including
without limitation Landlord's personal property used in the maintenance,
repair or operation of the Building or the Property, or any other tax on
the leasing of the Building or on the rents from the Building (other
than any federal, state or local income or franchise tax); (ii) any and
all assessments Landlord must pay for the Building or Property pursuant
to any transportation or any other improvement monitoring or management
plan, or any other covenant, condition or reciprocal easement
agreements; (iii) electricity, gas and similar energy sources, refuse
collection, water, sewer and other utilities services for the Building
and the Property; provided, however, to the extent that any such
services are separately metered to Tenant, Tenant shall pay the actual
separately incurred charges; (iv) all licenses, permits and inspection
fees, market rate property management fees paid to independent or
affiliated contractors or to Landlord, and legal, accounting and other
professional expenses; (v) window washing; (vi) unless otherwise
excluded herein, all costs of improvements or alterations to the
Building, Property and Common Areas required by Laws, to save labor, or
reduce Operating Expenses; (vii) all premiums and deductibles for
liability, property damage, casualty, rental loss, compensation or other
insurance maintained by Landlord for the Building or Property; (viii)
air conditioning, heating, ventilating, elevator maintenance, supplies,
materials, equipment, tools, including the repair and maintenance of the
plumbing, heating, ventilating, air conditioning and electrical systems
of the Building; (ix) maintenance costs, including utilities and payroll
expenses, rental of personal property used in maintenance and all other
upkeep of Common Areas, including landscaping; (x) costs and expenses of
repairs, monitoring, repairing, maintenance, painting, lighting,
cleaning, refuse removal, security and similar items, including
appropriate reserves, (xi) third-party market rate property management
fees and other costs incurred in the management of the Building and
Property (including supplies, wages and salaries of employees used in
the management, operation and maintenance thereof and payroll taxes and
similar governmental charges with respect thereto, and Building
management office rental, if any); (xii) any other expense or charge
whether or not described above that in accordance with generally
accepted accounting and management practices is properly an expense of
maintaining, operating or repairing the Building, Property or Common
Areas.
Operating Expenses shall not include Landlord's costs incurred under
Section 3.1 above or: (i) depreciation on the Building or equipment
therein, (ii) costs (including principal and interest) related to
Landlord's financing, (iii) costs incurred by Landlord for alterations
or additions which are considered capital improvements and replacements
under generally accepted accounting principles, including any
alterations or additions required to be made in
5
<PAGE> 6
accordance with the provisions of the Americans With Disabilities Act or
any other applicable law, except (a) costs incurred to reduce or save
Operating Expenses, amortized over the term such savings are reasonably
expected to be realized; provided that the annual amortized cost billed
to Tenant shall not exceed the amount of the annual reduction in
Operating Expenses or savings realized by Tenant as a result of such
costs incurred by Landlord; and (b) costs incurred to retrofit the
Premises to satisfy ADA requirements on account of Tenant's use of the
Premises (which retrofitting shall be Tenant's responsibility and shall
be subject to Section 11); (iv) costs (including permit, license and
inspection fees) incurred in renovating or otherwise improving or
decorating, painting or redecorating space for tenants or other
occupants or vacant space other than normal and ordinary maintenance;
(v) expenses in connection with services or other benefits of a type
which are not provided Tenant but which are provided to another tenant
or occupant; (vi) costs incurred due to violation by Landlord of the
terms and conditions of any other lease, and any costs (including any
costs of compliance), fines or penalties incurred due to violations by
Landlord of any governmental rule or authority unless such costs, fines,
or penalties are incurred by Landlord due to Tenant's failure to perform
any of its obligations under the Lease; (vii) overhead and profit
increment paid to subsidiaries or affiliates of Landlord for supplies or
other materials to the extent that the costs of such supplies or
materials exceed the costs that would have been paid had the supplies or
materials been provided by unaffiliated parties on a competitive basis;
(viii) Landlord's general corporate overhead and general administrative
expenses, except for reimbursement for out of pocket costs for postage,
photocopies, and telephone costs incurred in operating the Building;
(ix) any compensation paid to clerks, attendants or other persons in
commercial concessions (such as parking garage attendants) operated by
Landlord; (x) all items and services for which Tenant reimburses
Landlord or pays third persons or which Landlord provides selectively to
one or more tenants or occupants of the Building (other than Tenant)
without reimbursement; (xii) advertising and promotional expenditures to
market the Building; (xiii) any other expense which, under generally
accepted accounting principles, would not be considered a normal
maintenance or operating expense; (xvii) Landlord's executive salaries;
(xviii) real estate brokers' commissions; (xix) costs or expenses for
which Landlord is entitled to be reimbursed or indemnified, by an
insurer, condemnor, tenant or otherwise; (xx) janitorial expenses; (xxi)
cost of utilities provided to any tenant which uses such utilities in
quantities significantly greater than typical office building tenants;
(xxii) costs for acquiring artwork or other similar Building amenities;
and (xxiii) legal fees in connection with negotiating leases or
collections on, terminations of, or modifications of leases, or
Landlord's financing or sale of the Building. Landlord shall not collect
more than 100% of Operating Expenses and shall not recover any item of
cost more than once.
6.4 Landlord currently estimates that Tenant's Share of
Operating Expenses from and after the Commencement Date through the end
of 1998 will be $7.00 per year, or $6,625 per month. Prior to each
December 1 of the Term beginning December 1, 1998, Landlord shall
furnish Tenant a written statement of the estimated Operating Expenses
for the coming calendar year and the estimated Tenant's Share of
Operating Expenses for the coming year. Landlord may, by written notice
to Tenant, revise its estimate of Tenant's Share of Operating Expenses
from time to time if circumstances make such revision reasonable.
6.5 Tenant shall pay, as Additional Rent, the monthly estimated
Operating Expenses then in effect, and such payment shall be made in the
same manner as Base Monthly Rent.
6.6 Within 90 days after each January 1 during the Term, or as
soon thereafter as practicable, Landlord shall deliver to Tenant a
written statement setting forth the actual Operating Expenses for the
preceding year and Tenant's Share thereof. To the extent
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Tenant's Share of actual Operating Expenses exceeded the estimated
Tenant's Share thereof paid by Tenant, Tenant shall pay Additional Rent
to Landlord within 30 days after receipt of such statement by Tenant. To
the extent Tenant's Share of actual Operating Expenses was less than the
estimated Tenant's Share thereof paid by Tenant, Tenant shall receive a
credit against its next payable Rent or such amount shall otherwise be
refunded to Tenant, as Landlord determines in its discretion.
6.7 Landlord shall keep full and accurate books of account
covering Operating Expenses for at least three years after the delivery
of each annual statement of Operating Expenses. Tenant shall have the
right at Tenant's cost, during Landlord's regular business hours, to
inspect, copy and audit such books of account at a reasonable time on
five days' prior written notice to Landlord. Such right may be exercised
no more than once in any calendar year, and shall not cover periods more
than three years prior to such inspection. Tenant shall furnish Landlord
with a copy of any report or summary prepared by or for Tenant
concerning such inspection. If such inspection discloses that Tenant has
overpaid Operating Expenses by more than 5% of actual Operating Expenses
in any calendar year (other than any calendar year for which Landlord
has not completed its annual reconciliation), Landlord will pay the cost
of correcting accounts and compensate Tenant for any costs reasonably
incurred to inspect, copy or audit the accounts. If Tenant has overpaid
Operating Expenses, Landlord will credit such overpayment to the
installments of Rent next due, or at its election shall pay Tenant the
amount of such overpayment, in either case together with interest at the
rate set forth in Section 31.8. If such inspection discloses that Tenant
has underpaid Operating Expenses, Tenant shall promptly pay Landlord the
amount of such underpayment.
6.8 If this Lease shall expire or otherwise terminate other than
on a December 31, Landlord may in its discretion make a special
determination of Tenant's Share of actual Operating Expenses for the
partial calendar year ending on the date of such expiration or other
termination, or may defer such determination until its usual
reconciliation of Operating Expenses for the Building for the entire
calendar year. The excess actual Tenant's Share for such partial
calendar year shall be paid to Landlord, or the excess estimated
Tenant's Share already paid by Tenant, as the case may be, shall be paid
by Tenant to Landlord or Landlord to Tenant, as the case may be, within
30 days of such determination.
6.9 Landlord shall have the same rights with respect to Tenant's
nonpayment of Tenant's Share of Operating Expenses as required under
this Lease as it has with respect to any other nonpayment of Rent under
this Lease.
7. Repair Responsibility.
7.1 Tenant accepts the Premises AS IS, and as being in good and
sanitary order, condition and repair and suitable for Tenant's intended
use, subject to Landlord's obligations to perform maintenance and repair
under Section 7.5 and to perform seismic upgrades, as described in
Section 3. Tenant shall, at its expense, keep, maintain and preserve the
Premises in good repair, subject to reasonable wear and tear, throughout
the Term, except to the extent this Lease specifically provides
otherwise.
7.2 Tenant shall also pay the cost of any separate heating,
ventilating, and air conditioning system (including computer chilling
equipment) that is exclusive to the computer room to be installed in the
Premises ("HVAC System"), including the cost of a maintenance firm
engaged by Tenant for such purpose.
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7.3 Tenant shall surrender the Premises to Landlord upon the
expiration or sooner termination of this Lease, in good condition and
repair, excluding ordinary wear and tear and damage by casualty or
destruction.
7.4 Subject to Section 3, Landlord shall have no obligation to
alter, remodel, improve, repair, decorate, or paint the Premises, or any
part thereof, in connection with the Initial Improvements. Tenant
affirms that Landlord has made no representations to Tenant about the
condition of the Premises or the Building, except as may be specifically
set forth in this Lease.
7.5 Notwithstanding the above, Landlord shall, at its expense,
repair and maintain the structural portions of the Building which shall
constitute the foundation, bearing and exterior walls, subflooring, and
roof and the plumbing, heating, ventilation, air conditioning, elevator,
and electrical systems serving the Premises (other than the HVAC system
serving, and the electrical systems within and specifically dedicated
to, the computer room). Landlord shall give reasonable advance written
notice to tenant of Landlord's repairs and significant maintenance work,
unless such notice is impractical under the circumstances. Any repair to
be done by Landlord to the Premises under this Lease shall be done
promptly (under the circumstances) after notice by Tenant. In carrying
out such repairs, and in performing the work under Section 3.1, Landlord
shall avoid unnecessary interference with Tenant's use of the Premises.
In the event of damage, destruction or condemnation of the Premises, the
Building or the Property, the provisions of Sections 13 and 14 shall
apply.
7.6 Except as otherwise set forth in this Lease, Tenant waives
the right to make repairs at Landlord's expense under any law, statute,
or ordinance now or hereafter in effect except for costs incurred in an
emergency to prevent imminent harm to life or property.
8. Common Areas.
8.1 Landlord shall maintain the Common Areas in good condition
at all times, the cost of which shall constitute an Operating Expense
except as otherwise provided in Section 6.3. Landlord shall have the
right to establish and enforce reasonable rules and regulations
applicable to all tenants concerning the maintenance, management, use,
and operation of the Common areas; and to make changes to the Common
Areas, including without limitation changes in the location of lobbies,
entrances, exits, vehicular parking spaces, parking areas, restrooms and
elevators, or the direction of the flow of traffic, provided that no
such changes shall impair Tenant's access to or use or enjoyment of the
Premises.
8.2 In this lease, "Common Areas," means all parts of the
Building and related land areas and facilities outside the Premises and
the premises leased or available for lease to other tenants, but
constituting a part of the Property, and the common plumbing, sewage,
electrical and telecommunications and data communications systems, pipes
conduits, wires and appurtenant equipment of the Building.
9. Utilities and Services.
9.1 Landlord shall cause to be furnished to the Premises the
following utilities and services, during generally recognized business
hours: electricity for normal lighting and office machines, heat and air
conditioning required in landlord's reasonable judgment in light of the
HVAC equipment existing in the building on the date hereof for the
comfortable use and occupation of the premises, and janitorial services.
Tenant acknowledges that the
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existing HVAC system in the Building is adequate for its needs outside
of the computer room, subject to Landlord's repair obligations under
Section 7. Business hours shall include 7:00 a.m. to 6:00 p.m. Monday
through Friday, and 8:00 a.m. to 1:00 p.m., Saturdays, but legal
holidays excluded. Computer chilling facilities and computer and
telecommunications cabling shall be Tenant's responsibility.
9.2 The provision and use of such utilities and services shall
be in accordance with any applicable rules and regulations under this
Lease. If Tenant requires or utilizes more water or electrical power
than is considered reasonable or normal by Landlord, and if such usage
is not separately metered, Landlord may at its option require Tenant to
pay, as Additional Rent, the cost, as fairly determined by Landlord,
incurred in such extraordinary usage. Landlord shall base any such extra
charges on the actual cost charged by the utility supplier. In addition,
Landlord shall install separate meters in accordance with Section 9.4.
9.3 At Tenant's request, Landlord shall furnish, at Tenant's
expense, heat and air conditioning as described in Section 9.1 outside
of generally recognized business hours, at rates charged by the utility
supplier, and to be paid by Tenant as billed by Landlord.
9.4 Electrical service shall be separately metered to the
Premises, and Tenant shall pay for such use in the same manner as Rent,
or shall pay the cost thereof directly to the service provider. Such
charges shall constitute Additional Rent hereunder.
9.5 Tenant shall have access to the Premises, together with all
utility service, 24 hours per day, 7 days per week. Landlord currently
provides Building security on working weekdays between 10:30 a.m. and
6:00 p.m. At Tenant's request, Landlord shall contract for Building
security service for additional times. The cost of such additional
security services shall be paid directly by Tenant or reimbursed to
Landlord, as Additional Rent. In addition, Tenant shall contract
directly for its own janitorial service.
9.5 In the event of any failure or interruption of utilities and
services for which Landlord is responsible, Landlord shall diligently
attempt to resume service promptly. Landlord understands that the
availability of continuous, 24-hour, year-round utility service is a
material inducement to Tenant entering into this Lease. If the utilities
or services that are required for Tenant's use and occupancy of the
Premises and are the responsibility of Landlord hereunder are
interrupted so that they are provided only intermittently or the
utilities or services altogether cease to be provided to the Premises
for any reason whatsoever, other than the fault of Tenant or causes
beyond the control of Landlord Identified In Section 10.1, for a period
of 72 consecutive hours, Tenant has the right to abate Base Rent from
the first day of the interruption until the interrupted utilities or
services are fully restored. Except as provided in the foregoing
sentence, Tenant shall not be entitled to any abatement or reduction of
Rent by reason of any failure or interruption of utilities or services,
no eviction of Tenant shall result from any such failure or
interruption, and Tenant shall not be relieved from the performance of
any obligation in this Lease because of such failure or interruption.
10. Limits on Landlord's Liability. Landlord's liability in
respect of its obligations under Sections 7, 8 and 9 to repair and
maintain portions of the Premises, Building and Common Areas and to
provide utilities and services (collectively, "Repair and Service
Obligations") is subject to the following limitations:
10.1 Landlord shall not be liable for any failure of Repair and
Service Obligations when such failure is caused by (i) third-party
strikes, lockouts or other labor disturbance or labor dispute of any
character, (ii) governmental regulation, moratorium or other
governmental action, (iii) inability despite the exercise of reasonable
diligence to obtain
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electricity, water or fuel from the providers thereof, (iv) acts of God
or (v) any other cause beyond Landlord's reasonable control.
10.2 Subject to Section 10.1 and 9.5, Landlord shall not be
liable for any failure of Repair and Service Obligations, unless such
failure shall persist for five days after written notice of the need of
such repairs or maintenance or of the interruption of services is given
to Landlord by Tenant, except in an emergency, in which event notice may
be telephonic and the five-day period shall be shortened to one day.
10.3 If maintenance and repairs to the Premises, Building or
Common Areas are caused in whole by the act, neglect, fault, or omission
of any duty by Tenant, its agents, servants, employees, or invitees,
Tenant shall pay to Landlord the costs of such maintenance and repairs,
unless such maintenance and repairs are covered by insurance for which
effective waivers of subrogation under this Lease are then in full force
and effect.
10.4 Except as specifically provided in this Lease, there shall
be no abatement of Rent in any circumstance under this Lease.
10.5 Landlord's maintenance and repairs shall be accomplished
with the least possible amount of interference with the conduct of
Tenant's business and, to the extent practicable, shall be done after
normal business hours. Unless otherwise agreed, all maintenance or
repair work to be performed by Landlord under this Lease shall be
completed promptly but in any event within 24 hours in any emergency (as
defined below) and within 30 days for all other repairs. If the work
cannot be completed within 24 hours or 30 days, as the case may be, it
shall be commenced within the applicable period and prosecuted
continuously and diligently thereafter until completion. "Emergency"
means a situation that (i) threatens the physical well-being of persons
within the Premises, or (ii) materially disrupts the Tenant's use and/or
occupancy of the Premises or any portion thereof.
10.6 Without limiting the generality of this Section, in no
event shall Landlord have any liability for consequential damages
resulting from any act or omission of Landlord in respect of its Repair
and Service Obligations, even if Landlord has been advised of the
possibility of such consequential damages.
11. Alterations and Additions by Tenant. With the prior written
consent of Landlord, Tenant may make at its expense additional improvements or
alterations to the Premises, beyond the Initial Improvements. Any repairs or new
construction by Tenant shall be done in conformity with plans and specifications
approved by Landlord and in conformity with all laws and legal requirements, by
contractors approved by Landlord, and subject to Landlord's reasonable rules and
regulations regarding such construction. All work performed shall be done
lien-free In a workmanlike manner. Landlord may require that Tenant provide to
Landlord, at Tenant's expense, a lien and completion bond in an amount equal to
150% of the estimated cost of any improvements, additions, or alterations in
the Premises. Landlord shall not unreasonably withhold its consent to Tenant's
proposed alterations or improvements if the conditions of this Section 11 are
satisfied. Landlord may, if it so notifies Tenant of the time of initial
consent, require Tenant to remove any improvements or alterations made under
this Section 11 at the expiration or termination of the Term, such removal to
occur at Tenant's expense; and Tenant shall repair all damage to the Premises or
Building occurring as a result of such removal. In the event Tenant fails to
remove any improvements or alterations as required by Landlord or repair any
damage occurring during such removal, Landlord shall be entitled to remove any
improvements or alterations or make such repairs, at Tenant's expense, and shall
further be entitled to draw upon the Deposit. Any approval of Landlord required
under this Section shall not be unreasonably withheld, conditioned or delayed;
provided, however, that If Landlord does not respond to a request for consent
within ten (10) days,
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such consent shall be deemed given. in addition, and notwithstanding anything to
the contrary herein, Tenant may, without Landlord's prior written consent, but
in conformity with all laws and legal requirements and subject to the other
requirements of this Section 11, make alterations in and to the Premises which
consist of data and telephone cabling and wiring, decorations, interior painting
and nonstructural alterations that do not affect Building systems.
12. Insurance; Indemnity.
12.1 Landlord shall not be liable to Tenant, and Tenant hereby
waives all claims against Landlord, for injury or damage to any person
or property in or about the Premises, Building, Property or Common Areas
by or from any cause whatsoever, including without limitation any acts
or omissions of any other tenants, licensees or invitees of the
Building.
12.2 Tenant shall indemnify and defend (using legal counsel
acceptable to Landlord) Landlord and hold Landlord harmless, from and
against any and all loss, cost, damage, liability and expense (including
reasonable attorneys' fees) whatsoever that may arise out of or in
connection with Tenant's occupation, use or improvement of the Premises
or the Building (including without limitation Tenant's access rights
under Section 35 below), or that of its employees, agents, contractors,
or invitees, or Tenant's breach of its obligations under this Lease. To
the extent necessary to fully indemnify Landlord from claims made by
Tenant or its employees, this indemnity constitutes a waiver, as between
Landlord and Tenant only, of Tenant's immunity, if any, under the
Washington Industrial Insurance Act, RCW Title 51. This indemnity shall
survive the expiration or termination of the Term.
12.3 The foregoing exculpation, release and indemnity provisions
shall not apply to the extent the subject claims thereunder were caused
by Landlord's negligence or willful misconduct or by Landlord's failure
to perform its obligations under this Lease. Landlord shall indemnify
and defend (using legal counsel acceptable to Tenant) Tenant and hold
harmless Tenant from claims, suits, actions, or liabilities for personal
injury, death or for loss or damage to property that arises from the
negligence or willful misconduct of Landlord, its employees, agents or
contractors; or from any breach or default by Landlord in the
performance of any of Landlord's obligations under this Lease. However,
in no event shall Landlord have any liability to Tenant for
consequential damages under this lease.
12.4 Tenant shall procure and maintain throughout the Term at
Tenant's expense, the following insurance:
12.4.1 Commercial general public liability insurance,
insuring Tenant against liability arising out of the Lease and
the use, occupancy, or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be in the amount of
not less than $2,500,000 combined single limit for injury to or
death of one or more persons in an occurrence, and for damage to
tangible property (including loss of use) in an occurrence. Such
policy shall insure the operations of independent contractors
and contractual liability (covering the indemnity in Section
12.2) and shall: (i) name Landlord as an additional insured,
(ii) provide a waiver of subrogation endorsements with respect
to Landlord, and (iii) provide that it is primary and
noncontributing with any insurance in force or on behalf of
Landlord.
12.4.2 Standard form property insurance insuring against the
perils of fire, extended coverage, vandalism, malicious
mischief, special extended coverage ("All-Risk") and sprinkler
leakage. This insurance policy shall be upon all personal
property for which Tenant is legally liable or that was
installed at Tenant's expense, and that is located in the
Building or Premises, including without limitation
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the Initial Improvements and all Tenant's furnishings, fixtures,
furniture, fittings, and equipment and all improvements to the
Premises installed by Tenant, in an amount not less than 90% of
the full replacement cost thereof. Such policy shall also
include business interruption coverage, covering direct or
indirect loss of Tenant's earnings attributable to Tenant's
inability to use fully or obtain access to the Premises or
Building, in an amount as will properly reimburse Tenant. Such
policy shall name Landlord and any mortgagees of Landlord as
additional insured parties, as their respective interests may
appear.
12.4.3 Workman's Compensation and Employer's Liability
Insurance (as required by state law).
12.5 All policies of insurance to be obtained by Tenant
hereunder shall be in a form satisfactory to Landlord and shall be
issued by insurance companies holding a General Policyholder Rating of
"A-" and a Financial Rating of "VII" or better in the most current issue
of Best's Insurance Guide. Tenant shall provide Landlord with
certificates of such insurance. No such policy shall be cancelable or
reducible in coverage except after 30 days' prior written notice to
Landlord. Tenant shall, within ten days prior to the expiration of such
policies, furnish Landlord with renewals or "binders" thereof, or
Landlord may order such insurance and charge the cost thereof to Tenant
as Additional Rent.
12.6 Landlord shall maintain liability and casualty insurance
for the Building and Property adequate in Landlord's judgment to cover
(with commercially reasonable deductibles) the risks customarily insured
against by owners of properties similar to the Building.
12.7 The proceeds of any insurance policies maintained by or for
the benefit of Landlord shall belong to and be paid over to Landlord.
Any interest or right of Tenant in any such proceeds shall be subject to
Landlord's interest and right in such proceeds.
12.8 Anything in this Lease to the contrary notwithstanding,
Tenant and Landlord each waives its entire right of recovery, claims,
actions, or causes of action against the other for loss or damage to the
Premises, Building, or Property or any personal property of such party
therein that is caused by or incident to the perils covered by normal
extended coverage clauses of standard fire insurance policies carried by
the waiving party and in force at the time of damage or loss. Tenant and
Landlord each waives any right of subrogation it may have against the
other party to the extent of recovery under any such insurance, and
shall cause each insurance policy obtained by it to provide that the
insurance company waives all right to recovery by way of subrogation
against the other party in connection with any such loss or damage. If
either Landlord or Tenant is unable to obtain its insurer's permission
to waive any claim against the other party, such party shall promptly
notify the other party of such inability.
12.9 Tenant shall promptly notify Landlord of any casualty or
accident occurring in or about the Premises.
13. Destruction.
13.1 If the Premises or the Building is destroyed by fire,
earthquake, or other casualty to the extent that they are untenantable
in whole or in part and can be rebuilt and restored within 180 days from
the date of destruction, then Landlord shall have the right but not the
obligation to proceed with reasonable diligence to rebuild and restore
the Premises or the Building or such part thereof. In the event of
partial destruction of the Building and/or the Premises, to an extent
not exceeding 25% of the full insurable value
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thereof, and if the damage thereto is such that the Building and/or the
Premises may be repaired, reconstructed or restored within a period of
90 days from the date of such casualty, and if Landlord will receive
insurance proceeds sufficient to cover the cost of such repairs and if
Landlord's lender has not required the application of insurance proceeds
to any indebtedness, the repayment of which is secured by the Property,
then Landlord shall commence and proceed diligently with the work of
repair, reconstruction and restoration and this Lease shall continue in
full force and effect.
13.2 Landlord shall within 30 days after such destruction or
injury notify Tenant whether Landlord intends to rebuild. If Landlord
notifies Tenant that Landlord does not intend to rebuild, this Lease
shall terminate upon the date of damage. If repair, reconstruction or
restoration of the Premises cannot be completed within 180 days after
the date of the damage, or if such work is commenced and is not, for any
reason whatsoever, completed within 270 days, then Tenant may, at its
option, terminate this Lease by written notice to Landlord within 20
days after Landlord's notice of its intent to rebuild or 20 days after
expiration of the 270 day period, as the case may be.
13.3 During the period from destruction or damage until
restoration (or termination of this Lease), Rent shall be abated in the
same ratio as that portion of the Premises which is unfit for occupancy
shall bear to the whole Premises.
13.4 Landlord shall not be required to repair any injury or
damage by fire or other cause to, or to make any repairs or replacements
of any panels, decoration, office fixtures, paintings, floor covering,
or any other improvements to the Premises installed by Tenant. Instead,
if Landlord repairs or rebuilds the Premises under this Section 13,
Tenant shall repair or rebuild such Tenant-installed improvements and
other items of property
13.5 Tenant shall not be entitled to any compensation or damages
from Landlord for loss of the use of the whole or any part of the
Premises, the property of Tenant, or any inconvenience or annoyance
occasioned by such damage, repair, reconstruction, or restoration.
14. Condemnation.
14.1 If all or part of the Premises are taken under power of
eminent domain, or sold under the threat of the exercise of said power,
this Lease shall terminate as to the part so taken as of the date the
condemning authority takes possession.
14.2 If more then 25% of the floor area of Premises is taken by
condemnation, Landlord or Tenant may, by written notice to the other
within ten days after notice of such taking, terminate this Lease as to
the remainder of the Premises as of the date the condemning authority
takes possession or Tenant is dispossessed of the Premises, whichever is
earlier.
14.3 If Landlord or Tenant does not so terminate, this Lease
shall remain in effect as to such remainder, except that the Rent shall
be reduced in the proportion that the rentable floor area taken bears to
the original rentable total floor area. However, if circumstances make
abatement based on floor area unreasonable, the Rent shall abate by a
reasonable amount to be determined by Landlord. In the event that
neither Landlord nor Tenant elects to terminate this Lease, Landlord's
responsibility to restore the remainder of the Premises shall be limited
to the amount of any condemnation award allocable to the Premises, as
reasonably determined by Landlord.
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14.4 Any award for the taking of all or part of the Premises
under the power of eminent domain, including payment made under threat
of the exercise of such power, shall be the property of Landlord,
whether made as compensation for diminution in value of the leasehold or
for the taking of the fee or as severance damages. Tenant shall only be
entitled to such compensation as may be separately awarded or
recoverable by Tenant in Tenant's own right for the loss of or damage to
improvements to the Premises installed by Tenant, Tenant's trade
fixtures and removable personal property. Landlord shall not be liable
to Tenant for the loss of the use of all or any part of the Premises
taken by condemnation.
14.5 Landlord shall have the exclusive authority to grant
possession and use to the condemning authority and to negotiate and
settle all issues of just compensation or, in the alternative, to
conduct litigation concerning such issues; provided, however, that
Landlord shall not enter into any settlement of any separate award that
may be made to Tenant as described above without Tenant's prior approval
of such settlement, which approval shall not be unreasonably withheld.
15. Assignment and Subletting.
15.1 Tenant shall not assign this Lease, or sublet the Premises
or any part thereof, either by operation of law or otherwise, or permit
any other party to occupy all or any part of the Premises, without first
obtaining the written consent of Landlord. Landlord shall not
unreasonably withhold its consent to any assignment or sublease proposed
by Tenant in accordance with this Section. Tenant shall propose such
assignment or sublease by written notice to Landlord, and such notice
shall specify an effective date which shall be not less than 30 days
after the date of such notice. This Lease shall not be assignable by
operation of law. Tenant shall further provide to Landlord other
information and creditworthiness materials concerning any proposed
assignee or sublessee as is reasonably requested by Landlord. Any
consent required by Landlord under this Section shall not be
unreasonably withheld, conditioned or delayed.
15.2 Subject to Section 15.5, if Tenant is a corporation, any
transfer of this Lease from Tenant by merger, consolidation, or
liquidation, or any change in the ownership of or power to vote 50% or
more of the outstanding voting stock of Tenant shall constitute an
assignment under this Lease. If Tenant Is a partnership or limited
liability company, any change In the Identity or majority ownership of
partners or members in Tenant serving as general partner or manager or
owning 50% or more of the outstanding economic interests in such entity
shall constitute an assignment under this Lease.
15.3 If Tenant proposes to sublet the entire Premises, Landlord
shall, except as set forth in Section 15.5, have the right to recapture
the Premises. Landlord may exercise such right by notice to Tenant
within 10 days after receipt of Tenant's notice. Such recapture shall
terminate this Lease as to the applicable portion of the Premises
effective on the effective date proposed in Tenant's notice.
15.4 If Landlord elects not to recapture and thereafter elects
to gives its consent to the proposed assignment or sublease, (i)
Landlord may charge Tenant a reasonable sum to reimburse Landlord for
legal and administrative costs incurred in connection with such consent
not to exceed $1,500 in any instance; (ii) In the event of a sublease,
Landlord and Tenant shall share equally in any net rent and other net
proceeds paid to Tenant in excess of the Rent to be paid to Landlord
under this Lease; and (iii) in the event of an assignment or a sublease,
Tenant shall remain liable to Landlord for the performance of all of
Tenant's obligations under this Lease.
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15.5 Notwithstanding any other provision of this Section 15,
Tenant shall be entitled to assign this Lease or sublease all or any
portion of the Premises to any subsidiary of Tenant or to any affiliate
of Tenant (as defined in the Securities Act of 1933), without the prior
consent of Landlord; provided, however, that Tenant shall notify
Landlord of any such assignment or sublease as soon as practicable, and
no such assignment or sublease shall relieve Tenant of its obligations
under this Lease. Notwithstanding any other provision of this Section
15, Landlord hereby consents to an assignment of this Lease, or a
subletting of all or part of the Premises, to (a) any corporation in
whom or with which Tenant may be merged or consolidated, provided that
the net worth of the resulting corporation is at least equal to (i) the
net worth of Tenant on the date hereof, or (ii) the net worth of Tenant
immediately prior to such merger or consolidation, or (b) any entity to
whom Tenant sells all or substantially all of its assets, provided that
such entity expressly assumes all of Tenant's obligations hereunder.
Landlord acknowledges that Tenant is a publicly-owned corporation, and
Landlord agrees that, notwithstanding anything to the contrary in this
Lease, any sales, exchanges or other transfers of stock in Tenant shall
not constitute an assignment of this Lease or require Landlord's
consent.
15.6 In the event of any sale of the Building or Property, or
any assignment of this Lease by Landlord, Landlord shall be relieved of
all liability under this Lease arising out of any act, occurrence, or
omission occurring after sale or assignment provided that Landlord shall
be relieved of liability for the security deposit only if Landlord
transfers the security deposit; and the purchaser or assignee at such
sale or assignment or any subsequent sale or assignment of Lease, the
Property, or Building, shall be deemed without any further agreement to
have assumed all of the obligations of the Landlord under this Lease
accruing after the date of such sale or assignment.
15.7 Subject to the provisions of this Section, this Lease shall
be binding upon and inure to the benefit of the parties, their heirs,
successors and assigns.
16. Default.
16.1 The occurrence of any one or more of the following events
shall constitute a material default and breach of the Lease by Tenant
("Default"):
16.1.1 failure by Tenant to make any payment of Rent
required as and when due, where such failure shall continue
after receipt of five days' written notice from Landlord;
16.1.2 failure by Tenant to observe or perform any of the
covenants, conditions, or provisions of this Lease, other than
the payment of Rent, where such failure shall continue after 30
days' written notice from Landlord provided, however, that if
the nature of Tenant's obligation is such that more than 30 days
are required for performance, Tenant shall not be in default if
Tenant commences performance within 30 days after Landlord's
notice and thereafter completes such performance diligently and
within a reasonable time; or
16.1.3 (i) the making by Tenant of any general assignment or
general arrangement for the benefit of creditors; (ii) the
filing by or against Tenant of a petition in bankruptcy,
including reorganization or arrangement, unless, in the case of
a petition filed against Tenant, the same is dismissed within 30
days; (iii) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at
the Premises or of Tenant's interest in this Lease; (iv) the
seizure by any department of any government or any officer
thereof of the business or property of Tenant; and (v)
adjudication that Tenant is bankrupt.
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16.2 Tenant shall notify Landlord promptly of any Default by
Tenant (or event or occurrence which, with the passage of time, the
giving of notice, or both, would become a Default) that by its nature is
not necessarily known to Landlord.
16.3 Landlord shall be in Default if it fails to observe or
perform any of the covenants, conditions, or provisions of this Lease,
where such failure shall continue after 30 days' written notice from
Tenant; provided, however, that if the nature of Landlord's obligation
is such that more than 30 days are required for performance, Landlord
shall not be in Default if Landlord commences performance within 30 days
after Tenant's notice and thereafter completes such performance
diligently and within a reasonable time. Tenant shall copy Landlord's
lender with any such notice of default, if Tenant has been provided with
the name and address of any such lender.
16.4 Notwithstanding any provisions in this Lease to the
contrary, if Landlord is in Default under this Lease, Tenant may,
without waiving any claim for damages for breach of agreement or any
other rights or remedies it may have under this Lease at law, at any
time thereafter do any of the following, if applicable under the
circumstances:
(a) Cure the Default for the account of the Landlord, and
any amount reasonably paid or any contractual liability
reasonably incurred by Tenant in so doing shall be deemed paid
or incurred for the account of Landlord, and Landlord shall
reimburse Tenant on demand.
(b) Abate Rent for the portion(s) of the Premises rendered
unusable for Tenant's purposes.
(c) Terminate this Lease if Tenant's use and occupancy of
the Premises or a material portion thereof are prevented or made
dangerous.
(d) If the obligations of Landlord under this Lease are not
performed during the pendency of a bankruptcy or insolvency
proceeding involving the Landlord as the debtor, or following
the rejection of this Lease in accordance with Section 365 of
the United States Bankruptcy Code and the election of Tenant to
remain in possession of the Premises in a bankruptcy or
insolvency proceeding involving the Landlord as the debtor, to
set off against Rent next due and owing under this Lease (i) any
and all damages that it demonstrates to the Bankruptcy Code were
caused by nonperformance of the Landlord's obligations under
this Lease by Landlord, debtor-in-possession, or the bankruptcy
trustee, and (ii) any and all damages caused by the
nonperformance of Landlord's obligations under this Lease
following any rejection of this Lease in accordance with Section
365 of the United States Bankruptcy Code.
Except as specifically provided otherwise above, in no event
shall a default by Landlord under this Lease give rise to any right of
Tenant to terminate this Lease or withhold or offset the payment of Base
Rent or Additional Rent. The obligations of Tenant to pay Base Rent and
Additional Rent shall continue unaffected in all events unless suspended
or terminated pursuant to an express provision of this Lease.
17. Remedies in Default.
17.1 In the event of any Default by Tenant, Landlord may, at any
time without waiving or limiting any other right or remedy, do any one
or more of the following: (i) reenter and take possession of the
Premises, (ii) pursue any remedy allowed by law or equity,
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<PAGE> 17
(iii) terminate this Lease and/or (iv) terminate any options to extend
the Term, if then exercised.
17.2 Whether Landlord has elected to terminate this Lease or not
Tenant shall pay Landlord the cost of recovering possession of the
Premises, the expenses of reletting, and any other costs or damages
arising out of Tenant's Default, including without limitation the costs
of removing persons and property from the Premises, the costs of
preparing or altering the Premises for reletting, broker's commissions,
and attorneys' fees.
17.3 No re-entry or taking possession of the Premises by
Landlord pursuant to this Section or acceptance of Tenant's keys to or
surrender of the Premises shall be construed as an election to terminate
this Lease unless a written notice of such intention is given to Tenant,
17.4 Notwithstanding any reentry or termination, the liability
of Tenant for the Rent shall continue for the balance of the Term, and
Tenant shall make good to Landlord any deficiency arising from reletting
the Premises at a lesser rent than the Rent provided for in this Lease.
Tenant shall pay such deficiency each month as the amount thereof is
ascertained by Landlord, provided that Landlord is obligated to exercise
reasonable efforts to mitigate its damages by reletting the Premises,
and Tenant's liability shall be limited to the amount of rent that could
not reasonably have been achieved even if Landlord had mitigated its
damages by reletting the Premises.
18. Access. Landlord acknowledges that the Premises will be a high
security area for Tenant, and that any access to the Premises by Landlord or its
invitees for any purposes under this Lease shall be permitted by Tenant only
after at least twenty-four (24) hour notice (which may be telephonic) from
Landlord (except in the event of an emergency, in which event Landlord shall
endeavor to give advance telephonic notice) and shall be conducted only in the
presence of an escort or employee which shall be provided by Tenant. Landlord
shall also comply with reasonable sign-in procedures and shall provide the name,
affiliation and business purpose of each such visit by Landlord or its invitees.
Landlord may also show the Premises to prospective purchasers or tenants at
reasonable times, provided that Landlord shall not interfere with Tenant's
business operation, provided that Landlord shall cause such persons to comply
with the security measures described above, and Landlord shall identify such
persons by name and affiliation in its notice to Tenant. In the event Tenant
objects to the identity of such person on the basis that it is a direct or
indirect competitor of Tenant, such person shall not have access to the
Premises. Tenant may also require Landlord and any such prospective visitor,
tenant or purchaser to execute a commercially reasonable confidentiality
agreement as a condition of access.
19. Hold-Over Tenancy. If without execution of a new Lease or
written extension Tenant shall hold over after the expiration or termination of
the Term, with Landlord's written consent, Tenant shall be deemed to be
occupying the Premises as a Tenant from month to month, which tenancy may be
terminated as provided by law, unless the parties agree otherwise at the time of
Landlord's consent. If Tenant shall hold over after expiration or termination of
the Term without Landlord's written consent, the Base Monthly Rent payable shall
be 150% of the Base Monthly Rent payable in the last month prior to expiration
or termination of the Term, and Tenant shall continue to pay Additional Rent.
During any such tenancy, Tenant shall continue to be bound by all of the terms,
covenants, and conditions of this Lease, insofar as applicable.
20. Compliance with Law. Tenant shall not use the Premises or permit
anything to be done in or about the Premises which will in any way conflict with
any applicable law, statute, ordinance, or governmental rule or regulation and
any restrictive covenants and obligations created by private contracts which
affect the use and operation of the Premises, Building, or Property, now or
hereafter in force ("Laws"). Landlord represents and warrants to Tenant that (a)
any such
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restrictive covenants and obligations created by private contracts are not
inconsistent with, and do not adversely affect, this Lease, and (b) as of the
date of execution of this Lease, to Landlord's knowledge, the Premises and
Building comply with all laws and can be legally occupied by Tenant for the uses
permitted hereunder. In its use, occupancy and alteration of the Premises,
Tenant shall at its sole cost and expense promptly comply with all Laws,
including without limitation the Americans with Disabilities Act, and with the
requirements of any board of fire insurance underwriters or other similar bodies
now or hereafter constituted, relating to, or affecting the use or occupancy of
the Premises. The judgment of any court of competent jurisdiction, or the
admission of Tenant in any action, whether Landlord be a party thereto or not,
that Tenant has violated any Laws, shall be conclusive of the fact as between
Landlord and Tenant.
21. Rules and Regulations. Tenant shall faithfully observe and
comply with the reasonable rules and regulations that Landlord shall from time
to time promulgate. Landlord reserves the right from time to time to make all
reasonable modifications to such rules and regulations. Additions and
modifications to rules and regulations shall be binding on Tenant 30 days after
delivery of a copy of them to Tenant. Landlord shall not be responsible to
Tenant for the nonperformance of any rules or regulations by any other tenants
or occupants of the Building.
22. Parking. Tenant shall have the right to use, in common with
other tenants and occupants of the Building, one parking stall per entire
multiple of 2,000 rsf then occupied by Tenant (other than storage space), in the
parking facility located within the Building. The parking facility shall be
available for use by all tenants of the Building, their guests and invitees, but
may, at Landlord's election, be designated by Landlord. Tenant shall pay, as
Additional Rent, the market rate charges that Landlord that may establish or
alter for such parking facilities from time to time, for the number of spaces
allocable to Tenant, except to the extent Tenant has agreed to reduce the number
of parking stalls allocated to Tenant by notice to Landlord. As of the date of
this Lease, the monthly parking rate is $180.00.
23. Estoppel Certificates. Tenant shall execute, within 20 days
following Landlord's request, a certificate in such reasonable form as may be
required by Landlord or a prospective purchaser, mortgagee or trust deed
beneficiary, or Landlord's successor after a sale or foreclosure, certifying:
(i) the Commencement Date of this Lease, (ii) that the Lease is unmodified and
in full force and effect, (or if there have been modifications hereto, that this
Lease is in full force and effect, and stating the date and nature of such
modifications); (iii) that there have been no current defaults under this Lease
by either Landlord or Tenant except as specified in Tenant's statement, (iv) the
dates to which the Base Monthly Rent, Additional Rent and other charges have
been paid, and (v) any other information reasonably requested by the requesting
party. Such certificate may be relied upon by Landlord and/or such other
requesting party. Tenant shall use diligent efforts to deliver said statement
promptly upon request and shall deliver such statement within 20 days of
request. In any event, Tenant's failure to deliver said statement within 20 days
of request, shall constitute Tenant's admission of the facts as stated in the
proposed certificate.
24. Subordination. Landlord represents and warrants to Tenant that
it is the sole owner in fee simple of the Building, subject to a deed of trust
in favor of Washington Mutual Bank and various other exceptions (but no other
liens or encumbrances for borrowed money). Tenant agrees that this Lease shall
be subordinate to the lien of any mortgage, deeds of trust, or ground leases now
or hereafter placed against the Property or Building, and to all renewals and
modifications, supplements, consolidations, and extensions thereof.
Notwithstanding the foregoing, Landlord reserves the right, however, to
subordinate or cause to be subordinated any such mortgage, deed of trust or
ground lease to this Lease. Tenant shall have the continued quiet enjoyment of
the Premises free from any disturbance or interruption by any successor to
Landlord's interest existing or first mortgagee or beneficiary of a deed of
trust, or any purchaser at a foreclosure or private sale of the Property as a
result of Landlord's default under such mortgage or deed of trust, so long as
Tenant performs its obligations under this Lease. Upon a foreclosure or
conveyance in lieu of
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foreclosure under such mortgage or deed of trust, or a termination of such
ground lease, and a demand by Landlord's successor, Tenant shall attorn to and
recognize such successor as Landlord under this Lease. Tenant shall execute and
deliver on request and in the form reasonably requested from time to time by
Landlord or its successor, any instruments reasonably necessary or appropriate
to evidence, effect or confirm such subordination, provided that such
instruments confirm that Tenant's right to quiet enjoyment of the Premises in
accordance with the provisions of this Lease shall not be disturbed. Should
Tenant fail to sign and return any such documents within 10 business days of
request, Tenant shall be in Default. Notwithstanding the foregoing, Landlord
agrees to use diligent efforts to obtain for Tenant's benefit a commercially
reasonable subordination, non-disturbance and attainment agreement from
Washington Mutual Bank within 15 days after mutual execution of this Lease.
25. Removal of Property. On expiration or other termination
of this Lease, Tenant shall remove (i) all personal property of Tenant on the
Premises, including without limitation all Tenant's furnishings, fixtures,
furniture, fittings, data cabling, data wiring and equipment and those items
designated as Tenant's property in the schedule provided for under Section 3 or
as otherwise provided in Section 3.3; (ii) all improvements to the Premises
installed by or at the expense of Tenant other than such improvements as have
become the property of Landlord under this Lease; and (iii) at Landlord's
request, made at the time of initial consent, all non-standard or specialty
improvements made to the Premises by Landlord or Tenant (other than the
electrical vault and the structural frame on the roof for the generator and
computer room HVAC system). Tenant shall repair or reimburse Landlord for the
cost of repairing any damage to the Premises resulting from the installation or
removal of such property of Tenant. All property of Tenant remaining on the
Premises after reentry or termination of this Lease shall be deemed abandoned
and may be removed by Landlord. Landlord may store such property of Tenant in
any place selected by Landlord, including but not limited to a public warehouse,
at the expense and risk of the owner thereof, with the right to sell such stored
property of Tenant without notice to Tenant. The proceeds of such sale shall be
applied first to the cost of such sale, second to the payment of the cost of
removal and storage, if any, and third to the payment of any other amounts that
may then be due from Tenant to Landlord under this Lease, and any balance shall
be paid to Tenant.
26. Personal Property Taxes. Tenant shall pay prior to
delinquency all personal property taxes, if any, payable with respect to all
property of Tenant located on the Premises or the Building and promptly upon
request of Landlord shall provide satisfactory evidence of such payment.
"Personal property taxes" under this Section shall include all property taxes
assessed against the property of Tenant, whether assessed as real or personal
property.
27. Notices. All notices under this Lease shall be in
writing. Notices shall be effective (i) 3 business days after mailed by
certified mail, return receipt requested or(ii) when personally delivered
(including without limitation by messenger service). Either party may change its
address and fax number for notices by notice to the other from time to time. The
parties' addresses for notices are as follows:
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Landlord Tenant
1 100 Second Avenue Limited Partnership Amazon.com, Inc.
c/o Second Avenue Properties, Inc. 1516 Second Avenue, 4th Floor
Attn: Robert A. Hubbard Seattle, Washington 98101
3533 262nd Ave. S.E. Attn: General Counsel
Issaquah, Washington 98029 fax:__________________________
fax: 206-391-2453
with a copy to: with a copy to:
Phillips McCullough Wilson Hill & Fikso Perkins Coie
Attn: Robert B. Fikso Attn: William L. Green
2025 First Avenue, Suite 1130 1201 Third Avenue, 40' Floor
Seattle, Washington 98121-2100 Seattle, Washington 98101
fax: 206-448-3444 fax: 206-583-8500
28. [Intentionally Omitted.]
29. Hazardous Substances.
29.1 Tenant shall not, without first obtaining Landlord's prior
written approval, generate, release, store, deposit, transport, or
dispose of (collectively "Release") any hazardous substances, sewage,
petroleum products, hazardous materials, toxic substances or any
pollutants or substances, defined as hazardous or toxic in applicable
federal, state and local laws and regulations ("Hazardous Substances")
in, on or about the Premises, except for normal quantities of customary
office products used as intended by the manufacturer (including, but not
limited to, diesel fuel for the emergency generator) and in compliance
with Laws. In the event, and only in the event, Landlord approves such
Release of Hazardous Substances on the Premises, such Release shall
occur safely and in compliance with all applicable Laws.
29.2 Tenant shall indemnify and defend (with counsel approved by
Landlord) Landlord, and hold Landlord harmless, from and against any and
all claims, liabilities, losses, damages, cleanup costs, and expenses
(including reasonable attorneys' fees) arising out of or in any way
relating to the Release by Tenant or any of its agents, representatives,
employees or invitees, or the presence of any Hazardous Substances in,
on or about the Premises occurring as a result of or in connection with
Tenant's use or occupancy of the Premises at any time after the
Commencement Date.
Landlord shall indemnify and defend (with counsel approved by Tenant)
Tenant, and hold Tenant harmless, from and against any and all claims,
liabilities, losses, damages, cleanup costs, and expenses (including
reasonable attorneys' fees) arising out of or in any way relating to the
Release by Landlord or any of its agents, representatives, employees or
invitees, or the presence on the date hereof of any Hazardous Substances
in, on or about the Premises or the Building.
29.3 Landlord shall have the right, subject to Section 18, from
time to time to enter the Premises, Building and Property and inspect
the same for the presence of Hazardous Substances and compliance with
the provisions of this Section upon a reasonable suspicion by Landlord
that there may be Hazardous Substances in the Premises in violation of
Tenant's obligations under this Lease.
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29.4 The provisions of this Section shall survive the expiration
or termination of this Lease with respect to any occurrences during the
Term.
30. Signs. Tenant shall not place upon or install in windows or
other openings or exterior sides of doors or walls of the Premises any symbols,
drapes, or other materials without the written consent of Landlord. Tenant shall
observe and comply with the requirements of all Laws applicable to signage.
31. General Provisions.
31.1 Attorneys' Fees. In the event of any litigation,
arbitration or other proceeding (including proceedings in bankruptcy and
probate and on appeal) brought to enforce or interpret or other wise
arising under this Lease, the substantially prevailing party therein
shall be entitled to the award of its reasonable attorneys' fees,
witness fees, and court costs incurred therein and in preparation
therefor.
31.2 Governing Law. This Lease shall be governed by and
construed in accordance with the laws of the State of Washington.
31.3 Cumulative Remedies. No remedy or election under this Lease
shall be deemed exclusive but shall, wherever possible, be cumulative
with all other remedies at law or in equity.
31.4 Exhibits; Addenda. Exhibits and Addenda, if any, affixed to
this Lease are a part of and incorporated into this Lease.
31.5 Interpretation. This Lease has been submitted to the
scrutiny of all parties hereto and their counsel, if desired, and shall
be given a fair and reasonable interpretation in accordance with the
words hereof, without consideration or weight being given to its having
been drafted by any party hereto or its counsel.
31.6 Joint Obligation. If there is more than one Tenant under
this Lease, the obligations hereunder imposed upon Tenants shall be
joint and several.
31.7 Keys. Upon expiration or termination of this Lease, Tenant
shall surrender all keys to the Premises to Landlord at the place then
fixed for payment of Rent and shall inform Landlord of all combination
locks, safes, and vaults, if any, in the Premises.
31.8 Late Charges; Interest. Late payment (i.e., payment not
made within 5 days after its due date) by Tenant to Landlord of Rent or
other sums due under this Lease will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which would be difficult
and impractical to ascertain. Such costs include without limitation
processing and accounting charges and late charges which may be imposed
on Landlord by the terms of any mortgage or trust deed covering the
Premises. Accordingly, Tenant shall pay to Landlord as Additional Rent a
late charge equal to three percent of such installment as liquidated
damages for such late payment, other than for time value damages. A
$50.00 charge will be paid by Tenant to Landlord for each returned
check. In addition, any Rent or other sums due under this Lease to
Landlord that is not paid when due shall bear interest at the rate per
annum of two percent over the prime rate in effect at Seafirst Bank,
Main Office (or its successor), on the day such Rent or other sum was
due. The existence or payment of charges and interest under this Section
shall not cure or limit Landlord's remedies for any Default under this
Lease.
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31.9 Light, Air, and View. Landlord does not guarantee the
continued present status of light, air, or view in, to or from the
Premises.
31.10 Measurements. All measurements of the Premises stated in
this Lease, even if approximations, shall govern and control over any
actual measurement of the Premises. Except as provided otherwise in
Section 1, the Rent provided in this Lease and Tenant's Share shall not
be modified or changed by reason of any measurement or re-measurement of
the Premises that may occur after the date of this Lease, and is agreed
by Landlord and Tenant to constitute the negotiated rent for the
Premises.
31.11 Name. Tenant shall not use the name of the Building for
any purpose other than as an address of the business conducted by the
Tenant in the Premises.
31.12 Prior Agreements; Amendments. This Lease contains all of
the agreements of the parties with respect to any matter covered or
mentioned in this Lease, and no prior agreements or understandings
pertaining to any such matters shall be effective for any purpose. No
provision of this Lease may be amended or added to except by an
agreement in writing signed by the parties or their respective
successors in interest. This Lease shall not be effective or binding on
any party until fully executed by both parties hereto.
31.13 Recordation. Tenant shall not record this Lease or a short
form memorandum of this Lease without the prior written consent of
Landlord which shall not be unreasonably withheld.
31.14 Severability. That any provision of this Lease is invalid,
void, or illegal shall in no way affect, impair, or invalidate any other
provision of this Lease and such other provision shall remain in full
force and effect.
31.15 Time. Time is of the essence of this Lease and each of its
provisions.
31.16 Waiver. No provision of this Lease shall be deemed to have
been waived by Landlord unless such waiver is in writing signed by
Landlord's duly authorized representatives. The waiver by either party
of any provision of this Lease shall not be deemed to be a waiver of
such provision or any other provision, in any subsequent instance. The
acceptance of Rent by Landlord shall not be deemed to be a waiver of any
preceding Default or breach by Tenant under this Lease, whether known or
unknown to Landlord, other than the failure of the Tenant to pay the
particular Rent so accepted.
31.17 No Waste. Tenant shall not commit or suffer to be
committed any waste, damage or nuisance in or upon the Premises.
31.18 Quiet Enjoyment. Provided Tenant observes its obligations
under this Lease, its quiet enjoyment of the Premises throughout the
Term shall not be disturbed.
32. Authority of Tenant.
32.1 If Tenant is a corporation, each individual executing this
Lease on behalf of Tenant represents and warrants that (s)he is duly
authorized by all necessary action of the directors of Tenant to execute
and deliver this Lease on behalf of Tenant, and that this Lease is
binding upon Tenant in accordance with its terms.
32.2 If Tenant is a partnership or limited liability company,
each individual executing this Lease on behalf of Tenant represents and
warrants that (s)he is duly authorized in accordance with Tenant's
partnership agreement or limited liability company
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agreement by all necessary action of the partners or members or managers
of Tenant to execute and deliver this Lease on behalf of Tenant, and,
and that this Lease is binding upon Tenant in accordance with its terms.
33. Commissions. Landlord shall pay the commissions of
Washington Partners, pursuant to a separate letter of agreement between Landlord
and such broker. Each party represents and warrants to the other that it has not
had dealings with any real estate broker or agent other than those identified
above with respect to this Lease that would cause the other party to have any
liability for any commissions or other compensation to such broker or agent, and
that no such broker or agent has asserted any claim or right to any such
commission or other compensation. Such representing party shall defend and
indemnify the other party and hold the other party harmless from and against any
and all loss, cost, liability, damage and expense (including reasonable
attorneys' fees) whatsoever that may arise out of the breach of such
representation and warranty.
34. HVAC; Auxiliary Power Generator. Landlord shall provide
space in the parking garage of the Building and/or on the roof of the Building,
in a location approved by Landlord, sufficient to accommodate the installation
of Tenant's auxiliary generator. Tenant may install such generator at its
expense as part of or after the Initial Improvements work. Tenant may also
install the computer room HVAC System on the roof, together with such structural
support as may be required by Tenant and approved by Landlord consistent with
the terms of this Lease. Landlord makes no representation as to the suitability
of the roof or garage for such generator or HVAC System. The generator and HVAC
System shall be installed and operated in accordance with all laws and legal
requirements.
35. Ingress and Egress for Equipment. Tenant shall have the
right, exercisable from time to time during the first 60 days of the Term, to
use the staircase adjacent to the entrance to the south half of Floor 1 of the
Building, as shown on Exhibit B, for purposes of delivery and removal of
Tenant's equipment that cannot be accommodated in the freight elevator. After
the first 60 days of the Term, Tenant shall use the east elevator in the Floor 2
bank of three elevators (the "East Elevator") for purposes of such delivery and
removal, subject to the following conditions: (a) Tenant's access to the East
Elevator shall be from the Building garage or loading dock area directly to the
common area of Floor 2; (b) Tenant shall remove the East Elevator Door and
deliver and remove Tenant's equipment through the East Elevator shaft; (c)
Tenant shall provide Landlord two weeks' prior written notice of such use of the
East Elevator, which use shall be limited to the hours between 6:00 p.m. Friday
and 6:00 p.m. Sunday; (d) Tenant shall be entitled to use the East Elevator for
removal and delivery of equipment no more than five times during the Term.
Tenant shall promptly repair any damage to the Building, including damage to any
other tenant's premises, the common area, and the East Elevator, caused by the
use of the equipment ingress and egress rights under this Section. -
36. Reimbursement of Landlord. Tenant shall reimburse
Landlord for the amount, up to $3,000, actually incurred by Landlord for
electrical, structural and other studies deemed appropriate by Landlord to
assess, monitor and regulate the effect of Tenant's Initial Improvements on the
operation of the Building generally. Tenant shall make such reimbursement to
Landlord within 30 days of Landlord's request, which request shall include
reasonable evidence of such costs.
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EXECUTED the day and year above written.
LANDLORD:
1100 SECOND AVENUE LIMITED PARTNERSHIP
By Second Avenue Properties, Inc.,
General Partner
BY /s/ ROBERT A. HUBBARD
---------------------------------------
Robert A. Hubbard, its Vice President
TENANT:
AMAZON.COM, INC.
BY /s/ RICK DALZELL
---------------------------------------
Rick Dalzell ,its CIO/VP
--------------- -------------------
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STATE OF WASHINGTON )
)ss.
COUNTY OF KING )
On this 17th day of April, 1998, before me, the undersigned, a Notary
Public in and for the State of Washington, personally appeared Robert A.
Hubbard, to me known to be the Vice President of SECOND AVENUE PROPERTIES, INC.,
General Partner of 1100 SECOND AVENUE LIMITED PARTNERSHIP, the limited
partnership that executed the foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed of said corporation and
said limited partnership, for the uses and purposes therein mentioned, and on
oath stated that he/she was authorized to execute the said instrument on behalf
of said corporation and said limited partnership.
WITNESS MY HAND AND OFFICIAL SEAL hereto affixed the day and year first
above written.
/s/ STEVE C. HECHMAN
-------------------------------------------------
Name Steve C. Hechman
[SEAL] ---------------------------------------------
NOTARY PUBLIC in and for the State of Washington,
residing at Seattle
--------------------------------------
My commission expires 5/7/01
---------------------------
STATE OF WASHINGTON )
)ss.
COUNTY OF. KING )
On this 17th day of April, 1998, before me, the undersigned, a Notary
Public in and for the State of Washington, personally appeared Rick Dalzell to
me known to be the CIO/VP of AMAZON.COM INC., the corporation that executed the
foregoing instrument, And acknowledged the said instrument to be the free and
voluntary act and deed of said corporation for the uses and purposes therein
mentioned, and on oath stated that he/she was authorized to execute the said
instrument on behalf of said corporation.
WITNESS MY HAND AND OFFICIAL SEAL hereto affixed the day year first
above written.
/s/ LAURA LEE ELDER
-------------------------------------------------
Name Laura Lee Elder
NOTARY PUBLIC in and for the State of Washington,
[SEAL]
NOTARY PUBLIC in and for the State of Washington,
residing at MTLK Terrace
--------------------------------------
My commission expires 11/20/01
---------------------------
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EXHIBIT A
LEGAL DESCRIPTION OF PROPERTY
The land is located in the county of King, state of Washington, and is described
as follows:
LOTS 1, 4, 5 AND 8, BLOCK 14, ADDITION TO THE TOWN OF SEATTLE, AS LAID
OUT ON THE CLAIMS OF C. D. BOREN AND A.A. DENNY AND H.L. YESLER
(COMMONLY KNOWN AS C.D. BOREN'S ADDITION TO THE CITY OF SEATTLE),
ACCORDING TO THE PLAT THEREOF, RECORDED IN VOLUME 1 OF PLATS, PAGE(S)
25, IN KING COUNTY, WASHINGTON;
EXCEPT THE WESTERLY 12 FEET THEREOF CONDEMNED IN DISTRICT COURT CAUSE
NO. 7097 FOR THE WIDENING OF SECOND AVENUE AS PROVIDED BY ORDINANCE
NUMBER 1107 OF THE CITY OF SEATTLE;
TOGETHER WITH THAT PORTION OF THE VACATED ALLEY ADJOINING, WHICH UPON
VACATION, ATTACHED THERETO BY OPERATION OF LAW.
1
<PAGE> 27
EXHIBIT B
BASEMENT FLOOR PLAN
<PAGE> 28
EXHIBIT C
[SKILLING WARD MAGNUSSON BARKSHIRE INC. LETTERHEAD]
Page 1
INTRODUCTION
Purpose
The purpose of this review is to access, to the extent possible, the
overall structural condition and possible seismic performance of the 1100
Second Avenue Building in Seattle. This assessment includes the review of
the Building's structural condition, based primarily on observation, and
its seismic capability relative to FEMA-178. Handbook for the Seismic
Evaluation of Existing Buildings. Our work has not included an estimate of
the Probable Maximum Loss in the event of a rare earthquake.
This report contains the Scope of Services provided, a discussion of the
Site Investigation and Document Review that was performed, assumptions
regarding the Site Seismic Condition, a section presenting the Building
Description, and a discussion of the Criteria for Seismic Review employed.
The final sections present the Summary of Findings and Recommendations,
including a discussion of regulatory issues and a rough order of magnitude
costs.
Scope of Services
The following services were performed as part of the structural and
seismic review.
1. Visits to the site.
2. Collection and review of existing documentation for both buildings.
3. Review the buildings' overall structural condition.
4. Review the buildings' seismic capability relative to FEMA-178, NEHRP
Handbook for the Seismic Evaluation of Existing Buildings.
5. Development of recommendations, prioritization, and relative costs
for improvements.
6. Preparation of this report, outlining the findings of the above
reviews and noting issues which do not meet the stated standard.
The above scope of services were authorized by an agreement dated June 17,
1997 and signed by Robert Hubbard on June 18.
Limitations
Our professional services have been performed using the degree of care and
skill ordinarily exercised, under similar circumstances, by reputable
structural engineers practicing in this area. No other warranty,
expressed or implied, is made as to the professional advice included in
this report. This report has been prepared for Robert Hubbard and McKensay
Real Estate Services Inc. This report has not been prepared for use by
other parties, and may not contain sufficient information for purposes of
other parties or other users.
<PAGE> 29
Page 2
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SITE INVESTIGATION AND DOCUMENT REVIEW
On-site observations were made on June 15 and 26, 1997 to evaluate the
general condition of the buildings and to compare, where possible, as-built
conditions with existing construction documents. These observations were
conducted to the extent that existing conditions were observable without
exploratory demolition or excavation. Our evaluation of the underlying
structure was inferred from the condition of the finishes. No material tests
were conducted. The findings of the site investigation are presented in the
Summary of Findings section.
The drawings available for our review are presented in Table I.
Table I
Drawings Available for Review
<TABLE>
<S> <C> <C> <C>
1906 Architectural Drawings, including 1/23/07 Saunders and
floor plans, elevations and sections. Lawson
Structural Steel Election Drawings. 8/24/06 American
Bridge Co.
1958 Structural Drawings, S1-S15 2/10/58 Peter
Hosmark
1989 Seismic Structural Drawings, S:1 & S;2 7/5/89 TRA
</TABLE>
In most areas, the drawings provided a relatively clear definition of the
structural systems. Also, the site investigations verified that the buildings
appear to comply with the details and notes on the drawings, where conditions
were visible. The most glaring exceptions is in the 1906 Building, where
original drawings were based on a full build-out of eight floors. Only four
floors were constructed at that time and a fifth was added at a later date. No
drawings were available for this addition. Assumptions were made regarding
structural conditions not shown. These assumptions were used to complete the
structural analysis.
Also available for our review was a Identification of the Property, prepared
sometime subsequent to 1995. This document contains relevant legal information
as well as a detailed history of the buildings on the site, including the dates
of significant improvements and changes in ownership. The physical condition of
the buildings was assessed briefly as "average to good" and no significant
deferred maintenance was noted.
Photographs were taken during our site investigation. Selective photographs of
the buildings are included in Appendix A.
<PAGE> 30
Page 3
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SITE SEISMIC CONDITIONS
Introduction
The 1100 Second Avenue Building is located in downtown Seattle. The
western portions of the Pacific Northwest have experienced significant
seismic activity in the past 150 years and many large earthquakes in
geologically recent time. It is recognized that the Pacific Northwest
is one of the higher earthquake hazard regions in the United States.
There are three different, although related, source mechanisms that
produce earthquakes in the Pacific Northwest (1) crustal, or shallow,
earthquakes, (2) intraplate earthquakes, and (3) subduation
earthquakes. However, when compared to coastal California, the
seismicity of the Pacific Northwest is not as well understood with
regard to fault locations, activity, and recurrence intervals. A more
in-depth discussion regarding earthquake source mechanisms and hazard
terminology can be found in Appendix B.
Seismicity at the Site
As described above, 1100 Second Avenue is located in one of the higher
earthquake hazard regions in the United States. The earthquake ground
motion associated with an event that is expected to occur every 475
years was used to assess the likely performance of the buildings. In
terms of probability, this earthquake ground motion has a 10 percent
probability of exceedance in 50 years. This ground motion is also
consistent with the earthquake ground motion used in the design of new
buildings (as defined in the 1994 Uniform Building code) and the
evaluation of existing buildings (as defined in FEMA-178). Finally,
this ground motion is often referred to as the Design Basis Earthquake
(DBE) and can be generated on any of the known seismic sources
described above. Although the DBE for a source is defined as that level
of ground motion that, on average, is expected to occur once every 475
years, it may actually occur more or less often. Also, it is not the
strongest ground motion which could ever occur at the site. It is,
however, a reasonable estimate of the strongest shaking likely to occur
during the buildings' lives.
The ground motion parameters used to review the buildings' seismic
capability, relative in FEMA-178, are presented in table II. These
ground motion parameters are based on the latest research performed by
the United States Geological Survey (USGS). The USGS is nearing
completion of their periodical updates -- the parameters presented
below reflect these results.
<TABLE>
<CAPTION>
Table II
Ground Motion Parameters
------------------------------------------------------------------------
------------------------------------------------------------------------
<S> <C> <C>
Peak Ground Acceleration (PGA) .030g FEMA-178 Review
------------------------------------------------------------------------
Maximum Shaking Intensity (MMI) VIII PML Estimate
------------------------------------------------------------------------
</TABLE>
<PAGE> 31
Page 4
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BUILDING DESCRIPTION
The 1100 Second Avenue Building is composed of two smaller buildings constructed
at vastly different times. The buildings were constructed against one another
and in the 1980s, mechanical connections were constructed reinforcing the
linkage between the structures. For this reason, analysis of seismic performance
assumed that the buildings would act as one.
1906 Building (Baillargeon Building)
The southern half of the block was constructed in 1906-07, a half century
before the northern half of the block. The building is five stories tall
and rectangular, about 108 feet by 120 feet. It occupies a hillside site,
sloping downward from east to west between the alley and Second Avenue. The
structure is composed of structural steel columns, beams and purlins
supporting a concrete floor slab. Concrete is also cast around the steel
members to serve as fire resistance. Foundation support is provided by a
steel grillage that cast in concrete.
The building was designed, at that time, to be eight stories tall. Initial
construction, however, stopped at four floors, with one additional floor
added probably before the adjacent portion of the structure was constructed
in 1958. No drawings of the fifth floor addition were available for our
review. Architectural finish is composed primarily of terra cotta tiles and
these are supported by an infill brick and clay die system.
Resistance to wind and seismic forces is provided by a moment frame along
the street and alley elevations and a braced frame against the party
wall. These methods, while providing some nominal resistance to lateral
loads, were not designed with earthquakes in mind.
1958 Building (National Bank of Commerce Annex)
In 1958, a five-story building was constructed immediately north of the
existing Baillargeon Building. This building has a similar size and siting
to its neighbor.
This building is also steel. It supports gravity loads using structural
steel columns, beams, and purlins. These, in turn support concrete floor
slabs. Foundation support is provided by spread footings.
Lateral support, in this case, is provided by cast-in-place concrete
exterior walls. These either act as moment frames composed of deep beams
and wide columns, or as shear walls. The walls are cast around the
underlying steel frame, consequently they do not support any vertical
loading. Along the Second Avenue facade, the walls are reduced to a moment
frame of conventional sizes. Since the Seattle Building Code at the time
included some earthquake provisions, this building was designed with these
forces in mind.
The building is sheathed in terra cotta like its neighbor, but the
underlying support is provided by the concrete walls rather than brick or
clay tile.
<PAGE> 32
Page 5
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CRITERIA FOR SEISMIC REVIEW
To ascertain the buildings, probable seismic performance, FEMA-178 is used as
the primary methodology. A brief discussion regarding Seismic Evaluation of
Existing Buildings, followed by a discussion of the Background of FEMA-178, is
presented below.
Seismic Evaluation of Existing Buildings
Evaluation of an existing building for potential damage from an earthquake
requires balancing structural engineering, economic, Life Safety, and
policy concerns. No code currently exists as a benchmark for an earthquake
assessment. Consequently, priorities regarding loss of life and/or
building damage in the event of an earthquake must be developed.
The desired level of risk-reduction determines the philosophy of the
earthquake assessment. There are a number of earthquake assessment
philosophies representing various performance goals. Our seismic review
of the buildings is based on the Life Safety Philosophy of FEMA-178.
Background of FEMA-178
The purpose of FEMA-178 is to provide guidance in the review of a
building's response to earthquake based on a Life Safety Philosophy. The
intent is to prevent collapse and allow buildings to be safely existed.
Life safety is the primary concern; reoccupancy and damage to the building
are not a consideration under this philosophy.
FEMA-178. NEHRP Handbook for the Seismic Evaluation of Existing Buildings.
Is a standard assessment philosophy developed by the Building Seismic
Safety Council (BSSC) for the Federal Emergency Management Agency (FEMA).
The philosophy follows two basic courses. The first is an empirical
evaluation of building elements based on historic evidence regarding
hazards. The second is an evaluation of the building using earthquake
forces that the building is intended to resist. An expert panel developed
these forces to be consistent with a Life Safety Philosophy.
A building does not meet the Life Safety objective of this handbook if any
of the following events occur during an earthquake:
o The entire building collapses.
o Any portions of the building collapse.
o The components of the building fail and fall.
o The exit and entry routes are blocked, preventing evacuation and
restate of the occupants.
<PAGE> 33
Page 6
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The approach used by FEMA-178 and the UBC, with respect to development of
the seismic forces on the buildings, is very similar. However, the
acceptance criteria is, necessarily, different since FEMA-178 is an
evaluation document whereas the UBC is a design document. A brief
discussion regarding the FEMA-178 approach is presented below.
FEMA-178 Approach
The FEMA-178 approach is based on a pre-arranged set of checklists for
common building types designed to identify flaws and weaknesses. The
checklist is a collection of positive evaluation statements describing
building characteristics that are essential if the failures observed from
past earthquakes are to be avoided. True statements identify conditions
that are acceptable and false statements identify conditions that need
further investigation. These checklists were completed as part of this
review.
The basic approach of FEMA-178 is to select a Response Modification Factor,
R, for the structure. The 1906 and 1958 buildings are joined structurally
and thus, a single response factor of 6.0 (Non-load bearing shear walls)
was chosen for both. This factor combined with building weight (14,200,000
and 10,600,000 pounds respectively), local seismic forces (.25g), gives a
lateral force of 1,444 kbps.
This force was used to test each of the principal components of the
existing lateral force resisting system.
<PAGE> 34
Page 7
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SUMMARY OF FINDINGS
Introduction
The scope of work for this report includes a review of both the
existing structural condition of the building as well as an analysis of
its potential seismic capabilities. Generally, the structure at 1100
Second Avenue, both the 1906 and 1958 buildings, appear to be in good
condition. No significant deficiencies, which would reduce the
capabilities of the existing structure to handle either gravity or
lateral loads, were noted during our two visits to the site.
Earthquake forces are resisted in different ways by each of the
buildings on the site; however, the buildings were not only constructed
against one another, but were connected in the 1989 renovation
completed by TRA. Consequently, our findings below are based on an
assessment of the structures together.
Since the buildings are not likely to behave individually in seismic
events, the recommendations for remediation are based on considering
1100 Second Avenue as a unit. For the most part, considering the
buildings together has positive consequences for both the types and
costs of remediation suggested.
Condition Survey Findings
1100 Second Avenue has remained, for the most part, a fully-functioning
office building during the entirety of its life. As a result, it has
been both well-maintained and apparently repaired as necessary.
Condition issues noted during our visit to the site were minor and no
deterioration of the capability of the structure was noted.
Minor deterioration associated with roof leaks, now apparently
repaired, was noted. This leakage was noted primarily in the penthouse
and other service areas of the building. In addition, some minor
deterioration of the cladding was noted immediately under the bridge
which connects the 1100 Second Avenue and 1111 Third Avenue buildings.
In neither case was structural deterioration noted. The cause of damage
in each incidence is water and in the case of the bricks beneath the
bridge, the damage is apparently associated with poor drainage off the
sides of the bridge walls.
Seismic Review Findings
As noted previously, both the 1906 and 1958 structures collect and
resist seismic forces in different ways. The 1906 structure uses a
combination of moment frames which take the form of rivited beams and
columns along the primary faces of the building, along with a braced
frame at the party wall between the 1906 and 1958 buildings. The 1958
structure uses a non gravity-load-bearing concrete shear wall system
to resist lateral loads. As a consequence, the 1958 Building is much
stiffer and thus more likely to collect loads for both buildings. This
is particularly true given the connection made in the TRA renovation in
the 1980s.
<PAGE> 35
Page 8
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1906 Building
The 1906 structure, if taken alone, has a significant number of deficiencies
from the perspective of FEMA 178. While noted separately here, the deficiencies
should be seen in light of the fact that the two buildings will behave together
and many of the deficiencies noted in the structure will be mitigated at least
in part by strengthening the 1958 building. Deficiencies noted in FEMA 178 for
the 1906 structure include:
1. Torsion.
2. High drift ratios, particularly along the south elevation.
3. Brick infills, not isolated from the supporting steel structure.
4. Column splices not detailed and located in a moment region, approximately
one foot off the floor line.
5. Poor moment connection capabilities.
6. Poor partial continuity at the connection of beams and columns.
7. Probable height/thickness ratios along the alley walls.
8. Soft story along Second Avenue.
The 1906 structure also has several positive attributes which should be noted
here. These include:
1. The original design allowed three additional stories over the number of
floors presently on the site and, consequently, the structure has
relatively strong columns when compared with beam strengths.
2. The fact that the structure is constructed of steel and has significant
over-capacity in its columns, means that regardless of the significant
deficiencies noted in the FEMA 178 analysis, the building probably does not
present a collapse hazard.
1958 Building
The structure constructed in 1958 consists of a steel frame supporting all
gravity loads, but lateral forces are resisted by concrete shear walls along
each elevation of the building. These walls are extraordinarily stiff,
especially when compared with the moment frames used in the 1906 Building.
Consequently, our analysis considered a significant portion of the load
developed in the 1906 Building as being resisted by the shear wall in the 1958
Building. Generally, these walls prove capable of resisting even these higher
loads. Weaknesses noted in this structure, are limited to both a soft and weak
story along Second Avenue, and a few minor detailing deficiencies associated
with stirrups and ties in the shear wall/frames.
<PAGE> 36
Page 9
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The arrangement of columns and spandrel beams along Second Avenue is safe
because of the higher floor-to-floor height between the first and second
floors, as opposed to subsequent floors. It is also weak because the
columns have significantly less cross-sectional area than the columns
above. The short column deficiencies are also created at this elevation
because of a mid-height spandrel beam between floors one and two. This
mid-height spandrel beam creates a short column immediately above it,
which is likely incapable of resisting the deformation requirements of
any significant seismic event.
RECOMMENDATIONS
Regulatory Issues
Buildings in the City of Seattle do not require mandatory seismic
retrofits, unless a significant remodel is planned or the building is
subjected to a change in use. Given that neither are planned for this
structure, it is unlikely that any of the following recommendations would
be required by the City of Seattle. However, should a change of use, for
instance from office to residential, be planned or if significant moneys
are planned to remodel mechanical, electrical, or other architectural
improvements to the structure, a seismic rehabilitation component will
need to be considered for the structures.
Seismic Renovation
The two buildings that make up 1100 Second Avenue, when taken together,
compensate for many of each other's deficiencies. The deficiencies which
remain, however, are significant and should be considered to provide a
building which is seismically life safe. These deficiencies are:
1. The soft/weak story along Second Avenue.
2. Inadequate resistance in the transverse (east-west) direction at the
south elevation of the 1906 Building.
The deficiencies noted above, particularly in the 1906 Building, can be
mitigated using the same methods used to mitigate the deficiencies noted
above, provided that the buildings remain connected. Once again, we
believe the connection made by TRA in the 1980s is adequate to carry
seismic loads between the buildings.
Our recommendations include providing a soft story brace, preferably in
the 1958 Building, against the Second Avenue elevation. This brace would
be between floors one and two. It is certainly possible to locate this
brace in-board a bay from the Second Avenue elevation, but the loads
coming from above, proceeding down the corporate elevation along Second
Avenue, could most easily be collected and carried by braces and/or shear
walls located against that elevation. In addition, the column strength
which exists in this area is sufficient to allow the installation of
braces or walls without any significant improvements to the existing
column or foundation structure.
<PAGE> 37
Page 10
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Mitigation of the second deficiency, weakness in the transverse direction
along the south elevation, can be accomplished by installing a brace or
shear wall against the southern elevation of the 1906 Building or within
one bay. The brace must be oriented in the east-west direction and, again,
there is significant overstrength available in the existing columns, so
the columns should be used to connect the braces. Using this technique, it
is, again, unlikely that any significant column strengthening improvements
or footing improvements would be required.
The only other deficiency of note is the relatively high height/thickness
ratio along the alley wall of the 1906 Building. This deficiency can be
corrected by strong-backing, either using concrete or light gauge steel.
However, given its location against the alley, it is less likely to impose
a life safety threat. Consequently, it would not have the priority of the
other two mitigation techniques.
The above recommendations for braces along Second Avenue in the southern
elevation, should be taken together and constructed at the same time. They
can be constructed separately, but if one is constructed and the other
left out, significant deficiencies would remain within the structure.
A rough cost estimate for the structural costs of the three
recommendations is $130,000. This figure includes approximately $50,000
for the Second Avenue soft story brace, $69,000 for the brace along the
southern elevation, and $11,000 to brace the brick walls along the eastern
elevation of the 1906 Building.
This cost includes the structure only and does not include demolition of
architectural finishes or the reinstallation the existing architectural
features of the building. It also presumes a nominal contract overhead and
profit figure as well as a 20% contingency. It does not include any of the
soft costs associated with either management, taxes, or fees usually
associated with contractions of this type.
<PAGE> 38
EXHIBIT D
Tenant's Fixtures, General Categories:
- -- Raised computer room floor and all its attendant parts.
- -- Computer room fire suppression system and its parts.
- -- Our security system and its parts and hardware.
- -- Our generator and its attendant parts, including but not limited to its
fuel tank, pumping system and automatic transfer switch.
- -- All our major power regulation and distribution systems, including but
not limited to our interruptible power supply systems and power
distribution units.
- -- Our HVAC systems, including but not limited to all cooling units,
drycoolers, motors and pumps.
- -- Equipment racks and cabling equipment, including but not limited to
any equipment racks and cable trays that may be bolted to the floor or
elsewhere for seismic purposes, as well as patch panels, connectors and
cabling fixtures.
- -- Any major electrical systems and/or parts that are dedicated to our
data center space, including but not limited to switchgear and
transformers.
<PAGE> 39
EXHIBIT D
SCHEDULE OF TENANT'S PROPERTY
Tenant's Fixtures, General Categories:
- - Raised computer room floor and all its attendant parts.
- - Computer room fire suppression system and its parts.
- - Our security system and its parts and hardware.
- - Our generator and its attendant parts, including but not limited to its
fuel tank, pumping system and automatic transfer switch.
- - All our major power regulation and distribution systems, including but not
limited to our uninterruptible power supply systems and power distribution
units.
- - Our HVAC systems, including but not limited to all cooling units,
drycoolers, motors and pumps.
- - Equipment racks and cabling equipment, including but not limited to any
equipment racks and cable trays that may be bolted to the floor or
elsewhere for seismic purposes, as well as patch panels, connectors and
cabling fixtures.
- - Any major electrical systems and/or parts that are dedicated to our data
center space, including but not limited to switchgear and transformers,
located within the rentable area.
1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AMAZON.COM, INC. FORM 10-Q FOR THE QUARTER ENDED MAR-31-1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 98,600
<SECURITIES> 18,220
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 11,674
<CURRENT-ASSETS> 132,893
<PP&E> 14,970
<DEPRECIATION> 5,197
<TOTAL-ASSETS> 145,007
<CURRENT-LIABILITIES> 48,478
<BONDS> 0
0
0
<COMMON> 483
<OTHER-SE> 19,344
<TOTAL-LIABILITY-AND-EQUITY> 145,007
<SALES> 87,375
<TOTAL-REVENUES> 87,375
<CGS> 68,054
<TOTAL-COSTS> 68,054
<OTHER-EXPENSES> 28,195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,025
<INCOME-PRETAX> (9,259)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,259)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,259)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997 UNAUDITED
FINANCIAL STATEMENTS FOR THE QUARTERS ENDED MARCH 31, 1997, JUNE 30, 1997 AND
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS YEAR 9-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 MAR-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997 JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997 DEC-31-1997 SEP-30-1997 JUN-30-1997
<CASH> 6,248 7,162 109,810 44,687 47,700
<SECURITIES> 0 0 15,256 3,494 8,692
<RECEIVABLES> 0 0 0 0 0
<ALLOWANCES> 0 0 0 0 0
<INVENTORY> 571 939 8,971 2,732 1,652
<CURRENT-ASSETS> 7,140 9,038 137,335 52,697 59,206
<PP&E> 1,295 3,221 12,899 6,710 4,896
<DEPRECIATION> 310 730 3,634 2,307 1,332
<TOTAL-ASSETS> 8,271 11,722 149,006 57,447 63,098
<CURRENT-LIABILITIES> 4,870 8,959 43,818 19,848 17,357
<BONDS> 0 0 0 0 0
0 0 0 0 0
6 6 0 0 0
<COMMON> 318 347 479 477 477
<OTHER-SE> 3,077 2,410 28,007 36,941 45,083
<TOTAL-LIABILITY-AND-EQUITY> 8,271 11,722 149,006 57,447 63,098
<SALES> 15,746 16,005 147,758 81,747 43,860
<TOTAL-REVENUES> 15,746 16,005 147,758 81,747 43,860
<CGS> 12,287 12,484 118,945 65,826 35,117
<TOTAL-COSTS> 12,287 12,484 118,945 65,826 35,117
<OTHER-EXPENSES> 9,438 6,623 58,022 35,276 18,912
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 0 0 279 0 0
<INCOME-PRETAX> (5,777) (3,038) (27,590) (18,253) (9,743)
<INCOME-TAX> 0 0 0 0 0
<INCOME-CONTINUING> (5,777) (3,038) (27,590) (18,253) (9,743)
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> (5,777) (3,038) (27,590) (18,253) (9,743)
<EPS-PRIMARY> (0.31) (0.16) (1.27) (0.86) (0.48)
<EPS-DILUTED> (0.31) (0.16) (1.27) (0.86) (0.48)
</TABLE>
