<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 5, 1995
------------------------
PRONET INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-16029 75-1832168
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification Number)
incorporation)
600 DATA DRIVE 75075
SUITE 100 (Zip Code)
PLANO, TEXAS
(Address of principal
executive offices)
</TABLE>
Registrant's telephone number, including area code: (214) 964-9500
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 5. OTHER EVENTS.
(A) PAGE EAST, INC. AUDITED FINANCIAL STATEMENTS
On May 12, 1995, the Company announced the signing of a letter of intent to
acquire all the outstanding capital stock of North Carolina based Page East,
Inc., including approximately 12,000 subscribers, for a purchase price of
approximately $6.3 million. The transaction includes the right to acquire the
paging assets of Coastal Carolina Communications, Inc. ("Coastal"), including
approximately 4,500 subscribers, for a purchase price of approximately $1.7
million. The acquisitions of these paging operations are subject to various
conditions and approvals and are scheduled to close in the second half of 1995.
A copy of the Letter of Intent is included herein as Exhibit 10.1. Also attached
hereto as Exhibit 99.1 are audited financial statements as of and for the years
ended December 31, 1994 and 1993 and unaudited financial statements as of and
for the three months ended March 31, 1995, which combine the operations of Page
East, Inc. and Coastal.
(B) RULE 144A PRIVATE PLACEMENT OF DEBT
On June 19, 1995, the Company announced that it completed a Rule 144A
offering of $100 million principal amount of its 11 7/8% Senior Subordinated
Notes due 2005. The notes are general unsecured obligations of the Company and
are subordinated to all existing and future Senior Debt (defined in the
indenture governing the notes) of the Company. The indenture provides that the
Company may not incur any debt that is subordinate in right of payment to the
Senior Debt and senior in right of payment to the notes. The indenture also
contains certain covenants that, among other things, limit the ability of the
Company and its subsidiaries to incur indebtedness, pay dividends, engage in
transactions with affiliates, sell assets and engage in certain other
transactions.
Proceeds to the Company from the sale of the notes (after deducting
discounts, commissions and offering expenses) were approximately $95.6 million.
The Company used approximately $49.4 million of the net proceeds to repay all
indebtedness outstanding under its $125 million credit facility. The Company
expects to use the remaining proceeds to pursue the Company's acquisition
strategy, to purchase frequency rights, to make capital expenditures for
buildout of the Company's regional paging systems and for enhanced services, and
for working capital and general corporate purposes.
(C) PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
Attached hereto as Exhibit 99.2 are certain pro forma condensed consolidated
financial statements and notes thereto of the Company and its completed and
pending acquisitions.
(D) NEW OFFICE LEASE
On April 7, 1995, the Company entered into an agreement to lease a new
headquarters building in Dallas, Texas. The Company anticipates moving to the
new building in October 1995. Under the terms of the agreement, the Company will
lease approximately 27,000 square feet at an annual rent of approximately
$285,000 for the first two years and approximately $305,000 for the next three
years. The company has an option to extend the lease for a five-year term.
Attached hereto as Exhibit 10.2 is the new office lease agreement.
(E) INDENTURE RELATED TO RULE 144A OFFERING
Attached hereto as Exhibit 4.1 is a copy of the Indenture related to the
Rule 144A Offering completed by the Company.
(F) CERTIFICATE OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION OF THE
COMPANY
On June 12, 1995, the Company filed a Certificate of Amendment to Restated
Certificate of Incorporation with the Secretary of State in Delaware to increase
to 25 million the number of authorized shares of capital stock of the Company of
which 20 million are common stock, par value $0.01 per share, and 5 million are
preferred stock, par value $1.00 per share. A copy of the Certificate of
Amendment is attached hereto as Exhibit 3.1.
2
<PAGE>
SIGNATURE
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 hereunto duly authorized.
PRONET INC.
(Registrant)
By: ________/s/_JAN E. GAULDING_______
Jan E. Gaulding
Senior Vice President and Chief
Financial Officer
(principal financial and accounting
officer)
Date: July 5, 1995
3
<PAGE>
EXHIBIT INDEX
3.1 Certificate of Amendment to Restated Certificate of Incorporation dated
June 12, 1995.
4.1 Indenture, dated as of June 15, 1995, between the Company and First
Interstate Bank of Texas, N.A., as Trustee.
10.1 Letter of Agreement dated May 12, 1995, regarding the acquisition of
substantially all of the common stock of Page East Inc., by and among
the Company and C.T. Spruill.
10.2 Office Lease Agreement by and between the Company and Carter-Crowley
Properties, Inc., as Landlord.
99.1 Audited Financial Statements as of and for the years ended December
31, 1994 and 1993 and unaudited financial statements as of and for the
three months ended March 31, 1995, which combine the operations of Page
East, Inc. and Coastal Carolina Communications, Inc.
99.2 Pro Forma Condensed Consolidated Financial Statements of the Company
and its completed and pending acquisitions.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
PRONET INC.
PRONET INC., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation
resolutions were duly adopted setting forth a proposed amendment to the
Restated Certificate of Incorporation of the Corporation, declaring said
amendment to be advisable and calling for submission thereof to the
stockholders of the Corporation at the annual meeting. The resolution setting
forth the proposed amendment is as follows:
RESOLVED, that Article Fourth of the Corporation's Restated Certificate of
Incorporation be, and it hereby is, amended so as to read in its entirety
as follows:
FOURTH:
A. Authorized Shares and Classes of Stock:
The total number of shares of stock that the Corporation shall
have authority to issue is 25,000,000 shares, which shall be divided
into two classes as follows: 20,000,000 shares of Common Stock, par
value $0.01 per share (the "Common Stock"), and 5,000,000 shares of
Preferred Stock, par value $1.00 per share (the "Preferred Stock").
B. Preferred Stock:
The Board of Directors of the Corporation is hereby expressly
vested with authority to issue 5,000,000 shares of Preferred Stock
from time to time in series, with such series designation, number of
shares in the series, and such powers, preferences, and rights, and
qualifications, limitations, or restrictions thereof that are not
fixed by this Certificate of Incorporation and as may be fixed and
determined by resolution or resolutions of the Board of Directors.
Shares of any series of the Preferred Stock, upon issuance, may be
redeemable if entitled to a preference upon any distribution of the
Corporation's assets, whether by dividend or by liquidation, over
another class of stock or series of Preferred Stock of the Corporation.
The Board of Directors in establishing a series of Preferred Stock is
hereby authorized to fix and determine:
(1) The annual rate of dividend and, if cummulative, the date
from which such dividends would accumulate:
<PAGE>
(2) The price at which and the terms and conditions upon which
shares may be redeemed;
(3) The amount payable on shares in the event of involuntary
liquidation;
(4) The amount payable on shares in the event of voluntary
liquidation;
(5) Sinking fund provisions for the redemption or purchase of
shares;
(6) The terms and conditions upon which shares may be converted,
if the shares of any series are issued with the privilege of
conversion;
(7) Voting rights; and
(8) The restrictions, if any, on the transfer of the shares of
any series.
Shares of Preferred Stock that have been redeemed or converted,
or that have been issued and reacquired in any manner and retired,
shall have the status of authorized and unissued Preferred Stock and
may be reissued by the Board of Directors as shares of the same or
any other series, unless otherwise provided with respect to any
series in the resolution or resolutions of the Board of Directors
creating such series.
SECOND: That thereafter the annual meeting of stockholders of the
Corporation was duly called and held and at which meeting the necessary
number of shares as required by statute were voted in favor of the foregoing
amendment.
THIRD: That the foregoing amendment to Article Fourth of the Restated
Certificate of Incorporation was duly adopted in accordance with the
provisions of the Restated Certificate of Incorporation and Section 242 of
the General Corporation Law of the State of Delaware.
2
<PAGE>
IN WITNESS WHEREOF, this instrument has been executed for, on behalf of,
and in the name of the Corporation by its officers thereunto duly authorized
on June 12, 1995.
PRONET INC.
By: /s/ Jan E. Gaulding
--------------------------------------
Jan E. Gaulding, Senior Vice President
and Treasurer
ATTEST:
/s/ Mark A. Solls
- -------------------------------
Mark A. Solls, Vice President
and Secretary
3
<PAGE>
EXHIBIT 4.1
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- --------------------------------------------------------------------------------
PRONET INC.
$100,000,000
11 7/8% Senior Subordinated Notes due 2005
---------------------
INDENTURE
Dated as of June 15, 1995
---------------------
FIRST INTERSTATE BANK OF TEXAS, N.A.
as Trustee
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<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Indenture
Act Section Section
- --------------- ---------
310 (a)(1). . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5). . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8
7.10
12.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 12.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 12.3
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1). . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(2). . . . . . . . . . . . . . . . . . . . . . . . . 7.6
12.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
4.7
12.2
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . 12.4
(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . 12.4
(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 12.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(2)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(1)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(3)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence). . . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . 6.5
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . 6.4
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4
317 (a)(1). . . . . . . . . . . . . . . . . . . . . . . . . 6.2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . 6.2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1
318 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1
N.A. means not applicable.
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* This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS**
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Other Definitions . . . . . . . . . . . . . . . . . . 14
Section 1.3. Incorporation by Reference of Trust Indenture Act . . 14
Section 1.4. Rules of Construction . . . . . . . . . . . . . . . . 15
Section 1.5. Acts of Holders . . . . . . . . . . . . . . . . . . . 15
ARTICLE 2
THE SECURITIES. . . . . . . . . . . . . . . 16
Section 2.1. Form and Dating . . . . . . . . . . . . . . . . . . . 16
Section 2.2. Execution and Authentication. . . . . . . . . . . . . 17
Section 2.3. Registrar and Paying Agent. . . . . . . . . . . . . . 18
Section 2.4. Paying Agent to Hold Money in Trust . . . . . . . . . 19
Section 2.5. Securityholder Lists. . . . . . . . . . . . . . . . . 19
Section 2.6. Transfer and Exchange . . . . . . . . . . . . . . . . 19
Section 2.7. Replacement Securities. . . . . . . . . . . . . . . . 20
Section 2.8. Outstanding Securities. . . . . . . . . . . . . . . . 20
Section 2.9. Treasury Securities . . . . . . . . . . . . . . . . . 21
Section 2.10. Temporary Securities. . . . . . . . . . . . . . . . . 21
Section 2.11. Cancellation. . . . . . . . . . . . . . . . . . . . . 21
Section 2.12. Defaulted Interest. . . . . . . . . . . . . . . . . . 22
Section 2.13. Persons Deemed Owners . . . . . . . . . . . . . . . . 22
Section 2.14. CUSIP Number. . . . . . . . . . . . . . . . . . . . . 23
Section 2.15. Book-Entry Provisions for Global Securities . . . . . 23
Section 2.16. Special Transfer Provisions . . . . . . . . . . . . . 24
ARTICLE 3
REDEMPTION. . . . . . . . . . . . . . . . 27
Section 3.1. Notices to Trustee. . . . . . . . . . . . . . . . . . 27
Section 3.2. Selection of Securities to Be Redeemed. . . . . . . . 27
Section 3.3. Notice of Redemption. . . . . . . . . . . . . . . . . 28
Section 3.4. Effect of Notice of Redemption. . . . . . . . . . . . 29
Section 3.5. Deposit of Redemption Price . . . . . . . . . . . . . 29
Section 3.6. Securities Redeemed in Part . . . . . . . . . . . . . 30
Section 3.7. Optional Redemption . . . . . . . . . . . . . . . . . 30
Section 3.8. Redemption Upon Change of Control Offer . . . . . . . 30
Section 3.9. Redemption Pursuant to Section 4.15 . . . . . . . . . 30
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** This Table of Contents shall not, for any purpose, be deemed a part of the
Indenture.
- i -
<PAGE>
Page
----
ARTICLE 4
COVENANTS. . . . . . . . . . . . . . . . 31
Section 4.1. Payment of Principal and Interest . . . . . . . . . . 31
Section 4.2. Maintenance of Office or Agency for Notices and
Demands . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.3. Insurance Matters . . . . . . . . . . . . . . . . . . 32
Section 4.4. Compliance Certificate; Notice of Default . . . . . . 32
Section 4.5. Corporate Existence . . . . . . . . . . . . . . . . . 32
Section 4.6. Payment of Taxes and Other Claims . . . . . . . . . . 33
Section 4.7. Reports to the Commission . . . . . . . . . . . . . . 33
Section 4.8. Waiver of Stay, Extension or Usury Laws . . . . . . . 34
Section 4.9. Limitation on Consolidated Debt . . . . . . . . . . . 34
Section 4.10. Limitation on Certain Debt. . . . . . . . . . . . . . 35
Section 4.11. Limitation on Restricted Payments . . . . . . . . . . 35
Section 4.12. Limitation on Distributions by and Transfers to
Subsidiaries, etc.. . . . . . . . . . . . . . . . . . 37
Section 4.13. Limitation on Liens . . . . . . . . . . . . . . . . . 38
Section 4.14. Limitation on Transactions with Affiliates and
Related Persons . . . . . . . . . . . . . . . . . . . 38
Section 4.15. Limitation on Certain Asset Dispositions. . . . . . . 39
Section 4.16. Limitation on Issuances and Sales of Capital Stock
of Subsidiaries . . . . . . . . . . . . . . . . . . . 40
Section 4.17. Change of Control . . . . . . . . . . . . . . . . . . 40
ARTICLE 5
SUCCESSORS. . . . . . . . . . . . . . . . 42
Section 5.1. Limitation on Mergers, Consolidations and Certain
Sales of Assets . . . . . . . . . . . . . . . . . . . 42
Section 5.2. Successor Corporation Substituted . . . . . . . . . . 43
ARTICLE 6
DEFAULTS AND REMEDIES. . . . . . . . . . . . . 44
Section 6.1. Events of Default . . . . . . . . . . . . . . . . . . 44
Section 6.2. Acceleration. . . . . . . . . . . . . . . . . . . . . 46
Section 6.3. Other Remedies. . . . . . . . . . . . . . . . . . . . 47
Section 6.4. Waiver of Past Defaults . . . . . . . . . . . . . . . 47
Section 6.5. Control by Majority . . . . . . . . . . . . . . . . . 47
Section 6.6. Limitation on Suits . . . . . . . . . . . . . . . . . 48
Section 6.7. Rights of Holders to Receive Payment. . . . . . . . . 48
Section 6.8. Collection Suit by Trustee. . . . . . . . . . . . . . 48
Section 6.9. Trustee may File Proofs of Claim. . . . . . . . . . . 49
Section 6.10. Priorities. . . . . . . . . . . . . . . . . . . . . . 49
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . 50
ii
<PAGE>
Page
----
ARTICLE 7
TRUSTEE . . . . . . . . . . . . . . . . 50
Section 7.1. Duties of Trustee . . . . . . . . . . . . . . . . . . 50
Section 7.2. Rights of Trustee . . . . . . . . . . . . . . . . . . 51
Section 7.3. Individual Rights of Trustee. . . . . . . . . . . . . 52
Section 7.4. Trustee's Disclaimer. . . . . . . . . . . . . . . . . 52
Section 7.5. Notice of Defaults. . . . . . . . . . . . . . . . . . 52
Section 7.6. Reports by Trustee to Holders . . . . . . . . . . . . 52
Section 7.7. Compensation and Indemnity. . . . . . . . . . . . . . 53
Section 7.8. Replacement of Trustee. . . . . . . . . . . . . . . . 54
Section 7.9. Successor Trustee by Merger, etc. . . . . . . . . . . 55
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . 55
Section 7.11. Preferential Collection of Claims Against Company . . 55
ARTICLE 8
DISCHARGE OF INDENTURE. . . . . . . . . . . . . 55
Section 8.1. Legal Defeasance and Covenant Defeasance of the
Securities. . . . . . . . . . . . . . . . . . . . . . 55
Section 8.2. Termination of Obligations upon Cancellation of the
Securities. . . . . . . . . . . . . . . . . . . . . . 58
Section 8.3. Survival of Certain Obligations . . . . . . . . . . . 59
Section 8.4. Acknowledgment of Discharge by Trustee. . . . . . . . 59
Section 8.5. Application of Trust Assets . . . . . . . . . . . . . 59
Section 8.6. Repayment to the Company; Unclaimed Money . . . . . . 60
Section 8.7. Reinstatement.. . . . . . . . . . . . . . . . . . . . 60
ARTICLE 9
AMENDMENTS. . . . . . . . . . . . . . . . 61
Section 9.1. Without Consent of Holders. . . . . . . . . . . . . . 61
Section 9.2. With Consent of Holders . . . . . . . . . . . . . . . 62
Section 9.3. Compliance with Trust Indenture Act . . . . . . . . . 63
Section 9.4. Revocation and Effect of Consents . . . . . . . . . . 63
Section 9.5. Notation on or Exchange of Securities . . . . . . . . 64
Section 9.6. Trustee to Sign Amendments, etc.. . . . . . . . . . . 64
ARTICLE 10
MEETINGS OF SECURITYHOLDERS . . . . . . . . . . . 64
Section 10.1. Purposes for Which Meetings May Be Called . . . . . . 64
Section 10.2. Manner of Calling Meetings. . . . . . . . . . . . . . 65
Section 10.3. Call of Meetings by Company or Holders. . . . . . . . 65
Section 10.4. Who May Attend and Vote at Meetings . . . . . . . . . 66
- iii -
<PAGE>
Page
----
Section 10.5. Regulations May Be Made by Trustee; Conduct of the
Meeting; Voting Rights; Adjournment . . . . . . . . . 66
Section 10.6. Voting at the Meeting and Record to Be Kept . . . . . 67
Section 10.7. Exercise of Rights of Trustee or Securityholders May
Not Be Hindered or Delayed by Call of Meeting.. . . . 68
Section 10.8. Procedures Not Exclusive. . . . . . . . . . . . . . . 68
ARTICLE 11
SUBORDINATION. . . . . . . . . . . . . . . 68
Section 11.1. Securities Subordinated to Senior Debt. . . . . . . . 68
Section 11.2. Priority and Payment Over of Proceeds in Certain
Events. . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.3. Payments May Be Made Prior to Dissolution . . . . . . 71
Section 11.4. Rights of Holders of Senior Debt Not to Be Impaired . 72
Section 11.5. Authorization to Trustee to Take Action to
Effectuate Subordination. . . . . . . . . . . . . . . 72
Section 11.6. Subrogation . . . . . . . . . . . . . . . . . . . . . 72
Section 11.7. Obligations of Company Unconditional. . . . . . . . . 73
Section 11.8. The Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice . . . . . . . . . . . 74
Section 11.9. Right of Trustee to Hold Senior Debt. . . . . . . . . 74
Section 11.10. No Implied Covenants by or Obligations of the
Trustee . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE 12
MISCELLANEOUS. . . . . . . . . . . . . . . 75
Section 12.1. Trust Indenture Act Controls. . . . . . . . . . . . . 75
Section 12.2. Notices . . . . . . . . . . . . . . . . . . . . . . . 75
Section 12.3. Communication by Holders with Other Holders . . . . . 76
Section 12.4. Certificate and Opinion as to Conditions Precedent. . 76
Section 12.5. Statements Required in Certificate or Opinion . . . . 77
Section 12.6. Rules by Trustee and Agents . . . . . . . . . . . . . 77
Section 12.7. Legal Holidays. . . . . . . . . . . . . . . . . . . . 77
Section 12.8. No Recourse Against Others. . . . . . . . . . . . . . 78
Section 12.9. Governing Law . . . . . . . . . . . . . . . . . . . . 78
Section 12.10. No Adverse Interpretation of Other Agreements . . . . 78
Section 12.11. Successors. . . . . . . . . . . . . . . . . . . . . . 78
Section 12.12. Severability. . . . . . . . . . . . . . . . . . . . . 78
Section 12.13. Counterpart Originals . . . . . . . . . . . . . . . . 78
Section 12.14. Variable Provisions . . . . . . . . . . . . . . . . . 78
Section 12.15. Qualification of Indenture. . . . . . . . . . . . . . 78
- iv -
<PAGE>
Page
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Section 12.16. Table of Contents, Headings, etc. . . . . . . . . . . 79
Section 12.17. Indenture Controls over Form of Security. . . . . . . 79
SIGNATURES. . . . . . . . . . . . . . . . 80
- v -
<PAGE>
EXHIBIT A FORM OF SECURITY
EXHIBIT A-1 PRIVATE PLACEMENT LEGEND FOR RESTRICTED SECURITIES
EXHIBIT B FORM OF LEGEND FOR GLOBAL SECURITIES
EXHIBIT C TRANSFEREE CERTIFICATE FOR NON-QIB ACCREDITED INVESTORS
EXHIBIT D TRANSFEREE CERTIFICATE FOR TRANSFERS PURSUANT TO REGULATION S
- vi -
<PAGE>
INDENTURE dated as of June 15, 1995 between ProNet Inc., a Delaware
corporation (the "Company"), and First Interstate Bank of Texas, N.A., as
trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders (as defined below) of the
Company's 11 7/8% Senior Subordinated Notes due 2005 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS.
The term "ACQUIRED DEBT" shall mean (i) Debt of a Person existing at
the time such Person was acquired (by merger, consolidation or otherwise) by the
Company or a Subsidiary of the Company, PROVIDED that such Debt was not incurred
in connection with or in contemplation of the acquisition of such Person and
(ii) every obligation of such Person issued as the deferred purchase price, to
the extent payable within one year, of property (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business).
The term "AFFILIATE" of any Person shall mean any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person. For the purposes of this definition, "control"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
The term "AGENT" shall mean any registrar or paying agent, Transfer
Agent, custodian for the Securities, or authenticating agent or co-registrar.
The term "ASSET DISPOSITION" by any Person shall mean any transfer,
conveyance, sale, lease or other disposition by such Person or any of its
Subsidiaries (including a consolidation or merger or other sale of any such
Subsidiary with, into or to another Person in a transaction in which such
Subsidiary ceases to be a Subsidiary, but excluding a disposition by a
Subsidiary of such Person to such Person or a wholly owned Subsidiary of such
Person or by such Person to a wholly owned Subsidiary of such Person, and
excluding the creation of a lien, pledge or security interest) of (i) shares of
Capital Stock (other than directors' qualifying shares) or other ownership
interests of a Subsidiary of such Person, (ii) substantially all of the assets
of such Person or any of its Subsidiaries representing a division or line of
business or (iii) other assets or rights of such Person or any of its
Subsidiaries outside of the ordinary course
<PAGE>
2
of business, in any case where the consideration received by such Person or a
Subsidiary of such Person exceeds $1 million.
The term "ASSET EXCHANGE TRANSACTION" shall mean (i) any transaction
pursuant to which properties or assets of the Company or a Subsidiary of the
Company constituting a paging system within a geographically identifiable area
and related properties and assets (an "Identifiable Paging System") or all of
the shares of Capital Stock of a Subsidiary of the Company, the properties and
assets of which constitute an Identifiable Paging System, are to be exchanged
for properties or assets constituting an Identifiable Paging System of another
Person or all of the shares of Capital Stock of another Person the properties
and assets of which constitute an Identifiable Paging System or (ii) any
transaction pursuant to which licenses for frequencies (for purposes other than
paging) or related agreements and related properties or assets of the Company or
a Subsidiary of the Company ("Non-Paging Licenses") or all of the shares of
Capital Stock of a Subsidiary of the Company, the properties and assets of which
constitute Non-Paging Licenses, are to be exchanged for properties or assets
constituting Non-Paging Licenses of another Person or all of the shares of
Capital Stock of another Person the properties and assets of which constitute
Non-Paging Licenses.
The term "ATTRIBUTABLE DEBT" in respect of a sale and leaseback shall
mean, at the time of determination, the present value (discounted at the
interest rate implicit in the lease, compounded semiannually) of the obligation
of the lessee of the property subject to such sale leaseback transaction for
rental payments during the remaining term of the lease included in such
transaction including any period for which such lease has been extended or may,
at the option of the lessor, be extended or until the earliest date on which the
lessee may terminate such lease without penalty or upon payment of penalty (in
which case the rental payments shall include such penalty), after excluding all
amounts required to be paid on account of maintenance and repairs, insurance,
taxes, assessments, water, utilities and similar charges.
The term "BANKRUPTCY LAW" shall mean Title 11, United States Code or
any similar Federal or state law for the relief of debtors.
The term "BOARD OF DIRECTORS", when used with reference to the
Company, shall mean the Board of Directors of the Company, or the Executive
Committee of such Board.
The term "BUSINESS DAY" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in
New York, New York are authorized or obligated by law or executive order to
close.
<PAGE>
3
The term "CAPITAL EXPENDITURES" shall mean, with respect to any Person
for any period, the aggregate of all direct and indirect expenditures (including
capitalized interest) of such Person during such period which are required to be
included in property, plant or equipment or similar tangible property account,
including, without limitation, additions to equipment and leasehold
improvements, on a consolidated balance sheet of such Person and its
Subsidiaries prepared in accordance with GAAP.
The term "CAPITAL LEASE OBLIGATION" of any Person shall mean the
obligation to pay rent or other payment amounts under a lease of (or other Debt
arrangements conveying the right to use) real or personal property of such
Person which is required to be classified and accounted for as a capital lease
or a liability on the face of a balance sheet of such Person in accordance with
GAAP. The Stated Maturity of such obligation shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty.
The term "CAPITAL STOCK" of any Person shall mean any and all shares,
interests, participation or other equivalents (however designated) of corporate
stock of such Person.
The term "CHANGE OF CONTROL" shall mean the occurrence of one or more
of the following events: (i) a person or entity or group (as that term is used
in Section 13(d)(3) of the Exchange Act) of persons or entities shall have
become the beneficial owner of a majority of the securities of the Company
ordinarily having the right to vote in the election of directors, (ii) during
any consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any directors
who are members of such Board of Directors of the Company on the date hereof and
any new directors whose election by such Board of Directors of the Company or
whose nomination for election by the stockholders of the Company was approved by
a vote of 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office, (iii) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, the assets of the Company to
any person or entity or group (as so defined) of persons, or entities (other
than any wholly owned Subsidiary of the Company) or (iv) the merger or
consolidation of the Company with or into another corporation or the merger of
another corporation into the Company with the effect that immediately after such
transaction any person or entity or group (as so defined) of persons or entities
shall have become the beneficial owner of securities of the surviving
corporation of such merger or consolidation representing a majority of the
combined voting power of the
<PAGE>
4
outstanding securities of the surviving corporation ordinarily having the right
to vote in the election of directors.
The term "COMMON STOCK", of any Person shall mean Capital Stock of
such Person that does not rank prior, as to the payment of dividends or as to
the distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of Capital Stock of such Person.
The term "COMPANY" shall mean ProNet Inc. and, subject to the
provisions of Article Five, shall also include its successors and assigns.
The term "CONSOLIDATED CASH FLOW" of any Person shall mean for any
period the Consolidated Net Income of such Person for such period increased by
(i) Consolidated Interest Expense of such Person for such period, plus (ii) the
consolidated income tax expense of such Person for such period, plus (iii) the
consolidated depreciation and amortization expense included in the income
statement of such Person and its consolidated Subsidiaries for such period, plus
(iv) other non-cash charges deducted from consolidated revenues in determining
Consolidated Net Income for such period, minus (v) non-cash items increasing
Consolidated Net Income for such period.
The term "CONSOLIDATED FIXED CHARGES" of any Person shall mean for any
period Consolidated Interest Expense plus Preferred Stock dividends declared and
payable in cash.
The term "CONSOLIDATED INTEREST EXPENSE" of any Person shall mean for
any period the consolidated interest expense included in a consolidated income
statement (without deduction of interest income) of such Person and its
consolidated Subsidiaries for such period determined in accordance with
generally accepted accounting principles, including without limitation or
duplication (or, to the extent not so included, with the addition of), (i) the
amortization of Debt discounts; (ii) any payments of fees with respect to
letters of credit, bankers' acceptances or similar facilities; (iii) fees with
respect to interest rate swap or similar agreements or foreign currency hedge,
exchange or similar agreements, other than fees or charges related to the
acquisition or termination thereof which are not allocable to interest expense
in accordance with GAAP; and (iv) the interest component of Capital Lease
Obligations.
The term "CONSOLIDATED NET INCOME" of any Person shall mean for any
period the consolidated net income (or loss) of such Person and its Subsidiaries
for such period determined in accordance with GAAP; PROVIDED, that there shall
be excluded therefrom (i) the net income (but not the net loss) of any
consolidated Subsidiary of such Person which is subject to restrictions which
prevent the payment of dividends and the making of distributions (by loans,
advances, intercompany
<PAGE>
5
transfers or otherwise) to such Person to the extent of such restrictions,
(ii) the net income (or loss) of any Person that is not a consolidated
Subsidiary of such Person except to the extent of the amount of dividends or
other distributions actually paid to such Person by such other Person during
such period, (iii) gains or losses on Asset Dispositions by such Person or its
consolidated Subsidiaries and (iv) all extraordinary gains and extraordinary
losses.
The term "CONSOLIDATED TANGIBLE ASSETS" of any Person shall mean, at
any date, on a consolidated basis, the gross book value determined in accordance
with GAAP of all its property both real and personal, less (i) the net book
value of all its licenses, patents, patent applications, copyrights, trademarks,
trade names, goodwill, non-compete agreements or organizational expenses and
other like intangibles, (ii) unamortized Debt discount and expense, (iii) all
reserves for depreciation, obsolescence, depletion and amortization of its
properties and (iv) all proper reserves which in accordance with GAAP should be
provided in connection with the business conducted by such Person.
The term "CREDIT FACILITY" shall mean the credit agreement dated as of
June 30, 1994, between the Company and The First National Bank of Chicago, as
amended and restated as of February 9, 1995, and amended as of June 12, 1995 and
as the same may be amended (including any amendment and restatement thereof),
modified, supplemented, restated or replaced from time to time.
The term "DEBT" shall mean (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person,
and whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business), (v) every Capital Lease Obligation of such Person,
(vi) Attributable Debt of such Person, (vii) the maximum fixed redemption or
repurchase price of Redeemable Stock of such Person at the time of
determination, and (viii) every obligation of the type referred to in clauses
(i) through (vii) of another Person and all dividends of another Person the
payment of which, in either case, such Person has Guaranteed or for which such
Person is responsible or liable, directly or indirectly, as obligor, Guarantor
or otherwise.
The term "DEPOSITORY" shall mean The Depository Trust Company, New
York, New York, or its nominee or successors and
<PAGE>
6
assigns, or such other depository institution hereinafter appointed by the
Company.
The term "DESIGNATED SENIOR DEBT" shall mean any Senior Debt of the
Company (other than under the Credit Facility), and all fees, expenses,
indemnities and other monetary obligations in respect thereof which, at the date
of creation thereof or determination, has an aggregate principal amount
outstanding of, or under which at the date of creation thereof or determination,
the holders thereof are committed to lend, at least $5 million and is
specifically designated by the Company in the instrument evidencing or governing
such Senior Debt as "Designated Senior Debt" for purposes of this Indenture and
a Board Resolution setting forth such designation by the Company has been filed
with the Trustee.
The term "EVENT OF DEFAULT" shall have the meaning specified in
Section 6.1.
The term "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
The term "FREE CASH FLOW" of any Person shall mean, for any period,
Consolidated Cash Flow of such Person minus Capital Expenditures of such Person
for such period.
The term "GAAP" shall mean generally accepted accounting principles
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 may be approved by a significant segment of
the accounting profession of the United States, as in effect on the Issue Date.
The term "GUARANTY" by any Person shall mean any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Debt of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, and including, without limitation,
any obligation of such Person (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such Debt,
(ii) to purchase property, securities or services for the purpose of assuring
the holder of such Debt of the payment of such Debt, or (iii) to maintain
working capital, equity capital or other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Debt (and "Guaranteed," "Guaranteeing" and "Guarantor" shall have meanings
correlative to the foregoing); PROVIDED, HOWEVER, that the Guaranty by any
Person shall not include endorsements by such Person for collection or deposit,
in either case, in the ordinary course of business.
<PAGE>
7
The term "HOLDER," "HOLDER OF SECURITIES" or other similar terms,
shall mean the person in whose name a particular Security shall be registered on
the books of the Company kept for that purpose in accordance with the terms
hereof, and the word "majority," used in connection with the terms "Holder,"
"Holder of Securities," or other similar terms, shall signify the "majority in
principal amount" whether or not so expressed.
The term "INDENTURE" shall mean this instrument as originally
executed, or, if amended or supplemented as herein provided, as so amended or
supplemented.
The term "INTERNAL REVENUE CODE" shall mean the Internal Revenue Code
of 1986, as amended from time to time hereafter, or any successor federal income
tax laws.
The term "ISSUE DATE" shall mean the date on which the Securities are
first authenticated and delivered under this Indenture.
The term "LIEN" shall mean, with respect to any property or assets,
any mortgage or deed of trust, pledge, security interest, lien, charge,
encumbrance of any kind in respect of such properties or assets or other
security agreement (including, without limitation, any conditional sale or other
title retention agreement having substantially the same economic effect as any
of the foregoing).
The term "MATURITY" when used with respect to any Security, shall mean
the date on which the principal of such Security or an installment of principal
becomes due and payable as therein or herein provided, whether at Stated
Maturity or by declaration of acceleration, call for redemption or otherwise.
The term "NET AVAILABLE PROCEEDS" from any Asset Disposition by any
Person shall mean cash or readily marketable cash equivalents received
(including by way of sale or discounting of a note, installment receivable or
other receivable, but excluding any other consideration received in the form of
assumption by the acquiree of Debt or other obligations relating to such
properties or assets or received in any other noncash form) therefrom by such
Person, net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred and all federal, state, provincial, foreign and
local taxes required to be accrued as a liability as a consequence of such Asset
Disposition, (ii) all payments made by such Person or its Subsidiaries on any
Debt which is secured by such assets in accordance with the terms of any Lien
upon or with respect to such assets or which must by the terms of such Lien, or
in order to obtain a necessary consent to such Asset Disposition or by
applicable law, be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments made to minority interest holders in
Subsidiaries of such Person or joint ventures as a result of such Asset
<PAGE>
8
Disposition and (iv) a reasonable reserve for the after-tax costs of any
indemnification payments (fixed or contingent) attributable to the seller's
indemnities to the purchaser undertaken by the Company or any of its
Subsidiaries in connection with such Asset Disposition.
The term "OFFICER" shall mean any of the Chairman of the Board, the
Chief Executive Officer, the President, any Executive Vice President, the Chief
Financial Officer or the Corporate Secretary of the Company or any other obligor
upon the Securities.
The term "OFFICERS' CERTIFICATE" shall mean a certificate signed by
two Officers or an Officer and a Vice President, the Secretary or the Treasurer
of the Company which shall comply with applicable provisions of Sections 12.4
and 12.5 hereof.
The term "OPINION OF COUNSEL" shall mean, with respect to any Person,
an opinion in writing signed by legal counsel (who may be an employee of or
counsel to such Person) who is reasonably acceptable to the Trustee and, as
otherwise contemplated hereby, the Company, which shall comply with applicable
provisions of Sections 12.4 and 12.5 hereof.
The term "PERMITTED DEFERRED PAYMENTS" shall mean Debt incurred by the
Company or any of its Subsidiaries in connection with the acquisitions of, and
payable to the sellers of, the paging assets of Americom Paging Corporation,
Gold Coast Paging, Inc., Denton Enterprises, Inc., MetroTones, Inc., Lewis
Paging, Inc. and the capital stock of Page East, Inc. (provided that the
aggregate principal amount thereof does not exceed $12.7 million).
The term "PERMITTED LIENS" means: (i) Liens incurred and pledges and
deposits made in the ordinary course of business in connection with liability
insurance, workers' compensation, unemployment insurance, old-age pensions, and
other social security benefits other than in respect of employee benefit plans
subject to ERISA; (ii) Liens securing performance, surety, and appeal bonds and
other obligations of like nature incurred in the ordinary course of business;
(iii) Liens on goods and documents securing trade letters of credit; (iv) Liens
imposed by law, such as carriers', warehousemen's, mechanics', materialmen's,
and vendor's liens, incurred in the ordinary course of business and securing
obligations which are not yet due or which are being contested in good faith by
appropriate proceedings; (v) Liens securing the payment of taxes, assessments,
and governmental charges or levies (a) either (1) not delinquent or (2) being
contested in good faith by appropriate legal or administrative proceedings and
(b) as to which adequate reserves shall have been established on the books of
the relevant corporation in conformity with GAAP; (vi) zoning restrictions,
easements, rights of way, reciprocal easement agreements, operating agreements,
<PAGE>
9
covenants, conditions, or restrictions on the use of any parcel of property that
are routinely granted in real estate transactions or do not interfere in any
material respect with the ordinary conduct of the business of the Company and
its Subsidiaries or the value of such property for the purpose of such business;
(vii) purchase money Liens upon any property or equipment acquired or held in
the ordinary course of business to secure Debt incurred prior to, at the time
of, or within 60 days after the acquisition of such property or equipment solely
for the purpose of financing the acquisition of such property or equipment;
(viii) Liens on property existing at the time such property is acquired and
Liens on the assets of any Subsidiary of the Company at the time such Subsidiary
is acquired, provided such Liens apply only to such acquired property; (ix)
Liens existing as of the date of the Indenture; (x) Liens securing Debt incurred
for the purpose of financing all or any part of the cost of acquiring assets
(whether by merger, consolidation, purchase of assets or otherwise), PROVIDED
that such Debt is incurred prior to, at the time of, or within 60 days after the
acquisition of such assets solely for the purpose of financing the acquisition
of such assets in compliance with the provision described under Section 4.9;
(xi) any attachment or judgment Lien, unless the judgment it secures would
constitute an Event of Default; (xii) Liens with respect to assets of a
Subsidiary granted by such Subsidiary to the Company to secure Debt owing to the
Company; (xiii) right of banks to set off deposits against debts owed to said
banks; (xiv) any interest or title of a lessor in property of the Company or a
Subsidiary subject to any capitalized lease or operating lease, as each are
defined under GAAP; (xv) other Liens incidental to the conduct of the business
of the Company or any of its Subsidiaries, as the case may be, or the ownership
of their assets that do not materially detract from the value of the property of
the Company or a Subsidiary subject thereto; (xvi) Liens in addition to the
foregoing securing Debt not to exceed, together with Attributable Debt in
connection with sale-leaseback transactions, $500,000 in the aggregate
outstanding at any time; and (xvii) without limiting the ability of the Company
or any of its Subsidiaries to create, incur, assume, or suffer to exist any Lien
otherwise permitted under any of the foregoing clauses, any extension, renewal,
or replacement, in whole or in part, of any Lien described in the foregoing
clauses; PROVIDED, HOWEVER, that any such extension, renewal, or replacement
Lien is limited to the property or assets covered by the Lien extended, renewed,
or replaced or substitute property or assets, the value of which is determined
by the Board of Directors of the Company to be not materially greater than the
value of the property or assets for which the substitute property or assets are
substituted.
The term "PERSON" shall mean an individual, partnership, corporation,
trust or unincorporated organization, and a government or agency or political
subdivision thereof.
<PAGE>
10
The term "PREFERRED STOCK," as applied to the Capital Stock of any
Person, shall mean Capital Stock of such Person of any class or classes (however
designated) that ranks prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
The term "PRO FORMA CONSOLIDATED CASH FLOW" of any Person means for
any period the Consolidated Cash Flow of such Person for such period calculated
on a pro forma basis to give effect to any Asset Disposition or acquisition of
assets not in the ordinary course of business (including acquisitions of other
Persons by merger, consolidation or purchase of Capital Stock) during such
period as if such Asset Disposition or acquisition had taken place on the first
day of such period.
The term "REDEEMABLE STOCK" shall mean any equity security that by its
terms or otherwise is required to be redeemed prior to the Stated Maturity of
the Securities, or is redeemable at the option of the holder thereof at any time
prior to the Stated Maturity of the Securities.
The term "REDEMPTION DATE" when used with respect to any Security to
be redeemed or repurchased, shall mean the date fixed for such redemption or
repurchase by or pursuant to this Indenture.
The term "REDEMPTION PRICE" shall mean the amount payable for the
redemption or repurchase of any Security on the Redemption Date, and shall
always include interest accrued and unpaid to the Redemption Date, unless
otherwise specifically provided.
The term "REFINANCING DEBT" shall mean any Debt of the Company that
renews, refunds or extends any Debt of the Company or a Subsidiary of the
Company, in any case in an amount not to exceed the outstanding principal amount
of the Debt so refinanced plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the debt refinanced or
the amount of any premium reasonably determined by the Company as necessary to
accomplish such refinancing by means of a tender offer or privately negotiated
repurchase, plus the expenses of the Company incurred in connection with such
refinancing, PROVIDED that, (A) in the case of any refinancing of the Securities
or any pari passu Debt, such Refinancing Debt is made pari passu or subordinate
in right of payment to the Securities, (B) in the case of any refinancing of
Debt that is subordinate in right of payment to the Securities, such Refinancing
Debt is made subordinate in right of payment to the Securities, and (C) such
Refinancing Debt does not require the payment of all or a portion of the
principal thereof (whether pursuant to purchase, redemption, repayment,
defeasance, retirement, prepayment, sinking fund payment, payment at Stated
<PAGE>
11
Maturity or otherwise) prior to the final scheduled maturity of the Debt being
renewed, refunded or extended.
The term "REGISTRATION RIGHTS AGREEMENT" shall mean the Registration
Rights Agreement dated as of the Issue Date between the Company and the initial
purchasers of the Securities.
The term "RELATED PERSON" means any Person owning (i) 5% or more of
the outstanding Common Stock of the Company or a Subsidiary of the Company or
(ii) 5% or more of the Voting Stock of the Company or a Subsidiary of the
Company.
The term "RESPONSIBLE OFFICER" when used with respect to the Trustee
shall mean the chairperson or vice-chairperson of the board of directors, the
chairperson of the executive committee of the board of directors, the president,
any vice president, any assistant vice president, the cashier, any assistant
cashier, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, any senior trust officer, any trust officer, or any other officer or
assistant officer of the Trustee customarily performing functions similar to
those performed by the persons who at the time shall be such officers,
respectively.
The term "SECURITIES" shall have the meaning set forth in the recitals
of this Indenture and more particularly shall mean any Securities issued under
this Indenture (including Securities registered under the Securities Act to be
exchanged for Securities issued on the Issue Date pursuant to the Registration
Rights Agreement).
The term "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
The term "SECURITYHOLDER" means a Holder of one or more Securities.
The term "SENIOR DEBT" shall mean (i) the principal of (and premium,
if any), interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding) on,
penalties and any obligation of the Company for reimbursement, indemnities and
fees relating to, Debt outstanding pursuant to the Credit Facility, (ii) all
other Debt of the Company referred to in the definition of Debt other than
clauses (vii) and (viii) (with respect to clause (vii) of such definition)
thereof, (iii) payment obligations of the Company under interest rate swap or
similar agreements or foreign currency hedge, exchange or similar agreements
required by the Credit Facility, where the counterparty to such agreement is a
lender under the Credit Facility, and (iv) all renewals, extensions,
modifications, refinancings, refundings and amendments of any Debt or payment
obligations referred to in clause (i), (ii), or (iii) above
<PAGE>
12
(including, without limitation, any interest rate swap or similar agreements or
foreign currency hedge, exchange or similar agreements that are entered into by
the Company for the purpose of modifying, terminating or hedging any agreement
that constitutes Senior Debt under clause (iii) above whether or not such
modification, termination or hedge was required by the Credit Facility and
whether or not the counterparty to such agreement is a lender or former lender
under such Credit Facility), unless, in the case of any particular Debt referred
to above, (a) such Debt is owed to a Subsidiary of the Company, (b) the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Debt is not superior in right of
payment to the Securities, (c) such Debt is incurred in violation of the
Indenture, or (d) such Debt is by its terms subordinate in right of payment in
respect of any other Debt of the Company.
The term "SENIOR REPRESENTATIVE" shall mean any trustee, agent or
representative, if any, for the holders of any Designated Senior Debt.
The term "STATED MATURITY" when used with respect to any security or
Debt, or any installment of interest thereon, shall mean the date specified in
such security or the instrument relating to such Debt as the fixed date on which
the principal of such security or Debt or such installment of interest is due
and payable.
The term "SUBSIDIARY" of any Person shall mean (i) a corporation more
than 50% of the outstanding Voting Stock of which is owned, directly or
indirectly, by such Person or by one or more other Subsidiaries of such Person,
or by such Person and one or more other Subsidiaries thereof or (ii) any other
Person (other than a corporation) in which such Person, or one or more other
Subsidiaries of such Person or such Person and one or more other Subsidiaries
thereof, directly or indirectly, has at least a majority ownership and power to
direct the policies, management and affairs thereof; PROVIDED, that an
Unrestricted Subsidiary shall not be deemed to be a Subsidiary of the Company
for purposes of the Indenture.
The term "TIA" or "TRUST INDENTURE ACT" shall mean the Trust Indenture
Act of 1939 as in effect on the date on which this Indenture is qualified under
the TIA, except as provided in Section 9.3 hereof and except to the extent any
amendment to the TIA retroactively applies to this Indenture.
The term "TRANSFER AGENT" shall mean any Person, which may be the
Company, authorized by the Company to exchange or register the transfer of
Securities.
The term "TRUSTEE" shall mean the Person identified as the Trustee in
the recitals of this Indenture, or any successor appointed pursuant to this
Indenture.
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The term "UNRESTRICTED SUBSIDIARY" shall mean (i) any Subsidiary of
the Company which at the time of determination shall be an Unrestricted
Subsidiary (as designated by the Board of Directors of the Company, as provided
below) and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors of the Company may designate any Subsidiary of the Company (other than
as provided below but including any newly acquired or newly formed Subsidiary)
to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock
of, or owns or holds any Lien on any property of, any other Subsidiary of the
Company which is not a Subsidiary of the Subsidiary to be so designated or
otherwise an Unrestricted Subsidiary, PROVIDED, that (a) either (x) the
Subsidiary to be so designated has total assets of $10,000 or less or (y)
immediately after giving effect to such designation, the Company could incur
$1.00 of additional Debt pursuant to the first paragraph of Section 4.9 and (b)
immediately after giving effect to such designation, the Company could make an
additional Restricted Payment of $1.00 pursuant to the first paragraph of
Section 4.11; PROVIDED, that the holders of Debt thereof do not have direct or
indirect recourse against the Company or any Subsidiary of the Company and
neither the Company nor any Subsidiary of the Company otherwise has liability,
for any payment obligations in respect of such Debt. The Board of Directors of
the Company may designate any Unrestricted Subsidiary to be a Subsidiary,
PROVIDED, that immediately after giving effect to such designation, the Company
could incur $1.00 of additional Debt pursuant to the first paragraph of Section
4.9. Any such designation by the Board of Directors of the Company shall be
evidenced by filing with the Trustee a certified copy of the resolution of the
Board of Directors of the Company giving effect to such designation and an
Officers' Certificate certifying that such designation complies with the
foregoing conditions.
The term "U.S. GOVERNMENT OBLIGATIONS" shall mean securities which 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, and shall
also include a depository receipt issued by a bank or trust company as custodian
with respect to any such U.S. Government Obligations or a specific payment of
interest on or principal of any such U.S. Government Obligations 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 respect of the U.S. Government
Obligations or the specific payment of interest on or principal of the U.S.
Government Obligations evidenced by such depository receipt.
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The term "VOTING STOCK" of any Person means Capital Stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
SECTION 1.2. OTHER DEFINITIONS.
Defined in
Term Section
---- ----------
"Acceleration Due to Blockage"......... 6.2
"Act".................................. 1.5
"Agent Members"........................ 2.15
"blockage period"...................... 11.2
"Change of Control Offer".............. 4.17
"Commission"........................... 4.7
"covenant defeasance".................. 8.1
"Default".............................. 6.1(c)
"Events of Default".................... 6.1
"Global Securities".................... 2.2
"incur"................................ 4.9
"Indemnification Agreements"........... 4.14
"Institutional Accredited Investors"... 2.16
"legal defeasance"..................... 8.1
"Non-U.S. Person"...................... 2.16
"QIB".................................. 2.16
"Paying Agent"......................... 2.3
"Physical Securities".................. 2.2
"Private Placement Legend"............. 2.2
"Registrar"............................ 2.3
"Repurchase Date"...................... 4.17
"Restricted Payment"................... 4.11
"Restricted Security".................. 2.16
"Rule 144A"............................ 2.2
"Senior Nonmonetary Default"........... 11.2
"Senior Payment Default"............... 11.2
"Surviving Entity"..................... 5.2
SECTION 1.3. 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 Securities;
"INDENTURE SECURITY HOLDER" means a Securityholder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
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15
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and
"OBLIGOR" on the Securities means the Company, any other obligor upon
the Securities or any successor obligor upon the Securities.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule under
the TIA have the meanings so assigned to them.
SECTION 1.4. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
SECTION 1.5. ACTS OF HOLDERS.
(1) Meetings of Securityholders shall be conducted in accordance with
Article 10. Any other request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company.
Actions taken at meetings pursuant to Article 10 and such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 7.1) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
(2) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take
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16
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him or her the execution thereof. Where such
execution is by an officer of a corporation or a member of a partnership, on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his or her authority.
(3) The ownership of Securities shall be proved by the register
maintained by the Registrar.
(4) Subject to the provisions of Section 9.4, any request, demand,
authorization, direction, notice, consent, waiver or other Act of the Holder of
any Security shall bind every future Holder of the same Security and the Holder
of every Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustee or the Company in reliance thereon, whether
or not notation of such action is made upon such Security. However, any such
Holder or subsequent Holder may revoke the request, demand, authorization,
direction, notice, consent, waiver or other Act as to his or her Security or
portion thereof if the Trustee receives written notice of revocation before the
date such Act becomes effective.
(5) Securities that remain outstanding after the consummation of the
"Exchange Offer" as defined in the Registration Rights Agreement and new
Securities issued in connection with such Exchange Offer will be entitled to
vote or consent on all matters as a single class of Securities; neither the
Securities nor such new Securities issued in connection with such Exchange Offer
will have the right to vote or consent on any matter as a separate class.
ARTICLE 2
THE SECURITIES
SECTION 2.1. FORM AND DATING.
The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A. The Securities may have notations,
legends or endorsements required by law, stock exchange rule or usage, in
addition to those set forth in Exhibit A. The Company shall approve the form of
the Securities and any notation, legend or endorsement on them. Each Security
shall be dated the date of its authentication. The Securities shall be in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Securities shall constitute,
and are hereby expressly made, a part of this Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture,
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17
expressly agree to such terms and provisions and to be bound thereby.
SECTION 2.2. EXECUTION AND AUTHENTICATION.
Two Officers (each of whom shall have been duly authorized by all
requisite corporate actions) shall sign the Securities for the Company by manual
or facsimile signature. The Company's seal shall be reproduced on the
Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
The Trustee shall from time to time authenticate Securities for
original issue up to the aggregate principal amount stated in paragraph 4 of the
Securities upon a written order of the Company in the form of an Officers'
Certificate. In addition, on or prior to the date of the exchange offer
contemplated by the Registration Rights Agreement, the Trustee or an
authenticating agent shall authenticate Securities to be issued at the time of
such exchange offer up to the aggregate principal amount of Securities which the
Company accepts for exchange in the exchange offer contemplated by the
Registration Rights Agreement, upon receipt of a written order of the Company
signed by an Officer of the Company accompanied by the Securities accepted for
exchange, which shall thereupon be cancelled. In each case, the Officers'
Certificate shall specify the amount and type of Securities to be authenticated
and the date on which the Securities are to be authenticated and the legends, if
any, to be placed on the Securities. The aggregate principal amount of
Securities outstanding at any time may not exceed the amount set forth herein
except as provided in Section 2.8.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Securities. An authenticating agent may
authenticate Securities whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with the
Company or any Affiliate of the Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
Securities offered and sold in reliance on Rule 144A under the
Securities Act ("Rule 144A") shall be issued initially in the form of one or
more permanent Global Securities in
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18
registered form, substantially in the form set forth in Exhibit A ("Global
Securities"), deposited with the Trustee, as custodian for the Depository, and
shall bear the legends set forth on Exhibit A-1 and Exhibit B. The aggregate
principal amount of any Global Securities may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depository, as hereinafter provided.
Securities offered and sold in offshore transactions in reliance on
Regulation S under the Securities Act shall be issued in the form of
certificated Securities in registered form set forth in Exhibit A and shall bear
the legend regarding transfer restrictions applicable to certificated Securities
(the "Private Placement Legend") set forth on Exhibit A-1. Securities offered
and sold in reliance on any other exemption from registration under the
Securities Act other than as described in the preceding paragraph shall be
issued, and Securities offered and sold in reliance on Rule 144A may be issued,
in the form of certificated Securities in registered form in substantially the
form set forth in Exhibit A and shall bear the Private Placement Legend set
forth on Exhibit A-1. Such certificated Securities are herein referred to as
the "Physical Securities."
SECTION 2.3. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("Registrar"),
(b) Securities may be presented or surrendered for payment ("Paying Agent") and
(c) notices and demands in respect of the Securities and this Indenture may be
served. The Company may serve as the Agent referred to in clause (a), (b) or
(c) above. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company, upon notice to and approval of the Trustee,
may appoint one or more co-registrars and one or more additional paying agents.
The term "Paying Agent" includes any additional paying agent reasonably
acceptable to the Trustee. The term "Registrar" includes any appointed
co-registrar. The Company initially appoints the Trustee as Registrar and
Paying Agent and agent to receive notices and demands in respect of the
Securities until such time as the Trustee has resigned or a successor has been
appointed.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee, in advance, of the name and address of any such Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such.
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SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of, premium, if any, or interest on, the Securities
(whether such money has been distributed to it by the Company or any other
obligor on the Securities), and will notify the Trustee of any Default by the
Company (or any other obligor upon the Securities) in making any such payment.
If the Company or a Subsidiary acts as Paying Agent, it shall segregate such
money and hold it as a separate trust fund. While any such Default continues,
the Trustee may require a Paying Agent to pay all money held by it to the
Trustee. The Company (or any other obligor upon the Securities) at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company, a Subsidiary
or any other obligor upon the Securities) shall have no further liability for
the money.
SECTION 2.5. SECURITYHOLDER LISTS.
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
Securityholders and shall otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, the Company (or any other obligor upon the
Securities) shall furnish to the Trustee at least seven Business Days before
each interest payment date (and in all events at intervals of not more than six
months) and at such other times as the Trustee may request in writing a list in
such form and as of such date as the Trustee may reasonably require of the names
and addresses of Securityholders, and the Company shall otherwise comply with
TIA Section 312(a).
SECTION 2.6. TRANSFER AND EXCHANGE.
Subject to the applicable provisions of Sections 2.15 and 2.16 hereof,
where Physical Securities are presented to the Registrar or a co-registrar with
a request to register the transfer of such Securities or exchange them for an
equal principal amount of Securities of other authorized denominations, the
Registrar or co-registrar shall register the transfer or make the exchange if
its requirements for such transactions are met; provided that any Security
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar or co-registrar and the Trustee, duly executed by
the Holder thereof or his or her attorney duly authorized in writing. To permit
registrations of transfer and exchanges, the Company shall issue and the Trustee
shall authenticate Securities at the Registrar's or co-registrar's request.
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The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Security (i) during a period beginning at the
opening of business on a Business Day 15 days before the mailing of a notice of
redemption of Securities and ending at the close of business on the day of such
mailing and (ii) selected for redemption in whole or in part pursuant to Article
Three, except the unredeemed portion of any Security being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange; provided, however, that the Company may require payment of a sum
sufficient to pay any taxes or similar governmental charges that may be imposed
in connection with the transfer or exchange of Securities from the
Securityholder requesting such transfer or exchange (other than any such
transfer taxes or similar governmental charges arising under the laws of the
United States or of any State thereof payable upon transfers or exchanges
pursuant to Sections 2.2, 2.7, 2.10, 3.6, 3.8, 4.17 or 9.5).
SECTION 2.7. REPLACEMENT SECURITIES.
If any mutilated Security is surrendered to the Trustee or if the
Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, and the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Security, the Company
shall issue and the Trustee, upon the written order of the Company signed by two
Officers, shall authenticate a replacement Security if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent or any
authenticating agent from any loss which any of them may suffer if a Security is
replaced. The Company may charge the Holder for its reasonable out-of-pocket
expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.8. OUTSTANDING SECURITIES.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled or those delivered to it
for cancellation and those described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section 2.7.
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If an amount of money necessary to pay or redeem any Security shall be
deposited in trust with the Trustee (and in the case of a Security which is to
be redeemed prior to the Stated Maturity thereof, notice of such redemption
shall be duly given or provision satisfactory to the Trustee shall be made for
giving such notice), it shall cease to be outstanding and interest on it ceases
to accrue on and after the Redemption Date.
If a Security is cancelled by the Trustee or delivered to the Trustee
for cancellation, it ceases to be outstanding and interest on it ceases to
accrue.
A Security does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Security, except as otherwise provided in
Section 2.9 hereof.
SECTION 2.9. TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, any other obligor upon the Securities or an Affiliate of the
Company or such other obligor shall be considered as though not outstanding,
except that, for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Securities
which the Trustee knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee, upon receipt of the written order of the Company
pursuant to Section 2.2, shall authenticate definitive Securities in exchange
for temporary Securities. Until such exchange, temporary Securities shall be
entitled to the same rights, benefits and privileges as definitive Securities.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee, or at the direction of the Trustee, the Registrar or the
Paying Agent (other than the Company or a Subsidiary), and no one else,
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22
shall cancel all Securities surrendered for registration of transfer, exchange,
payment, replacement or cancellation and shall destroy cancelled Securities in
accordance with the usual destruction procedures of the Trustee, unless the
Company directs them to be returned to it by written order signed by two
Officers of the Company. Subject to Section 2.7, the Company may not issue new
Securities to replace Securities that it has paid or that have been delivered to
the Trustee for cancellation. All cancelled Securities held by the Trustee
shall be destroyed in accordance with the usual destruction procedures of the
Trustee and a record of their destruction shall be maintained by the Trustee.
If the Company shall acquire any of the Securities, such acquisition shall not
operate as a redemption or satisfaction of the Debt represented by such
Securities unless and until the same are surrendered to the Trustee for
cancellation pursuant to this Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest plus, to the extent lawful, interest payable on
the defaulted interest, to the Persons who are Holders on a subsequent special
record date, which date shall be the fifteenth day next preceding the date fixed
by the Company for the payment of defaulted interest or the next succeeding
Business Day if such date is not a Business Day, in each case at the rate
provided in the Securities. The Company shall, with the consent of and by
written notice to the Trustee, fix each such special record date and payment
date. At least 15 days before the special record date, the Company shall pay
the amount due to the Trustee and the Company (or the Trustee, in the name of
and at the expense of the Company) shall mail to each Holder, with a copy to the
Trustee, a notice that states the subsequent special record date, the payment
date and the amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid.
SECTION 2.13. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer
and subject to Section 2.12, the Company, the Trustee, any Paying Agent, any
co-registrar and any Registrar may deem and treat the person in whose name any
Security shall be registered upon the register of Securities kept by the
Registrar as the absolute owner of such Security (whether or not such Security
shall be overdue and notwithstanding any notation of the ownership or other
writing thereon made by anyone other than the Company, any co-registrar or any
Registrar) for the purpose of receiving payments of principal of, premium, if
any, or interest on, such Security and for all other purposes; and none of the
Company, the Trustee, any Paying Agent, any co-registrar or any Registrar shall
be affected by any notice to the contrary. However, neither the Company nor the
Trustee will be liable for any delay by the Holder of the Global Securities or
the
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23
Depository in identifying beneficial owners of the Securities and the Company
and the Trustee may conclusively rely on, and will be protected in relying on,
instructions from such Holder of such Global Securities or the Depository for
all purposes.
SECTION 2.14. CUSIP NUMBER.
The Company in issuing the Securities may use one or more "CUSIP"
numbers, in accordance with the requirements of the Depository, and if so, the
Trustee shall use the CUSIP number or numbers in notices of redemption or
exchange as a convenience to Holders; PROVIDED that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number or numbers printed in the notice or on the Securities, and that reliance
may be placed only on the other identification numbers printed on the
Securities.
SECTION 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) The Global Securities initially shall (i) be issued as one
certificate and registered in the name of the Depository or the nominee of such
Depository, (ii) be delivered to the Trustee or its Agent as custodian for such
Depository and (iii) bear legends as set forth in Exhibit A-1 and Exhibit B.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of the Global
Security 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 Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository. In addition, Physical Securities shall be
transferred to all beneficial owners in exchange for their beneficial interests
in Global Securities if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for any Global Security and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a request from the Depository or the Trustee to issue
Physical Securities.
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(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Security to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Securities are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Company shall execute and the Trustee shall authenticate and deliver, one or
more Physical Securities of like tenor and amount.
(d) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b), the Global Securities
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 Depository in exchange for its beneficial
interest in the Global Securities, an equal aggregate principal amount of
Physical Securities of authorized denominations.
(e) Any Physical Security constituting a Restricted Security, as
defined below, delivered in exchange for an interest in a Global Security
pursuant to paragraph (b) or (c) shall, except as otherwise provided by
paragraph (c) of Section 2.16, bear the Private Placement Legend in Exhibit A-1.
(f) The Holder of any Global Security may grant proxies and otherwise
authorize any person, including any agent and persons that may hold interests
through an agent, to take any action which a Holder is entitled to take under
this Indenture or the Securities.
SECTION 2.16. SPECIAL TRANSFER PROVISIONS.
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS AND
NON-U.S. PERSONS. The following provisions shall apply with respect to the
registration of any proposed transfer of a Security constituting a restricted
security as defined in Rule 144(a)(3) under the Securities Act (a "Restricted
Security") to any accredited investor as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act ("Institutional Accredited Investors") and which is
not a qualified institutional buyer ("QIB") as defined in Rule 144A under the
Securities Act or to any person who is not a U.S. Person as defined under
Regulation S promulgated under the Securities Act (a "Non-U.S. Person"):
(i) the Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend (which Securities will be assumed by the Registrar
to be Restricted Securities, until the Registrar receives written notice
from the Company that the Securities have been registered under the
Securities Act) if (A) the transferor furnishes to the
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25
Company and the Transfer Agent such certifications, legal opinions or other
information as they 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, and (B) (x) in the case of
a transfer to an Institutional Accredited Investor which is not a QIB (excluding
Non-U.S. Persons), the proposed transferee has delivered to the Registrar a
certificate substantially in the form of Exhibit C hereto or (y) in the case of
a transfer to a Non-U.S. Person, the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit D hereto and, in
each case, upon written approval of the transfer by an Officer of the Company;
and
(ii) if the proposed transferor is the Depository or an Agent Member
holding a beneficial interest in a Global Security, upon receipt by the
Registrar of (x) the certificate, if any, required by paragraph (i) above
and (y) instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon the Registrar shall reflect on its books and records the date and (if
the transfer does not involve a transfer of outstanding Physical Securities) a
decrease in the principal amount of a Global Security in an amount equal to the
principal amount of the beneficial interest in a Global Security to be
transferred, and the Company shall execute and the Trustee shall authenticate
and deliver one or more Physical Securities 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 Security constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) 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 Security 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 Security stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Security
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
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26
relying upon its foregoing representations in order to claim the exemption from
registration provided by Rule 144A;
(ii) if the proposed transferee is the Depository or an Agent Member,
and the Securities to be transferred consist of Physical Securities which
after transfer are to be evidenced by an interest in the Global Security,
upon receipt by the Registrar of instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the Global Security in an amount equal to the principal amount of the
Physical Securities to be transferred, and the Trustee shall cancel the
Physical Securities so transferred; and
(iii) if the proposed transferor is the Depository or an Agent Member
holding a beneficial interest in a Global Security, and the Securities to
be transferred consist of Global Securities which after the transfer are to
be evidenced by Physical Securities, upon receipt by the Registrar of
instructions given in accordance with the Depository's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date
and a decrease in the principal amount of the Global Security in an amount
equal to the principal amount of the beneficial interest in the Global
Security to be transferred, and the Company shall execute and the Trustee
shall authenticate and deliver one or more Physical Securities of like
tenor and amount.
(c) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless evidence satisfactory to the Trustee has
been provided that (i) 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 or (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act.
(d) GENERAL. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to
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27
Section 2.15 or this Section 2.16. 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.
The Company shall cooperate with and advise the Trustee and the
Registrar in writing regarding the application of Sections 2.15 and 2.16 such
that the Trustee and the Registrar can determine the applicable requirements and
satisfaction of such requirements.
ARTICLE 3
REDEMPTION
SECTION 3.1. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to the optional
redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at
least 30 days but not more than 60 days before a Redemption Date, an Officers'
Certificate setting forth the Section of this Indenture pursuant to which the
redemption shall occur, the Redemption Date, the principal amount of Securities
to be redeemed and the Redemption Price. If the Company elects to have the
Trustee furnish notice of redemption (as described above) of the Securities to
the Holders, the Company shall notify the Trustee in writing and provide all the
information and documentation required by this paragraph, at least 45 days but
not more than 60 days before a Redemption Date.
If the Company is required to repurchase Securities pursuant to the
provisions of Section 4.17 hereof, it shall notify the Trustee in writing, at
least 30 days but not more than 60 days before a Redemption Date, of the Section
of this Indenture pursuant to which the repurchase shall occur, the Redemption
Date, the principal amount of Securities to be repurchased and the Redemption
Price and shall furnish to the Trustee an Officers' Certificate to the effect
that (a) the Company is required to make or has made a Change of Control Offer
and (b) the conditions set forth in Section 5.1 hereof, as the case may be, have
been satisfied. If the Company elects to have the Trustee furnish notice of
repurchase (as described above) of the Securities to the Holders, the Company
shall notify the Trustee in writing and provide all the information and
documentation required by this paragraph, at least 45 days but not more than 60
days before a Redemption Date.
If the Registrar is not the Trustee, the Company shall, concurrently
with each notice of redemption, cause the Registrar to deliver to the Trustee a
certificate (upon which the Trustee may rely) setting forth the principal
amounts of Securities held by each Holder.
SECTION 3.2. SELECTION OF SECURITIES TO BE REDEEMED.
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28
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed in compliance with the requirements
of the principal national securities exchange, if any, on which the Securities
are listed or, if the Securities are not listed on a national securities
exchange or if no such requirements exist, on a PRO RATA basis, by lot or by
such method as the Trustee shall deem fair and reasonable. In the event of
partial redemption by lot, the particular Securities to be redeemed shall be
selected, unless otherwise provided herein, not less than 30 nor more than 60
days prior to the Redemption Date by the Trustee from the outstanding Securities
not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected for
partial redemption, the principal amount thereof to be redeemed. Securities and
portions of them selected shall be in amounts of $1,000 or integral multiples of
$1,000; except that if all of the Securities of a Holder are to be redeemed, the
entire outstanding amount of Securities held by such Holder, even if not a
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
In the event the Company is required to make an offer to redeem
Securities pursuant to Section 4.15 hereof and the amount of the Net Available
Proceeds from the Asset Disposition are not evenly divisible by $1,000, the
Trustee shall hold the remaining portion of such Net Available Proceeds that are
not so divisible until such amount, together with the Net Available Proceeds
from any subsequent Asset Disposition, may be applied to make an offer to redeem
Securities pursuant to Section 4.15.
SECTION 3.3. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.8 hereof, at least 30 days but
not more than 60 days before a Redemption Date, the Company shall send by first
class mail a notice of redemption to each Holder, at the last address for such
Holder then shown on the registry books, whose Securities are to be redeemed,
with a copy to the Trustee.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, upon surrender
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29
of such Security, a new Security or Securities in principal amount equal to the
unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price;
(6) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date, and the only remaining right of the Holders
of such Securities is to receive payment of the Redemption Price upon
surrender to the Paying Agent of the Securities redeemed;
(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption; and
(8) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided that the Company
shall deliver to the Trustee, at least 45 days prior to the Redemption Date, an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.
SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date at the Redemption Price. Upon
surrender to any Paying Agent, such Securities shall be paid at the Redemption
Price, on condition that sufficient funds to pay the Redemption Price on such
Securities have been deposited with the Paying Agent; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, registered as such, at
the close of business on the relevant record date for the payment of such
installment of interest.
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30
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the Redemption Date, the
Company shall irrevocably deposit with the Trustee or with the
Paying Agent money sufficient to pay the Redemption Price of all Securities to
be redeemed on that date. The Trustee or the Paying Agent shall return to the
Company any money not required for that purpose.
If the Company complies with the preceding paragraph, unless the
Company defaults in the payment of such Redemption Price, interest on the
Securities to be redeemed will cease to accrue on the applicable Redemption
Date, whether or not such Securities are presented for payment. If any Security
called for redemption shall not be so paid upon surrender for redemption because
of the failure of the Company to comply with the preceding paragraph, interest
will be paid on the unpaid principal, from the Redemption Date until such
principal is paid, and on any interest not paid on such unpaid principal, in
each case at the rate provided in the Securities and in Section 4.1 hereof.
SECTION 3.6. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder at the expense of
the Company a new Security equal in principal amount to the unredeemed portion
of the Security surrendered.
SECTION 3.7. OPTIONAL REDEMPTION.
The Company may redeem all or any of the Securities at any time on or
after June 15, 2000 at the Redemption Prices set forth in the Securities. Any
redemption pursuant to this Section 3.7 shall be made pursuant to the provisions
of Section 3.1 through 3.6 hereof.
SECTION 3.8. REDEMPTION UPON CHANGE OF CONTROL OFFER.
The Company shall redeem Securities in accordance with the provisions
of Section 4.17 hereof at a price of 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the Redemption Date. Any redemption
pursuant to this Section 3.8 shall be made pursuant to the provisions of
Sections 3.1 through 3.6 hereof.
SECTION 3.9. REDEMPTION PURSUANT TO SECTION 4.15.
The Company shall redeem Securities in accordance with the provisions
of Section 4.15 hereof at a price of 100% of the principal amount thereof plus
accrued and unpaid interest, if any, to the Redemption Date. Any redemption
pursuant to this
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31
Section 3.9 shall be made pursuant to the provisions of Sections 3.1 through 3.6
hereof.
ARTICLE 4
COVENANTS
Subject to the provisions of Section 8.1, so long as Securities are
outstanding hereunder, the Company covenants for the benefit of the Holders
that:
SECTION 4.1. PAYMENT OF PRINCIPAL AND INTEREST.
The Company will punctually pay the principal, premium, if any, and
interest to become due in respect of the Securities according to the terms of
the Securities and this Indenture. One Business Day prior to any Stated
Maturity, the Company shall irrevocably deposit with the Trustee or with the
Paying Agent money in immediately available funds sufficient to pay such
principal, premium, if any, and interest. The Trustee or the Paying Agent shall
return to the Company any money not required for that purpose. Such interest on
the Securities shall be payable without presentation of such Securities only to
or upon the written order of the Holders of such Securities. Subject to
requirements of the Depository, payments of interest shall be made either, at
the option of the Company, by check mailed to the address of the Person entitled
thereto as such address shall appear on the register of Securities or at the
office or agency of the Company maintained in accordance with Section 4.2.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
the rate per annum set forth in the Securities.
SECTION 4.2. MAINTENANCE OF OFFICE OR AGENCY FOR NOTICES AND DEMANDS.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where the Securities may be presented for payment, an
office or agency where the Securities may be presented for registration of
transfer and for exchange as provided in this Indenture and an office or agency
where notices and demands to or upon the Company in respect of such Securities
or of this Indenture may be served. Until otherwise designated by the Company
in a written notice to the Trustee, such office or agency in the City of New
York shall be the corporate trust office of the Trustee which shall be, until
further notice to the Company by the Trustee, at First Interstate Bank of Texas,
N.A. c/o Bank of Montreal Trust Company, 77 Water Street, Fourth Floor, New
York, New York 10005.
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32
SECTION 4.3. INSURANCE MATTERS.
The Company shall provide or cause to be provided, for itself and each
of its Subsidiaries, insurance (including appropriate self-insurance) against
loss or damage of the kinds that, in the reasonable, good faith opinion of the
Company are adequate and appropriate for the conduct of the business of the
Company and Subsidiaries in a prudent manner, 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
either (i) consistent with past practices of the Company or the applicable
Subsidiary or (ii) customary, in the reasonable, good faith opinion of the
Company, for corporations similarly situated in the industry, unless the failure
to provide such insurance (together with all other such failures) would not have
a material adverse effect on the financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole.
SECTION 4.4. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of the Company's fiscal year, an Officers' Certificate stating that a
review of its activities and the activities of its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether it has kept, observed, performed and
fulfilled its obligations under this Indenture and further stating, as to each
such Officer signing such certificate, that to the best of his or her knowledge
the Company during such preceding fiscal year has kept, observed, performed and
fulfilled each and every of its covenants contained in this Indenture and no
Default or Event of Default occurred during such year or, if such signers do
know of any Default or Event of Default, the certificate shall describe such
Default or Event of Default and its status with reasonable particularity.
(b) The Company shall deliver to the Trustee, within five (5)
Business Days of becoming aware of any Default or Event of Default in the
performance of any covenant, agreement or condition contained in this Indenture,
a notice identifying in reasonable detail the circumstances relating to such
Default or Event of Default.
SECTION 4.5. CORPORATE EXISTENCE.
Subject to Article Five, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, material rights (charter and statutory) and franchises; provided,
however, that the Company shall not be required to preserve any such material
right or franchise if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not
<PAGE>
33
disadvantageous in any material respect to the Holders of the Securities.
SECTION 4.6. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before any material penalty accrues thereon, (1) all material taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all material lawful claims for labor, materials and supplies which, if unpaid,
might by law become a Lien upon the property of the Company or any Subsidiary;
provided, however, 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 whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 4.7. REPORTS TO THE COMMISSION.
(a) The Company (at its own expense) shall file with the Trustee
within five days after it files with the Securities and Exchange Commission (the
"Commission") definitive copies of the annual reports and of the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the Commission may by rules and regulations prescribe) to be filed pursuant
to Sections 13 or 15(d) of the Exchange Act (without exhibits). In the event
that the Company is not subject to the requirements of such Section 13 or 15(d)
of the Exchange Act, the Company (at its own expense) shall file with the
Trustee such reports, information and other documents that would have been filed
with the Trustee pursuant to the preceding sentence had the Company been subject
to such reporting requirements of such Sections. Upon qualification of this
Indenture under the TIA, the Company shall also comply with the provisions of
TIA Section 314(a). Notwithstanding anything to the contrary herein, the
Trustee shall have no duty to review such documents for purposes of determining
compliance with any provisions of this Indenture.
(b) At the Company's expense, the Company shall cause definitive
copies (without exhibits) of any annual report if furnished by it to
stockholders generally and each quarterly report if furnished by it to
stockholders generally, in each case filed with the Trustee pursuant to
paragraph (a) above, to be mailed to the Holders at their addresses appearing in
the register of Securities maintained by the Registrar at the time of such
furnishing to stockholders. If the Trustee (at the Company's request and
expense) is to mail the foregoing information to the Holders, the Trustee shall
have not more than ten days after its receipt thereof from the Company to
complete such distribution. Notwithstanding anything contrary herein, the
Trustee shall have no duty to review such documents for purposes of determining
compliance with any provisions of this Indenture.
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34
(c) The Company will, upon request, provide to any Holder of
Securities that are not subject to an effective registration statement under the
Securities Act or any prospective transferee of any such Holder any information
concerning the Company (including financial statements) necessary in order to
permit such Holder to sell or transfer such Securities in compliance with Rule
144A under the Securities Act.
SECTION 4.8. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, 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 Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which 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 will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.9. LIMITATION ON CONSOLIDATED DEBT.
The Company may not, and may not permit its Subsidiaries to, directly
or indirectly, create, incur, assume, become liable for or guarantee the payment
of (collectively, "incur") any Debt (including Acquired Debt), PROVIDED,
HOWEVER, that the Company may incur Debt (including Acquired Debt) and may
permit a Subsidiary to incur Acquired Debt if immediately thereafter the ratio
of the aggregate principal amount of Debt of the Company and its Subsidiaries
outstanding as of the most recent available quarterly or annual balance sheet to
Pro Forma Consolidated Cash Flow for the preceding four full fiscal quarters,
determined on a pro forma basis as if any such Debt had been incurred and the
proceeds thereof had been applied at the beginning of such four fiscal quarters,
would be less than 5.5 to 1.
Notwithstanding the foregoing, the Company may, and may permit its
Subsidiaries to, incur the following without regard to the foregoing limitation
and without duplication: (i) Debt of the Company under the Credit Facility in
an aggregate principal amount not to exceed $125 million at any one time
outstanding; (ii) Guarantees by Subsidiaries of Debt permitted by clause (i);
(iii) Debt of the Company evidenced by the Securities; (iv) Debt owed by the
Company to any wholly owned Subsidiary of the Company or owed by any wholly
owned Subsidiary of the Company to the Company or any other wholly owned
Subsidiary of the Company (but only so long as such Debt is held by the Company
or such wholly owned Subsidiary); (v) Debt outstanding on the date the
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35
Securities are originally issued under the Indenture; (vi) Permitted Deferred
Payments; (vii) Debt arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the ordinary course of business, provided that such Debt is
extinguished within two Business Days of its incurrence; (viii) Refinancing
Debt; and (ix) renewals of Guarantees permitted by clause (ii) above.
For purposes of determining any particular amount of Debt under this
covenant, Guarantees of (or obligations with respect to letters of credit
supporting) Debt otherwise included in the determination of such amount shall
not also be included. For the purpose of determining compliance with this
covenant, (A) in the event that an item of Debt meets the criteria of more than
one of the types of Debt described in the above clauses, the Company, in its
sole discretion, shall classify such item of Debt and only be required to
include the amount and type of such Debt in one of such clauses; and (B) the
amount of Debt issued at a price which is less than the principal amount thereof
shall be equal to the amount of the liability in respect thereof determined in
accordance with GAAP.
SECTION 4.10. LIMITATION ON CERTAIN DEBT.
So long as any of the Securities are outstanding the Company will not
incur or suffer to exist any Debt (other than (i) the Securities and (ii) any
PARI PASSU Debt) that is by its terms subordinate in right of payment to any
other Debt of the Company unless such Debt is also subordinate by its terms in
right of payment to the Securities.
SECTION 4.11. LIMITATION ON RESTRICTED PAYMENTS.
The Company may not, and may not permit any of its Subsidiaries to,
(i) directly or indirectly, declare or pay any dividend, or make any
distribution, in respect of its Capital Stock or to the holders thereof
(including pursuant to a merger or consolidation of the Company, but excluding
any dividends or distributions payable solely in shares of its Capital Stock
(other than Redeemable Stock) or in options, warrants or other rights to acquire
its Capital Stock (other than Redeemable Stock)), other than dividends or
distributions payable to the Company or any wholly owned Subsidiary of the
Company, or by a Subsidiary of the Company to a holder who is not the Company or
a wholly owned Subsidiary of the Company, provided that such dividend or
distribution is paid to all of the holders of the Capital Stock of the payor of
such dividend, pro rata in accordance with their respective interests, (ii)
directly or indirectly, purchase, redeem or otherwise acquire or retire for
value (a) any Capital Stock of the Company or any Related Person or (b) any
options, warrants, or rights to purchase or acquire shares of Capital Stock of
the Company or any Related Person, (iii) make any loan, advance, capital
contribution to or
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36
investment in, or payment on a Guarantee of any obligation of any Affiliate or
any Related Person (other than the Company or a Subsidiary of the Company),
inclusive of any loan, advance, capital contribution to or investment in, or
payment on a Guarantee of any obligation of any Affiliate or Related Person by
the Company pursuant to a transaction whereby any such Affiliate or Related
Person becomes an Affiliate or Related Person, but exclusive of any loan,
advance, capital contribution to or investment in, or payment on a Guarantee of
any obligation of, any Person by the Company or a Subsidiary of the Company
pursuant to a transaction whereby any such Person becomes a Subsidiary of the
Company, in each case unless otherwise prohibited by the terms of this
Indenture, or (iv) redeem, defease, repurchase, retire or otherwise acquire or
retire for value prior to any scheduled maturity, repayment or sinking fund
payment (other than with the proceeds of Refinancing Debt), Debt of the Company
which is subordinate in right of payment to the Securities (each of clauses (i)
through (iv) being a "Restricted Payment"), if at the time of such Restricted
Payment, or after giving effect thereto: (1) an Event of Default, or an event
that with the lapse of time or the giving of notice, or both, would constitute
an Event of Default, shall have occurred and be continuing, (2) the Company
could not incur $1.00 of additional Debt under the first paragraph of Section
4.9 hereof, or (3) the aggregate of all Restricted Payments from the date of the
Indenture exceeds the sum of: (a) the remainder of (x) 100% of cumulative Free
Cash Flow after June 30, 1995 through the last day of the last full fiscal
quarter immediately preceding such Restricted Payment for which quarterly or
annual financial statements of the Company are available minus (y) the product
of 2.0 times cumulative Consolidated Fixed Charges after June 30, 1995 through
the last day of the last full fiscal quarter immediately preceding such
Restricted Payment for which quarterly or annual financial statements of the
Company are available; and (b) after the date of the Indenture, 100% of the
aggregate net proceeds from the issuance of Capital Stock (other than Redeemable
Stock) of the Company and options, warrants or other rights on Capital Stock
(other than Redeemable Stock) of the Company and the principal amount of Debt of
the Company that has been converted into Capital Stock (other than Redeemable
Stock) of the Company.
The foregoing provision will not be violated by reason of (i) the
payment of any dividend within 60 days after declaration thereof if at the
declaration date such payment would have complied with the foregoing provision;
(ii) the purchase, redemption, acquisition or retirement of any shares of
Capital Stock of the Company in exchange for, or out of the net proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of,
other shares of Capital Stock (other than Redeemable Stock) of the Company;
(iii) the purchase, redemption, defeasance or other acquisition or retirement of
Debt of the Company which is subordinate in right of payment of the Securities,
in exchange for, by conversion into, or out of the net proceeds of, a
substantially concurrent (a) issue or sale
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37
(other than to a Subsidiary) of Capital Stock (other than Redeemable Stock) of
the Company, or (b) incurrence of Refinancing Debt with respect to such
subordinated Debt; or (iv) investments in telecommunications businesses in an
aggregate amount not exceeding $10.0 million; PROVIDED that no Default or Event
of Default shall have occurred and be continuing at the time, or shall occur as
a result, of any of the actions contemplated in clauses (ii) and (iii) above.
Any payment made pursuant to clauses (i) through (iii) (other than subclause
(iii)(b)) of this paragraph shall be a Restricted Payment for purposes of
calculating aggregate Restricted Payments under the preceding paragraph.
SECTION 4.12. LIMITATION ON DISTRIBUTIONS BY AND TRANSFERS TO SUBSIDIARIES,
ETC.
The Company may not, and may not permit any Subsidiary of the Company
to, create, assume or otherwise suffer to exist any encumbrance or restriction
on the ability of any Subsidiary of the Company to (i) pay, directly or
indirectly, dividends or make any other distributions in respect of its Capital
Stock or pay any Debt or other obligation owed to the Company or any other
Subsidiary of the Company; (ii) make loans or advances to the Company or any
Subsidiary of the Company; or (iii) transfer any of its property or assets to
the Company or a Subsidiary of the Company. Notwithstanding the foregoing, the
Company may, and may permit any of its Subsidiaries to, create, assume or
otherwise suffer to exist any such encumbrances or restriction on the ability of
any Subsidiary of the Company if and to the extent (i) subject to the provision
described under Section 5.1, such encumbrance or restriction existed prior to
the time any Person became a Subsidiary of the Company and such restriction or
encumbrance was not incurred in anticipation of such acquisition of such Person
by the Company; (ii) subject to the provisions described under Section 5.1,
Section 4.15 and Section 4.16, such encumbrance or restriction exists by reason
of a customary merger or acquisition agreement for the purchase or acquisition
of the stock or assets of the Company or any of its Subsidiaries by another
Person; (iii) such encumbrance or restriction is contained in an operating lease
for real property and is effective only upon the occurrence and during the
continuance of a default in the payment of rent; (iv) such encumbrance or
restriction is the result of applicable corporate law or regulation relating to
the payment of dividends or distributions; (v) such encumbrance or restriction
is the result of applicable statute, regulation or administrative rule which
restricts the transfer of licenses or permits; and (vi) such encumbrance or
restriction is contained in the Credit Facility on the date of the Indenture,
including any amendment, modification, supplementation, restatement or
replacement of such Credit Facility, PROVIDED that the terms and conditions of
such amendment, modification, supplementation, restatement or replacement in
respect of such encumbrance or restriction are not less favorable to the Holders
of the Securities than the terms
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38
and conditions in respect of such encumbrance or restriction of the Credit
Facility on the date of the Indenture.
SECTION 4.13. LIMITATION ON LIENS.
The Company will not, and will not permit any Subsidiary of the
Company to, create, incur, assume or suffer to exist any Lien (other than
Permitted Liens) upon or in respect of any of its property or assets to secure
any Debt which is pari passu with or subordinate in right of payment to the
Securities, unless the Securities are secured equally and ratably simultaneously
with or prior to the creation, incurrence or assumption of such Lien; PROVIDED,
HOWEVER, that if such Debt is expressly subordinate to the Securities, the Lien
securing such subordinated Debt shall be subordinate and junior to the Lien
securing the Securities with the same relative priority as such subordinated
Debt shall have with respect to the Securities.
SECTION 4.14. LIMITATION ON TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS.
The Company may not, and may not permit any Subsidiary of the Company
to, directly or indirectly, enter into any transaction or series of transactions
after the date of the Indenture with any Affiliate or Related Person (other than
the Company or a wholly owned Subsidiary of the Company), unless (i) such
transaction or series of transactions is on terms no less favorable to the
Company or such Subsidiary than those that could be obtained in a comparable
arm's-length transaction with an entity that is not an Affiliate or a Related
Person; and (ii) if such transaction or series of transactions involves
aggregate of $1 million, then such transaction or series of transactions is
approved by a majority of the Board of Directors of the Company, including the
approval of a majority of the independent, disinterested directors, and is
evidenced by a resolution of the Board of Directors of the Company. Any such
transaction or series of transactions shall be conclusively deemed to be on
terms no less favorable to the Company or such Subsidiary than those that could
be obtained in an arm's-length transaction if such transaction or transactions
are approved by a majority of the Board of Directors of the Company, including a
majority of the independent disinterested directors, and are evidenced by a
resolution of the Board of Directors of the Company.
This covenant will not apply to (a) transactions between the Company
or any of its Subsidiaries and any employee of the Company or any of its
Subsidiaries that are entered into in the ordinary course of business, (b) the
payment of reasonable and customary regular fees and expenses to directors of
the Company, (c) the making of indemnification, contribution or similar payments
to any director or officer of the Company or any Subsidiary of the Company under
the Company's or such Subsidiary's charter or bylaws (as each may be amended
after the date of this Indenture or any indemnification or similar
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39
agreement between the Company or any such Subsidiary and any of its directors or
officers (collectively, "Indemnification Agreements"), or (d) the entering into
any Indemnification Agreements with any current or future directors or officers
or the Company or any Subsidiary of the Company.
SECTION 4.15. LIMITATION ON CERTAIN ASSET DISPOSITIONS.
The Company may not, and may not permit any Subsidiary of the Company
to, make any Asset Disposition in one or more transactions unless: (i) the
Company (or such Subsidiary, as the case may be) receives consideration at the
time of such Asset Disposition at least equal to the fair market value for the
assets sold or disposed of as determined by the Board of Directors of the
Company; (ii) at least 80% of the consideration for such Asset Disposition
consists of cash or readily marketable cash equivalents or the assumption of
Senior Debt or pari passu Debt of the Company and release from all liability on
such Senior Debt or pari passu Debt; and (iii) all Net Available Proceeds of
such Asset Disposition, less any amounts invested within 180 days of such Asset
Disposition in assets related to the business of the Company, are applied within
180 days of such Asset Disposition, (a) first to the permanent reduction of any
Debt then outstanding under the Credit Facility to the extent the terms of the
Credit Facility require such application or prohibit prepayment of the
Securities, (b) second, to the repayment of any other Senior Debt to the extent
the terms of such Debt require such application or prohibit prepayment of the
Securities, and (c) third, to the extent remaining Net Available Proceeds,
together with any remaining Net Available Proceeds from any prior Asset
Disposition, exceed $3 million, to make an offer to purchase, on a pro rata
basis according to their respective principal amounts then outstanding (or
accreted value, as the case may be), the outstanding Securities and pari passu
Debt, at 100% of their principal amount (or accreted value, as the case may be),
plus accrued interest to the date of the purchase.
Notwithstanding the foregoing, the Company shall not be required to
repurchase or redeem Securities or to repay other Debt pursuant to clause (iii)
above until the Net Available Proceeds from any Asset Disposition together with
the Net Available Proceeds from any prior Asset Disposition not otherwise
applied in accordance with clause (a), (b) or (c) of the preceding paragraph,
less any amounts invested within 180 days of such disposition or dispositions in
assets related to the business of the Company, exceed $5 million. To the extent
that the aggregate purchase price of the Securities tendered pursuant to such an
offer to purchase is less than the aggregate purchase price offered in such
offer, the Company may use such shortfall for general corporate purposes. The
Company shall not be entitled to any credit against such obligation to purchase
Securities for the principal amount of any Securities acquired by the Company
other than pursuant to such offer to purchase. These
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40
provisions will not apply to a transaction which is permitted under the
provisions described under Section 5.1.
Subject to the provisions described under Section 5.1, below, the
provisions of this covenant shall not apply to any Asset Disposition which is
part of an Asset Exchange Transaction if (i) the Board of Directors of the
Company shall determine that the Asset Exchange Transaction is fair and
reasonable to, and in the best interests of, the Company, which determination
shall be evidenced by a resolution of the Board of Directors of the Company
filed with the Trustee and (ii) in the event (a) the properties and assets of
the Company or a Subsidiary of the Company to be transferred in such Asset
Exchange Transaction or the properties and assets of the Subsidiary of the
Company whose Capital Stock is being transferred in such Asset Exchange
Transaction represent $5 million or more as reflected in the most recent
quarterly or annual consolidated balance sheet of the Company and its
Subsidiaries prior to such Asset Exchange Transaction and (b) such transfer is
made to an Affiliate or Related Person, the Company shall have obtained the
written opinion of an independent financial advisor stating that the Asset
Exchange Transaction is fair to the Company from a financial point of view or
the determination under (i) above shall have been made by a majority of the
disinterested directors of the Company.
SECTION 4.16. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF
SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Subsidiary of the
Company to, transfer, convey, sell, lease or otherwise dispose of any Capital
Stock of such or any other Subsidiary to any Person (other than the Company or a
wholly owned Subsidiary) unless such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Subsidiary owned by the Company
or such other Subsidiary and the Net Available Proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance with
Section 4.15 and (ii) shall not permit any Subsidiary to issue shares of its
Capital Stock (other than directors' qualifying shares), or securities
convertible into, or warrants, rights or options to subscribe for or purchase
shares of, its Capital Stock to any Person other than the Company or a wholly
owned Subsidiary of the Company.
SECTION 4.17. CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder of the
Securities shall have the right to require that the Company repurchase such
Holder's Securities, in whole or in part (equal to $1,000 or integral multiples
of $1,000), at a repurchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of
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41
repurchase, pursuant to the offer described in the succeeding paragraph (the
"Change of Control Offer").
Within 30 days following any Change of Control, the Company shall mail
a notice to each Holder with a copy to the Trustee stating: (i) that a Change
of Control has occurred and that such Holder has the right to require the
Company to repurchase such Holder's Securities, in whole or in part (equal to
$1,000 or integral multiples of $1,000), at a repurchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of repurchase; (ii) the circumstances and relevant facts regarding
such Change of Control (including relevant information with respect to the
transaction giving rise to such Change of Control and, if applicable,
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change of Control); (iii) the
repurchase date (which shall be not earlier than 30 days or later than 60 days
from the date such notice is mailed) (the "Repurchase Date"); (iv) that any
Security not tendered will continue to accrue interest; (v) that any Security
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Repurchase Date; (vi) that Holders electing to have a
Security purchased pursuant to a Change of Control Offer will be required to
surrender the Security, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Security completed, to the Paying Agent (which
may be the Company) at the address specified in the notice prior to the close of
business on the Repurchase Date (provided that the Company may require delivery
of notice of tender on such earlier date as may be required by the Depository
prior to the Repurchase Date); (vii) 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 (or such shorter periods as may be required
by applicable law) preceding the Repurchase Date, a telegram, telex, facsimile
transmission, letter or other written communication customarily practiced by the
Depository and the Trustee, setting forth the name of the Holder, the principal
amount of Securities the Holder delivered for purchase, and a statement that
such Holder is withdrawing his or her election to have such Securities purchased
and instructing the Trustee to return his or her Physical Securities; and (viii)
that Holders which elect to have their Securities purchased only in part will be
issued new Securities in a principal amount equal to the unpurchased portion of
the Securities surrendered.
The Company shall (i) on the Repurchase Date, accept for payment
Securities or portions thereof validly tendered pursuant to the Change of
Control Offer, (ii) one Business Day prior to the Repurchase Date deposit with
the Trustee or a Paying Agent (or segregate, if the Company is acting as its own
Paying Agent) money in immediately available funds sufficient to pay the
purchase price of all Securities or portions thereof so tendered and (iii) on
the Repurchase Date, deliver or cause to be delivered to the Trustee
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42
Securities so accepted, together with an Officers' Certificate stating the
Securities or portions thereof which are thereby tendered to the Company. The
Trustee or a Paying Agent shall promptly mail to the Holders of Securities such
accepted payment in an amount equal to the purchase price and promptly
authenticate and mail to such Holders a new Security in a principal amount equal
to any unpurchased portion of the Security surrendered. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Repurchase Date.
In the event a Change of Control occurs and any repurchase pursuant to
the foregoing constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act, the Company will comply with the requirements of Rule 14e-1 as
then in effect, to the extent applicable, and any other applicable securities
laws or regulations with respect to such repurchase. The Change of Control
provisions described above may deter certain mergers, tender offers and other
takeover attempts involving the Company.
ARTICLE 5
SUCCESSORS
SECTION 5.1. LIMITATION ON MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF
ASSETS.
The Company (i) may not consolidate with or merge into any other
Person or permit any other Person to consolidate with or merge into the Company
or any Subsidiary of the Company (in a transaction in which such Subsidiary
remains a Subsidiary of the Company); (ii) may not, directly or indirectly,
transfer, convey, sell, lease or otherwise dispose of all or substantially all
of its assets; (iii) may not, and may not permit any Subsidiary of the Company
to, directly or indirectly, acquire Capital Stock of any other Person such that
such Person becomes a Subsidiary of the Company; and (iv) may not, and may not
permit any Subsidiary of the Company to, directly or indirectly, purchase, lease
or otherwise acquire (x) all or substantially all of the assets or (y) any
existing business (whether existing as a separate entity, subsidiary, division,
unit or otherwise) of any Person unless: (1) immediately before and after
giving effect to such transaction and treating any Debt incurred by the Company
or a Subsidiary of the Company as a result of such transaction as having been
incurred by the Company or such Subsidiary at the time of the transaction, no
Event of Default or event that with the passing of time or the giving of notice,
or both, shall constitute an Event of Default, shall have occurred and be
continuing; (2) in a transaction in which the Company does not survive or in
which the Company conveys, sells, leases or otherwise disposes of all or
substantially all of its assets, the successor entity to the Company is
organized under the laws of
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43
the United States or any State thereof or the District of Columbia and expressly
assumes, by a supplemental Indenture executed and delivered to the Trustee in
form satisfactory to the Trustee, all of the Company's obligations under this
Indenture; and (3) immediately after giving effect to such transaction, the
Company or the successor entity to the Company could incur at least $1.00 of
additional Debt pursuant to the first paragraph of Section 4.9 hereof; PROVIDED,
HOWEVER, that the provisions of this clause (3) shall not apply to transactions
described in clauses (i) through (iv) above which are (x) between the Company
and one or more of its wholly owned Subsidiaries or (y) between two or more
wholly owned Subsidiaries of the Company.
Notwithstanding clause (3) above, the Company or any Subsidiary of the
Company may acquire the Capital Stock of a Person in a transaction in which such
Person becomes a Subsidiary of the Company or directly or indirectly purchase,
lease or otherwise acquire (x) all or substantially all of the assets or (y) any
existing business (whether existing as a separate entity, subsidiary, division,
unit or otherwise) of any Person so long as (a) the sum of the consideration
paid for all other such acquisitions consummated during the twelve-month period
immediately preceding the date of such acquisition and the Debt incurred in
connection therewith does not exceed 5% of Consolidated Tangible Assets of the
Company immediately prior to such acquisition.
The Company shall deliver to the Trustee prior to the consummation of
the proposed transaction an Officers' Certificate to the foregoing effect and an
Opinion of Counsel stating that the proposed transaction and such supplemental
indenture comply with this Indenture.
SECTION 5.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company, in
accordance with Section 5.1 hereof, the continuing corporation or the entity
formed by or surviving any such consolidation or merger, or to which a sale,
lease, conveyance or other disposal of all or substantially all of the Company's
assets is made (the "Surviving Entity") 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 Surviving Entity has been named as the Company
herein, and, except in the case of a lease, the predecessor corporation shall be
relieved of all obligations and covenants under this Indenture and the
Securities.
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44
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall occur if:
(a) the Company defaults in the payment of interest on any Securities
when the same becomes due and payable and the Default continues for a
period of 30 days (including the failure to make payments pursuant to a
Change of Control Offer pursuant to Section 4.17 or an offer to repurchase
pursuant to Section 4.15);
(b) the Company defaults in the payment of the principal or premium,
if any, of any Securities when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise (including the failure
to make payments pursuant to a Change of Control Offer pursuant to Section
4.17 or an offer to repurchase pursuant to Section 4.15);
(c) the Company or any Subsidiary of the Company fails to comply with
any other covenants or agreements (other than the provisions of Article
Five) contained in the Securities or this Indenture (a "Default"), and the
Default continues for a period of 60 days after the notice specified below;
(d) the Company or any Subsidiary of the Company fails to perform or
comply with the provisions of Article Five;
(e) the Company or any of its Subsidiaries (A) admits in writing its
inability to pay its debts generally as they become due, (B) commences a
voluntary case or proceeding under any Bankruptcy Law with respect to
itself, (C) consents to the entry of a judgment, decree or order for relief
against it in an involuntary case or proceeding under any Bankruptcy Law,
(D) consents to the appointment of a custodian of it or for substantially
all of its property, (E) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it, (F) makes a general
assignment for the benefit of its creditors, or (G) takes any corporate
action to authorize or effect any of the foregoing;
(f) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any of its Subsidiaries in an
involuntary case or proceeding under any Bankruptcy Law, which shall (A)
approve as properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect of the Company or any of its
Subsidiaries, (B) appoint a custodian
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45
of the Company or any of its Subsidiaries or for substantially all of its
property or (C) order the winding-up or liquidation of its affairs; and such
judgment, decree or order shall remain unstayed and in effect for a period of 60
consecutive days;
(g) final judgment or judgments for the payment of money which in the
aggregate at any one time exceeds $2 million shall be rendered against the
Company or any Subsidiary of the Company by a court of competent
jurisdiction and shall not have been vacated, discharged, satisfied or
stayed within 60 days after such judgment becomes final and nonappealable;
or
(h) a default shall have occurred under any bonds, debentures, notes
or other evidences of indebtedness of the Company or any Subsidiary of the
Company or under any mortgages, indentures or instruments under which there
may be issued or by which there may be secured or evidenced any
indebtedness by the Company or any Subsidiary of the Company, in any case
with a principal amount of at least $2 million outstanding, and such
indebtedness already is due and payable in full or such default has
resulted in the acceleration of the maturity of such indebtedness, in each
case after a period of five days during which period such default shall not
have been cured or such acceleration shall not have been rescinded.
Subject to the provisions of this Indenture relating to the duties of
the Trustee in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under this Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee indemnity satisfactory to the
Trustee, in accordance with Sections 6.6 and 7.1(5). Subject to such provisions
for the indemnification of the Trustee and in accordance with Section 6.5, the
Holders of a majority in aggregate principal amount of the outstanding
Securities will have the right to 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.
A Default under clause (c) above is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in principal amount
of the outstanding Securities notify the Company and the Trustee, of the
Default, and the Company or the Subsidiary of the Company does not cure the
Default within 60 days after receipt of the notice. The notice must specify the
Default, demand that it be remedied and state that the notice is a "Notice of
Default" under this Section 6.1. Such notice shall be given by the Trustee if
so requested by the Holders of at least 25% in principal amount of the
Securities then outstanding. When a Default is cured or waived, it ceases.
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46
SECTION 6.2. ACCELERATION.
(a) If an Event of Default (other than an Event of Default specified
in Section 6.1(e) or 6.1(f) with respect to the Company or any Subsidiary of the
Company) occurs and is continuing, the Trustee may, by notice to the Company and
to the agent bank for the Credit Facility (and, if any Designated Senior Debt is
outstanding, to the holders thereof or their Senior Representatives), or the
Holders of at least 25% in principal amount of the Securities then outstanding
may, by written notice to the Company and the Trustee, and the Trustee shall
(with notice to the agent bank for the Credit Facility and to the holders of
Designated Senior Debt or their Senior Representatives if any Designated Senior
Debt is outstanding), upon the request of such Holders, declare the aggregate
principal amount of the Securities outstanding, together with accrued but unpaid
interest thereon to the date of payment, to be due and payable and, upon any
such declaration, the same (i) shall become and be due and payable; or (ii) if
there is any Senior Debt under the Credit Facility or Designated Senior Debt
outstanding, shall become due and payable upon the first to occur of an
acceleration under such Senior Debt or five Business Days after receipt by the
Company, the agent bank for the Credit Facility and the Senior Representative
with respect to such Designated Senior Debt of such acceleration notice, unless
all Events of Default specified in such acceleration notice (other than any
Event of Default in respect of non-payment of principal) shall have been cured;
thereupon the Trustee may, at its discretion, proceed to protect and enforce the
rights of the Holders of Securities by appropriate judicial proceeding.
However, the Trustee shall be under no obligation to follow any request of any
of the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred by it in compliance with such request, order or direction. If an Event
of Default specified in Section 6.1(e) or 6.1(f) occurs with respect to the
Company, all unpaid principal or premium, if any, of, and accrued interest on,
the Securities 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 Holders.
(b) After a declaration of acceleration has been made, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of at least a majority in aggregate principal amount of
Securities outstanding, by written notice to the Company and the Trustee, may
annul such declaration if (i) the Company has paid or deposited with the Trustee
a sum sufficient to pay (a) all sums paid or advanced by the Trustee under this
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, (b) all overdue interest on all
Securities, and (c) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities; and (ii) all
Events of Default, other than the non-payment of
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47
principal of the Securities which have become due solely by such declaration of
acceleration, have been cured or waived. Notwithstanding the foregoing, any
acceleration of payment of the Securities from the failure of the Company to
make an interest payment on the Securities during a Payment Blockage Period (an
"Acceleration Due to Blockage") automatically will be rescinded if and when the
following conditions are satisfied within five Business Days following the end
of such Payment Blockage Period: (i) the payment in respect of interest on the
Securities, the failure of which gave rise to such Event of Default, is made;
and (ii) no other Event of Default, other than an Event of Default which has
occurred solely as a result of the acceleration of other Debt of the Company or
any Restricted Subsidiary prior to its express maturity that was caused solely
by an Acceleration Due to Blockage, shall have occurred and be continuing.
SECTION 6.3. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, premium, if any, or interest on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of
any other remedy. All available remedies are cumulative to the extent permitted
by law.
SECTION 6.4. WAIVER OF PAST DEFAULTS.
Subject to Sections 6.7 and 9.2, the Holders of greater than 50% in
aggregate principal amount of the Securities outstanding may on behalf of the
Holders of all the Securities waive any past defaults under this Indenture and
its consequences, except a default in the payment of the principal of, premium,
if any, or interest on any Security, or in respect of a covenant or provision
which under this Indenture cannot be modified or amended without the consent of
the Holder of each Security outstanding.
SECTION 6.5. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the outstanding
Securities 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 it including, without limitation, any remedies provided for in
Section 6.3. Subject to Section 7.1, however, the Trustee may refuse to follow
any direction that conflicts with any law or this Indenture that
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48
the Trustee determines may be unduly prejudicial to the rights of another
Holder, or that may involve the Trustee in personal liability; provided that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
SECTION 6.6. LIMITATION ON SUITS.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holder or Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the Trustee to pursue the
remedy;
(c) such Holders offer to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense to be incurred in compliance
with such request;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of satisfactory indemnity; and
(e) during such 60-day period the Holder or Holders of a majority in
principal amount of the outstanding Securities do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
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.
SECTION 6.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of, premium, if any, and interest on,
a Security, on or after the respective due dates expressed in such Security, or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
Holder.
SECTION 6.8. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal, premium, if any, or
interest specified in clause (a) or (b) of Section 6.1 occurs and is continuing,
or if any other Event of Default has occurred and the amounts due have been
accelerated, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any other obligor on the Securities for
the whole amount of principal, premium, if
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49
any, and accrued interest remaining unpaid, together with interest on overdue
principal and, to the extent that payment of such interest is lawful, interest
on overdue installments of interest, in each case at the rate per annum borne by
the Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.9. 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 the
Holders allowed in any judicial proceedings relating to the Company or any other
obligor upon the Securities, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any custodian in any such judicial proceedings 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 7.7. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Securityholder 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 amounts due under
Section 7.7 and the costs and expenses of collection;
Second: to holders of Senior Debt to the extent required by Article
11;
Third: to Holders for amounts due and unpaid on the Securities for
principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal, premium, if any, and interest, respectively; and
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Fourth: to the Company.
The Trustee, upon prior 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 in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, 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 6.7, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Securities.
ARTICLE 7
TRUSTEE
SECTION 7.1. DUTIES OF TRUSTEE.
(1) If an Event of Default has occurred and is continuing, the
Trustee, subject to subparagraph (5) below, shall exercise such of the rights
and powers vested in it by this Indenture, and use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(2) Except during the continuance of an Event of Default:
(a) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
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(3) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) This paragraph does not limit the effect of paragraph (2) of this
Section.
(b) The Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts.
(c) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(4) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(1), (2) and (3) of this Section and the first sentence of paragraph (5) of this
Section.
(5) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense including, without
limitation, reasonable attorney fees.
(6) 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.
SECTION 7.2. RIGHTS OF TRUSTEE.
(1) The Trustee may rely on any document 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 the document.
(2) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel. The Trustee may consult
with counsel and the written 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.
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(3) The Trustee may act through agents or attorneys and shall not be
responsible for the misconduct or negligence of any agent or attorney appointed
with due care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or an
Affiliate of the Company with the same rights it would have if it were not
Trustee. Any Paying Agent may do the same with like rights. However, the
Trustee is subject to Sections 7.10 and 7.11 hereof.
SECTION 7.4. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities or any money paid to the Company or upon
the Company's direction under any provision hereof, it shall not be responsible
for the use or application of any money received by any Paying Agent other than
the Trustee and it shall not be responsible for any statement or recital herein
or any statement in the Securities other than its certificate of authentication.
SECTION 7.5. NOTICE OF DEFAULTS.
If a Default occurs and is continuing, the Trustee shall mail to
Securityholders a notice of the Default within 90 days after it occurs. Except
in the case of a Default in payment on any Security (including the failure to
make a mandatory redemption pursuant hereto), the Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Holders.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall mail to Holders a brief report
dated as of such reporting date that complies with TIA Section 313(a), if such a
report is required pursuant to TIA Section 313(a). The Trustee also shall
comply with TIA
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53
Section 313(b). The Trustee shall also transmit by mail all reports as required
by TIA Section 313(c).
Commencing at the time this Indenture is qualified under the TIA, a
copy of each report at the time of its mailing to Securityholders shall be filed
with the Commission and each stock exchange on which the Securities are listed.
The Company or any other obligor upon the Securities shall notify the Trustee
when the Securities are listed on any stock exchange.
SECTION 7.7. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable disbursements, advances and expenses incurred by it.
Such expenses shall include the reasonable compensation, disbursements and
expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any loss, liability or
expense incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, except as set forth in the
fourth paragraph of this Section 7.7. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. The Company shall defend
the claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.7 to compensate
and indemnify the Trustee and its agents and to reimburse the Trustee for its
reasonable expenses shall survive the resignation or replacement of the Trustee
or the termination of the Company's obligations hereunder and the satisfaction
and discharge of this Indenture.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or willful
misconduct, except to the extent the Trustee has acted in accordance with the
standard of care set forth in clauses (a) and (c) of Section 7.1(3).
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal,
premium, if any, and interest on particular Securities. Such Lien shall survive
the satisfaction and discharge of this Indenture.
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54
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(e) or (f) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.8. 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.
The Trustee may resign and be discharged from the trust hereby created
by so notifying the Company. The Holders of a majority in principal amount of
the then outstanding Securities may remove the Trustee by so notifying the
Trustee and the Company. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent
or an order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(3) a custodian or public officer takes charge of the Trustee or its
property; or
(4) 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 and any other obligor upon the
Securities 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 then outstanding Securities may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least a majority in principal amount of the then outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee after written request by any Holder who has been a
Holder for at least six months fails to comply with Section 7.10, such Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee
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55
shall become effective, and the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture. The successor Trustee
shall mail a notice of its succession to Holders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
subject to the Lien provided for in Section 7.7, and all duties and obligations
of the retiring Trustee hereunder shall cease.
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise corporate
trustee powers, shall be subject to supervision or examination by Federal or
state authority and shall have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee is subject to TIA Section
310(a)(5) concerning inability of a trustee to be a direct or indirect obligor
of the Securities and is subject to TIA Section 310(b) regarding
disqualification of a trustee upon acquiring any conflicting interest. Nothing
contained herein shall prevent the Trustee from filing the application in TIA
Section 310(b) regarding resignation.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), subject to the creditor
relationship provisions listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.1. LEGAL DEFEASANCE AND COVENANT DEFEASANCE OF THE SECURITIES.
(a) The Company may, at its option by Board resolution, at any time,
with respect to the Securities, elect to have either paragraph (b) or paragraph
(c) below be applied to
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56
the outstanding Securities upon compliance with the conditions set forth in
paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Securities on the date the conditions set forth below are satisfied
(hereinafter, "legal defeasance"). For this purpose, such legal defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of the Sections of and
matters under this Indenture referred to in (i) and (ii) below, and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned, except for the following which shall
survive until otherwise terminated or discharged hereunder: (i) the rights of
Holders of outstanding Securities to receive solely from the trust fund
described in paragraph (d) below and as more fully set forth in such paragraph,
payments in respect of the principal of, premium, if any, and interest on such
Securities when such payments are due and (ii) obligations listed in Section
8.3.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and discharged
from its obligations under any covenant contained in Section 5.1 and in Sections
4.3 through 4.17 (subject to compliance with the Company's obligations under the
TIA), with respect to the outstanding Securities on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant defeasance"),
and the Securities shall thereafter be deemed to be not "outstanding" for the
purpose of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the outstanding
Securities, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.1(c), nor
shall any event referred to in Section 6.1(f) thereafter constitute a Default or
an Event of Default thereunder but, except as specified above, the remainder of
this Indenture and such Securities shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
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(1) The Company shall have irrevocably deposited in trust with the
Trustee, pursuant to an irrevocable trust and security agreement in form
and substance satisfactory to the Trustee, cash or U.S. Government
Obligations maturing as to principal and interest at such times, or a
combination thereof, in such amounts as are sufficient, without
consideration of the reinvestment of such interest and after payment of all
Federal, state and local taxes or other charges or assessments in respect
thereof payable by the Trustee, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof (in form and substance reasonably satisfactory to the Trustee)
delivered to the Trustee, to pay the principal of, premium, if any, and
interest on the outstanding Securities on the dates on which any such
payments are due and payable in accordance with the terms of this Indenture
and of the Securities;
(2) (i) No Event of Default shall have occurred or be continuing on
the date of such deposit, and (ii) no Default or Event of Default under
Section 6.1(e) or 6.1(f) shall occur on or before the 123rd day after the
date of such deposit;
(3) Such deposit will not result in a Default under this Indenture or
a breach or violation of, or constitute a default under, any other
instrument or agreement to which the Company is a party or by which it or
its property is bound;
(4) No default on any Senior Debt shall have occurred and be
continuing;
(5) In the case of a legal defeasance under paragraph (b) above, the
Company has delivered to the Trustee an Opinion of Counsel stating that (a)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (b) since the date of this Indenture there has
been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that, the
Holders of the Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amounts 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; and, in the case
of a covenant defeasance under paragraph (c) above, the Company shall
deliver to the Trustee an Officers' Certificate and an Opinion of Counsel,
in form and substance reasonably satisfactory to the Trustee, to the effect
that Holders of the Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance and
will be subject to federal income
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58
tax on the same amounts, in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred;
(6) The Holders shall have a perfected security interest under
applicable law in the cash or U.S. Government Obligations deposited
pursuant to Section 8.1(d)(1) above, or such cash or U.S. Government
Obligations are held in irrevocable trust for the benefit of all Holders;
(7) The Company shall have delivered to the Trustee an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee, to
the effect that, (i) after the passage of 123 days following the deposit,
the trust funds will not be subject to any applicable bankruptcy,
insolvency, reorganization or similar law affecting creditors' rights
generally, and (ii) neither the Company, the Trustee nor the trust is an
investment company under the Investment Company Act of 1940, or has been
registered as an investment company; and
(8) The Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
specified herein relating to the defeasance contemplated by this Section
8.1 have been complied with; PROVIDED, HOWEVER, that no deposit under
clause (1) above shall be effective to terminate the obligations of the
Company under the Securities or this Indenture prior to 123 days following
any such deposit.
In connection with the issuance of debt securities the proceeds of
which will be used to redeem all the Securities then outstanding, none of
Sections 4.9, 4.10, 4.11 and 4.12 shall be violated by the issuance of such debt
securities to the extent the Company complies with all of the provisions of this
Section 8.1(d) other than Section 8.1(d)(2)(ii). The Company and the Trustee
shall use their best efforts to ensure that the deposit referred to in Section
8.1(d)(1) does not result in the Company, the Trustee or the trust becoming or
being deemed an investment company under the Investment Company Act of 1940. In
the event that such deposit does result in the Company, the Trustee or the trust
becoming or being deemed an investment company, the Company shall bear all
related expenses of registration and reporting under the Investment Company Act
of 1940 for the duration of the trust.
SECTION 8.2. TERMINATION OF OBLIGATIONS UPON CANCELLATION OF THE SECURITIES.
In addition to the Company's rights under Section 8.1, the Company may
terminate all of its obligations under this Indenture (subject to Sections 8.3
and 8.7) when:
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(1) all Securities theretofore authenticated and delivered (other
than Securities which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 2.7) have been delivered to
the Trustee for cancellation;
(2) the Company has paid or caused to be paid all other sums payable
hereunder and under the Securities by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate, stating that all conditions precedent specified herein
relating to the satisfaction and discharge of this Indenture have been
complied with.
SECTION 8.3. SURVIVAL OF CERTAIN OBLIGATIONS.
Notwithstanding the satisfaction and discharge of this Indenture and
of the Securities referred to in Section 8.1 or 8.2, the respective obligations
of the Company, and the Trustee under Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7,
2.14, 4.2, 6.7, 7.7, 7.8, 8.5, 8.6 and 8.7 and shall survive until the
Securities are no longer outstanding, and thereafter the obligations of the
Company and the Trustee under Sections 7.7, 8.5, 8.6 and 8.7 shall survive.
Nothing contained in this Article Eight shall abrogate any of the obligations or
duties of the Trustee under this Indenture.
SECTION 8.4. ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE.
Subject to Section 8.7, after (i) the conditions of Section 8.1 or 8.2
have been satisfied, (ii) the Company has paid or caused to be paid all other
sums payable hereunder by the Company and (iii) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent referred to in clause (i) above relating to the
satisfaction and discharge of this Indenture have been complied with, the
Trustee upon written request shall acknowledge in writing the discharge of the
Company's obligations under this Indenture except for those surviving
obligations specified in Section 8.3.
SECTION 8.5. APPLICATION OF TRUST ASSETS.
The Trustee shall hold any cash or U.S. Government Obligations
deposited with it in the irrevocable trust established pursuant to Section 8.1.
The Trustee shall apply the deposited cash or the U.S. Government Obligations,
together with earnings thereon, through the Paying Agent, in accordance with
this Indenture and the terms of the irrevocable trust agreement established
pursuant to Section 8.1, to the payment of principal of, premium, if any, and
interest on the Securities. The cash or U.S. Government Obligations so held in
trust and deposited with the Trustee in compliance with Section 8.1, shall not
be part of
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the trust estate under this Indenture, but shall constitute a separate trust
fund for the benefit of all Holders entitled thereto.
SECTION 8.6. REPAYMENT TO THE COMPANY; UNCLAIMED MONEY.
Upon termination of the trust established pursuant to Section 8.1, the
Trustee and the Paying Agent shall promptly pay to the Company upon request any
excess cash or U.S. Government Obligations held by them. Additionally, if money
for the payment of principal, premium, if any, or interest remains unclaimed for
two years, the Trustee and the Paying Agent will pay the money back to the
Company forthwith, unless otherwise required by law. After that, all liability
of the Trustee and such Paying Agent with respect to such money shall cease.
The Trustee and the Paying Agent shall pay to the Company upon
request, and, if applicable, in accordance with the irrevocable trust
established pursuant to Section 8.1, any cash or U.S. Government Obligations
held by them for the payment of principal of, premium, if any, or interest on
the Securities that remain unclaimed for two years after the date on which such
payment shall have become due unless otherwise required by law. After payment
to the Company, Holders entitled to such payment must look to the Company for
such payment as general creditors unless an applicable abandoned property law
designates another person.
SECTION 8.7. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any cash or U.S.
Government Obligations in accordance with Section 8.1 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 Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.1 until
such time as the Trustee or Paying Agent is permitted to apply all such cash or
U.S. Government Obligations in accordance with Section 8.1; provided that if the
Company makes any payment of principal of, premium, if any, or interest on any
Securities following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money held by the Trustee or the Paying Agent.
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ARTICLE 9
AMENDMENTS
SECTION 9.1. WITHOUT CONSENT OF HOLDERS.
The Company, when authorized by a Board resolution, and the Trustee,
together, may amend or supplement this Indenture or the Securities without the
consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency; provided that
such amendment or supplement does not adversely affect the rights of any
Holder;
(2) to comply with Section 5.1;
(3) to comply with any requirements of the Commission
in connection with the qualification of this Indenture under the TIA as
then in effect;
(4) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(5) to make any change that does not adversely affect the legal
rights hereunder of any Securityholder;
(6) to evidence or to provide for a replacement Trustee under Section
7.8;
(7) to make Securities registered under the Securities Act subject to
this Indenture in accordance with the Registration Rights Agreement; or
(8) to add to the covenants and agreements of the Company for the
benefit of the Holders and to surrender any right or power herein reserved
to the Company, PROVIDED that, except in the case of clause (6) above, the
Company has delivered to the Trustee an Opinion of Counsel and an Officers'
Certificate, each stating that such amendment or supplement complies with
the provisions of this Section 9.1.
Upon the written request of the Company, accompanied by a resolution
of the Board of Directors authorizing the execution of any supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
9.6 hereof, the Trustee shall join with the Company in the execution of any
supplemental Indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
supplemental Indenture which affects its own rights, duties or immunities under
this Indenture or otherwise.
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SECTION 9.2. WITH CONSENT OF HOLDERS.
The Company, when authorized by a Board resolution, and the Trustee,
together, may amend this Indenture or the Securities with the written consent of
the Holders of at least a majority in principal amount of the then outstanding
Securities. The Holders of a majority in principal amount of the Securities
then outstanding may, or the Trustee with the written consent of the Holders of
at least a majority in principal amount of the then outstanding Securities may,
waive compliance in a particular instance by the Company with any provision of
this Indenture or the Securities.
Upon the written request of the Company, accompanied by a resolution
of the Board of Directors authorizing the execution of any such supplemental
Indenture, and upon the filing with the Trustee of evidence of the consent of
the Holders as aforesaid, and upon receipt by the Trustee of the documents
described in Section 9.6 hereof, the Trustee shall join with the Company in the
execution of such supplemental Indenture but the Trustee shall not be obligated
to enter into such supplemental Indenture which affects its own rights, duties
or immunities under this Indenture or otherwise.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section becomes effective, the
Company shall mail to the Holders of each Security affected thereby a notice
briefly describing the amendment or waiver. 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.
Notwithstanding the first paragraph of this Section 9.2, without the
consent of each Holder affected, an amendment or waiver under this Section may
not:
(1) reduce the percentage of principal amount of Securities whose
Holders must consent to an amendment, supplement or waiver;
(2) reduce the percentage of principal amount of outstanding
Securities whose Holders must consent to a modification or amendment of
this Indenture or for waiver of Events of Default or Defaults provided for
in this Indenture;
(3) reduce the principal amount (or the premium) of any Security or
change the maturity date of the principal of, or any installment of
interest on, Securities;
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(4) reduce the Redemption Price, including premium, if any, payable
upon redemption or repurchase of any Security or change the time at which
any Security may or shall be redeemed or repurchased;
(5) reduce the rate or change the time, place or currency of payment
of principal of, premium, if any, or interest (including defaulted
interest) on, any Security;
(6) impair the right to institute suit for the enforcement of any
payment of principal of, premium, if any, or interest on, any Security;
(7) waive a continuing past Default or Event of Default in the
payment of principal of, premium, if any, or interest on, the Securities;
(8) modify any of the provisions of this Indenture relating to the
subordination of the Securities in a manner adverse to Holders of such
Securities;
(9) modify any of the provisions of this Indenture relating to the
modification and amendment of this Indenture or the waiver of past defaults
or covenants; or
(10) following the mailing of an offer with respect to a Change of
Control Offer as described under Section 4.17 or an offer to purchase as
described under Section 4.15, modify this Indenture with respect to such
Change of Control Offer or offer to purchase in a manner adverse to such
Holders.
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT.
If at the time this Indenture shall be qualified under the TIA, every
amendment to this Indenture or the Securities shall be set forth in a
supplemental Indenture that complies with the TIA as then in effect.
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or waiver becomes effective, a consent to it by a
Holder of a Security is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his or her Security or portion of a Security if the Trustee
receives written notice of revocation before the date the amendment or waiver
becomes effective.
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 Act of
Holders, including any amendment,
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supplement or waiver. If a record date is fixed, 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 Act of Holders, including an amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date. After
an Act of Holders, including an amendment, supplement or waiver becomes
effective, it shall bind every Securityholder, unless it is an amendment,
supplement or waiver that makes a change described in any of clauses (1) through
(10) of Section 9.2, in which case, the amendment, supplement or waiver shall
bind only each Holder of a Security who has consented to it and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security; PROVIDED that any such waiver shall not impair
or affect the right of any Holder to receive payment of principal of and
interest on a Security, on or after the respective due dates expressed in such
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates without the consent of such Holder.
SECTION 9.5. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation about an amendment or waiver on
any Security thereafter authenticated. The Company in exchange for all
Securities may issue and the Trustee shall authenticate new Securities that
reflect the amendment or waiver.
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment, waiver or supplemental Indenture
authorized pursuant to this Article Nine if the amendment does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it
does, the Trustee may, but need not, sign it. In signing or refusing to sign
such amendment, waiver or supplemental Indenture, the Trustee shall be entitled
to receive and, subject to Section 7.1, shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel as conclusive evidence
that such amendment, waiver or supplemental Indenture is authorized or permitted
by this Indenture, that it is not inconsistent herewith, and that it will be
valid and binding upon the Company in accordance with its terms.
ARTICLE 10
MEETINGS OF SECURITYHOLDERS
SECTION 10.1. PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
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A meeting of Securityholders may be called at any time and from time
to time pursuant to the provisions of this Article Ten for any of the following
purposes:
(a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to waive or to consent to the waiving of
any Default or Event of Default hereunder and its consequences, or to take
any other action authorized to be taken by Securityholders pursuant to any
of the provisions of Article Six;
(b) to remove the Trustee or appoint a successor Trustee pursuant to
the provisions of Article Seven;
(c) to consent to an amendment, supplement or waiver pursuant to the
provisions of Section 9.2; or
(d) to take any other action authorized to be taken by or on behalf
of the Holders of any specified aggregate principal amount of the
Securities under any other provision of this Indenture, or authorized or
permitted by law.
SECTION 10.2. MANNER OF CALLING MEETINGS.
The Trustee may at any time call a meeting of Securityholders to take
any action specified in Section 10.1, to be held at such time and at such place
in The City of New York, New York or elsewhere as the Trustee shall determine.
Notice of every meeting of Securityholders, setting forth the time and place of
such meeting and in general terms the action proposed to be taken at such
meeting, shall be mailed by the Trustee, first-class postage prepaid, to the
Company and to the Holders at their last addresses as they shall appear on the
registration books of the Registrar not less than 10 nor more than 60 days prior
to the date fixed for a meeting.
Any meeting of Securityholders shall be valid without notice if the
Holders of all Securities then outstanding are present in person or by proxy, or
if notice is waived before or after the meeting by the Holders of all Securities
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
SECTION 10.3. CALL OF MEETINGS BY COMPANY OR HOLDERS.
In case at any time the Company, pursuant to a Board resolution, or
the Holders of not less than 10% in aggregate principal amount of the Securities
then outstanding shall have requested the Trustee to call a meeting of
Securityholders to take any action specified in Section 10.1, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have mailed the notice of such meeting within
20 days after receipt of such
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66
request, then the Company or the Holders of Securities in the amount above
specified may determine the time and place in The City of New York, New York or
elsewhere for such meeting and may call such meeting for the purpose of taking
such action, by mailing or causing to be mailed notice thereof as provided in
Section 10.2, or by causing notice thereof to be published at least once in each
of two successive calendar weeks (on any Business Day during such week) in a
newspaper or newspapers printed in the English language, customarily published
at least five days a week of a general circulation in The City of New York,
State of New York, the first such publication to be not less than 10 nor more
than 60 days prior to the date fixed for the meeting.
SECTION 10.4. WHO MAY ATTEND AND VOTE AT MEETINGS.
To be entitled to vote at any meeting of Securityholders, a person
shall (a) be a registered Holder of one or more Securities, or (b) be a person
appointed by an instrument in writing as proxy for the registered Holder or
Holders of Securities. The only persons who shall be entitled to be present or
to speak at any meeting of Securityholders shall be the persons entitled to vote
at such meeting and their counsel and any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.
Securities that remain outstanding after the consummation of the
"Exchange Offer" as defined in the Registration Rights Agreement and new
Securities issued in connection with such Exchange Offer will be entitled to
vote or consent on all matters as a single class of Securities; neither the
Securities nor such new Securities issued in connection with such Exchange Offer
will have the right to vote or consent on any matter as a separate class.
SECTION 10.5. REGULATIONS MAY BE MADE BY TRUSTEE; CONDUCT OF THE MEETING;
VOTING RIGHTS; ADJOURNMENT.
Notwithstanding any other provision of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any action by or
any meeting of Securityholders, in regard to proof of the holding of Securities
and of the appointment of proxies, and in regard to the appointment and duties
of inspectors of votes, and submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think appropriate. Such regulations may fix
a record date and time for determining the Holders of record of Securities
entitled to vote at such meeting, in which case those and only those persons who
are Holders of Securities at the record date and time so fixed, or their
proxies, shall be entitled to vote at such meeting whether or not they shall be
such Holders at the time of the meeting.
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The Trustee shall, by an instrument in writing, appoint a temporary
chairperson of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 10.3, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairperson. A permanent chairperson and a
permanent secretary of the meeting shall be elected by vote of the Holders of a
majority in principal amount of the Securities represented at the meeting and
entitled to vote.
At any meeting each Securityholder or proxy shall, subject to the
provisions of Section 10.4 hereof, be entitled to one vote for each $1,000
principal amount of Securities held or represented by him or her; PROVIDED,
HOWEVER, that no vote shall be cast or counted at any meeting in respect of any
Securities challenged as not outstanding and ruled by the chairperson of the
meeting to be not outstanding. The chairperson may adjourn any such meeting if
he or she is unable to determine whether any Holder or proxy shall be entitled
to vote at such meeting. The chairperson of the meeting shall have no right to
vote other than by virtue of Securities held by him or her or instruments in
writing as aforesaid duly designating him or her as the proxy to vote on behalf
of other Securityholders. Any meeting of Securityholders duly called pursuant
to the provisions of Section 10.2 or Section 10.3 may be adjourned from time to
time by vote of the Holders of a majority in aggregate principal amount of the
Securities represented at the meeting and entitled to vote, and the meeting may
be held as so adjourned without further notice.
SECTION 10.6. VOTING AT THE MEETING AND RECORD TO BE KEPT.
The vote upon any resolution submitted to any meeting of
Securityholders shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities or of their representatives by proxy and
the principal amount of the Securities voted by the ballot. The permanent
chairperson of the meeting shall appoint two inspectors of votes, who shall
count all votes cast at the meeting for or against any resolution and shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to such record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts, setting forth a
copy of the notice of the meeting and showing that such notice was mailed as
provided in Section 10.2. The record shall be signed and verified by the
affidavits of the permanent chairperson and the secretary of the meeting and one
of the duplicates shall be delivered to the Company and the other to the Trustee
to be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
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Any record so signed and verified shall be conclusive evidence of the
matters therein stated and any such vote shall constitute an Act of the Holders.
SECTION 10.7. EXERCISE OF RIGHTS OF TRUSTEE OR SECURITYHOLDERS MAY NOT BE
HINDERED OR DELAYED BY CALL OF MEETING.
Nothing contained in this Article Ten shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Securityholders or
any rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Securityholders under any of the provisions of
this Indenture or of the Securities.
SECTION 10.8. PROCEDURES NOT EXCLUSIVE.
The procedures set forth in this Article Ten are not exclusive and the
rights and obligations of the Company, the Trustee and the Holders under other
Articles of this Indenture (including, without limitation, Section 1.5 and
Articles 6, 7, 8 and 9) shall in no way be limited by the provisions of this
Article Ten.
ARTICLE 11
SUBORDINATION
SECTION 11.1. SECURITIES SUBORDINATED TO SENIOR DEBT.
Notwithstanding the provisions of Sections 6.2 and 6.3 but subject to
Section 11.2(b), the Company covenants and agrees, and the Trustee and each
Holder of the Securities by his or her acceptance thereof likewise covenants and
agrees, that all payments of the principal of, premium, if any, and interest on
the Securities by the Company shall be subordinated in accordance with the
provisions of this Article Eleven to the prior payment in full in cash of all
amounts payable under Senior Debt of the Company.
The Company also covenants and agrees not to incur any Debt, other
than the Securities, that is subordinated in right of payment to any other Debt
of the Company or its Subsidiaries unless such Debt by its terms is pari passu
with, or subordinated to, the Securities pursuant to subordination provisions
substantially similar to those contained in this Indenture.
SECTION 11.2. PRIORITY AND PAYMENT OVER OF PROCEEDS IN CERTAIN EVENTS.
(a) SUBORDINATION ON DISSOLUTION, LIQUIDATION OR REORGANIZATION OF
THE COMPANY. In the event of any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation,
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reorganization or other similar case or proceeding in connection therewith,
relative to the Company or to its assets, or any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary, or any
assignment for the benefit of creditors or other marshalling of assets or
liabilities of the Company (except in connection with the consolidation or
merger of the Company or its liquidation or dissolution following the
conveyance, transfer or lease of its properties substantially as an entirety,
upon the terms and conditions described under Article Five hereof), all Senior
Debt due and owing (including, in the case of Designated Senior Debt and Senior
Debt under the Credit Facility, interest accruing after the commencement of any
such case or proceeding at the rate specified in the instrument evidencing such
Senior Debt, whether or not a claim therefor is allowed in such proceeding, to
the date of payment of such Senior Debt) must be paid in full in cash before any
payment or distribution of any assets of the Company of any kind or character
(excluding shares of Capital Stock of the Company or securities of the Company
provided for in a plan of reorganization or readjustment which are subordinate
in right of payment to all Senior Debt to substantially the same extent as the
Securities are so subordinated) is made on account of principal of, premium, if
any, or interest on, the Securities including repurchase, purchase, redemption
or other acquisition of the Securities. Before any payment may be made by the
Company of the principal of, premium, if any, or interest on the Securities, and
upon any such dissolution or winding up or liquidation or reorganization, any
payment or distribution of assets or securities of the Company of any kind or
character, whether in cash, property or securities, to which the Holders or the
Trustee on their behalf would be entitled, except for the provisions of this
Article Eleven, shall be made by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, directly to the holders of the Senior Debt of the Company or any
Senior Representatives thereof to the extent necessary to pay all such Senior
Debt in full in cash after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt.
(b) SUBORDINATION ON DEFAULT IN SENIOR DEBT. During the continuance
of any default in the payment of principal of, reimbursement obligation under,
premium, if any, or interest on, any Senior Debt, the payment of commitment or
facility fees, letter of credit fees and agency fees under the Credit Facility,
and payments with respect to letter of credit reimbursement arrangements with
one or more lenders under the Credit Facility when due (a "Senior Payment
Default"), no direct or indirect payment or distribution of any assets of the
Company of any kind or character may be made on account of the principal of,
premium, if any, interest on, or other amounts payable in respect of, the
Securities or on account of the purchase, redemption or other acquisition of or
in respect of the Securities unless and until such Senior Payment Default has
been cured, waived or has ceased
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to exist or such Senior Debt shall have been discharged or paid in full or when
the right under this Indenture to prevent any such payment is waived by or on
behalf of the holders of such Senior Debt.
During the continuance of any event (other than a Senior Payment
Default) the occurrence of which entitles, or with the giving of notice or lapse
of time would entitle, one or more Persons to accelerate the maturity of any
Senior Debt (a "Senior Nonmonetary Default") and the receipt by the Trustee and
the Company from the agent bank for the Credit Facility or from any authorized
person on behalf of any Designated Senior Debt of a written notice of such
Senior Nonmonetary Default, no payment or distribution of any assets of the
Company of any kind or character may be made by the Company on account of the
principal of, premium, if any, or interest on, the Securities or on account of
the purchase, redemption or other acquisition of, the Securities for the period
specified below (the "blockage period").
The blockage period shall commence upon the receipt of notice of a
Senior Nonmonetary Default by the Trustee and the Company and shall end (subject
to any blockage of payment that may be in effect in respect of a Senior Payment
Default or insolvency) on the earlier of (i) 179 days after the receipt of such
notice provided such Senior Debt shall not theretofore have been accelerated and
no Senior Payment Default shall be in effect; and (ii) the date on which such
Senior Nonmonetary Default is cured, waived or ceases to exist or such Senior
Debt is discharged or paid in full. In no event will a blockage period extend
beyond 179 days from the date of the receipt by the Trustee and the Company of
the notice initiating such blockage period. Any number of notices of a Senior
Nonmonetary Default may be given during a blockage period; provided, that no
such notice shall extend such blockage period, only one blockage period may be
commenced within any 360-day period and there shall be a period of at least 181
consecutive days in each period of 360 consecutive days when no blockage period
is in effect. No Senior Nonmonetary Default with respect to Senior Debt that
existed or was continuing on the date of the commencement of any blockage period
and that was known to the holders of or the Senior Representative for such
Senior Debt will be, or can be, made the basis for the commencement of a
subsequent blockage period, whether or not within a period of 360 consecutive
days, unless such Senior Nonmonetary Default has been cured or waived for a
period of not less than 90 consecutive days. The Company shall deliver an
Officers' Certificate to the Trustee promptly after the date on which any
Senior Nonmonetary Default is cured or waived or ceases to exist or on which the
Senior Debt related thereto is discharged or paid in full.
(c) RIGHTS AND OBLIGATIONS OF HOLDERS OF SECURITIES AND TRUSTEE. In
the event that, notwithstanding the foregoing provisions prohibiting such
payment or distribution, the Trustee
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or any Holder shall have received any payment on account of the principal of,
premium, if any, or interest on the Securities (other than as permitted by
subsections (a) and (b) of this Section 11.2) at a time when such payment is
prohibited by this Section 11.2 and before the principal of, premium, if any,
and interest on Senior Debt is paid in full in cash, then and in such event
(subject to the provisions of Section 11.8) such payment or distribution shall
be received and held in trust for the holders of Senior Debt and shall be paid
over or delivered to the holders of the Senior Debt or to their Senior
Representatives remaining unpaid at their written direction to the extent
necessary to pay in full in cash the principal of, premium, if any, and interest
on such Senior Debt in accordance with its terms after giving effect to any
concurrent payment or distribution to the holders of such Senior Debt.
Nothing contained in this Article Eleven will limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Section 6.2 or to pursue any rights or
remedies hereunder against the Company; PROVIDED that, to the extent provided in
this Article Eleven, all Senior Debt of the Company then or thereafter due or
declared to be due shall first be paid in full in cash before the Holders or the
Trustee are entitled to receive any payment from the Company of principal of,
premium, if any, or interest on the Securities.
Upon any payment or distribution of assets or Securities referred to
in this Article Eleven, the Trustee and the Holders shall be entitled to rely
upon any order or decree of a court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization proceedings are pending,
and upon a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making any such payment or distribution,
delivered to the Trustee for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of Senior Debt and other Debt of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
Eleven. In the absence of such order, decree or certificate, the Trustee and
the Holders shall be entitled to request and rely upon an Officers' Certificate
from the Company. The Company shall provide to the Trustee in the form of an
Officers' Certificate, the names and addresses of the holders of such Senior
Debt, the amount of the Senior Debt outstanding to each such holder of Senior
Debt and any necessary information to calculate the daily increase in
indebtedness to such holders of Senior Debt. The Trustee shall be entitled to
rely conclusively on such order, decree or certificates including an Officers'
Certificate in making any disbursements to the holders of Senior Debt without
making any independent verification of the information contained therein.
SECTION 11.3. PAYMENTS MAY BE MADE PRIOR TO DISSOLUTION.
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Nothing contained in this Article Eleven or elsewhere in this
Indenture shall prevent (i) the Company, except under the conditions described
in Section 11.2, from making payments at any time for the purpose of making such
payments of principal of, premium, if any, and interest on the Securities, or
from depositing with the Trustee any monies for such payments or (ii) the
application by the Trustee of any monies deposited with it for the purpose of
making such payments of principal of, premium, if any, and interest on, the
Securities, to the Holders entitled thereto unless by noon central time one
Business Day prior to the date upon which such payment would otherwise (except
for the prohibitions contained in Section 11.2) become due and payable, the
Trustee shall have received the written notice provided for in Section 11.2(b)
(or there shall have been an acceleration of the Securities prior to such
application), subject to Section 11.8.
SECTION 11.4. RIGHTS OF HOLDERS OF SENIOR DEBT NOT TO BE IMPAIRED.
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act in good faith by any such holder, or by
any noncompliance by the Company, with the terms and provisions and covenants
herein regardless of any knowledge thereof any such holder may have or otherwise
be charged with.
The provisions of this Article Eleven are intended to be for the
benefit of, and shall be enforceable directly by, the holders of Senior Debt.
SECTION 11.5. AUTHORIZATION TO TRUSTEE TO TAKE ACTION TO EFFECTUATE
SUBORDINATION.
Each Holder of Securities by his or her acceptance thereof authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Senior Debt
and the Holders, the subordination as provided in this Article Eleven and
appoints the Trustee his or her attorney-in-fact for any and all such purposes.
Whenever a distribution is to be made or a notice given to holders of Senior
Debt, the distribution or notice may be made to the Senior Representatives and
agents of such holders of Senior Debt as such agents or representatives are
identified by such holders in writing to the Trustee. If the Trustee does not
file a proper claim or proof of debt in the form required in such proceeding
prior to 30 days before the expiration of the time to file such claim or claims,
then the holders of Senior Debt are hereby authorized to have the right to file
and are hereby authorized to file an appropriate claim for and on behalf of such
holders.
SECTION 11.6. SUBROGATION.
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Subject to the payment in full of all amounts payable under or in
respect of Senior Debt, the Holders shall be subrogated to the rights of the
holders of such Senior Debt to receive payments or distributions of assets of
the Company made on such Senior Debt until the Securities shall be paid in full
in cash; and for the purposes of such subrogation, no payments or distributions
to holders of such Senior Debt of any cash, property or securities to which
Holders of the Securities would be entitled except for the provisions of this
Article Eleven, and no payment pursuant to the provisions of this Article Eleven
to holders of such Senior Debt by the Holders, shall, as between the Company,
its creditors other than holders of such Senior Debt and the Holders, be deemed
to be a payment by the Company to or on account of such Senior Debt, it being
understood that the provisions of this Article Eleven are solely for the purpose
of defining the relative rights of the holders of such Senior Debt, on the one
hand, and the Holders, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Eleven shall have been
applied, pursuant to the provisions of this Article Eleven, to the payment of
all amounts payable under the Senior Debt, then and in such case, the Holders
shall be entitled to receive from the holders of such Senior Debt at the time
outstanding any payments or distributions received by such holders of Senior
Debt in excess of the amount sufficient to pay all amounts payable under or in
respect of such Senior Debt in full.
SECTION 11.7. OBLIGATIONS OF COMPANY UNCONDITIONAL.
Nothing contained in this Article Eleven or elsewhere in this
Indenture or in any Security is intended to or shall impair, as between the
Company and the Holders, the obligations of the Company, which are absolute and
unconditional to pay to the Holders the principal of, premium, if any, and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Company other than the holders of the
Senior Debt, nor shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
Default under this Indenture, subject to the rights, if any, under this Article
Eleven of the holders of such Senior Debt in respect of cash, property or
Securities of the Company received upon the exercise of any such remedy.
The failure to make a payment on account of principal of, premium, if
any, or interest on, the Securities by reason of any provision of this Article
Eleven shall not be construed as preventing the occurrence of an Event of
Default under Section 6.1.
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SECTION 11.8. THE TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED IN ABSENCE
OF NOTICE.
The Trustee or Paying Agent shall not at any time be charged with the
knowledge of the existence of any facts which would prohibit the making of any
payment to or by the Trustee or Paying Agent, unless and until the Trustee or
Paying Agent shall have received written notice thereof from the Company or one
or more holders of Senior Debt or from any trustee or agent therefor, including
Senior Representatives; and, prior to the receipt of any such written notice,
the Trustee or Paying Agent shall be entitled to assume conclusively that no
such facts exist. Unless by noon central time one Business Day prior to the
date on which by the terms of this Indenture any monies are to be deposited by
the Company with the Trustee or any Paying Agent (whether or not in trust) for
any purpose (including, without limitation, the payment of the principal of,
premium, if any, or the interest on, any Security), the Trustee or Paying Agent
shall have received with respect to such monies the notice provided for in the
preceding sentence, the Trustee or Paying Agent shall have full power and
authority to receive such monies and to apply the same to the purpose for which
they were received, and shall not be affected by any notice to the contrary
which may be received by it on or after such date, except for an acceleration of
the Securities prior to such application. The foregoing shall not apply to the
Paying Agent if the Company is acting as Paying Agent. Nothing contained in
this Section 11.8 shall limit the right of the holders of Senior Debt to recover
payments as contemplated by Section 11.2. The Trustee shall be entitled to rely
on the delivery to it of a written notice by a person representing himself or
itself to be a holder of such Senior Debt (or a trustee on behalf of, or other
representative of, such holder, including Senior Representatives) to establish
that such notice has been given by a holder of such Senior Debt or a trustee on
behalf of any such holder. Nothing in this Article Eleven shall apply to
amounts due the Trustee pursuant to Section 7.7 herein.
SECTION 11.9. RIGHT OF TRUSTEE TO HOLD SENIOR DEBT.
The Trustee and any agent (including Senior Representatives) for the
holders of Senior Debt shall be entitled to all of the rights set forth in this
Article Eleven in respect of any Senior Debt at any time held by it to the same
extent as any other holder of such Senior Debt, and nothing in this Indenture
shall be construed to deprive the Trustee or any agent for the holders of Senior
Debt of any of its rights as such holder.
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SECTION 11.10. NO IMPLIED COVENANTS BY OR OBLIGATIONS OF THE TRUSTEE.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Eleven, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Article Eleven against the Trustee. The Trustee shall not be deemed to have any
fiduciary duty to the holders of the Senior Debt.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by operation of subsection (c) of Section 318 of the TIA, the
imposed duties shall control.
SECTION 12.2. NOTICES.
Any notice or communication by the Company, the Trustee or any Senior
Representative to the others is duly given if in writing and delivered in person
or mailed by first-class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next day
delivery, to the other's address:
If to the Company:
ProNet Inc.
600 Data Drive, Suite 100
Plano, Texas 75075
Attention: Chief Financial Officer
Telephone No.: (214) 964-9500
Telecopier No.: (214) 964-9570
With a copy to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Jeffrey A. Chapman
Telephone No.: (214) 220-7700
Telecopier No.: (214) 220-7716
<PAGE>
76
If to the Trustee:
First Interstate Bank of Texas, N.A.
1445 Ross Avenue, 2nd floor
Dallas, Texas 75202
Attention: Corporate Trust Department
Telephone: (214) 740-1552
Telecopier: (214) 740-1583
If to any Senior Representative, to such address as such Senior
Representative may by notice to the others designate.
The Company, any other obligor upon the Securities or the Trustee or
any Senior Representative by notice to the others may designate additional or
different addresses for subsequent notices or communications.
All notices and communications (other than those sent to
Securityholders) 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 acknowledged, if telecopied; and the next Business Day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next day
delivery.
Any notice or communication to a Securityholder shall be mailed by
first-class mail to his or her address shown on the register kept by the
Registrar. Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company (or any other obligor upon the Securities) mails a
notice or communication to Securityholders, it shall mail a copy to the Trustee
and each Agent at the same time.
SECTION 12.3. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and other applicable
Persons shall have the protection of TIA Section 312(c).
SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company (or any other obligor
upon the Securities) to the Trustee to take any
<PAGE>
77
action under this Indenture, the Company (or such other obligor) shall furnish
to the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 12.5) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 12.5) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been complied with.
SECTION 12.5. 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:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements contained in such certificate or
opinion are based;
(3) a statement that, in the opinion of 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
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 12.6. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. Any Agent may make reasonable rules and set reasonable
requirements for its functions.
SECTION 12.7. LEGAL HOLIDAYS.
If any specified date for making payment is not a Business Day,
subject to Section 4.1 hereof, the action may be taken on the next succeeding
Business Day without penalty of any kind (including the accrual of interest).
<PAGE>
78
SECTION 12.8. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder of the Company, as such,
shall not have any liability for any obligations of the Company under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Securityholder by accepting
a Security waives and releases all such liability.
SECTION 12.9. GOVERNING LAW.
The laws of the State of New York (applicable to contracts made and to
be performed entirely within such State) shall govern and be used to construe
this Indenture and the Securities.
SECTION 12.10. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 12.11. SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 12.12. SEVERABILITY.
In case any provision in this Indenture or in the Securities 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 12.13. COUNTERPART 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. One signed copy is enough to prove this Indenture.
SECTION 12.14. VARIABLE PROVISIONS.
The Company initially appoints the Trustee as Paying Agent and
Registrar and custodian with respect to any Global Securities.
SECTION 12.15. QUALIFICATION OF INDENTURE.
The Company shall qualify this Indenture under the TIA in accordance
with the terms and conditions of the Registration Rights Agreement and shall pay
all reasonable costs and expenses
<PAGE>
79
(including attorneys' fees for the Company and the Trustee) incurred in
connection therewith, including, but not limited to, costs and expenses of
qualification of the Indenture and the Securities and printing this Indenture
and the Securities. The Trustee shall be entitled to receive from the Company
any such Officers' Certificates, Opinions of Counsel or other documentation as
it may reasonably request in connection with any such qualification of this
Indenture under the TIA and the registration and exchange of the Securities.
SECTION 12.16. 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 or provisions hereof.
SECTION 12.17. INDENTURE CONTROLS OVER FORM OF SECURITY.
If any provision of the Security conflicts with the terms of this
Indenture, the terms of this Indenture shall control.
<PAGE>
SIGNATURES
PRONET INC.
Dated as of June 15, 1995 By
-------------------------------------------
Name:
Title:
FIRST INTERSTATE BANK OF
TEXAS, N.A., as Trustee
Dated as of June 15, 1995 By:
-------------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF SECURITY
[FRONT SIDE]
11 7/8% SENIOR SUBORDINATED NOTES CUSIP _______
DUE 2005
No. $___________
PRONET INC., a Delaware corporation (the "Company", which term
includes any successor corporation under the indenture hereinafter referred to),
for value received promises to pay to
or registered assigns,
the principal sum of
Dollars on June 15, 2005.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Dated: June 15, 1995
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<PAGE>
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted herein.
PRONET INC.
[Corporate Seal] By______________________
Name:
Title:
By______________________
Name:
Title:
Attest:__________________
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<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Securities
referred to in the within-
mentioned Indenture:
First Interstate Bank of Texas, N.A., as Trustee
By ________________________________
Authorized Signature
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<PAGE>
[REVERSE SIDE]
11 7/8% SENIOR SUBORDINATED NOTES
DUE 2005
1. INTEREST. The Company promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company will pay
interest semi-annually on June 15 and December 15 of each year. Interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from June 15, 1995; PROVIDED that the first
interest payment date shall be December 15, 1995. Interest on the Securities
will continue to accrue at the rate of 11 7/8% per annum in the event of overdue
principal, premium or interest, if any. Interest will be computed on the basis
of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. One Business Day prior to the Stated Maturity,
the Company shall irrevocably deposit with the Trustee or the Paying Agent money
in immediately available funds sufficient to pay such principal, premium, if
any, and/or interest. The Paying Agent will pay from such monies interest on
the Securities (except defaulted interest) to the Persons who are registered
Holders of Securities at the close of business on the record date next preceding
the interest payment date, even if such Securities are cancelled, redeemed or
repurchased after such record date and on or before such interest payment date.
Subject to the foregoing, each Security delivered under the Indenture upon
registration of, transfer of or in exchange for or in lieu of any other Security
shall carry the rights to interest accrued and unpaid, and to accrue, which were
carried by such other Security. The Holder must surrender this Security to a
Paying Agent to collect principal payments. The Company will pay principal,
premium, if any, and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. Subject to the
requirements of the Depository, the Company, at its option, may pay principal,
premium, if any, and interest by check payable in such money mailed to a
Holder's registered address or at the office or agency of the Company maintained
for such purpose in the City of New York.
3. PAYING AGENT AND REGISTRAR. Initially, First Interstate Bank of
Texas, N.A., as Trustee ("Trustee," which term shall include any successor
trustee under the Indenture hereinafter referred to), will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or
co-registrar without notice to any Securityholder.
4. INDENTURE. The Company issued the Securities under an Indenture
dated as of June 15, 1995 (as it may be amended from time to time in accordance
with the terms thereof, the "Indenture") between the Company and the Trustee.
The terms of the Securities include those stated in the Indenture and those
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<PAGE>
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code Sections 77aaa-77bbbb). The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and such Act for a statement
of such terms. The Securities are unsecured general obligations of the Company
limited to $100,000,000 in aggregate principal amount.
5. OPTIONAL REDEMPTION. (a) The Company may redeem all or any of
the Securities at any time on or after June 15, 2000, upon not less than 30 nor
more than 60 days' prior notice in amounts of $1,000 or an integral multiple
thereof at the Redemption Prices (expressed as a percentage of the principal
amount) set forth below, if redeemed during the 12-month period beginning June
15 of the years indicated below:
Year Percentage
---- ----------
2000 . . . . . . . . . . . . . . . . . . 105.938%
2001 . . . . . . . . . . . . . . . . . . 103.958%
2002 . . . . . . . . . . . . . . . . . . 101.979%
2003 and 2004. . . . . . . . . . . . . . 100.000%
in each case together with accrued and unpaid interest to the Redemption Date.
6. MANDATORY REDEMPTION. There is no sinking fund with respect to
the Securities. If the Company consummates any Asset Disposition (as such term
is defined in the Indenture), the Company may be required to utilize a certain
portion of the proceeds received from such Asset Disposition to offer to
repurchase Securities at a price equal to 100% of the principal amount plus
accrued and unpaid interest.
7. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at its registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Securities held by a Holder are to be
redeemed. On and after the Redemption Date, interest ceases to accrue on
Securities or portions of them called for redemption.
8. REDEMPTION OF SECURITIES AT THE OPTION OF THE HOLDER. Subject to
the terms and conditions of the Indenture, if any Change of Control (as defined
in the Indenture) occurs on or prior to maturity, the Company will be required,
subject to its prior compliance with certain covenants in respect of Senior
Debt, to offer to purchase each Holder's Securities as provided in the Indenture
for a purchase price equal to 101% of the principal amount thereof plus accrued
and unpaid interest to the purchase date.
9. SUBORDINATION. The Securities are subordinated to Senior Debt (as
defined in the Indenture) which includes (with certain exceptions) the principal
of, and premium, if any, and
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<PAGE>
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, any Debt of
the Company, whether outstanding on the date of the Indenture or thereafter
created, incurred or assumed, unless, in the case of any particular Debt, the
instrument creating or evidencing, or the agreement governing, such Debt or
pursuant to which such Debt is outstanding expressly provides that such Debt
shall not be senior in right of payment to the Securities. To the extent
provided in the Indenture, Debt must be paid before the Securities may be paid.
The Company agrees, and each Securityholder by accepting a Security agrees, to
the subordination and authorizes the Trustee to give it effect.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in
registered form without coupons in denominations of $1,000 and in integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements, certificates, opinions and transfer documents and to pay any taxes
and fees required by law or permitted by the Indenture. The Registrar need not
exchange or register the transfer of any Security or portion of a Security
selected for redemption. Also, it need not exchange or register the transfer of
any Securities for a period of 15 days before a selection of Securities to be
redeemed or during the period between a record date and the next succeeding
interest payment date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Security may
be treated as its owner for all purposes.
12. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture or the Securities may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Securities then
outstanding, or compliance by the Company with any provision of the Indenture or
the Securities may be waived; provided, however, that without the consent of
each Holder affected thereby, the Company may not (1) reduce the percentage of
principal amount of Securities whose Holders must consent to an amendment,
supplement or waiver; (2) reduce the percentage of principal amount of
outstanding Securities whose Holders must consent to a modification or amendment
of the Indenture or for waiver of Events of Default or Defaults as defined in
the Indenture; (3) reduce the principal amount (or the premium) of any Security
or change the maturity date of the principal of, or any installment of interest
on, Securities; (4) reduce the Redemption Price, including premium, if any,
payable upon redemption or repurchase of any Security or change the time at
which any Security may or shall be redeemed or repurchased; (5) reduce the rate
or change the time, place or currency of payment of principal of, premium, if
any, or interest (including defaulted interest) on, any Security; (6) impair the
right to institute suit for the enforcement of any payment of
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<PAGE>
principal of, premium, if any, or interest on, any Security; (7) waive a
continuing past Default or Event of Default in the payment of principal of,
premium, if any, or interest on, the Securities; (8) modify any of the
provisions of the Indenture relating to the subordination of the Securities in a
manner adverse to the Securityholders; (9) modify any of the provisions of the
Indenture relating to the modification and amendment of the Indenture or the
waiver of past defaults or covenants; or (10) following the mailing of an offer
with respect to a Change of Control Offer as described under Section 4.17 or an
offer to purchase as described under Section 4.15, modify the Indenture with
respect to such Change of Control Offer or offer to purchase in a manner adverse
to such Holders.
Notwithstanding the foregoing, without the consent of any Holder of
Securities and subject to certain requirements set forth in Section 9.1 of the
Indenture, the Company and the Trustee may amend or supplement the Indenture or
the Securities to cure an ambiguity, defect or inconsistency, to comply with
Section 5.1 of the Indenture, to provide for uncertificated Securities in
addition to or in place of certificated Securities, to make any change that does
not adversely affect the legal rights under the Indenture of any such Holder, to
evidence or to provide for a replacement Trustee, to comply with requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act, or to add to the covenants and agreements of the
Company for the benefit of the Holders and to surrender any right or power
herein reserved to the Company.
13. DEFAULTS AND REMEDIES. Events of Default include: (1) the
Company defaults in the payment of interest on any Securities when the same
becomes due and payable and the Default continues for a period of 30 days
(including the failure to make payments pursuant to a Change of Control Offer
pursuant to Section 4.17 of the Indenture or an offer to repurchase pursuant to
Section 4.15); (2) the Company defaults in the payment of the principal or
premium, if any, of any Securities when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise (including the failure to
make payments pursuant to a Change of Control Offer pursuant to Section 4.17 or
an offer to repurchase pursuant to Section 4.15); (3) the Company or any
Subsidiary of the Company fails to comply with any other covenants or agreements
(other than the provisions of Article Five) contained in the Securities or this
Indenture and the default continues for a period of 60 days after the notice
specified in the Indenture; (4) the Company or any Subsidiary of the Company
fails to perform or comply with the provisions of Article Five; (5) the Company
or any of its Subsidiaries (A) admits in writing its inability to pay its debts
generally as they become due, (B) commences a voluntary case or proceeding under
any Bankruptcy Law with respect to itself, (C) consents to the entry of a
judgment, decree or order for relief against it in an involuntary case or
proceeding under any Bankruptcy Law, (D) consents to the appointment of a
custodian of it or for substantially all of its property, (E) consents to or
A-7
<PAGE>
acquiesces in the institution of a bankruptcy or an insolvency proceeding
against it, (F) makes a general assignment for the benefit of its creditors, or
(G) takes any corporate action to authorize or effect any of the foregoing; (6)
a court of competent jurisdiction enters a judgment, decree or order for relief
in respect of the Company or any of its Subsidiaries in an involuntary case or
proceeding under any Bankruptcy Law, which shall (A) approve as properly filed a
petition seeking reorganization, arrangement, adjustment or composition in
respect of the Company or any of its Subsidiaries, (B) appoint a custodian of
the Company or any of its Subsidiaries or for substantially all of its property
or (C) order the winding-up or liquidation of its affairs; and such judgment,
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; (7) final judgment or judgments for the payment of money which
in the aggregate at any one time exceeds $2 million shall be rendered against
the Company or any Subsidiary of the Company by a court of competent
jurisdiction and shall not have been vacated, discharged, satisfied or stayed
within 60 days after such judgment becomes final and nonappealable; or (8) a
default shall have occurred under any bonds, debentures, notes or other
evidences of indebtedness of the Company or any Subsidiary of the Company or
under any mortgages, indentures or instruments under which there may be issued
or by which there may be secured or evidenced any indebtedness by the Company or
any Subsidiary of the Company, in any case with a principal amount of at least
$2 million outstanding, and such indebtedness already is due and payable in full
or such default has resulted in the acceleration of the maturity of such
indebtedness, in each case after a period of five days during which period such
default shall not have been cured or such acceleration shall not have been
rescinded. If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Securities
may declare all the Securities to be due and payable as provided in the
Indenture, except that in the case of an Event of Default arising from certain
events of bankruptcy or insolvency, all outstanding Securities become due and
payable immediately without further action or notice. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Securities.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Securities may direct the Trustee in its exercise of any trust
or power. The Company must furnish an annual compliance certificate to the
Trustee. The Company must also furnish a notice of any Default to the Trustee
within five business days of such occurrence.
14. TRUSTEE DEALINGS WITH COMPANY. Subject to certain limitations,
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 Trustee.
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<PAGE>
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder by accepting a Security waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Securities.
16. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Securityholder or an assignee, such as: TEN COM (= tenants in common),
TENANT (= 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).
18. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee or Paying Agent will pay
the money back to the Company, unless otherwise required by law. After that,
Holders entitled to money must look to the Company for payment, unless otherwise
required by law.
19. DISCHARGE PRIOR TO MATURITY. If the Company irrevocably deposits
with the Trustee or Paying Agent in trust cash or U.S. Government Obligations
sufficient to pay the principal of and interest on the Securities to maturity
and satisfies certain conditions specified in the Indenture, the Company will be
discharged from the Indenture except for certain Sections thereof.
20. SUCCESSOR. When a successor to the Company assumes all the
obligations of its predecessor under the Securities and the Indenture, such
predecessor shall be released from those obligations.
21. GOVERNING LAW. This Security shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within such State.
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture. Request may be made to:
ProNet Inc.
Attention: President
600 Data Drive, Suite 100
Plano, Texas 75075
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<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign
and transfer this Security to
_________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________________
_____________________________________________ agent to transfer
this Security on the books of the Company. The agent may substitute another to
act for him or her.
Date:____________________
Your Signature:____________________
(Sign exactly as your name appears
on the face of this Security)
Signature Guarantee: ____________________________________________
(Participant in recognized signature guarantee medallion
program)
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to elect to have all or any portion of this Security
purchased by the Company pursuant to Section 4.17 ("Change of Control Offer") of
the Indenture, check the applicable boxes:
/ / Change of Control Offer:
in whole / /
in part / /
Amount to be
purchased: $__________
Dated: _______________________ Signature:______________________
(Sign exactly as your name appears
on the other side of this Security)
Signature
Guarantee:______________________________________________________________
(Participant in recognized signature guarantee medallion program)
Social Security Number or
Taxpayer Identification Number:__________________________________
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<PAGE>
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the SEC of
the effectiveness of a registration statement under the Securities Act of 1933,
as amended (the "Securities Act") covering resales of this Security (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) June 15, 1998, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer:
[CHECK ONE]
(1) ___ to the Company; or
(2) ___ pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
(3) ___ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter containing
certain representations and agreements (the form of which letter can
be obtained from the Trustee); or
(4) ___ outside the United States to a person who is not a U.S. Person in
compliance with Rule 904 of Regulation S under the Securities Act of
1933, as amended; or
(5) ___ pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; PROVIDED, HOWEVER, that if box (3) or (4) is
checked, the Company or the Trustee may require, prior to registering any such
transfer of the Securities, in its sole discretion, such written legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Trustee or the Company may reasonably request 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
of 1933.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Security 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 2.16 of the Indenture shall have
been satisfied.
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<PAGE>
Dated: __________________ Signed: ___________________________
(Sign exactly as name appears on the other side of
this Security)
Signature Guarantee: ____________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security 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
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
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<PAGE>
EXHIBIT A-1
Private Placement Legend for Restricted Securities
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, 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
BELOW. 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 "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND HAS ACQUIRED THE NOTES EVIDENCED
HEREBY IN AN OFFSHORE TRANSACTION PURSUANT TO REGULATION S UNDER THE SECURITIES
ACT, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE
OF THE NOTES EVIDENCED HEREBY RESELL OR OTHERWISE TRANSFER THE NOTES EVIDENCED
HEREBY, EXCEPT (A) TO PRONET INC. ("PRONET"), (B) INSIDE THE UNITED STATES 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 FIRST INTERSTATE BANK OF TEXAS, N.A., AS
TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTES EVIDENCED HEREBY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), OR (D) OUTSIDE THE UNITED
STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT AND (3) AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTES EVIDENCED HEREBY ARE
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THE NOTES EVIDENCED HEREBY WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF SUCH NOTES, THE HOLDER MUST COMPLETE THE APPROPRIATE
INFORMATION SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO FIRST INTERSTATE BANK OF TEXAS, N.A., AS
TRANSFER AGENT. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO PRONET AND FIRST
INTERSTATE BANK OF TEXAS, N.A., AS TRANSFER AGENT, SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS THEY 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. THIS
LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THREE YEARS FROM THE ORIGINAL
ISSUANCE OF THE NOTES EVIDENCED HEREBY. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS
GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.
<PAGE>
EXHIBIT B
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER
OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), 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 IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
[Trustee]
Attention: [Corporate Trust Department]
Re: ProNet Inc. (the "Company")
11 7/8% Senior Subordinated Notes due 2005
(the "Securities")
------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $__________ aggregate
principal amount of the Securities, we confirm that:
1. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture
dated as of June 15, 1995 relating to the Securities (the "Indenture") and
the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Securities except in compliance with such
restrictions and conditions and the Securities Act of 1933, as amended (the
"Securities Act").
2. We understand that the Securities have not been registered under
the Securities Act, and that the Securities 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 should sell any Securities within three years after the
original issuance of the Securities, we will do so only (A) to the Company
or any subsidiary thereof, (B) inside the United States to a "qualified
institutional buyer" in compliance with Rule 144A under the Securities Act,
(C) inside the United States to an "institutional accredited investor" (as
defined below) that, prior to such transfer, furnishes to you a signed
letter substantially in the form of this letter, (D) outside the United
States to a foreign person in compliance 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 (if available), 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
Securities from us a notice advising
C-1
<PAGE>
such purchaser that resales of the Securities are restricted as stated
herein.
3. We understand that, on any proposed resale of any Securities, 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 Securities 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) 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 Securities, 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 Securities 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
C-2
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
___________, ____
[Trustee]
Attention: [Corporate Trust Department]
Re: ProNet Inc. (the "Company") 11 7/8%
Senior Subordinated Securities
due 2005 (the "Securities")
-----------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a U.S. Person;
(2) either (a) at the time the buy offer 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, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
D-1
<PAGE>
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
D-2
<PAGE>
Exhibit 10.1
CONTACT COMMUNICATIONS, INC.
600 Data Drive, Suite 100
Plano, Texas 75075
VIA FACSIMILE
(919) 794-3008
May 10, 1995
Mr. C. T. Spruill
President
Page East, Inc.
310 U.S. 13 & 17 South
Windsor, North Carolina 27983
Dear Mr. Spruill:
This letter will confirm the understanding that C. T. Spruill (the
"Shareholder") has reached with Contact Communications Inc., a Delaware
corporation ("Buyer"), wholly-owned subsidiary of ProNet, Inc. ("ProNet"),
with respect to the acquisition ("Acquisition") by Buyer of all of the issued
and outstanding shares of common stock (and preferred stock, if any) of Page
East, Inc., a North Carolina corporation (the "Company") from the Shareholder.
1. The parties hereto shall immediately proceed with the further
negotiation, preparation and execution of a Definitive Agreement (herein so
called) containing, among other things, the terms and conditions set forth in
Exhibit A attached hereto. The parties intend that the Definitive Agreement be
executed no later than 5:00 p.m., Dallas time, July 1, 1995.
2. Following the date of execution hereof, the Shareholder and the
Company shall afford to Buyer through its officers, attorneys, accountants,
lenders and authorized representatives and affiliates free and full access to
the properties, books and records of the Company on reasonable notice during
normal business hours in order to permit Buyer to make such investigation of the
business, properties and operations of the Company as Buyer may deem necessary,
provided however that Buyer shall have completed its Due Diligence review by
July 1, 1995. In the event Buyer or Shareholder determines not to proceed with
the Acquisition, any information furnished to, or obtained by, any party hereto,
its officers, attorneys, accountants, lenders or authorized representatives, as
a result of its investigations or otherwise in connection with the Acquisition,
shall be treated as confidential information except (a) to the extent such
information is otherwise public or generally available to the public or (b) as
required by law. In the event the Acquisition does not occur, each party shall
return to the other parties all written confidential information furnished by
the other parties to it or him and will not thereafter use, for any
1
<PAGE>
purposes whatsoever, such confidential information, or permit any such
confidential information to be made publicly available.
3. The Shareholder and the Company represent and warrant to Buyer that
neither the Shareholder nor the Company has entered into any agreement pursuant
to which any person or entity has obtained the right to acquire any portion of
the securities or assets of the Company (whether by purchase of assets or stock,
by merger, or otherwise) and (b) the execution, delivery and performance of this
letter of intent by the Shareholder and the Company do not and will not breach,
violate or conflict with or permit the cancellation of, any agreement to which
the Company is a party or by which it or its properties are bound. In order to
induce Buyer to undertake the considerable effort and to incur the major
expenses associated with the Acquisition, the Shareholder and the Company shall
not, and shall use their best efforts to cause the officers, directors,
employees, and agents of the Company not to, (a) solicit, initiate or encourage
the submission of proposals or offers from any person or entity for, or enter
into any agreement or arrangement relating to, any acquisition or purchase of
any or all of the assets of, or securities of, or any merger, consolidation, or
business combination with, the Company or any subsidiary thereof or (b)
participate in any negotiations regarding or, except as required by legal
process, furnish to any other person or entity any information with respect to,
or otherwise cooperate in any way with, or assist or participate in, facilitate,
or encourage any effort or attempt by any other person or entity to do or seek
any of the foregoing. In addition, until 5:00 p.m., Dallas, Texas time, on July
1, 1995, the Shareholder and the Company agree that neither the Shareholder nor
the Company will enter into any agreement or consummate any transaction that
would interfere with the consummation of the Acquisition. The Shareholder and
the Company shall promptly notify Buyer if any such proposal or offer described
in this paragraph, or any inquiry or contact with any person or entity with
respect thereto, is made. The notification under this paragraph shall include
the identity of the person or entity making such acquisition, offer or other
proposal, the terms thereof, and any other information with respect thereto as
Buyer may reasonably request.
4. No public announcement shall be made by Buyer, ProNet, the
Company or the Shareholder with respect to the transactions contemplated hereby
without the approval of the respective parties, unless otherwise required by
law; provided, however, it is specifically understood that ProNet shall issue
press releases regarding the execution of this letter of intent, the execution
of the Definitive Agreement and the Closing of the Acquisition, following prior
notification to the Shareholder of the specific content of each such release and
providing Shareholder with the reasonable ability to modify any portion of any
such release which might be untrue, inaccurate or detrimental to the value of
the Company.
5. This letter and attached Exhibit A are intended merely to be a guide
in the preparation of a Definitive Agreement satisfactory to the parties hereto
and nothing contained herein shall be construed to preclude other provisions
that are inconsistent with
2
<PAGE>
the terms of the Acquisition outlined herein from being included in the
Definitive Agreement, provided such other provisions are satisfactory to all
parties to the Definitive Agreement. While the parties presently intend to
proceed promptly to complete the Definitive Agreement, it is expressly
understood that this is a letter of intent and that no liability or obligation
of any nature whatsoever is intended to be created between or among any of the
parties hereto except as set forth in paragraphs 2, 3 and 4 hereof.
If the foregoing sets forth your understanding with respect to this matter,
please execute the enclosed copies of this letter in the space provided below
for your signatures and return one fully executed copy to the undersigned,
whereupon this letter shall become a binding agreement among the parties hereto
and our respective heirs, successors and assigns as of the date hereof.
CONTACT COMMUNICATIONS INC.
By: /s/ Mark A. Solls
------------------------------------
Title: Vice President
---------------------------------
Accepted and agreed to in all respects
as of _____________________ 1995.
PAGE EAST, INC.
By:_________________________________
Title:_______________________________
____________________________________
C. T. Spruill
3
<PAGE>
EXHIBIT A
TERM SHEET
Nature of Transaction Acquisition of all of the issued and outstanding
common (and preferred, if any) stock of the
Company.
Purchase Price The Purchase Price shall be $6,376,000.
The Purchase Price shall be paid as follows: (a)
70% in cash at closing and (b) the balance payable
in shares of common stock of ProNet Inc. (valued
at the then current trading price) or cash (the
"Deferred Amount"), in Buyer's sole discretion, in
whole or part, within 12 months after the Closing
of the Acquisition, providing however, any cash
payment elected to be paid by Buyer as a portion
of the Deferred Amount shall not be paid sooner
than January 1, 1996. Shareholder may elect to
take some portion of (a) above in shares of common
stock of ProNet, Inc. (valued at the then current
trading price), provided however, that the then
current trading price is $18 per share or greater.
The shares of common stock to be delivered in
payment of the Deferred Amount, if any, shall be
the subject of a Registration Rights Agreement
between the Shareholder and ProNet pursuant to
which ProNet shall agree that such shares shall be
registered with the Securities and Exchange
Commission (the "SEC") within 14 days after the
delivery of such shares to the Shareholders.
At the Closing of the Acquisition, Buyer further
agrees to deliver to the Shareholder 15,000 shares
of common stock of ProNet.
The Purchase Price shall be adjusted upward to
reflect Buyer's purchase of the Company's Accounts
Receivable in accord with a mutually acceptable
schedule and Company's inventory which is greater
than $45,000 which shall be sold at cost.
4
<PAGE>
Financial Condition Of Page
East, Inc. At Closing (1) Between March 31, 1995 and Closing, there
shall have been no material adverse change in the
financial condition, assets or business of the
Company, and between March 31, 1995 and Closing,
the Business of the Company shall have been
conducted in the ordinary course consistent with
past practice.
(2) No declared but unpaid dividends.
(3) No loans to officers or employees
outstanding.
(4) Since March 31, 1995, there shall have been
no dividends or distributions, no material
increase in the compensation to officers or other
key employees of the Company (other than in the
normal course consistent with past practice) and
no material commitments shall be made without the
consent of the Buyer, except such distributions or
compensation as is mutually agreed to between the
parties.
(5) The cash and cash equivalents (excluding
accounts receivable) of the Company shall meet or
exceed the amount of Accounts Payable existing on
the date of the Closing. On or prior to Closing,
the Shareholder may retain or dividends cash and
cash equivalents excluding accounts receivable in
excess of such Accounts Payable.
(7) The Company's pagers in service shall not be
less than 12,000 at the date of the Closing and
Buyer shall adjust the Purchase Price upward to
reflect the sale of service to greater than 12,500
pagers at a amount equal to $150 per pager. Pager
accounts obtained via Shareholder's or Company's
purchase of Coastal Carolina Communications, Inc.
shall not be counted toward the calculation of
total pagers for the purpose of adjusting the
Purchase Price.
5
<PAGE>
Other Conditions To Closing
(1) All third party consents, approvals and
waivers required to be obtained by the Company or
the Buyer to consummate the transaction shall have
been obtained or waived.
(2) Any required government filings shall have
been made and applicable waiting periods shall
have expired or been terminated or waived by
Buyer.
(3) Execution by the Shareholder of a
noncompetition agreement.
Hart-Scott-Rodino Filing No later than ten (10) days after the Definitive
Agreement has been executed, the parties shall
make such filings as required by the Hart-Scott-
Rodino Antitrust Improvements Act with respect
to this transaction. Buyer shall be solely
responsible for any expenses associated with such
filings and the parties will cooperate in seeking
early termination of the waiting period under the
Act.
Coastal Carolina
Communications,Inc. The Company has entered into an agreement to
purchase the assets of Carolina Communications,
Inc. (the "CCI Agreement") for $1,624,000, subject
to adjustment. Subject to its approval after due
diligence review, Buyer shall assume the rights
and obligations of the Company under the CCI
Agreement. The Shareholder and the Company's
obligations under the Definitive Agreement shall
be conditioned upon Buyer's satisfactory
completion of said due diligence.
Noncompetition Agreement The Shareholder will agree not to compete with
Buyer in the area in which the Company serves its
customers for a period of two years from the
Closing of the Acquisition, subject to mutually
agreeable terms between the parties.
6
<PAGE>
Representation
and Warranties The Shareholder shall represent and warrant that
(a) neither he nor the Company has entered into
any agreement pursuant to which any person or
entity has obtained the right to acquire any
portion of the securities or all or substantially
all of the assets of the Company (whether by
purchase of assets or stock, by merger or
otherwise), and (b) except as otherwise disclosed
on the appropriate disclosure schedule, the
execution, delivery and performance of the
Definitive Agreement by the Shareholder and the
Company do not and will not breach, violate or
conflict with, or permit the cancellation of, any
agreement to which the Shareholder or the Company
is a party or by which any of them or their
properties are bound.
License Transfers Within 14 days after the parties have signed the
Definitive Agreement, Buyer (with Seller's
assistance) shall apply with the Federal
Communications Commission for the transfer of all
licenses currently issued to the Company
(including any pending applications with respect
to the Company).
Liabilities The Shareholder will pay or provide for payment at
Closing for all of the Company's liabilities so
that Buyer will be receiving the shares and assets
of the Company free and clear of all liabilities,
liens and encumbrances, except such liabilities
which Buyer agrees to accept pursuant to the terms
of the Definitive Agreement.
Indemnification/Offset Buyer shall have a right to offset against the
Deferred Amount for any damages resulting from
material breaches of the Definitive Agreement by
the Company or the Shareholder, and the amounts of
any such offset and the method of calculation of
any such offset shall be specifically set forth
within the Definitive Agreement.
ProNet Guarantee ProNet shall guarantee the obligations of Buyer
contained in the Definitive Agreement.
7
<PAGE>
Exhibit 10.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONCOURSE OFFICE PARK
OFFICE LEASE AGREEMENT
BETWEEN
CARTER-CROWLEY PROPERTIES, INC.
AS LANDLORD
AND
PRONET INC.
AS TENANT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page No.
--------
1. DEFINITIONS................................................... 1
(a) "Building"............................................... 1
(b) "Premises"............................................... 1
(c) "Base Rental"............................................ 1
(d) "Commencement Date"...................................... 1
(e) "Lease Term"............................................. 1
(f) "Lease Year"............................................. 1
(g) "Security Deposit"....................................... 1
(h) "Expense Stop"........................................... 1
(i) "Basic Operating Costs".................................. 1
(j) "Tenant's Share"......................................... 1
(k) "Common Areas"........................................... 1
(l) "Service Areas".......................................... 2
(m) "Rentable Area".......................................... 2
(n) "Normal Business Holidays"............................... 2
(o) "Normal Business Hours".................................. 2
(p) "Initial Improvements"................................... 2
(q) "Building Standard"...................................... 2
(r) "Ready for Occupancy".................................... 2
(s) "Complex"................................................ 2
(t) "Broker"................................................. 2
(u) "Substantially Complete"................................. 2
(v) "Punchlist Items"........................................ 2
2. LEASE GRANT................................................... 2
3. LEASE TERM.................................................... 2
4. USE........................................................... 3
5. PAYMENT OF RENT............................................... 3
6. BASIC OPERATING COSTS......................................... 3
7. LATE PAYMENTS................................................. 5
8. [Intentionally Deleted]....................................... 5
9. SERVICES TO BE FURNISHED BY LANDLORD.......................... 6
10. GRAPHICS...................................................... 7
11. COST OF IMPROVEMENTS.......................................... 7
12. REPAIR AND MAINTENANCE BY LANDLORD............................ 8
13. MAINTENANCE BY TENANT......................................... 8
14. REPAIRS BY TENANT............................................. 8
15. ALTERATIONS, ADDITIONS, IMPROVEMENTS.......................... 8
16. LAWS AND REGULATIONS; DISABILITY LAWS; BUILDING RULES......... 8
17. ENTRY BY LANDLORD............................................. 9
18. ASSIGNMENT AND SUBLETTING..................................... 9
19. MECHANIC'S LIENS.............................................. 11
i
<PAGE>
20. PROPERTY INSURANCE............................................ 11
21. LIABILITY INSURANCE........................................... 12
22. INDEMNITY..................................................... 12
23. WAIVER OF SUBROGATION RIGHTS.................................. 13
24. CASUALTY DAMAGE............................................... 13
25. CONDEMNATION.................................................. 14
26. DAMAGES FROM CERTAIN CAUSES................................... 14
27. EVENTS OF DEFAULT/REMEDIES.................................... 14
28. DEFAULT BY LANDLORD........................................... 16
29. QUIET ENJOYMENT............................................... 16
30. [Intentionally Deleted]....................................... 16
31. HOLDING OVER.................................................. 16
32. CHANGE OF BUILDING NAME OR COMMON AREAS....................... 16
33. SUBORDINATION TO MORTGAGE; ESTOPPEL AGREEMENT................. 16
34. [Intentionally Deleted]....................................... 17
35. ATTORNEY'S FEES............................................... 17
36. NO IMPLIED WAIVER............................................. 17
37. INDEPENDENT OBLIGATIONS....................................... 17
38. RECOURSE LIMITATION........................................... 18
39. NOTICES....................................................... 18
40. SEVERABILITY.................................................. 18
41. RECORDATION................................................... 18
42. GOVERNING LAW................................................. 18
43. FORCE MAJEURE................................................. 18
44. TIME OF PERFORMANCE........................................... 18
45. TRANSFERS BY LANDLORD......................................... 18
46. COMMISSIONS................................................... 18
47. EFFECT OF DELIVERY OF THIS LEASE.............................. 18
48. WAIVER OF WARRANTIES AND ACCEPTANCE OF CONDITION.............. 18
49. MERGER OF ESTATES............................................. 19
50. SURVIVAL OF COVENANTS......................................... 19
51. HEADINGS...................................................... 19
52. ENTIRE AGREEMENT; AMENDMENTS.................................. 19
ii
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53. EXHIBITS...................................................... 19
54. JOINT AND SEVERAL LIABILITY................................... 19
55. MULTIPLE COUNTERPARTS......................................... 20
iii
<PAGE>
CONCOURSE OFFICE PARK
OFFICE LEASE AGREEMENT
----------------------
THIS OFFICE LEASE AGREEMENT ("Lease") is executed effective as of April 7,
1995, between CARTER-CROWLEY PROPERTIES, INC., a Texas corporation ("Landlord"),
and ProNet Inc., a Delaware corporation ("Tenant").
W I T N E S S E T H:
1. DEFINITIONS. As used in this Lease, the following terms shall have the
meanings set forth below:
(a) "Building" shall mean the office building located upon the real
property ("Property") described in EXHIBIT "A" and having a street address of
6340 LBJ Freeway, Dallas, Texas 75240. The Rentable Area of all buildings within
the Complex is hereby stipulated and agreed for all purposes to be 244,879
square feet.
(b) "Premises" shall mean the suite of offices, known as Suites No.
100 and 200, located upon the 1st and 2nd floors of the Building and outlined on
the floor plan(s) attached to this Lease as EXHIBIT "B." The Rentable Area of
the Premises is hereby stipulated and agreed for all purposes to be 27,150
square feet, irrespective of whether the same should be more or less as a result
of variations resulting from actual construction and completion of the Premises
for occupancy.
(c) "Base Rental" shall mean an annual sum of $ SEE PAGE 1-A ,
payable in monthly installments of $ SEE PAGE 1-A , plus the amounts specified
in SECTION 6. The Base Rental for any partial month at the beginning of the
Lease Term shall be pro-rated and paid at the rental rate applicable during the
first full month of the Lease Term. Any such pro-rated Base Rental shall be due
upon receipt of an invoice from Landlord. The Base Rental due for the first
(1st) full month of the Lease Term shall be deposited with Landlord by Tenant
contemporaneously with the delivery by Tenant to Landlord of this Lease.
(d) "Commencement Date" shall mean the earlier of (i) the date that
Tenant actually occupies the Premises for the conduct of its business, or (ii)
the later of (A) October 1, 1995, or (B) the date fifteen (15) business days
after the date on which the Premises are Ready for Occupancy.
(e) "Lease Term" shall mean a term commencing on the Commencement
Date and continuing for the remainder of the month containing the Commencement
Date and then for five (5) Lease Years. If the Commencement Date occurs on the
first day of the month, the first Lease Year shall begin on the Commencement
Date.
(f) "Lease Year" shall mean a period of twelve (12) consecutive
calendar months. The first Lease Year shall begin on the 1st day of the month
following the Commencement Date unless the Commencement Date occurs on the 1st
day of a month, in which event the first Lease Year shall begin on the
Commencement Date.
(g) "Security Deposit" shall mean the sum of $ -0-.
(h) "Expense Stop" shall mean the greater of (i) the actual basic
Operating Costs for the Complex for calendar year 1995, or (ii) the product
found by multiplying the total Rentable Area of the Complex by $5.00.
(i) "Basic Operating Costs" shall have the meaning given to such term
in SECTION 6.
(j) "Tenant's Share" shall mean eleven and 09/100 percent (11.09%)
which is the proportion which the Rentable Area of the Premises bears to one
hundred percent (100%) of the Rentable Area of all buildings within the Complex.
(k) "Common Areas" shall mean those areas devoted to corridors,
elevator foyers, restrooms, mechanical rooms, janitorial closets, electrical and
telephone closets, vending areas, and lobby areas (whether at ground level or
otherwise), and other similar facilities provided for the common use or benefit
of all tenants generally and/or the public (but shall not include any such areas
for the exclusive use of a particular tenant or any parking facilities).
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Base Rental Schedule
--------------------
Rate Per Square
Foot of Annual Monthly
Lease Year Rentable Area Sum Installment
1 $ 10.50 $ 285,075.00 $ 23,756.25
2 $ 10.50 $ 285,075.00 $ 23,756.25
3 $ 11.25 $ 305,437.50 $ 25,453.13
4 $ 11.25 $ 305,437.50 $ 25,453.13
5 $ 11.25 $ 305,437.50 $ 25,453.13
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(l) "Service Areas" shall mean those areas within the outside walls
used for elevator mechanical rooms, building stairs, elevator shafts, flues,
vents, stacks, pipe shafts and other vertical penetrations (but shall not
include any such areas for the exclusive use of a particular tenant).
(m) "Rentable Area" of the Premises shall mean (1) the "Usable Area"
within the Premises (i.e., the gross area enclosed by the surface of the
exterior glass walls, the mid-point of any walls separating portions of the
Premises from those of adjacent tenants, the slab penetration line of all walls
separating the Premises from Service Areas and the corridor side of walls
separating the Premises from Common Areas) plus (2) a pro rata part of the
Common Areas within the Building, including the area encompassed by any columns
or other structural elements which provide support to the Premises and/or the
Building. Rentable Area shall not include any Service Areas, except Service
Areas which are for the specific use of Tenant, such as special stairs or
elevators.
(n) "Normal Business Holidays" means New Years Day, Memorial Day,
July 4th (Independence Day), Labor Day, Thanksgiving, Christmas Day and any
other day which shall be subsequently recognized by office tenants generally as
a national holiday on which employees are not required to work.
(o) "Normal Business Hours" for the Building shall mean 7:00 a.m. to
6:00 p.m. Mondays through Fridays and 8:00 a.m. to 1:00 p.m. on Saturdays,
exclusive of Normal Business Holidays.
(p) "Initial Improvements" shall mean those improvements to the
Premises which Landlord has agreed to provide according to the work letter
attached to this Lease as EXHIBIT "D" ("Work Letter").
(q) "Building Standard" shall mean the level of service or type of
equipment standard in the Building or the type, brand and/or quality of
materials Landlord designates from time to time to be the minimum quality to be
used in the Building or the exclusive type, grade or quality of material to be
used in the Building. A list of the current Building Standard materials is
attached to this Lease as EXHIBIT "F".
(r) "Ready for Occupancy" shall mean a Certificate of Occupancy (or
its equivalent) has been issued for the Premises and the Initial Improvements
are Substantially Complete (as defined below).
(s) "Complex" shall mean the Property, all buildings located upon the
Property and the Parking Garage (as defined in EXHIBIT "E").
(t) "Broker" shall mean The Staubach Company (Elysia Holt and Kelley
Kackley).
(u) "Substantially Complete" shall mean that (i) the Initial
Improvements have been completed in substantial accordance with the Plans and
Specifications (excluding Punchlist Items), (ii) all fire alarms, smoke
detectors, exit lights and life safety equipment have been installed and are
operational, (iii) all elevators, HVAC systems, utilities, plumbing, doors and
hardware have been installed and are in working order, and (iv) the Premises is
capable of being occupied for its intended purpose. In the event of any dispute
between Landlord and Tenant relating to whether the Initial Improvements are
Substantially Complete, or relating to what Punchlist Items or other work is
required to finally complete construction in accordance with the Plans and
Specifications, the decision of the architect that prepared the Plans and
Specifications, certified by such architect as having been determined in good
faith and in accordance with professional industry standards, shall be
controlling absent manifest error. The party to this Lease that engaged the
architect that prepared the Plans and Specifications shall use its best efforts
to cause such architect to timely render a decision in accordance with the
standards described in the preceding sentence.
(v) "Punchlist Items" shall mean touch-up, minor finish, mechanical
adjustment, or decoration items that do not unreasonably interfere with
occupancy of the Premises by Tenant.
2. LEASE GRANT. Upon the terms of this Lease, Landlord leases to Tenant,
and Tenant leases from Landlord, the Premises.
3. LEASE TERM.
(a) This Lease shall continue in force during a period beginning on
the effective date of this Lease (though no Rent shall accrue until the
Commencement Date) and continuing until the
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expiration of the Lease Term, unless this Lease is sooner terminated or extended
to a later date under any other term or provision hereof.
(b) If the Commencement Date is delayed due to omission, delay or
default by Tenant or anyone acting under or for Tenant (a "Tenant Delay"),
Landlord shall have no liability for such delay, and the obligations of Tenant
under this Lease (including, without limitation, the obligation to pay Rent)
shall nonetheless commence as of the date that the Commencement Date would have
occurred but for such Tenant Delay. If, however, the Commencement Date is
delayed due to any reason other than a Tenant Delay, then, as Tenant's sole
remedy for the delay in Tenant's occupancy of the Premises, the Commencement
Date shall be delayed and the Rent herein provided shall not commence until the
earlier to occur of (i) the date of actual occupancy by Tenant of the Premises,
or (ii) the date five (5) business days following the date on which the Premises
are Ready for Occupancy. Notwithstanding anything contained herein to the
contrary, in the event the Premises are not Ready for Occupancy within one
hundred eighty (180) days after final approval of the Plans and Specifications
(as extended by each day of delay attributable to Tenant Delay), Landlord shall
provide Tenant with a credit against the first Rent due hereunder equal to
$1,000.00 per each day of delay until the Premises are Ready for Occupancy.
4. USE. The Premises shall be used for office purposes and
radio/electronics light assembly and repair and for no other purpose.
5. PAYMENT OF RENT. The term "Rent" shall mean, collectively, the Base
Rental, the Tenant's Share of any increases in Basic Operating Costs as provided
in SECTION 6, and all other sums of money becoming due and payable to Landlord
under this Lease. Except as otherwise expressly provided in this Lease, the
Rent shall be due and payable to Landlord in advance in monthly installments on
the first day of each calendar month during the Lease Term, in legal tender of
the United States of America, at Landlord's address as provided on the signature
page of this Lease or to such other person or at such other address as Landlord
may from time to time designate in writing. The Rent shall be paid without
notice, demand, abatement, deduction or offset, except as otherwise expressly
provided in this Lease. If the Lease Term commences on other than the first day
of a calendar month, then the installment of Base Rental for such partial month
shall be prorated as provided in SECTION 1(c). If the Lease Term commences or
ends at any time other than the first day of a calendar year, the Tenant's Share
of any increases in the Basic Operating Costs shall be prorated for such year
according to the number of days of the Lease Term during such year.
6. BASIC OPERATING COSTS.
(a) In addition to the Base Rental, Tenant shall also pay Tenant's
Share of the amount, if any, by which the Basic Operating Costs during any
calendar year of the Lease Term exceed the Expense Stop. Prior to the
commencement of each calendar year during the Lease Term, Landlord may, at its
option, provide Tenant with a then current estimate of Basic Operating Costs for
the upcoming calendar year, and thereafter Tenant shall pay, as additional
rental, in monthly installments in accordance with SECTION 5, Tenant's Share of
the difference between Landlord's estimate of the Basic Operating Costs for the
calendar year in question and the Expense Stop. The failure of Landlord to
estimate Basic Operating Costs and bill Tenant on a monthly basis shall in no
event relieve Tenant of its obligation to pay the Tenant's Share of increases in
Basic Operating Costs over the Expense Stop. Notwithstanding anything contained
in this SECTION 6(a) to the contrary, Tenant's obligation for the payment of
"Controllable Basic Operating Costs" shall be capped so as not to exceed an
aggregate annual increase from the Base Year in excess of eight percent (8%) per
annum. As used herein, the term "Controllable Basic Operating Costs" shall mean
all Basic Operating Costs except those described in paragraphs (3),
(5), (6) and (10) of Section 6(c) hereof and the amortization of the cost of
installation of capital investment items required by governmental authority.
(b) By June 1 of each calendar year following the calendar year
containing the Commencement Date (including the calendar year following the year
in which the Lease Term is terminated), or as soon thereafter as possible,
Landlord shall furnish to Tenant a statement of actual Basic Operating Costs for
the prior calendar year, and within thirty (30) days thereafter an appropriate
adjustment shall be made between Landlord and Tenant to reflect any overpayment
or underpayment of Basic Operating Costs for the prior calendar year because of
any difference between the amount, if any, collected by Landlord from Tenant for
Tenant's Share of Basic Operating Costs and the actual amount of Tenant's Share
of Basic Operating Costs. In the event of an underpayment by Tenant, Tenant
shall pay the amount of suds underpayment to Landlord within thirty (30) days
following delivery of such statement. In the event of an overpayment by Tenant,
Landlord hall, if no Event of Default exists hereunder, make a cash payment to
Tenant in the amount of such overpayment, or, if an Event of Default exists
hereunder, credit such overpayment against delinquent Rent and make a cash
payment to Tenant for the balance.
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(c) "Basic Operating Costs" shall mean all direct and, to the extent
provided in subsection (c)(1) below, indirect costs and expenses incurred in
each calendar year of operating, maintaining, repairing, managing and owning the
Complex, including without limitation, the following:
(1) Wages and salaries of all employees at the grade of building
manager and below engaged in the direct operation and maintenance of the
Complex, employer's social security taxes, unemployment taxes or insurance and
any other taxes which may be levied on such wages and salaries, and the cost of
disability and hospitalization insurance and pension or retirement benefits for
such employees; provided, however, with respect to employees engaged in the
operation and maintenance of other buildings owned by Landlord (or an affiliate
of Landlord) other than the Complex, such items shall be fairly apportioned
among all such buildings;
(2) Cost of leasing or purchasing all supplies, tools, equipment
and materials used in the operation, maintenance, repair and management of the
Complex;
(3) Cost of all utilities for the Complex, including the cost of
water and power, sewage, heating, lighting, air conditioning and ventilation for
the Complex;
(4) Cost of all maintenance and service agreements for the
Complex and surrounding grounds, including, but not limited to, janitorial
service, security service, equipment leasing, energy management system leasing,
landscape maintenance, alarm service, window cleaning and elevator maintenance;
(5) Cost of all insurance relating to the Complex, including,
but not limited to, fire and extended coverage insurance, rental interruption
insurance and liability insurance applicable to the Complex and Landlord's
personal property used in connection therewith, plus the cost of all deductible
payments made by Landlord in connection therewith (but only to the extent not
already deducted as a Basic Operating Cost);
(6) All taxes and assessments and governmental charges, whether
federal, state, county or municipal and whether they be by taxing districts or
authorities presently taxing the Complex or by others, subsequently created or
otherwise and any other taxes, association dues and assessments attributable to
the Complex or its operation, excluding, however, federal and state income
taxes, franchise taxes, inheritance, estate, gift, corporation, net profits or
any similar tax for which Landlord becomes liable and/or which may be imposed
upon or assessed against Landlord;
(7) Cost of repairs and general maintenance for the Complex
(excluding such repairs and general maintenance paid by insurance proceeds or by
Tenant or other third parties);
(8) Legal expenses incurred with respect to the Complex which
relate directly to the operation of the Complex (and not the leasing, sale or
financing of the Complex) and which benefit all of the tenants of the Complex
generally, such as legal proceedings to abate offensive activities or uses or
reduce property taxes, but excluding any proceedings to collect Rent;
(9) Fees for management services, whether provided by an
independent management company, by Landlord or by any affiliate of Landlord, but
only to the extent that the costs of such services do not exceed competitive
costs for such services in the Dallas area office market generally;
(10) Expenses incurred in order to comply with any federal, state
or municipal laws, codes or ordinances, or regulations promulgated under any of
the same, which first become applicable to the Complex after the date of this
Lease;
(11) Amortization of the cost of installation of capital
investment items which are primarily for the purpose of either (i) reducing (or
avoiding increases in) operating costs (but only to the extent of any actual
savings), (ii) promoting safety, or (iii) which may be required in order to
comply with any federal, state or municipal laws, codes or ordinances, or
regulations promulgated under the same, which first become applicable to the
Complex after the date of this Lease. All costs of such capital investment items
shall be amortized over the reasonable life of such items with the reasonable
life and amortization schedule being determined in accordance with generally
accepted accounting principles and in no event to extend beyond the remaining
useful life of the Building; and
(12) Costs of ad valorem tax consultants.
(d) Notwithstanding anything to the contrary in this Lease, Basic
Operating Costs shall not include any expenses or costs for the following items:
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(1) Except as provided in subsection (c)(11) above, costs that
under generally accepted accounting principles are classified as capital
expenditures, and related amortization thereof;
(2) Except as provided in subsection (c)(11) above, depreciation
or amortization of the Building or its contents or components;
(3) Expenses for the preparation of space (including tenant
finish out costs) or other similar type work which Landlord performs for any
tenant or prospective tenant of the Building;
(4) Expenses incurred in leasing or obtaining new tenants or
retaining existing tenants, including, but not limited to, leasing commissions;
(5) Except as provided in subsection (c)(8) above, legal
expenses;
(6) Interest, amortization or other costs associated with any
mortgage, loan or refinancing of the Complex;
(7) Any ground rent incurred for the Complex; and
(8) Any costs or expenses incurred primarily for the purpose of
complying with the Americans With Disabilities Act of 1990 or Tex. Civ. Stat.
Ann. art. 9102 (collectively, the "Disability Laws").
(e) Tenant, at Tenant's expense, shall have the right, no more
frequently than once per calendar year, following thirty (30) days' prior
written notice to Landlord, to audit Landlord's books and records relating to
Basic Operating Costs; provided that such audit must be commenced and concluded
by December 31 of the year following the year to which such audit relates; and
provided further that such audit does not unreasonably interfere with the
conduct of Landlord's business. Unless Landlord disputes the results of such
audit, an appropriate adjustment shall be made between Landlord and Tenant to
reflect any overpayment or underpayment of Basic Operating Costs within thirty
(30) days after delivery of such audit to Landlord. In the event of an
overpayment by Tenant, Landlord shall, if no Event of Default exists hereunder,
make a cash payment to Tenant in the amount of such overpayment, or, if an Event
of Default exists hereunder, credit such overpayment against delinquent Rent and
make a cash payment to Tenant for the balance. In the event Landlord disputes
the results of any such audit, the parties shall in good faith attempt to
resolve any discrepancies and final settlement shall be made within ten (10)
days thereafter. If the parties are unable to resolve any discrepancy, any sum
on which there is no longer dispute shall be paid and any remaining
discrepancies shall be referred to a mutually satisfactory third party certified
public accountant for final resolution. The cost of such certified public
accountant shall be split equally between Landlord and Tenant.
(f) Nothing in this SECTION 6 shall be construed at any time to
reduce the Base Rental below the amount set forth in SECTION 1(c) above.
7. LATE PAYMENTS.
(a) In the event any installment of Rent is not received within five
(5) days after the date due more than twice during the preceding twelve (12)
month period (without in any way implying Landlord's consent to such late
payment), Tenant, to the extent permitted by law, agrees to pay, in addition to
said installment of Rent, a late payment charge equal to two and one-half
percent (2 1/2%) of the installment of Rent due, it being understood that said
late payment charge shall be for the purpose of reimbursing Landlord for the
additional costs and expenses which Landlord presently expects to incur in
connection with the handling and processing of late payments. In the event of
any such late payment(s) by Tenant, the additional costs and expenses so
resulting to Landlord will be difficult to ascertain precisely and the foregoing
charge constitutes a reasonable and good faith estimate by the parties of the
extent of such additional costs and expenses. Acceptance of such late charge by
Landlord shall in no event constitute a waiver of Tenant's default with respect
to such overdue amount, nor prevent Landlord from exercising any other rights or
remedies granted hereunder.
(b) In addition to and cumulative of the foregoing, all Rent, if not
paid within thirty (30) days of the date due, shall, at the option of Landlord,
and to the extent permitted by law, bear interest from the date due until paid
at the lesser of (i) the rate of fourteen percent (14%) per annum and (ii) the
maximum rate of interest then permissible for a commercial loan to Tenant in the
State of Texas (the "Default Rate").
8. [Intentionally Deleted]
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9. SERVICES TO BE FURNISHED BY LANDLORD. So long as no Event of Default
exists under this Lease, Landlord agrees to furnish Tenant the following
services:
(a) Facilities for hot and cold water at those points of supply
provided for general use of other tenants in the Building, and central heat and
air conditioning in season, during Normal Business Hours, at such temperatures
and in such amounts as are considered to be standard for similar class office
buildings within a three (3) mile radius of the Building or as required by
governmental authority (including energy conservation requirements).
(b) Routine maintenance and electric lighting service for all Common
Areas and Service Areas of the Building in the manner and to the extent deemed
by Landlord to be standard.
(c) Janitor service, five (5) days per week, exclusive of Normal
Business Holidays at least consistent with the level of janitorial service
provided in similar class office buildings within a three (3) mile radius of the
Building.
(d) All Building Standard florescent and incandescent bulb and
ballast replacement in the Premises, the Common Areas and the Service Areas.
(e) Limited access to the Building during other than Normal Business
Hours through the use of master entry cards and/or keys. Tenant shall receive
one (1) master entry card and/or key for each two hundred and fifty (250) square
feet of Rentable Area in the Premises. Tenant shall reimburse Landlord for the
cost of each additional card and/or key and for each replacement card and/or key
for any card and/or key lost by or stolen from Tenant. The cost of additional
keys shall be $3.50 per key and the cost of additional cards shall be $10.00 per
card. Tenant further agrees to surrender all master entry cards and/or keys in
its possession upon the expiration or earlier termination of this Lease. Any
lost cards and/or keys shall be canceled. In addition, as long as Carter-Crowley
Properties, Inc. or any affiliate thereof owns the Complex, Landlord shall
provide a security guard to patrol the Complex during the hours of 4:30 p.m. -
9:00 p.m., Monday - Friday (excluding Normal Business Holidays). LANDLORD SHALL
HAVE NO LIABILITY TO TENANT, ITS EMPLOYEES, AGENTS, CONTRACTORS, INVITEES, OR
LICENSEES FOR LOSSES DUE TO THEFT OR BURGLARY (OTHER THAN THEFT OR BURGLARY
COMMITTED BY EMPLOYEES OF LANDLORD), OR FOR DAMAGES DONE BY UNAUTHORIZED PERSONS
ON THE PREMISES OR THE COMPLEX, EXCEPT TO THE EXTENT ATTRIBUTABLE TO THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD OR ANY EMPLOYEE OF LANDLORD. Tenant
shall cooperate fully in Landlord's efforts to control access in the Building
and shall follow all regulations promulgated by Landlord with respect thereto
which are adopted in accordance with EXHIBIT "C". TENANT MAY, AT ITS SOLE COST
AND EXPENSE, MODIFY THE EXISTING SECURITY SYSTEM AT THE BUILDING AND/OR INSTALL
ITS OWN SECURITY SYSTEM IN THE BUILDING; PROVIDED, HOWEVER, TENANT SHALL NOT
HAVE THE RIGHT TO REMOVE TENANT'S EXISTING SECURITY SYSTEM AND WILL REPAIR ANY
DAMAGE TO SUCH SYSTEM CAUSED BY TENANT. IF TENANT MODIFIES THE EXISTING SYSTEM
OR INSTALLS A NEW SYSTEM, LANDLORD SHALL HAVE NO RESPONSIBILITY FOR THE
MONITORING OR REPAIR OF SUCH SYSTEM OR FOR ANY FAILURE OF SUCH SYSTEM. TENANT
SHALL FURTHER HAVE THE RIGHT TO LIMIT ACCESS TO CERTAIN PORTIONS OF THE PREMISES
AS LONG AS LANDLORD MAY ALWAYS IMMEDIATELY ACCESS SUCH PORTIONS OF THE PREMISES
IN THE EVENT OF AN EMERGENCY.
(f) Electricity and proper facilities to furnish (i) Building
Standard lighting and cooling and (ii) sufficient electrical power for normal
office machines (including electric typewriters, desk-top computer facilities
and desk-top word processing facilities) and other machines of similar
electrical consumption ("Miscellaneous Power"), provided that Tenant's
Miscellaneous Power requirements shall not exceed six (6) watts per square foot
of connected load and two (2) watts per square foot of demand load, or require a
voltage greater than 120/208 volts 3-phase (the "Building Standard Electrical
Design Load"). In the event Landlord determines that Tenant will require, or is
consuming, special lighting or cooling in excess of Building Standard or
Miscellaneous Power in excess of the Building Standard Electrical Design Load,
(i) Tenant shall reimburse Landlord for the cost of any additional equipment,
such as transformers, risers and supplemental air conditioning equipment, which
Landlord's engineer reasonably deems necessary to accommodate such above
standard consumption (without implying any obligation on the part of Landlord to
accommodate such use), and (ii) Landlord may install separate meters to all or a
portion of the Premises at the cost of Tenant. In the event separate utility
meters are provided to the Premises, Landlord may elect to have all charges for
the utilities separately metered to the Premises billed directly to Tenant and
Landlord shall make a corresponding adjustment to Tenant's Share of Basic
Operating Costs.
(g) Passenger elevator service for ingress to and egress from the
floor(s) upon which the Premises are situated, twenty-four (24) hours a day,
seven (7) days a week (however, all of the foregoing shall be subject to the
Rules and Regulations for the Building and temporary cessation for ordinary
repair and maintenance and during times when life safety systems override normal
Building operating systems).
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(h) The unintentional failure by Landlord to any extent to furnish
services hereunder or any cessation thereof shall not render Landlord liable in
any respect for damages (including, without limitation, business interruption)
to either person or property, nor be construed as an eviction of Tenant, nor
work an abatement of Rent, nor relieve Tenant from fulfillment of any covenant
or agreement hereof. Should any of such services be interrupted, Landlord shall
use reasonable diligence to restore the same promptly, but Tenant shall have no
claim for rebate of Rent, damages or eviction on account thereof.
Notwithstanding the foregoing, subject to SECTION 24 (Casualty Damage) and
SECTION 25 (Condemnation), if any portion of the Premises becomes unfit for
occupancy because Landlord fails to deliver any service required under this
SECTION 9 for any period exceeding five (5) consecutive business days, and
provided such failure is not caused by Tenant or any Tenant Related Party (as
defined in SECTION 22), Landlord shall allow Tenant an equitable abatement of
Rent (based on the severity of the interruption and the amount of space unfit
for occupancy) effective from the fifth business day following the earlier to
occur of (i) the date on which Tenant first provided Landlord with written
notice of the interruption of such service, and (ii) the date on which Landlord
first acquired actual knowledge of the interruption of such service, until such
portion of the Premises is again fit for occupancy. In addition, subject to
SECTION 24 (Casualty Damage) and SECTION 25 (Condemnation), if for any reason
other than the gross negligence or willful misconduct of Tenant or any employee,
officer, contractor, agent, subtenant, guest, licensee or invitee of Tenant, any
of such services are interrupted and as a consequence thereof the Premises are
rendered untenantable for sixty (60) consecutive days, and if Tenant does not
conduct its normal business in the Premises during such sixty-day period, Tenant
may, at its option, at any time within sixty (60) days thereafter, terminate
this Lease by written notice to Landlord.
(i) Heating and air conditioning during other than Normal Business
Hours shall be provided through a mechanism controlled by Tenant. The electrical
power necessary to provide such after-hours HVAC service shall be separately
metered and paid directly by Tenant.
(j) In the event Landlord agrees to provide any additional services
at the specific request of Tenant, without implying any obligation on the part
of Landlord) to do so, the provision of such services shall, unless otherwise
specifically agreed in writing, be subject to the availability of building
personnel, and, if the provision of any such service requires Landlord to incur
out-of-pocket cost, Tenant shall reimburse Landlord for the actual cost of
providing such service (plus an administrative charge equal to five percent (5%)
of cost) within ten (10) days following receipt of invoice. Unless Landlord has
agreed with Tenant to the contrary in writing, Landlord may discontinue the
provision of such additional service at any time upon thirty (30) days advance
written notice (or immediately upon the occurrence of an Event of Default).
10. GRAPHICS.
(a) Landlord shall, at Landlord's sole cost, provide and install one
(1) Building Standard identification sign per floor within the Premises and add
Tenant's name and suite number to the Building directory in the lobby (the "Base
Building Signage"). Any other signage requested by Tenant in addition to the
Base Building Signage shall be subject to the prior approval of Landlord, which
consent shall not be unreasonably withheld if (a) such graphics are not visible
from the exterior of the Premises, (b) such graphics do not consist of neon or
other lighted material, and (c) such graphics are in keeping with the quality of
the standard Building graphics and shall be provided at the cost of Tenant (plus
an administrative charge equal to five percent (5%) of cost to Landlord). All
such additional signage shall be in the standard graphics for the Building and
no others shall be used or permitted without Landlord's prior written consent.
Tenant, at its sole cost and expense, shall remove all non-standard building
signage upon the termination of this Lease and repair any damage caused by such
removal.
(b) Tenant shall have the right, at its sole cost and expense, to
install signage on the exterior of the Building, subject to approval by Landlord
of the size, style and location of such signage, such approval not to be
unreasonably withheld or delayed. Landlord hereby approves the north side of the
Building, east end, top of the Building as an acceptable location.
(c) Subject to the approval of the City of Dallas, Landlord shall add
the name and/or logo of Tenant to the remaining one-half (1/2) of the monument
sign located near the main entrance of the Complex, the exact size, style, and
cost of such sign to be mutually agreed to by Landlord and Tenant. Tenant shall
reimburse Landlord for fifty percent (50%) of the cost of adding Tenant's name
and/or logo to such monument sign; provided, however, Tenant may utilize any
unused portion of the Construction Allowance to pay its portion of such cost.
Tenant may use such remaining one-half (1/2) of the monument sign during the
Lease Term.
11. COST OF IMPROVEMENTS. Except for the Initial Improvements (which shall
be governed by the Work Letter), all installations and improvements now or
hereafter placed on the Premises at the request of Tenant shall be at Tenant's
cost and if Landlord performs such installations or improvements
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on Tenant's behalf, such cost (plus a construction management fee equal to three
percent (3%) of hard costs) shall be payable by Tenant to Landlord within ten
(10) days following Tenant's receipt of an invoice as additional Rent.
12. REPAIR AND MAINTENANCE BY LANDLORD. Except as provided in SECTION 14
below, Landlord shall be responsible for the maintenance and repair of exterior
and load-bearing walls, floors (but not floor coverings), mechanical,
electrical, plumbing and HVAC systems and equipment which are Building Standard,
the roof of the Building, the Common Areas (including restrooms located on any
full floors leased by Tenant), the Service Areas and the Parking Garage. In no
event shall Landlord be responsible for the maintenance or repair of
improvements made by or at the request of Tenant which are not Building
Standard. All requests for repairs must be submitted to Landlord in writing,
except in the case of an emergency.
13. MAINTENANCE BY TENANT. Tenant shall maintain the Premises in a clean
and orderly condition and shall not commit or allow any waste to be committed on
any portion of the Premises, and at the termination of this Lease shall deliver
up the Premises to Landlord in as good condition as at the Commencement Date,
ordinary wear and tear and damage by fire or casualty loss (unless caused by
Tenant) excepted.
14. REPAIRS BY TENANT. Tenant shall, at Tenant's cost, repair or replace
any damage to the Premises that is not caused by or the responsibility of
Landlord and any damage to the Complex, or any part thereof, caused by Tenant or
any employee, officer, contractor, agent, subtenant, guest, licensee or invitee
of Tenant (except that with respect to any such damage outside of the Premises
or below floor coverings, above ceilings or behind walls or columns, such damage
shall be repaired by Landlord, but at the cost of Tenant (plus an administrative
charge equal to ten percent (10%) of cost); provided if Tenant fails to make
such repairs or replacements within thirty (30) days after receipt of written
notice from Landlord, Landlord may, at Landlord's option, make such repairs or
replacements at the cost of Tenant (plus an administrative charge equal to ten
percent (10%) of cost). The cost of all repairs performed by Landlord pursuant
to this SECTION 14 shall be payable by Tenant to Landlord within ten (10) days
following Tenant's receipt of an invoice as additional Rent.
15. ALTERATIONS, ADDITIONS, IMPROVEMENTS.
(a) Tenant will make no alteration, change, improvement, replacement
or addition to the Premises (collectively, "Alterations"), without the prior
written consent of Landlord. Landlord's consent shall not be unreasonably
withheld with respect to interior Alterations which do not affect, in any way,
the mechanical, electrical, plumbing, HVAC and/or structural components of the
Building. Landlord may, at its option, require Tenant to submit plans and
specifications to Landlord for approval prior to commencing any Alterations. All
Alterations shall be done in a good and workmanlike manner and in compliance
with all applicable laws and ordinances. Tenant shall require that any
contractors used by Tenant carry a comprehensive liability (including builder's
risk) insurance policy in such amounts as Landlord may reasonably require and
provide proof of such insurance to Landlord prior to the commencement of any
Alterations. All persons performing work in the Building at the request of
Tenant shall register with the Building Manager prior to initiating any work.
(b) Upon the termination of this Lease, Tenant may remove its trade
fixtures, office supplies and movable office furniture and equipment not
attached to the Building provided (i) such removal is made prior to the
termination or expiration of the Lease Term; (ii) Tenant is not then in default
in the timely performance of any obligation or covenant under this Lease; and
(iii) Tenant promptly repairs all damage caused by such removal. All other
property at the Premises, any Alterations to the Premises, and any other
articles attached or affixed to the floor, wall, or ceiling of the Premises
shall, immediately upon installation, be deemed the property of Landlord and
shall be surrendered with the Premises at the termination or expiration of this
Lease, without payment or compensation therefor. If, however, Landlord so
requests in writing, Tenant will, at Tenant's sole cost and expense, prior to
the termination or expiration of the Lease Term, remove (i) any and all trade
fixtures, office supplies and office furniture and equipment placed or installed
by Tenant in the Premises, and (ii) any non-Building Standard Alterations (other
than the Initial Improvements) installed by Tenant or installed by Landlord at
Tenant's request in the Premises and which Landlord designated in writing for
potential removal as a condition to approval of the alteration in question, and
will repair any damage caused by such removal.
16. LAWS AND REGULATIONS; DISABILITY LAWS; BUILDING RULES.
(a) Tenant, at Tenant's sole cost and expense, shall comply with all
current and subsequent federal, state, municipal and other laws and ordinances
applicable to the Premises, the employees, agents, visitors and invitees of
Tenant, and the business conducted in the Premises by Tenant, including, without
limitation, all environmental laws and regulations; will not engage in any
activity
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which would cause Landlord's fire and extended coverage insurance to be
cancelled or the rate increased (or, at Landlord's option, Tenant will pay any
such increase); and will not commit any act which is a nuisance or annoyance to
Landlord or to other tenants in the Building or which might, in the reasonable
judgment of Landlord, appreciably damage Landlord's goodwill or reputation, or
tend to injure or depreciate the value of the Building. Notwithstanding the
foregoing, nothing in this SECTION 16(a) shall be construed as requiring Tenant
to be responsible for any legal requirements applicable to the structural
portions of the Premises, any restrooms within the Building (other than
restrooms constructed by or at the special request of Tenant) or the Building
Standard mechanical, electrical, plumbing or HVAC systems, unless the failure to
comply with any such legal requirements is caused by Tenant or anyone acting for
Tenant.
(b) Tenant, at its sole cost, shall be responsible for compliance
with Disability Laws with respect to (i) all structural barriers to the disabled
created by the Initial Improvements (but only if Tenant engaged the architect
that prepared the Plans and Specifications), (ii) all structural barriers to the
disabled created by Alterations made to the Premises or any other acts of Tenant
after the Commencement Date, (iii) all non-structural requirements of Disability
Laws applicable to Tenant and the employees, agents, visitors and invitees of
Tenant, including, without limitation, requirements related to auxiliary aids
and graphics installed by or on behalf of Tenant (other than Base Building
Signage), and (iv) all requirements of Disability Laws that first become
applicable to the Premises after the Commencement Date. Except as provided in
the preceding sentence, Landlord, at its sole cost, shall be responsible for
compliance with Disability Laws with respect to all structural barriers to the
disabled within the Premises, the Common Areas (including restrooms located upon
full floors leased by Tenant) and the Service Areas. Neither party shall be in
default under this SECTION 16(b) for its failure to comply with Disability Laws
so long as the responsible party is either (i) contesting in good faith, and by
legal means, the enforcement of Disability Laws, or (ii) undertaking diligent
efforts to comply with Disability Laws.
(c) Tenant will comply with the rules and regulations of the Building
as adopted and altered by Landlord from time to time in accordance with EXHIBIT
"C" and will cause all of its agents, employees, contractors, invitees and
visitors to do so. All changes to such rules and regulations will be sent by
Landlord to Tenant in writing. The current rules and regulations for the
Building are attached hereto as EXHIBIT "C". All changes to the rules and
regulations shall be uniformly enforced against all tenants of the Complex and
shall be binding upon Tenant upon delivery of written notice thereof to Tenant.
17. ENTRY BY LANDLORD. Tenant agrees to permit Landlord and its
employees, agents, contractors or representatives to enter into and upon any
part of the Premises at all reasonable hours upon reasonable prior notice (and
in the case of emergencies at all times and without notice) to inspect the same,
or to show the Premises to prospective purchasers, mortgagees, insurers or
tenants, or to clean or make repairs, alterations or additions thereto, and
Tenant shall not be entitled to any abatement or reduction of Rent by reason
thereof. Landlord shall use reasonable efforts to minimize any disruption to the
conduct of Tenant's business by reason of any such entry. No notice shall be
required with respect to entry by Landlord, or its employees, agents or
contractors to perform janitorial services.
18. ASSIGNMENT AND SUBLETTING.
(a) Tenant shall not assign this Lease or sublease the Premises or
any part thereof or mortgage, pledge or hypothecate its leasehold interest or
grant any concession or license within the Premises (any such assignment,
sublease, mortgage, pledge, hypothecation, or grant of a concession or license
being hereinafter referred to in this SECTION 18 as a "Transfer") without the
prior written consent of Landlord, and any attempt to effect a Transfer without
such consent of Landlord shall be void and of no effect. Landlord shall not
unreasonably withhold its consent with respect to an assignment or subletting to
a third party if (i) Landlord receives evidence reasonably satisfactory to
Landlord that such third party possesses sufficient financial strength to
satisfy its obligations under such assignment or sublease, and (ii) the
occupancy of the Premises or the applicable portion thereof by the proposed
third party would not increase fire hazards, require substantial alterations to
the Premises or adversely affect the reputation and image of the Building.
Notwithstanding the foregoing, under no circumstances shall Landlord be required
to consent to an assignment or subletting to another tenant in the Complex or to
any party with whom Landlord has conducted negotiations during the preceding six
(6) months regarding the leasing of space in the Complex. In order for Tenant to
make a Transfer, Tenant must request in writing Landlord's consent at least
fifteen (15) days in advance of the date on which Tenant desires to make a
Transfer and pay Landlord a $250.00 fee for reviewing such request (the "Review
Fee") Such request shall include the name of the proposed assignee or sublessee,
current financial information on the proposed assignee or sublessee and the
terms of the proposed Transfer. Landlord shall then have a period of fifteen
(15) days following receipt of such request within which to notify Tenant in
writing that Landlord elects (i) to terminate this Lease as to the space so
affected as of the date so specified by Tenant, in which event Tenant will be
relieved of all further obligations hereunder as to such space, (ii)
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to permit Tenant to assign or sublet such space in accordance with the terms
provided to Landlord, or (iii) to refuse consent to Tenant's requested Transfer
and to continue this Lease in full force and effect as to the entire Premises.
If Landlord shall fail to notify Tenant in writing of such election within said
fifteen (15) day period, Landlord shall be deemed to have elected option (ii)
above. If Landlord elects options (i) or (iii) above, Landlord shall return the
Review Fee to Tenant. If Landlord elects to exercise option (ii) above, Tenant
agrees to provide, at its expense, direct access from any sublet space or
concession area to a public corridor of the Building, and such other
improvements, alterations or additions as may be required by applicable law. The
prohibition against a Transfer contained herein shall be construed to include a
prohibition against any Transfer by merger, sale of assets, sale of stock or
operation of law except for the following transactions:
(1) SALE OF TENANT EXCEPTION. The sale of all or substantially
all of the capital stock of the Tenant, whether by merger, consolidation or
otherwise, as long as the surviving entity expressly assumes the obligations of
the Tenant under this Lease and as long as the net worth of Tenant is not
reduced following such sale.
(2) CHANGE IN OWNERSHIP. The issuance by Tenant of equity
securities, and changes in percentage ownership, if any, of the Tenant's equity
securities, as long as the control (as defined below) of Tenant does not change
and the net worth of Tenant is not reduced as a result of any such change in
ownership.
(3) SALE OF ASSETS. A sale of all or substantially all of the
assets of Tenant as long as the purchasing entity expressly assumes the
obligations of the Tenant under this Lease and such purchasing entity has a net
worth following such purchase no less than that of Tenant immediately prior to
such sale.
Notwithstanding the foregoing or anything else to the contrary in this Lease,
Tenant shall have the right, subject to SECTION 18(b), without Landlord's
consent, to assign this Lease or sublet all or any portion of the Premises to
any person or entity who controls, is controlled by, or is under common control
with the original Tenant named in this Lease (an "Affiliate Transfer"). The term
"control" shall mean (i) with respect to a corporation, the right to exercise,
directly or indirectly, more than fifty percent (50%) of the voting rights
attributable to the shares of the controlled corporation, and (ii) with respect
to a person or entity that is not a corporation, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of the controlled person or entity. Tenant shall provide Landlord with
written notice of any Affiliate Transfer within ten (10) days after the
effective date thereof.
(b) Notwithstanding that the prior express written consent of
Landlord to a Transfer may have been obtained under the provisions of SECTION
18(a) or that such permission is not required, the following shall apply to all
Transfers (including Affiliate Transfers):
(1) In the event of an assignment or sublease, Tenant shall (i)
in the case of an assignment, cause the assignee to expressly assume in writing
and to agree to perform all of the covenants, duties and obligations of Tenant
hereunder, and such assignee shall be jointly and severally liable therefor
along with Tenant; and (ii) agree with Landlord that, except in the case of an
Affiliate Transfer, in the event that the rent or other consideration due and
payable by a sublessee or assignee under any such permitted sublease or
assignment exceeds the Rent for the portion of the Premises so transferred, then
Tenant shall pay Landlord as additional rental hereunder seventy-five percent
(75%) of all such excess rental and other consideration immediately upon receipt
thereof by Tenant from such transferee;
(2) No usage of the Premises different from the usage herein
provided to be made by Tenant shall be permitted, and all of the terms and
provisions of this Lease shall continue to apply after a Transfer; and
(3) Tenant will nevertheless remain directly and primarily
liable for the performance of all the covenants, duties and obligations of
Tenant hereunder (including, without limitation, the obligation to pay Rent),
and Landlord shall be permitted to enforce the provisions of this Lease against
the undersigned Tenant or any transferee, or both, without demand upon or
proceeding in any way against any other persons.
(c) The consent by Landlord to a particular Transfer shall not be
deemed a consent to any other subsequent Transfer. If this Lease, the Premises
or the Tenant's leasehold interest therein, or if any portion of the foregoing
is transferred, or if the Premises are occupied in whole or in part by anyone
other than Tenant without the prior consent of Landlord as provided herein,
Landlord may nevertheless collect rent from the transferee or other occupant and
apply the net amount collected to the Rent payable hereunder, but no such
transaction or collection of rent or application thereof by Landlord
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shall be deemed a waiver of the provisions hereof or a release of Tenant from
the further performance by Tenant of its covenants, duties and obligations
hereunder.
(d) Notwithstanding anything to the contrary contained herein, if
Tenant, as a debtor-in-possession (the "DIP"), or a trustee for the estate in
bankruptcy of Tenant (the "Trustee"), assumes this Lease and proposes to assign
this Lease, or sublet the Premises (or any portion thereof), pursuant to the
provisions of the Federal Bankruptcy Code, 11 U.S.C. Sections 101 ET SEQ. (the
"Bankruptcy Code") to any person, partnership, corporation or other entity (the
"Proposed Assignee"), then such assumption of this Lease and any such assignment
or sublease shall be subject to all of the following:
(1) The DIP, or the Trustee, as the case may be, shall give
Landlord written notice at least ten (10) days prior to the date that the DIP or
the Trustee, as the case may be, shall make application to a court of competent
jurisdiction for authority and approval to enter into such assumption and
assignment or subletting, which notice shall set forth: (i) the name and address
of the Proposed Assignee; (ii) all of the terms and conditions of the Proposed
Assignee's offer; and (iii) the adequate assurances to be provided Landlord to
assure such Proposed Assignee's future performance under this Lease. Landlord,
upon receipt of such notice, shall have the prior right and option, to be
exercised by notice to the DIP or the Trustee, as the case may be, given at any
time prior to the effective date of such proposed assignment or sublease, to
accept an assignment or sublease of this Lease by any other assignee or
sublessee, acceptable to Landlord, upon the same terms and conditions and for
the same consideration, if any, as the Proposed Assignee, less any brokerage
commissions which may be payable out of the consideration to be paid by or for
the assignment of this Lease;
(2) If the rental agreed upon between the DIP or the Trustee, as
the case may be, and the Proposed Assignee under any proposed assignment or
sublease of the Premises (or any part thereof) is greater than the rental rate
that Tenant must pay Landlord hereunder for that portion of the Premises that is
subject to such proposed assignment or sublease, or if any consideration
shall be received by the DIP or the Trustee, as the case may be, in connection
with any such proposed assignment or sublease, then all such excess rental or
such consideration shall be paid or delivered to Landlord, and shall not
constitute property of the DIP, the Trustee, or of the estate of Tenant, as the
case may be, within the meaning of the Bankruptcy Code; and
(3) Any proposed assignment or sublease of this Lease by the DIP
or the Trustee, as the case may be, pursuant to provisions of the Bankruptcy
Code shall provide adequate assurance of future performance under this Lease by
the Proposed Assignee, which adequate assurance shall include, as a minimum, the
following: (i) any Proposed Assignee of the Lease shall deliver to Landlord a
security deposit in an amount equal to at least three (3) months Base Rental
accruing under this Lease; (ii) any Proposed Assignee of the Lease shall provide
to Landlord an unaudited financial statement, certified to be accurate by such
Proposed Assignee or by an officer, director or partner thereof and dated no
later than six (6) months prior to the effective date of such proposed
assignment or sublease, which financial statement shall show the Proposed
Assignee to have a net worth equal to at least the Rent that shall accrue under
this Lease for the next year of the Term, (iii) any Proposed Assignee shall pay
all Rent not previously paid under this Lease including all payments which have
been suspended, mitigated, nullified or reduced to a claim of any kind against
Tenant or the Tenant's property, by operation of law or otherwise; and (iv) any
Proposed Assignee shall assume Tenant's obligation to pay Landlord's attorneys'
fees pursuant to SECTION 35 hereof.
This SECTION 18(d) shall not apply to any assignment or sublease other than
pursuant to the provisions of the Bankruptcy Code, nor shall it in any way limit
Landlord's rights to damages or other relief in a proceeding under the
Bankruptcy Code.
19. MECHANIC'S LIENS. Tenant will not permit any mechanic's liens or other
liens to be placed upon the Premises or the Complex for any work performed by or
at the request of Tenant, or any assignee, sublessee or licensee of Tenant, and
nothing in this Lease shall be deemed or construed in any way as constituting
the consent or request of Landlord, express or implied, by inference or
otherwise, to any person for the performance of any labor or the furnishing of
any materials to the Premises, or any part thereof, nor as giving Tenant any
right, power, or authority to contract for or permit the rendering of any
services or the furnishing of any materials that would give rise to any
mechanic's or other liens against the Premises or the Complex. In the event any
such lien is attached to the Premises or the Complex and not discharged by
payment, bonding or otherwise within fifteen (15) days after receipt of written
notice from Landlord, then, in addition to any other right or remedy of
Landlord, Landlord may, but shall not be obligated to, discharge the same. Any
amount paid by Landlord for the aforesaid purpose shall be paid by Tenant to
Landlord on demand as additional Rent and bear interest at the Default Rate
until paid.
20. PROPERTY INSURANCE.
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(a) Landlord shall maintain fire and extended coverage insurance on
the portion of the Complex that is the property of Landlord, including
Alterations by Tenant that have become the property of Landlord, in an amount
equal to not less than ninety percent (90%) of the replacement cost. Such
insurance shall be maintained at the expense of Landlord (as a part of the Basic
Operating Costs), and payments for losses thereunder shall be made solely to
Landlord or the mortgagees of Landlord as their interests shall appear.
(b) Tenant shall maintain fire and extended coverage insurance on all
of its personal property, including removable trade fixtures, located on the
Premises, in an amount equal to full replacement cost. Such insurance shall be
maintained at the expense of Tenant and payment for losses thereunder shall be
made solely to Tenant or the mortgagees of Tenant as their interests shall
appear. Tenant shall, at Landlord's request from time to time, provide Landlord
with a current certificate of insurance evidencing Tenant's compliance with this
SECTION 20. Tenant shall obtain the agreement of Tenant's insurers to notify
Landlord that a property insurance policy is due to be cancelled or expire at
least thirty (30) days prior to such cancellation or expiration.
21. LIABILITY INSURANCE. Tenant and Landlord shall (Landlord as a part of
Basic Operating Costs and Tenant at its own expense) maintain a policy or
policies of commercial general liability insurance with respect to the
respective activities of each in or on the Complex, with the premiums thereon
fully paid on or before the due date, issued by and binding upon an insurance
company licensed to do business in the State of Texas and having an A.M. Best
Rating of "A" or better. Such insurance shall provide minimum protection of not
less than $1,000,000 combined single limit primary coverage per occurrence of
bodily injury, property damage or combination thereof and shall from time to
time during the Lease Term be for such higher limits as are customarily carried
with respect to similar buildings in the area where the Complex is located.
Tenant's insurance shall contain an endorsement that Tenant's insurance is
primary for claims arising out of an incident or event occurring within the
Premises. Landlord's insurance shall contain an endorsement that Landlord's
insurance is primary for claims arising out of an incident or event occurring
within the Common Areas. Tenant's insurance shall contain a provision naming
Landlord (and any mortgagee designated by Landlord) as an additional insured and
include coverage for the contractual liability of Tenant to indemnify Landlord
pursuant to SECTION 22 below. Tenant shall, prior to occupancy of the Premises
and at Landlord's request from time to time, provide Landlord with a current
certificate of insurance evidencing Tenant's compliance with this SECTION 21.
Tenant shall obtain the agreement of Tenant's insurers to notify Landlord that a
liability insurance policy is due to be cancelled or expire at least thirty (30)
days prior to such cancellation or expiration.
22. INDEMNITY.
(a) TENANT SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS LANDLORD AND ANY
OFFICER, DIRECTOR, PARTNER OR EMPLOYEE OF LANDLORD (HEREIN COLLECTIVELY CALLED A
"LANDLORD RELATED PARTY") FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
DAMAGES, CLAIMS, SUITS, LOSSES, CAUSES OF ACTION, LIENS, JUDGMENTS AND EXPENSES
(INCLUDING COURT COSTS, ATTORNEY'S FEES AND COSTS OF INVESTIGATION) OF ANY KIND,
NATURE OR DESCRIPTION RESULTING FROM ANY INJURIES TO OR DEATH OF ANY PERSON OR
ANY DAMAGE TO PROPERTY WHICH ARISES, OR IS CLAIMED TO ARISE FROM: (i) AN
INCIDENT OR EVENT WHICH OCCURRED WITHIN OR ON THE PREMISES; OR (ii) THE
OPERATION OR CONDUCT OF TENANT'S BUSINESS WITHIN THE PREMISES; OR (iii) ANY
DEFAULT BY TENANT UNDER THIS LEASE (COLLECTIVELY, THE "CLAIMS"), EVEN IF THE
CLAIM IS THE RESULT OF OR CAUSED BY THE NEGLIGENT ACTS OR OMISSIONS OF ANY
LANDLORD RELATED PARTY. IF ANY SUCH CLAIM IS MADE AGAINST ANY LANDLORD RELATED
PARTY, TENANT SHALL, AT TENANT'S SOLE COST AND EXPENSE, DEFEND SUCH CLAIM BY OR
THROUGH ATTORNEYS REASONABLY ACCEPTABLE TO LANDLORD. The indemnity obligations
of Tenant under this subsection (i) shall be limited to the greater of the
amount of commercial general liability insurance required to be carried by
Tenant under this Lease or $5,000,000, and (ii) shall not apply to a Claim (y)
waived by Landlord under SECTION 23 below or any other provision of this Lease,
or (z) arising out of the gross negligence or intentional misconduct of any
Landlord Related Party.
(b) LANDLORD SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS TENANT AND ANY
OFFICER, DIRECTOR, PARTNER OR EMPLOYEE OF TENANT (HEREIN COLLECTIVELY CALLED A
"TENANT RELATED PARTY") FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
DAMAGES, CLAIMS, SUITS, LOSSES, CAUSES OF ACTION, LIENS, JUDGEMENTS AND EXPENSES
(INCLUDING COURT COSTS, ATTORNEYS' FEES AND COSTS OF INVESTIGATION) OF ANY KIND,
NATURE OR DESCRIPTION RESULTING FROM ANY INJURIES TO OR DEATH OF ANY PERSON OR
ANY DAMAGE TO PROPERTY WHICH ARISES, OR IS CLAIMED TO ARISE FROM, (i) AN
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INCIDENT OR EVENT WHICH OCCURRED WITHIN OR ON THE COMMON AREAS; OR (ii) THE
OPERATION OR CONDUCT OF LANDLORD'S BUSINESS WITHIN THE COMMON AREAS; OR (iii)
ANY DEFAULT BY LANDLORD UNDER THIS LEASE (COLLECTIVELY, THE "CLAIMS"), EVEN IF
THE CLAIM IS THE RESULT OF OR CAUSED BY THE NEGLIGENT ACTS OR OMISSIONS OF ANY
TENANT RELATED PARTY. IF ANY SUCH CLAIM IS MADE AGAINST ANY TENANT RELATED
PARTY, LANDLORD SHALL, AT LANDLORD'S SOLE COST AND EXPENSE, DEFEND SUCH CLAIM BY
OR THROUGH ATTORNEYS REASONABLY ACCEPTABLE TO TENANT, The indemnity obligations
of Landlord under this subsection (i) shall be limited to the greater of the
amount of commercial general liability insurance required to be carried by
Landlord under this Lease or $5,000,000, and (ii) shall not apply to a claim (y)
waived by Tenant under SECTION 23 below or any other provision of this Lease, or
(z) arising out of the gross negligence or intentional misconduct of any Tenant
Related Party.
23. WAIVER OF SUBROGATION RIGHTS. NOTWITHSTANDING ANYTHING IN THIS LEASE
TO THE CONTRARY, TO THE EXTENT THAT AND SO LONG AS THE SAME IS PERMITTED UNDER
THE LAWS AND REGULATIONS GOVERNING THE WRITING OF INSURANCE WITHIN THE STATE OF
TEXAS, ALL INSURANCE CARRIED BY EITHER LANDLORD OR TENANT SHALL PROVIDE FOR A
WAIVER OF RIGHTS OF SUBROGATION AGAINST LANDLORD AND TENANT ON THE PART OF THE
INSURANCE CARRIER. UNLESS THE WAIVERS CONTEMPLATED BY THIS SENTENCE ARE NOT
OBTAINABLE FOR THE REASONS DESCRIBED IN THIS SECTION 23, LANDLORD AND TENANT
EACH HEREBY WAIVE ANY AND ALL RIGHTS OF RECOVERY, CLAIMS, ACTIONS OR CAUSES OF
ACTION AGAINST THE OTHER, ITS AGENTS, OFFICERS, OR EMPLOYEES, FOR ANY LOSS OR
DAMAGE TO PROPERTY OR ANY INJURIES TO OR DEATH OF ANY PERSON WHICH IS COVERED OR
WOULD HAVE BEEN COVERED UNDER THE INSURANCE POLICIES REQUIRED UNDER THIS LEASE.
THE FOREGOING RELEASE SHALL NOT APPLY TO LOSSES OR DAMAGES IN EXCESS OF ACTUAL
OR REQUIRED POLICY LIMITS (WHICHEVER IS GREATER), BUT SHALL APPLY TO ANY
DEDUCTIBLE APPLICABLE UNDER ANY POLICY OBTAINED BY THE WAIVING PARTY. THE
FAILURE OF EITHER PARTY (THE "DEFAULTING PARTY") TO TAKE OUT OR MAINTAIN ANY
INSURANCE POLICY REQUIRED UNDER THIS LEASE SHALL BE A DEFENSE TO ANY CLAIM
ASSERTED BY THE DEFAULTING PARTY AGAINST THE OTHER PARTY HERETO BY REASON OF ANY
LOSS SUSTAINED BY THE DEFAULTING PARTY THAT WOULD HAVE BEEN COVERED BY ANY SUCH
REQUIRED POLICY. THE WAIVERS SET FORTH IN THE IMMEDIATELY PRECEDING SENTENCE
SHALL BE IN ADDITION TO, AND NOT IN SUBSTITUTION FOR, ANY OTHER WAIVERS,
INDEMNITIES, OR EXCLUSIONS OF LIABILITIES SET FORTH IN THIS LEASE.
24. CASUALTY DAMAGE. If the Premises or any part thereof shall be damaged
by fire or other casualty, Tenant shall give prompt written notice thereof to
Landlord. In case the Building shall be so damaged by fire or other casualty
that substantial alteration or reconstruction of the Building (i.e., alteration
or reconstruction which is estimated to cost in excess of the product found by
multiplying the Rentable Area of the Building by $5.00) shall, in the judgment
of an independent architect selected by Landlord, be required (whether or not
the Premises shall have been damaged by such fire or other casualty), or in the
event any mortgagee under a first mortgage or first deed of trust covering the
Building should require that the insurance proceeds payable as a result of said
fire or other casualty be used to retire the mortgage debt, or in the event of
the occurrence of a casualty which is not insured under the fire and extended
coverage insurance required to be carried by Landlord pursuant to the terms of
SECTION 20 Landlord may, at its option, terminate this Lease by notifying Tenant
in writing of such termination within sixty (60) days after the date of such
damage or determination by such a mortgagee to take the proceeds, in which event
the Rent hereunder shall be abated as of the date of such damage. If Landlord
does not elect to terminate this Lease, Landlord shall within ninety (90) days
after the date of such damage, commence to repair and restore the Building and
shall proceed with reasonable diligence to restore the Building to substantially
the same condition which it was in immediately prior to the happening of the
fire or other casualty, except that Landlord shall not be required to rebuild,
repair, or replace any part of Tenant's furniture, fixtures and equipment
removable by Tenant under the provisions of this Lease or any Alterations to the
Premises made by Tenant following the Commencement Date which were not approved
by Landlord in writing, and Landlord shall not in any event be required to spend
for such work an amount in excess of the insurance proceeds actually received by
Landlord as a result of the fire or other casualty plus any deductible amounts
thereunder. If Landlord determines that insurance proceeds will be insufficient
to restore the Building as required by this SECTION 24, Landlord may, at its
option, elect to either (i) terminate this Lease by written notice to Tenant, or
(ii) provide the extra funds necessary to complete the restoration. In the event
Landlord did not originally construct any Alterations to be repaired, the time
for Landlord to commence and complete such repairs shall be extended by the
amount of time reasonably necessary for Landlord to obtain detailed working
drawings of the Alterations to be repaired. In the event Landlord does not
either (i) commence the repairs to the
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Building within the time required herein, or (ii) complete the repairs to the
Building within one hundred eighty (180) days after the date of such damage,
Tenant may terminate the Lease by written notice thereof to Landlord given no
later than thirty (30) days following the date on which Landlord was to commence
or complete such repairs, as the case may be. Landlord shall not be liable for
any inconvenience or annoyance to Tenant or injury to the business of Tenant
resulting in any way from such damage or the repair thereof, except that,
subject to the provisions of the next sentence, Landlord shall allow Tenant an
equitable abatement of Rent during the time and to the extent the Premises are
unfit for occupancy and vacated by Tenant. If the Premises or any other portion
of the Complex be damaged by fire or other casualty resulting from the
intentional acts of Tenant or any employee, officer, contractor, agent,
subtenant, or licensee of Tenant, the Rent hereunder shall not be abated during
the repair of such damage, and Tenant shall remain liable for the payment
thereof to the extent, if any, Landlord is not reimbursed by the proceeds of
rental interruption insurance carried by Landlord.
25. CONDEMNATION. If (i) the whole or substantially the whole of the
Building, or (ii) the whole or such portion of the Premises as shall render the
remainder reasonably unfit for Tenant's use, shall be taken for any public or
quasi-public use, by right of eminent domain or otherwise, or sold in lieu of
condemnation, then this Lease shall terminate as of the date when physical
possession of the Building or the Premises are taken by the condemning
authority. If this Lease is not so terminated upon any such taking or sale, the
Base Rental payable hereunder shall be diminished by an amount representing that
portion of Base Rental applicable to the portion of the Premises subject to such
taking or sale, and Landlord shall to the extent Landlord deems feasible,
restore the Building and the Premises to substantially their former condition,
except that Landlord shall not be required to rebuild, repair, or replace any
Alterations to the Premises made by Tenant following the Commencement Date which
were not approved by Landlord in writing, nor shall Landlord in any event be
required to spend for such work an amount in excess of the amount received by
Landlord as compensation for such taking. All amounts awarded upon a taking of
any part or all of the Property, Building or the Premises shall belong to
Landlord, and Tenant shall not be entitled to and expressly waives all claims to
any such compensation except that Tenant may make a separate claim upon the
condemning authority for expenses related to relocation and the unamortized cost
of leasehold improvements paid for by Tenant.
26. DAMAGES FROM CERTAIN CAUSES. NOTWITHSTANDING ANYTHING CONTAINED IN
THIS LEASE TO THE CONTRARY, NEITHER LANDLORD NOR ANY LANDLORD RELATED PARTY
SHALL BE LIABLE FOR DAMAGES TO TENANT OR ANY PARTY CLAIMING THROUGH TENANT FOR
ANY INJURY TO OR DEATH OF ANY PERSON OR DAMAGE TO PROPERTY OR FOR INTERRUPTION
OR DAMAGE TO BUSINESS RESULTING FROM ANY OF THE FOLLOWING REASONS: (A) ANY ACT,
OMISSION OR NEGLIGENCE OF TENANT OR TENANT'S EMPLOYEES, AGENTS, CONTRACTORS,
OFFICERS, SUBTENANTS, ASSIGNEES, LICENSEES, INVITEES OR CUSTOMERS; (B)ANY ACT,
OMISSION OR NEGLIGENCE OF ANY OTHER TENANT WITHIN THE BUILDING, OR ANY OF THEIR
RESPECTIVE EMPLOYEES, AGENTS, CONTRACTORS, TENANTS, ASSIGNEES, LICENSEES,
INVITEES OR CUSTOMERS; (C) THE REPAIR, ALTERATION, MAINTENANCE, DAMAGE OR
DESTRUCTION OF THE PREMISES OR ANY OTHER PORTION OF THE BUILDING (INCLUDING THE
CONSTRUCTION OF LEASEHOLD IMPROVEMENTS FOR OTHER TENANTS OF THE BUILDING) EXCEPT
TO THE EXTENT CAUSED BY THE NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD OR ANY
LANDLORD RELATED PARTY; (D)VANDALISM, THEFT, BURGLARY AND OTHER CRIMINAL ACTS
(OTHER THAN THOSE COMMITTED BY LANDLORD'S EMPLOYEES OR RESULTING FROM THE GROSS
NEGLIGENCE, OR WILLFUL MISCONDUCT OF LANDLORD OR ITS EMPLOYEES); (E) ANY DEFECT
IN OR FAILURE OF EQUIPMENT, PIPES, WIRING, HEATING OR AIR CONDITIONING
EQUIPMENT, STAIRS, ELEVATORS, OR SIDEWALKS; THE BURSTING OF ANY PIPES OR THE
LEAKING, ESCAPING OR FLOWING OF GAS, WATER, STEAM, ELECTRICITY, OR OIL; BROKEN
GLASS; OR THE BACKING UP OF ANY DRAINS, EXCEPT TO THE EXTENT CAUSED BY THE
NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD OR ANY LANDLORD RELATED PARTY; (F)
INJURY DONE OR OCCASIONED BY WIND, SNOW, RAIN OR ICE, FIRE, ACT OF GOD, PUBLIC
ENEMY, INJUNCTION, RIOT, STRIKE, INSURRECTION, WAR, COURT ORDER, REQUISITION,
ORDER OF ANY GOVERNMENTAL BODY OR AUTHORITY, OR ANY OTHER CAUSE BEYOND THE
REASONABLE CONTROL OF LANDLORD. UNDER NO CIRCUMSTANCES SHALL LANDLORD BE LIABLE
FOR DAMAGES RELATED TO BUSINESS INTERRUPTION OR LOSS OF PROFITS. THE PROVISIONS
OF THIS SECTION 26 SHALL NOT LIMIT THE OBLIGATIONS OF LANDLORD OR THE RIGHTS OF
TENANT UNDER THIS LEASE NOT INVOLVING A CLAIM FOR DAMAGES.
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27. EVENTS OF DEFAULT/REMEDIES.
(a) The following events shall be deemed to be events of default by
Tenant under this Lease (hereinafter called an "Event of Default"):
(1) Tenant shall fail to timely pay any Rent and such failure
shall continue for a period of five (5) days after written notice of such
default shall have been delivered to Tenant; provided however, once Landlord has
given Tenant two (2) such notices during any twelve (12) month period (whether
as to one or more than one failures to pay) it shall not be required to give
further notice and thereafter the failure or refusal by Tenant to timely make
any payment of Rent when due hereunder within the following twelve (12) months
shall be an Event of Default without further notice;
(2) Tenant shall fail to comply with any provision of this Lease
or any other agreement between Landlord and Tenant not requiring the payment of
Rent, all of which terms, provisions and covenants shall be deemed material, and
such failure shall continue for a period of thirty (30) days after written
notice of such failure is delivered to Tenant or, if such failure cannot
reasonably be cured within such thirty (30) day period, Tenant shall fail to
commence to cure such failure within such thirty (30) day period and/or shall
thereafter fail to prosecute such cure diligently and continuously to completion
within ninety (90) days of the date of Landlord's notice of default;
(3) Tenant takes any action to, or notifies Landlord that Tenant
intends to file a petition under any section or chapter of the United States
Bankruptcy Code, as amended from time to time, or under any similar law or
statute of the United States or any state thereof; or a petition shall be filed
against Tenant under any such statute and not be dismissed within sixty (60)
days thereafter; or
(4) a receiver or trustee shall be appointed for Tenant's
leasehold interest in the Premises or for all or a substantial part of the
assets of Tenant.
(b) Upon the occurrence of any Event of Default, Landlord may, at its
option and without further notice to Tenant, in addition to all other remedies
given hereunder or by law or equity, do any one or more of the following: (1)
terminate this Lease, in which event Tenant shall immediately surrender
possession of the Premises to Landlord; (2) enter upon and take possession of
the Premises and expel or remove Tenant therefrom, with or without having
terminated this Lease; (3) change or re-key all locks to entrances to the
Premises, and Landlord shall have no obligation to give Tenant a new key to the
Premises until such Event of Default is cured; and (4) remove from the Premises
any furniture, fixtures, equipment or other personal property of Tenant, without
liability for trespass or conversion, and store such items either in the Complex
or elsewhere at the sole cost of Tenant and without liability to Landlord.
Landlord may retain control over all such property for the purpose of
foreclosing the security interest created by SECTION 34. Any of such furniture,
fixtures, equipment or personal property not claimed within thirty (30) days
from the date of removal shall be deemed abandoned.
(c) Exercise by Landlord of any one or more remedies hereunder shall
not constitute forfeiture or an acceptance of surrender of the Premises by
Tenant, it being understood that such surrender can be effected only by the
written agreement of Landlord and Tenant.
(d) If Landlord terminates this Lease by reason of an Event of
Default, Tenant shall pay to Landlord the sum of (1) the cost of recovering the
Premises, (2) the unpaid Rent and all other indebtedness accrued hereunder to
the date of such termination, (3) the amounts stated in SECTION 27(f), and (4)
the total Rent which Landlord would have received under this Lease for the
remainder of the Lease Term minus the Fair Market Rental Value (hereinafter
defined) of the Premises for the same period, both discounted to present value
at the Prime Rate (hereinafter defined) in effect upon the date of
determination, and (5) any other damages or relief which Landlord may be
entitled to at law or in equity. For the purposes of this section, "Fair Market
Rental Value" shall be the rental rate for premises and other properties of
equivalent quality, size, utility and location as the Premises, taking into
account any allowances, free rent or other concessions, which are generally
prevailing in the market place after Tenant's default and a reasonable marketing
time for Landlord to re-let the Premises. For purposes of this section, "Prime
Rate" shall mean the per annum rate of interest announced or published from time
to time by Bank One, Texas, N.A., Dallas, Texas (or its successors or assigns)
as its prime commercial lending rate.
(e) If Landlord repossesses the Premises without terminating this
Lease, then Tenant shall pay to Landlord (1) the cost of recovering the
Premises, (2) the unpaid Rent and other indebtedness accrued to the date of such
repossession, (3) the amounts stated in Section 27(f), and (4) the total Rent
which Landlord would have received under this Lease for the remainder of the
Lease Term minus any net sums thereafter received by Landlord through reletting
the Premises during said period (after deducting expenses incurred by Landlord
as provided below). Re-entry by Landlord will not affect the
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obligations of Tenant for the unexpired term of this Lease. Tenant shall not be
entitled to any excess of Rent obtained by reletting over the Rent herein
reserved. Actions to collect amounts due by Tenant may be brought on one or more
occasions, without the necessity of Landlord's waiting until the expiration of
the Lease Term. In addition, Landlord may at any time following repossession of
the Premises without termination of the Lease elect to terminate the Lease and
pursue the remedies available to Landlord pursuant to SECTION 27(d) above in
lieu of the remedies available to Landlord pursuant to this SECTION 27(e).
(f) In the case of an Event of Default, Tenant shall also pay to
Landlord: (1) the unamortized portion (assuming level amortization at 10%
interest over the Lease Term) of all leasing commissions, tenant improvement
costs and other out-of-pocket costs and allowances paid by Landlord in
connection with the Lease; and (2) all other expenses reasonably incurred by
Landlord in enforcing Landlord's remedies, including attorneys' fees and court
costs.
(g) Upon termination of the Lease or repossession of the
Premises for an Event of Default, Landlord shall not be obligated to relet or
attempt to relet the Premises, except to the extent required by law.
(h) If Tenant should fail to make any payment, perform any
obligation, or cure any default hereunder, Landlord, without obligation to do so
and without thereby waiving such failure or default, may make such payment,
perform such obligation, and/or remedy such other default for the account of
Tenant (and enter the Premises for such purpose), and Tenant shall, within ten
(10) days following written demand, pay all costs, expenses and disbursements
(including attorneys' fees) incurred by Landlord in taking such remedial action,
plus, at the option of Landlord, interest thereon at the Default Rate.
28. DEFAULT BY LANDLORD. Landlord shall be in default under this Lease if
Landlord fails to perform any of its obligations hereunder and such failure
continues for a period of thirty (30) days after Tenant delivers written notice
of such failure to Landlord and to the holder(s) of any indebtedness or other
obligations secured by any mortgage or deed of trust affecting the Premises, the
name and address of which have been provided to Tenant in writing, provided that
if such failure cannot reasonably be cured within such thirty (30) day period,
Landlord shall not be in default hereunder as long as Landlord or such holder(s)
commences the remedying of such failure within such thirty-day period and
diligently prosecutes the same to completion, during which time Landlord and
such holder(s), or either of them, their agents or employees, shall be entitled
to enter upon the Premises and do whatever may be necessary to remedy such
failure.
29. QUIET ENJOYMENT. Tenant, on paying all sums herein called for and
performing and observing all of its covenants and agreements hereunder, shall
and may peaceably and quietly occupy and use the Premises during the Lease Term
subject to the provisions of this Lease, all matters of record affecting the
Complex and applicable governmental laws, rules, and regulations; and Landlord
agrees to warrant and forever defend Tenant's right to such occupancy against
the claims of any and all persons whomsoever lawfully claiming the same or any
part thereof, by, through, or under Landlord, but not otherwise, subject only to
the provisions of this Lease, all matters of record affecting the Complex and
all applicable governmental laws, rules, and regulations.
30. [Intentionally Deleted]
31. HOLDING OVER. Should Tenant continue to occupy the Premises after the
expiration of the Lease Term without the prior written consent of Landlord, such
occupancy shall be a tenancy at will under all of the terms, covenants and
conditions of this Lease, but at a daily Base Rental equal to the sum found by
dividing one hundred and fifty percent (150%) of the Base Rental for the final
month of the Lease Term by thirty (30), plus any sums due pursuant to SECTION 6.
Tenant shall also pay any and all damages sustained by Landlord as a result of
such holdover. If Tenant consists of more than one person or entity, and if any
of the persons or entities comprising Tenant continue to occupy the Premises
after the expiration of the Lease Term, all other persons or entities comprising
Tenant shall be deemed to have consented to such occupancy and shall continue to
be jointly and severally liable for all of the terms, covenants and conditions
contained in this Lease during the holdover term.
32. CHANGE OF BUILDING NAME OR COMMON AREAS.
(a) Landlord reserves the right at any time to change the name of the
Building upon thirty (30) days advance written notice.
(b) Landlord hereby reserves the right to repair, change, redecorate,
alter, improve, or renovate any part of the Common Areas, without being held
guilty of an actual or constructive eviction
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of Tenant or breach of any express or implied warranty and without an abatement
of Rent. In exercising such right, Landlord will use reasonable efforts to
minimize any interruption to the conduct of Tenant's business. Landlord
acknowledges that so long as Tenant leases the entire Building, the Common Areas
shall not include any areas within the Building other than areas dedicated to
the exclusive use of Landlord (such as janitorial closets).
33. SUBORDINATION TO MORTGAGE; ESTOPPEL AGREEMENT.
(a) Landlord represents to Tenant that there are currently no deed of
trust liens or mortgages against the Complex and that there will be no deed of
trust liens or mortgages against the Complex as of the Commencement Date.
(b) This Lease shall be subordinate to any mortgage, deed of trust or
other lien hereafter placed upon the Premises, or upon the Complex and to any
renewals, modifications, consolidations, refinancings, and extensions thereof,
but Tenant agrees that any such mortgagee or deed of trust beneficiary shall
have the right at any time to subordinate such mortgage, deed of trust or other
lien to this Lease on such terms and subject to such conditions as such
mortgagee or deed of trust beneficiary may deem appropriate in its discretion.
In the event any proceedings are brought for the foreclosure of, or in the event
of the exercise of the power of sale under, any such mortgage, deed of trust or
other lien, Tenant agrees, without further action hereunder, to attorn to the
purchaser upon such foreclosure (or any deed in lieu of foreclosure) and
recognize such purchaser as the Landlord under this Lease. Landlord is hereby
irrevocably vested with full power and authority to subordinate this Lease to
any mortgage, deed of trust or other lien hereafter placed upon the Premises or
the Complex and Tenant agrees upon demand to execute such further instruments
subordinating this Lease or attorning to the holder of any such liens as
Landlord may reasonably request. In the event that Tenant should fail to execute
any subordination or other agreement required by this SECTION 33 within ten (10)
days after written request, Tenant hereby irrevocably constitutes and appoints
Landlord as its attorney-in-fact to execute such instrument in Tenant's name,
place and stead, it being agreed that such power is one coupled with an
interest.
(c) Tenant agrees that it will from time to time within ten (10) days
after written request by Landlord execute and deliver to such persons as
Landlord shall request an estoppel agreement in recordable form certifying that
this Lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as so modified),
stating the dates to which Rent and other charges payable under this Lease have
been paid, stating the Landlord is not in default hereunder (or if Tenant
alleges a default stating the nature of such alleged default) and further
stating such other matters as Landlord shall reasonably require.
(d) Notwithstanding anything in SECTION 33(b) to the contrary,
Tenant's agreement that this Lease will be subordinate to any mortgage, deed of
trust or other lien hereafter placed upon the Complex shall be conditioned upon
the receipt by Tenant from the holder of the mortgage, deed of trust or other
lien to which this Lease will be subordinate of a non-disturbance agreement in
form and substance reasonably acceptable to Tenant whereby said holder agrees
that, in the event of foreclosure or deed in lieu of foreclosure, provided
Tenant is not in default hereunder and attorns to the new owner of the Complex,
said owner, whether it is the holder or a party acquiring the Complex from the
holder, shall not disturb Tenant and shall honor the covenants and agreements of
Landlord under this Lease. Tenant shall agree in such non-disturbance agreement
to attorn to the new owner under the same terms and provisions of this Lease;
provided, however, that regardless of whether such rights existed before or
arose on or after the date of foreclosure or deed in lieu of foreclosure, said
new owner shall not be (i) bound by any payment of Rent or additional Rent for
more than one month in advance, (ii) liable for the return of the Security
Deposit unless such new owner shall have actually received the same, or (iii)
liable for any act or omission of any prior landlord.
34. [Intentionally Deleted]
35. ATTORNEY'S FEES. If Landlord or Tenant should find it necessary to
employ an attorney to recover any Rent due, to enforce any of its rights under
this Lease, to assert or defend any action arising out of the breach of any
term, covenant or provision of this Lease, or to bring legal action for the
unlawful detainer of the Premises, the prevailing party shall be entitled to
recover from the nonprevailing party attorney's fees and costs of suit incurred
in connection therewith.
36. NO IMPLIED WAIVER. The failure of either party to insist at any time
upon the strict performance of any covenant or agreement in this Lease or to
exercise any right, power or remedy contained in this Lease shall not be
construed as a waiver or a relinquishment thereof for the future. The acceptance
by Landlord of late payments shall not be construed as a waiver by Landlord of
the requirement for timely payment nor create a course of dealing. No payment by
Tenant or receipt by
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Landlord of a lesser amount than the monthly installment of Rent due under this
Lease shall be deemed to be other than on account of the earliest Rent due
hereunder, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as Rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such Rent or pursue any other remedy provided in
this Lease.
37. INDEPENDENT OBLIGATIONS. The obligation of Tenant to pay Rent
hereunder and the obligation of Tenant to perform Tenant's other covenants and
duties hereunder constitute independent unconditional obligations to be
performed at all times provided for hereunder. Except as expressly provided in
this Lease, Tenant waives and relinquishes all rights which Tenant might have to
claim any nature of lien against or withhold, abate or deduct from, or offset
against Rent.
38. RECOURSE LIMITATION. Tenant specifically agrees to look solely to
Landlord's interest in the Complex (and any proceeds from the sale thereof) for
the recovery of any judgment from Landlord, it being agreed that Landlord shall
never be personally liable for any such judgment. The provision contained in
the foregoing sentence shall not limit any right that Tenant might otherwise
have to obtain specific performance of Landlord's obligations under this Lease.
39. NOTICES. Any notice under the Lease must be in writing, and shall be
given or be served by (a) personal delivery, (b) delivery via a recognized
overnight courier, or (c) depositing the same in the United States mail, postage
prepaid, certified mail, return receipt requested, addressed to the party to be
notified at the address stated in this Lease or such other address in the
continental United States of which notice has been given to the other party in
the manner provided herein. Notice by personal delivery or overnight courier
shall be effective upon receipt, and notice by mail shall be effective upon
deposit in the United States mail in the manner above described.
40. SEVERABILITY. If any term or provision of this Lease, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and enforced to the fullest
extent permitted by law.
41. RECORDATION. Tenant agrees not to record this Lease or any memorandum
hereof. Tenant may file a record of this Lease with the Securities and Exchange
Commission, the National Association of Securities Dealers and any other entity
to which Tenant is required by law to file this Lease.
42. GOVERNING LAW. This Lease and the rights and obligations of the
parties hereto shall be interpreted, construed, and enforced in accordance with
the laws of the State of Texas. This Lease is performable in, and the exclusive
venue for any action brought with respect hereto, shall be in Dallas County,
Texas.
43. FORCE MAJEURE. Whenever a period of time is herein prescribed for the
taking of any action by Landlord or Tenant, the party responsible for taking
such action shall not be liable or responsible for, and there shall be excluded
from the computation of such period of time, any delays due to strikes, riots,
acts of God, shortages of labor or materials, war, governmental laws,
regulations or restrictions, or any other cause whatsoever beyond the control of
the party responsible for taking such action; provided, however, the provisions
of this SECTION 43 shall never be construed as allowing an extension of time
with respect to Tenant's obligation to pay Rent when and as due under this
Lease.
44. TIME OF PERFORMANCE. Except as otherwise expressly provided herein,
time is of the essence under this Lease, including all Exhibits.
45. TRANSFERS BY LANDLORD. Landlord shall have the right to transfer and
assign, in whole or in part, all its rights and obligations hereunder and in the
Complex, and in such event and upon such transfer, Landlord shall be released
from any further obligations accruing after the date of transfer, and Tenant
agrees to look solely to such successor in interest of Landlord for the
performance of such obligations.
46. COMMISSIONS. Landlord and Tenant agree that the Broker is the only
broker involved in the procurement, negotiation or execution of this Lease,
whose commission shall be paid by Landlord pursuant to a separate commission
agreement. Landlord and Tenant hereby agree to defend, indemnify and hold each
other harmless against any loss, claim, expense or liability with respect to any
commissions or brokerage fees claimed on account of the execution and/or renewal
of this Lease or the expansion of the Premises due to any action of the
indemnifying party.
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47. EFFECT OF DELIVERY OF THIS LEASE. Landlord has delivered a copy of
this Lease to Tenant for Tenant's review only, and the delivery hereof does not
constitute an offer to Tenant or an option. This Lease shall not be effective
until a copy of this Lease executed by both Landlord and Tenant is delivered by
Landlord to Tenant.
48. WAIVER OF WARRANTIES AND ACCEPTANCE OF CONDITION. TENANT ACKNOWLEDGES
AND AGREES THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS LEASE (INCLUDING
THE WORK LETTER), NEITHER LANDLORD NOR ANY LANDLORD RELATED PARTY HAS MADE ANY
REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE HABITABILITY,
MERCHANTABILITY, SUITABILITY, QUALITY, CONDITION OR FITNESS FOR ANY PARTICULAR
PURPOSE WITH REGARD TO THE PREMISES OR THE COMPLEX AND THAT THIS LEASE
CONSTITUTES THE FULL AND FINAL AGREEMENT OF LANDLORD AND TENANT WITH RESPECT TO
THE LEASE OF SPACE IN THE BUILDING BY TENANT. EXCEPT FOR ANY WARRANTY SET OUT IN
THE WORK LETTER, TENANT HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY CLAIM
OR CAUSE OF ACTION BASED UPON ANY WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO
HABITABILITY, MERCHANTABILITY, SUITABILITY, QUALITY, CONDITION OR FITNESS FOR
ANY PARTICULAR PURPOSE WITH REGARD TO THE PREMISES OR THE COMPLEX. TENANT'S
TAKING POSSESSION OF THE PREMISES SHALL BE CONCLUSIVE EVIDENCE THAT (A) TENANT
HAS INSPECTED (OR HAS CAUSED TO BE INSPECTED) THE PREMISES AND THE COMPLEX, (B)
TENANT ACCEPTS THE PREMISES AND THE COMPLEX AS BEING IN GOOD AND SATISFACTORY
CONDITION AND SUITABLE FOR TENANT'S PURPOSES, AND (C) THE PREMISES AND THE
COMPLEX FULLY COMPLY WITH LANDLORD'S COVENANTS AND OBLIGATIONS HEREUNDER.
NOTWITHSTANDING THE FOREGOING, TENANT DOES NOT WAIVE THE RIGHT TO CAUSE LANDLORD
TO (i) CORRECT ANY DEFECTIVE WORK COVERED BY ANY WARRANTY IN THE WORK LETTER,
(ii) COMPLETE ANY PUNCHLIST ITEMS IN ACCORDANCE WITH THE TERMS OF THE WORK
LETTER OR (iii) CORRECT ANY "LATENT DEFECTS" IN OR AFFECTING THE PREMISES (I.E.,
DEFECTS NOT REASONABLY DISCOVERABLE PURSUANT TO A THOROUGH INVESTIGATION OF THE
PREMISES). TENANT SHALL HAVE THE RIGHT FOR TWELVE (12) MONTHS FOLLOWING THE
COMMENCEMENT DATE TO PROVIDE LANDLORD WITH WRITTEN NOTICE OF ALLEGED DEFECTS IN
THE PERFORMANCE OF THE WORK. EXCEPT FOR LATENT DEFECTS, FAILURE OF TENANT TO
DELIVER WRITTEN NOTICE OF DEFECTIVE WORK WITHIN SUCH TWELVE (12) MONTH PERIOD
SHALL CONSTITUTE A WAIVER OF ANY FURTHER CLAIMS OF TENANT RELATING TO THE
INITIAL IMPROVEMENTS AND THE CONDITION OF THE PREMISES AS OF THE COMMENCEMENT
DATE. NOTHING CONTAINED IN THIS SECTION 48 SHALL LIMIT THE REPAIR AND
MAINTENANCE OBLIGATIONS OF LANDLORD UNDER THIS LEASE.
49. MERGER OF ESTATES. The voluntary or other surrender of this Lease by
Tenant or a mutual cancellation thereof, shall not constitute a merger; and upon
such surrender or cancellation of this Lease, Landlord shall have the option, in
Landlord's sole discretion, to (a) either terminate all or any existing
subleases or subtenancies, or (b) assume Tenant's interest in any or all
subleases or subtenancies.
50. SURVIVAL OF COVENANTS. Any and all covenants of Landlord or Tenant not
fully performed on the date of the expiration or termination of this Lease shall
survive such expiration or termination.
51. HEADINGS. Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provision of this Lease.
52. ENTIRE AGREEMENT; AMENDMENTS. This Lease, including the exhibits and
addenda, if any, listed in SECTION 53 below, embodies the entire agreement
between the parties hereto with relation to the transaction contemplated hereby,
and there have been and are no covenants, agreements, representations,
warranties or restrictions between the parties hereto other than those
specifically set forth herein. Any amendment or modification of this Lease must
be in writing and signed by Landlord and Tenant.
53. EXHIBITS. The following exhibits are attached hereto and incorporated
herein and made a part of this Lease for all purposes:
Exhibit "A" - Property Description
Exhibit "B" - Floor Plan
Exhibit "C" - Rules and Regulations
Exhibit "D" - Work Letter
Exhibit "E" - Parking
Exhibit "F" - Building Standard Materials
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Exhibit "G" - Renewal Option
Exhibit "H" - Right of First Refusal
Exhibit "I" - Moving Allowance
Exhibit "J" - Antenna Installation
Exhibit "K" - Right of First Offer
54. JOINT AND SEVERAL LIABILITY. If Tenant consists of more than one
person or entity, the obligations of such parties under this Lease shall be
joint and several.
55. MULTIPLE COUNTERPARTS. This Lease may be executed in multiple
counterparts, each of which shall constitute an original instrument, but all of
which shall constitute one and the same agreement.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
date first above written.
LANDLORD:
ADDRESS: CARTER-CROWLEY PROPERTIES,
INC., a Texas corporation
Concourse Office Park
6330 LBJ Freeway
Suite 236 By: /s/ Jed J. Thompson
Dallas, Texas 75240 --------------------------------
Attn: Property Manager Name: Jed J. Thompson
Title: Executive Vice President-
Real Estate Operations
TENANT:
Address Prior to
Commencement Date: PRONET INC.,
a Delaware corporation
600 Data Drive
Suite 100
Plano, Texas 75075 By: /s/ Mark A. Solls
--------------------------------
Attn: Mark A. Solls Name: Mark A. Solls
---------------- -------------------------------
Title: Vice President
------------------------------
Address Subsequent to
Commencement Date:
Premises
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<PAGE>
EXHIBIT "A"
-----------
PROPERTY DESCRIPTION
--------------------
BEING 8.721 acres situated in the City of Dallas and the Thomas Dykes Survey,
Abstract Number 405, Dallas County, Texas and being all of Lot 1, Block A/7444
of the Registry, an addition to the City of Dallas, Texas, recorded in Volume
86184, Page 4062 of the Deed Records of Dallas County, Texas and being all of
CONCOURSE OFFICE PARK, a condominium project according to the Declaration filed
March 18, 1986, recorded in Volume 86053, Page 4370, Condominium Records, Dallas
County, Texas, Save and Except a 2 foot right-of-way dedication along the west
boundary line and a 10 foot by 10 foot corner clip found at the northwest corner
of The Registry, an addition to the City of Dallas as shown on plat recorded in
Volume 86184, Page 4062, Map Records, Dallas County, Texas, said 8.721 acres
being more particularly described as follows:
BEGINNING at a one-half inch iron rod with cap inscribed "RLG" found for the
northwest corner of said Lot 1, same being the intersection of the south line of
LBJ Freeway (IH 635) (variable width right-of-way) and the east line of Hughes
Lane;
THENCE North 89DEG.17'00" East along the south line of LBJ Freeway a distance of
750.47 feet to a one-half inch iron rod found for the northeast corner of said
Lot 1;
THENCE South 6DEG.38'30" East a distance of 518.34 feet to a one-half inch iron
rod with cap inscribed "RLG" found in the north line of a 15 foot wide alley for
the southeast corner of said Lot 1 and the southeast corner of Lot 9, Block
8/7445 of the Huffines Hill Addition, an addition to the City of Dallas;
THENCE North 81DEG.57'35" West along the north line of said 15 foot wide alley
and the north line of Huffines Hill Addition a distance of 264.08 feet to a
one-half inch iron rod with cap inscribed "RLG" found for corner;
THENCE South 89DEG.28'16" West continuing along the north line of said 15 foot
wide alley and the north line of Huffines Hill Addition a distance of 328.05
feet to a one-half inch iron rod with cap inscribed "RLG" found for corner;
THENCE South 87DEG.16'21" West continuing along the north line of said 15 foot
wide alley a distance of 231.81 feet to a one-half inch iron rod set in the east
line of Hughes Lane for the southwest corner of dais Lot 1;
THENCE North 0DEG.51'51" East along the east line of Hughes Lane and the west
line of said Lot 1 a distance of 169.20 feet to an "X" found in concrete;
THENCE North 0DEG.20'10" West continuing along the east line of Hughes Lane and
the west line of said Lot 1 a distance of 303.31 feet to a one-half inch iron
rod with cap inscribed "RLG" found for corner;
THENCE North 44DEG.28'41" East a distance of 14.18 feet to the POINT OF
BEGINNING;
CONTAINING within the metes recited 8.721 acres of land, more or less.
-1-
<PAGE>
EXHIBIT "B"
-----------
FLOOR PLAN
----------
[To be Attached]
[Graphic of Floorplan]
CONCOURSE OFFICE PARK BUILDING NINE
6340 SECOND FLOOR
[Graphic of Floorplan]
CONCOURSE OFFICE PARK BUILDING NINE
6340 FIRST FLOOR
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<PAGE>
EXHIBIT "C"
-----------
RULES AND REGULATIONS
---------------------
1. Sidewalks, doorways, vestibules, halls, stairways, and similar areas
shall not be obstructed nor shall refuse, furniture, boxes or other items be
placed therein by Tenant or its officers, agents, servants, and employees, or
used for any purpose other than ingress and egress to and from the Premises, or
for going from one part of the Building to another part of the Building. Nothing
shall be swept or thrown into the corridors, halls, elevator shafts or stairway.
Canvassing, soliciting and peddling in the Building are prohibited.
2. Plumbing fixtures and appliances shall be used only for the purpose
for which constructed, and no unsuitable material shall be placed therein. Any
stoppage or damage to any such fixtures or appliances from misuse on the part of
Tenant or Tenant's officers, agents, contractors, employees, guests and
customers shall be paid by Tenant, and Landlord shall not in any case be
responsible therefor.
3. No signs, directories, posters, advertisements, or notices visible to
the public shall be painted or affixed on or to any of the windows or external
doors. Landlord shall have the right to remove all unapproved signs,
directories, posters, advertisements or notices without notice to Tenant and at
the expense of Tenant.
4. Tenant shall not do, or permit anything to be done in or about the
Building, or bring or keep anything therein, that will in any way increase the
rate of fire or other insurance on the Building, or on property kept therein or
otherwise increase the possibility of fire or other casualty. No cooking,
including grills or barbecues, other than cooking using microwave ovens, shall
be permitted within the Premises or on any patio adjoining the Premises.
5. Landlord shall have the power to prescribe the weight and position of
heavy equipment or objects which may overstress any portion of the floor. All
damage done to the Building by the improper placing of such heavy items will be
repaired at the sole expense of Tenant. Tenant shall notify the Building manager
when safes or other heavy equipment are to be taken in or out of the Building
and the moving shall be done only after written permission is obtained from
Landlord on such conditions as Landlord shall require. Upon approval by Landlord
of the Plans and Specifications, Landlord shall be deemed to have approved the
placement of any items of heavy equipment clearly noted thereon.
6. [Intentionally Deleted]
7. [Intentionally Deleted]
8. Tenant shall cooperate with Landlord's employees in keeping the
Premises neat and clean.
9. Tenant shall not cause or permit any improper noises in the Building,
or allow any unpleasant odors to emanate from the Premises, or otherwise
interfere, injure or annoy in any way other tenants, or persons having business
with them.
10. No animals shall be brought into or kept in or about the Building,
except those assisting the disabled.
11. No machinery of any kind, other than ordinary office machines such as
copiers, fax machines, personal computers and related mainframe equipment,
electric typewriters and word processing equipment and any machinery identified
on the Plans and Specifications, shall be operated on the Premises without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed.
12. Tenant shall not use or keep in the Building any flammable or
explosive fluid or substance (including Christmas trees and ornaments), or any
illuminating materials without the prior written approval of the Building
manager.
13. No bicycles, motorcycles or similar vehicles will be allowed in the
Building.
14. No nails, hooks, or screws (other than those necessary for hanging
artwork, diplomas, posterboards, etc. on interior walls) shall be driven into or
inserted in any part of the Building except as approved by Landlord.
-1-
<PAGE>
15. Landlord has the right to evacuate the Building in the event of an
emergency or catastrophe. Tenant shall cause its officers, partners and
employees to participate in any fire safety or emergency evacuation drills
scheduled by Landlord.
16. No food and/or beverages shall be distributed from the Premises
without the prior written approval of Landlord, which approval shall not be
unreasonably withheld or delayed. Tenant shall be permitted to install
refrigerators, microwave ovens, small kitchen appliances and coffee machines
(but not vending or dispensing machines) for the use of its own employees. No
vending machines or dispensing machines of any kind (other than those available
solely for the guests and employees of Tenant) will be placed in the Premises by
Tenant without the prior written approval of Landlord.
17. No additional locks shall be placed upon any doors without the prior
written approval of Landlord, which approval shall not be unreasonably withheld
or delayed. All necessary keys shall be furnished by Landlord, and the same
shall be surrendered upon termination of this Lease and Tenant shall then give
Landlord an explanation of the combination of all locks on doors or vaults.
Tenant may install additional locks that comply with all applicable codes
provided Landlord is provided with keys.
18. Tenant will not locate furnishings or cabinets adjacent to mechanical
or electrical access panels or over air conditioning outlets so as to prevent
operating personnel from servicing such units as routine or emergency access may
require. The cost of moving such furnishings for Landlord's access will be at
Tenant's expense. EXCEPT FOR THE DEDICATED DEVICES RELATED TO TENANT'S
AFTER-HOURS HVAC, THE LIGHTING AND AIR CONDITIONING EQUIPMENT OF THE BUILDING
WILL REMAIN THE EXCLUSIVE CHARGE OF PERSONNEL DESIGNATED BY LANDLORD.
19. No portion of the Building shall be used for the purpose of lodging
rooms.
20. Prior written approval, which approval shall not be unreasonably
withheld or delayed, must be obtained for installation of window shades, blinds,
drapes or any other window treatment or object that may be visible from the
exterior of the Building or affect the heating and cooling of the Building.
Landlord will control all internal lighting that may be visible from the
exterior of the Building and shall have the right to change any unapproved
lighting, without notice to Tenant, at Tenant's expense.
21. Should Tenant require telegraphic, telephonic, annunciator or other
communication service, Landlord shall have the right to direct the electricians
and installers where and how the wires are to be introduced and placed, and none
shall be introduced or placed except as the Landlord shall direct.
22. No supplemental heating, air ventilation or air conditioning
equipment, including space heaters and fans, other than equipment noted on the
Plans and Specifications, shall be installed or used by Tenant without the prior
written consent of Landlord.
23. NO SMOKING SHALL BE PERMITTED ANYWHERE WITHIN THE COMPLEX OTHER THAN
THOSE SMOKING AREAS DESIGNATED BY THE BUILDING MANAGER.
24. No unattended children shall be allowed within the Complex.
25. Landlord reserves the right to rescind any of these rules and
regulations and make such other and further rules and regulations as in its
judgment shall from time to time be necessary or advisable for the operation of
the Building, providing that such rules and regulations are in writing and
uniformly enforced against all other tenants of the Building. Such rules and
regulations shall be binding upon Tenant upon delivery to Tenant of notice
thereof in writing.
26. In the event of any inconsistency between these rules and regulations
and the terms of the Lease, the terms of the Lease shall control.
-2-
<PAGE>
EXHIBIT "D"
-----------
WORK LETTER
-----------
This Work Letter ("Work Letter") describes and specifies the rights and
obligations of Landlord and Tenant with respect to the design, construction and
payment for the completion of the Initial Improvements within the Premises.
1. DEFINITIONS. Terms which are defined in the Lease shall have the same
meaning in this Work Letter. Additionally, as used in this Work Letter, the
following terms (when delineated with initial capital letters) shall have the
respective meaning indicated for each as follows:
(a) CONSTRUCTION ALLOWANCE shall mean the sum of $15.00 multiplied by
the Rentable Area of the Premises.
(b) DESIGN ALLOWANCE shall mean the sum of $1.00 multiplied by the
Rentable Area of the Premises.
(c) SPACE PLAN shall mean the space plan dated N/A , 19___, prepared
by Interprise, and showing the general configuration of the Initial
Improvements. If no Space Plan has been agreed upon by Landlord and Tenant as of
the execution date of this Lease, "Space Plan" shall mean the Space Plan
described in Paragraph 2 below.
(d) PLANS AND SPECIFICATIONS shall mean the detailed construction
documents for the Initial Improvements dated N/A , 19____, prepared by
Interprise. If no Plans and Specifications have been agreed upon by Landlord
and Tenant as of the execution date of this Lease, "Plans and Specifications"
shall mean the Plans and Specifications described in Paragraph 2 below.
(e) WORK shall mean all materials and labor to be added to the
existing improvements in the Premises, if any, in order to complete the
installation of the Initial Improvements within the Premises for Tenant in
accordance with the Plans and Specifications, including, without limitation, all
air balancing and other mechanical adjustments to Building equipment serving the
Premises and all voice and data cabling. Tenant acknowledges and agrees that
only Building Standard materials may be utilized in the performance of the Work
unless otherwise approved by Landlord in writing, such approval not to be
unreasonably withheld. The Work shall not include the purchase and installation
of any telephone or other communications equipment unless specifically included
on the Plans and Specifications.
(f) DESIGN WORK shall mean the preparation of the Space Plan and the
Plans and Specifications.
(g) COST OF THE WORK shall mean the cost of performing the Work. The
Cost of the Work shall include all permit fees and a construction management fee
to Landlord in the amount of three percent (3%) of all hard costs. Landlord
shall not charge the Contractor or any subcontractor for utilities, toilets,
security, elevator service or parking.
(h) COST OF THE DESIGN WORK shall mean the cost of performing the
Design Work.
(i) EXCESS CONSTRUCTION AMOUNT shall mean the amount by which the
Cost of the Work exceeds the Construction Allowance.
(j) EXCESS DESIGN AMOUNT shall mean the amount by which the Cost of
the Design Work exceeds the Design Allowance.
(k) CHANGE COSTS shall mean any increase in the Cost of the Work
attributable to any change in the scope of the Work requested or made necessary
by Tenant or its representatives that causes the Cost of the Work to exceed the
Construction Allowance (including the Deferred Excess Amount (as defined in
Paragraph 4)), including, without limitation, (i) a direction by Tenant to add
to, modify or omit any item of Work contained in the Space Plan or the Plans and
Specifications, (ii) any additional architectural or engineering services, (iii)
any changes to materials in the process of fabrication, (iv) the cancellation or
modification of supply or fabricating contracts, or(v) the removal or alteration
of any Work completed or in process.
-1-
<PAGE>
(l) WORKING DAYS shall mean all days of the week other than Saturday,
Sunday, and legal holidays.
(m) CONTRACTOR shall mean the general contractor selected by Landlord
to perform the Work. Landlord shall competitively bid the Work to at least
three (3) mutually agreeable contractors off of Landlord's approved list (which
is attached hereto as EXHIBIT "D-1") and Landlord agrees to accept the lowest
conforming bid. Landlord reserves the right to replace the initial Contractor
and/or to engage other contractors.
(n) CONSTRUCTION MANAGER shall mean any third party engaged by Tenant
to manage or inspect the performance of the Work. The choice of Construction
Manager shall be subject to the prior written approval of Landlord, such
approval not to be unreasonably withheld. Landlord hereby approves of The
Staubach Company as Construction Manager.
2. APPROVAL OF DESIGN PROFESSIONALS; SPACE PLAN AND PLANS AND
SPECIFICATIONS. All design professionals engaged by Tenant, including, without
limitation, architects, engineers and interior designers shall be subject to the
prior written approval of Landlord, such approval not to be unreasonably
withheld. Landlord hereby approves Interprise as architect for the Initial
Improvements. If the Space Plan and/or the Plans and Specifications have not
been completed by the execution date of this Lease, then within sixty (60) days
after the execution of this Lease, Tenant and Landlord shall agree upon a final
space plan and Tenant shall prepare and deliver construction documents to
Landlord for approval. Landlord shall approve or disapprove such construction
documents within ten (10) days after receipt thereof. The failure of Landlord to
disapprove such construction documents within such ten (10) day period shall
constitute approval by Landlord. If Landlord does not approve such construction
documents, Landlord shall specifically identify its objections and Tenant shall
revise such construction documents to address Landlord's objections and
re-submit the same to Landlord for approval within ten (10) days thereafter.
The preceding three sentences shall be implemented repeatedly until Landlord
shall have approved Tenant's construction documents. Upon approval by Landlord,
such construction documents shall constitute the "Plans and Specifications"
hereunder. Notwithstanding anything contained herein to the contrary, Landlord's
approval rights shall be limited to the following: (i) compliance with all
applicable laws, (ii) no material adverse effect on flee structure, systems or
visible exterior aesthetics of the Building, Service Areas or Common Areas, and
(iii) conformance with the Building's mechanical, electrical and plumbing design
capacity.
3. COMPLIANCE WITH APPLICABLE LAWS. Tenant acknowledges that the Plans
and Specifications will be prepared by a third party architect and that Landlord
shall have no responsibility for compliance of the Plans and Specifications with
applicable federal, state and local statutes, codes, ordinances and other
regulations, and the approval of the Plans and Specifications by Landlord shall
not constitute an indication, representation or certification by Landlord that
such Plans and Specifications are in compliance with said statutes, codes,
ordinances and other regulations. Tenant further acknowledges that the Plans and
Specifications for the Initial Improvements will either be prepared under the
direction of and pursuant to the instructions of Tenant, or be reviewed and
approved by Tenant, and Landlord shall not be liable to Tenant or any other
party for any injury or liability resulting from or arising out of any defect or
insufficiency in the Plans and Specifications except to the extent attributable
to changes to the Plans and Specifications required by Landlord.
4. APPLICATION OF ALLOWANCES; PAYMENT OF EXCESS AMOUNTS. Landlord shall
make the Design Allowance available to Tenant to pay for the Cost of the Design
Work upon the submission of written invoices and shall credit the Construction
Allowance against the Cost of the Work. Any Excess Design Amounts or Excess
Construction Amounts shall be paid by Tenant. Landlord may, at its option, prior
to the commencement of the Work, provide Tenant with an estimate of the Excess
Construction Amount. Tenant shall, as a condition to the commencement of the
Work, deposit the full amount of the estimated Excess Construction Amount with
Landlord (the "Construction Deposit"). The Construction Deposit shall be applied
by Landlord against the Excess Construction Amount. Any excess in the
Construction Deposit shall be refunded to Tenant within thirty (30) days
following the Commencement Date and any deficiency in the Construction Deposit
shall be paid by Tenant to Landlord within thirty (30) days following written
demand. If Landlord does not require a Construction Deposit, Landlord shall
invoice Tenant for the Excess Construction Amount following completion of the
Work and Tenant shall pay such sum to Landlord within thirty (30) days
thereafter. The Design Allowance may not be used for any purpose other than for
payment of the Cost of the Design Work and, except as otherwise expressly
provided in the Lease or this Work Letter, the Construction Allowance may not be
used for any purpose other than for payment of the Cost of the Work. No portion
of either Allowance may be applied against Rent. Notwithstanding anything
contained herein to the contrary, Tenant shall be entitled to utilize any unused
portion of the Design Allowance to pay shortages in the Construction Allowance,
and may utilize shortages in either Allowance for subsequent refurbishment of
the Premises (the "Refurbishment Allowance"). Tenant may request payment of the
Refurbishment Allowance at any time during the Lease
-2-
<PAGE>
Term upon submission to Landlord of invoices evidencing expenditures made by
Tenant for the improvement of the Premises and payment shall be made by Landlord
within thirty (30) days thereafter. In addition, provided that no Event of
Default shall then exist under this Lease and Tenant has occupied the Premises,
Tenant shall be entitled to defer payment of a portion of the Excess Amount (the
"Deferred Excess Amount") not in excess of the sum of $3.00 multiplied by the
Rentable Area of the Premises, as follows:
The Deferred Excess Amount shall be treated as a loan from Landlord to
Tenant advanced on the first day of the month preceding the Commencement
Date, maturing upon the expiration date of the initial Lease Term, bearing
interest at eleven percent (11.0%) per annum, compounded monthly, and
payable in equal monthly installments. The amount of each monthly
installment shall be added to the Base Rental and shall be payable monthly
as provided in Section 5 of the Lease. Payments received shall be applied
first toward accrued interest on the Deferred Excess Amount and the balance
in reduction of the principal of the Deferred Excess Amount. Upon the
occurrence of an Event of Default, the unpaid principal portion of the
Deferred Excess Amount, and all accrued but unpaid interest, shall be
immediately due and payable in full without further notice of any kind,
Tenant hereby waiving demand, notice of intent to accelerate, notice of
acceleration and all other notices.
The portion of the Excess Amount, if any, in excess of the Deferred Excess
Amount shall be due and payable within thirty (30) days following submission of
an invoice therefor by Landlord. Upon calculation by Landlord of the Deferred
Excess Amount and the amount of the resulting adjustment to the monthly
installment of Rent, Landlord and Tenant shall enter into an amendment to this
Lease adjusting the Base Rental payable by Tenant.
5. CHANGE COSTS. Tenant shall at all times pay all Change Costs incurred
by Landlord, which Change Costs shall be paid as a condition precedent to
Landlord implementing the change in question.
6. FAILURE TO PAY. The amounts payable by Tenant to Landlord hereunder
shall constitute Rent, and Tenant's failure to make any such payment when due
shall constitute a default under the Lease, entitling Landlord, subject to any
applicable notice and/or grace periods provided in the Lease, to exercise any or
all of its remedies under the Lease or this Work Letter.
7. PERFORMANCE OF WORK AND DELAYS. Following final approval of the Plans
and Specifications, Landlord shall instruct the Contractor to proceed with the
Work. If a delay shall occur in the completion of the Work as the result of (i)
any state of facts described in the definition of Change Costs, (ii) the fact
that Work which is non-Building Standard requires a lead time (not due to
Landlord default or error) to obtain or construction time to perform, in excess
of that required for Work which is Building Standard, as reasonably determined
by Landlord, (iii) the failure of Tenant to make the Construction Deposit, or
(iv) any other act or omission of Tenant, its agents or employees or the
Construction Manager, including any violation of the provisions of the Lease or
any delay in giving authorizations or approvals pursuant to this Work Letter,
then any such delay shall be considered a Tenant Delay and will be subject to
the terms of SECTION 3(b) of the Lease.
8. CHANGE ORDERS. All changes and modifications in the Work from that
contemplated in the Plans and Specifications, whether or not such change or
modification gives rise to a Change Cost, must be evidenced by a written Change
Order executed by both Landlord and Tenant. In that regard, Tenant shall submit
to Landlord such information as Landlord shall require with respect to any
Change Order requested by Tenant. After receipt of a requested Change Order,
together with such information as Landlord shall require with respect thereto,
Landlord shall return to Tenant either a proposed form of Change Order (which
shall show any increase in the Cost of the Work) which will evidence Landlord's
approval thereof, or a statement disapproving such requested Change Order and
stating the reasons for disapproval. Tenant shall execute and return any
approved Change Order to Landlord as a condition to the implementation of the
change in question.
9. PUNCHLIST. Prior to the Commencement Date, Landlord and Tenant shall
conduct a walk-through of the Premises and specify in writing the Punchlist
Items which remain to be performed by Landlord; and except for the Punchlist
Items so identified, and the obligation of Landlord to correct defective work
pursuant to Paragraph 11 of this Work Letter and latent defects pursuant to
SECTION 48 of the Lease, all obligations of Landlord in regard to the Work shall
be deemed to have been satisfied. Landlord shall have the right to enter the
Premises to complete the Punchlist Items, and entry by Landlord, its agents,
servants, employees or contractors for such purpose shall not relieve Tenant of
any of its obligations under the Lease or impose any liability on Landlord or
its agents, servants, employees or contractors. Tenant may require that all
Punchlist Items be performed after Normal Business Hours.
-3-
<PAGE>
10. NOTICES. All notices required or contemplated hereunder shall be given
to the parties in the manner specified for giving notices under the Lease.
11. WARRANTY. Landlord warrants that the Initial Improvements will be free
from material defects in workmanship and material and will comply with the Plans
and Specifications in all material respects. If within one (1) year after the
earlier to occur of (i) the date of Substantial Completion of the Work, if the
work is being supervised by an architect engaged by Tenant, or (ii) in all other
cases, the date of the walk-through inspection referenced in Paragraph 9 of this
Work Letter, any part of the Initial Improvements is found not to be in
compliance with the foregoing warranty, Landlord shall correct the
non-compliance promptly at its own expense after receipt of written notice from
Tenant. Tenant shall give any such notice promptly after discovery of the
defective condition. The warranty described in this Paragraph 11 shall terminate
and be of no further force or effect with respect to any notices received by
Landlord after the one-year period referenced in this Paragraph 11.
Notwithstanding anything contained herein to the contrary, Landlord provides no
material warranty on any non-Building Standard materials incorporated by Tenant
into the Initial Improvements nor any workmanship warranty with respect to
contractors or subcontractors specially requested by Tenant and not generally
utilized by Landlord.
12. USE OF BUILDING STOCK. Tenant shall be entitled to retain and use,
without charge, any existing improvements within the Premises, including but not
limited to cabling and conduit, the raised computer flooring, any capital
equipment serving the Premises and all non-Building Standard materials currently
located within the Building. Notwithstanding the foregoing, Tenant shall have no
right to use, without paying Landlord's standard charge, the boxed ceiling tile,
door frames, supply grilles, doors, sheet rock or wall studs currently located
within the Premises. Landlord's standard charges for such items is attached
hereto as EXHIBIT "D-2"
13. EARLY ACCESS TO PREMISES. Tenant shall be entitled to access the
Premises thirty (30) days prior to the anticipated Commencement Date for the
purpose of installing telephones, data cabling and furniture; provided, however,
Tenant shall coordinate such activities with Landlord and the Contractor in a
manner that will not delay or increase the cost of construction of the Initial
Improvements.
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<PAGE>
EXHIBIT "D-1"
-------------
CARTER-CROWLEY PROPERTIES, INC.
APPROVED CONTRACTORS
--------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CONTRACTORS NAMES PHONE # FAX #
- -------------------------------------------------------------------------------
Abstract Construction Cynthia Jacobs 620-9438 243-0465
- -------------------------------------------------------------------------------
Benchmark Group Bill Luveless 960-6999 960-1561
- -------------------------------------------------------------------------------
Constructors &
Associates, Inc. David Snyder 520-3353 520-0413
- -------------------------------------------------------------------------------
The Hooker Company Gary Hooker 241-6546 241-6671
- -------------------------------------------------------------------------------
Innerspace Contruction Chris Sidwa 387-0462 387-4022
- -------------------------------------------------------------------------------
Kibler/Scott Interiors Chris Scott 358-4685 956-7473
- -------------------------------------------------------------------------------
Pacific Builders Jim Perry 358-4400 358-4205
- -------------------------------------------------------------------------------
McFadden & Miller* Mark Jacobson 350-2356 350-4274
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*SPECIALTY ITEMS ONLY
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<PAGE>
EXHIBIT "D-2"
-------------
MATERIAL COST BREAKDOWN
-----------------------
Item Quantity Cost Total
Door Frames 53 $ 15.00 $ 795.00
2X2 Supply Grilles 59 $ 18.00 $1,062.00
Drywall 148 $ 5.76 $ 852.00
Metal Studs 327 $ 1.36 $ 445.00
Ceiling Tiles 228 $ 2.47 $ 563.00
Doors 2 $ 232.00 $ 464.00
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<PAGE>
EXHIBIT "E"
-----------
PARKING
-------
This EXHIBIT "E" ("Parking Exhibit") describes and specifies Tenant's
nonexclusive right to use (i) eighty-two (82) parking spaces (the "Spaces")
located within the Building's parking garage ("Parking Garage"), and (ii) the
surface parking areas on the Property. Tenant shall also be entitled, free of
charge, to the exclusive use of the eight (8) surface spaces identified on
EXHIBIT "E-1" attached hereto, which shall be marked by Landlord as "Reserved
for Tenant".
1. DEFINITIONS. The terms which are defined in the Lease shall have the
same meaning in this Parking Exhibit.
2. GRANT AND RENTAL FEE. Provided no Event of Default has occurred and
is continuing under the Lease, Tenant shall be permitted the nonexclusive use of
the Spaces during the Lease Term at a monthly rate of $ -0- per Space (together
with any applicable tax thereon) and subject to such terms, conditions, and
regulations as are, from time to time, promulgated by Landlord or the manager of
the Parking Garage.
3 LANDLORD'S FAILURE TO PROVIDE SPACES. In the event all or a portion of
the Spaces become unavailable to Tenant, Landlord shall use reasonable efforts
to provide Tenant with reasonably satisfactory alternative parking arrangements
until the use of such Spaces is restored. Notwithstanding anything contained
herein to the contrary, Tenant shall have no right to terminate this Lease by
reason of the failure, for any reason (other than willful breach of this Lease
by Landlord), to provide or make available the Spaces or the inability of Tenant
to utilize all or any portion of the Spaces, unless twenty-five percent (25 %)
or more of the Spaces are unavailable for a period in excess of sixty (60) days
during a period when Tenant is occupying the Premises and Landlord has failed
during such sixty (60) day period to provide reasonably satisfactory alternative
parking arrangements for Tenant.
4. RISK. All motor vehicles (including all contents thereof) shall be
parked in the Spaces at the sole risk of Tenant, its employees, agents, invitees
and licensees, it being expressly agreed and understood that Landlord has no
duty to insure any of said motor vehicles (including the contents thereof), and
that Landlord is not responsible for the protection and security of such
vehicles. LANDLORD SHALL HAVE NO LIABILITY WHATSOEVER FOR ANY PROPERTY DAMAGE
AND/OR PERSONAL INJURY WHICH MIGHT OCCUR IN THE PARKING GARAGE OR ON THE SURFACE
PARKING AREAS ON THE PROPERTY OR AS A RESULT OF OR IN CONNECTION WITH THE
PARKING OF MOTOR VEHICLES IN ANY OF THE SPACES, AND TENANT HEREBY AGREES TO
DEFEND, INDEMNIFY AND HOLD LANDLORD HARMLESS FROM AND AGAINST ANY AND ALL COSTS,
CLAIMS, EXPENSES, AND/OR CAUSES OF ACTION WHICH LANDLORD MAY INCUR IN CONNECTION
WITH OR ARISING OUT OF TENANT'S USE OF THE SPACES EXCEPT TO THE EXTENT
ATTRIBUTABLE TO THE NEGLIGENCE OF LANDLORD.
5. RULES AND REGULATIONS. In its use of the Spaces, Tenant shall follow
all rules and regulations promulgated by Landlord or the manager of the Parking
Garage, as applicable, as the same may be amended from time to time in
accordance with the terms of EXHIBIT "C".
6. DEFAULT. Upon the occurrence of an Event of Default by Tenant under
the Lease, Landlord shall be entitled to terminate Tenant's right to utilize the
Spaces.
7. ACCESS. Landlord shall be entitled to utilize whatever access device
Landlord deems necessary (including but not limited to the issuance of parking
stickers or access cards), to assure that only those persons leasing spaces in
the Parking Garage are using the parking spaces therein. In the event Tenant,
its agents or employees wrongfully park in any of the Parking Garage's spaces or
reserved surface spaces, Landlord shall be entitled and is hereby authorized to
have any such vehicle towed away, at Tenant's sole risk and expense, and
Landlord is further authorized to impose upon Tenant a penalty of $50.00 for
each such occurrence. Tenant hereby agrees to pay all amounts falling due
hereunder upon demand therefor, and the failure to pay any such amount within
ten (10) days after written notice shall additionally be deemed an Event of
Default under the Lease, entitling Landlord to all of its rights and remedies
hereunder and thereunder
8. SURFACE PARKING. The surface parking areas on the Property are
provided for the nonexclusive and common use of Landlord, all tenants of the
Building, and their respective guests and invitees. Utilization of the surface
parking is subject to availability (and Landlord shall have no obligation to
provide a specific number of surface parking spaces to Tenant) and to such rules
and
-1-
<PAGE>
regulations as may be promulgated by Landlord, from time to time in accordance
with the terms of EXHIBIT "C".
-2-
<PAGE>
EXHIBIT "E-1"
-------------
RESERVED PARKING SPACES
-----------------------
-3-
<PAGE>
EXHIBIT "F"
-----------
BUILDING STANDARD MATERIALS
---------------------------
BUILDING STANDARD SPECIFICATION LIST
Property name: Concourse Office Park - Buildings 6310, 6320, 6330, 6350, 6370,
6380
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
ITEM MANUFACTURER STYLE FINISH
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Passage Set Schlage D-10S-ATH Bronze
- ------------------------------------------------------------------------------------------------------------------------
Interior/Corridor Lockset Schlage D-53 PD-ATH Bronze
- ------------------------------------------------------------------------------------------------------------------------
Door Closers Yale 3000 Series Bronze
- ------------------------------------------------------------------------------------------------------------------------
Door Stops Trimco Floor Mount Bronze
- ------------------------------------------------------------------------------------------------------------------------
Door Hinges Stanley US10B Bronze
- ------------------------------------------------------------------------------------------------------------------------
Doors (prefinished sample must be 3'0 x 6'8" Birch Natural Satin
approved by management) (Hollow int. solid ext.)
- ------------------------------------------------------------------------------------------------------------------------
Door Frames Timely 3'0" x 6'8" 36C-445 Brownstone
- ------------------------------------------------------------------------------------------------------------------------
Ceiling Tile Armstrong 755B - 2'x 4' Acoustical
- ------------------------------------------------------------------------------------------------------------------------
Exterior Diffuser Krueger #4604 - 2'x 2' White
- ------------------------------------------------------------------------------------------------------------------------
Interior Diffuser Krueger #4604 - 2'x 2' White
- ------------------------------------------------------------------------------------------------------------------------
Return Air Grills Plastic Grid Core White
- ------------------------------------------------------------------------------------------------------------------------
Light Fixtures w/Cool White R40 Bulbs Lithinia 2-GT-440 2'x2'4 lamp
- ------------------------------------------------------------------------------------------------------------------------
Flexible Duct ATCO Rubber Flexible Duct 8"
- ------------------------------------------------------------------------------------------------------------------------
Mini Blinds Bali l" Blinds Bronze
- ------------------------------------------------------------------------------------------------------------------------
Thermostats White Rodgers 1F97-71 Auto-changeover
- ------------------------------------------------------------------------------------------------------------------------
Carpet Shaw Cypress Point III, 30 oz.
VCT Armstrong Excelon
- ------------------------------------------------------------------------------------------------------------------------
Base Shaw 4"
Roppe 4"
- ------------------------------------------------------------------------------------------------------------------------
Sprinkler Heads N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other: Corridor Vinyl (Bldg. 6330 PAINTED) - Curvwall - Grit
Corridor Paint - Sherwin Williams -
Laminate - Wilson Art
Key Way - Schlage - C
NOTE: ALL DOORS THAT HAVE CLOSER ARE REQUIRED TO HAVE BALL BEARING HINGES.
-1-
<PAGE>
BUILDING STANDARD SPECIFICATION LIST
------------------------------------
Property name: Concourse Office Park - Buildings 6340, 6360, 6390
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
ITEM MANUFACTURER STYLE FINISH
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Passage Set Schlage L9O1OO5L613 Full Mortise Bronze
- ------------------------------------------------------------------------------------------------------------------------
Interior/Corridor Lockset Schlage L945305A613 Full Mortise Bronze
- ------------------------------------------------------------------------------------------------------------------------
Door Closers Yale 3000 Series Bronze
- ------------------------------------------------------------------------------------------------------------------------
Door Stops Trimco Floor Mount Bronze
- ------------------------------------------------------------------------------------------------------------------------
Door Hinges Stanley US10A Bronze
- ------------------------------------------------------------------------------------------------------------------------
Doors (prefinished sample must be Buell Door Solid Core Stained
approved by management)
- ------------------------------------------------------------------------------------------------------------------------
Door Frames Timely 3'0" x 8'4" 36C-445 Brownstone
- ------------------------------------------------------------------------------------------------------------------------
Ceiling Tile Armstrong 755B - 2' x 4' Acoustical
- ------------------------------------------------------------------------------------------------------------------------
Exterior Diffuser Krueger #4604 - 2'x 2' White
- ------------------------------------------------------------------------------------------------------------------------
Interior Diffuser Krueger #4604 - 2'x 2' White
- ------------------------------------------------------------------------------------------------------------------------
Return Air Grills Plastic Grid Core White
- ------------------------------------------------------------------------------------------------------------------------
Light Fixtures w/Cool White R40 Bulbs Wright Light SST-440-A12 277v 4 lamp
- ------------------------------------------------------------------------------------------------------------------------
Flexible Duct ATCO Rubber Flexible duct 8"
- ------------------------------------------------------------------------------------------------------------------------
Mini Blinds Bali 1" Blinds Bronze
- ------------------------------------------------------------------------------------------------------------------------
Thermostats Robert Shaw T-18-301 Direct Action Silver
T-19-301 Reverse Action
- ------------------------------------------------------------------------------------------------------------------------
Carpet Shaw Cypress Point III, 30 oz.
VCT Armstrong Excelon
- ------------------------------------------------------------------------------------------------------------------------
Base Shaw 4"
Roppe 4"
- ------------------------------------------------------------------------------------------------------------------------
Sprinkler Heads Central 456A-SSP2 Chrome
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other: Corridor Vinyl - Curvwall - Grit - TBD
Corridor Carpet - 8 yrs. old - spec not available
Corridor Base - Matches carpet
Key Way - Schlage - E
NOTE: ALL DOORS THAT HAVE CLOSER ARE REQUIRED TO HAVE BALL BEARING HINGES.
-2-
<PAGE>
EXHIBIT "G"
-----------
RENEWAL OPTION
--------------
Provided that, at the time of Tenant's exercise of the Option (defined
below) and upon the commencement of the First Renewal Term (defined below), this
Lease is in full force and effect and there is no Event of Default under this
Lease, Tenant shall have the option ("Option") to renew this Lease as follows:
Tenant may, by notifying Landlord of its election in writing not less than
one hundred and fifty (150) days prior to the end of the Lease Term, renew this
Lease for an additional term ("First Renewal Term") beginning on the date next
following the expiration date of the Lease Term and continuing for five (5)
Lease Years thereafter. Such renewal shall include the Premises, as well as any
other space within the Building then being leased by Tenant as of the date of
exercise of the Option. The renewal of this Lease will be upon the same terms,
covenants, and conditions applicable during the Lease Term, as provided in the
Lease, except that (a) the Base Rental payable during the First Renewal Term
shall be an amount equal to the existing "market rental rate" (as defined below)
as of the date on which the First Renewal Term commences, (b) the defined term
"Lease Term" shall be deemed to include the "First Renewal Term", (c) no
concessions applicable during the initial Lease Term (such as construction
allowances, moving allowances or free rent) shall be applicable during the First
Renewal Term, and (d) Tenant shall possess no further renewal options. As used
herein, the phrase "market rental rate" shall mean the prevailing market rental
rate (stated in the form of a dollar amount per rentable square foot) which
would be charged under a comparable lease to a tenant comparable in size and
credit standing to Tenant for comparable space in the Building and in buildings
of similar age and quality to the Building in an area within a three (3) mile
radius of the Building (the "Comparison Area") for a term of similar duration,
taking into account customary allowances, concessions and base year operating
expense adjustments. The failure of Tenant to exercise the Option within the
time period set forth herein shall constitute a waiver and termination of such
Option. In addition, the occurrence of an Event of Default during the Lease Term
and any Transfer by Tenant, whether or not with the approval of Landlord, other
than an Affiliate Transfer, shall terminate the Option.
The determination of such market rental rate shall, for all applications in
this Lease, be made using the following procedure:
(1) Whenever, pursuant to the terms of this Lease, a determination must be
made of the "market rental rate" Landlord shall deliver such
determination to Tenant in writing within ten (10) days. If Tenant
accepts such determination by Landlord in writing, within ten (10)
days following Tenant's receipt of such determination, such
determination by Landlord of the market rental rate for that
applicable portion of the Lease shall irrevocably become the "market
rental rate."
(2) If Tenant notifies Landlord, within ten (10) days following its
receipt of Landlord's determination of market rental rate, that it
objects to such determination as not accurately reflecting the "market
rental rate" or fails to respond within such ten (10) day period
("Tenant's Notice of Objection"), then Landlord's determination of
market rental rate referred to in paragraph 1 above shall thereafter
not be effective, and instead the following procedure shall be
implemented to determine the "market rental rate":
(a) Within ten (10) days following Landlord's receipt (or deemed
receipt) of Tenant's Notice of Objection, Landlord shall select
and notify Tenant of its selection of an independent real estate
broker from a recognized commercial real estate brokerage firm
knowledgeable in the commercial real estate market in the
Comparison Area (the "Landlord's Market Broker"). Landlord shall
cause such broker to analyze the then existing market conditions,
prepare and deliver to Landlord and Tenant, within ten (10) days
following Landlord's selection of Landlord's Market Broker, such
broker's determination of the "market rental rate" for the space
to be leased by Tenant within the Building to which such market
rental rate shall apply. If Tenant accepts in writing such
determination of market rental rate presented by Landlord's
Market Broker within ten (10) days following Tenant's receipt of
such determination by Landlord's Market Broker, then such
determination by Landlord's Market Broker of the "market rental
rate" for that applicable portion of this Lease shall irrevocably
become the "market rental rate".
-1-
<PAGE>
(b) If Tenant notifies Landlord, within ten (10) days following its
receipt of Landlord's Market Broker's determination of the
"market rental rate", that it objects to such determination as
not accurately reflecting such market rental rate or fails to
respond within such ten (10) day period ("Tenant's Notice of
Objection to Landlord's Market Broker's Determination"), then the
following procedure shall be implemented to determine the "market
rental rate":
(i) Within ten (10) days following Landlord's receipt (or deemed
receipt) of Tenant's Notice of Objection to Landlord's
Market Broker's Determination, Tenant shall select, and
shall notify Landlord of its selection of, an independent
real estate broker from a recognized commercial real estate
brokerage firm knowledgeable in the commercial real estate
market in the Comparison Area (the "Tenant's Market
Broker"). Tenant shall cause such broker to analyze the then
existing market conditions, and prepare and deliver to
Landlord and Tenant within ten (10) days following Tenant's
selection of Tenant's Market Broker, such broker's
determination of the "market rental rate" for the space to
be leased by Tenant within the Building to which such market
rental rate shall apply. If Landlord accepts in writing such
determination of market rental rate presented by Tenant's
Market Broker within ten (10) days following Landlord's
receipt of such determination by Tenant's Market Broker,
then such determination by Tenant's Market Broker of the
"market rental rate" for that applicable portion of the
Lease shall irrevocably become the "market rental rate".
(ii) If Landlord notifies Tenant, within ten (10) days following
its receipt of Tenant's Market Broker's determination of the
"market rental rate", that it objects to such determination
as not accurately reflecting such market rental rate or
fails to respond within such ten (10) day period
("Landlord's Notice of Objection to Tenant's Market Broker's
Determination"), then Landlord shall, within five (5) days
thereafter, direct both Landlord's Market Broker and
Tenant's Market Broker to select within ten (10) days
thereafter, and notify Landlord and Tenant of their
selection of, a third independent real estate broker from a
recognized commercial real estate brokerage firm
knowledgeable in the commercial real estate market of the
Comparison Area (the "Third Market Broker"). Such Third
Market Broker shall analyze the then existing market
conditions and prepare and deliver, within ten (10) days
following selection of such Third Market Broker, to
Landlord, Tenant, Landlord's Market Broker and Tenant's
Market Broker such Third Market Broker's determination of
the "market rental rate" for the space to be leased by
Tenant within the Building to which such market rental rate
shall apply. If the Third Market Broker's determination of
market rental rate falls between (x) the rental rate
determined by Landlord's Market Broker, expanded 5 % both
higher and lower from such rental rate, and (y) the rental
rate determined by Tenant's Market Broker, expanded 5% both
higher and lower from such rental rate, then such Third
Market Broker's determination of "market rental rate" shall
be irrevocably binding upon both Landlord and Tenant.
However, if the Third Market Broker's determination of the
"market rental rate" is a number not between (x) and (y)
from the previous sentence, then the final, irrevocable
determination of the "market rental rate" which shall be
binding upon both Landlord and Tenant, will be calculated by
adding together the two closest appraisals of the three
determinations from the three brokers, and dividing such sum
by two. Both Landlord and Tenant acknowledge that
determination of the "market rental rate" which is derived
from such procedure shall be irrevocably binding upon both
Landlord and Tenant.
(c) Notwithstanding any provisions elsewhere in this Lease allocating
the payment of expenses, Landlord agrees to pay the expenses
associated with the services of Landlord's Market Broker, Tenant
agrees to pay the expenses associated with the services of
Tenant's Market Broker, and both Landlord and Tenant agree to
jointly and equally pay the expenses associated with the services
of the Third Market Broker.
-2-
<PAGE>
EXHIBIT "H"
-----------
RIGHT OF FIRST REFUSAL
----------------------
If, during the initial Lease Term, Landlord shall receive an offer which
Landlord is willing to accept (the "Offer") to lease vacant space within either
of Building 6330 or 6360 within the Complex (the "Refusal Space") and provided
that this Lease is in full force and effect and there is no uncured Event of
Default under this Lease, Tenant shall have a right of first refusal ("Right of
First Refusal") to lease all (but not part) of the portion of the Refusal Space
that is the subject of the Offer (the "Subject Space") upon the same terms and
conditions contained in the Offer; provided, however, the lease term for the
Subject Space shall be the same as the remaining Lease Term of this Lease, and
if the remaining Lease Term is shorter than the term stated in the Offer, the
rental rate in the Offer shall be adjusted by Landlord in accordance with its
standard pricing procedures to take into account the shorter period within which
Landlord may recover any allowances, concessions or other costs to be paid by
Landlord as set forth in the Offer. Notwithstanding the foregoing, if Landlord
receives the Offer within the first eighteen (18) months of the Lease Term,
Tenant may elect to lease the Subject Space upon the same terms and conditions
of this Lease, except that all Allowances will be reduced by a fraction, the
numerator of which will be the number of full months which have elapsed between
the Commencement Date and the date sixty (60) days after the date on which
Landlord notifies Tenant of the Offer, and the denominator of which shall be
sixty (60). If, within ten (10) days after Landlord gives Tenant written notice
of the Offer (including a statement of the material terms and conditions
thereof), Tenant does not notify Landlord in writing that Tenant elects to lease
the Subject Space, then Landlord may enter into a Lease with the prospective
tenant who made the Offer on substantially the same terms and conditions
contained therein; provided, however, if Landlord fails to lease the Subject
Space to the prospective tenant who made the Offer within six (6) months
thereafter, Tenant's Right of First Refusal with respect to such space shall be
reinstated and apply again to any subsequent Offer for such space. In addition,
if the Subject Space is less than all of the Refusal Space, and the remainder of
the Refusal Space is adjacent to the Premises, Tenant's failure to exercise the
Right of First Refusal with respect to the Subject Space shall not prejudice its
Right of First Refusal with respect to the remainder of the Refusal Space.
Except as provided in the preceding two sentences, the failure of Tenant to
exercise the Right of First Refusal within the time period set forth herein
shall constitute a waiver and termination of the Right of First Refusal. If
Tenant timely notifies Landlord of its intention to lease the Subject Space,
Landlord and Tenant shall promptly enter into an amendment to this Lease adding
the Subject Space to the Premises and otherwise incorporating the terms and
conditions of the Offer. Any termination of this Lease during the Lease Term
and any Transfer by Tenant, whether or not with the approval of Landlord, other
than an Affiliate Transfer, shall terminate this Right of First Refusal.
Notwithstanding anything contained herein to the contrary, Tenant's Right of
First Refusal shall be subject to all currently existing renewal, expansion and
first refusal/offer rights in favor of existing tenants and the right of
Landlord to renew the lease of any existing tenant (whether pursuant to a
renewal option or otherwise) as long as such renewal does not result in the
expansion of such tenant's premises.
-1-
<PAGE>
EXHIBIT "I"
-----------
MOVING ALLOWANCE
----------------
Provided that Tenant has occupied the Premises and that no Event of Default
shall then exist under this Lease, Landlord shall pay to Tenant a moving
allowance (the "Moving Allowance") in an amount equal to the lesser of (i) the
actual relocation costs incurred by Tenant in moving from Tenant's current
locations to the Building, and (ii) $1.00 multiplied by the Rentable Area of the
Premises. The Moving Allowance shall be paid within thirty (30) days following
the later of (j) the date upon which Tenant actually commences the conduct of
its business in the Premises, and (ii) the date on which all supporting invoices
have been submitted to Landlord. All requests for the Moving Allowance must be
supported by invoices or other evidence of relocation cost reasonably
satisfactory to Landlord. As used herein, the term "relocation costs" shall mean
sums paid for professional movers, printing of new stationery and business
cards, cabling and phone installation costs, and such other reasonably related
costs and expenses as shall be approved by Landlord. Any unused portion of the
Moving Allowance may be utilized by Tenant to increase the Construction
Allowance.
-1-
<PAGE>
EXHIBIT "J"
-----------
ROOF TOP INSTALLATIONS
----------------------
Landlord hereby grants Tenant a license, for so long as no Event of Default
exists under the Lease, and without charge, to install an antenna, a transmitter
and a satellite dish and other communications equipment (the "Communications
Equipment") upon the roof of the Building at a location approved by Landlord in
its sole discretion, together with the right to use a chase or other accessways
for wiring between the Premises and the Communications Equipment. Tenant shall
be responsible for ensuring that the Communications Equipment complies with all
applicable codes, ordinances and private deed restrictions and any applicable
rules and regulations of the FCC and/or FAA. Tenant shall submit plans and
specifications for the Communications Equipment to Landlord for approval prior
to installation, such approval not to be unreasonably withheld or delayed. All
installation and maintenance costs related to the Communications Equipment shall
be the sole responsibility of Tenant. In no event shall the Communications
Equipment be affixed to the roof of the Building in a manner which penetrates
the roof without the prior written consent of Landlord. Tenant, at its sole cost
and expense, shall remove such Communications Equipment upon the termination of
this Lease and repair any damage to the Building caused by such removal.
Landlord also grants Tenant the right, for as long as no Event of Default
exists under the Lease, to use the supplemental HVAC unit on the roof of the
Building.
-1-
<PAGE>
EXHIBIT "K"
-----------
RIGHT OF FIRST OFFER
--------------------
If, during the initial Lease Term, a current tenant in either Building 6330
or 6360 vacates its space and Landlord elects to lease to third parties all or
any part of such space ("Offer Space"), and provided that this Lease is in full
force and effect and there is no uncured Event of Default under this Lease,
Tenant shall have an initial right of first offer ("Right of First Offer") to
lease all (but not part) of the portion of the Offer Space that Landlord elects
to lease to third parties (the "Subject Space") prior to Landlord leasing the
Subject Space to any third party. Prior to Landlord leasing the Subject Space to
third parties, Landlord shall first offer to lease the Subject Space to Tenant
by written notice. Tenant shall have the right for five (5) days following the
receipt of such notice to submit a written offer (the "Offer") to Landlord to
lease all (but not less than all) of the Subject Space. The Offer shall contain
all of the material terms and conditions upon which Tenant would be willing to
lease the Subject Space, including, without limitation, rental rate, allowances
and concessions, term, and date of requested occupancy. If, within five (5)
days after Landlord gives Tenant such written notice, Tenant does not submit an
Offer to Landlord, then Tenant's rights to lease the Subject Space shall
terminate and expire and the Right of First Offer granted herein shall
automatically terminate and be of no further force or effect. If Tenant timely
submits an Offer, Landlord shall have a period of ten (10) days to accept or
reject the Offer in its sole and absolute discretion. The failure of Landlord to
accept the Offer within such ten-day period shall constitute rejection of the
Offer. If Landlord accepts the Offer, Landlord and Tenant shall promptly enter
into an amendment to the Lease adding the Subject Space to the Premises and
otherwise incorporating the terms and conditions of the Offer. If Landlord
rejects the Offer, Landlord shall be free to lease the Subject Space to a third
party upon such terms and conditions as Landlord shall elect in its sole
discretion and the Right of First Offer granted herein shall automatically
terminate and be of no further force or effect; provided, however, if Landlord
intends to lease the Subject Space on terms less favorable to Landlord than
those stated in the Offer, Landlord shall provide written notice to Tenant
detailing the terms upon which Landlord intends to lease the Subject Space and
Tenant shall have five (5) days after receipt of such notice to notify Landlord
in writing that it elects to lease the Subject Space on the terms stated in such
notice. If Tenant fails to so notify Landlord within such five (5) day period,
Tenant's right to lease the Subject Space shall terminate and expire and the
Right of First Offer granted herein shall terminate and be of no further force
or effect. Notwithstanding the foregoing, if the Subject Space constitutes less
than all of the Offer Space, the Right of First Offer shall continue with
respect to the balance of the Offer Space. Any termination of this Lease during
the Lease Term and any Transfer by Tenant, whether or not with the approval of
Landlord, other than an Affiliate Transfer, shall terminate the Right of First
Offer.
-1-
<PAGE>
EXHIBIT 99.1
REPORT OF INDEPENDENT AUDITORS
Board of Directors
ProNet Inc.
We have audited the accompanying combined balance sheets of Page East, Inc.,
as of December 31, 1994 and 1993, and the related combined statements of
operations, stockholder's equity, and cash flows for the years then ended. These
combined financial statements are the responsibility of Page East, Inc.'s
management. Our responsibility is to express an opinion on these combined
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Page East,
Inc. at December 31, 1994 and 1993, and the combined results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
June 9, 1995
Dallas, Texas
<PAGE>
PAGE EAST, INC.
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1993
MARCH 31, ---------- ----------
1995
-----------
(UNAUDITED)
<S> <C> <C> <C>
Cash............................................................................ $ 105,322 $ 28,241 $ 78,849
Trade accounts receivable....................................................... 215,373 263,935 142,637
Inventories..................................................................... 87,146 30,744 33,808
Due from affiliates............................................................. 465,338 166,612 38,291
Note receivable................................................................. 35,040 35,040 5,040
----------- ---------- ----------
Total current assets........................................................ 908,219 524,572 298,625
Equipment:
Pagers........................................................................ 886,271 922,234 825,915
Communications equipment...................................................... 1,006,356 1,031,061 999,813
Office and other equipment.................................................... 27,697 24,040 17,539
----------- ---------- ----------
1,920,324 1,977,335 1,843,267
Less allowance for depreciation............................................... 1,441,571 1,442,887 1,137,112
----------- ---------- ----------
478,753 534,448 706,155
Other assets.................................................................... 79,062 16,510 37,800
----------- ---------- ----------
Total assets................................................................ $ 1,466,034 $1,075,530 $1,042,580
----------- ---------- ----------
----------- ---------- ----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade payables................................................................ $ 35,429 $ 73,446 $ 166,185
Advances from stockholder (Note 3)............................................ 380,000 380,000 440,902
Customer deposits............................................................. 77,751 75,342 53,663
Note payable to related party................................................. -- -- 50,000
----------- ---------- ----------
Total current liabilities................................................... 493,180 528,788 710,750
Stockholder's equity:
Common stock $10 par value:
Authorized shares -- 1,000
Issued and outstanding shares -- 100........................................ 1,000 1,000 1,000
Additional paid in capital.................................................... 15,000 15,000 15,000
Retained earnings............................................................. 956,854 530,742 315,830
----------- ---------- ----------
972,854 546,742 331,830
----------- ---------- ----------
Total liabilities and stockholder's equity.................................. $ 1,466,034 $1,075,530 $1,042,580
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
See accompanying notes.
<PAGE>
PAGE EAST, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1994 1993
THREE MONTHS ------------ ------------
ENDED
MARCH 31,
1995
-------------
(UNAUDITED)
<S> <C> <C> <C>
Recurring revenues..................................................... $ 817,837 $ 2,678,781 $ 2,062,887
Product sales.......................................................... 105,605 288,551 230,963
------------- ------------ ------------
Total revenues..................................................... 923,442 2,967,332 2,293,850
Cost of products sold.................................................. 93,873 250,140 181,415
------------- ------------ ------------
Net revenues....................................................... 829,569 2,717,192 2,112,435
Cost of pager lease and access services................................ 163,031 871,124 524,318
------------- ------------ ------------
Gross margin......................................................... 666,538 1,846,068 1,588,117
Expenses:
Selling, general, and administrative................................. 214,390 938,340 913,786
Depreciation and amortization........................................ 69,499 319,414 339,577
------------- ------------ ------------
283,889 1,257,754 1,253,363
------------- ------------ ------------
Operating income....................................................... 382,649 588,314 334,754
Other income........................................................... 43,463 16,206 44,841
------------- ------------ ------------
Net income............................................................. $ 426,112 $ 604,520 $ 379,595
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
See accompanying notes.
<PAGE>
PAGE EAST, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1994 1993
THREE MONTHS ----------- -----------
ENDED MARCH 31,
1995
----------------
(UNAUDITED)
<S> <C> <C> <C>
Operating activities:
Net income.......................................................... $ 426,112 $ 604,520 $ 379,595
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization..................................... 69,499 319,414 339,577
Changes in operating assets and liabilities:
Trade accounts receivable....................................... 48,562 (121,298) 7,256
Inventories..................................................... (56,402) 3,064 (3,027)
Trade payables.................................................. (38,017) (92,639) 41,770
Due from affiliates............................................. (375,082) (496,739) (434,911)
Customer deposits............................................... 2,409 21,679 20,024
---------------- ----------- -----------
Net cash provided by operating activities............................. 77,081 238,001 350,284
---------------- ----------- -----------
Investing activities:
Purchases of equipment.............................................. -- (147,707) (283,376)
Funding of note receivable.......................................... -- (30,000) --
---------------- ----------- -----------
Net cash used by investing activities................................. -- (177,707) (283,376)
---------------- ----------- -----------
Financing activities:
Payment of note payable............................................. -- (60,902) (40,000)
Payment of advances from stockholder................................ -- (50,000) --
---------------- ----------- -----------
Net cash used by financing activities................................. -- (110,902) (40,000)
---------------- ----------- -----------
Net (decrease) increase in cash....................................... 77,081 (50,608) 26,908
Cash at beginning of year............................................. 28,241 78,849 51,941
---------------- ----------- -----------
Cash at end of year................................................... $ 105,322 $ 28,241 $ 78,849
---------------- ----------- -----------
---------------- ----------- -----------
</TABLE>
See accompanying notes.
<PAGE>
PAGE EAST, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
RETAINED
COMMON PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at January 1, 1993.......................................... $ 1,000 $ 15,000 $ (63,765) $ (47,765)
Net income........................................................ -- -- 379,595 379,595
----------- --------- ---------- ----------
Balance at December 31, 1993........................................ 1,000 15,000 315,830 331,830
Net income........................................................ -- -- 604,520 604,520
Distribution to shareholder....................................... -- -- (389,608) (389,608)
----------- --------- ---------- ----------
Balance at December 31, 1994........................................ 1,000 15,000 530,742 546,742
Net income (unaudited)............................................ -- -- 426,112 426,112
----------- --------- ---------- ----------
Balance at March 31, 1995........................................... $ 1,000 $ 15,000 $ 956,854 $ 972,854
----------- --------- ---------- ----------
----------- --------- ---------- ----------
</TABLE>
See accompanying notes.
<PAGE>
PAGE EAST, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
These financial statements combine the financial positions, results of
operations, and cash flows of Page East, Inc. (Page East) and the paging assets
and paging operations of Coastal Carolina Communications, Inc. (Coastal, and
collectively, the Company). Page East entered into an agreement to purchase the
paging assets of Coastal on May 8, 1995. On May 10, 1995, ProNet Inc. (ProNet)
signed a letter of intent to purchase the stock of Page East, including the
assignment of the right to purchase the paging assets of Coastal.
The Company sells and leases paging equipment and operates paging systems in
North Carolina.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Leasing revenue is recognized as it is earned. The Company also sells pagers
for which revenue is recognized at the point of sale.
CREDIT CONCENTRATIONS
The Company's customers are concentrated in eastern North Carolina. No
single customer accounted for a significant amount of the Company's sales. The
Company reviews a customer's credit history before extending credit and
generally does not require significant collateral. Bad debts are recognized on
the specific write-off method.
INVENTORIES
Inventories which consist of pagers held for resale are valued at lower of
cost or market. Cost is determined by the first-in-first-out (FIFO) method.
EQUIPMENT
Equipment is recorded at cost. Depreciation is computed by the straight-line
method over the estimated useful lives of the assets. Estimated useful lives
generally range from three to ten years.
OTHER ASSETS
Other assets includes a noncompete agreement which is being amortized on a
straight-line method over four years.
INCOME TAXES
The Company has elected to be taxed under the Subchapter S provisions of the
Internal Revenue Code. Accordingly, the Company's income or loss passes through
its stockholder for inclusion in his individual income tax returns.
3. RELATED PARTY TRANSACTIONS
Certain administrative services are provided to the Company for a fee from
related entities which are owned or controlled by the stockholder.
The Company has received advances from its stockholder and entities
controlled by the stockholder. These advances which are non-interest bearing are
due on demand.
The Company leases, from its stockholder or related entities controlled by
the stockholder, office space and certain tower transmission sites under
agreements which are classified as operating leases. Rent expense for 1994 and
1993 under such operating leases was approximately $400,000 and $115,000,
respectively.
4. STOCKHOLDER'S DISTRIBUTIONS
Distributions to stockholder represents assets which will be retained by the
stockholder.
<PAGE>
EXHIBIT 99.2
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Since January 1994, the Company has completed the acquisition of all of the
outstanding capital stock of Contact and Metropolitan and substantially all of
the paging assets of Radio Call, ChiComm, High Tech, Signet, Carrier and All
City (collectively, the "Completed Acquisitions"). The Company has signed
definitive agreements or letters of intent to acquire all of the outstanding
capital stock of Page East and substantially all of the paging assets of
Americom, Gold Coast, Denton, MetroTones and Lewis (collectively, the "Pending
Acquisitions"). The combination of the Completed Acquisitions and the Pending
Acquisitions is referred to as the "Acquisitions."
The accompanying unaudited pro forma condensed consolidated balance sheet of
the Company combines the historical consolidated balance sheet of the Company
and the balance sheets of Carrier, Metropolitan, All City and the Pending
Acquisitions as if the acquisitions of Carrier, Metropolitan, All City and the
Pending Acquisitions had occurred on March 31, 1995, as adjusted to reflect the
sale of the Notes offered hereby and the application of the net proceeds
therefrom. The accompanying unaudited pro forma condensed consolidated statement
of operations of the Company for the year ended December 31, 1994 combines the
historical consolidated statement of operations of the Company and the
statements of operations of the Acquisitions as if the Acquisitions had occurred
on January 1, 1994, and assumes that they were funded with the proceeds of this
offering. The accompanying unaudited pro forma condensed consolidated statement
of operations of the Company for the three months ended March 31, 1995, combines
the historical statement of operations of the Company and the statements of
operations of Signet, Carrier, Metropolitan, All City and the Pending
Acquisitions as if the acquisitions of Signet, Carrier, Metropolitan, All City
and the Pending Acquisitions had occurred on January 1, 1995, and assumes that
they were funded with the proceeds of this offering.
The pro forma condensed consolidated financial statements do not purport to
represent what the Company's results of operations would have been had the
Acquisitions occurred on the dates indicated or for any future period or date.
The pro forma adjustments give effect to available information and assumptions
that management believes are reasonable. The pro forma condensed consolidated
financial statements should be read in conjunction with the Company's historical
consolidated financial statements and the financial statements of certain
Acquisitions and the notes thereto included or incorporated elsewhere herein.
<PAGE>
PRONET INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1995
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
PENDING
ACQUISITIONS PRO FORMA PRO FORMA
PRONET CARRIER METROPOLITAN ALL CITY (1) ADJUSTMENTS CONSOLIDATED
--------- --------- ------------- ---------- --------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Current Assets........................ $ 16,567 $ 508 $ 2,051 $ 298 $ 3,373 $ 17,321 $ 40,118
Equipment
Pagers.............................. 25,257 800 -- 3,045 2,424 (4,735) 26,791
Communications equipment............ 14,931 797 6,068 1,690 5,685 (8,719) 20,452
Security systems equipment.......... 10,843 -- -- -- -- -- 10,843
Office and other.................... 3,743 57 758 256 467 (870) 4,411
--------- --------- ------ ---------- ------- ----------- ------------
54,774 1,654 6,826 4,991 8,576 (14,324) 62,497
Less allowance for depreciation..... 26,880 1,187 2,865 3,665 6,135 (13,853) 26,879
--------- --------- ------ ---------- ------- ----------- ------------
27,894 467 3,961 1,326 2,441 (471) 35,618
Goodwill and other assets, net........ 42,511 192 -- 167 237 63,425 106,532
--------- --------- ------ ---------- ------- ----------- ------------
TOTAL ASSETS.......................... $ 86,972 $ 1,167 $ 6,012 $ 1,791 $ 6,051 $ 80,275 $ 182,268
--------- --------- ------ ---------- ------- ----------- ------------
--------- --------- ------ ---------- ------- ----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities................... $ 9,328 $ 978 $ 862 $ 1,190 $ 6,339 $ (8,133) $ 10,564
Deferred payments..................... 5,332 -- -- -- -- 15,960 21,292
Long-term debt, less current
maturities........................... 21,900 -- -- 10,832 1,079 66,189 100,000
Shareholders' equity (deficit)........ 50,412 189 5,150 (10,231) (1,367) 6,259 50,412
--------- --------- ------ ---------- ------- ----------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY............................... $ 86,972 $ 1,167 $ 6,012 $ 1,791 $ 6,051 $ 80,275 $ 182,268
--------- --------- ------ ---------- ------- ----------- ------------
--------- --------- ------ ---------- ------- ----------- ------------
<FN>
- ------------------------
(1) See Schedule A for detail of the Pending Acquisitions.
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
PRONET INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL RESULTS
------------------------- PRO FORMA PRO FORMA
PRONET ACQUISITIONS (1) ADJUSTMENTS CONSOLIDATED
--------- -------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
NET REVENUES
Recurring revenues...................................... $ 33,079 $ 32,158 $ (349) $ 64,888
Product sales........................................... 6,639 6,993 -- 13,632
--------- ------- ----------- ------------
Total revenues........................................ 39,718 39,151 (349) 78,520
Cost of products sold................................... 6,644 6,812 -- 13,456
--------- ------- ----------- ------------
33,074 32,339 (349) 65,064
COST OF SERVICES.......................................... 9,185 7,606 (46) 16,745
--------- ------- ----------- ------------
GROSS MARGIN............................................ 23,889 24,733 (303) 48,319
EXPENSES
Sales, general and administrative....................... 12,126 16,475 (3,505) 25,096
Depreciation and amortization........................... 8,574 5,105 5,342 19,021
--------- ------- ----------- ------------
20,700 21,580 1,837 44,117
--------- ------- ----------- ------------
OPERATING INCOME (LOSS)................................. 3,189 3,153 (2,140) 4,202
OTHER INCOME (EXPENSE)
Interest expense........................................ (1,774) (2,620) (8,513) (12,907)
Interest and other income............................... 173 108 -- 281
--------- ------- ----------- ------------
(1,601) (2,512) (8,513) (12,626)
--------- ------- ----------- ------------
INCOME (LOSS) BEFORE INCOME TAXES....................... 1,588 641 (10,653) (8,424)
Provision (benefit) for income taxes...................... 895 323 (3,320) (2,102)
--------- ------- ----------- ------------
NET INCOME (LOSS)..................................... $ 693 $ 318 $ (7,333) $ (6,322)
--------- ------- ----------- ------------
--------- ------- ----------- ------------
<FN>
- ------------------------
(1) See Schedule B for detail of the Acquisitions.
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
PRONET INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL RESULTS
--------------------------
SIGNET,
CARRIER,
METROPOLITAN,
ALL CITY AND
PENDING PRO FORMA PRO FORMA
PRONET ACQUISITIONS (1) ADJUSTMENTS CONSOLIDATED
--------- --------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
NET REVENUES
Recurring revenues...................................... $ 10,488 $ 6,342 $ (83) $ 16,747
Product sales........................................... 2,196 1,081 -- 3,277
--------- ------ ----------- ------------
Total revenues........................................ 12,684 7,423 (83) 20,024
Cost of products sold................................... 2,066 897 -- 2,963
--------- ------ ----------- ------------
10,618 6,526 (83) 17,061
COST OF SERVICES.......................................... 2,466 1,538 (7) 3,997
--------- ------ ----------- ------------
GROSS MARGIN............................................ 8,152 4,988 (76) 13,064
EXPENSES
Sales, general and administrative....................... 4,638 2,477 (640) 6,475
Depreciation and amortization........................... 2,745 686 1,085 4,516
--------- ------ ----------- ------------
7,383 3,163 445 10,991
--------- ------ ----------- ------------
OPERATING INCOME (LOSS)................................. 769 1,825 (521) 2,073
OTHER INCOME (EXPENSE)
Interest expense........................................ (386) (497) (2,462) (3,345)
Interest and other income............................... 41 125 -- 166
--------- ------ ----------- ------------
(345) (372) (2,462) (3,179)
--------- ------ ----------- ------------
INCOME (LOSS) BEFORE INCOME TAXES....................... 424 1,453 (2,983) (1,106)
Provision (benefit) for income taxes...................... 358 158 (554) (38)
--------- ------ ----------- ------------
NET INCOME (LOSS)....................................... $ 66 $ 1,295 $ (2,429) $ (1,068)
--------- ------ ----------- ------------
--------- ------ ----------- ------------
<FN>
- ------------------------
(1) See Schedule C for detail of the acquisitions of Signet, Carrier,
Metropolitan, All City and the Pending Acquisitions.
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
SCHEDULE A
PENDING ACQUISITIONS
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1995
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
GOLD TOTAL PENDING
AMERICOM COAST DENTON LEWIS METROTONES PAGE EAST ACQUISITIONS
----------- --------- --------- --------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets...................... $ 1,136 $ 51 $ 696 $ 421 $ 161 $ 908 $ 3,373
Equipment
Pagers............................ -- 242 890 272 134 886 2,424
Communications equipment.......... 2,519 375 862 386 537 1,006 5,685
Office and other.................. -- 166 136 69 68 28 467
----------- --------- --------- --------- ----------- ----------- -------------
2,519 783 1,888 727 739 1,920 8,576
Less allowance for depreciation... 1,238 756 1,773 360 567 1,441 6,135
----------- --------- --------- --------- ----------- ----------- -------------
1,281 27 115 367 172 479 2,441
Goodwill and other assets, net...... (34) 174 16 2 -- 79 237
----------- --------- --------- --------- ----------- ----------- -------------
TOTAL ASSETS........................ $ 2,383 $ 252 $ 827 $ 790 $ 333 $ 1,466 $ 6,051
----------- --------- --------- --------- ----------- ----------- -------------
----------- --------- --------- --------- ----------- ----------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities................. $ 2,622 $ 225 $ 944 $ 217 $ 1,838 $ 493 $ 6,339
Deferred payments................... -- -- -- -- -- -- --
Long-term debt, less current
maturities......................... 104 627 -- 309 39 -- 1,079
Shareholders' equity (deficit)...... (343) (600) (117) 264 (1,544) 973 (1,367)
----------- --------- --------- --------- ----------- ----------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY............................. $ 2,383 $ 252 $ 827 $ 790 $ 333 $ 1,466 $ 6,051
----------- --------- --------- --------- ----------- ----------- -------------
----------- --------- --------- --------- ----------- ----------- -------------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
SCHEDULE B
ACQUISITIONS
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
SEVEN MONTHS
TWO MONTHS ENDED YEAR ENDED
ENDED FEB. JULY 31, 1994 DECEMBER 31, 1994
28, 1994 ---------------------- ---------------------------------------------------------
----------- RADIO METRO-
CONTACT CALL CHICOMM HIGH TECH SIGNET CARRIER POLITAN ALL CITY
----------- --------- ----------- --------- --------- ----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES
Recurring revenues............. $ 1,599 $ 3,200 $ 2,225 $ 291 $ 4,750 $ 2,435 $ 4,835 $ 3,257
Product sales.................. 743 738 338 -- 1,100 900 152 387
----------- --------- ----------- --------- --------- ----------- ----------- ---------
Total revenues............... 2,342 3,938 2,563 291 5,850 3,335 4,987 3,644
Cost of products sold.......... 956 536 296 -- 1,089 1,185 156 299
----------- --------- ----------- --------- --------- ----------- ----------- ---------
1,386 3,402 2,267 291 4,761 2,150 4,831 3,345
COST OF SERVICES................. 202 755 486 86 1,149 203 1,517 833
----------- --------- ----------- --------- --------- ----------- ----------- ---------
GROSS MARGIN................. 1,184 2,647 1,781 205 3,612 1,947 3,314 2,512
EXPENSES
Sales, general and
administrative................ 1,022 2,181 792 220 2,287 1,603 1,622 1,670
Depreciation and
amortization.................. 93 689 413 128 627 228 597 1,225
----------- --------- ----------- --------- --------- ----------- ----------- ---------
1,115 2,870 1,205 348 2,914 1,831 2,219 2,895
----------- --------- ----------- --------- --------- ----------- ----------- ---------
OPERATING INCOME (LOSS)...... 69 (223) 576 (143) 698 116 1,095 (383)
OTHER INCOME (EXPENSE)
Interest expense............... (46) (44) (141) -- (292) (124) -- (1,595)
Interest and other income...... -- -- -- -- 5 -- 27 --
----------- --------- ----------- --------- --------- ----------- ----------- ---------
(46) (44) (141) -- (287) (124) 27 (1,595)
----------- --------- ----------- --------- --------- ----------- ----------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES....................... 23 (267) 435 (143) 411 (8) 1,122 (1,978)
Provision (benefit) for income
taxes......................... -- (59) -- -- -- -- 382 --
----------- --------- ----------- --------- --------- ----------- ----------- ---------
NET INCOME (LOSS)............ $ 23 $ (208) $ 435 $ (143) $ 411 $ (8) $ 740 $ (1,978)
----------- --------- ----------- --------- --------- ----------- ----------- ---------
----------- --------- ----------- --------- --------- ----------- ----------- ---------
<CAPTION>
TOTAL COM-
PLETED YEAR ENDED DECEMBER 31, 1994
ACQUISI- --------------------------------------------------------------------------
TIONS AMERICOM GOLD COAST DENTON LEWIS METRO- TONES PAGE EAST
----------- ----------- ----- ----------- --------- ----------- -----------
<S> <C> <C>
NET REVENUES
Recurring revenues............. $ 22,592 $ 3,477 $ 699 $ 889 $ 1,047 $ 775 $ 2,679
Product sales.................. 4,358 1,105 -- 265 803 173 289
----------- ----------- ----- ----------- --------- ----- -----------
Total revenues............... 26,950 4,582 699 1,154 1,850 948 2,968
Cost of products sold.......... 4,517 1,015 -- 178 669 183 250
----------- ----------- ----- ----------- --------- ----- -----------
22,433 3,567 699 976 1,181 765 2,718
COST OF SERVICES................. 5,231 856 158 54 70 366 871
----------- ----------- ----- ----------- --------- ----- -----------
GROSS MARGIN................. 17,202 2,711 541 922 1,111 399 1,847
EXPENSES
Sales, general and
administrative................ 11,397 1,764 232 939 831 374 938
Depreciation and
amortization.................. 4,000 381 92 78 135 99 320
----------- ----------- ----- ----------- --------- ----- -----------
15,397 2,145 324 1,017 966 473 1,258
----------- ----------- ----- ----------- --------- ----- -----------
OPERATING INCOME (LOSS)...... 1,805 566 217 (95) 145 (74) 589
OTHER INCOME (EXPENSE)
Interest expense............... (2,242) (291) -- (44) (9) (34) --
Interest and other income...... 32 -- -- 41 -- 19 16
----------- ----------- ----- ----------- --------- ----- -----------
(2,210) (291) -- (3) (9) (15) 16
----------- ----------- ----- ----------- --------- ----- -----------
INCOME (LOSS) BEFORE INCOME
TAXES....................... (405) 275 217 (98) 136 (89) 605
Provision (benefit) for income
taxes......................... 323 -- -- -- -- -- --
----------- ----------- ----- ----------- --------- ----- -----------
NET INCOME (LOSS)............ $ (728) $ 275 $ 217 $ (98) $ 136 $ (89) $ 605
----------- ----------- ----- ----------- --------- ----- -----------
----------- ----------- ----- ----------- --------- ----- -----------
<CAPTION>
TOTAL PEND-
ING TOTAL
ACQUISI- ACQUISI-
TIONS TIONS
----------- -----------
NET REVENUES
Recurring revenues............. $ 9,566 $ 32,158
Product sales.................. 2,635 6,993
----------- -----------
Total revenues............... 12,201 39,151
Cost of products sold.......... 2,295 6,812
----------- -----------
9,906 32,339
COST OF SERVICES................. 2,375 7,606
----------- -----------
GROSS MARGIN................. 7,531 24,733
EXPENSES
Sales, general and
administrative................ 5,078 16,475
Depreciation and
amortization.................. 1,105 5,105
----------- -----------
6,183 21,580
----------- -----------
OPERATING INCOME (LOSS)...... 1,348 3,153
OTHER INCOME (EXPENSE)
Interest expense............... (378) (2,620)
Interest and other income...... 76 108
----------- -----------
(302) (2,512)
----------- -----------
INCOME (LOSS) BEFORE INCOME
TAXES....................... 1,046 641
Provision (benefit) for income
taxes......................... -- 323
----------- -----------
NET INCOME (LOSS)............ $ 1,046 $ 318
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
SCHEDULE C
SIGNET, CARRIER, METROPOLITAN, ALL CITY AND THE PENDING ACQUISITIONS
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31, 1995
--------------------------
TWO MONTHS ENDED THREE MONTHS ENDED PENDING ACQUISITIONS
FEBRUARY 28, 1995 MARCH 31, 1995 --------------------------
--------------------- ---------------------------------------
SIGNET CARRIER METROPOLITAN ALL CITY AMERICOM GOLD COAST
--------------------- ----------- ------------- ----------- ------------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
NET REVENUES
Recurring revenues............. $ 872 $ 532 $ 1,408 $ 863 $ 963 $ 160
Product sales.................. 109 197 26 69 212 --
----- ----- ------ ----- ----- -----
Total revenues............... 981 729 1,434 932 1,175 160
Cost of products sold.......... 109 179 30 55 194 --
----- ----- ------ ----- ----- -----
872 550 1,404 877 981 160
COST OF SERVICES................. 273 59 392 211 181 38
----- ----- ------ ----- ----- -----
GROSS MARGIN................. 599 491 1,012 666 800 122
EXPENSES
Sales, general and
administrative................ 367 286 404 340 316 60
Depreciation and
amortization.................. 17 54 160 201 104 19
----- ----- ------ ----- ----- -----
384 340 564 541 420 79
----- ----- ------ ----- ----- -----
OPERATING INCOME (LOSS)...... 215 151 448 125 380 43
OTHER INCOME (EXPENSE)
Interest expense............... (54) (26) -- (396) (3) --
Interest and other income...... 2 1 13 -- 43 --
----- ----- ------ ----- ----- -----
(52) (25) 13 (396) 40 --
----- ----- ------ ----- ----- -----
INCOME (LOSS) BEFORE INCOME
TAXES....................... 163 126 461 (271) 420 43
Provision (benefit) for income
taxes......................... -- 1 157 -- -- --
----- ----- ------ ----- ----- -----
NET INCOME (LOSS)............ $ 163 $ 125 $ 304 $ (271) $ 420 $ 43
----- ----- ------ ----- ----- -----
----- ----- ------ ----- ----- -----
<CAPTION>
TOTAL PENDING
DENTON LEWIS METROTONES PAGE EAST ACQUISITIONS TOTAL
----------- --------- --------------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET REVENUES
Recurring revenues............. $ 227 $ 347 $ 152 $ 818 $ 2,667 $ 6,342
Product sales.................. 54 258 50 106 680 1,081
----------- --------- ----- ----- ------ ---------
Total revenues............... 281 605 202 924 3,347 7,423
Cost of products sold.......... 52 171 13 94 524 897
----------- --------- ----- ----- ------ ---------
229 434 189 830 2,823 6,526
COST OF SERVICES................. 126 21 74 163 603 1,538
----------- --------- ----- ----- ------ ---------
GROSS MARGIN................. 103 413 115 667 2,220 4,988
EXPENSES
Sales, general and
administrative................ 128 248 114 214 1,080 2,477
Depreciation and
amortization.................. 11 33 17 70 254 686
----------- --------- ----- ----- ------ ---------
139 281 131 284 1,334 3,163
----------- --------- ----- ----- ------ ---------
OPERATING INCOME (LOSS)...... (36) 132 (16) 383 886 1,825
OTHER INCOME (EXPENSE)
Interest expense............... (11) (2) (3) (2) (21) (497)
Interest and other income...... 9 9 3 45 109 125
----------- --------- ----- ----- ------ ---------
(2) 7 -- 43 88 (372)
----------- --------- ----- ----- ------ ---------
INCOME (LOSS) BEFORE INCOME
TAXES....................... (38) 139 (16) 426 974 1,453
Provision (benefit) for income
taxes......................... -- -- -- -- -- 158
----------- --------- ----- ----- ------ ---------
NET INCOME (LOSS)............ $ (38) $ 139 $ (16) $ 426 $ 974 $ 1,295
----------- --------- ----- ----- ------ ---------
----------- --------- ----- ----- ------ ---------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
PRONET INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On March 1, 1994, the Company completed the acquisition of all the
outstanding capital stock of Contact for approximately $19.0 million in cash
(including amounts paid pursuant to noncompetition agreements). On August 1,
1994, the Company completed the purchase of substantially all of the paging
assets of Radio Call and certain of its affiliates for approximately $7.8
million in cash (including amounts paid pursuant to noncompetition agreements).
On August 1, 1994, the Company also completed the purchase of substantially all
of the Chicago area paging assets of ChiComm for approximately $9.8 million,
comprised of approximately $8.9 million in cash at closing (including amounts
paid pursuant to noncompetition agreements) and a $900,000 Deferred Payment.
Effective December 31, 1994, the Company purchased substantially all of the
paging assets of High Tech for $900,000, comprised of $700,000 in cash at
closing and a $200,000 Deferred Payment. On March 1, 1995, the Company purchased
substantially all of the paging assets of Signet for approximately $9.0 million,
comprised of approximately $4.8 million in cash at closing and a $4.2 million
Deferred Payment. On April 1, 1995, the Company completed the purchase of
substantially all of the paging assets of Carrier for approximately $6.5
million, comprised of approximately $3.5 million in cash at closing and a
Deferred Payment of approximately $3.0 million. On May 3, 1995, the Company
completed the acquisition of all the outstanding capital stock of Metropolitan
for approximately $21.0 million in cash. On May 19, 1995, the Company completed
the purchase of substantially all of the paging assets of All City for
approximately $6.4 million, comprised of approximately $6.1 million in cash at
closing and a $350,000 Deferred Payment. These acquisitions were accounted for
as purchases and were financed by borrowings under the Credit Facility. The
results of operations for Contact, Radio Call, ChiComm, High Tech, and Signet
are included in the actual results of operations of the Company from the
respective dates of acquisition, and the historical balance sheet of the Company
at March 31, 1995 includes these acquisitions.
On May 24, 1995, the Company signed a definitive agreement to purchase the
paging assets of Americom for approximately $18.0 million, comprised of
approximately $9.0 million to be paid in cash at closing and a $9.0 million
Deferred Payment. On April 5, 1995, the Company signed letters of intent to
purchase the paging assets of Lewis, Gold Coast, MetroTones and Denton for
approximately $9.5 million, collectively, comprised of approximately $7.8
million in cash at closing and a $1.7 million Deferred Payment. On May 10, 1995,
the Company signed a letter of intent to purchase all of the outstanding capital
stock of Page East for approximately $8.0 million, comprised of approximately
$6.1 million in cash at closing and a Deferred Payment of approximately $1.9
million. These transactions are subject to various conditions, including FCC,
regulatory and other third party approvals, and the execution of definitive
agreements. All Deferred Payments listed above are due one year from the closing
of the respective transactions and are payable, at the Company's discretion,
either in cash or shares of the Company's Common Stock based on market value at
the date of payment.
All of the Pending Acquisitions will be accounted for as purchases and are
assumed to be funded with a portion of the proceeds of this offering.
The unaudited pro forma condensed consolidated statements of operations
reflect the Acquisitions as if the Acquisitions had been completed at the
beginning of the periods presented. The Company and the Acquisitions except for
Contact and Gold Coast operated on a December 31 fiscal year basis. Gold Coast
operated on a June 30 fiscal year basis. Gold Coast's results of operations for
the six months ended June 30, 1994 were combined with the results of operations
for the six months ended December 31, 1994 to reflect the year ended December
31, 1994. The respective results of operations for Contact, Radio Call, ChiComm
and High Tech from January 1, 1994 to the dates of the respective acquisitions
were combined with the actual results of operations of the Company, Signet,
Carrier, Metropolitan, All City and the Pending Acquisitions for the year ended
December 31, 1994 to determine the pro forma results of operations for the year
ended December 31, 1994. The respective results of operations for Signet from
January 1, 1995 to the date of acquisition were combined with the actual results
of operations of the Company, Carrier, Metropolitan, All City and the Pending
Acquisitions for the three months ended March 31, 1995 to determine the pro
forma results of operations for the three months ended March 31, 1995.
The historical financial information presented for ChiComm includes an
audited Statement of Net Assets and a Summary of Income and Direct Operating
Expenses. ChiComm was a stand alone division of Chicago Communication Service,
Inc. and was not a separate reporting entity. The Summary of Income and Direct
Operating Expenses excludes certain overhead and corporate expenses not directly
related to ChiComm.
The accompanying pro forma condensed consolidated balance sheet as of March
31, 1995, has been prepared as if the Carrier, Metropolitan and All City
acquisitions and the Pending Acquisitions had occurred on that date and reflects
the following adjustments:
<PAGE>
PRONET INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(A) A pro forma adjustment is made to reflect the fair value of those
assets and liabilities that were acquired as a result of the Carrier,
Metropolitan and All City acquisitions and the Pending Acquisitions. The
Company did not acquire cash or assume certain trade payables, certain
accrued expenses or existing long-term debt.
(B) A pro forma adjustment is made to goodwill equal to the excess of
the applicable purchase price over the fair values assigned to assets and
liabilities acquired. A pro forma adjustment is made to other assets to
record the noncompetition agreements based on amounts stated in the
respective letters of intent or definitive agreements.
(C) A pro forma adjustment is made to (i) reverse the $15.2 million of
debt (including current maturities) of Carrier, Metropolitan, All City and
the Pending Acquisitions that were not, and will not, be assumed by the
Company, (ii) record the sale of the Notes and the repayment of outstanding
borrowings under the Credit Facility with a portion of the proceeds
therefrom, and (iii) record the incurrence of Deferred Payments of $16.0
million in connection with the acquisitions of Carrier, All City and the
Pending Acquisitions. All Deferred Payments are classified as long-term
liabilities since the Company has the option to make the Deferred Payments
in cash with funds available from the proceeds of this offering or the
Credit Facility or in shares of the Company's Common Stock.
The accompanying pro forma condensed consolidated statements of operations
for the year ended December 31, 1994 and for the three months ended March 31,
1995, have been prepared by combining the historical results of the Company and
the Acquisitions for such respective periods and reflect the following
adjustments:
(D) A pro forma adjustment is made to reflect the effect on net revenues
and costs of sales related to the segment of the operations of All City not
acquired by the Company.
(E) The pro forma adjustment to sales, general and administrative
expenses represents expenses that either would or would not have been
incurred had the Acquisitions occurred at the beginning of the periods
presented. For Signet, All City, Metropolitan, Americom, Gold Coast, Lewis,
Denton and MetroTones, cost savings relate to decreased salaries, office
rent, professional fees, telephone costs and bad debts. For ChiComm,
additional costs relate to additional salaries and office rent.
(F) Pro forma adjustments are made to the statements of operations to
reflect additional depreciation and amortization expense based on the fair
value of the assets acquired as if the Acquisitions had occurred at the
beginning of the periods presented. Pro forma depreciation is computed using
the straight-line method over the remaining estimated useful lives of the
assets. The noncompetition agreements are amortized using the straight-line
method over a five-year term, goodwill is amortized using the straight-line
method over a 15-year term and the discount on the Notes is amortized on a
straight-line basis over the life of the Notes.
(G) Interest expense is comprised of interest on long-term debt and the
Deferred Payments, plus the commitment fee on the Credit Facility. Pro forma
adjustments reflect (i) the reversals of interest expense of $497,000 for
the three months ended March 31, 1995 and $2.6 million for the year ended
December 31, 1994 on debt of the Acquisitions not assumed by the Company and
(ii) the increase in interest expense due to the sale of the Notes at an
annual rate of 11.875%. Interest expense on the Deferred Payments is
provided as required by the definitive agreements or letters of intent.
(H) A pro forma adjustment is made to reflect the effect upon the income
tax provision as if the Acquisitions had occurred at the beginning of the
periods presented. The primary differences in the effective tax rate between
the Company's historical financial statements and the pro forma statements
are state taxes and the amortization of goodwill related to the acquisitions
of Contact, Metropolitan and Page East, which is assumed not to be
deductible for tax purposes.
The pro forma condensed consolidated financial information presented is not
necessarily indicative of either the results of operations that would have
occurred had the acquisitions taken place at the beginning of the periods
presented or of future results of operations of the combined operations.
