<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 8, 1997
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
NOTE EXCHANGE OFFER
ON
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COINSTAR, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7299 94-3156448
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
13231 SE 36TH STREET, SUITE 200
BELLEVUE, WASHINGTON 98006
(206) 644-6789
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
JENS H. MOLBAK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COINSTAR, INC.
13231 SE 36TH STREET, SUITE 200
BELLEVUE, WASHINGTON 98006
(206) 644-6789
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
MARK P. TANOURY, ESQ.
STEPHANIE A. ANAGNOSTOU, ESQ.
COOLEY GODWARD LLP
3000 Sand Hill Road, Bldg. 3, Suite 230
Menlo Park, California 94025-7116
(415) 843-5000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
13% Senior Discount Notes due 2006............ $95,000,000 100% $95,000,000 $28,788
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION DATED AUGUST 8, 1997
PROSPECTUS
COINSTAR, INC.
OFFER TO EXCHANGE ITS
13% SENIOR DISCOUNT NOTES DUE OCTOBER 1, 2006
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR ANY AND
ALL OF ITS OUTSTANDING 13% SENIOR DISCOUNT NOTES DUE OCTOBER 1, 2006
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON , 1997, UNLESS EXTENDED.
---------------------
Coinstar, Inc. ("Coinstar" or the "Company") hereby offers, upon the terms
and subject to the conditions set forth in this Prospectus (as the same may be
amended or supplemented from time to time, the "Prospectus") and the
accompanying Letter of Transmittal (the "Letter of Transmittal" and together
with this Prospectus, the "Exchange Offer"), to exchange $1,000 principal amount
of its 13% Senior Discount Notes due October 1, 2006 (the "New Notes") which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a registration statement (the "Registration
Statement") of which this Prospectus is a part, for each $1,000 principal amount
of its outstanding 13% Senior Discount Notes due October 1, 2006 (the "Old
Notes," and together with the New Notes, the "Notes"), of which $95 million
principal amount at maturity is outstanding as of the date hereof.
The Company will accept for exchange any and all validly tendered Old Notes
prior to 5:00 P.M., New York City time, on , 1997, unless extended
(the "Expiration Date"). Old Notes may be tendered only in integral multiples of
$1,000. Tenders of Old Notes may be withdrawn at any time prior to 5:00 P.M.,
New York City time, on the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. However, the Exchange Offer is subject to certain customary
conditions. In the event the Company terminates the Exchange Offer and does not
accept for exchange any Old Notes, the Company will promptly return the Old
Notes to the holders thereof. The Company will not receive any proceeds from the
Exchange Offer. See "The Exchange Offer."
The terms of the New Notes will be identical to the terms of the Old Notes,
in all material respects, except that the New Notes (i) will have been
registered under the Securities Act and therefore will not be subject to certain
restrictions on transfer applicable to the Old Notes and (ii) will not be
entitled to registration or other rights under the Registration Rights Agreement
(as defined below) including the provision in the Registration Rights Agreement
for an increase of .50% per annum of the interest rate thereon upon failure by
the Company to consummate the Exchange Offer. See "Description of the Old
Notes." The New Notes will be entitled to the benefits of the indenture
governing the Old Notes (the "Indenture"). See "Description of New Notes" and
"The Exchange Offer."
CONTINUED ON FOLLOWING PAGE
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST BEING MAILED TO HOLDERS
ON , 1997.
SEE "RISK FACTORS" ON PAGE 14 FOR INFORMATION THAT SHOULD BE CONSIDERED
IN CONNECTION WITH THIS OFFERING.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
(CONTINUATION OF COVER PAGE)
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company under the Notes Registration Rights Agreement, dated
as of October 22, 1996 by and between the Company and the Initial Purchaser (as
defined herein) (the "Registration Rights Agreement"), a copy of which has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The Exchange Offer is intended to satisfy the Company's obligations under
the Registration Rights Agreement to register the Old Notes under the Securities
Act. Once the Exchange Offer is consummated, the Company will have no further
obligations to register any of the Old Notes not tendered by the holders of the
Old Notes (the "Holders") for exchange. See "Risk Factors--Consequences to
Non-Tendering Holders of Old Notes."
Old Notes initially purchased by "qualified institutional buyers" (as such
term is defined in Rule 144A under the Securities Act) were initially
represented by one Global Old Note (as defined herein) in fully registered form,
registered in the name of a nominee of The Depository Trust Company ("DTC"), as
depositary. The New Notes exchanged for the Old Notes represented by the Global
Old Note will be represented by a single Global New Note (as defined herein) in
fully registered form, registered in the name of the nominee of DTC. The Global
New Note will be exchangeable for the New Notes in registered form, in
denominations of $1,000 and integral multiples thereof as described herein. The
New Notes in global form will trade in The Depository Trust Company's Same-Day
Funds Settlement System, and secondary market trading activity in such New Notes
will therefore settle in immediately available funds. See "Description of New
Notes--Form, Denomination and Book-Entry Procedures."
The New Notes will accrete at the rate of 13% per annum from the date of
issuance thereof until October 1, 1999. Thereafter, the New Notes will bear
interest at a rate equal to 13% per annum, payable semi-annually in arrears on
October 1 and April 1 of each year, commencing April 1, 2000. The Old Notes will
continue to accrete at the rate of 13% per annum to, but not including, the date
of issuance of the New Notes. Such accretion will become a part of the Accreted
Amount (as defined herein) of the New Notes.
The New Notes will be redeemable at the option of the Company, in whole or
in part, at any time on or after October 1, 2001, at the redemption prices set
forth herein, together with accrued and unpaid interest and Liquidated Damages
(as defined in the Registration Rights Agreement) thereon, if any, to the date
of redemption. At any time prior to October 1, 1999, up to 100% of the aggregate
principal amount of the New Notes originally issued will be redeemable at the
option of the Company from the net proceeds of a Public Equity Offering (as
defined in the Indenture) after which there exists a Public Market (as defined
in the Indenture) within 60 days thereafter, at 118% of the Accreted Value (as
defined in the Indenture) thereof as of the date of redemption, together with
accrued and unpaid Liquidated Damages thereon, if any, to the date of
redemption. Upon the occurrence of a Change of Control (as defined in the
Indenture), each holder of the New Notes may require the Company to repurchase
all or a portion of such holder's New Notes at 101% of the Accreted Value
thereof (if prior to October 1, 1999) plus accrued and unpaid Liquidated Damages
thereon, if any, or (if on or after October 1, 1999) 101% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of repurchase. See "Description of New Notes."
The Company is making the Exchange Offer in reliance on the position of the
Staff of the Division of Corporation Finance of the Securities and Exchange
Commission (the "Commission") as set forth in the Staff's Exxon Capital Holdings
Corp. SEC No-Action Letter (available April 13, 1989), Morgan Stanley & Co.,
Inc. SEC No-Action Letter (available June 5, 1991), Shearman & Sterling SEC
No-Action Letter (available July 7, 1993), and other interpretive letters
addressed to third parties in other transactions. However, the Company has not
sought its own interpretive letter and there can be no assurance that the Staff
of the Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such interpretive
letters to third parties. Based on these interpretations by the Staff of the
Division of Corporation Finance, and subject to the two immediately
2
<PAGE>
following sentences, the Company believes that New Notes issued pursuant to this
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by a holder thereof (other than a Holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such Holder's business and that such Holder
is not participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Notes. However, any Holder of Old Notes who is an "affiliate" of the
Company or who intends to participate in the Exchange Offer for the purpose of
distributing New Notes, or any broker-dealer who purchased Old Notes from the
Company to resell pursuant to Rule 144A under the Securities Act ("Rule 144A")
or any other available exemption under the Securities Act, (a) will not be able
to rely on the interpretations of the staff of the Division of Corporation
Finance of the Commission set forth in the above-mentioned interpretive letters,
(b) will not be permitted or entitled to tender such Old Notes in the Exchange
Offer and (c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Notes unless such sale is made pursuant to an exemption from such
requirements. See "Risk Factors--Consequences to Non-Tendering Holders of Old
Notes." In addition, as described below, if any broker-dealer holds Old Notes
acquired for its own account as a result of market-making or other trading
activities and exchanges such Old Notes for New Notes, then such broker-dealer
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such New Notes.
Each Holder of Old Notes who wishes to exchange Old Notes for New Notes in
the Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Company, (ii) any New Notes to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes, and (iv) if such Holder is not
a broker-dealer, such Holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities Act) of such New Notes.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Old Notes for its own
account as a result of market making activities or other trading activities and
must agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Based on the position taken by the Staff of the
Division of Corporation Finance of the Commission in the interpretive letters
referred to above, the Company believes that broker-dealers who acquired Old
Notes for their own accounts, as a result of market making activities or other
trading activities ("Participating Broker-Dealers") may fulfill their prospectus
delivery requirements with respect to the New Notes received upon exchange of
such Old Notes (other than Old Notes which represent an unsold allotment from
the original sale of the Old Notes) with a prospectus meeting the requirements
of the Securities Act, which may be the prospectus prepared for an exchange
offer so long as it contains a description of the plan of distribution with
respect to the resale of such New Notes. Accordingly, this Prospectus, as it may
be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer during the period referred to below in connection with resales of
New Notes received in exchange for Old Notes where such Old Notes were acquired
by such Participating Broker-Dealer for its own account as a result of market
making or other trading activities. Subject to certain provisions set forth in
the Registration Rights Agreement, the Company has agreed that this Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of such New Notes for a
period ending 90 days after the Expiration Date (subject to extension under
certain limited circumstances described below) or, if earlier, when all such New
Notes have been disposed of by such Participating Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-Dealer who is an "affiliate" of the
Company may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. See "The Exchange Offer--Resales of New
Notes."
3
<PAGE>
In that regard, each Participating Broker-Dealer who surrenders Old Notes
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any material
respect or which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in light of the circumstances under which they were made, not misleading
or of the occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the sale of New
Notes pursuant to this Prospectus until the Company has amended or supplemented
this Prospectus to correct such misstatement or omission and has furnished
copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company has given notice that the sale of the New Notes may
be resumed, as the case may be. If the Company gives such notice to suspend the
sale of the New Notes, it shall extend the 90 day period referred to above
during which Participating Broker-Dealers are entitled to use this Prospectus in
connection with the resale of New Notes by the number of days during the period
from and including the date of the giving of such notice to and including the
date when Participating Broker-Dealers shall have received copies of the amended
or supplemented Prospectus necessary to permit resales of the New Notes or to
and including the date on which the Company has given notice that the sale of
New Notes may be resumed, as the case may be.
The New Notes will be unsecured obligations of the Company, will be
subordinated to all other Senior Debt (as defined in the Indenture) of the
Company and will be effectively subordinated to all indebtedness (including
senior indebtedness and trade credit) of subsidiaries of the Company. As of June
30, 1997 the aggregate amount of Senior Debt of the Company was $4.0 million.
See "Capitalization." The Indenture permits the Company and its subsidiaries to
incur substantial additional indebtedness, including senior indebtedness and
secured indebtedness. The Company currently does not have any subsidiaries.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the same rights and will be subject to
the same limitations applicable thereto under the Indenture (except for those
rights which terminate upon consummation of the Exchange Offer). Following
consummation of the Exchange Offer, the Holders of Old Notes will continue to be
subject to the existing restrictions upon transfer thereof and the Company will
have no further obligation to such Holders (other than to the Initial Purchaser
under certain limited circumstances) to provide for registration under the
Securities Act of the Old Notes held by them. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, a Holder's ability to sell
untendered Old Notes could be adversely affected. See "Summary--Certain
Consequences of a Failure to Exchange Old Notes."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
Prior to this offering, there has been no public market for the Old Notes or
New Notes. The Company does not intend to list the New Notes on a national
securities exchange or to seek approval for quotation through the Nasdaq
National Market. As the Old Notes were issued and the New Notes are being issued
to a limited number of institutions who typically hold similar securities for
investments, the Company does not expect that an active public market for the
New Notes will develop. In addition, resales by certain Holders of the Old Notes
or the New Notes of a substantial percentage of the aggregate principal amount
of such Notes could constrain the ability of any market maker to develop or
maintain a market for the New Notes. To the extent that a market for the New
Notes should develop, the market value of the New Notes will depend on
prevailing interest rates, the market for similar securities and other factors,
including the financial condition, performance and prospects of the Company.
Such factors might cause the New Notes to trade at a discount from face value.
See "Risk Factors--Absence of Public Market for the Notes." The Company has
agreed to pay the expenses of the Exchange Offer.
4
<PAGE>
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. No dealer-manager is being used in connection with the
Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Reports, proxy statements and other information filed by the Company
with the Commission pursuant to the informational requirements of the Exchange
Act may be inspected and copied at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, and at the Commission's Regional Offices in New York
City (Seven World Trade Center, 13th Floor, New York, New York 10048), and
Chicago (Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661). Copies of these materials may be obtained upon written request from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Common Stock of the Company is traded on
the Nasdaq National Market. Reports, proxy statements and other information
concerning the Company may also be inspected at the offices of the Nasdaq
National Market, Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments thereto, the "Registration Statement") filed by
the Company with the Commission under the Securities Act. This Prospectus, which
forms a part of the Registration Statement, does not contain all the information
set forth in the Registration Statement, certain parts of which have been
omitted in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and related exhibits and
schedules filed therewith for further information with respect to the Company
and the New Notes offered hereby. Statements contained herein concerning the
provisions of any document are not necessarily complete and, in each instance,
reference is made to the copy of such document filed or incorporated by
reference as an exhibit to the Registration Statement or otherwise filed by the
Company with the Commission and each such statement is qualified in its entirety
by such reference. The Registration Statement and the exhibits and schedules
thereto may be inspected and copied at the public reference facilities
maintained by the Commission at the addresses described above. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Copies of the Registration Statement may be obtained from the
Commission's internet address at http://www.sec.gov.
5
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND THE FINANCIAL STATEMENTS AND NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THE NEW NOTES OFFERED HEREBY
ARE SUBJECT TO A HIGH DEGREE OF RISK. SEE "RISK FACTORS." THE DISCUSSION IN THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND "BUSINESS" AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS
PROSPECTUS.
THE COMPANY
Coinstar, Inc. develops, owns and operates a network of automated,
self-service coin counting and processing machines that provide consumers with a
convenient means to convert loose coins into cash. The Coinstar units, located
in supermarkets and financial institutions in 24 states across the country,
accept and count accumulated loose coins deposited by consumers and issue
vouchers listing the total number, denominations and dollar value of coins
processed less a processing fee charged by the Company, currently 7.5% (prior to
1996 the Company charged a 10% processing fee on pennies and a 5% processing fee
on all other coins.) The vouchers are redeemable by customers at store cashiers
for either credit towards retail purchases or cash, regardless of whether a
purchase is made. The Company believes its service addresses a significant
consumer need for a convenient and reliable coin processing method. The Coinstar
service provides consumers with a means of redeeming accumulated loose coins and
an alternative to manually presorting, counting and wrapping coins typically
required for cash redemption at a bank. Since inception, the Coinstar network
has processed over 9.5 million customer transactions consisting of over 7.5
billion coins worth over $261 million. The Company began commercial deployment
of the network in 1994 and, in 1996, significantly accelerated its plans for
installation of the Coinstar units in various geographic regions. As of June 30,
1997, the Company had an installed base of 2,335 units located in supermarkets
and financial institutions in 33 regional markets across the United States.
THE NEW YORK TIMES has reported that an estimated 288 billion cash
transactions have occurred on an annual basis in the United States. Assuming
that the change generated by each such cash transaction averaged fifty cents,
the annual coin flow resulting from such transactions would have been
approximately $144 billion. To support the flow of coins in the economy, the
United States Mint (the "U.S. Mint") has produced $15 billion in new coins over
the past 25 years. According to the U.S. Mint, the circulating stock of coins
used in cash transactions is approximately $8 billion. The prevalence of coins
used in cash transactions and the lack of a convenient alternative for
converting coins into cash has resulted in the accumulation of coins. Based on
such U.S. Mint data, only $8 billion of the $15 billion in coins produced over
the last 25 years (the useful life of a coin) are regarded as circulating, and
the Company believes there is an estimated $7 billion of non-circulating coins.
The Company believes a significant market opportunity exists for providing a
convenient method of redeeming non-circulating coins and recycling the recurring
coin flow in the United States economy. The actual size of the market
potentially available to the Company, however, is limited by the number of
geographic locations in which it is economically feasible for the Company to
locate units. In addition, many consumers regularly use their loose change in
commercial transactions rather than accumulating it, or may elect other
alternatives for recycling their accumulated coins. In 1996 the Company
processed approximately $115 million of coins. See "Risk Factors."
The Company believes a key competitive advantage is its significant
expertise accumulated over the past five years in designing and manufacturing
the Coinstar units, in developing and supporting a wide-area communications
network capable of receiving and transmitting data to all Coinstar units, and in
building a dedicated field service organization with the ability to rapidly
deploy and service the Coinstar units. The Coinstar unit is a modularly
designed, free-standing machine controlled by an internal computer connected to
the Company's wide-area communications network. The network is critical to
providing high
6
<PAGE>
availability of the Coinstar units, maintaining a high level of customer service
and managing direct operating costs. The reliability of the Coinstar unit and
the utilization of the communications network, in conjunction with the support
of the Company's regional field service organization, have resulted in median
availability of units in operation of over 98%. In addition, the network is used
to distribute store-specific promotional programs such as electronic offers,
coupons and advertising.
The focus of the Company's growth has been to increase its installed base in
supermarkets in some of the largest designated market areas ("DMAs") in the
country. The Company believes that installation of the Coinstar units in
supermarket chains provides meaningful benefits to its retail distribution
partners, such as offering a new customer service, increasing store traffic,
promoting sales and generating media coverage. The Company has targeted
supermarkets as its initial primary distribution channel for deployment of its
units because of the prevalence of large regional chains, geographic
concentration of stores and recurring consumer traffic, all of which create
economies of scale for the marketing, deployment and operation of the Coinstar
units. The Company estimates that there are 30,000 supermarkets in the United
States, 25,000 of which are located in the 100 largest DMAs targeted by the
Company.
The Company's primary objective is to extend its position as the leading
provider of automated, self-service coin processing services and to develop new
value-added services that can be delivered through its network. Principal
elements of the Company's growth strategy include: (i) increasing penetration of
its installed base in supermarkets in the largest DMAs nationwide; (ii)
developing and implementing new marketing programs and initiatives to promote
consumer awareness and usage of its service; and (iii) entering new distribution
channels for the installation of the Coinstar unit, such as banks, convenience
stores and mass merchants, and, potentially, international distribution
channels. The Company will continue to evaluate new consumer service offerings
that could be developed to capitalize on its ownership and operation of a
networked service and delivery platform in high traffic retail locations. The
modular construction of the Coinstar unit facilitates the potential addition of
peripherals to provide additional services such as targeted electronic
promotions, event ticketing and smart card applications.
RISK FACTORS
The Company was organized in 1991 and began commercial deployment of the
Coinstar units in 1994. The Company has a limited operating history and has
incurred substantial and increasing operating losses since its inception. As of
June 30, 1997, the Company had an accumulated deficit of $44.4 million. An
investment in the New Notes offered hereby involves a high degree of risk,
including the risks associated with the Company's history of substantial losses,
anticipating continuing losses, substantial debt and debt service obligations,
dependence upon the market acceptance of the Company's coin processing services,
management of growth, reliance on third party suppliers and manufacturers and
other risks. Prospective investors should refer to "Risk Factors" set forth
beginning on Page 14.
THE EXCHANGE OFFER
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<S> <C>
The Exchange Offer................ $1,000 principal amount of the New Notes in exchange for
each $1,000 principal amount of the Old Notes. As of
June 30, 1997, $95 million in aggregate principal amount
at maturity of Old Notes were outstanding. The Company
will issue the New Notes to Holders on or promptly after
the Expiration Date.
Based on an interpretation by the Staff of the
Commission set forth in the Staff's Exxon Capital
Holdings Corp. SEC No-Action Letter (available April 13,
1989), Morgan Stanley & Co., Inc. SEC No-Action Letter
(available June 5, 1991), Shearman & Sterling SEC
No-Action Letter (available July 7, 1993), and other
no-action letters issued to third parties, the
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Company believes that New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by Holders
thereof without compliance with the registration and
prospectus delivery provisions of the Securities Act.
However, any Holder who is an "affiliate" of Coinstar or
who intends to participate in the Exchange Offer for the
purpose of distributing the New Notes (i) cannot rely on
the interpretation by the Staff of the Commission set
forth in the above referenced no-action letters, (ii)
cannot tender its Old Notes in the Exchange Offer, and
(iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any sale or transfer of the Old Notes,
unless such sale or transfer is made pursuant to an
exemption from such requirements. See "Risk
Factors--Consequences to Non-Tendering Holder of Old
Notes."
Each broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any
resale of such New Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-
dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market
making activities or other trading activities or other
trading activities and not acquired directly from the
Company. Coinstar has agreed that for a period of 90
days after the Expiration Date it will make this
Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of
Distribution."
Expiration Date................... 5:00 p.m., New York City time, on , 1997, unless
the Exchange Offer is extended, in which case the term
"Expiration Date" means the latest date and time to
which the Exchange Offer is extended.
Accretion of the New Notes and the
Old Notes....................... No cash interest will accrue or be payable in respect of
the New Notes prior to October 1, 1999. Thereafter,
interest will accrue at the rate of 13% per annum,
payable semi-annually in arrears on each October 1 and
April 1, commencing April 1, 2000. The Old Notes will
continue to accrete at the rate of 13% per annum to, but
excluding, the issuance date of the New Notes. The Old
Notes accepted for exchange will cease to accrete upon
cancellation of the Old Notes and issuance of the New
Notes. The Accreted Value of the New Notes upon issuance
will equal the Accreted Value of the Old Notes
immediately prior to issuance of the New Notes.
Conditions to the Exchange The Exchange Offer is subject to certain customary
Offer........................... conditions. The conditions are limited and relate in
general to proceedings
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
which have been instituted or laws which have been
adopted that might impair the ability of the Company to
proceed with the Exchange Offer. As of ,
1997, none of these events had occurred, and the Company
believes their occurrence to be to be unlikely. If any
such conditions do exist prior to the Expiration Date,
the Company may (i) refuse to accept any Old Notes and
return all previously tendered Old Notes, (ii) extend
the Exchange Offer or (iii) waive such conditions. See
"The Exchange Offer--Conditions."
Procedures for Tendering Old Each Holder of Old Notes wishing to accept the Exchange
Notes........................... Offer must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in accordance with
the instructions contained herein and therein, and mail
or otherwise deliver such Letter of Transmittal, or such
facsimile, together with such Old Notes to be exchanged
and any other required documentation to The Bank of New
York, as Exchange Agent (the "Exchange Agent"), at the
address set forth herein and therein or effect a tender
of such Old Notes pursuant to the procedures for
book-entry transfer as provided for herein. By executing
the Letter of Transmittal, each Holder will represent to
the Company that, among other things, the New Notes
acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the
person receiving such New Notes, whether or not such
person is the Holder, that neither the Holder nor any
such other person has an arrangement or understanding
with any person to participate in the distribution of
such New Notes and that neither the Holder nor any such
person is an "affiliate", as defined in Rule 405 under
the Securities Act, of the Company. Each broker-dealer
that receives New Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market making
activities or other trading activities and not acquired
directly from the Company, must acknowledge that it will
deliver a prospectus in connection with any resale of
such New Notes. See "The Exchange Offer--Procedures" for
"Tendering and Plan of Distribution."
Special Procedures for Beneficial
Owners.......................... Any beneficial owner whose Old Notes are registered in
the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender such
Old Notes in the Exchange Offer should contact such
registered Holder promptly and instruct such registered
Holder to tender such Old Notes on such beneficial
owner's behalf. If such beneficial owner wishes to
tender on such beneficial owner's own behalf, such owner
must, prior to completing and executing the Letter of
Transmittal and delivering its Old Notes, either make
appropriate arrangements to register ownership of the
Old Notes in such beneficial owner's name or obtain a
properly completed bond power from the registered
Holder. The transfer of registered ownership may take
considerable time and may not be able to be completed
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
prior to the Expiration Date. See "The Exchange Offer--
Procedures for Tendering."
Guaranteed Delivery Procedures.... Holders of Old Notes who wish to tender their Old Notes
and whose Old Notes are not immediately available or who
cannot deliver their Old Notes, the Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent, or cannot
complete the procedure for book-entry transfer, prior to
the Expiration Date must tender their Old Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights................. Tenders may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date by delivering
a written notice of such withdrawal to the Exchange
Agent in conformity with certain procedures set forth
below under "The Exchange Offer--Withdrawal of Tenders."
Acceptance of Old Notes and
Delivery of New Notes........... The Company will accept for exchange any and all Old
Notes which are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the
Expiration Date. The New Notes issued pursuant to the
Exchange Offer will be delivered promptly following the
Expiration Date. Any Old Notes not accepted for exchange
will be returned without expense to the tendering Holder
thereof as promptly as practicable after the expiration
or termination of the Exchange Offer. See "The Exchange
Offer--Terms of the Exchange Offer."
Certain Tax Considerations........ The exchange pursuant to the Exchange Offer will not be
a taxable event for federal income tax purposes. See
"Certain United States Federal Income Tax
Considerations."
Exchange Agent.................... The Bank of New York is serving as Exchange Agent in
connection with the Exchange Offer.
</TABLE>
10
<PAGE>
TERMS OF NEW NOTES
The Exchange Offer applies to up to $95 million aggregate principal amount
at maturity of Coinstar's Old Notes. The New Notes will be obligations of the
Company evidencing the same debt as the Old Notes and will be entitled to the
benefits of the same Indenture. See "Description of New Notes." The form and
terms of the New Notes are the same as the form and terms of the Old Notes in
all material respects except that the New Notes have been registered under the
Securities Act and hence do not include certain rights to registration
thereunder and do not contain transfer restrictions or terms with respect to the
special interest payments applicable to the Old Notes. See "Description of New
Notes."
<TABLE>
<S> <C>
New Notes Offered................. $95 million aggregate principal amount at maturity of
13% Senior Discount Notes due October 1, 2006.
Accretion and Interest Payments... No cash interest will accrue or be payable in respect of
the New Notes prior to October 1, 1999. Thereafter,
interest will accrue at the rate of 13% per annum and
will be payable semi-annually in arrears on each October
1 and April 1, commencing April 1, 2000.
Maturity Date..................... October 1, 2006.
Optional Redemption............... The New Notes will be redeemable, in whole or in part,
at the option of the Company, on or after October 1,
2001, at the redemption prices set forth herein plus
accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of redemption. At any time
prior to October 1, 1999, the Company may, at its
option, redeem up to 100% of the aggregate principal
amount of the New Notes originally issued at 118% of the
Accreted Value thereof as of the redemption date, plus
accrued and unpaid Liquidated Damages, if any, to the
date of redemption, with the proceeds of a Public Equity
Offering after which there is a Public Market; provided,
however, that such redemption occurs within 60 days of
the date of closing of such Public Equity Offering.
Mandatory Redemption or Sinking
Fund............................ None.
Change of Control................. In the event of a Change of Control, the Company will be
obligated to make an offer to purchase all or a portion
of the New Notes then outstanding at a purchase price of
101% of the Accreted Value thereof (if prior to October
1, 1999) plus accrued and unpaid Liquidated Damages
thereon, if any, or (if on or after October 1, 1999)
101% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any,
to the date of repurchase.
Ranking........................... The New Notes will represent general unsecured
obligations of the Company, and will be subordinated to
all other Senior Debt of the Company and will be
effectively subordinated to all indebtedness (including
senior indebtedness and trade credit) of subsidiaries of
the Company.
Certain Covenants................. The Indenture contains certain covenants that, among
other things, limit the ability of the Company and its
subsidiaries to incur debt, issue certain preferred
stock, sell or transfer assets,
</TABLE>
11
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<TABLE>
<S> <C>
make restricted payments and engage in certain
transactions with affiliates and certain mergers.
Exchange Rights................... Holders of New Notes will not be entitled to any
exchange or registration rights with respect to the New
Notes. Holders of Old Notes are entitled to certain
exchange rights pursuant to the Registration Rights
Agreement. Under the Registration Rights Agreement, the
Company is required to offer to exchange the Old Notes
for new notes having substantially identical terms which
have been registered under the Securities Act. This
Exchange Offer is intended to satisfy such obligation.
Once the Exchange Offer is consummated, the Company will
have no further obligations to register any of the Old
Notes not tendered by the Holders for exchange. See
"Risk Factors--Consequences to Non-Tendering of Old
Notes."
Use of Proceeds................... The Company will not receive any proceeds from the
Exchange Offer.
</TABLE>
CERTAIN CONSEQUENCES OF A FAILURE TO EXCHANGE OLD NOTES
The Old Notes have not been registered under the Securities Act or any state
securities laws and therefore may not be offered, sold or otherwise transferred
except in compliance with the registration requirements of the Securities Act
and any other applicable securities laws, or pursuant to an exemption therefrom
or in a transaction not subject thereto, and in each case in compliance with
certain other conditions and restrictions, including the Company's and the
Trustee's (as defined herein) right in certain cases to require the delivery of
opinions of counsel, certifications and other information prior to any such
transfer. Old Notes which remain outstanding after consummation of the Exchange
Offer will continue to bear a legend reflecting such restrictions on transfer.
In addition, upon consummation of the Exchange Offer, Holders of Old Notes which
remain outstanding will not be entitled to any rights to have such Old Notes
registered under the Securities Act or to any similar rights under the
Registration Rights Agreement (subject to certain limited exceptions applicable
solely to the Initial Purchaser). The Company currently does not intend to
register under the Securities Act any Old Notes which remain outstanding after
consummation of the Exchange Offer (subject to such limited exceptions, if
applicable).
To the extent that Old Notes are tendered and accepted in the Exchange Offer
any trading market for Old Notes which remain outstanding after the Exchange
Offer could be adversely affected.
The New Notes and any Old Notes which remain outstanding after consummation
of the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding principal
amount thereof have taken certain actions or exercised certain rights under the
Indenture. See "Description of New Notes."
The Registration Rights Agreement relating to Old Notes provides that, if
the Exchange Offer were not consummated by October 1, 1999, the interest rate
borne by the Old Notes would increase by 0.50% per annum following October 1,
1999, until the Exchange Offer were consummated. See "Description of Old Notes."
Following consummation of the Exchange Offer, neither the Old Notes nor the New
Notes will be entitled to any increase in the interest rate thereon.
12
<PAGE>
SUMMARY FINANCIAL INFORMATION AND OTHER DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT DATA)
The following table sets forth summary statement of operations data and
selected other data of the Company for each of the years in the four year period
ended December 31, 1996, for the six months and three months ended June 30, 1997
and 1996 and the balance sheet data at June 30, 1997. The financial information
data were derived from, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements of the Company and the notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS
YEAR ENDED DECEMBER 31, JUNE 30, ENDED JUNE 30,
----------------------------------- ----------------- ----------------
1993 1994 1995 1996 1996 1997 1996 1997
------- ------- ------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue:........................................ $ 15 $ 325 $ 1,063 $ 8,312 $ 2,134 $ 9,289 $ 1,388 $ 5,294
Expenses:
Direct operating.............................. 45 488 1,336 7,258 2,209 7,416 1,321 3,966
Regional sales and marketing.................. 3 86 349 1,505 615 1,602 407 972
Product research and development.............. 1,368 1,648 1,830 3,969 1,423 3,080 762 1,640
Selling, general and administrative........... 402 1,716 2,790 5,351 1,939 5,157 1,067 2,630
Depreciation and amortization................. 40 440 1,117 4,135 1,295 3,843 796 2,158
Loss from operations............................ (1,843) (4,053) (6,359) (13,906) (5,347) (11,809) (2,965) (6,072)
Net loss........................................ $(1,814) $(4,316) $(6,169) $(15,967) $(5,347) $(15,548) $(3,038) $(8,047)
Pro forma net loss per share(1)................. -- -- -- $ (1.49) $ (.51) $ (1.49) $ (0.29) $ (0.77)
Pro forma weighted average shares
outstanding(1)................................ -- -- -- 10,715 10,460 10,460 10,460 10,460
OTHER DATA:
Number of new Coinstar units installed during
the period.................................... 13 31 215 1,238 533 834 364 406
Installed base of Coinstar units at end of
period........................................ 17 48 263 1,501 796 2,335 796 2,335
Number of regional markets...................... 2 4 11 23 18 33 18 33
Dollar value of coins processed................. $ 74 $ 5,245 $17,701 $115,476 $32,998 $123,350 $20,692 $70,626
Capital expenditures............................ 620 2,163 3,823 20,820 9,651 15,392 6,466 7,717
Direct contribution (loss)(2)................... (30) (163) (273) 1,054 (75) 1,873 67 1,328
Direct operating expense per average installed
unit(3)....................................... -- 20,353 11,717 8,610 4,641 3,875 2,205 1,858
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA(4) ADJUSTED(5)
---------- ------------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments(6)................. $ 39,352 $ 39,352 $ 67,895
Total assets......................................................... 79,103 79,103 107,646
Total debt, including current portion................................ 74,629 74,629 74,629
Mandatorily Redeemable Preferred Stock............................... 24,972 -- --
Total stockholders' equity (deficit)................................. $ (37,474) $ (12,502) $ 16,041
</TABLE>
- ------------------------------
(1) See Note 2 to Audited Financial Statements for an explanation of the
determination of the number of shares used in computing pro forma net loss
per share. Pro forma net loss per share is not presented for the years ended
December 31, 1993 through 1995 due to the lack of comparability.
(2) Direct contribution (loss) is defined as revenue less direct operating
expenses. The Company uses direct contribution (loss) as a measure of
operating performance to assist in understanding its operating results.
Direct contribution (loss) is not a measure of financial performance under
generally accepted accounting principles ("GAAP") and should not be
considered in isolation or an alternative to gross margin, income (loss)
from operations, net income (loss), or any other measure of performance
under GAAP.
(3) Based on monthly averages of units in operation over the applicable period.
Commercial deployment of the units did not commence until 1994; therefore,
information relating to 1993 is not meaningful.
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(4) Reflects, at the closing of the Company's initial public offering of
3,000,000 shares of Common Stock on July 9, 1997 (the "Initial Public
Offering") the conversion of all outstanding shares of Preferred Stock into
Common Stock and excludes (a) the exercise of certain warrants on a cash
basis to purchase 352,907 shares of Common Stock at an aggregate exercise
price of approximately $1.26 million, which expired on July 9, 1997; and (b)
the issuance of 1,267,263 shares of Common Stock upon the net exercise of
certain warrants, which expired on July 9, 1997. Also excludes the assumed
exercise of certain warrants on a cash basis to purchase 665,000 shares of
Common Stock at an aggregate exercise price of $6,650, which expire within
90 days of July 9, 1997 and warrants to purchase 1,042,981 shares of Common
Stock at a weighted average exercise price of $12.57 per share, which
warrants did not expire upon the closing of the Initial Public Offering or
within 90 days thereafter.
(5) Adjusted to reflect the proceeds of the Company's Initial Public Offering at
an offering price of $10.50 per share after deducting estimated underwriting
discounts and commissions and offering expenses payable by the Company. See
"Use of Proceeds."
(6) Cash, cash equivalents and short-term investments include $11.1 million of
funds in transit, which represent amounts being processed by armored car
carriers or residing in Coinstar units.
14
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE NEW NOTES BEING OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK
FACTORS, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS,
BEFORE EXCHANGING THE OLD NOTES FOR THE NEW NOTES OFFERED HEREBY. THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
IN "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" AND "BUSINESS" AS WELL AS THOSE DISCUSSED ELSEWHERE
IN THIS PROSPECTUS.
HISTORY OF SUSTAINED OPERATING LOSSES AND CONTINUATION OF SUCH LOSSES
The Company has incurred substantial and increasing operating losses since
inception in 1991. The Company's net loss for 1995, 1996 and the six months and
three months ended June 30, 1997 was $6.2 million, $16.0 million, $15.5 million
and $8.0 million, respectively. As of June 30, 1997, the Company had an
accumulated deficit of $44.4 million. Operating losses to date have resulted
primarily from expenses incurred in the development, marketing and operation of
the Coinstar units, development and maintenance of the network, administrative
and occupancy expenses at the Company's headquarters, and depreciation and
amortization. The Company expects to continue to incur substantial and
increasing operating losses and negative cash flow from operating and investing
activities as it plans to significantly increase its installed base of Coinstar
units. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
LIMITED OPERATING HISTORY
After several years of development, the Company commenced commercial
deployment of Coinstar units in 1994 and placed approximately 89% of the
installed base as of June 30, 1997 in service during 1996 and the six months
ended June 30, 1997. Prospective investors, therefore, have limited historical
financial information on which to base an evaluation of the Company's
performance. The Company's prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in an early stage
of development, particularly companies in new or rapidly evolving markets. There
can be no assurance that the Company will install a sufficient number of its
Coinstar units or obtain sufficient market acceptance to allow the Company to
achieve or sustain profitability, or generate sufficient cash flow to meet the
Company's capital and operating expenses and debt service obligations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
UNCERTAINTY OF FUTURE OPERATING RESULTS
Substantially all of the Company's revenue has been, and the Company
believes will continue to be, derived from the processing fees charged for the
Company's coin processing service. Prior growth rates in the Company's revenue
should not be considered indicative of future operating results. The timing and
amount of future revenues will depend almost entirely on the Company's ability
to obtain new agreements with supermarket chains and other potential retail
distribution partners for the installation of Coinstar units, the successful
deployment and operation of the Company's coin processing network, and customer
utilization of the service. Future operating results will depend upon many
factors, including the Company's success in deploying a substantial number of
additional units, the consumer demand for the Company's coin processing service,
the level of product and price competition, the Company's success in expanding
its national network and managing the growth of such network, the ability of the
Company to develop and market product enhancements, the timing of product
enhancements, activities of and acquisitions by competitors, the ability to hire
additional employees and the timing of such hiring and the ability to control
costs. Fluctuations in the volume and value of coins processed and the rate of
unit installations have caused and may continue to cause material fluctuations
in the Company's operating results, particularly on a
15
<PAGE>
quarterly basis. Quarterly revenue and operating results, therefore, depend on
the volume and mix of coins processed and the rate of unit installations during
the quarter, all of which are difficult to forecast. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Sales and Marketing."
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The customer utilization of the Company's coin processing service varies
substantially from unit to unit, making the Company's revenues difficult to
forecast. Customer utilization is affected by the timing and success of
promotions by the Company and its retail distribution partners, age of the
installed unit, adverse weather conditions and other factors, many of which are
not in the Company's control. Based on its limited operating history, the
Company believes that coin processing volumes are affected by seasonality; in
particular the Company believes that on a relative basis coin processing volumes
have been lower in the months of January, February, September and October. There
can be no assurance, however, that such seasonal trends will continue. Any
projections of future seasonality are inherently uncertain due to the Company's
limited operating history, and due to the lack of comparable companies engaged
in the coin processing business. As a result of these and other factors, revenue
for any quarter is subject to significant variation, and the Company believes
that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance. Because the Company's operating expenses are based on anticipated
revenue trends and because a large percentage of the Company's expenses are
relatively fixed, revenue variability could cause significant variations in
operating results from quarter to quarter and could result in significant
losses. To the extent such expenses precede, or are not subsequently followed
by, increased revenue, the Company's operating results would be materially
adversely affected. Due to all of the foregoing factors, it is likely that in
some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In such event, the price
of the Company's Common Stock would likely be materially adversely affected.
Fluctuations in operating results may also result in volatility in the price of
the Company's Common Stock. See "Risk Factors--Possible Termination of Retail
Distribution Partner Agreements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business--Sales and
Marketing."
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
The Company had outstanding indebtedness as of June 30, 1997 of $74.6
million, which included $70.6 million of the Notes. The Notes will accrete to
$95.0 million by October 1999. The Company must begin paying cash interest on
the Notes in April 2000. Beginning at that time, the Company will have debt
service obligations of over $12.0 million per year until October 2006 when the
principal amount of $95.0 million will be due. The Company's capital
expenditures will increase significantly upon the continued expansion of the
Coinstar network, and the Company expects that its operating cash flow will be
insufficient to finance capital expenditures over the next several years. The
ability of the Company to meet its debt service requirements will depend upon
achieving significant and sustained growth in the Company's cash flow, which
will be affected by its success in implementing its business strategy,
prevailing economic conditions and financial, business and other factors,
certain of which are beyond the Company's control. Accordingly, there can be no
assurance as to whether or when the Company's operations will generate positive
cash flow or become profitable or whether the Company will at any time have
sufficient resources to meet its debt service obligations. If the Company is
unable to generate sufficient cash flow to service its indebtedness, it will
have to reduce or delay planned capital expenditures, sell assets, restructure
or refinance its indebtedness or seek additional equity capital. There can be no
assurance that any of these strategies could be effected on satisfactory terms,
if at all, particularly in light of the Company's high levels of indebtedness.
In addition, the degree to which the Company is leveraged could have significant
consequences, including, but not limited to, the following: (i) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, product research and development,
16
<PAGE>
acquisitions, and other general corporate purposes may be materially limited or
impaired, (ii) a substantial portion of the Company's cash flow from operations
may need to be dedicated to the payment of principal and interest on its
indebtedness and therefore not available to finance the Company's business and
(iii) the Company's high degree of leverage may make it more vulnerable to
economic downturns, may limit its ability to withstand competitive pressures and
may reduce its flexibility in responding to changing business and economic
conditions. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
COMPETITION
The Company believes that it is the first company to provide a widespread
network of self-service coin processing machines that provide a convenient,
reliable means for consumers to convert loose coins into cash. The Company has
become aware of two direct competitors that operate self-service coin processing
machines, both of which the Company believes operate an installed base of less
than 50 units in certain regions of the United States. There can be no
assurance, however, that such competitors have not or will not increase their
installed base of units or expand their service nationwide. The Company also
competes indirectly with manufacturers of machines and devices that enable
consumers to count or sort coins themselves. The Company also competes or may
compete directly or indirectly with banks and similar depository institutions
for coin conversion customers. Currently, banks are the primary alternative
available to consumers for converting coins into cash, and they generally do not
charge a fee for accepting rolled coins. As the market for coin processing
develops, banks and other businesses may decide to offer additional coin
processing services, either as a customer service or on a self-service basis,
and compete directly with the Company. Many of these potential competitors have
longer operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical, marketing and public relations
resources than the Company. Such competitors may be able to undertake more
extensive marketing campaigns, adopt more aggressive pricing policies and make
more attractive offers to consumers and businesses. There can be no assurance,
however, that the Company's competitors, or others will not succeed in
developing technologies, products or services that are more effective, less
costly or more widely used than those that have been or are being developed by
the Company or that would render the Company's technologies or products obsolete
or noncompetitive. There can be no assurance that the Company will be able to
compete effectively with current or future competitors or that the competitive
pressures faced by the Company will not have a material adverse effect on the
Company's business, financial condition and results of operations and on its
ability to achieve sufficient cash flow to service its indebtedness. See
"Business--Competition."
DEPENDENCE ON CONTINUED MARKET ACCEPTANCE BY CONSUMERS AND RETAIL DISTRIBUTION
PARTNERS
The Company is substantially dependent on continued market acceptance of its
coin processing service by consumers and its retail distribution partners, which
have been almost exclusively supermarket chains. The self-service coin
processing market is relatively new and evolving; accordingly, it is difficult
to predict the future growth rate and size of this market. There can be no
assurance that the Company will be successful in achieving the large-scale
adoption of its coin processing service. While the Company's existing installed
base of Coinstar units has been well received by both retail distribution
partners and customers to date, there can be no assurance that the operating
results of the installed units will continue to be favorable or past results
will be indicative of future market acceptance of the Company's service. The
Company believes that market acceptance of the Coinstar unit is dependent on the
consumer's perception that the units are convenient, easy to use and reliable.
Even if the Company is successful in promoting awareness of the Coinstar unit
among consumers, there can be no assurance that such consumers will utilize the
Coinstar units in sufficient volume to make the Company profitable. In addition,
market acceptance and ongoing use of the Coinstar service may be adversely
affected by the increasing use of alternatives to coin and currency transactions
such as credit and debit cards, checks, wire transfers, smart cards and other
forms of electronic payment. See "Business--Sales and Marketing."
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Market acceptance of the Coinstar units is also dependent on the willingness
of potential retail distribution partners to have the units installed in their
stores. The Company believes that market acceptance by potential retail
distribution partners will be dependent on its ability to demonstrate the
utility of the Coinstar unit as a customer service and as a means to provide
other tangible benefits, including increased customer traffic and the promotion
of store sales. There can be no assurance, however, that potential retail
distribution partners will be willing to place Coinstar units in their stores or
that, once installed, Coinstar units will obtain market acceptance from
consumers. Market acceptance and the Company's revenues may also be affected by
the availability and success of coin processing services offered by competitors.
In the event the Company's service does not achieve market acceptance or does so
less rapidly than expected or the Company's contracts with one or more of its
retail distribution partners is terminated, the Company and its results of
operations, including its ability to achieve sufficient cash flow to service its
indebtedness and achieve profitability, will be materially adversely affected.
Moreover, the Company intends to deploy the Coinstar units in banks, convenience
stores and mass merchants and is exploring opportunities for deployment in the
international market. However, the Company has not yet entered such markets and
there can be no assurance that, if entered, deployment in such markets would be
successful. See "Risk Factors--Possible Termination of Retail Distribution
Partner Agreements" and "Business."
POSSIBLE TERMINATION OF RETAIL DISTRIBUTION PARTNER AGREEMENTS
The Company is substantially dependent upon its ability to enter into
agreements with retail distribution partners for the installation of its
Coinstar units. In addition, the Company generally has separate agreements with
each of its retail distribution partners, providing for the Company's exclusive
right to provide coin processing services in their retail locations. These
contracts generally have terms ranging from two to three years and are generally
terminable by either party with advance notice of at least 90 days. In addition,
Coinstar units in service in several supermarket chains account for a
significant portion of the Company's revenue. In the six months ended June 30,
1997, Coinstar units in service in three supermarket chains accounted for
approximately 32.3% of the Company's revenue. The units in service in two of
these chains, Ralphs Grocery Co. ("Ralphs") and The Kroger Co. ("Kroger"),
accounted for approximately 11.0% and 13.0%, respectively, of the Company's
revenue in the six months ended June 30, 1997. The termination of any one or
more of the Company's contracts with its retail distribution partners could have
a material adverse effect on the Company's business, financial condition,
results of operations and on its ability to achieve sufficient cash flow to
service its indebtedness. See "Business--Sales and Marketing."
MANAGEMENT OF GROWTH
The Company has experienced rapid growth and intends to continue to
aggressively expand its operations. The growth in the size and scale of the
Company's business has placed and is expected to continue to place significant
demands on its operational, administrative and financial personnel and operating
systems. Additional planned expansion by the Company may further strain
management and other resources. The Company's ability to manage growth
effectively will depend on its ability to improve its operating systems, to
expand, train and manage its employee base and to develop additional
manufacturing and service capacity. In particular, the Company will be required
to rapidly expand its operating systems and processes in order to support the
projected installations of Coinstar units and the potential addition of
value-added services. Such expansion will require improvements to both hardware
and software and the hiring and training of additional software engineers. In
addition, the Company will be required to establish relationships with
additional third-party service providers. These demands, and others, will
require the addition of new management personnel and the development of
additional expertise by existing management personnel. There can be no assurance
that the Company will be able to effectively manage the expansion of its
operations, or that the Company's systems, procedures or controls will be
adequate to support the Company's operations or that Company management will be
able to achieve and manage the
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rapid roll-out currently projected. If the Company is unable to manage growth
effectively, the Company's business, financial condition and results of
operations and its ability to achieve sufficient cash flow to service its
indebtedness will be materially adversely affected. See "Business."
DEPENDENCE ON A SINGLE SERVICE
The Company has and expects for the foreseeable future to derive
substantially all of its revenues from the operation of Coinstar units.
Accordingly, market acceptance of the Company's coin processing service is
critical to the Company's future success. Since there is only a limited existing
market for the Company's coin processing service, there can be no assurance that
an acceptable level of demand will be achieved or sustained. If sufficient
demand for the Company's coin processing service does not develop due to lack of
market acceptance, technological change, competition or other factors, the
Company's business, financial condition and results of operations and its
ability to achieve sufficient cash flow to service its indebtedness will be
materially adversely affected. See "Risk Factors--Dependence on Continued Market
Acceptance By Consumers and Retail Distribution Partners" and "Business--Sales
and Marketing."
EXPOSURE TO COMPONENT SHORTAGES FROM SINGLE SOURCE SUPPLIER
The Company currently purchases the coin counter component of the Coinstar
unit from a single manufacturer, Scan Coin AB, pursuant to an agreement that may
be terminated by either party with six months notice at any time on or after
June 30, 1998. The Company has entered into a non-binding letter of intent with
Scan Coin AB for a new agreement, although no assurance can be given that the
parties will enter into a new agreement. Currently, no other manufacturer
produces a coin counter capable of being used in the Coinstar units without
extensive enhancements and modifications. No assurance can be given that Scan
Coin AB will be able or willing to supply coin counter components to the Company
in the future. The Company believes it would require up to 12 months to source
and make necessary modifications to an alternative coin counter component.
Moreover, it could take several additional months for any such alternative
supplier to meet the Company's required volume levels. Accordingly, any
cessation, slow-down or disruption in the Company's current supply of coin
counter components would have a material adverse effect on the Company's
business, financial condition and results of operations and on its ability to
achieve sufficient cash flow to service its indebtedness. Although the Company
believes alternative suppliers are available, there can be no assurance that the
Company would be able to locate an alternate supplier on a timely or
cost-efficient basis, if at all, and make the necessary modifications and
enhancements to the design of the Coinstar unit to utilize such replacement,
both of which, in the event of their nonoccurrence, would materially impair its
ability to have Coinstar units manufactured. A prolonged inability to obtain
certain components could have a material adverse effect on the Company's
business, financial condition and results of operations and on its ability to
achieve sufficient cash flow to service its indebtedness, particularly as the
Company increases its manufacturing requirements to support its nationwide
deployment. See "Business--Manufacturing and Supply."
RELIANCE ON THIRD-PARTY MANUFACTURER AND SERVICE PROVIDERS
The Company does not conduct manufacturing operations and is dependent and
will continue to be dependent on outside parties for the manufacture of the
Coinstar unit and its key components. While Coinstar intends to significantly
expand its installed base, such expansion may be constrained by the
manufacturing capacity of its third-party manufacturers and suppliers. Although
the Company expects that its current contract manufacturer, SeaMed Corporation
("SeaMed") will be able to produce sufficient units to meet projected demand,
there can be no assurance that SeaMed or other manufacturers will be able to
meet the Company's manufacturing needs in a satisfactory and timely manner. In
the event of an unanticipated increase in demand for Coinstar unit installations
by retail distribution partners, the Company may be unable to meet such demand
due to manufacturing constraints. Although the Company
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has a contract with SeaMed, it does not have a long-term obligation to continue
the manufacture of the Coinstar unit or its components. Further, SeaMed is
principally engaged in the manufacture of electronic medical instruments for
medical technology companies. The Company believes that it is SeaMed's only
material non-medical customer. As such, the Company faces an increased risk that
SeaMed may choose to focus exclusively on manufacturing its medical products and
cease making the Company's products. Should SeaMed cease providing services, the
Company would be required to locate and qualify additional suppliers. There can
be no assurance that the Company would be able to locate alternate manufacturers
on a timely basis. The Company's reliance on third-party manufacturers involves
a number of additional risks, including the absence of guaranteed capacity and
reduced control over delivery schedules, quality assurance, production yields
and costs. There can be no assurance that the manufacturing capability of such
third-party manufacturers will successfully address the Company's needs. In the
event the Company is unable to retain such manufacturing on commercially
reasonable terms, its business, financial condition and results of operation and
its ability to achieve sufficient cash flow to service its indebtedness will be
materially adversely affected. See "Business--Manufacturing and Supply."
The Company relies on third-party service providers for substantial support
and service efforts that the Company currently does not provide directly. In
particular, the Company contracts with armored carriers to arrange for the
pick-up, processing and deposit of coins. The Company generally contracts with
one armored carrier to service a particular region. Many of these carriers do
not have long-standing relationships with the Company and these contracts
generally can be terminated by either party with advance notice ranging from 30
to 90 days. In the past, the Company has experienced a sudden disruption in
service from an armored carrier company. The Company does not currently have nor
does it expect to have in the foreseeable future the internal capability to
provide back up service in the event of sudden disruption in service from an
armored carrier company. Any failure by the Company to maintain its existing
relationships or to establish new relationships on a timely basis or on
acceptable terms would have a material adverse effect on the Company's business,
financial condition and results of operations and on its ability to achieve
sufficient cash flow to service its indebtedness. Moreover, as with any business
that handles large volumes of cash, the Company is susceptible to theft,
counterfeit and other forms of fraud, including security breaches of the
Company's computing system that performs important accounting functions. There
can be no assurance that the Company will be successful in developing product
enhancements and new services to thwart such attempts. See "Business--The
Coinstar System."
RISK OF DEFECTS IN OPERATING SYSTEMS
The Company collects financial and operating data and monitors unit
performance through a wide-area communications network connecting each of the
Coinstar units with a central computing system located at the Company's
headquarters. This information is used to track the flow of coins, verify coin
counts and schedule and dispatch unit service. The operation of the Coinstar
units depends on sophisticated software, computing systems and communications
services that may contain undetected errors or are subject to failures. These
errors and failures may arise particularly when new services or service
enhancements are added or when the volume of services provided increases.
Although each unit is designed to store all data collected, helping to ensure
critical data is not lost due to an operating systems failure, the inability of
the Company to collect the data from its units could lead to a delay in
processing coins and crediting the accounts of its distribution partners for
vouchers already redeemed. Further, there can be no assurance that the design of
the operating systems to prevent the loss of data will operate as intended and
any loss of or delay in collecting coin processing data would materially and
adversely effect the Company's operations. In addition, the Company has in the
past experienced limited delays and disruptions resulting from upgrading or
improving its operating systems. Although such disruptions have not had a
material effect on the Company's operations, there can be no assurance that
future upgrades or improvements will not result in delays or disruptions that
would have a material adverse impact on the Company's operations. In particular,
the Company is currently planning some significant improvements in its operating
platform in order to support its projected expansion of the installed base of
Coinstar units and the potential addition
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of value-added services. While the Company is taking steps to ensure that the
potential adverse impact of such improvements on the Company's operations is
minimized, there can be no assurance that the platform will be able to handle
the increased volume of services expected from the continued expansion of the
Company's network and the potential addition of value-added services or that the
improvements will occur on a timely basis so as not to disrupt such continued
expansion and potential addition of value-added services. In addition, the
communications network on which the Company relies is not owned by the Company
and is subject to service interruptions. Further, while the Company has taken
significant steps to protect the security of its network, any breach of such
security whether intentional or from a computer virus could have a material
adverse impact on the Company. Any service disruptions, either due to errors or
delays in the Company's software or computing systems or interruptions or
breaches in the communications network, or security breaches of the system,
could have a material adverse affect on the Company's business, financial
condition and results of operations and on its ability to achieve sufficient
cash flow to service its indebtedness. See "Business--The Coinstar System."
DEPENDENCE ON KEY PERSONNEL AND NEED TO HIRE ADDITIONAL PERSONNEL
The Company's performance is substantially dependent on the performance of
its executive officers and key employees and its long term success will depend
on its ability to recruit, retain and motivate highly skilled personnel. Jens H.
Molbak, President and Chief Executive Officer, Rod W. Brooks, Vice President of
Sales and Marketing, Aaron R. Finch, Vice President of Operations, and Daniel A.
Gerrity, Vice President and Chief Technical Officer, have been primarily
responsible for the development and expansion of the Company's business. The
Company recently hired Kirk A. Collamer as Vice President and Chief Financial
Officer. All of the Company's executive officers and employees are employed on
an at-will basis. The loss of the services of any of these executive officers or
other key employees or the inability to attract and retain necessary technical
and managerial personnel could have a material adverse effect upon the Company's
business, financial condition and results of operation and on its ability to
achieve sufficient cash flow to service its indebtedness. Presently, the Company
maintains a "key man" life insurance policy on Mr. Molbak in the amount of $2.0
million. See "Management."
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS
The Company's future success depends, in part, on its ability to protect its
intellectual property and maintain the proprietary nature of its technology
through a combination of patents, licenses and other intellectual property
arrangements, without infringing the proprietary rights of third parties. In
October 1996 and April 1997, the Company was issued United States patents
relating to removing debris from coins processed in a self-service environment
and other aspects of self-service coin processing. These patents will expire in
October 2013 and April 2014, respectively. Sufficient debris removal is
important to reducing clogging and malfunctioning. Reducing these problems and
the associated downtime improves unit availability for customer use and reduces
the amount of time that Company or retail partner personnel must spend attending
to the unit, both of which are important features of operating in a self-service
environment. No assurance can be given that any patents from any pending patent
applications or from any future patent applications will be issued, that any of
the Company's patents will be held valid if subsequently challenged or that
others will not claim rights in or ownership of the patents and other
proprietary rights held by the Company. Moreover, there can be no assurance that
any patents issued to the Company will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide proprietary
protection to the Company. Despite the Company's efforts to safeguard and
maintain its proprietary rights, there can be no assurance that the Company will
be successful in doing so or that the Company's competitors will not
independently develop or patent technologies that are substantially equivalent
or superior to the Company's technologies. On June 18, 1997, the Company filed
in the United States District Court, Northern District of California against
CoinBank Automated Systems, Inc. ("CoinBank"), one of its competitors, a
complaint for infringement of one of the Company's United States patents (the
"Patent Infringement Claim"). CoinBank responded to the Company by letter
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dated June 23, 1997, alleging that the Company failed to conduct a reasonable
investigation before filing the Patent Infringement Claim, the Patent
Infringement Claim is unreasonable and without factual foundation and the Patent
Infringement Claim was filed for an improper purpose. CoinBank has demanded the
Company dismiss such action, and has indicated that if such action is not
dismissed, CoinBank will answer the Patent Infringement Claim on June 26, 1997
and counterclaim for declaration of noninfringement, invalidity and
unenforceability of the subject patent and file a claim for $12 million of
damages based on the tort of intentional interference with prospective economic
advantage. CoinBank further stated that it may file a cross-complaint against
Scan Coin AB for indemnity and breach of warranty of title. On June 27, 1997,
CoinBank answered the Patent Infringement Claim and counterclaimed for
declaration of noninfringement, invalidity and unenforceability of the subject
patent, and filed a claim for breach of warranty against Scan Coin AB. There can
be no assurance that the Company will prevail in such Patent Infringement Claim
or on any claim that might be filed by CoinBank against the Company, or that as
a result of such Patent Infringement Claim, the Company's patent will not be
limited in scope or found to be invalid.
Since patent applications in the United States are not publicly disclosed
until the patent is issued, applications may have been filed by others which, if
issued as patents, could cover the Company's products. The Company is subject to
the risk of claims and litigation alleging infringement of the intellectual
property rights of others. There can be no assurance that others will not assert
infringement or misappropriation claims against the Company in the future based
on patents, copyrights or trade secrets or that such claims will not be
successful. The Company could incur substantial costs in defending itself and
its retail distribution partners against any such claims, regardless of the
merits of such claims. Parties making such claims may be able to obtain
injunctive or other equitable relief which could effectively block the Company's
ability to provide its coin processing service and use the processing equipment
in the United States and abroad, and could result in an award of substantial
damages. In the event of a successful claim of infringement, the Company may
need or be required to obtain one or more licenses from, and/or grant one or
more licenses to, others. There can be no assurance that the Company could
obtain necessary licenses from others at a reasonable cost or at all. The
defense of any lawsuit could result in time-consuming and expensive litigation,
damages, license fees, royalty payments, diversion of the attention of key
personnel and restrictions on or the termination of the Company's ability to
provide its coin processing service and use the processing equipment, any of
which could have a material adverse effect on the Company's business, financial
condition and results of operations and on its ability to achieve sufficient
cash flow to service its indebtedness. The Company also relies on trade secrets
to develop and maintain its competitive position. Although the Company protects
its proprietary technology in part by confidentiality agreements with its
employees, consultants and corporate partners, there can be no assurance that
these agreements will not be breached, that the Company will have adequate
remedies for any breach or that the Company's trade secrets will not otherwise
become known or be discovered independently by its competitors. See
"Business--Proprietary Rights."
RAPID TECHNOLOGICAL CHANGE
The self-service coin processing market is relatively new and evolving. As
such, the Company anticipates that, as the market matures, it will be subject to
technological change, new services and product enhancements, particularly as the
Company expands its service offerings. Accordingly, the Company's success may
depend in part upon its ability to develop product enhancements and new services
that keep pace with continuing changes in technology and consumer preferences
while remaining price competitive. There can be no assurance, however, that the
Company would be successful in developing such product enhancements or new
services, that it will be able to introduce such products or services on a
timely basis or that any such product enhancements or new services will be
successful in the marketplace. The Company's failure to develop technological
improvements or to adapt its products and services to technological change on a
timely basis could, over time, have a material adverse effect on the Company's
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business, financial condition and results of operations and on its ability to
achieve sufficient cash flow to service its indebtedness. See "Business--Product
Research and Development."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The New Notes are being offered to the Holders of the Old Notes. Prior to
this Exchange Offer, there has been no public market for the Old Notes. Prior to
Exchange Offer there are no New Notes. The Company does not intend to apply for
listing of the New Notes on any securities exchange or for quotation through the
Nasdaq National Market. The Initial Purchaser has informed the Company that it
currently intends to make a market for the New Notes. However, the Initial
Purchaser is not obligated to do so and any such market making may be
discontinued at any time without notice. Therefore, no assurance can be given as
to whether an active trading market will develop or be maintained for the New
Notes. If the New Notes are traded after their initial issuance they may trade
at a discount from their initial offering price, depending on prevailing
interest rates, the market for similar securities and other factors, including
the financial condition, performance and prospects of the Company.
CONSEQUENCES TO NON-TENDERING HOLDERS OF OLD NOTES
Upon consummation of the Exchange Offer, the Company will have no further
obligation to register the Old Notes. Thereafter, any Holder of Old Notes who
does not tender its Old Notes in the Exchange Offer, including any Holder which
is an "affiliate" (as that term is defined in Rule 405 of the Securities Act) of
the Company which cannot tender its Old Notes in the Exchange Offer, will
continue to hold restricted securities which may not be offered, sold or
otherwise transferred, pledged or hypothecated except pursuant to Rule 144 and
Rule 144A under the Securities Act or pursuant to any other exemption from
registration under the Securities Act relating to the disposition of securities,
provided that an opinion of counsel is furnished to the Company that such an
exemption is available.
RANKING OF NOTES
The Notes will be unsecured obligations of the Company, will be subordinated
to all other Senior Debt of the Company and will be effectively subordinated to
all indebtedness (including senior indebtedness and trade credit) of
subsidiaries of the Company. As of June 30, 1997 the aggregate amount of Senior
Debt of the Company was $4.0 million. See "Capitalization." The Indenture
permits the Company and its subsidiaries to incur substantial additional
indebtedness, including senior indebtedness and secured indebtedness. The
Company currently does not have any subsidiaries.
The Company and its subsidiaries may incur substantial additional
indebtedness, including senior indebtedness and secured indebtedness. Any
holders of secured indebtedness of the Company would be entitled to payment of
their indebtedness out of the proceeds of their collateral prior to the holders
of any general unsecured obligations of the Company, including the Notes, and
any holders of senior indebtedness of the Company or of subsidiaries of the
Company would generally be entitled to repayment of such indebtedness from the
assets of the Company or of the affected subsidiaries before such assets were
made available for distribution to holders of subordinated obligations of the
Company or to the Company, respectively. In addition, holders of any future
indebtedness of the Company ranking pari passu in right of payment with the
Notes would generally share pro rata in the remaining assets of the Company with
the holders of the Notes. Similarly, in the event of any distribution or payment
of the assets of the Company in any foreclosure, dissolution, winding-up,
liquidation or reorganization, holders of any secured indebtedness will have a
secured prior claim to the assets of the Company that constitute their
collateral and holders of senior or subsidiary indebtedness would be entitled to
prior repayment of their claims from the assets of the Company or of the
relevant subsidiary. In the event of bankruptcy, liquidation or reorganization
of the Company, holders of the Notes will participate ratably with all holders
of unsecured indebtedness of the Company which is deemed to be of the same class
as the Notes, and potentially with all other general creditors of the Company,
based upon the respective amounts owed to each holder or creditor, in
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the remaining assets of the Company. In any of the foregoing events, there can
be no assurance that there would be sufficient assets to pay amounts due on the
Notes. See "Description of Old Notes-- Subordination."
In the event that the Company is unable to generate sufficient cash flow and
the Company is otherwise unable to obtain funds necessary to meet required
payments of principal, premium, if any, and interest on its indebtedness,
including the Notes, the Company could be in default under the terms of the
agreements governing such indebtedness, including the Indenture. In the event of
such default, the holders of such indebtedness could elect to declare all of the
funds borrowed thereunder to be due and payable together with accrued and unpaid
interest. If such an acceleration were effected and the Company did not have
sufficient funds to pay the accelerated indebtedness, the holders of such
indebtedness could initiate foreclosure or other enforcement action against the
Company. Any such circumstances would materially adversely affect the Company's
ability to pay principal, premium, if any, and interest on the Notes and the
market value of the Notes.
FRAUDULENT TRANSFER AND PREFERENCE CONSIDERATIONS
Under applicable provisions of the federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if the Company, at the time of
issuance of, or making any payment in respect of, the Notes, (a)(i) was or was
rendered insolvent thereby, was engaged or about to engage in a business or
transaction for which its assets constituted unreasonably small capital, or
intended to incur, or believed that it would incur, debts beyond its ability to
pay such debts as they matured, and (ii) the Company received less than
reasonably equivalent value or fair consideration for such issuance, or (b) the
Company issued the Notes or made any payment thereunder with intent to hinder,
defraud or delay any of its creditors, the obligations of the Company under some
or all of the Notes could be avoided or held to be unenforceable by a court, the
obligations of the Company under the Notes could be subordinated to claims of
other creditors or the holders could be required to return payments already
received. In any of the foregoing cases, there could be no assurance that the
holders would ultimately recover the amounts owing under the Notes. In addition,
under the preference law of the State of New York, if the Company were to issue
the Notes or make any payment in respect thereof in contemplation of insolvency,
the Notes could be avoided or amounts paid to the holders could be required to
be returned.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law applied in any such case. Generally, however, the Company would be
considered insolvent if the sum of its debts, including contingent liabilities,
was greater than all of its assets at a fair valuation or if the present fair
saleable value of its assets was less than the amount that would be required to
pay the probable liability on its existing debts, including contingent
liabilities, as they become absolute and matured.
The Company believes that it will not be insolvent at the time of or as a
result of any of the offerings made hereby, that it will not engage in a
business or transaction for which its assets constitute unreasonably small
capital, and that it did not and does not intend to incur or believe that it
will incur debts beyond its ability to pay such debts as they mature. These
beliefs are based on internal cash flow projections and estimated value of
assets and liabilities. There can be no assurance, however, that a court passing
on such questions would agree with the Company's analysis.
ORIGINAL ISSUE DISCOUNT
The Notes will be issued at a substantial discount from their principal
amount at maturity. Although cash interest will not be payable in respect of the
Notes prior to April 1, 2000, Original Issue Discount (the difference between
the stated redemption price at maturity of the Notes and the issue price of the
Notes) will accrue from the issue date of the Notes and generally will be
includable as interest income in the Note holder's gross income for United
States federal income tax purposes in advance of the cash payments to which the
income is attributable.
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Furthermore, the Notes will be subject to the high yield discount obligation
rules which will defer and may in part eliminate the Company's ability to deduct
the Original Issue Discount attributable to the Notes. Accordingly, the
Company's after tax cash flow might be less than if the Original Issue Discount
on the Notes was deductible when it accrued. See "Certain Federal Income Tax
Considerations--Notes-- Applicable High Yield Discount Obligations." Similar
results may apply under state tax laws.
If a bankruptcy case were commenced by or against the Company under the
Federal Bankruptcy Code of 1978, as amended (the "Bankruptcy Code"), after the
issuance of the Notes, the claim of a holder is the sum of: (i) the initial
offering price and (ii) that portion of the Original Issue Discount that is not
deemed to constitute "unmatured interest" for purposes of the Bankruptcy Code.
Any Original Issue Discount that was not accrued as of the date of any such
bankruptcy filing would constitute "unmatured interest."
THE COMPANY
The Company's executive offices are located at 13231 SE 36th Street, Suite
200, Bellevue, Washington 98006. Its telephone number at that address is (206)
644-6789.
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. Coinstar will not receive
any cash proceeds from the issuance of the New Notes offered in the Exchange
Offer. In consideration for issuing the New Notes as contemplated in this
Prospectus, the Company will receive in exchange Old Notes in like principal
amount, the form and terms of which are the same in all material respects as the
form and terms of the New Notes except that the New Notes have been registered
under the Securities Act and hence do not include certain rights to registration
thereunder. The Old Notes surrendered in exchange for New Notes will be retired
and canceled and cannot be reissued. Accordingly, issuance of the New Notes will
not result in any increase in the indebtedness of the Company.
Net proceeds from the sale of the Old Notes (after the deduction of
placement fees and other expenses of the offering of the Old Notes) were
approximately $62.9 million. Such proceeds have been and will be used (i)
predominantly to fund capital expenditures and working capital requirements
incurred in connection with the continued expansion of the Coinstar network,
(ii) for the repayment of certain previously outstanding long-term obligations,
(iii) for product research and development, and deployment of enhancements to
the Coinstar unit and coin processing network and (iv) and for general corporate
purposes. Pending application of the proceeds as described above, the Company
has invested the net proceeds of the issuance of the Old Notes in short-term,
interest-bearing, investment-grade securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain any future earnings to finance
the growth and development of its business and therefore does not anticipate
paying any cash dividends in the foreseeable future. The future payment of cash
dividends, if any, is within the discretion of the Board of Directors and will
depend on the future earnings, capital requirements, financial condition and
future prospects of the Company and such other factors as the Board of Directors
may determine. In addition, the Company's Indenture governing the Notes
restricts the Company's ability to pay dividends if at the time of such dividend
or immediately thereafter, the Company is in default under the Indenture or does
not meet certain tests associated with the Company's financial position.
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CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
as of June 30, 1997, (ii) the pro forma capitalization in connection with the
Company's Initial Public Offering after giving effect to the automatic
conversion of all outstanding shares of Preferred Stock into Common Stock, and
(iii) the pro forma capitalization as adjusted to reflect the receipt of the net
proceeds from the sale of Common Stock in the Initial Public Offering at the
Initial Public Offering price of $10.50 per share (after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by the Company). This table excludes the exercise of certain warrants on a cash
basis to purchase 352,907 shares of Common Stock at an aggregate exercise price
of approximately $1.26 million, which expired on July 9, 1997 and the issuance
of 1,267,263 shares of Common Stock upon the net exercise of certain warrants,
which expired on July 9, 1997. This table also excludes the assumed exercise of
certain warrants on a cash basis to purchase 665,000 shares of Common Stock at
an aggregate exercise price of $6,650, which expire within 90 days of July 9,
1997 and warrants to purchase 1,042,981 shares of Common Stock at a weighted
exercise price of $12.57 per share, which did not expire upon the closing of the
Initial Public Offering or within 90 days thereafter. Such warrants may be
exercised for cash or on a cashless basis at the option of the warrant holder.
This table also excludes 921,900 shares of Common Stock issuable upon exercise
of outstanding options granted under the Equity Incentive Plan as of June 30,
1997 at a weighted average exercise price of $5.67 per share and 40,000 shares
of Common Stock issuable upon exercise of outstanding options granted outside
the Equity Incentive Plan as of June 30, 1997 at a weighted average exercise
price of $3.50 per share. This table should be read in conjunction with the
Financial Statements and related Notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- -------------------- -----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Cash, cash equivalents and short-term investments(1).............. $ 39,352 $ 39,352 $ 67,895
---------- -------- -----------
---------- -------- -----------
Debt:
13% Senior Subordinated Discount Notes due 2006................. $ 70,618 $ 70,618 $ 70,618
Other long term obligations, including current portion.......... 4,011 4,011 4,011
---------- -------- -----------
Total debt, including current portion........................... 74,629 74,629 74,629
---------- -------- -----------
Mandatory Redeemable Preferred Stock, $.001 par value; 16,000,000
shares authorized; 7,315,795 shares outstanding actual no shares
outstanding pro forma and as adjusted........................... 24,972 -- --
---------- -------- -----------
Stockholders' equity (deficit):
Convertible Preferred Stock, $.001 par value; 16,000,000 shares
authorized; 1,545,281 shares outstanding actual; no shares
outstanding pro forma and as adjusted........................... 4,232 -- --
Common Stock, $.001 par value; 22,000,000 authorized; 984,012
outstanding actual; 9,972,976 shares pro forma; and 12,972,976
shares outstanding as adjusted.................................. 94 29,298 57,841
Contributed capital for warrants.................................. 2,621 2,621 2,621
Accumulated deficit............................................... (44,421) (44,421) (44,421)
---------- -------- -----------
Total stockholders' equity (deficit).............................. (37,474) (12,502) 16,041
---------- -------- -----------
Total capitalization.......................................... $ 62,127 $ 62,127 $ 90,670
---------- -------- -----------
---------- -------- -----------
</TABLE>
- ------------------------
(1) Cash, cash equivalents and short-term investments include $11.1 million of
funds in transit, which represent amounts being processed by armored car
carriers or residing in Coinstar units.
26
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
The following table sets forth selected financial data of the Company as of
and for each of the years in the five year period ended December 31, 1996, as of
and for the six month periods ended June 30, 1996 and 1997 and as of and for the
three month periods ended June 30, 1996 and 1997. The statements of operations
data for each of the years in the three year period ended December 31, 1996 and
the balance sheet data as of December 31, 1995 and 1996 have been derived from
the financial statements of the Company, audited by Deloitte & Touche LLP,
independent auditors, which are included elsewhere in this Prospectus. The
statements of operations data for each of the years in the two year period ended
December 31, 1993 and the balance sheet data as of December 31, 1992, 1993 and
1994 have been derived from audited financial statements of the Company which
are not included in this Prospectus. The statements of operations data for the
six month and three month periods ended June 30, 1996 and 1997 and the balance
sheet data as of June 30, 1997 have been derived from unaudited financial
statements of the Company that include, in the opinion of management, all normal
and recurring adjustments that management considers necessary for a fair
statement of the quarterly results. The operating results for the six months and
three months ended June 30, 1997 are not necessarily indicative of results that
may be expected for the year ending December 31, 1997. The following information
is qualified by reference to, and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and related Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE
MONTHS
SIX MONTHS ENDED ENDED
INCEPTION TO YEAR ENDED DECEMBER 31, JUNE 30, JUNE 30,
DECEMBER 31, -------------------------------------------- -------------------- ---------
1992(1) 1993(1) 1994 1995 1996 1996 1997 1996
--------------- ----------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPTIONS DATA:
Revenue....................... $ 8 $ 15 $ 325 $ 1,063 $ 8,312 $ 2,134 $ 9,289 $ 1,388
Expenses:
Direct operating............ 46 45 488 1,336 7,258 2,209 7,416 1,321
Regional sales and
marketing................. -- 3 86 349 1,505 615 1,602 407
Product research and
development............... 383 1,368 1,648 1,830 3,969 1,423 3,080 762
Selling, general and
administrative............ 171 402 1,716 2,790 5,351 1,939 5,157 1,067
Depreciation and
amortization.............. -- 40 440 1,117 4,135 1,295 3,843 796
----- ----------- --------- --------- --------- --------- --------- ---------
Loss from operations............ (592) (1,843) (4,053) (6,359) (13,906) (5,347) (11,809) (2,965)
Other income (expense)
Interest income............... 11 29 34 398 848 255 1,020 95
Interest expense.............. -- -- (297) (208) (2,661) (255) (4,759) (168)
----- ----------- --------- --------- --------- --------- --------- ---------
Net loss before extraordinary
item.......................... (581) (1,814) (4,316) (6,169) (15,719) (5,347) (15,548) (3,038)
Extraordinary item--loss related
to early retirement of debt... -- -- -- -- (248) -- -- --
----- ----------- --------- --------- --------- --------- --------- ---------
Net loss........................ $ (581) $ (1,814) $ (4,316) $ (6,169) $ (15,967) $ (5,347) $ (15,548) $ (3,038)
----- ----------- --------- --------- --------- --------- --------- ---------
----- ----------- --------- --------- --------- --------- --------- ---------
Pro forma net loss per share
before extraordinary
item(2)....................... -- -- -- -- $ (1.47) $ (0.51) $ (1.49) $ (0.29)
Pro forma extraordinary item per
share(2)...................... -- -- -- -- (0.02) -- -- --
--------- --------- --------- ---------
Pro forma net loss per
share(2)...................... -- -- -- -- $ (1.49) $ (0.51) $ (1.49) $ (0.29)
--------- --------- --------- ---------
--------- --------- --------- ---------
Pro forma weighted average
shares outstanding
(000's)(2).................... -- -- -- -- 10,715 10,460 10,460 10,460
OTHER DATA:
Number of new Coinstar units
installed during the period... 4 13 31 215 1,238 533 834 364
Installed base of Coinstar units
at end of the period.......... 4 17 48 263 1,501 796 2,335 796
Number of regional markets...... 2 4 11 23 18 33 18
Dollar value of coins
processed..................... -- $ 74 $ 5,245 $ 17,701 $ 115,476 $ 32,998 $ 123,350 $ 20,692
Capital expenditures............ 8 620 2,163 3,823 20,820 9,651 15,392 6,466
Direct contribution (loss)(3)... (38) (30) (613) (273) 1,054 (75) 1,873 67
Direct operating expense per
average installed unit(4)..... -- -- 20,353 11,717 8,610 4,641 3,875 2,205
<CAPTION>
1997
---------
<S> <C>
STATEMENTS OF OPTIONS DATA:
Revenue....................... $ 5,294
Expenses:
Direct operating............ 3,966
Regional sales and
marketing................. 972
Product research and
development............... 1,640
Selling, general and
administrative............ 2,630
Depreciation and
amortization.............. 2,158
---------
Loss from operations............ (6,072)
Other income (expense)
Interest income............... 440
Interest expense.............. (2,415)
---------
Net loss before extraordinary
item.......................... (8,047)
Extraordinary item--loss related
to early retirement of debt... --
---------
Net loss........................ $ (8,047)
---------
---------
Pro forma net loss per share
before extraordinary
item(2)....................... $ (0.77)
Pro forma extraordinary item per
share(2)...................... --
---------
Pro forma net loss per
share(2)...................... $ (0.77)
---------
---------
Pro forma weighted average
shares outstanding
(000's)(2).................... 10,460
OTHER DATA:
Number of new Coinstar units
installed during the period... 406
Installed base of Coinstar units
at end of the period.......... 2,335
Number of regional markets...... 33
Dollar value of coins
processed..................... $ 70,626
Capital expenditures............ 7,717
Direct contribution (loss)(3)... 1,328
Direct operating expense per
average installed unit(4)..... 1,858
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments(5)........ $ 46 $ 1,417 $ 1,343 $ 14,120 $ 56,310 $ 39,352
Total assets................................................ 80 2,090 3,913 19,601 82,531 79,103
Total debt, including current portion....................... 4 -- 4,660 1,658 70,065 74,629
Mandatorily Redeemable Preferred Stock...................... -- -- -- 23,548 24,972 24,972
Paid in capital............................................. 657 4,239 4,512 5,409 6,871 6,947
Total stockholders' equity (deficit)........................ $ 76 $ 1,844 $ (2,224) $ (7,471) $ (21,976) (37,474)
</TABLE>
- ------------------------------
(1) Commercial deployment of the units did not commence until 1994; therefore,
certain information relating to 1992 and 1993 is not meaningful.
(2) See Note 2 to Audited Financial Statements for an explanation of the
determination of the number of shares used in computing pro forma net loss
per share. Pro forma net loss per share is not presented for the years ended
December 31, 1992 through 1995 due to the lack of comparability.
(3) Direct contribution (loss) is defined as revenue less direct operating
expenses. The Company uses direct contribution (loss) as a measure of
operating performance to assist in understanding its operating results.
Direct contribution (loss) is not a measure of financial performance under
GAAP and should not be considered in isolation or an alternative to gross
margin, income (loss) from operations, net income (loss), or any other
measure of performance under GAAP.
(4) Based on monthly averages of units in operation over the applicable period.
(5) Cash, cash equivalents and short-term investments include funds in transit,
which represent amounts being processed by armored car carriers or residing
in Coinstar units, of $767,000, $5.5 million and $11.1 million at December
31, 1995 and 1996, and June 30, 1997, respectively. Funds in transit prior
to such dates are negligible.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS. EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE
DISCUSSION IN THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES, SUCH AS THE COMPANY'S PLANS, OBJECTIVES,
EXPECTATIONS AND INTENTIONS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS
THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED
TO, THOSE DISCUSSED BELOW, IN "RISK FACTORS," "BUSINESS" AND ELSEWHERE IN THIS
PROSPECTUS.
OVERVIEW
The Company develops, owns and operates a network of automated, self-service
coin counting and processing machines that provides consumers with a convenient
means to convert loose coins into cash. The Company began field testing of a
prototype unit in 1992 and commercial installation of units in supermarkets in
1994. The Company has increased its store installation base every year and as of
June 30, 1997 had an installed base of 2,335 units located in supermarkets and
financial institutions in 33 regional markets across the United States. In 1996,
the Company significantly accelerated its plans for installation of the Coinstar
units in various geographic regions.
Beginning in 1995, the Company has devoted significant resources to building
a sales and marketing organization, adding administrative personnel and
developing the network systems and infrastructure to support the rapid growth of
its installed base of units. The cost of this expansion and the significant
depreciation expense of its installed network have resulted in significant
operating losses to date and an accumulated stockholders' deficit of $44.4
million as of June 30, 1997. The continued rapid expansion of its installed base
is expected to result in continued increases in the number of employees,
marketing and field service personnel expenses in new regions and general and
administrative expenses related to the ongoing development of information
systems to support future growth. Consequently, the Company expects to incur
increasing operating losses in the future. To date, the Company has funded its
operating losses and capital expenditure requirements through the private sale
of equity and in October 1996, the sale of the Notes for net proceeds of $62.9
million. In connection with the debt financing in October 1996, the Company
began to prepare for accelerated future growth of its installed base by
increasing expenditures on its field service organization, upgrading its systems
engineering capabilities and developing and testing new marketing and promotion
programs designed to increase coin processing volumes.
The Company currently derives substantially all its revenues from coin
processing services generated by its installed base of Coinstar units located in
supermarket chains in 24 states across the country. The Company generates
revenues based on a processing fee, currently 7.5%, charged on the total dollar
amount of coins processed in a transaction. Prior to 1996 the Company's
processing fee was 10% on pennies and 5% on all other coins. Beginning in the
first quarter of 1996 the Company began charging a flat 7.5% fee on selected
units and converted all units to this new fee structure by the end of the second
quarter of 1996. Coin processing fee revenue is recognized at the time the
customers' coins are counted by the Coinstar unit. Overall revenue growth is
dependent on both the rate of new installations and the growth in coin
processing volumes of its installed base. The Company's experience to date is
that coin processing volumes per unit have generally increased with the length
of time the unit is in operation. The Company believes that coin processing
volumes per unit may also be affected by other factors such as public relations,
advertising and other activities that promote awareness of the units, as well as
the amount of consumer traffic in the stores in which the units are located and
seasonality. Given the Company's limited operating history, there can be no
assurance, however, that unit volumes will continue to increase as a function of
the time the unit is in operation, or that unit volumes will be affected by such
other factors. The significant increase in the Company's installed base in 1996
and the first quarter of 1997 resulted in a reduction in average age of all
units in operation and consequently contributed to a lower average revenue
29
<PAGE>
per unit. The average age of all units in operation increased slightly during
the second quarter of 1997 and contributed to a nominal increase in the average
revenue per unit. The Company expects that as it continues to aggressively
expand installations relative to the size of its installed base, the average
revenue per unit may decrease even as the per unit dollar volume of mature units
increases.
Direct operating expenses are comprised of the regional expenses associated
with Coinstar unit operations and support and consist primarily of coin pickup
and processing, field operations support and related expenses, and retail
operations support. Coin pickup and processing costs, which represent a major
portion of direct operating expenses, vary based on the level of total coin
processing volume and the density of the units within a region. The Company
believes that while coin pickup and processing costs are variable based on units
in service and coin volume generated, economies related to these direct expense
components can be achieved through increasing the density of units in operation
in regional markets. Field service operations and related expenses vary
depending on the number of geographic regions in which Coinstar units are
located and the density of the units within a region. Regional sales and
marketing expenses are comprised of ongoing marketing, advertising and public
relations efforts in existing market regions and startup marketing expenses
incurred to launch the Coinstar service in new regional markets. Product
research and development expense consists of the development costs of the
Coinstar unit software, network applications, Coinstar unit sustaining
engineering and new product development. Selling, general and administrative
expenses are comprised of management compensation, administrative support for
field operations, the customer service center, sales and marketing support,
systems and engineering support, corporate services, and accounting, human
resources and occupancy expenses. Depreciation and amortization consists
primarily of depreciation charges on Coinstar units and, to a lesser extent,
depreciation on furniture and fixtures and computer equipment and amortization
of intangibles.
The Company expects to continue to evaluate new marketing and promotional
programs to increase the breadth and rate of customer utilization of its service
and to engage in systems and product research and development. The Company
intends to continue to invest in sales and marketing and product research and
development, which is expected to negatively impact its operating results. The
Company believes that its future revenue growth, operating margin gains and
profitability will be dependent upon the penetration of its installed base with
retail distribution partners in existing markets, expansion and penetration of
installations in new market regions and successful ongoing marketing and
promotional activities to sustain the growth in unit coin volume over time.
Given the Company's limited operating history, unpredictability of the timing of
installations with retail distribution partners and the resulting revenues, and
the continued market acceptance of the Company's service by consumers and retail
distribution partners, the Company's operating results for any quarter are
subject to significant variation, and the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. See "Risk
Factors--History of Sustained Operating Losses and Continuation of Such Losses,"
"Risk Factors--Limited Operating History," "Risk Factors--Uncertainty of Future
Operating Results," "Risk Factors--Fluctuations in Quarterly Operating Results,"
"Risk Factors-- Dependence on Continued Market Acceptance By Consumers and
Retail Distribution Partners," "Risk Factors--Possible Termination of Retail
Distribution Partner Agreements," and "Business--Sales and Marketing."
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
REVENUE
Revenue increased to $5.3 million in the three months ending June 30, 1997
from $1.4 million in the comparable 1996 period. The increase was due
principally to the increase in the number of Coinstar units in service during
the three month period and the increase in the volume of coins processed by the
units in service during this period. The installed base of Coinstar units
increased to 2,335 as of June 30, 1997 from
30
<PAGE>
796 units as of June 30, 1996. During the second quarter of 1997, 406 units were
installed compared to 364 for the same period in 1996. The dollar value of coins
processed in the second quarter of 1997 increased to $70,626 million compared to
$20,692 million in the comparable 1996 period.
DIRECT OPERATING EXPENSES
Direct operating expenses increased to $4.0 million in the three months
ending June 30, 1997 from $1.3 million in the comparable 1996 period. The
increase in direct operating expenses was primarily attributable to increased
coin pickup and processing costs as a result of the increased dollar volumes
processed by the network and the increase in field service personnel expenses
associated with the hiring and training of new field service personnel to
support the Company's accelerated growth and its expansion into 15 new regions
as of June 30, 1996. Direct operating expense as a percentage of revenue
decreased to 74.9% for the three months ending June 30, 1996 from 95.2% in the
comparable 1996 period. The Company anticipates that direct operating expense
will continue to increase as the number of installed units increases. However,
direct operating expenses as a percentage of revenue are anticipated to decrease
as (i) coin pickup and processing cost economies from regional densities are
realized and (ii) field engineering expenses decrease as a percentage of revenue
as the Company increases its density in its existing markets.
REGIONAL SALES AND MARKETING
Regional sales and marketing expense increased to $1.0 million in the three
months ending June 30, 1997 from $400,000 in the comparable 1996 period. The
increase in regional marketing expense was the result of an increased level of
advertising, cooperative promotion with its retail distribution partners and
public relation efforts focused in the new regions installed in the second
quarter of 1997 and the initial incurrence of ongoing marketing expenses in the
existing markets. The Company expects sales and marketing expenses to continue
to increase as the Company expands the installed base of units and enters new
regional markets.
PRODUCT RESEARCH AND DEVELOPMENT
Product research and development expenses increased to $1.6 million in the
three months ending June 30, 1997 from $800,000 in the comparable 1996 period.
The principal component of such expenses was personnel compensation and the
period-to-period increase was due largely to higher staffing levels required for
the improvement of existing and development of new Coinstar unit software,
hardware, network applications and development costs related to new service
offerings. The Company expects to continue to increase its product research and
development expenditures during 1997 as it continues to add personnel in
connection with operating systems improvements and the potential addition of
value-added services. A portion of the product research and development expenses
may be capitalized in the future.
SELLING, GENERAL, AND ADMINISTRATIVE
Selling, general, and administrative expense increased to $2.6 million in
the three months ending June 30, 1997 from $1.1 million in the comparable 1996
period. The principal component of such expenses was personnel compensation and
the period-to-period increase reflects an investment in higher staffing levels
to support the Company's rapid growth and expansion. The Company expects selling
general and administrative expenses to continue to increase in 1997 as the
Company continues to add staff.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased to $2.2 million in the three
months ending June 30, 1997 from $800,000 in the comparable 1996 period. The
increase was primarily due to the increase in the installed base of Coinstar
units during these periods. The Company expects depreciation and amortization
31
<PAGE>
expense to increase significantly over the next several years as a result of
expected increases in the installation of Coinstar units.
INTEREST INCOME AND EXPENSE
Interest income increased to $400,000 in the three months ending June 30,
1997 from $100,000 in the comparable 1996 period. The increase in interest
income is attributed to higher invested cash balances resulting from net
proceeds received from the sale of Notes in October 1996.
Interest expense increased to $2.4 million in the three months ending June
30, 1997 from $200,000 in the comparable 1996 period. The increase was due to
the accretion of the Notes. No cash interest payments are due on the Notes until
April 2000.
NET LOSS
Net Loss increased to $8.0 million in the three months ending June 30, 1997
from $3.0 million in the comparable 1996 period. The increase in the net loss
primarily was due to the fact that selling, general, and administrative
expenses, product research and development expenses, and depreciation and
amortization increased during the same period at a disproportionately higher
rate that the Company's direct contribution margin. This was the result of the
Company's decision to build infrastructure necessary to support the rapid growth
of its installed base of units. In the near term, the Company expects to
continue to add infrastructure to support expected increases in its installed
base, and as a result expects to incur increasing net losses. In the longer
term, the Company expects that it will not be required to add as much
infrastructure to support its installed base and as a result expects to achieve
profitability as its direct contribution margin from its larger base of
installed units grows proportionately faster than its operating expenses. There
can be no assurance, however, that the Company will install a sufficient number
of units or obtain sufficient market acceptance to allow the Company to achieve
or sustain profitability. See "Risk Factors--Dependence on Continued Market
Acceptance By Consumers and Retail Distribution Partners."
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
REVENUE
Revenue increased to $9.3 million in the first six months of 1997 from $2.1
in the comparable 1996 period. The increase was due principally to the increase
in the number of Coinstar units in service during the 1997 period and the
increase in the volume of coins processed by the units in service during this
period. The installed base of Coinstar units increased to 2,335 as of June 30,
1997 from 796 units as of June 30, 1996. The dollar value of coins processed
increased to $123.4 million during the 1997 period from $33.0 million in the
comparable 1996 period.
DIRECT OPERATING EXPENSES
Direct operating expenses increased to $7.4 million in the first six months
of 1997 from $2.2 in the comparable 1996 period. The increase in direct
operating expenses was primarily attributable to increased coin pickup and
processing costs as a result of the increased dollar volumes processed by the
network and the increase in field service personnel expenses associated with the
hiring and training of new field service personnel to support the Company's
accelerated growth and its expansion into 15 new regional markets as of June 30,
1996. Direct operating expenses as a percentage of revenue decreased to 79.9% in
the 1997 period from 103.5% in the 1996 period. The Company anticipates that
direct operating expenses will continue to increase as the number of installed
units increases. However, direct operating expenses as a percentage of revenue
are anticipated to decrease as (i) coin pickup and processing cost economies
from regional densities are realized and (ii) field engineering expenses
decrease as a percentage of revenue as the Company increases its density in its
existing markets.
32
<PAGE>
REGIONAL SALES AND MARKETING
Regional sales and marketing expenses increased to $1.6 million in the first
six months of 1997 from $600,000 in the comparable 1996 period. The increase in
regional marketing expense was the result of an increased level of advertising,
cooperative promotion with its retail distribution partners and public relations
efforts focused in the new regions installed during the 1997 period and the
initial incurrence of ongoing marketing expenses in existing markets. The
Company expects that the components of sales and marketing expenses in the
future will include ongoing marketing expenses in existing markets and startup
marketing expenses in new regions entered. The Company expects sales and
marketing expenses to continue to increase as the Company expands the installed
base of units and enters new regional markets.
PRODUCT RESEARCH AND DEVELOPMENT
Product research and development expenses increased to $3.1 million in the
first six months of 1997 from $1.4 million in the comparable 1996 period. The
principal component of such expenses was personnel compensation and the
period-to-period increase was due largely to higher staffing levels required for
the improvement of existing and development of new Coinstar unit software,
hardware, network applications and development costs related to new service
offerings. The Company expects to increase its product research and development
expenditures during 1997 as it continues to add personnel in connection with
operating systems improvements and the potential addition of value-added
services. A portion of the product research and development expenses may be
capitalized in the future.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expense increased to $5.2 million in the
first six months of 1997 from $1.9 million in the comparable 1996 period. The
principal component of such expenses was personnel compensation and the
period-to-period increase primarily reflects an investment in higher staffing
levels during the second half of 1996 and first six months of 1997 to support
the Company's rapid growth and expansion. The Company expects selling, general
and administrative expenses to continue to increase in 1997 as the Company
continues to add staff.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased to $3.8 million in the first
six months of 1997 from $1.3 million in the comparable 1996 period. The increase
was primarily due to the increase in the installed base of Coinstar units during
these periods. The Company expects depreciation and amortization expense to
increase significantly over the next several years as a result of expected
increases in the installation of Coinstar units.
INTEREST INCOME AND EXPENSE
Prior to October 1996, the Company funded its liquidity needs primarily from
the issuance of equity securities. In October 1996, the Company issued a total
of $95 million aggregate principal amount at maturity of the Notes and certain
related warrants. Accordingly, the Company has incurred significant non-cash
interest expense from the amortization of the original issue discount and
deferred financing fees on such debt.
Interest income increased to $1.0 million in the first six months of 1997
from $300,000 in the comparable 1996 period. The increase in interest income is
attributable to higher invested cash balances resulting from net proceeds of
$62.9 million received from the sale of the Notes in October 1996.
Interest expense increased to $4.8 million in first six months of 1997 from
$300,000 in the comparable 1996 period as a result of the sale of the Notes. The
increase was due to the accretion of the Notes. No cash interest payments are
due on the Notes until April 2000.
33
<PAGE>
NET LOSS
Net loss increased to $15.5 million in the first six months of 1997 from
$5.3 million in the comparable 1996 period. The increase in net loss primarily
was due to the fact that selling, general and administrative expenses, product,
research and development expenses, and depreciation and amortization increased
during the same period at a disproportionately higher rate than the Company's
direct contribution margin. This was the result of the Company's decision to
build the infrastructure necessary to support the rapid growth of its installed
base of units. In the near term, the Company expects to continue to add
infrastructure to support expected increases in its installed base, and as a
result expects to incur increasing net losses. In the longer term, the Company
expects that it will not be required to add as much infrastructure to support
its installed base and as a result expects to achieve profitability as its
direct contribution margin from its significantly larger base of installed units
grows proportionately faster than its operating expenses. There can be no
assurance, however, that the Company will install a sufficient number of units
or obtain sufficient market acceptance to allow the Company to achieve or
sustain profitability. See "Risk Factors--Dependence on Continued Market
Acceptance By Consumers and Retail Distribution Partners."
YEARS ENDED DECEMBER 31, 1996 AND 1995
REVENUE
Revenue increased to $8.3 million in 1996 from $1.1 million in 1995. The
increase was due principally to the increase in the number of Coinstar units
placed in service during 1996 and the increase in the volume of coins processed
by the units in service during that year. The installed base of Coinstar units
increased to 1,501 at the end of 1996 from 263 at the end of 1995. The dollar
value of coins processed increased to $115.5 million during 1996 from $17.7
million in 1995.
DIRECT OPERATING EXPENSES
Direct operating expenses increased to $7.3 million in 1996 from $1.3
million in 1995. The increase in direct operating expenses was primarily
attributable to increased coin pickup and processing costs as a result of the
increased dollar volumes processed by the network and the increase in field
service personnel expenses associated with the hiring and training of new field
service personnel to support the Company's accelerated growth and its expansion
into 12 new regional markets in 1996. Direct operating expenses as a percentage
of revenue decreased to 87% in 1996 from 126% in 1995.
REGIONAL SALES AND MARKETING
Regional sales and marketing expenses increased to $1.5 million in 1996 from
$349,000 in 1995. The increase in regional marketing expense was the result of
an increased level of advertising, cooperative promotion with its retail
distribution partners and public relations efforts focused in the new regions
installed during 1996. Substantially all of the Company's sales and marketing
expenses in 1996 were attributable to startup marketing activities as the
Company increased its installed base to 23 regions at the end of 1996 from 11
regions in 1995.
PRODUCT RESEARCH AND DEVELOPMENT
Product research and development expenses increased to $4.0 million in 1996
from $1.8 million in 1995 due largely to increased staffing levels required for
the improvement of existing and development of new Coinstar unit software,
hardware, network applications and development costs related to new service
offerings. The Company expects to increase its product research and development
expenditures in 1997 as it continues to add personnel in connection with
operating systems improvements and the potential addition of value-added
services. A portion of the product research and development expenses may be
capitalized in the future.
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SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased to $5.4 million in
1996 from $2.8 million in 1995. The increase primarily reflects an investment in
higher staffing levels during the second half of 1996 to support the Company's
rapid growth and expansion.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased to $4.1 million in 1996 from
$1.1 million in 1995. The increase was primarily due to the increase in the
installed base of Coinstar units during these years.
INTEREST INCOME AND EXPENSE
Interest income increased to $848,000 in 1996 from $398,000 in 1995. The
increase in interest income is attributable to higher invested cash balances
resulting from net proceeds of $62.9 million received from the sale of the Notes
in October 1996.
Interest expense increased to $2.7 million in 1996 from $208,000 in 1995 as
a result of the sale of the Notes in October 1996 and the accretion of such
Notes since the original issue date to year end.
NET LOSS
Net loss increased to $16.0 million in 1996 from $6.2 million in 1995. The
increase in net loss primarily was due to disproportionately higher increases in
operating expenses and interest expense as compared to increases in the
Company's direct contribution margin. This was the result of the Company adding
infrastructure during the year to support an expected increase in the number of
installed units.
YEARS ENDED DECEMBER 31, 1995 AND 1994
REVENUE
Revenue increased to $1.1 million in 1995 from $325,000 in 1994. The
increase was due principally to the increase in the number of Coinstar units
placed in service during 1995 and the increase in the volume of coins processed
by the units in service during that year. The installed base of Coinstar units
increased to 263 at the end of 1995 from 48 at the end of 1994. The dollar value
of coins processed increased to $17.7 million during 1995 from $5.2 million in
1994.
DIRECT OPERATING EXPENSES
Direct operating expenses increased to $1.3 million in 1995 from $488,000 in
1994. The increase in direct operating expenses was primarily attributable to
increased coin pickup and processing costs as a result of the increased dollar
volumes processed by the network and the overall growth of the number of units
in service. The increase was also attributable to higher field service personnel
expenses associated with the hiring and training of new field service personnel
to support the Company's accelerated growth and its expansion into seven new
regional markets in 1995. Operating expenses as a percentage of revenue
decreased to 126% in 1995 from 150% in 1994.
REGIONAL SALES AND MARKETING
Regional sales and marketing expenses increased to $349,000 in 1995 from
$86,000 in 1994. The increase in regional marketing expense was the result of an
increased level of advertising, cooperative promotion with its retail
distribution partners and public relations efforts focused in the new startup
regions installed during 1995. Substantially all of the Company's sales and
marketing expenses in 1995 were attributable to startup marketing activities as
the Company increased its installed base to 11 regions at the end of 1995 from
four regions in 1994.
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PRODUCT RESEARCH AND DEVELOPMENT
Product research and development expenses increased to $1.8 million in 1995
from $1.6 million in 1994 due largely to the costs related to the improvement of
existing and development of new Coinstar unit software, hardware, network
applications and development costs related to new service offerings.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased to $2.8 million in
1995 from $1.7 million in 1994. The increase primarily reflects an investment in
higher staffing levels to support the Company's rapid growth and expansion.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased to $1.1 million in 1995 from
$439,000 in 1994. The increase was primarily due to the increase in the
installed base of Coinstar units during these years.
INTEREST INCOME AND EXPENSE
Interest income increased to $398,000 in 1995 from $34,000 in 1994. The
increase in interest income is attributable to higher invested cash balances
resulting from the proceeds received from private debt and equity financings.
Interest expense decreased to $208,000 in 1995 from $297,000 in 1994
primarily as a result of a lower average level of borrowings during 1995.
NET LOSS
Net loss increased to $6.2 million in 1995 from $4.3 million in 1994. The
increase in net loss was the result of operating expenses increasing at a higher
amount than the Company's increase in revenue during the period.
INCOME TAXES
At December 31, 1996 and 1995, the Company had net deferred tax assets of
approximately $9.9 million and $4.4 million, respectively, resulting primarily
from net operating loss and credit carryforwards available to offset future
income and tax obligations, respectively. The extent to which the loss
carryforwards can be used to offset future taxable income will be limited
because of the ownership changes within any three-year period as provided in the
Tax Reform Act of 1986. The Initial Public Offering may trigger such a
limitation as a result of which the annual usage will be limited by the market
value of the Company at the closing of the offering multiplied by the then
current long-term tax exempt interest rate. Such federal carryforwards expire
through 2011. Based upon the Company's history of operating losses and
expiration dates of the loss carryforwards, the Company has recorded a valuation
allowance to the full extent of its net deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
Since inception and prior to its Initial Public Offering in July 1997, the
Company has funded its operations primarily through the private sale of equity
securities, equipment lease financing, bank borrowings and the sale of the
Notes. As of June 30, 1997, the Company had cash and cash equivalents of $16.3
million, short-term investments of $23.1 million and working capital of $22.7
million. Cash and cash equivalents include $11.1 million of funds in transit,
which represent amounts being processed by armored car carriers or residing in
Coinstar units. Net cash used by operating activities was $1.3 million for the
six months ended June 30, 1997 and net cash used by operating activities was
$400,000 for the six months ended June 30, 1996. Net cash used by operating
activities was $3.4 million, $4.5 million, $2.6 million for
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<PAGE>
1996, 1995 and 1994, respectively. The principal use of cash for all periods was
to fund net operating losses incurred, partially offset by depreciation and
other non-cash charges, and in 1996 and the six months ended June 30, 1997 by an
increase in accrued liabilities.
Net cash used by investing activities during the six month period ended June
30, 1997 was $6.1 million and $9.8 million for the comparable 1996 period.
Capital expenditures for such periods were $15.4 million and $9.7 million,
respectively. Net cash used by investing activities was $53.2 million, $3.9
million and $2.2 million in 1996, 1995 and 1994, respectively. Capital
expenditures for such years were $20.8 million, $3.8 million and $2.2 million,
respectively. The majority of capital expenditures consist of the purchase of
Coinstar units. The installed cost of the Coinstar unit decreased over time to
approximately $13,500 in 1996 from approximately $22,200 in 1993. The Company
expects the cost of the unit to continue to decrease in 1997. In 1996, $32.2
million of the Company's investing activities were for the purchase of
short-term investments. At the end of 1996, the Company's purchase commitments
for 1997 totaled $8.7 million.
Net cash used by financing activities for the six month period ended June
30, 1997 was $200,000 and net cash provided by financing activities for the six
month period ended June 30, 1996 was $3.3 million. Net cash provided by
financing activities was $66.3 million, $21.2 million and $4.7 million in 1996,
1995 and 1994, respectively. For 1996, financing activities consisted primarily
of the sale of the Notes. For 1995, financing activities consisted primarily of
proceeds from the sale of Preferred Stock. For 1994, financing activities
consisted primarily of borrowings under short-term debt obligations which were
subsequently converted into Preferred Stock.
During 1995, the Company entered into a loan agreement which allowed for
maximum borrowings of $2.0 million to be drawn under specific notes and secured
by certain equipment of the Company. The Company drew down approximately $2.0
million under five separate notes between November 1995 and February 1996. The
effective annual interest rate on this loan was 17.5%, and the loan was due in
monthly installments. The Company repaid this note in December 1996. In
connection with this loan, the Company issued 49,231 detachable warrants to
purchase shares of Series C Preferred Stock at an exercise price of $3.25. Upon
the closing of the Initial Public Offering, such warrants automatically
converted into warrants to purchase an equivalent number of shares of Common
Stock.
In January 1996, the Company entered into a loan agreement which allows for
maximum borrowings of $3.0 million to be drawn under specific notes secured by
certain equipment of the Company. During 1996, the Company drew the entire $3.0
million. The effective annual interest rate on this loan is 16.6% and the loan
is due in monthly installments that will be paid through October 1999. In
connection with this loan, the Company issued detachable warrants to purchase
93,750 shares of its Series D Preferred Stock at an exercise price of $4.00.
Upon the closing of the Initial Public Offering, such warrants automatically
converted into warrants to purchase an equivalent number of shares of Common
Stock.
In August 1996, the Company entered into a $7.0 million term loan facility
and a $250,000 line of credit. The facility was secured by certain Coinstar
units and all remaining corporate assets, excluding specific equipment currently
under lease or purchase money security interest. The Company drew approximately
$4.5 million on this loan during 1996. The term loan bore interest at the rate
of prime plus 3.5% and was payable on December 31, 2000. The line of credit bore
interest at the rate of prime plus 3.0% and expired on August 12, 1997. The
Company paid off this loan in December 1996. In connection with this loan, the
Company issued detachable warrants to purchase 51,176 shares of its Series D
Preferred Stock at an exercise price of $4.25. Upon the closing of the Initial
Public Offering, such warrants automatically converted into warrants to purchase
an equivalent number of shares of Common Stock.
In October 1996, the Company issued and sold a total of $95.0 million in
aggregate principal amount at maturity of the Notes due 2006, and warrants to
purchase an aggregate of 665,000 shares of Common Stock at a nominal exercise
price for proceeds, net of issuance costs, of $62.9 million. Although interest
is not payable prior to April 1, 2000, the carrying amount of such indebtedness
accretes as the original issue
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<PAGE>
discount is amortized through maturity in October 2006 and the Company's
interest expense includes such accretion. Cash interest on the Notes will accrue
and be payable semi-annually in arrears at the rate of 13.0% per annum, on
October 1 and April 1. No principal payments on the Notes are due prior to
maturity in 2006. The Notes are redeemable at the option of the Company in whole
or in part within 60 days of the consummation of a Public Equity Offering for an
amount equal to 118% of the accreted value as of the date of redemption, plus
accrued and unpaid interest and Liquidated Damages, if any. Otherwise the Notes
are redeemable after October 1, 2001 at declining redemption prices to maturity.
The Indenture governing the Notes contains certain covenants that, among other
restrictions, limit the Company's ability to pay dividends or make other
restricted payments, engage in transactions with affiliates, incur additional
indebtedness, effect asset dispositions or merge or sell substantially all its
assets.
In July 1997, the Company completed its Initial Public Offering of 3,000,000
shares of Common Stock at a purchase price of $10.50 per share for net proceeds
of approximately $28.5 million. The net proceeds received by the Company will be
used (i) predominantly to fund capital expenditures and working capital in
connection with the continued expansion of the Coinstar network, (ii) for
product research and development, and deployment of enhancements to the Coinstar
unit and the coin processing network and (iii) for general corporate purposes.
The Company believes existing cash equivalents and short-term investments
will be sufficient to fund its cash requirements and capital expenditure needs
for the continued expansion of the Coinstar network at the recent installation
rate for at least the next twelve months. The extent of additional financing
needed will depend on the success of the Company's business. If the Company
significantly increases installations beyond planned levels or if unit coin
processing volumes generated are lower than historical levels, the Company may
seek additional external financing to fund its cash needs. The Company's future
capital requirements will depend on a number of factors, including the timing
and number of unit installations, the type and scope of service enhancements,
and the level of market acceptance of the Company's service. In addition,
beginning in April 2000, the Company will have debt service obligations under
the Notes that were issued in October 1996 of over $12 million per year until
October 2006, at which time the principal amount of the Notes ($95.0 million)
will be due.
QUARTERLY FINANCIAL RESULTS
The following table sets forth selected unaudited quarterly financial
information and operating data for the last five quarters. This information has
been prepared on the same basis as the Company's Financial Statements and
includes, in the opinion of management, all normal and recurring adjustments
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<PAGE>
that management considers necessary for a fair statement of the quarterly
results for the periods. The operating results and data for any quarter are not
necessarily indicative of the results for future periods.
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1996 1996 1996 1997 1997
--------- ------------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue........................................... $ 1,388 $ 2,830 $ 3,349 $ 3,995 $ 5,294
Expenses:
Direct operating................................ 1,321 2,110 2,940 3,450 3,966
Regional sales and marketing.................... 407 396 494 630 972
Product research and development................ 762 1,014 1,533 1,441 1,640
Selling, general and administrative............. 1,067 1,425 1,987 2,528 2,630
Depreciation and amortization................... 796 1,098 1,741 1,684 2,158
Loss from operations.............................. $ (2,965) $ (3,213) $ (5,346) $ (5,738) (6,072)
OTHER DATA:
Number of New Coinstar units installed during the
period.......................................... 364 413 292 428 406
Installed base of Coinstar units at end of
period.......................................... 796 1,209 1,501 1,929 2,335
Number of regional markets........................ 18 22 23 27 33
Dollar value of coins processed................... $ 20,692 $ 37,637 $ 44,841 $ 52,724 $ 70,626
Direct contribution (loss)(1)..................... 67 720 409 545 1,328
Direct operating expense per average installed
unit(2)......................................... 2,205 2,055 2,112 2,037 1,858
</TABLE>
- ------------------------
(1) Direct contribution (loss) is defined as revenue less direct operating
expenses. The Company uses direct contribution (loss) as a measure of
operating performance to assist in understanding its operating results.
Direct contribution (loss) is not a measure of financial performance under
GAAP and should not be considered in isolation or an alternative to gross
margin, income (loss) from operations, net income (loss), or any other
measure of performance under GAAP.
(2) Based on monthly averages of units in operation over the applicable period.
Based on its limited operating history, the Company believes that coin
processing volumes have been affected by seasonality; in particular the Company
believes that on a relative basis coin processing volumes are lower in the
months of January, February, September and October. There can be no assurance,
however, that such seasonal trends will continue. Any projections of future
seasonality are inherently uncertain due to the Company's limited operating
history, and due to the lack of comparable companies engaged in the coin
processing business. The Company's revenue growth in the third and fourth
quarters of 1996 reflect the acceleration of Coinstar unit installations
beginning in the second quarter of that year and higher coin volumes generated
by its older units in service, offset in part by the seasonally lower coin
processing volume of its installed base. In addition to the seasonal impact of
such fourth quarter revenues, direct contribution in that fourth quarter
reflects higher direct operating expenses as a percentage of revenue and higher
field service expenses from the anticipated entry into new regional markets.
Higher coin pickup and processing costs were attributable principally to
seasonally lower volumes and a semi-fixed pickup schedule largely in effect
during the period. The Company experienced improved pickup efficiencies in the
quarters ended March 31, 1997 and June 30, 1997 and continues to take measures
to optimize such efficiencies.
In addition to fluctuations in revenue resulting from factors affecting
customer usage, timing of unit installations will result in significant
fluctuations in quarterly results. The rate of installations does not follow a
regular pattern, as it depends principally on installation schedules determined
by agreements
39
<PAGE>
between the Company and its retail distribution partners, variable length of
partner trial periods and the planned coordination of multiple partner
installations in a given geographic region.
Increasing quarterly losses from operations during the periods presented
were the result of higher direct operating expenses associated with the
significant increase in the Company's installed base, higher depreciation and
amortization expense from the expansion of the installed base and the
significantly higher level of systems infrastructure and management personnel to
support the Company's accelerated growth. The Company expects to continue to
incur substantial and increasing quarterly operating losses from operations as
it plans to significantly increase its installed base of Coinstar units.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard ("SFAS") No. 128, EARNINGS PER
SHARE, was recently issued and is effective for the Company's fiscal year ending
December 31, 1997. This statement requires a change in the presentation of
earnings per share. Early adoption of this statement is not permitted.
Management believes that the impact of the adoption of this statement on the
financial statements, taken as a whole, will not be material.
SFAS No. 130, REPORTING COMPREHENSIVE INCOME, and SFAS No. 131, DISCLOSURE
ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, were also issued and
are effective for the Company's year ending December 31, 1998. The Company is
currently evaluating the effects of these standards, however, management
believes the impact of adoption will not be material to the financial
statements, taken as a whole.
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BUSINESS
SUMMARY
The Company develops, owns and operates a network of automated, self-service
coin counting and processing machines that provide consumers with a convenient
means to convert loose coins into cash. The Coinstar units, located in
supermarkets and financial institutions in 24 states across the country, accept
and count accumulated loose coins deposited by consumers and issue vouchers
listing the total number, denominations and dollar value of coins processed less
a processing fee charged by the Company, currently 7.5% (prior to 1996 the
Company charged a 10% processing fee on pennies and a 5% processing fee on all
other coins.) The vouchers are redeemable by customers at store cashiers for
either credit towards retail purchases or cash, regardless of whether a purchase
is made. The Company believes its service addresses a significant consumer need
for a convenient and reliable coin processing method. The Coinstar service
provides consumers with a means of redeeming accumulated loose coins and an
alternative to manually presorting, counting and wrapping coins typically
required for cash redemption at a bank. Since inception, the network has
processed over 9.5 million customer transactions consisting of over 7.5 billion
coins worth over $261 million. The Company began commercial deployment of the
Coinstar network in 1994 and, in 1996, significantly accelerated its plans for
installation of the Coinstar units in various geographic regions. As of June 30,
1997, the Company had an installed base of 2,335 units located in supermarkets
and financial institutions in 33 regional markets across the United States.
The Company believes a key competitive advantage is its significant
expertise accumulated over the past five years in designing and manufacturing
the Coinstar units, in developing and supporting a wide-area communications
network capable of receiving and transmitting data to all Coinstar units, and in
building a dedicated field service organization with the ability to rapidly
deploy and service the Coinstar units. The Coinstar unit is a modularly
designed, free-standing machine controlled by an internal computer connected to
the Company's wide-area communications network. The network is critical to
providing high availability of the Coinstar units, maintaining a high level of
customer service and managing direct operating costs. The reliability of the
Coinstar unit and the utilization of the communications network, in conjunction
with the support of the Company's regional field service organization, have
resulted in median availability of units in operation of over 98%. In addition,
the network is used to distribute store-specific promotional programs such as
electronic offers, coupons and advertising.
The Company's primary objective is to extend its position as the leading
provider of automated, self-service coin processing services and to develop new
value-added services that can be delivered through its network. Principal
elements of the Company's growth strategy include: (i) increasing penetration of
its installed base in supermarkets in the largest DMAs nationwide; (ii)
developing and implementing new marketing programs and initiatives to promote
consumer awareness and usage of its service; and (iii) entering new distribution
channels for the installation of the Coinstar unit, such as banks, convenience
stores and mass merchants, and, potentially, international distribution
channels. The Company will continue to evaluate new consumer service offerings
that could be developed to capitalize on its ownership and operation of a
networked service and delivery platform in high traffic retail locations. The
modular construction of the Coinstar unit facilitates the potential addition of
peripherals to provide additional services such as targeted electronic
promotions, event ticketing and smart card applications.
THE RECURRING FLOW OF COINS IN THE ECONOMY
THE NEW YORK TIMES has reported that an estimated 288 billion cash
transactions have occurred on an annual basis in the United States. Assuming
that the change generated by each such cash transaction averaged fifty cents,
the annual coin flow resulting from such transactions would have been
approximately $144 billion. Based on the current population in the United
States, the average person handles approximately $600 in coins each year. To
support this flow of coins in the economy, the U.S. Mint has produced $15
billion in new coins over the past 25 years. According to the U.S. Mint, the
circulating stock of coins used in cash transactions is approximately $8
billion, which the Company estimates would have to turn over
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<PAGE>
approximately 18 times a year to support a coin flow of $144 billion. The
prevalence of coins in cash transactions and the lack of a convenient
alternative for converting coins into cash has resulted in the accumulation of
coins. Based on the U.S. Mint data above, only $8 billion of the $15 billion in
coins produced over the last 25 years (the useful life of a coin) are regarded
as circulating, and the Company believes there is an estimated $7 billion of
non-circulating coins. New coins are made to replace those that fall out of
circulation and to support the increasing size of the economy. In 1996 alone,
the U.S. Mint produced over 19 billion new coins worth approximately $1 billion.
The Company believes a significant market opportunity exists for providing a
convenient method of redeeming non-circulating coins and recycling the recurring
coin flow in the United States economy. The actual size of the market of
recyclable coins potentially available to the Company, however, is limited by
the number of geographic locations in which it is economically feasible for the
Company to locate units. In addition, many consumers regularly use their loose
change in commercial transactions rather than accumulating it, or may elect
other alternatives for recycling their accumulated coins. In 1996 the Company
processed approximately $115 million of coins. See "Risk Factors."
The Company believes there is no widely available technology to quickly,
accurately and reliably sort and count odd volumes of coins in a self-service
environment. Traditionally, banks and other depository institutions have been
the primary means by which consumers could convert coins into cash, but they
typically have provided the service only to their depositors and generally only
after the coins have been pre-sorted, counted and wrapped in paper rolls by the
consumer, an inefficient and labor-intensive process. The lack of an efficient,
hassle-free alternative for consumers to convert coins into cash presents the
Company with a significant opportunity to capitalize on redeeming
non-circulating coins as well as recycling coins on a regular basis.
[CHART SHOWING ESTIMATED ANNUAL FLOW OF CONSUMER COINS IN THE U.S. ECONOMY,
DESIGNATING (1) THE ESTIMATED ANNUAL COIN FLOW IN THE U.S. ECONOMY OF $144
BILLION AND PER PERSON OF $600, (2) THE ESTIMATED TOTAL OF COINS OUT OF
CIRCULATION OF $7 BILLION, (3) THE AMOUNT OF COINS PROCESSED BY THE COMPANY
IN 1996 OF $115 MILLION, AND (4) THE AMOUNT OF COIN PRODUCTION BY THE U.S.
MINT IN 1996 OF $1 BILLION AND FROM 1972-1996 OF $15 BILLION. THE ESTIMATED
ANNUAL COIN FLOW INFORMATION REFERS TO A FOOTNOTE STATING "THE NEW YORK
TIMES HAS REPORTED THAT AN ESTIMATED 288 BILLION CASH TRANSACTIONS HAVE
OCCURRED ON AN ANNUAL BASIS IN THE UNITED STATES. ASSUMING THAT THE CHANGE
GENERATED BY EACH SUCH TRANSACTION AVERAGED FIFTY CENTS, THE ANNUAL COIN
FLOW RESULTING FROM SUCH TRANSACTIONS WOULD HAVE BEEN APPROXIMATELY $144
BILLION. BASED ON THE CURRENT POPULATION IN THE UNITED STATES, THE AVERAGE
PERSON HANDLES APPROXIMATELY $600 IN COINS EACH YEAR." COINS OUT OF
CIRCULATION INFORMATION REFERS TO A FOOTNOTE STATING "THE U.S. TREASURY
ESTIMATES THAT THE CUMULATIVE COIN PRODUCTION IN THE UNITED STATES HAS
TOTALED APPROXIMATELY $23 BILLION. THE U.S. MINT ESTIMATES THAT A COIN HAS A
USEABLE LIFE OF APPROXIMATELY 25 YEARS. FOR THE PURPOSES OF CALCULATING
THESE FIGURES, THE COMPANY DOES NOT INCLUDE COINS OLDER THAN 25 YEARS. BASED
ON THE U.S. MINT DATA, ONLY $8 BILLION OF THE $15 BILLION IN COINS PRODUCED
IN THE LAST 25 YEARS ARE REGARDED AS CIRCULATING, AND THE COMPANY BELIEVES
THAT THERE IS AN ESTIMATED $7 BILLION IN NON-CIRCULATING COINS. INCLUDING
COIN PRODUCTION PRIOR TO 1972, THE TOTAL DOLLAR VOLUME OF COINS OUT OF
CIRCULATION WOULD BE APPROXIMATELY $15 BILLION."]
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THE COINSTAR SOLUTION
The Company has designed, developed and is commercially deploying, in scale,
what the Company believes to be the first and only widespread network of
automated, self-service coin counting and processing machines. The Company
believes its service addresses a significant consumer need for a convenient and
reliable coin processing method. The Coinstar service provides consumers with a
means of redeeming accumulated loose coins and an alternative to manually
presorting, counting and wrapping coins typically required for cash redemption
at a bank or other depository institution. The Company believes a key
competitive advantage is its significant expertise accumulated over the past
five years in designing and manufacturing the Coinstar units, in developing and
supporting a wide-area communications network capable of receiving and
transmitting data to all Coinstar units, and in building a dedicated field
service organization with the ability to rapidly deploy and service the Coinstar
units.
Consumers take their accumulated loose coins to a supermarket or other
retail distribution channel, process them in a Coinstar unit and receive a
voucher. The voucher lists the total number, denominations and dollar value of
coins processed less a processing fee charged by the Company, currently 7.5%
(prior to 1996 the Company charged a 10% processing fee on pennies and a 5%
processing fee on all other coins). The voucher is redeemable by the customer at
the store cashier for either credit towards retail purchases or cash, regardless
of whether a purchase is made.
The key elements of the Coinstar system are:
- COINSTAR UNIT. The Coinstar unit is an automated, self-service coin
processing machine that incorporates certain hardware, electronics, and
software components in a free-standing unit. The unit is highly accurate,
durable, easy to use and service, and capable of processing up to 600
coins per minute. The Company's proprietary advances relating to certain
aspects of coin processing enable the Coinstar unit to handle moisture,
dirt, lint and other debris with infrequent clogging or malfunctioning,
important features for operating in a self-service environment. Each unit
is controlled by an internal computer that runs a multi-tasking operating
system and is connected to the Company's wide-area communications network.
The unit's flexible modular design, developed after extensive field
testing, supports new applications developed by the Company, systems
upgrades and expansion to address evolving customer needs.
- NETWORK. The Coinstar units have been designed to operate as part of a
two-way, wide-area communications network. The network is designed to
allow the Coinstar units to transmit key financial data and operating
statistics to headquarters on a daily basis. This information allows the
Company to accurately track unit coin flows and operating performance,
enabling the Company to efficiently schedule coin pickups, provide unit
service and perform essential accounting and reporting functions. In
addition, the network enables the Company to configure the units remotely
with a variety of operational data, store specific advertising, on-screen
promotions, coupons and future enhancements to the Coinstar unit.
- REGIONAL FIELD SERVICE ORGANIZATION. The Company has built a regional
field service organization with the primary goal of providing highly
responsive service to its retail distribution partners. The field service
organization is responsible for installing units, performing preventative
maintenance and repairs, and ensuring efficient collection and handling of
coins.
The reliability of the Coinstar unit and the utilization of the
communications network, in conjunction with the support of the Company's
regional field service organization, have resulted in median availability of
units in operation of over 98%.
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The Company's Coinstar units, first test marketed in 1993, were in operation
in 52 supermarket chains and financial institutions in 33 market regions across
the United States as of June 30, 1997. The following table sets forth key data
which highlight the Company's growth:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR-ENDED DECEMBER 31, JUNE 30,
--------------------------------------------- ---------------------
1993 1994 1995 1996 1996 1997
----- --------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Installed base of Coinstar units at end of
period........................................... 17 48 263 1,501 796 2,335
Number of regional markets......................... 2 4 11 23 18 33
Number of full time employees...................... 15 35 56 160 90 245
Number of coins processed (in millions)............ 2 147 461 3,407 944 3,569
Dollar value of coins processed (in thousands)..... $ 74 $ 5,245 $ 17,701 $ 115,476 $ 32,998 $ 123,350
</TABLE>
BUSINESS STRATEGY
The Company's primary objective is to extend its position as the leading
provider of automated, self-service coin processing services and to develop new
value-added services that can be delivered through its network. Principal
elements of the Company's growth strategy include the following:
INCREASE UNIT PENETRATION IN SUPERMARKETS IN LEADING MARKETS
The focus of the Company's growth has been to increase its installed base in
supermarkets in some of the largest DMAs in the country. The Company believes
that installation of Coinstar units in supermarket chains provides meaningful
benefits to its retail distribution partners, such as offering a new customer
service, increasing store traffic, promoting sales and generating media
coverage. The Company has targeted supermarkets as its initial primary
distribution channel for deployment of its units because of the prevalence of
large regional chains, geographic concentration of stores and recurring consumer
traffic, all of which create economies of scale for the marketing, deployment
and operation of the Coinstar units. The Company estimates that there are
approximately 30,000 supermarkets in the United States, 25,000 of which are
located in the 100 largest DMAs targeted by the Company.
INCREASE COIN VOLUME
The Company believes that increasing the volume of coins processed by each
unit is dependent on generating greater consumer awareness of the service. The
Company is increasing public relations initiatives associated with new market
launches, developing additional cooperative advertising programs with its retail
distribution partners and increasing its field marketing activities.
Additionally, in May 1997 the Company began a pilot program in the western
region of the State of Washington that provides consumers with a means for
making tax-deductible cash donations to participating non-profit organizations
of their choice through the Coinstar unit.
ENTER NEW DISTRIBUTION CHANNELS
BANKS AND OTHER DEPOSITORY INSTITUTIONS. The Company believes that it could
provide banks and other depository institutions with an economical way to handle
their in-branch coin processing needs. Traditionally, banks and other depository
institutions have been the primary means by which consumers could convert coins
into cash, but they typically have provided the service only to their depositors
and generally only after the coins have been pre-sorted, counted and wrapped in
paper rolls by the consumer, an inefficient and labor-intensive process.
However, many banks and other depository institutions would rather not spend the
resources required for coin deposit services and are making it increasingly
difficult for consumers to convert coins into cash at the teller window. The
Company believes it can provide these
44
<PAGE>
banks and depository institutions with a turnkey program that requires no
capital investment and that offers a new customer service. This program could
result in a significant reduction in teller time and associated coin handling
costs, and a potential new source of consumer and vendor deposits. The first
pilot program with a regional bank was deployed in May 1997.
CONVENIENCE STORES AND MASS MERCHANTS. The Company believes that, like
supermarkets, convenience stores and other mass merchants represent a viable
retail distribution channel for its service, offering a large market of
potential consumers, a convenient location for multiple consumer visits and
opportunities for large-scale deployments. Accordingly, the benefits offered to
these potential retail distribution partners for placing a Coinstar unit on
their premises are similar to those realized by supermarkets.
INTERNATIONAL MARKET. A number of potential retail distribution partners in
foreign countries have expressed interest in international expansion of the
Coinstar network. The Company believes that its network and software technology
could be adapted to meet the requirements of several foreign coin sets.
DEVELOP NEW VALUE-ADDED SERVICES FOR DELIVERY THROUGH THE NETWORK
The Company will continue to evaluate new consumer service offerings that
could be developed to capitalize on its ownership and operation of a networked
computerized service and delivery platform in high traffic retail locations. The
Coinstar unit is designed with an internal computer, high-speed two-way
communications system, color monitor, printer, keypad and speaker, which give
the Company the flexibility to upgrade its current services offerings and to
expand to new applications. The modular construction of the Coinstar unit also
facilitates the potential addition of other peripherals, such as card readers,
scanners, and touch screens, which could enable the Company to provide
additional services such as point of sale links, smart card applications,
frequent shopper program links, electronic promotions, coupons, advertising and
event ticketing, such as movies and concerts. The Company believes that such
additional services may increase the value of a transaction to a customer and
promote usage of the Coinstar unit. Although the Company frequently evaluates
the relative risks and merits of introducing new value-added services, the
Company has not made a determination to add any of the value-added services
described above and does not have any current plans to incorporate such
additional services.
SALES AND MARKETING
The Company's current sales and marketing efforts are focused on expanding
the Coinstar network within the United States and generating higher coin volumes
for each Coinstar unit. The Company's retail distribution partner marketing
strategy is to significantly increase its penetration with existing retail
distribution partners as well as to establish relationships with new retail
distribution partners in the 100 largest DMAs. The Company's consumer marketing
strategy highlights the core benefits to consumers, which the Company believes
are convenience and increased disposable income, to help build market awareness
and increase consumer usage.
MARKETING TO RETAIL DISTRIBUTION PARTNERS
The Company's retail development group is responsible for increasing the
installed base of Coinstar units within retail chains in the 100 largest DMAs.
Since the Coinstar service combines many aspects of the marketing, advertising,
accounting and operations of potential retail distribution partners, sales calls
can be made at the corporate, regional and store level of retail chains in each
DMA. Entry and expansion within a chain is frequently accomplished through a two
stage process, whereby a chain places a limited number of Coinstar units in its
stores for an evaluation period, after which it decides whether to commit to
chain-wide expansion. When marketing to supermarkets, the Company highlights the
following key benefits of its service:
- ENHANCES CUSTOMER SERVICE. Supermarket retailing is a highly competitive
business with low margin, high volume unit economics that demands tight
expense control. As a result, supermarkets
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<PAGE>
continuously pursue cost savings initiatives and customer service
opportunities to encourage shopper loyalty and attract new shoppers. The
Coinstar unit enables supermarkets to provide a convenient service to
their customers using minimal store space, while incurring virtually no
additional cost.
- INCREASES STORE TRAFFIC. The Company believes that installation of the
Coinstar unit helps to increase store traffic. A market study conducted in
1995 by Griggs & Anderson Research, an independent market research firm
hired by the Company, indicated that 33% of the Coinstar unit users were
not in the store in which they normally shop. A survey conducted in 1996
by Northwest Research Group indicated that 87% of the respondents stated
that they would visit another store to use the Coinstar unit if it were
not installed in the store they regularly visit.
- PROMOTES SALES. The Company believes that installation of the Coinstar
unit can promote sales for its retail distribution partners by putting new
disposable income in shoppers' hands while they are in the store. Coinstar
customers are more likely to make a purchase in the store because they
generally must redeem their vouchers at a check-out counter. The Company's
market study indicated that 77% of customers spent some or all of their
voucher in the store and, on average, customers who spent at least a
portion of their voucher estimated that they spent 70% of their voucher in
the store. Moreover, the study indicated that, of the Coinstar users who
were not in the store in which they usually shop, 79% made purchases in
that store. This first opportunity at new "found" money provides
supermarkets with an increased opportunity of generating incremental
sales.
- GENERATES MEDIA COVERAGE. In order to increase awareness of the Coinstar
unit and the supermarkets in which they are located, the Company usually
launches a public relations effort in a new region or for a new
supermarket partner, including coverage by the mass media, in-store
merchandising, demonstrations and co-operative advertising.
The following table presents the Company's historical unit growth and
geographical expansion over the last four years and as of June 30, 1997. As of
June 30, 1997, the Company's network of Coinstar units was operating in 52
supermarket chains and financial institutions located in 24 states.
46
<PAGE>
UNIT EXPANSION BY STATE
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------ JUNE 30,
STATE 1993 1994 1995 1996 1997
- ------------------------------------------------------- ----- ----- ----- --------- -----------
<S> <C> <C> <C> <C> <C>
California............................................. 17 30 112 491 529
Washington............................................. 18 55 93 110
North Carolina......................................... 32 70 100
Virginia............................................... 24 37 37
New York............................................... 19 153 228
New Jersey............................................. 13 98 197
Ohio................................................... 6 83 166
South Carolina......................................... 2 3 28
Texas.................................................. 135 197
Pennsylvania........................................... 98 144
Indiana................................................ 58 84
Massachusetts.......................................... 54 54
Arizona................................................ 51 75
Georgia................................................ 33 101
Colorado............................................... 31 52
Delaware............................................... 7 14
Kentucky............................................... 5 8
Vermont................................................ 1 2
Michigan............................................... 69
Utah................................................... 23
Illinois............................................... 13
Nevada................................................. 38
Tennessee.............................................. 44
Louisiana.............................................. 22
-- --
--- --------- -----
Total installed units.................................. 17 48 263 1,501 2,335
-- --
-- --
--- --------- -----
--- --------- -----
</TABLE>
The Company estimates that there are approximately 30,000 supermarkets in
the United States. The following table sets forth, as of June 30, 1997 for each
supermarket chain and financial institution, the number of Coinstar units
installed, the total number of stores and branches in operation and the
penetration of the Company's installed base.
47
<PAGE>
<TABLE>
<CAPTION>
UNITS TOTAL
CHAIN INSTALLED STORES(1) PENETRATION
- ------------------------------------------------------- ----------- ------------- -------------
<S> <C> <C> <C>
Abco Markets........................................... 24 53 45%
Acme Market............................................ 3 183 1
Acme................................................... 19 19 100
A & P.................................................. 64 427 15
Bel Air................................................ 15 17 88
Bi-Lo.................................................. 32 261 12
Cala Foods............................................. 20 29 69
Clemens Markets........................................ 3 17 19
Dominick's Finer Foods................................. 13 86 15
Drexel Hill Foods...................................... 1 1 100
Fifth Third Bank....................................... 4 411 *
Fleming Foods.......................................... 17 87 19
Food 4 Less............................................ 75 77 97
Food Lion.............................................. 1 1,105 *
Seaway Food Town....................................... 23 43 53
Food Mark.............................................. 3 7 43
Garrett Foods.......................................... 1 1 100
Gerland's.............................................. 20 20 100
Giant Eagle............................................ 98 104 94
Giant.................................................. 2 173 1
Grand Union............................................ 35 224 15
Haggen(2).............................................. 13 17 76
Harris Teeter.......................................... 85 136 62
Hughes Family Markets.................................. 56 57 98
K.V. Mart.............................................. 19 19 100
King Kullen............................................ 43 47 91
Kroger(3).............................................. 502 1,372 36
L&R Food............................................... 1 less than 10 N/A
Larry's Markets........................................ 5 6 83
Lucky Stores........................................... 39 436 9
Marsh Supermarkets..................................... 58 86 67
Mega Foods............................................. 1 less than 10 N/A
MidFirst Credit Union.................................. 1 less than 10 N/A
Olson's................................................ 1 1 100
Pak-n-Sav.............................................. 1 17 6
Pathmark Stores........................................ 128 144 89
Price Chopper.......................................... 39 93 42
Quality Food Centers(4)................................ 89 89 100
Raley's................................................ 44 70 63
Ralph's................................................ 252 265 95
Randall's.............................................. 68 71 95
Safeway................................................ 5 836 *
Save Mart.............................................. 22 92 24
Schwegmann Giant Supermarkets.......................... 22 26 84
Shop-Rite.............................................. 66 168 39
Smith's(5)............................................. 88 150 58
Star Market............................................ 50 51 98
Stater................................................. 5 110 4
Super Fresh............................................ 42 113 37
Tom Thumb.............................................. 48 51 94
Twin County Grocers (Foodtown)......................... 19 22 86
Waldbaum's............................................. 50 90 55
----- ------------- ---
Total................................................ 2,335 7,983 29%
----- ------------- ---
----- ------------- ---
</TABLE>
- ------------------------
*less than 1%
(1) Source: Company estimates and Trade Dimensions.
(2) Includes Top Foods, a division of Haggen.
48
<PAGE>
(3) Includes King Soopers Stores, a division of Kroger.
(4) Includes Stock Market Foods, a division of QFC.
(5) Includes Smitty's, a division of Smith's.
Generally, the Company enters into separate agreements with each of its
retail distribution partners, providing for the Company's exclusive right to
provide coin processing services in their retail locations. These contracts
generally have terms ranging from two to three years and are generally
terminable by either party with advance notice of at least 90 days. The Company
and the retail distribution partner may also agree to certain marketing
arrangements, such as promotional and public relations activities and
advertising. In addition, Coinstar units in service in several supermarket
chains account for a significant portion of the Company's revenue. In the six
months ended June 30, 1997, Coinstar units in service in three supermarket
chains accounted for approximately 32.3% of the Company's revenue. The units in
service in two of these chains, Ralphs and Kroger, accounted for approximately
11.0% and 13%, respectively, of the Company's revenue in the six months ended
June 30, 1997. The termination of any one or more of the Company's contracts
with its retail distribution partners could have a material adverse effect on
the Company's business, financial condition and results of operations and on its
ability to achieve sufficient cash flow to service its indebtedness. See "Risk
Factors--Fluctuations in Quarterly Operating Results" and "Risk
Factors--Possible Termination of Retail Distribution Partner Agreements."
MARKETING TO CONSUMERS
Since the Company offers a new consumer service, an important element of its
marketing strategy is to increase overall consumer awareness of the benefits of
the service. Independent market research conducted in a sample of installed
regions in October 1996 indicates that a majority of the consumers questioned
were unaware of the Coinstar service. To promote consumer awareness, the Company
is implementing an aggressive awareness-building campaign that it believes will
further increase dollar volumes processed by the Coinstar units.
The Coinstar unit has been designed to be prominently branded, highly
identifiable, easily recognized and capable of self promotion to consumers. The
Coinstar unit is generally located near the primary entrance areas of
supermarkets and in clear view of the check-out counters or service centers. The
Company is continually developing additional techniques such as the use of sound
and animation that, when added to the Coinstar unit, are intended to attract
consumers and stimulate awareness and trial.
The Company markets to its supermarket partners' existing customer base by
communicating through advertising media already used by such supermarket
partners, such as cooperative newspaper advertisements and direct mail
circulars, window signs, bag stuffers or printed bags, shelf talkers, in-store
demonstrations and other merchandising aids.
The Company also promotes the Coinstar unit to consumers in general by media
which include the use of free-standing newspaper advertisements, billboards,
radio and television commercials, targeted mailings and door-hangers. The
Company plans to continue to capitalize on its promotional opportunities as it
enters new markets and expands into existing markets with new or existing retail
distribution partners. The Company has generally found local, regional and
national press to be receptive to the Coinstar service and willing to devote
space and/or air time to communicate the Company's message.
The Company is also developing other programs designed to increase the
breadth and volume of consumer usage. In May 1997, the Company began a pilot
philanthropic service program in the western region of the State of Washington
that the Company believes provides non-profit organizations with a highly
cost-effective means of raising money. The new program enables non-profit
organizations to be designated by the customer as recipients of the dollar value
of coins processed by the Coinstar unit. This program provides consumers with a
simple means for making tax-deductible donations. Instead of receiving a voucher
to be redeemed at the retail distribution partner's check-out counter, the
consumer receives a printed receipt evidencing the value of their donation. The
Company has modified the
49
<PAGE>
functionality of the Coinstar unit so that consumers can designate the full
value of their processed coins to a participating organization. The Company and
the participating organizations will conduct joint promotional marketing for the
new service. The organizations pay the Company a fee based on the amount of
money raised through this new service that is significantly less, in general,
than the amount these organizations would otherwise spend to raise funds. See
"Risk Factors--Dependence on Continued Market Acceptance by Consumers and Retail
Distribution Partners."
THE COINSTAR SYSTEM
The Coinstar system consists of a robust unit, a two-way, wide-area
communications network capable of receiving and transmitting data to and from
all units and a dedicated field service organization. The reliability of the
Coinstar unit and the utilization of the communications network, in conjunction
with the support of the Company's regional field service organization, have
resulted in median availability of units in operation of over 98%.
COINSTAR UNIT
The Coinstar unit is comprised of a coin input and cleaning process, a coin
counter that is designed to be jam-resistant, coin collection bins, a computer,
a thermal printer, an input keypad, an internal phone and a color monitor. The
Coinstar unit is highly accurate, durable, easy to use and service, and capable
of processing up to 600 coins per minute. The counter detects foreign coins,
slugs, debris and damaged coins and directs the coins processed to collection
trolleys located inside the Coinstar unit. The Company's proprietary advances
relating to certain aspects of coin processing enable the Coinstar unit to
handle moisture, dirt, lint, and other debris with infrequent clogging or
malfunctioning, important features for operating in a self-service environment.
In October 1996 and April 1997, the Company was issued United States patents
relating to removing debris from coins processed in a self-service environment
and other aspects of self-service coin processing. These patents will expire in
October 2013 and April 2014, respectively. Sufficient debris removal is
important to reducing clogging and malfunctioning. Reducing these problems and
the associated downtime improves unit availability for customer use and reduces
the amount of time that Company or retail partner personnel must spend attending
to the unit, both of which are important features of operating in a self-service
environment.
The Coinstar unit is controlled by an internal computer that runs a
multi-tasking operating system. In addition to controlling and coordinating
Coinstar unit functions, the computer electronically records nearly all aspects
of the unit's operation. The unit electronically logs extensive transaction
information such as a unique transaction number, the dollar amount, time and
duration of each transaction, the numbers of each type of coin processed and the
number of rejected coins. Aggregate log information is transmitted daily over
the Company's wide-area communications network to the Company's headquarters for
analysis and backup.
The Coinstar unit is also equipped with a telephone handset that enables
supermarket personnel to connect directly to the Coinstar Customer Service
Center via a toll free number, providing store personnel direct support in the
event assistance is required.
NETWORK SYSTEM AND TECHNOLOGY
The Company believes that the availability of current performance,
configuration, and financial data through the wide-area communications network
is critical to providing high availability of the Coinstar units, maintaining a
high level of customer service, and managing direct operating costs. The Company
also believes the establishment and development of the network functions are a
significant barrier to entry for competitors. The Company believes that the
following benefits resulting from the network and
50
<PAGE>
associated features enable the Company to provide a higher level of service at a
lower cost than a traditional reactive, dispatch-oriented service organization:
- DOWNLOADABLE SOFTWARE PROGRAMS AND SYSTEMS ENHANCEMENTS. The two-way
network permits headquarters to send information to each Coinstar unit,
customized to the unit's location, including new graphics, animations,
sounds and voucher designs. This capability permits the Company to promote
the use of the service through store-specific advertising, on-screen
promotions, special offers, sweepstakes and coupons. In addition, the
network is used to download new versions of application and operating
system software from headquarters to the units in the field, and effect
other configuration changes electronically, avoiding on-site visits by
Company personnel.
- UNIT OPERATING PERFORMANCE REPORTING. Each Coinstar unit generates daily
performance and operating reports that are transmitted over the network to
headquarters for consolidation and then electronically distributed via the
network to the responsible field service employee. In addition, the
Coinstar unit provides specific service information to the responsible
field employee by directly paging the employee with current operating
information based on a series of predetermined performance criteria. The
Company's personnel use this unit performance information to make
proactive decisions to service each Coinstar unit in advance, such as
determining when a preventative maintenance is required or identifying the
specific maintenance or repairs needed.
- ENHANCEMENT OF FIELD SERVICE PRODUCTIVITY. Performance and operating
reports generated by the network are also used to better utilize field
service and armored carrier personnel. As part of the daily performance
and operating reports sent over the network, each Coinstar unit reports
its fill status and predicts, based on a number of factors, when it will
become full. This information is used by the Company to manage the
efficiency of armored carrier pickups and reduce downtime resulting from
full Coinstar units.
- FINANCIAL REPORTING AND RECONCILIATION. The network allows Coinstar units
to transmit key financial data and operating statistics to headquarters on
a daily basis. The financial and accounting information generated by the
Coinstar units is cross-checked at the Company's headquarters with bank
records and armored carrier processing data logged into the network to
ensure the accuracy, speed and control of each deposit. The Company also
balances the coin counts verified by armored carriers against the coin
counts declared by the Coinstar unit on a bin-by-bin basis, all of which
information is available from the network. In addition, retail
distribution partners receive weekly automated facsimile reports generated
by the network detailing information such as transaction volumes and
deposits made for each store.
- AUTOMATED TRACKING OF COIN COLLECTION, PROCESSING AND DEPOSITS. The
Company is expanding the Company's wide-area communications network to
provide information to, and gather information from, each of the Company's
armored carrier partners by deploying a proprietary automatic receipt
tracking system ("ARTS"). The addition of ARTS to the Coinstar network
enables the Company to track each deposit to the respective bank accounts
of the retail distribution partners and the Company.
The wide-area and local area networks at the Company's headquarters are
coupled securely using sophisticated modern networking equipment. These
scaleable networks are integrated using standard tcp/ip networking protocols
over a 100 Mbps backbone which features automatic segmentation and secure
subnets via firewall and intelligent ethernet switch technology. Headquarters
components of the network operate on widely available personal computers with
advanced reliability features including RAID-5 storage, multi-processor
configurations and clustering. The Company has built an extensive and secure
intranet on top of this physical infrastructure using standard client/server
tools provided by leading industry vendors. The client/server applications
leverage both traditional high performance relational database management
systems technology as well as novel, more flexible, discussion-oriented database
technology. Certain data processing activities occur at the Coinstar unit during
off-peak hours, distributing
51
<PAGE>
the processing load from headquarters and allowing the network of Coinstar units
to grow faster than the corresponding headquarters system capacities. In the
event of a network failure, however, availability of the Coinstar units and
related field service would be negatively impacted until such failure was
repaired, and a continued failure for a sustained period could have a material
adverse effect on the Company's business, financial condition and results of
operations and on the Company's ability to achieve sufficient cash flow to
service its indebtedness. See "Risk Factors--Risks of Defects in Operating
Systems."
REGIONAL FIELD SERVICE ORGANIZATION
The Company has assembled a regional field service organization comprised of
approximately 135 field service personnel and supporting employees with the
primary goal of providing highly responsive service to its retail distribution
partners. The field service organization is responsible for performing
preventative maintenance and repairs and ensuring the efficient collection and
handling of coins.
FIELD SERVICE PERSONNEL. In all markets in which the Company operates, the
field service employee is the Company's primary direct contact with consumers
and retail distribution partners. Every member of the field service team is
connected to the wide-area communications network. Each Coinstar unit generates
daily performance and operating reports which are transmitted over the network
to headquarters for consolidation and then electronically distributed via the
network to the responsible field service employee. In addition, the Coinstar
unit provides specific service information to the responsible field service
employee by directly paging such employee with current operating information
based on a series of predetermined performance criteria. If a site visit is
required, the field service employee responds on location, often before store
personnel at the site become aware of a problem. Such current operating
information is intended to allow Coinstar personnel to use this unit performance
information to make proactive decisions when maintaining the network of Coinstar
units. The most common problems, however, involve simple coin jams, most of
which can be readily fixed by the store manager. More difficult problems are
handled by Coinstar field service personnel.
ARMORED CARRIERS. The Company contracts with armored carrier companies to
handle the transportation and processing of coins deposited in Coinstar units.
The armored carriers are part of the traditional money handling infrastructure
and secure liability and loss insurance to protect the value of the coins
handled by them. The use of these contracted resources facilitates Coinstar's
growth and security with minimal investment in facilities and equipment when
entering new markets. The armored carrier service typically includes removing
the coin trolleys, tagging them for deposit, cleaning of the Coinstar unit,
transporting the coins for processing at the armored carrier's facilities, and
depositing the coins to the Company's local depository for subsequent transfer
to the respective bank accounts of the retail distribution partners and the
Company. The frequency of coin collections by armored carriers is determined by
machine usage and are monitored through the network. By leveraging its wide-area
communications network capabilities with its armored carrier service partners
through ARTS, the Company can efficiently monitor every step of the coin
collection and deposit process and manage the variable costs of pickups.
Generally, the Company contracts with one armored carrier to service a
particular region. Many of these carriers do not have long-standing
relationships with the Company and these contracts generally can be terminated
by either party with advance notice ranging from 30 to 90 days. In the past, the
Company has experienced a sudden disruption in service from an armored carrier
company. The Company does not currently have nor does it expect to have in the
foreseeable future the internal capability to provide back up service in the
event of sudden disruption in service from an armored carrier company. Any
failure by the Company to maintain its existing relationships or to establish
new relationships on a timely basis or on acceptable terms would have a material
adverse effect on the Company's business, financial condition and results of
operations and on the Company's ability to achieve sufficient cash flow to
service its indebtedness. See "Risk Factors--Reliance on Third Party
Manufacturer and Service Providers."
52
<PAGE>
INSTALLATION PERSONNEL. The ability to quickly and reliably perform
large-scale installations of Coinstar units with minimum impact on store
operations is important to building a nationwide network. Each installation is
managed by an individual account manager. For a typical installation, a sales
operations representative visits the store prior to the delivery of the Coinstar
unit to coordinate with the store manager regarding the location of the Coinstar
unit within the store and to review site requirements. Site requirements are
generally limited to a 110 volt outlet and a telephone line. On the day of
delivery, a Coinstar field service employee unpacks, levels and calibrates the
unit and conducts a training and orientation session for store personnel.
PRODUCT RESEARCH AND DEVELOPMENT
The Company has increased its product research and development efforts over
the past several years and expects to continue to spend a significant portion of
its resources on these activities for the foreseeable future. The Company spent
approximately $1.6 million, $1.8 million, and $4.0 million for technology and
product research and development in 1994, 1995, and 1996, respectively. The
Company presently employs approximately 40 software engineers, information
technology specialists and other professional staff in these efforts and
contracts with a number of specialized outside consultants for additional
services. The main focus of the Company's product research and development
efforts includes improvements to the operating systems and enhancements to the
network to support both the continued expansion of the network and the potential
addition of value-added services. See "Risk Factors--Rapid Technological
Change."
MANUFACTURING AND SUPPLY
The Company's manufacturing strategy is to utilize leading manufacturers to
produce Coinstar units at a reasonable cost. The Company believes that using
contract manufacturers has several advantages including decreasing capital
investment in plant and equipment and working capital, the ability to leverage
contract manufacturers' purchasing relationships for lower material costs,
minimal fixed costs of maintaining unused manufacturing capacity, greater
capacity flexibility and the ability to utilize suppliers' broad technical and
process expertise. Currently, the Coinstar units are assembled under contract
with a contract manufacturer in Redmond, Washington, which utilizes several
subsuppliers to provide components and subassemblies. Each Coinstar unit is
manufactured to the Company's proprietary designs and specifications, and all
designs, documentation, tooling, specialized fixtures and test equipment are
owned by the Company. Each unit is inspected and tested for quality by Company
personnel prior to shipment.
The Company does not conduct manufacturing operations and is dependent and
will continue to be dependent on outside parties for the manufacture of the
Coinstar unit and its key components. While Coinstar intends to significantly
expand its installed base, such expansion may be constrained by the
manufacturing capacity of its third party manufacturers and suppliers. Although
the Company expects that its current contract manufacturer, SeaMed, will be able
to produce sufficient units to meet projected demand, there can be no assurance
that SeaMed or other manufacturers will be able to meet the Company's
manufacturing needs in a satisfactory and timely manner. In the event of an
unanticipated increase in demand for Coinstar unit installations by retail
distribution partners, the Company may be unable to meet such demand due to
manufacturing constraints. Although the Company has a contract with SeaMed, it
does not have a long-term obligation to continue the manufacture of the Coinstar
unit or its components. Further, SeaMed is principally engaged in the
manufacture of electronic medical instruments for medical technology companies.
The Company believes that it is SeaMed's only material non-medical customer. As
such, the Company faces an increased risk that SeaMed may choose to focus
exclusively on manufacturing its medical products and cease making the Company's
products. Should SeaMed cease providing services, the Company would be required
to locate and qualify additional suppliers. There can be no assurance that the
Company would be able to locate alternate manufacturers on a timely basis. See
"Risk Factors--Reliance on Third-Party Manufacturers and Service Providers."
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<PAGE>
The Company currently purchases the coin counter component of the Coinstar
unit from a single manufacturer, Scan Coin AB, pursuant to an agreement that may
be terminated by either party with six months notice at any time on or after
June 30, 1998. The Company has entered into a non-binding letter of intent with
Scan Coin AB for a new agreement, although no assurance can be given that the
parties will enter into a new agreement. Currently, no other manufacturer
produces a coin counter capable of being used in the Coinstar units without
extensive enhancements and modifications. No assurance can be given that Scan
Coin AB will be able or willing to supply coin counter components to the Company
in the future. The Company believes that it would require up to 12 months to
source and make necessary modifications to an alternative coin counter
component. Moreover, it could take several additional months for any such
alternative supplier to meet the Company's required volume levels. Accordingly,
any cessation, slow-down or disruption in the Company's current supply of coin
counter components would have a material adverse effect on the Company's
business, financial condition and results of operations and on its ability to
achieve sufficient cash flow to service its indebtedness. Although the Company
believes alternative suppliers are available, there can be no assurance that the
Company would be able to locate an alternate supplier on a timely or cost
efficient basis, if at all, and make the necessary modifications and
enhancements to the design of the Coinstar unit to utilize such replacement,
both of which, in the event of their nonoccurrence, would materially impair its
ability to have Coinstar units manufactured. A prolonged inability to obtain
certain components could have a material adverse effect on the Company's
business, financial condition and results of operations and on its ability to
achieve sufficient cash flow to service its indebtedness, particularly as the
Company increases its manufacturing requirements to support its nationwide
deployment. See "Risk Factors--Exposure to Component Shortages from Single
Source Supplier."
PROPRIETARY RIGHTS
The technology necessary to quickly, accurately and reliably identify, count
and process coins is complex. The Company purchases the coin counter component
of the Coinstar unit on an OEM basis from a third party. The Company has made
several technological advances relating to self-service coin processing that are
important to the successful operation of the Coinstar unit in a self-service
environment. These advancements are implemented both mechanically and through
the Company's software. These technologies enable the Coinstar unit to handle
moisture, dust, lint, dirt, paper, paper clips, and other debris with infrequent
clogging or malfunctioning. In October 1996 and April 1997, the Company was
issued United States patents relating to removing debris from coins processed in
a self-service environment and other aspects of self-service coin processing.
These patents will expire in October 2013 and April 2014, respectively.
Sufficient debris removal is important to reduce clogging and malfunctioning.
Reducing these problems and the associated downtime improves the unit
availability for customer use and reduces the amount of time that Company or
retail partner personnel must spend attending to the unit, both of which are
important features of operating in a self-service environment. The Coinstar unit
also has a unique printed circuit board which contains a non-volatile memory for
data storage purposes. This board stores records of transactions and other
significant events which can be recovered in the event of a main CPU or hard
disk failure. This board also supports downloadable code to facilitate software
modification.
No assurance can be given that any patents will be issued from any pending
patent applications or from any future patent applications will be issued, that
any of the Company's patents will be held valid if subsequently challenged or
that others will not claim rights in or ownership of the patents and other
proprietary rights held by the Company. Moreover, there can be no assurance that
any patents issued to the Company will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide proprietary
protection to the Company. Despite the Company's efforts to safeguard and
maintain its proprietary rights, there can be no assurance that the Company will
be successful in doing so or that the Company's competitors will not
independently develop or patent technologies that are substantially equivalent
or superior to the Company's technologies. On June 18, 1997, the Company filed
in the United States District Court, Northern District of California against
CoinBank, one of its competitors, the Patent Infringement Claim. CoinBank
responded to the Company by letter dated June 23, 1997,
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<PAGE>
alleging that the Company failed to conduct a reasonable investigation before
filing the Patent Infringement Claim, the Patent Infringement Claim is
unreasonable and without factual foundation and the Patent Infringement Claim
was filed for an improper purpose. CoinBank has demanded the Company dismiss
such action, and has indicated that if such action is not dismissed, CoinBank
will answer the Patent Infringement Claim on June 26, 1997 and counterclaim for
declaration of noninfringement, invalidity and unenforceability of the subject
patent and file a claim for $12 million of damages based on the tort of
intentional interference with prospective economic advantage. CoinBank further
stated that it may file a cross-complaint against Scan Coin AB for indemnity and
breach of warranty of title. On June 27, 1997, CoinBank answered the Patent
Infringement Claim and counterclaimed for declaration of noninfringement,
invalidity and unenforceability of the subject patent, and filed a claim for
breach of warranty against Scan Coin AB. There can be no assurance that the
Company will prevail in such Patent Infringement Claim or on any claim that
might be filed by CoinBank against the Company, or that as a result of such
Patent Infringement Claim, the Company's patent will not be limited in scope or
found to be invalid. See "Risk Factors--Uncertainty of Protection of Patents and
Proprietary Rights."
COMPETITION
The Company believes that it is the first company to provide a widespread
network of self-service coin processing machines that provides a convenient,
reliable means for consumers to convert loose coins into cash. The Company has
become aware of two direct competitors that operate self-service coin processing
machines, both of which the Company believes operate an installed base of less
than 50 units in certain regions of the United States. There can be no
assurance, however, that such competitors have not increased or will not
increase their installed base of units or expand their service nationwide. The
Company also competes indirectly with manufacturers of machines and devices that
enable consumers to count or sort coins themselves. The Company also competes or
may compete directly or indirectly with banks and similar depository
institutions for coin conversion customers. Currently, banks are the primary
alternative available to consumers for converting coins into cash, and they
generally do not charge a fee for accepting rolled coins. As the market for coin
processing develops, banks or other businesses may decide to offer additional
coin processing services, either as a customer service or on a self-service
basis, and compete directly with the Company. Many of these potential
competitors have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical, marketing and
public relations resources than the Company. Such competitors may be able to
undertake more extensive marketing campaigns, adopt more aggressive pricing
policies and make more attractive offers to consumers and businesses. There can
be no assurance that the Company will be able to compete effectively with
current or future competitors or that the competitive pressures faced by the
Company will not have a material adverse effect on the Company's business,
financial condition and results of operations and the Company's ability to
achieve sufficient cash flow to service its indebtedness.
The Company believes its proprietary and patented advances relating to
self-service coin processing, its ability to collect and analyze operating and
financial statistics from Coinstar units through its wide-area communications
network, its installed base of units in supermarkets nationwide and its
dedicated regional field service organization are its principal competitive
strengths. There can be no assurance, however, that the Company's competitors,
or others, will not succeed in developing technologies, products or services
that are more effective, less costly or more widely used than those that have
been or are being developed by the Company or that would render the Company's
technologies or products obsolete or not competitive. See "Risk
Factors--Competition."
EMPLOYEES
As of June 30, 1997, the Company had 265 employees, including 20 part-time
field service employees. The Company has separate internal departments,
including sales and marketing, operations, technology
55
<PAGE>
systems and engineering, and finance and administration. No employee is
represented by a union, and the Company has not experienced a work stoppage. The
Company believes its employee relations are good.
PROPERTIES
The Company's headquarters occupies a 24,700 square foot facility in
Bellevue, Washington. The Company operates under a lease which expires in
October 1997. The Company has signed a lease for a 10,196 square foot building
in Bellevue, Washington (the "Maplewood Building") commencing April 1997 and
expiring in March 2002. The Company has also signed a lease for a 46,070 square
foot building currently under construction near the Maplewood Building. The
building is scheduled to be available for occupancy in September 1997, and the
lease for such building expires in August 2004. The Company believes this space
is adequate for its current needs and that it will be able to renew its leases
and obtain additional space, if necessary.
LITIGATION
The Company is not a party to any material legal proceedings other than
those associated with the Patent Infringement Claim. See "Business--Proprietary
Rights."
56
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND SENIOR MANAGEMENT
The executive officers, directors and senior management of the Company, and
their ages as of June 30, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- -------------------------------------------------
<S> <C> <C>
Jens H. Molbak................ 35 President, Chief Executive Officer and Director
Rod W. Brooks................. 44 Vice President of Sales and Marketing
Kirk A. Collamer.............. 44 Vice President and Chief Financial Officer
Aaron R. Finch................ 38 Vice President of Operations
Daniel A. Gerrity............. 36 Vice President and Chief Technical Officer
George H. Clute(1)............ 47 Director
Larry A. Hodges(2)............ 48 Director
David E. Stitt(1)(2).......... 50 Director
Ronald A. Weinstein(1)(2)..... 56 Director
SENIOR MANAGEMENT
Kirk W. Beach................. 43 Director, Software Engineering
William W. Booth.............. 41 Director, Retail Development
Bruce Coonan.................. 50 Director, Consumer Value Marketing
Michael L. Doran.............. 47 Director, Information Systems
Steven M. Geiger.............. 39 Director, Accounting, Controller
Jessaca A. Jacobson........... 34 Director, Sales Operations
Dennis J. Johnson............. 46 Director, Marketing and Sales Promotion
Carol Lewis................... 47 National Director, Philanthropic Services
Timothy J. Manion............. 39 Director, Operations Strategy and Planning
Tom B. Owen................... 49 Director, Commercial Services
Marion E. Mehrer.............. 40 Director, Corporate Services
Michael W. Parks.............. 50 Director, Field Operations
Marlane L. Wolf............... 52 National Director, Financial Services Program
</TABLE>
- ------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
EXECUTIVE OFFICERS AND DIRECTORS
JENS H. MOLBAK, the Company's President, Chief Executive Officer and a
director, founded the Company in 1990. Prior to that he served two years as an
analyst at Morgan Stanley & Co., Inc., an investment bank. Mr. Molbak earned his
M.B.A. from Stanford University Graduate School of Business and his B.A. in
Psychobiology with distinction in the major from Yale University.
ROD W. BROOKS, the Company's Vice President of Sales and Marketing, joined
the Company in July 1995. From June 1993 until July 1995, he was the Vice
President of Marketing, Consumer Product Division at Novell, Inc., a computer
networking company. From June 1989 until March 1993, Mr. Brooks served as the
Senior Vice President, Marketing and Merchandising for Egghead, Inc., a software
retailer ("Egghead"). Mr. Brooks has also held Vice President, Marketing
positions at Northern Automotive, Inc. and Quality Food Centers ("QFC"). Mr.
Brooks obtained his B.A. in Communications from Washington State University in
1975.
KIRK A. COLLAMER, the Company's Vice President and Chief Financial Officer,
joined the Company in February 1997. From March 1995 until February 1997, Mr.
Collamer served as the Chief Financial Officer
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of Muzak Limited Partnership, a business music services provider. From April
1988 to March 1995, he served in various capacities at Ameritech Corporation, a
telecommunications company, including serving as Vice President, Finance and
Controller and Vice President and Chief Financial Officer of two subsidiaries.
Prior to that he served in various finance positions at Brown-Forman Corp./Jack
Daniel Distillery, a producer of distilled spirits, and Aladdin Industries,
Inc., a marketer of consumer products. He has been a Certified Public Accountant
since 1974 and was previously employed by the public accounting firm of Arthur
Andersen & Co. from 1974 until 1978. Mr. Collamer received his M.B.A. from
Vanderbilt University and his B.A. in Accounting from Michigan State University.
AARON R. FINCH, the Company's Vice President of Operations, joined the
Company in February 1993. Prior to joining the Company, Mr. Finch worked in the
Investment Evaluation Department at Weyerhaeuser Co., a forest products company,
from 1990 until February 1993. He obtained his M.B.A. from Stanford University
Graduate School of Business and his B.S. in Natural Resource Management from
Colorado State University.
DANIEL A. GERRITY, the Company's Vice President and Chief Technical Officer,
joined the Company in November 1993 after serving on the Company's Advisory
Board since 1990. Prior to joining the Company, Mr. Gerrity was an engineering
manager for Slate Corporation, an application software company, from 1990 until
November 1993. Mr. Gerrity earned his M.B.A. from Stanford University Graduate
School of Business, his M.S. in Computer Systems from Stanford University and
his B.S. in Electrical Engineering from Stanford University.
GEORGE H. CLUTE has been a director of the Company since 1995. Mr. Clute, a
founding general partner of Rainier Venture Partners and Olympic Venture
Partners, has been a general partner of those venture capital funds since 1982.
Mr. Clute serves on the boards of Nth Degree Software Corp., Inc., a privately
held software development company, Sequel Technology Corp., a privately held
internet software development company, the Western Association of Venture
Capitalists and the Washington Software & Digital Media Alliance. He also sits
on the Executive Industry Board for the Fred Hutchinson Cancer Research Center.
He earned his M.B.A. and A.B. from the University of California, Los Angeles.
LARRY A. HODGES has been a director of the Company since December 1995. Mr.
Hodges has served as the President and Chief Executive Officer of Mrs. Field's
Cookies, a retail cookie/bakery chain, since April 1994. Prior to that Mr.
Hodges was hired in 1992 by Prudential Insurance Company ("Prudential") to
manage a distressed asset of Prudential, Food Barn Stores, Inc., a supermarket
chain ("Food Barn"). In 1993, Food Barn filed for bankruptcy protection in
federal court and was subsequently sold. Prior to that, Mr. Hodges served in
various capacities at American Stores Company, a food and drug retailer, for 25
years, including serving as President of two subsidiaries. Mr. Hodges earned his
B.A. from California State University, San Bernardino. Mr. Hodges also serves as
a director of Ameristar Casinos, Inc., a casino gaming company.
DAVID E. STITT has been a director of the Company since 1995. Since 1986, he
has been an employee of Vencap, Inc. (formerly, Vencap Equities Alberta Ltd.), a
venture capital firm, most recently as a Vice President. Mr. Stitt represents
Vencap, Inc. on several private company boards of directors in which such firm
has an investment interest. Mr. Stitt also serves on the board of Applied
Microsystems Corporation, an embedded systems tools company. Previously for
seven years, he was Vice President of Sales and Marketing for Westmills Carpet
Ltd., a regional carpet manufacturer located in western Canada.
RONALD A. WEINSTEIN has been a director of the Company since 1992. From 1984
to July 1991, he was a principal of Sloan Capital Companies, a private
investment firm. From February 1989 until April 1991, Mr. Weinstein served as
Executive Vice President of Merchandising at Egghead. Mr. Weinstein serves as
Chairman of B&B Auto Parts, Inc., an auto parts supplier and is a director of
QFC.
The Company intends to name two additional non-employee directors following
the Initial Public Offering.
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SENIOR MANAGEMENT
KIRK W. BEACH, the Company's Director of Software Engineering, joined the
Company in October 1996. From April 1996 until October 1996, he served as Vice
President, MIS of Health Resource Publishing Company (a Catalina Marketing
Corporation company) where he developed corporate strategies for the network and
systems. Prior to that, Mr. Beach was the Senior Director of Store Systems for
Catalina Marketing Corporation from January 1989 until October 1996.
WILLIAM W. BOOTH, the Company's Director of Retail Development, joined the
Company in April 1995. From April 1992 until March 1995 he served as the Senior
Director, Retail Marketing Services for Catalina Marketing Corporation, a
consumer marketing company. From July 1989 until March 1992 he served as Senior
Accountant Executive at Citicorp POS Information Services. Prior to that he held
account management and analyst positions at Datachecker Systems, Inc. and Sweda
International, Inc. Mr. Booth earned his B.A. in Economics/Business
Administration from Washington and Jefferson College.
BRUCE COONAN, the Company's Director of Consumer Value Marketing, joined the
Company in September 1995. From 1989 until September 1995, he operated an
independent consulting firm specializing in business planning, market
development and executive searches. Prior to that he held management positions
in marketing, sales promotion and sales with Colgate-Palmolive Co.,
Kimberly-Clark Corp. and Ralston Purina Co. He also served as Vice President of
Catalina Marketing Corporation from January 1984 to August 1988. Mr. Coonan
received his Master of International Management from the American Graduate
School of International Management and his B.A. from Stanford University.
MICHAEL L. DORAN, the Company's Director of Information Systems, joined the
Company in August 1996. From June 1989 to August 1996, Mr. Doran served as
Senior Manager, Application Services for Snohomish Public Utility District where
he directed automation planning and application development. Prior to that, he
opened and managed the Oregon office of Fiserv, Inc., a national service bureau
providing computer services to financial institutions and, while at US Bancorp,
Inc., he managed the bank's automated teller machines and debit card automation
projects. He earned his B.S. in Business Administration from Oregon State
University.
STEVEN M. GEIGER, the Company's Director of Accounting, Controller, joined
the Company in June 1996. From January 1991 until June 1996 he served as
Corporate Controller and the Director of Financial Planning and Assistant
Treasurer for MIDCOM Communications Inc., a communications services company. Mr.
Geiger is a Certified Public Accountant, a Certified Management Accountant and a
Certified Cash Manager. Mr. Geiger received his B.S. in Finance from the
University of Washington.
JESSACA A. JACOBSON, the Company's Director of Sales Operations, joined the
Company in April 1996. From June 1994 until April 1996, Ms. Jacobson operated an
independent consulting company specializing in business planning, operations
development, and marketing support catering to the specialty coffee industry in
both domestic and international markets. Prior to that, she held various
positions in retail operations with The Coffee Connection, Inc., a Boston based
specialty coffee retailer, from October of 1985 until June of 1994, serving as
the Director of Retail Operations for that organization from February 1989 until
June of 1994. Ms. Jacobson earned her B.A. degree in English from Occidental
College.
DENNIS J. JOHNSON, the Company's Director of Marketing and Sales Promotion,
joined the Company in April 1996. From 1985 until April 1996, he held various
positions in marketing and sales with Oberto Sausage Company, a snack food
company, serving most recently as Vice President of Corporate Marketing. Prior
to that Mr. Johnson served as a director of Alpac Corp., a beverage distributor,
as Division Sales Development Manager and District Manager for PepsiCo, Inc. and
as a sales representative and account manager for General Foods Corporation. Mr.
Johnson earned a B.S. in Business and a B.S. in Political Science from the
University of Oregon.
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<PAGE>
CAROL LEWIS, the Company's National Director, Philanthropic Services, joined
the Company in September 1996. From February 1994 until July 1995, she served as
Executive Director of Pacific Northwest Ballet, a professional ballet company.
Prior to that she served as Senior Vice President of Administration for Egghead.
Ms. Lewis' prior experience includes six years as Deputy Mayor of the City of
Seattle and work as a television news reporter for several Northwest stations.
She has a Masters in Public Policy from the JFK School of Government at Harvard
University and a B.A. from Stanford University.
TIMOTHY J. MANION, the Company's Director, Operations Strategy and Planning,
joined the Company in November 1996. Prior to joining the Company, Mr. Manion
held various management positions with Federal Express Corporation, an overnight
shipping company, from 1978 until November 1995. Mr. Manion earned a B.A. from
the University of Michigan in 1981.
MARION E. MEHRER, the Company's Director of Corporate Services, joined the
Company in August 1993. From May 1989 until August 1993, she served as Business
Manager and Controller for Fruhling, Inc., a construction company. Prior to
that, she spent six years at Microsoft Corporation in charge of corporate
services and operations in the International Division. Ms. Mehrer received her
D.P.M. degree from the Illinois College of Podiatric Medicine and her B.S. in
Environmental Health, School of Public Health from the University of Washington.
TOM B. OWEN, the Company's Director of Commercial Services, joined the
Company in June 1997. From March 1996 until May 1997, he served as Director of
Operations & Finance for Edmark Corporation, a developer of educational software
for children. Prior to that, he held various manufacturing, operations, and
finance positions with firms in the computer hardware and software industry,
including Quebecor Integrated Media, Egghead Software, and Hewlett Packard Co.
Mr. Owen earned his M.B.A. from Stanford University Graduate School of Business
and his B.A. in English from Tufts University.
MICHAEL W. PARKS, the Company's Director of Field Operations, joined the
Company in April 1994. From September 1993 to April 1994, Mr. Parks served as
President of Seriphus Group, a consulting company he founded. From 1969 until
August 1993, he served as Vice President at Seafirst Bank where he helped
develop and operate their debit card program and automated teller machine
systems. Mr. Parks is a graduate of the Post-Graduate Level Banking Program at
Pacific Coast Banking School at the University of Washington and holds a B.A.
from Central Washington University.
MARLANE L. WOLF, the Company's National Director, Financial Services
Program, joined the Company in February 1997. From May 1993 until February 1997,
she worked for Bank of America and their Seafirst division as Vice President,
Marketing Director of Seafirst. Prior to that, she was an Executive Vice
President and Senior Manager at Pacific First Bank where she managed Marketing,
Human Resources, Corporate Affairs, Training and Office Services. Her background
also includes marketing management, product development and business development
positions at Pillsbury Co. and Beatrice Foods Inc. Ms. Wolf completed a custom
marketing management program at the J.L. Kellogg Graduate School of Northwestern
University. She earned a B.A. from the University of Minnesota where she also
did graduate work.
FINANCIAL ADVISOR
ACORN VENTURES, INC. (RUFUS W. LUMRY). Acorn Ventures, Inc. ("Acorn"), of
which Mr. Lumry is a majority owner and employee, is a financial advisor of the
Company. Acorn was selected by the Board of Directors to serve as financial
advisor to the Company. In that role, Acorn assists in defining the Company's
business strategy, identifying and meeting with sources of financing and
assisting the Company in structuring and negotiating such financings. The
Company entered into a consulting agreement with Acorn setting forth the
services to be provided and indemnifying Acorn for certain actions, events or
proceedings related to such consulting relationship. Acorn does not receive any
compensation for its services, but is reimbursed for reasonable out-of-pocket
expenses in connection with services rendered.
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Mr. Lumry was one of the original founders of McCaw Cellular Communications,
Inc. ("McCaw") and from 1982 to 1990, served as its Chief Financial Officer.
Prior to his retirement in 1990, he served as a director of McCaw since its
organization and as a director of LIN Broadcasting, Inc., a partially owned
subsidiary of McCaw. Mr. Lumry received an A.B. in Economics from Harvard
College in 1969 and a M.B.A. from The Harvard Graduate School of Business
Administration in 1974.
DIRECTORS' COMPENSATION
The Company's directors do not currently receive any cash compensation for
service on the Board or any committee thereof, but directors may be reimbursed
for certain expenses in connection with attendance at Board and committee
meetings.
In February 1997, each of the Company's non-employee directors, Messrs.
Clute, Hodges, Stitt and Weinstein, was granted an option to purchase 10,000
shares of Common Stock at an exercise price of $10.00 per share under the Equity
Incentive Plan. Upon the completion of the Initial Public Offering, non-employee
directors will not be eligible to participate in the Equity Incentive Plan, but
will be eligible to receive options under the Directors' Plan. See "Equity
Incentive Plans."
COMMITTEES
The Audit Committee consists of Mr. Clute, Mr. Stitt and Mr. Weinstein. The
Audit Committee makes recommendations to the Board of Directors regarding the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by the Company's independent auditors and reviews
and evaluates the Company's audit and control functions.
The Compensation Committee consists of Mr. Hodges, Mr. Stitt and Mr.
Weinstein. The Compensation Committee makes recommendations regarding the
Company's equity incentive plans and makes decisions concerning salaries and
incentive compensation for employees and consultants of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between the Company's Board of Directors
or Compensation Committee and the board of directors or compensation committee
of any other party, nor has any such relationship existed in the past. Mr.
Weinstein is a stockholder of the Company and has entered into financing
arrangements with the Company from time to time.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the four other most highly compensated executive
officers (collectively, the "Named Executive Officers")
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whose salary and bonus for the fiscal year ended December 31, 1996 were in
excess of $100,000 for services rendered in all capacities to the Company for
that fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION(1) -------------------
SECURITIES
----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) OPTIONS (#) COMPENSATIONS ($)
- ------------------------------------------------- ---------- ----------- ------------------- -----------------------
<S> <C> <C> <C> <C>
Jens H. Molbak................................... $ 97,081 -- 25,000 --
President, Chief Executive Officer and Director
Rod W. Brooks.................................... 153,730 -- 25,000 --
Vice President of Sales and Marketing
Aaron R. Finch................................... 100,636 -- 15,000 --
Vice President of Operations
Daniel A. Gerrity................................ 126,219 $ 15,000 30,000 --
Vice President and Chief Technical Officer
Warren M. Gordon(2).............................. 100,636 -- 15,000 --
Vice President of Finance
</TABLE>
- ------------------------
(1) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), the compensation described in this table does not include
medical, group life insurance or other benefits received by the Named
Executive Officers which are available generally to all salaried employees
of the Company and certain perquisites and other personal benefits received
by the Named Executive Officers which do not exceed the lesser of $50,000 or
10% of any such officer's salary and bonus disclosed in this table.
(2) In February 1997, Mr. Gordon resigned from his position as the Company's
Chief Financial Officer and served as the Company's Vice President--Finance
until April 1997 when he began a one year leave of absence.
EQUITY INCENTIVE PLANS
1997 EQUITY INCENTIVE PLAN. In March 1997, the Board of Directors adopted
the Company's 1997 Equity Incentive Plan (the "Equity Incentive Plan"). The
Equity Incentive Plan is an amendment and restatement of the Company's 1992
Stock Option Plan, as amended. The Company has reserved a total of 2,900,000
shares of Common Stock for issuance under the Equity Incentive Plan. The Equity
Incentive Plan provides for grants of incentive stock options within the meaning
of Section 422 of the Internal Revenue Code, as amended (the "Code"), to
employees (including officers and employee directors) and nonstatutory stock
options, restricted stock purchase awards and stock bonuses to employees
(including officers and employee directors) and consultants of the Company. The
Company's Board of Directors has delegated administration of the Equity
Incentive Plan to the Compensation Committee. The Compensation Committee
membership is intended to satisfy the provisions of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended, and Code Section 162(m), in
each case to the extent applicable. The Committee has the authority, subject to
the terms of the Equity Incentive Plan, to determine the recipients and types of
awards to be granted, the terms of the awards granted, including the exercise
price, number of shares subject to the award the exercisability thereof, and the
form of consideration payable upon exercise.
The terms of stock options granted under the Equity Incentive Plan generally
may not exceed 10 years. The exercise price of options granted under the Equity
Incentive Plan is determined by the Board of
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Directors, provided that, in the case of an incentive stock option, the exercise
price cannot be less than 100% of the fair market value of the Common Stock on
the date of grant and, in the case of a nonstatutory stock option, the exercise
price cannot be less than 85% of the fair market value of the Common Stock on
the date of grant. The exercise price of options under the Equity Incentive Plan
granted to any person who at the time of grant owns stock possessing more than
10% of the total combined voting power of all classes of stock must be at least
110% of the fair market value of such stock on the date of grant and the terms
of these options cannot exceed five years. The aggregate fair market value,
determined at the time of grant, of the shares of Common Stock with respect to
which incentive stock options are exercisable for the first time by an optionee
during any calendar year (under all such plans of the Company and its
affiliates) may not exceed $100,000. No optionee shall be eligible for option
grants under the Equity Incentive Plan covering more than 1,000,000 shares at
such time as Section 162(m) of the Code becomes applicable to the Plan.
Options granted under the Equity Incentive Plan vest at the rate specified
in the option agreement. No option may be transferred by the optionee other than
by will or the laws of descent or distribution or, for a nonstatutory option,
pursuant to a qualified domestic relations order, provided that an optionee may
designate a beneficiary who may exercise the option following the optionee's
death, and, provided further, that the Compensation Committee may grant a
nonstatutory stock option that is transferable. An optionee whose relationship
with the Company or any affiliate ceases for any reason (other than by death or
disability) generally may exercise options in the three month period following
such cessation (unless such options terminate or expire sooner or later by their
terms). Options under the Equity Incentive Plan may be exercised for up to
twelve months after an optionee's relationship with the Company and its
affiliates ceases due to disability and for up to twelve months after an
optionee's relationship with the Company and its affiliates ceases due to death
(unless such options expire sooner or later by their terms).
Shares subject to options which have expired or otherwise terminated without
having been exercised in full become available for the grant of options under
the Equity Incentive Plan. Furthermore, the Board of Directors may offer to
exchange new options for existing options, with the shares subject to the
existing options again becoming available for grant under the Equity Incentive
Plan. In the event of a decline in the value of the Company's Common Stock, the
Board of Directors has the authority to offer optionees the opportunity to
replace outstanding higher priced options with new lower priced options.
Restricted stock purchase awards granted under the Equity Incentive Plan may
be granted pursuant to a repurchase option in favor of the Company in accordance
with a service vesting schedule determined by the Board. The purchase price of
such awards will be at least 85% of the fair market value of the Common Stock on
the date of grant. Stock bonuses may be awarded in consideration for past
services without a purchase payment.
Upon certain changes in control of the Company, all outstanding awards under
the Equity Incentive Plan shall either be continued, assumed or substituted by
the surviving entity. If the surviving entity determines not to continue, assume
or substitute such awards, then the time during which such options may be
exercised shall be accelerated and the awards shall be terminated if not
exercised prior to such event.
As of June 30, 1997, 257,787 shares of Common Stock had been issued upon the
exercise of options granted under the Equity Incentive Plan, options to purchase
921,900 shares of Common Stock at a weighted average exercise price of $5.67 per
share were outstanding and 1,720,313 shares remained available for future option
grants. The Equity Incentive Plan will terminate in March 2007, unless
terminated sooner by the Board of Directors.
1997 EMPLOYEE STOCK PURCHASE PLAN. In March 1997, the Company's Board of
Directors adopted the Purchase Plan covering an aggregate of 200,000 shares of
Common Stock. The Purchase Plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code.
Under the Purchase Plan, the Board of Directors may authorize participation by
eligible employees,
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<PAGE>
including officers, in periodic offerings following the adoption of the Purchase
Plan. The offering period for any offering may be no more than 27 months. The
Board has currently authorized an initial offering beginning with the
effectiveness of the Initial Public Offering and ending July 31, 1999.
Employees are eligible to participate if they are employed by the Company,
or an affiliate of the Company designated by the Board of Directors, provided
that under the currently authorized offerings an employee's customary employment
is for at least 20 hours per week and five months per calendar year. Employees
who participate in an offering can have up to 15% of their earnings withheld
pursuant to the Purchase Plan. The amount withheld will then be used to purchase
shares of the Common Stock on specified dates determined by the Board of
Directors and applied, on specified dates determined by the Board of Directors,
to the purchase of shares of Common Stock. Under the currently authorized
offerings, the purchase dates are each January 31 and July 31. The price of
Common Stock purchased under the Purchase Plan will be equal to 85% of the lower
of the fair market value of the Common Stock on the commencement date of each
offering period or the relevant purchase date. Employees may end their
participation in the offering at any time during the offering and participation
ends automatically on termination of employment with the Company or, under the
currently authorized offerings, when the employee elects to enroll in another
offering.
In the event of certain changes in control, the Board of Directors has
discretion to provide that each right to purchase Common Stock will be assumed
or an equivalent right substituted by the successor corporation, or the Board
may shorten the offering period and provide for all sums collected by payroll
deductions to be applied to purchase stock immediately prior to such merger or
other transaction. The Board has the authority to amend or terminate the
Purchase Plan, subject to the limitation that no such action may adversely
affect any outstanding rights to purchase Common Stock.
1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN. In March 1997, the
Company's Board of Directors adopted the Directors' Plan to provide for the
automatic grant of options to purchase shares of Common Stock to non-employee
directors of the Company. The Directors' Plan is administered by the Board,
unless the Board delegates administration to a committee of disinterested
directors.
The maximum number of shares of Common Stock that may be issued pursuant to
options granted under the Directors' Plan is 100,000. Pursuant to the terms of
the Directors' Plan, each person serving as a director of the Company who is not
an employee of the Company (a "Non-Employee Director") shall upon the date such
person first becomes a Non-Employee Director after the effectiveness of the
Initial Public Offering of the Company's Common Stock automatically be granted
an option to purchase 10,000 shares of Common Stock. In addition, on the date of
each annual meeting of stockholders following the effectiveness of the Initial
Public Offering each Non-Employee Director automatically will be granted an
option to purchase 5,000 shares of Common Stock (pro-rated for Non-Employee
Directors with less than a full year's tenure).
Options granted under the Directors' Plan will vest immediately. The
exercise price of options under the Directors' Plan must equal or exceed the
fair market value of the Common Stock on the date of grant. No options granted
under the Directors' Plan may be exercised after the expiration of ten years
from the date it was granted. Options granted under the Directors' Plan are
generally non-transferable except pursuant to a domestic relations order in
beneficiary descriptions. Unless otherwise terminated by the Board of Directors,
the Directors' Plan automatically terminates in March 2007. As of the date
hereof, no options have been granted under the Directors' Plan.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended December 31, 1996 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES PERCENTAGE OF PRICE APPRECIATION FOR OPTION
UNDERLYING TOTAL OPTIONS EXERCISE MARKET TERM($)(4)
OPTIONS GRANTED IN FISCAL PRICE PRICE EXPIRATION -------------------------------
NAME GRANTED(1) 1996 (%)(2) ($/SH) ($/SH)(3) DATE 0% 5% 10%
- ---------------------- ------------- ----------------- ----------- ----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jens H. Molbak........ 25,000 9.8 $ 0.70 $ 10.50 4/30/2006 $ 245,000 $ 389,724 $ 601,461
Rod W. Brooks......... 25,000 9.8 0.70 10.50 4/30/2006 245,000 389,724 601,461
Aaron R. Finch........ 15,000 5.9 0.70 10.50 4/30/2006 147,000 233,834 360,877
Daniel A. Gerrity..... 30,000 11.8 0.70 10.50 4/30/2006 294,000 467,668 721,754
Warren M. Gordon(5)... 15,000 5.9 0.70 10.50 4/30/2006 147,000 233,834 360,877
</TABLE>
- ------------------------------
(1) Options generally become exercisable at a rate of 50% on the second
anniversary of the vesting commencement date and 2.083% each month
thereafter and have a term of 10 years. Options may be exercised prior to
vesting, subject to the Company's right to repurchase in the event service
is terminated.
(2) Based on an aggregate of 254,850 shares subject to options granted to
employees of the Company in the fiscal year ended December 31, 1996,
including the Named Executive Officers.
(3) Based on the Initial Public Offering price of $10.50 per share. The
potential realizable value is calculated based on the term of the option at
the time of grant (10 years). Stock price appreciation of 0%, 5% and 10% is
assumed pursuant to rules promulgated by the Securities and Exchange
Commission and does not represent the Company's prediction of its stock
price performance.
(4) The potential realizable value is calculated by assuming that the Initial
Public Offering price of $10.50 per share appreciates at the indicated rate
for the entire term of the option and that the option is exercised at the
exercise price and sold on the last day of its term at the appreciated
price.
(5) In February 1997, Mr. Gordon resigned from his position as the Company's
Chief Financial Officer and served as the Company's Vice President--Finance
until April 1997 when he began a one year leave of absence.
AGGREGATE OPTIONS EXERCISED IN 1996 AND YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
shares acquired and the value realized on each exercise of stock options during
the year ended December 31, 1996 and the number and value of securities
underlying unexercised options held by the Named Executive Officers at December
31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1996 (#) DECEMBER 31, 1996($)(2)
ACQUIRED ON VALUE ---------------------------------- --------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE
- ---------------------------- ------------- ------------- ----------- --------------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Jens H. Molbak.............. -- -- 25,000 -- $ 245,000 --
Rod W. Brooks............... -- -- 100,000 -- 1,002,500 --
Aaron R. Finch.............. -- -- 96,500 -- 975,400 --
Daniel A. Gerrity........... -- -- 90,000 -- 901,875 --
Warren M. Gordon(3)......... 13,500 $ 5,400 61,500 -- 617,175 --
</TABLE>
- ------------------------------
(1) Options are immediately exercisable; however, the shares purchasable under
such options are subject to repurchase by the Company at the original
exercise price paid per share upon the optionee's cessation of service prior
to the vesting of such shares.
(2) Based on the difference between the Initial Public Offering price of $10.50
per share and the exercise price.
(3) In February 1997, Mr. Gordon resigned from his position as the Company's
Chief Financial Officer and served as the Company's Vice President--Finance
until April 1997 when he began a one year leave of absence.
65
<PAGE>
401(K) PLAN
As of July 1995, the Board adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering the Company's employees. Pursuant
to the 401(k) Plan, eligible employees may elect to reduce their current
compensation by up to the lesser of 15% of their annual compensation or the
statutorily prescribed annual limit ($9,500 in 1997) and have the amount of such
reduction contributed to the 401(k) Plan. The 401(k) Plan provides for
additional matching contributions to the 401(k) Plan by the Company in an amount
determined by the Company. The trustees under the 401(k) Plan, at the direction
of each participant, invest the assets of the 401(k) Plan in designated
investment options. The 401(k) Plan is intended to qualify under Section 401 of
the Code, so that contributions to the 401(k) Plan, and income earned on the
401(k) Plan contributions, are not taxable until withdrawn, and so that the
contributions by the Company will be deductible when made.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company will indemnify its directors
and executive officers and may indemnify its other officers, employees and other
agents to the fullest extent permitted by Delaware law. The Company is also
empowered under its Bylaws to enter into indemnification contracts with its
directors and officers and to purchase insurance on behalf of any person it is
required or permitted to indemnify. Pursuant to this provision, the Company has
entered into indemnity agreements with each of its directors and executive
officers.
In addition, the Company's Certificate of Incorporation provides that, to
the fullest extent permitted by Delaware law, the Company's directors will not
be liable for monetary damages for breach of the directors' fiduciary duty of
care to the Company and its stockholders. This provision in the Certificate of
Incorporation does not eliminate the duty of care, and in appropriate
circumstances equitable remedies such as an injunction or other forms of
non-monetary relief would remain available under Delaware law. Each director
will continue to be subject to liability for breach of the director's duty of
loyalty to the Company, for acts or omissions not in good faith or involving
intentional misconduct, for knowing violations of law, for any transaction from
which the director derived an improper personal benefit, for improper
transactions between the director and the Company and for improper distributions
to stockholders and loans to directors and officers. This provision also does
not affect a director's responsibilities under any other laws, such as the
federal securities laws or state or federal environmental laws.
There is no pending litigation or proceeding involving a director or officer
of the Company as to which indemnification is being sought, nor is the Company
aware of any pending or threatened litigation that may result in claims for
indemnification by any director or officer.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since the Company's inception in February 1991, the Company issued, in
private placement transactions, shares of its Preferred Stock as follows: (i)
649,775 shares of Series A Preferred Stock at $1.00 per share in March and
November 1992, (ii) 895,506 shares of Series B Preferred Stock at $4.00 per
share along with warrants to purchase 43,752 shares of Series B Preferred Stock
for $4.00 per share in June and September 1993, (iii) 4,567,016 shares of Series
C Preferred Stock at $3.25 per share along with warrants to purchase 1,419,369
shares of Series C Preferred Stock for $3.00 to $4.00 per share in February
1995, (iv) 2,500,000 shares of Series D Preferred Stock for $4.00 per share
along with warrants to purchase 705,891 shares of Series D Preferred Stock for
$4.25 per share in December 1995, and (v) 100,000 shares of Series E-1 Preferred
Stock for $6.00 per share along with warrants to purchase 350,000 shares of
Series E-2 Preferred Stock for $0.60 per share and warrants to purchase 550,000
shares of Series E-3 Preferred Stock for $0.388636 per share in August 1996. The
warrants provide that the purchase price paid for each warrant be credited
toward the exercise price for that warrant, resulting in effective exercise
prices for the warrants to purchase the Series E-2 Preferred Stock and Series
E-3 Preferred Stock of $11.40 and $15.61136 per share, respectively. The
following table sets forth the shares of Preferred Stock purchased by each of
the Company's directors, executive officers and key employees, five percent
stockholders and their respective affiliates:
<TABLE>
<CAPTION>
SERIES B SERIES C SERIES D SERIES E
SERIES A PREFERRED PREFERRED PREFERRED PREFERRED
PREFERRED STOCK AND STOCK AND STOCK AND STOCK AND
INVESTOR STOCK WARRANTS WARRANTS WARRANTS WARRANTS
- ------------------------------------------------------ ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Benaroya Capital Company, L.L.C....................... -- -- -- 1,154,118 --
Vencap, Inc.(1)....................................... -- -- 900,000 192,353 --
CIBC Woody Gundy Ventures, Inc........................ -- -- 800,001 265,087 --
Eos Partners SBIC, L.P................................ -- -- 700,001 160,294 --
Entities affiliated with Olympic Venture Partners III,
L.P.(2)............................................. -- -- 630,000 168,309 --
Roanoke Investors, L.P................................ -- -- 400,000 256,471 --
Acorn Ventures, Inc................................... -- -- -- -- 1,000,000
Rod W. Brooks(3)...................................... -- -- -- 8,015 --
Aaron R. Finch(4)..................................... -- 50,000 -- 9,618 --
Ronald Weinstein(5)................................... 60,000 53,907 100,178 36,833 --
</TABLE>
- ------------------------
(1) Mr. Stitt, a director of the Company, is an officer of Vencap, Inc. Mr.
Stitt disclaims beneficial ownership of such shares except to the extent of
his pro rata ownership interest therein.
(2) Mr. Clute, a director of the Company, is a general partner of the general
partner of the entities affiliated with Olympic Venture Partners III, L.P.
Mr. Clute disclaims beneficial ownership of such shares except to the extent
of his pro rata ownership interest therein.
(3) Mr. Brooks is the Vice President of Sales and Marketing of the Company.
(4) Mr. Finch is the Vice President of Operations of the Company.
(5) Mr. Weinstein is a director of the Company. Includes shares beneficially
owned by the Weinstein Family Partnership, of which Mr. Weinstein is a
general partner.
In January 1994, the Board of Directors granted to each of Gary Hudson,
Stephen Sander and Ronald Weinstein an option to purchase 10,000 shares of the
Company's Series B Preferred Stock and granted to Victor Alhadeff an option to
purchase 5,000 shares of the Company's Series B Preferred Stock. Each such
option has an exercise price of $4.00 per share and was fully vested on the date
of grant. At that time, such individuals were members of the Company's Board of
Directors.
As of December 31, 1996, the Company had approximately 116 Coinstar units
installed in QFC, including Hughes Markets, Inc. its subsidiary ("QFC-Hughes")
grocery stores. During 1996, the Coinstar units installed in QFC-Hughes were
responsible for approximately 14.9% of the Company's revenue. Mr. Weinstein, a
director of the Company, is also a director of QFC.
The Company believes that the foregoing transactions were on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
67
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of June 30, 1997 for (i)
each stockholder who is known by the Company to own beneficially more than five
percent of the Company's Common Stock, (ii) each Named Executive Officer, (iii)
each director, and (iv) all current directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF SHARES
BENEFICIAL OWNER OWNED BENEFICIALLY OWNED(1)(2)
- ---------------------------------------------------------------------- ----------------- -------------------------
<S> <C> <C>
Benaroya Capital Company, L.L.C.(3) .................................. 1,154,118 7.4%
1001 Fourth Avenue, Suite 4700
Seattle, WA 98154
Vencap, Inc.(4) ...................................................... 1,092,353 7.0
1980 Manulife Place
10180-101 Street
Edmonton, Alberta T5J3S4
CIBC Wood Gundy Ventures, Inc.(5) .................................... 1,065,088 6.8
425 Lexington Avenue, 2nd Floor
New York, NY 10017
Acorn Ventures, Inc.(6) .............................................. 1,000,000 6.0
11400 SE 6th Street, Suite 120
Bellevue, WA 98004
Eos Partners SBIC, L.P.(7) ........................................... 860,295 5.5
320 Park Avenue
New York, NY 10022
Entities affiliated with Olympic Venture Partners(8) ................. 798,309 5.1
2420 Carillon Point
Kirkland, WA 98033
Roanoke Investors' Limited Partnership ............................... 656,471 4.2
1111 Third Avenue, Suite 2220
Seattle, WA 98101
Jens H. Molbak(9)..................................................... 701,225 4.5
Rod W. Brooks(10)..................................................... 108,015 *
Kirk A. Collamer...................................................... 0 0
Aaron R. Finch(11).................................................... 163,261 1.0
Daniel A. Gerrity(12)................................................. 90,000 *
George H. Clute(13)................................................... 808,309 5.2
Larry A. Hodges(14)................................................... 15,940 *
David E. Stitt(15).................................................... 1,102,353 7.0
Ronald A. Weinstein(16)............................................... 258,380 1.6
All directors and executive officers as a group
(9 persons) (17).................................................... 3,247,483 20.4%
----------------- ---
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage of ownership of that
person, shares of Common Stock subject to options or warrants held by that
person that are currently exercisable or exercisable within 60 days of June
30, 1997 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person (unless such shares are otherwise assumed to be outstanding).
Except as indicated by footnote, and subject to community property laws
where applicable, the persons
68
<PAGE>
named in the table above have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by them.
Percentage of beneficial ownership is based on 15,666,396 shares of Common
Stock outstanding after completion of the Initial Public Offering and
assumes the cash exercise of warrants to purchase 2,693,420 shares of Common
Stock effective upon the completion of the Initial Public Offering or within
90 days thereafter.
(2) Certain of the principal stockholders, including Benaroya Capital Company,
L.L.C., Vancap, Inc., CIBC Wood Gundy Ventures, Inc., Acorn Ventures, Inc.,
Eos Partners SBIC, L.P., entities affiliated with Olympic Venture Partners,
Roanoke Investors' Limited Partnership and Jens H. Molbak, purchased 355,238
shares in the aggregate of the Common Stock offered in the Initial Public
Offering, and accordingly, such stockholders' beneficial ownership increased
after the Initial Public Offering.
(3) Includes 254,118 shares that may be acquired upon the exercise of a certain
warrant issued in connection with a prior Preferred Stock financing, which
expired upon the completion of the Initial Public Offering.
(4) Includes 250,045 shares that may be acquired upon the exercise of certain
warrants issued in connection with a prior Preferred Stock financing, which
expired upon the completion of the Initial Public Offering. Mr. Stitt, a
director of the Company, is a Vice President of Vencap, Inc. (formerly,
Vencap Equities Alberta Ltd.) Mr. Stitt disclaims beneficial ownership of
the shares except to the extent of his pro rata ownership therein.
(5) Includes 242,984 shares that may be acquired upon the exercise of certain
warrants issued in connection with a prior Preferred Stock financing, which
expired upon the completion of the Initial Public Offering.
(6) Includes 900,000 shares that may be acquired upon the exercise of certain
warrants issued in connection with a prior Preferred Stock financing. Fifty
percent (50%) of the shares issued upon the exercise of such warrants are
subject to a repurchase option in favor of the Company in the event that the
Company has not attained a specified valuation on certain dates.
(7) Includes 196,833 shares that may be acquired upon the exercise of certain
warrants issued in connection with a prior Preferred Stock financing, which
expired upon the completion of the Initial Public Offering.
(8) Includes 760,294 shares beneficially owned by Olympic Venture Partners III,
L.P. ("OVP III"), of which 173,756 shares may be acquired upon the exercise
of certain warrants issued in connection with a prior Preferred Stock
financing, which expired upon the completion of the Initial Public Offering.
Also includes 38,015 shares beneficially owned by OVP III Entrepreneurs
Fund, an affiliate of OVP III, of which 8,688 shares may be acquired upon
the exercise of certain warrants issued in connection with a prior Preferred
Stock financing, which expired upon the completion of the Initial Public
Offering. Mr. Clute, a director of the Company, is a general partner of the
General Partner of OVP III and OVP III Entrepreneurs Fund. Mr. Clute
disclaims beneficial ownership of the shares except to the extent of his pro
rata ownership therein.
(9) Includes 25,000 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1997, but such shares are subject to repurchase
by the Company through April 2000. Also includes 75,000 shares held by Mt.
Shuksan Investments LLC ("Shuksan") and 73,000 shares held by Penny Partners
L.P. ("Penny"). Mr. Molbak shares voting and investment power over the
shares held by Shuksan and Penny and disclaims beneficial ownership of such
shares except to the extent of his ownership interest therein.
(10) Includes 80,000 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1997, but such shares are subject to repurchase
by the Company through April 2000. Also includes
69
<PAGE>
1,765 shares issuable upon the exercise of a warrant which expired upon the
completion of the Initial Public Offering.
(11) Includes 16,250 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1997, but such shares are subject to repurchase
by the Company through April 2000. Also includes 16,404 shares issuable upon
the exercise of warrants which expired upon the completion of the Initial
Public Offering.
(12) Includes 66,000 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1997, but such shares are subject to repurchase
by the Company through April 2000.
(13) Includes 760,294 shares beneficially owned by OVP III, of which 173,756
shares may be acquired upon the exercise of certain warrants issued in
connection with a prior Preferred Stock financing, which expired upon the
completion of the Initial Public Offering. Also includes 38,015 shares
beneficially owned by OVP III Entrepreneurs Fund, an affiliate of OVP III,
of which 8,688 shares may be acquired upon the exercise of certain warrants
issued in connection with a prior Preferred Stock financing, which expired
upon the completion of the Initial Public Offering. Mr. Clute, a director of
the Company, is a general partner of the General Partner of OVP III and OVP
III Entrepreneurs Fund. Mr. Clute disclaims beneficial ownership of the
shares except to the extent of his pro rata ownership therein. Also includes
10,000 shares issuable upon the exercise of options exercisable within 60
days of June 30, 1997.
(14) Includes 15,940 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1997.
(15) Includes 250,045 shares that may be acquired upon the exercise of certain
warrants issued in connection with a prior Preferred Stock financing, which
expired upon the completion of the Initial Public Offering. Mr. Stitt, a
director of the Company, is a Vice President of Vencap, Inc. Mr. Stitt
disclaims beneficial ownership of the shares except to the extent of his pro
rata ownership therein. Also includes 10,000 shares issuable upon the
exercise of options exercisable within 60 days of June 30, 1997.
(16) Includes 90,400 shares beneficially owned by the Weinstein Family
Partnership, of which 14,132 shares may be acquired upon the exercise of
certain warrants issued in connection with prior Preferred Stock financings,
which expired upon the completion of the Initial Public Offering. Mr.
Weinstein is a general partner of the Weinstein Family Partnership. Also
includes 20,395 shares that may be acquired upon the exercise of certain
warrants issued in connection with prior Preferred Stock financings, which
expired upon the completion of the Initial Public Offering and shares
issuable upon the exercise of options.
(17) Includes 244,618 shares subject to stock options exercisable within 60 days
of June 30, 1997 and 311,429 shares that may be acquired upon the exercise
of certain warrants issued in connection with prior Preferred Stock
financings, which expired upon the completion of the Initial Public
Offering.
70
<PAGE>
THE EXCHANGE OFFER
PURPOSES OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on October 22, 1996, to Smith Barney
Inc. (the "Initial Purchaser"), who subsequently resold the Old Notes to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) and institutional "accredited investors" (within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act). In connection with the
sale of the Old Notes, the Company agreed to use its reasonable best efforts to
cause to become effective within the time periods respectively specified in the
Registration Rights Agreement or earliest to occur of (i) an initial public
offering, (ii) October 1, 1999, or (iii) the consummation of any offering of
securities after giving effect to which the Company is subject to the reporting
requirements of the Exchange Act, a registration statement with respect to the
Exchange Offer. However, in the event that (i) any change in applicable law or
applicable interpretations of the staff of the Commission does not permit the
Company to effect the Exchange Offer or (ii) if for any other reason the
Exchange Offer is not consummated within 135 days after August 8, 1996, (iii)
any Holder of Old Notes notifies the Company that, for certain specified
reasons, such Holder is precluded from participating in the Exchange Offer, or
(iv) any Holder who participates in the Exchange Offer does not receive New
Notes which can be sold without restriction under federal and state securities
laws, the Company has agreed to use its reasonable best efforts to cause to
become effective a shelf registration statement (the "Shelf Registration
Statement") with respect to the resale of the Old Notes and to keep the Shelf
Registration Statement effective for 24 months from the Effectiveness Date (as
defined in the Registration Rights Agreement).
The Exchange Offer is being made by Coinstar to satisfy its obligations
pursuant to the Registration Rights Agreement. Once the Exchange Offer is
consummated, Coinstar will have no further obligation to register any of the Old
Notes not tendered by the Holders for exchange. See "Risk Factors--Consequences
to Non-Tendering Holders of Old Notes." A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part.
Based on an interpretation by the staff of the Commission set forth in the
Staff's Exxon Capital Holdings Corp. SEC No-Action Letter (available April 13,
1989), Morgan Stanley & Co., Inc. SEC No-Action Letter (available June 5, 1991),
Shearman & Sterling SEC No-Action Letter (available July 7, 1993), and other
no-action letters issued to third parties, the Company believes that New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by Holders thereof without
compliance with the registration and prospectus delivery provisions of the
Securities Act. However, any Holder who is an "affiliate" of the Company or who
intends to participate in the Exchange Offer for the purpose of distributing the
New Notes (i) cannot rely on the interpretation by the staff of the Commission
set forth in the above referenced no-action letters, (ii) cannot tender its Old
Notes in the Exchange Offer, and (iii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or transfer of the Old Notes, unless such sale or transfer is made pursuant
to an exemption from such requirements. See "Risk Factors-- Consequences to
Non-Tendering Holders of Old Notes."
In addition, each broker-dealer that receives New Notes for its own account
in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market making activities or other trading
activities and not acquired directly from the Company, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution."
Except as aforesaid, this Prospectus may not be used for an offer to resell,
resale or other transfer of New Notes.
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TERMS OF THE EXCHANGE OFFER
GENERAL
Upon the terms and subject to the conditions of the Exchange Offer set forth
in this Prospectus and in the Letter of Transmittal, the Company will accept any
and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date. The Company will issue $1,000 principal
amount of New Notes in exchange for each $1,000 principal amount of outstanding
Old Notes accepted in the Exchange Offer. Holders may tender some or all of
their Old Notes pursuant to the Exchange Offer; provided, that Old Notes may be
tendered only in integral multiples of $1,000.
As of July 31, 1996, there was $95 million of aggregate principal amount at
maturity of the Old Notes outstanding and one registered Holder of Old Notes.
This Prospectus, together with the Letter of Transmittal, is being sent to such
registered Holder as of , 1997.
In connection with the issuance of the Old Notes, the Company arranged for
the Old Notes to be issued and transferable in book-entry form through the
facilities of DTC, acting as depositary. The New Notes will be issued and
transferable in book-entry form through DTC. See "The Exchange Offer--Book-Entry
Transfer."
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
of Old Notes for the purpose of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering Holder thereof as promptly as practicable
after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay the expenses, other than
certain applicable taxes, of the Exchange Offer. See "The Exchange Offer--Fees
and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS
OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE
EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD NOTES TO TENDER AFTER
READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR
ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1997, unless the Company
in its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
In order to extend the Expiration Date, the Company will notify the Exchange
Agent and the record Holders of Old Notes of any extension by oral or written
notice, each prior to 9:00 a.m., New York City time, on the business day prior
to the previously scheduled expiration date. Such notice may state that the
Company is extending the Exchange Offer for a specified period of time or on a
daily basis until 5:00 p.m., New York City time, on the date on which a
specified percentage of Old Notes are tendered.
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The Company reserves the right to delay accepting any Old Notes, to extend
the Exchange Offer, to amend the Exchange Offer or to terminate the Exchange
Offer and not accept Old Notes not previously accepted if any of the conditions
set forth herein under "The Exchange Offer--Conditions" shall have occurred and
shall not have been waived by the Company by giving oral or written notice of
such delay, extension, amendment or termination to the Exchange Agent. Any such
delay in acceptance, extension, amendment or termination will be followed as
promptly as practicable by oral or written notice thereof. If the Exchange Offer
is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment in a manner reasonably
calculated to inform the Holders of such amendment and the Company will extend
the Exchange Offer for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to Holders of the Old
Notes, if the Exchange Offer would otherwise expire during such five to ten
business day period.
Without limiting the manner in which the Company may choose to make public
announcement of any extension, amendment or termination of the Exchange Offer,
the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
ACCRETION OF THE NEW NOTES AND THE OLD NOTES; INTEREST
The Old Notes will continue to accrete in principal amount through (but not
including) the date of issuance of the New Notes. From and after the date of
issuance of the New Notes, the New Notes shall accrete at the rate of 13% per
annum, but no cash interest will accrue or be payable in respect of the New
Notes prior to October 1, 1999. Thereafter, the New Notes will bear interest at
a rate equal to 13% per annum. Interest on the New Notes will be payable
semi-annually in arrears on October 1 and April 1 of each year, commencing on
April 1, 2000.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a Holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by Instruction 3 of the Letter of Transmittal, and mail
or otherwise deliver such Letter of Transmittal or such facsimile, together with
the Old Notes and any other required documents, to the Exchange Agent prior to
5:00 p.m., New York City time, on the Expiration Date.
The tender by a Holder will constitute an agreement between such Holder and
the Company in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth below. Holders may also request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect the above transactions
for such Holders.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY.
Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "Holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered Holder.
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Any beneficial holder whose Old Notes are registered in the name of its
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered Holder promptly and instruct such
registered Holder to consent and/or tender on its behalf. If such beneficial
Holder wishes to tender on its own behalf, such beneficial Holder must, prior to
completing and executing the Letter of Transmittal and delivering its Old Notes,
either make appropriate arrangements to register ownership of the Old Notes in
such Holder's name or obtain a properly completed bond power from the registered
Holder. The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered Holder
who has not completed the box entitled "Special Payment Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or a commercial bank or trust company having an office or correspondent in the
U.S. (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by appropriate bond powers signed as the name of the registered
Holder or Holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Old Notes not properly tendered or any Old Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders of Old Notes, unless otherwise provided in the
Letter of Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date or, as set forth under "The Exchange Offer-Conditions," to
terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the terms
of the Exchange Offer.
By tendering, each Holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of such Holder's business, that such Holder has no
arrangement with any person to participate in the distribution of such New
Notes, and that such Holder is not an "affiliate," as defined under Rule 405 of
the Securities Act, of
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the Company. If the Holder is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market making activities or other trading activities and not acquired directly
from the Company, such Holder by tendering will acknowledge that it will deliver
a prospectus in connection with any resale of such New Notes. See "Plan of
Distribution."
BOOK-ENTRY TRANSFER
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish an account with respect to the
Old Notes at DTC for the purpose of facilitating the Exchange Offer, and subject
to the establishment thereof, any financial institution that is a participant in
DTC's system may make book-entry delivery of Old Notes by causing DTC to
transfer such Old Notes into the Exchange Agent's account with respect to the
Old Notes in accordance with DTC's Automated Tender Offer Program ("ATOP")
procedures for such book-entry transfers. Although delivery of the Old Notes may
be effected through book-entry transfer into the Exchange Agent's account at
DTC, the exchange for Old Notes so tendered will only be made after timely
confirmation (a "Book-Entry Confirmation") of such book-entry transfer of the
Old Notes into the Exchange Agent's account, and timely receipt by the Exchange
Agent of an Agent's Message (as defined herein) and any other documents required
by the Letter of Transmittal. The term "Agent's Message" means a message,
transmitted by DTC and received by the Exchange Agent and forming part of the
Book-Entry Confirmation, which states that DTC has received express
acknowledgment from a participant tendering Old Notes that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal, and
that such agreement may be enforced against such participant.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes to be tendered
in proper form for transfer (or a confirmation of a book-entry transfer into
the Exchange Agent's account at DTC of Old Notes delivered electronically)
and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or confirmation of a book-entry
transfer into the Exchange Agent's account at DTC of Old Notes delivered
electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
Upon request of the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
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WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To
withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the Holder
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Notes register the transfer of such Old Notes into the name
of the person withdrawing the tender, and (iv) specify the name in which any
such Old Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
no New Notes will be issued with respect thereto unless the Old Notes so
withdrawn are validly retendered. Any Old Notes which have been tendered but
which are not accepted for payment will be returned to the Holder thereof
without cost to such Holder as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may
be retendered by following one of the procedures, described above under "The
Exchange Offer--Procedures for Tendering" at any time prior to the Expiration
Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange New Notes for, any Old Notes not
theretofore accepted for exchange, and may terminate or amend the Exchange Offer
as provided herein before the acceptance of such Old Notes, if any of the
following conditions exist:
(a) the Exchange Offer, or the making of any exchange by a Holder,
violates applicable law or any applicable interpretation of the Commission;
(b) any action or proceeding instituted or threatened in any court or by
or before any governmental agency with respect to the Exchange Offer which,
in the sole judgment of the Company, might impair the ability of the Company
to proceed with the Exchange Offer;
(c) there shall have been adopted or enacted any law, statute, rule or
regulation which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer;
(d) a banking moratorium shall have been declared by U.S. federal or
California or New York state authorities which, in the Company's judgment,
would reasonably be expected to impair the ability of the Company to proceed
with the Exchange Offer;
(e) trading on the New York Stock Exchange or generally in the U.S.
over-the-counter market shall have been suspended by order of the Commission
or any other governmental authority which, in the Company's judgment, would
reasonably be expected to impair the ability of the Company to proceed with
the Exchange Offer; or
(f) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Company, threatened for that purpose.
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If any such conditions exist, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to exchanging Holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of Holders to withdraw such Old
Notes (see "The Exchange Offer--Withdrawal of Tenders") or (iii) waive certain
of such conditions with respect to the Exchange Offer and accept all properly
tendered Old Notes which have not been withdrawn or revoked. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver in a manner reasonably calculated to inform Holders of Old
Notes of such waiver.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition to the foregoing conditions, (i) if, because of any change in
applicable law or applicable interpretations thereof by the Commission, the
Company is not permitted to effect the Exchange Offer or (ii) if for any other
reason the Exchange Offer is not consummated within 135 days of August 8, 1997,
or (iii) any Holder of Old Notes notifies the Company that, for certain
specified reasons, such Holder is precluded from participating in the Exchange
Offer or (iv) any Holder who participates in the Exchange Offer does not receive
New Notes which can be sold without restrictions under federal and state
securities laws, then the Company shall file a Shelf Registration Statement and
use its reasonable best efforts to keep the Shelf Registration Statement
effective for 24 months from the Effectiveness Date. Thereafter, the Company's
obligation to consummate the Exchange Offer shall be terminated.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Letters of Transmittal and Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT COURIER:
Attention: George Johnson Attention: George Johnson
Reorganization Section Reorganization Section
The Bank of New York The Bank of New York
101 Barclay Street, 7E 101 Barclay Street, Ground Level
New York, NY 10286 Corporate Trust Services Window
New York, NY 10286
BY HAND: BY FACSIMILE:
Attention: George Johnson (212) 815-6339
Reorganization Section Attention: George Johnson
The Bank of New York Reorganization Section
101 Barclay Street, Ground Level
Corporate Trust Services Window Confirm by telephone:
New York, NY 10286 (212) 815-3687
</TABLE>
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FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Company may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this Prospectus and related documents to the beneficial owners of the
Old Notes, and in handling or forwarding tenders for exchange.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company, are estimated in the aggregate to be approximately
$175,000, and include fees and expenses of the Exchange Agent and the Trustee
under the Indenture and accounting and legal fees.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered Holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exception therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value as reflected in the Company's accounting records on the date
of the Exchange Offer. Accordingly, no gain or loss for accounting purposes will
be recognized upon consummation of the Exchange Offer. The issuance costs
incurred in connection with the Exchange Offer will be capitalized and amortized
over the term of the New Notes.
DESCRIPTION OF OLD NOTES
The Old Notes were issued under an indenture dated as of October 1, 1996
(the "Indenture"), by and between the Company and The Bank of New York, as
trustee (the "Trustee"). A copy of the form of Indenture is available from the
Company upon request. The following summaries of certain provisions of the Old
Notes and the Indenture do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all the provisions of the Old
Notes and the Indenture, including the definitions therein of certain terms
which are not otherwise defined in this Prospectus. Wherever particular
provisions or defined terms of the Indenture (or of the form of Old Note which
is a part thereof) are referred to, such provisions or defined terms are
incorporated herein by reference. As used in this "Description of Old Notes,"
the "Company" refers to Coinstar, Inc.
GENERAL
The Old Notes are unsecured obligations of the Company and are subordinated
to all other Senior Debt of the Company and are to be effectively subordinated
to all indebtedness (including senior indebtedness and trade credit) of
subsidiaries of the Company. The Old Notes are limited to $95,000,000
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aggregate principal amount at maturity, were issued in fully registered form
only in denominations of $1,000 or any integral multiple thereof and were
scheduled to mature on October 1, 2006.
Interest on the Old Notes neither accrues nor is payable prior to October 1,
1999. Thereafter, interest would accrue at 13% per annum and would be payable
semi-annually in arrears on each October 1 and April 1, commencing April 1,
2000. Interest would be computed on the basis of a 360-day year composed of
twelve 30-day months.
OPTIONAL REDEMPTION BY THE COMPANY
The Indenture provides that Old Notes are not redeemable at the option of
the Company prior to October 1, 2001. At any time on or after that date the Old
Notes could be redeemed at the Company's option on at least 30 but not more than
60 days' notice, in whole at any time or in part from time to time, at the
following respective prices (expressed in percentages of the principal amount),
together with accrued and unpaid interest and Liquidated Damages thereon, if
any, through the date of redemption, during the 12-month period beginning
October 1 of the years indicated:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2001............................................................................. 108.000%
2002............................................................................. 105.333
2003............................................................................. 102.667
2004 and thereafter.............................................................. 100.000
</TABLE>
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING
The Indenture provides that, in the event that the Company consummates a
Public Equity Offering after which there is a Public Market, the Company may, at
its option, redeem at any time prior to October 1, 1999, from the proceeds of
such Public Equity Offering received by the Company, up to 100% of the aggregate
principal amount of the of the Old Notes originally issued at a redemption price
equal to 118% of the Accreted Value thereof plus accrued and unpaid Liquidated
Damages, if any, to the date of redemption; provided, however, that such
redemption occurs within 60 days of the date of the closing of such Public
Equity Offering.
REDEMPTION OR REPURCHASE AT THE OPTION OF THE HOLDERS
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, the
Company is required to offer to repurchase (the "Change of Control Offer") all
or a portion of each Holder's Old Notes at a purchase price equal to 101% of the
Accreted Value thereof on the date of purchase (if prior to October 1, 1999), or
(if on or after October 1, 1999) 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of repurchase.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment Old Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the paying agent an
amount equal to the Change in Control Payment in respect of all Old Notes or
portions thereof so accepted, and (iii) deliver or cause to be delivered to the
Trustee Old Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Old Notes or portions thereof being tendered to
the Company.
Any amounts remaining after the purchase of Old Notes pursuant to a Change
of Control Offer shall be returned by the Trustee to the Company.
The definition of "Change of Control" includes a disposition of all or
substantially all of the assets of the Company. With respect to the disposition
of assets, the phrase "all or substantially all" as used in the
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Indenture (including as set forth under "The Exchange Offer--Certain
Covenants--Merger, Consolidation and Sale of Assets" below) varies according to
the facts and circumstances of the subject transaction, has no clearly
established meaning under New York law (which is the choice of law under the
Indenture) and is subject to judicial interpretation. Accordingly, in certain
circumstances there may be a degree of uncertainty in ascertaining whether a
particular transaction would involve a disposition of "all or substantially all"
of the assets of a Person, and therefore it may be unclear as to whether a
Change of Control has occurred and whether the Company is required to make a
Change of Control Offer.
None of the provisions relating to a repurchase upon a Change of Control are
waivable by the Board of Directors of the Company. The Company could, in the
future, enter into certain transactions, including certain recapitalizations of
the Company, that would not constitute a Change of Control with respect to the
Change of Control repurchase feature of the Old Notes, but would increase the
amount of Indebtedness outstanding at such time. If a Change of Control were to
occur, there can be no assurance that the Company would have sufficient funds to
pay the repurchase price for all Old Notes that the Company is required to
repurchase. In the event that the Company were required to repurchase
outstanding Old Notes pursuant to a Change of Control Offer, the Company expects
that it would need to seek third-party financing to the extent it does not have
available funds to meet its repurchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
If an offer is made to repurchase the Old Notes pursuant to a Change of
Control Offer, the Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
and regulations in connection with the repurchase of the Old Notes in connection
with a Change of Control and, to the extent that the provisions of such
securities laws or regulations conflict with the "Change of Control" provisions
of the Indenture, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
the "Change of Control" provisions of the Indenture by virtue thereof.
ASSET SALES
The Indenture provides that the Company shall not, and shall not permit any
Restricted Subsidiary to: (i) sell, lease, convey or otherwise dispose of any
assets (including, without limitation, by way of a sale and leaseback or similar
arrangement) other than in the ordinary course of business, provided that the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole shall be
governed by the provisions of Indenture governing Changes of Control or
successors by way of a merger, consolidation or sale of assets and not by this
provision; or (ii) issue or sell Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1 million or (b) for aggregate net proceeds in excess of $1
million (each of the foregoing an "ASSET SALE"), unless (x) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value (as evidenced by a
resolution of the Company's Board of Directors set forth in an Officers'
Certificate delivered to the Trustee) of the assets, or other property or Equity
Interests issued or sold or otherwise disposed of in the Asset Sale; and (y) at
least 100% in the case of a sale of accounts (except for a sale of past-due
accounts for collection), and 75% in the case of a sale of other assets, of such
consideration is in the form of cash or Cash Equivalents or any combination
thereof. Notwithstanding the foregoing, any Restricted Payment or Permitted
Investment that is permitted by provisions of the Indenture governing Restricted
Payments shall not be deemed to be an Asset Sale. Notwithstanding the foregoing,
the consideration received by the Company or any Restricted Subsidiary in
respect of any transaction which would constitute an Asset Sale but for the fact
that the fair market value of the property of which disposition is made, or the
amount of aggregate net proceeds yielded thereby, is less than $1 million,
shall, unless such transaction is permitted as a Restricted Payment or Permitted
Investment under provisions of the Indenture governing Restricted Payments,
equal to at least the fair market value of such property.
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Within 270 days after any Asset Sale, the Company or such Subsidiary shall
apply the Net Proceeds from such Asset Sale, to (a) reinvest in the business of
the Company (or any Restricted Subsidiary of the Company) that the Company was
engaged in on the date of this Indenture or (b) permanently reduce borrowings
and commitments under Indebtedness permitted to be incurred pursuant to "The
Exchange Offer--Certain Covenants--Limitation on Indebtedness and Issuance of
Disqualified Capital Stock." Pending the final application of any such Net
Proceeds, the Company may temporarily invest such Net Proceeds in any manner not
prohibited by this Indenture. Any Net Proceeds from an Asset Sale not applied or
invested as provided in the first sentence of this paragraph will be deemed to
constitute "EXCESS PROCEEDS."
Within five Business Days after any date that the aggregate amount of Excess
Proceeds exceeds $5 million (an "ASSET SALE OFFER TRIGGER DATE"), the Company
shall commence an Asset Sale Offer pursuant to Section 3.09 of the Indenture to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds at an offer price in cash in an amount equal to (if prior to the
Full Accretion Date) 100% of the Accreted Value thereof on the date of
repurchase, plus accrued and unpaid Liquidated Damages thereon, if any, or (if
on or after the Full Accretion Date) 100% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of repurchase, in each case in accordance with the procedures set forth in
Section 3.09 hereof. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
(or such Subsidiary) may use the remaining Excess Proceeds for any purpose not
prohibited by the Indenture. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be deemed to be reset at zero.
SELECTION AND NOTICE
If less than all of the Old Notes are to be redeemed at any time, selection
of Old Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Old Notes are listed or, if the Old Notes are not so listed, by lot or by such
other method as the Trustee deems fair and appropriate; provided, that no Old
Notes with a principal amount of $1,000 or less shall be redeemed in part.
Notice of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each Holder of Old Notes to be
redeemed at its registered address. If any Old Note is to be redeemed in part
only, the notice of redemption that relates to such Old Note shall state the
portion of the principal amount thereof to be redeemed. An Old Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
holder thereof upon cancellation of the original Old Note. On and after the
redemption date, interest will cease to accrue on Old Notes or portions thereof
called for redemption.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that, the Company shall not, and shall not cause or
permit any Restricted Subsidiary to, directly or indirectly, (i) declare or pay
any dividend or make any other payment or distribution (other than dividends or
distributions payable solely in shares of Capital Stock (other than Disqualified
Capital Stock) on shares of the Company's Capital Stock to holders of such
Capital Stock, (ii) purchase, redeem or otherwise acquire or retire for value
any Capital Stock of the Company, (iii) make any principal payment on, or
purchase, defease, redeem, or otherwise acquire or retire for value any
Indebtedness of the Company that is subordinate in right of payment to the Old
Notes, or (iv) make any Investment (other than Permitted Investments) (each of
the foregoing prohibited actions set forth in clauses (i), (ii), (iii) and (iv)
being referred to as a "Restricted Payment"), if at the time of such proposed
Restricted Payment or immediately after giving effect thereto, (a) a Default or
an Event of Default has occurred and is continuing or would result therefrom, or
(b) the Company is not, or would not be, able to incur at least $1.00 of
additional Indebtedness under the Debt to Cash Flow Ratio test, or (c) the
aggregate
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amount of Restricted Payments made subsequent to the Issue Date (excluding
Restricted Payments permitted by clauses (w) and (x) below) exceeds or would
exceed the sum of: (1) the difference between (A) the cumulative Consolidated
EBITDA of the Company as of the date of such Restricted Payment since the Issue
Date, minus (B) the product of 1.75 times cumulative Consolidated Interest
Expense of the Company as of the date of such Restricted Payment since the Issue
Date, PLUS (2) 100% of the aggregate net proceeds received by the Company from
sales of Capital Stock of the Company since the Issue Date (other than net
proceeds from the sale of Disqualified Capital Stock and net proceeds invested
pursuant to clause (viii) of the definition of "Permitted Investments" contained
in the Indenture and net proceeds with respect to which Indebtedness has been
issued pursuant to clause (x) of "The Exchange Offer--Certain
Covenants--Limitation on Indebtedness and Issuance of Disqualified Capital
Stock"). The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, declare or pay any dividend
or make any other payment or distribution(s) on any shares of the Company's
Preferred Equity (other than dividends or distributions payable solely in shares
of Preferred Equity of the same series (other than Disqualified Capital Stock)
prior to October 1, 1999.
Notwithstanding the foregoing, the Indenture provides that the provisions
set forth in the immediately preceding paragraph shall not prohibit: (u) the
payment of any dividend within 60 days of the date of declaration of such
dividend, if at said date of declaration such payment would have complied with
the provisions of the Indenture; (v) dividends and distributions made by any
Wholly Owned Subsidiary of the Company or a Restricted Subsidiary, (w) the
redemption, repurchase, retirement or other acquisition of any Equity Interests
of the Company in exchange for, or out of the proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, or the
substantially concurrent conversion of, other Equity Interests of the Company
(other than Disqualified Capital Stock), (x) the defeasance, redemption or
repurchase of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness or the substantially concurrent
sale (other than to a Subsidiary of the Company) of Equity Interests of the
Company (other than Disqualified Capital Stock); PROVIDED, HOWEVER, that the
amount of any such net cash proceeds that are utilized for any redemption,
repurchase, retirement or defeasance pursuant to clauses (w) or (x) above shall
be excluded from clause (c)(2) above, (y) the repurchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company or any
Subsidiary of the Company held by any employee, consultant or other service
provider of the Company; PROVIDED that the aggregate price paid for all such
Capital Stock shall not exceed $1 million, and (z) with respect to any
Restricted Subsidiary organized as a partnership or limited liability company or
similar organization, distributions in respect of partners' or members' income
tax liability or such distributions as may be required by law in an amount not
to exceed $1 million; PROVIDED, HOWEVER, in each case, that no Default or Event
of Default shall have occurred and be continuing at the time of such Restricted
Payment pursuant to any of the above clauses (u) though (z) and would not result
therefrom.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the first paragraph of this section were computed, which
calculations may be based upon the Company's most recently available financial
statements.
LIMITATION ON INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED CAPITAL STOCK
The Indenture provides that the Company shall not directly or indirectly,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to (collectively,
"INCUR"), any Indebtedness (including Acquired Debt), or issue any Disqualified
Capital Stock, and the Company shall not cause or permit any of its Restricted
Subsidiaries to incur any
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Indebtedness or issue any shares of Preferred Equity; PROVIDED, HOWEVER, that
the Company may incur Indebtedness (including Acquired Debt) and the Company may
issue Disqualified Capital Stock if: (i) no Default or Event of Default shall
have occurred and be continuing; and (ii) immediately after giving pro forma
effect to such proposed incurrence and the receipt and application of the net
proceeds therefrom, the Company's Debt to Cash Flow Ratio would not exceed (a)
7.0 to 1.0 from the Issue Date until the Full Accretion Date, and (b) 5.0 to 1.0
thereafter. The foregoing limitation shall not apply to (i) the Notes; (ii)
Indebtedness of the Company outstanding on the Issue Date; (iii) Indebtedness
incurred by the Company or its Restricted Subsidiaries to finance the purchase
of Coinstar units; provided, however, that (a) the aggregate principal amount of
such Indebtedness does not exceed 100% of the fair market value (on the date of
such incurrence) of the Coinstar units acquired, plus marketing costs incurred
within 120 days after the initial regional marketing launch for the designated
marketing area in which such Coinstar units are installed, provided that such
marketing costs shall not exceed $2,500 for each Coinstar unit installed, and
(b) the Company has budgeted the proceeds of the Offering in accordance with the
"Use of Proceeds" section of the Offering Memorandum and as projected and
described in Exhibit A to the Offering Memorandum; (iv) Indebtedness incurred by
the Company for working capital purposes pursuant to a revolving credit facility
in an aggregate principal amount that, when taken together with the principal
amount of all other Indebtedness incurred pursuant to this clause (iv) and then
outstanding, does not exceed $10 million; (v) Indebtedness of the Company's
Restricted Subsidiaries to the Company or to any Wholly Owned Restricted
Subsidiary of the Company; (vi) additional Indebtedness incurred by the Company
or its Restricted Subsidiaries to the extent that the aggregate principal amount
or accreted value thereof, as applicable (measured as of the date of issuance),
does not exceed $10 million at any one time outstanding; (vii) Permitted
Refinancing Indebtedness; (viii) Hedging Obligations entered into by the Company
not as speculative investments but as hedging transactions designed to protect
the Company against fluctuations in interest rates in connection with Permitted
Indebtedness; (ix) Indebtedness of the Company or a Restricted Subsidiary under
any Currency Agreements; provided that (a) such Currency Agreements relate to
Indebtedness otherwise permitted under this Indenture or the purchase of
Coinstar units by the Company or a Restricted Subsidiary in the ordinary course
of business and (b) such Currency Agreements do not increase the Indebtedness or
other obligations of the Company or a Restricted Subsidiary outstanding other
than as a result of fluctuations in foreign currency exchange rates or by reason
of fees, indemnities and compensation payable thereunder; and (x) additional
indebtedness equal to the aggregate amount of net cash proceeds received from
the sale of Capital Stock other than Disqualified Capital Stock since the Issue
Date (provided that the net proceeds from such sales of Capital Stock will be
excluded from the clause (c)(ii) of the first paragraph of "The Exchange
Offer--Certain Covenants--Restricted Payments" and the basket created by clause
(viii) of the definition of Permitted Investments).
ASSET MAINTENANCE TEST.
The Indenture provides that, notwithstanding any other provision of the
Indenture, the Company shall not (i) effect any sale, lease, transfer or other
disposition of any of its property or assets to a Subsidiary or (ii) make any
Permitted Investment (except (a) the initial $10 million permitted by clause
(viii) of the definition thereof and (b) an aggregate of $1 million for
Investments in Restricted Subsidiaries solely for the creation and maintenance
thereof) or (iii) make any Restricted Payment (except a Restricted Payment
permitted by clauses (u)-(z) of the second paragraph of "The Exchange
Offer--Certain Covenants-- Restricted Payments"), if, as a result thereof or
immediately upon giving effect thereto, Total Gross Assets
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would be less than the amounts set forth below during the twelve-month period
commencing January 1 of each year set forth below:
<TABLE>
<CAPTION>
TOTAL GROSS
YEAR ASSETS
- --------------------------------------------------------------------------- -----------------
<S> <C>
1996....................................................................... $ 60.0 million
1997....................................................................... 60.0 million
1998....................................................................... 70.0 million
1999....................................................................... 92.5 million
2000 and thereafter........................................................ 100.0 million
</TABLE>
In the event the Company redeems or repurchases, or effects a Legal
Defeasance or Covenant Defeasance with respect to, less than 100% of the Old
Notes, the amounts set forth under the caption "Total Gross Assets" above shall
be reduced by multiplying each such amount by a fraction the denominator of
which shall be the then outstanding aggregate Accreted Value (if prior to
October 1, 1999) or principal amount (if on or after October 1, 1999) of the Old
Notes and the numerator of which shall be the Accreted Value (if prior to
October 1, 1999) or principal amount (if on or after October 1, 1999) of the
Notes so redeemed, repurchased or defeased.
Within 30 days after the consummation by the Company of any transaction of a
type described in any of clause (i), (ii) or (iii) above, the Company shall
deliver, or cause to be delivered, to the Trustee, an Offficers' Certificate
stating that such transaction complies with this section and that all conditions
precedent in the Indenture relating to such transaction has been complied with.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company shall not, and shall not permit any
of its Restricted Subsidiaries to, directly or indirectly, conduct any business
or enter into or suffer to exist any transaction or series of transactions
(including the purchase, sale, transfer, lease or exchange of any Property or
the rendering of any service) with or for the benefit of any Affiliate (each, an
"AFFILIATE TRANSACTION") other than any Affiliate Transaction that is on terms
that are fair and reasonable and no less favorable to the Company or such
Restricted Subsidiary than those that might reasonably have been obtained at
such time in a comparable transaction or series of related transactions on an
arms-length basis from a Person that is not such an Affiliate; provided,
however, that any Affiliate Transaction involving aggregate consideration of $1
million or more shall require approval by a majority of the disinterested
members of the Company's Board of Directors; and provided, further, that any
Affiliate Transaction involving aggregate consideration of $10 million or more
in the event that a Public Equity Offering shall have been consummated or $5
million or more prior to the consummation of a Public Equity Offering, shall
require a fairness opinion from an accounting, appraisal or investment banking
firm of national standing. Notwithstanding the foregoing, transactions between
or among any combination of the Company and its Restricted Subsidiaries will not
be deemed Affiliate Transactions, and any transaction among any combination of
the Company and its Restricted Subsidiaries, on one hand, and any one or more
Unrestricted Subsidiaries on the other hand, shall not be deemed an Affiliate
Transaction if it is on terms that are fair and reasonable to the Company or any
such Restricted Subsidiary and would be permitted under "The Exchange
Offer--Certain Covenants--Restricted Payments."
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company shall not, and shall not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to: (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any Indebtedness
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owed to the Company or any of its Restricted Subsidiaries; (ii) make loans or
advances to the Company or to any of its Restricted Subsidiaries; or (iii)
transfer any of its property or assets to the Company or to any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) Indebtedness as in effect on the Issue Date, (b) the
Indenture and the Old Notes, (c) applicable law, (d) any Indebtedness permitted
by the terms of the Indenture to be incurred, PROVIDED that the restrictions
contained in the agreements governing such other Indebtedness are no more
restrictive than those contained in Exhibit C to the Indenture, (e) customary
provisions in leases or purchase-money or installment sales financings permitted
hereunder and entered into in the ordinary course of business and consistent
with past practices, restricting the transfer, assignment or disposition of the
assets so financed, assets directly related thereto (such as related insurance),
proceeds, products and replacements thereof and accessions thereto, but not
otherwise imposing restrictions on any transfers of properties or assets to the
Company or any of its Restricted Subsidiaries, and not imposing restrictions of
the kinds contemplated by clauses (i) or (ii) above, in each case, more
restrictive than those set forth in Exhibit C to the Indenture, or (f) Permitted
Refinancing Debt, PROVIDED that the restrictions contained in the agreements
governing such Permitted Refinancing Debt are no more restrictive than those
contained in the agreements governing the Indebtedness being refinanced.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Indenture provides as follows:
The Board of Directors of the Company may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary at any time; provided, however, that
immediately after giving effect to such designation on a pro forma basis as if
the same had occurred at the beginning of the most recently ended full fiscal
quarter of the Company for which consolidated financial statements are
available, (i) the Company would be permitted to incur at least $1.00 of
additional Indebtedness under the Debt to Cash Flow Ratio test and (ii) an
Officers' Certificate with respect to such designation is delivered to the
Trustee within 75 days after the end of the fiscal quarter of the Company in
which such designation is made (or, in the case of a designation made during the
last fiscal quarter of the Company's fiscal year, within 120 days after the end
of such fiscal year), which Officers' Certificate states the effective date of
such designation; and PROVIDED, FURTHER, that such designation shall be deemed
to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if no Default or Event of Default would be
in existence following such designation.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default; PROVIDED,
HOWEVER, that immediately after giving effect to such designation on a pro forma
basis, the Company would be in compliance with "The Exchange Offer-- Certain
Covenants--Restricted Payments." For purposes of making such determination, all
outstanding Investments by the Company and its Restricted Subsidiaries (except
to the extent repaid in cash or in the form in which such Investment was
originally made) in the Subsidiary so designated, whether made before or after
the Issue Date, shall be deemed to be Restricted Payments at the time of such
designation and shall reduce the amount available for Restricted Payments. All
such outstanding Investments shall be deemed to constitute Investments in an
amount equal to the greatest of (i) the net book value of such Investments at
the time of such designation, (ii) the fair market value of such Investments at
the time of such designation and (iii) the original fair market value of such
Investments at the time they were made. Such designation shall only be permitted
if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
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NO SENIOR SUBORDINATED DEBT
The Indenture provides that notwithstanding the provisions of "The Exchange
Offer--Certain Covenants--Limitation of Indebtedness and Issuance of
Disqualified Capital Stock," the Company shall not incur any Indebtedness that
is subordinate or junior in right of payment to any Senior Debt and senior in
any respect in right of payment to the Old Notes.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Indenture provides as follows:
The Company shall not consolidate with or merge with or into any Person
(whether or not the Company is the surviving Person) or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets (whether as an entirety or substantially as an entirety in a
transaction or a series of related transactions) to any Person or adopt a Plan
of Liquidation unless: (i) either (a) the Company will be the surviving or
continuing corporation (the "SURVIVING PERSON") or (b) the Surviving Person (if
other than the Company) formed by or surviving any such consolidation or merger
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall expressly assume, by supplemental indenture, executed and
delivered to the Trustee and in form satisfactory to the Trustee, all of the
obligations of the Company under the Old Notes, the Indenture and the
Registration Rights Agreement, and the obligations under the Old Notes, the
Indenture, and the Registration Rights Agreement remain in full force and
effect, (ii) immediately after giving effect to such transaction and the
assumption contemplated above, the Company or such Surviving Person shall have a
Debt to Cash Flow Ratio equal to or less than the Debt to Cash Flow Ratio of the
Company immediately preceding the transaction; (iii) immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
or be continuing; and (iv) immediately after giving effect to such transaction,
the Surviving Person shall continue to operate the business of the Company that
was the principal business of the Company immediately preceding such
transaction.
In connection with any consolidation, merger or transfer contemplated by
this provision, the Company shall deliver, or cause to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent in this
Indenture provided for relating to such transaction or transactions have been
complied with.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the SEC, so long as any Old Notes are outstanding, the Company
shall furnish to the Trustee and to all Holders of Old Notes once the Company
becomes subject to the reporting requirements of the Exchange Act, all quarterly
and annual financial information that would be required to be contained in a
filing with the SEC on Forms 10-Q and 10-K if the Company were required to file
such forms (without exhibits unless requested), including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Company and
its Restricted Subsidiaries and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants. In addition,
whether or not required by the rules and regulations of the SEC, the Company
shall file a copy of all such information and reports with the SEC for public
availability (unless the SEC will not accept such a filing) and shall promptly
make such information available to all securities analysts and prospective
investors upon request. The Company shall at all times comply with TIA '314(a).
For so long as any Transfer Restricted Securities remain outstanding, the
Company shall furnish to all Holders and prospective purchasers of the Old Notes
designated by the Holders of Transfer Restricted
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Securities, promptly upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of the covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
EVENTS OF DEFAULT AND REMEDIES
EVENTS OF DEFAULT
The Indenture provides that an Event of Default shall occur upon the
happening of any of the following:
(a)(i) the Company defaults in the payment when due of interest or
Liquidated Damages on any Note on any day and such default continues for a
period of 30 days or more after the same becomes due and payable;
(b) the Company defaults in the payment when due of principal or
Accreted Value of any Note, when such principal or Accreted Value becomes
due and payable, at maturity, upon redemption (including in connection with
an offer to purchase), pursuant to an Asset Sale Offer, a Change of Control
Offer or otherwise;
(c) the Company defaults in the observance or performance of any other
covenant, representation, warranty or agreement contained in this Indenture
or the Notes, which default continues for a period of 45 days after the
Company receives written notice specifying the default (and requiring that
such default be remedied) from the Trustee or from the Holders of not less
than 25% in Accreted Value (if prior to the Full Accretion Date) or
aggregate principal amount (if on or after the Full Accretion Date) of the
Notes then outstanding;
(d) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Material Restricted
Subsidiary (or the payment of which is guaranteed by the Company or any
Material Restricted Subsidiary), whether such Indebtedness or guarantee now
exists, or is created after the Issue Date, which default results in the
acceleration of such Indebtedness prior to its express maturity and the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness the maturity of which has been so
accelerated, aggregates $5 million or more;
(e) one or more judgments are entered by a court or courts of competent
jurisdiction against the Company or any of its Material Restricted
Subsidiaries and such judgment or judgments remain undischarged, or unstayed
or unsatisfied for a period of 60 consecutive days, where such judgment or
judgments are for the payment of money in an aggregate amount in excess of
$5 million (in excess of applicable insurance coverage with respect to which
the Company's insurer has acknowledged coverage in writing);
(f) the Company or any of its Restricted Subsidiaries pursuant to or
within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a Bankruptcy Custodian of such
Person or for all or substantially all of its property,
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(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due;
(g) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its Material
Restricted Subsidiaries in an involuntary case;
(ii) appoints a Bankruptcy Custodian of the Company or any of its
Material Restricted Subsidiaries for all or substantially all of the
property of the Company or any of its Material Restricted Subsidiaries;
or
(iii) orders the liquidation of the Company or any of its Material
Restricted Subsidiaries; and the order or decree remains unstayed and in
effect for 60 consecutive days; or
(h) any holder of at least $5 million in aggregate principal amount of
Indebtedness of the Company or any Material Restricted Subsidiary shall
commence judicial proceedings to foreclose upon assets of the Company or any
Material Restricted Subsidiary having an aggregate fair market value,
individually or in the aggregate, of at least $5 million or shall have
exercised any right under applicable law or applicable security documents to
take ownership of any such assets in lieu of foreclosure.
If any Event of Default (other than an Event of Default specified in clause
(f) or (g) above with respect to the Company, any Material Restricted Subsidiary
or any group of Material Restricted Subsidiaries that, taken as a whole, would
constitute a Material Restricted Subsidiary) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Upon any such declaration, the Notes shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (f) or
(g) above occurs with respect to the Company, any Material Restricted Subsidiary
or any group of Material Restricted Subsidiaries that, taken as a whole, would
constitute a Material Restricted Subsidiary), all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
any principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
If an Event of Default occurs on or after October 1, 2001 by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
the optional redemption provisions of the Indenture, then, upon acceleration of
the Notes, an equivalent premium shall also become and be immediately due and
payable, to the extent permitted by law, anything in this Indenture or in the
Notes to the contrary notwithstanding. If an Event of Default occurs prior to
October 1, 2001 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to such date, then, upon
acceleration of the Notes, an additional premium shall also become and be
immediately due and payable in an amount, for each of the years beginning on
October 1 of the years set
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forth below, as set forth below (expressed as a percentage of the Accreted Value
to the date of payment that would otherwise be due but for the provisions of
this sentence):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
1997.............................................................................. 113.000%
1998.............................................................................. 111.750%
1999.............................................................................. 110.500%
2000.............................................................................. 109.250%
2001.............................................................................. 108.000%
</TABLE>
Holders of not less than a majority in aggregate Accreted Value (if prior to
the Full Accretion Date) or principal amount (if on or after the Full Accretion
Date) of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on the Notes (including in connection with an offer to purchase).
The Holders of the Old Notes may not enforce the Indenture or the Old Notes
except as provided in the Indenture and under the TIA. Subject to the provisions
of the Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate Accreted
Value (if prior to the full Accretion Date) or aggregate principal amount (if on
or after the Full Accretion Date) of the then outstanding Old Notes may direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee. The Trustee may withhold from Holders notice of any continuing
Default or Event of Default (except a Default or Event of Default in the payment
of principal of or premium, if any, or interest) on the Old Notes if it
determines that withholding notice is in their interest.
Under the Indenture, the Company is required to provide an Officers'
Certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
DEFEASANCE
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Legal Defeasance or Covenant Defeasance be applied to all outstanding Old
Notes upon compliance with the conditions set forth below.
Upon the Company's exercise of the option applicable to Legal Defeasance,
the Company shall, subject to the satisfaction of the conditions set forth
below, be deemed to have been discharged from its obligations with respect to
all outstanding Notes on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that
the Company shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 of the Indenture and the
other Sections of the Indenture referred to in (i)-(iv) below, and to have
satisfied all of its other obligations under such Old Notes and the Indenture
(and the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following provisions,
which shall survive until otherwise terminated or discharged hereunder: (i) the
rights of Holders of outstanding Old Notes to receive solely from the trust fund
described in Section 8.04 of the Indenture, and as more fully set forth in such
Section, payments in respect of the principal of, premium, if
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any, and interest (including Liquidated Damages) on such Notes when such
payments are due; (ii) the Company's obligations with respect to such Old Notes
under Article 2 and Section 4.02 of the Indenture; (iii) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith; and (iv) to the Legal Defeasance Article
Eight of the Indenture. Subject to compliance with such Article 8, the Company
may exercise its option to Legal Defeasance notwithstanding the prior exercise
of its option to Covenant Defeasance.
Upon the Company's exercise of the option applicable to Covenant Defeasance,
the Company shall, subject to the satisfaction of the conditions set forth
below, be released from its obligations under the covenants contained in
Sections 4.07, 4.08, 4.09, 4.10, 4.11 and 4.13 of the Indenture with respect to
the outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes 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 (it being understood that such Old Notes shall
not be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Old Notes, 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 6.01 of the Indenture, but, except as
specified above, the remainder of this Indenture and such Old Notes shall be
unaffected thereby. In addition, upon the Company's exercise of the option
applicable to Covenant Defeasance, subject to the satisfaction of the conditions
set forth below, sections (c) through (e) and section (h) of "The Exchange
Offer--Events of Default and Remedies-- Events of Default shall not constitute
Events of Default.
The following shall be the conditions to the application of either Legal
Defeasance or Covenant Defeasance to the outstanding Old Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders, cash in United States dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium and Liquidated Damages, if any, and interest on
the outstanding Old Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be;
(b) in the case of an election to Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming 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 the 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 of Counsel shall confirm that, the Holders of the outstanding Old Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(c) in the case of an election to Covenant Defeasance, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
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(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the Notes pursuant to Article Eight of the Indenture
concurrently with such incurrence); provided, however, that the benefits of any
Covenant Defeasance or Legal Defeasance shall immediately and automatically
cease if any Event of Default under section (f) or (g) of "The Exchange
Offer--Events of Default and Remedies--Events of Default" shall have occurred,
at any time in the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than the Indenture) to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that, as of the date such opinion: after the 91st day following the
deposit (assuming that no Holder of any Old Notes would be considered an insider
of the Company under applicable Bankruptcy Law), the rights of the Holders will
not be adversely affected in any proceeding under applicable Bankruptcy Law by
reason of such Covenant Defeasance or Legal Defeasance (by comparison to the
rights such Holders would have had such Covenant Defeasance or Legal Defeasance
not been effected);
(g) the Company shall have delivered to the Trustee an Officers' Certificate
stating that the deposit was not made by it with the intent of preferring the
Holders of Notes over any other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding its creditors or others; and
(h) the Company shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent provided
for or relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Trustee may amend or
supplement the Indenture or the Old Notes without notice to or consent of any
Holder: (i) to cure any ambiguity, defect or inconsistency; (ii) to provide for
uncertificated Old Notes in addition to or in place of certificated Old Notes;
(iii) to comply with requirements of the Securities and Exchange Commission in
order to effect or maintain the qualification of the Indenture under the TIA;
(iv) to make any change that would provide any additional benefits or rights to
the Holders or that does not adversely affect the legal rights hereunder of any
Holder; (v) to provide for the assumption of the Company's obligations to the
Holder of the Old Notes in case of a merger or consolidation pursuant to "The
Exchange Offer--Certain Covenants--Merger, Consolidation or Sale of Assets."
In addition, subject to certain exceptions, the Company and the Trustee may
amend or supplement the Indenture or the Old Notes with the consent of the
Holders of at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a tender
offer or exchange offer for the Old Notes) and, subject to Sections 6.04 and
6.07 the Indenture, any existing Default or Event of Default (other than a
Default or Event of Default in the payment of the principal of, premium, if any,
or interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for the Notes).
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of certain documents, the Trustee shall join with the Company in the
execution of such
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amended or supplemental Indenture unless such amended or supplemental Indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes 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, supplement or waiver becomes effective, the Company
shall mail to the Holders of Notes affected thereby a notice briefly describing
the amendment, supplement 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 amended or supplemental Indenture or waiver. Subject to
Sections 6.04 and 6.07 of the Indenture, the Holders of a majority in aggregate
principal amount of the Old Notes then outstanding may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Old Notes. However, without the consent of each Holder affected, an amendment or
waiver may not (with respect to any Old Notes held by a non-consenting Holder):
(a) reduce the principal amount of Old Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Old
Notes or alter any provision that, directly or indirectly, affects the
redemption price, redemption date or the Accreted Value (if prior to the
Full Accretion Date) or principal amount (if on or after the Full Accretion
Date) of the Old Notes;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Old Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Old Notes (except a rescission of
acceleration of the Old Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Old Notes and a waiver of
the payment default that resulted from such acceleration);
(e) make any Old Note payable in any currency other than that stated in
the Old Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes (or,
if applicable, Accreted Value);
(g) waive a redemption payment with respect to any Old Note (other than
a payment required by "The Exchange Offer--Redemption or Repurchase at
Option of the Holders--Asset Sales" or "The Exchange Offer--Redemption or
Repurchase at Option of the Holders--Change of Control;" or
(h) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, no amendment of the Indenture shall adversely
affect the rights of any holder of Senior Debt under the subordination
provisions of the Indenture without the consent of such holder. Every amendment,
waiver or supplement of the Indenture or the Old Notes shall comply with the TIA
as then in effect.
SUBORDINATION
The Company agrees, and each Holder by accepting a Note agrees, that the
Indebtedness evidenced by the Old Note is subordinated in right of payment, to
the extent and in the manner provided to the prior payment in full of all Senior
Debt (whether outstanding on the date hereof or hereafter created, incurred,
assumed or guaranteed), and that the subordination is for the benefit of the
holders of Senior Debt. A distribution may consist of cash, securities or other
property, by set-off or otherwise.
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Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(a) holders of Senior Debt shall be entitled to receive payment in full
of all Obligations due in respect of such Senior Debt (including interest
after the commencement of any such proceeding at the rate specified in the
applicable Senior Debt) before Holders shall be entitled to receive any
payment with respect to the Old Notes (except that Holders may receive (i)
securities that are subordinated to at least the same extent as the Old
Notes to (A) Senior Debt and (B) any securities issued in exchange for
Senior Debt and (ii) payments and other distributions made from any
defeasance trust created pursuant to the Indenture); and
(b) until all Obligations with respect to Senior Debt (as provided in
subsection (a) above) are paid in full, any distribution to which Holders
would be entitled but for these provisions shall be made to holders of
Senior Debt (except that Holders may receive securities that are
subordinated to at least the same extent as the Old Notes to (i) Senior Debt
and (ii) any securities issued in exchange for Senior Debt), as their
interests may appear.
The Company may not make any payment or distribution to the Trustee or any
Holder in respect of Obligations with respect to the Old Notes and may not
acquire from the Trustee or any Holder any Old Notes for cash or property (other
than (i) securities that are subordinated to at least the same extent as the Old
Notes to (A) Senior Debt and (B) any securities issued in exchange for Senior
Debt and (ii) payments and other distributions made from any defeasance trust
created pursuant to the Indenture) until all principal and other Obligations
with respect to the Senior Debt have been paid in full if:
(a) a default in the payment of any principal or other Obligations with
respect to Designated Senior Debt occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other document
governing such Designated Senior Debt; or
(b) a default, other than a payment default, on Designated Senior Debt
occurs and is continuing that then permits holders of the Designated Senior
Debt to accelerate its maturity and the Trustee receives a notice of the
default (a "Payment Blockage Notice") from a Person who may give it pursuant
to Section 10.11 of the Indenture. If the Trustee receives any such Payment
Blockage Notice, no subsequent Payment Blockage Notice shall be effective
for purposes of this Section unless and until (i) at least 360 days shall
have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice and (ii) all scheduled payments of principal, premium, if
any, and interest on the Old Notes that have come due have been paid in full
in cash. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in respect of
the Old Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) 179 days have passed after notice is received if the maturity of
such Designated Senior Debt has not been accelerated,
if Article 10 of the Indenture otherwise permits the payment, distribution or
acquisition at the time of such payment or acquisition.
If payment of the Notes is accelerated because of an Event of Default, the
Company shall promptly notify holders of Senior Debt of the acceleration.
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The Company shall give prompt written notice to the Trustee of any fact
known to the Company that would prohibit the making of any payment to or by the
Trustee in respect of the Old Notes. Failure to give such notice shall not
affect the subordination of the Old Notes or Senior Debt. Notwithstanding these
provisions or any other provision of the Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts that would prohibit the
making of any payment to or by the Trustee in respect of the Old Notes, unless
and until the Trustee shall have received a Payment Blockage Notice; and, prior
to the receipt of any Payment Blockage Notice, the Trustee, subject to the
provisions of Section 7.01 of the Indenture, shall be entitled in all respects
to assume that no such facts exist; PROVIDED, HOWEVER, that if a Responsible
Officer of the Trustee shall not have received, at least three Business Days
prior to the date upon which by the terms hereof any such money may become
payable for any purpose (including, without limitation, the payment of the
principal amount, issue price, accrued original issue discount, redemption
price, purchase price, Change of Control Offer Purchase Price or interest, if
any, as the case may be, in respect of any Note), a Payment Blockage Notice,
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purpose for which such money was received and shall not be affected by
any notice to the contrary that may be received by it within three Business Days
prior to such date.
Subject to the provisions of Section 7.01 of the Indenture, the Trustee
shall be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Debt (or a trustee or agent on
behalf of such holder), or a Representative of any of the foregoing, to
establish that such notice has been given by a holder of Senior Debt (or a
trustee or agent on behalf of any such holder). In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any Person as a holder of Senior Debt to participate in any payment or
distribution, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent of which such Person is entitled to participate in such
or distribution of any other facts pertinent to the rights of such Person, and
if such evidence is not furnished, the Trustee may defer any payment which it
may be required to make for the benefit of such Person pursuant to the terms of
this Indenture pending judicial determination as to the rights of such Person to
receive such payment.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Old Notes at a time when the Trustee or such
Holder, as applicable, has received a Payment Blockage Notice or otherwise has
actual knowledge that such payment is prohibited, such payment shall be held by
the Trustee or such Holder, in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to, the holders of Senior
Debt as their interests may appear or their Representative under the indenture
or other agreement (if any) pursuant to which Senior Debt may have been issued,
as their respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent necessary
to pay such Obligations in full in accordance with their terms, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth, and no implied covenants or obligations with respect to the holders of
Senior Debt shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and
shall not be liable to any such holders if the Trustee shall pay over or
distribute to or on behalf of Holders or the Company or any other Person money
or assets to which any holders of Senior Debt shall be entitled, except if such
payment is made as a result of the willful misconduct or gross negligence of the
Trustee.
The Company shall promptly notify the Trustee and the Paying Agent of any
facts known to the Company that would cause a payment of any Obligations with
respect to the Notes to violate these provisions, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt.
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After all Senior Debt is paid in full and until the Notes are paid in full,
Holders shall be subrogated (equally and ratably with all other Indebtedness
pari passu with the Old Notes) to the rights of holders of Senior Debt to
receive distributions applicable to Senior Debt to the extent that distributions
otherwise payable to the Holders have been applied to the payment of Senior
Debt. A distribution made to holders of Senior Debt that otherwise would have
been made to Holders is not, as between the Company and Holders, a payment by
the Company on the Old Notes.
Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and
interest on the Old Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors of the Company
other than their rights in relation to holders of Senior Debt; or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders.
If the Company fails because of these provisions to pay principal of or
interest on an Old Note on the due date, the failure is still a Default or Event
of Default.
No right of any holder of Senior Debt to enforce the subordination of the
Indebtedness evidenced by the Old Note shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
GOVERNING LAW
The Indenture provides that it and the Old Notes will be governed by, and
construed in accordance with, the internal laws of the State of New York. Each
of the parties to the Indenture irrevocably and unconditionally: (i) submits
itself and its property in any legal action or proceeding relating to the
Indenture, the Old Notes and the Notes Registration Rights Agreement, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive jurisdiction of the courts of the State of New York and the courts
of the United States of America for the Southern District of New York, and
appellate courts thereof, and consents and agrees to such action or proceeding
being brought in such courts; and (ii) waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in any inconvenient court and
agrees not to plead or claim the same.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions with the Company or
its Subsidiaries; provided, however, that if the Trustee acquires any
conflicting interest as described in the TIA, it must eliminate such conflict or
resign.
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CERTAIN DEFINITIONS
"ACCRETED VALUE" means, with respect to any Note, as of any date of
determination prior to the Full Accretion Date, the sum of (i) the initial
offering price of such Note and (ii) the portion of the excess of the principal
amount of each Note over such initial offering price that shall have been
accreted thereon through such date, such amount to be so accreted on a daily
basis at the rate of 13% per annum of the initial offering price of such Note,
compounded semi-annually on each October 1 and April 1 from the Issue Date of
the Notes through the date of determination; PROVIDED that on and after the Full
Accretion Date, the Accreted Value shall be equal to the principal amount of
such Note.
"ACQUIRED DEBT" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person; and (ii) Indebtedness
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "CONTROL"
(including, with correlative meanings, the terms "CONTROLLING," "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control and, PROVIDED, FURTHER, that the Principal shall be
deemed an Affiliate of the Company so long as the Principal directly or
indirectly owns at least 3% of the Equity Interests of the Company and Mr. Rufus
Lumry and any Person of which at least 5% of the Equity Interests of such Person
is directly or indirectly owned by Mr. Lumry or any Affiliate of Mr. Lumry shall
be deemed an affiliate of the Company so long as Mr. Lumry or any affiliate of
Mr. Lumry is a member of the Board of Directors of the Company or directly or
indirectly owns at least 3% of the Equity Interests of the Company.
"BANKRUPTCY CUSTODIAN" means any receiver, trustee, assignee, liquidator or
similar officer under any Bankruptcy Law.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state
law, as amended from time to time, and applicable to the relevant case,
providing for the relief of debtors.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet of the lessee in
accordance with GAAP.
"CAPITAL STOCK" means: (i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (iii) in the case of a partnership or limited liability
company, partnership interests (whether general or limited) or other membership
interests; and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of (other than any such distributions in respect of Indebtedness), the
issuing Person.
"CASH EQUIVALENTS" means: (i) United States dollars; (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than twelve
months from the date of acquisition; (iii) certificates of deposit and
eurodollar time deposits with maturities of twelve months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding twelve months
and overnight bank deposits, in each case with any domestic commercial bank
having combined capital and surplus in excess of $500 million and a Thomson Bank
Watch Rating of "B" or better; (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with
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any financial institution meeting the qualifications specified in clause (iii)
above; (v) commercial paper having a rating of at least P-1 from Moody's or a
rating of at least A-1 from Standard & Poor's; and (vi) mutual funds and money
market accounts investing 100% of the funds under management in instruments of
the types described in clauses (i) through (v) above and, in each case, maturing
within twelve months after the date of acquisition by the Company thereof.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "PERSON" or "GROUP" (within the meanings of Sections 13(d)(3) and
14(d)(2), respectively, of the Exchange Act) other than (y) the holders of the
Company's Capital Stock as of the date of this Indenture, or (z) the Principal
or any Related Party, (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company and (iii) the consummation of any transaction
(including any merger or consolidation) the result of which is that any
"PERSON"or "GROUP" (as defined above), other than (y) the holders of the
Company's Capital Stock as of the date of this Indenture, or (z) the Principal
and any Related Party, becomes the "BENEFICIAL OWNER" (as such term is defined
in Rules 13(d)-3 and 13(d)-5 of the Exchange Act) directly or indirectly, of
more than 50% of the Voting Stock of the Company or (iv) 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 new directors whose
election to such Board of Directors or whose nomination for election by the
stockholders of the Company was approved by a vote of a majority of the
directors of the Company 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.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSOLIDATED ANNUALIZED EBITDA" means, with respect to any Person, such
Person's Consolidated EBITDA for the most recently completed full fiscal quarter
for which internal financial statements are available ending not more than 135
days prior to the transaction or event giving rise to the need to calculate
Consolidated Annualized EBITDA, multiplied by four.
"CONSOLIDATED EBITDA" means, with respect to any Person for any period, the
sum (without duplication) of (i) Consolidated Net Income of such Person for such
period; plus, (ii) to the extent that any of the following shall have been
included in determining such Consolidated Net Income, (A) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale
(to the extent such losses were deducted in computing such Consolidated Net
Income), (B) all income taxes for such Person and its Restricted Subsidiaries
paid or accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary, unusual or nonrecurring gains or losses or taxes
attributable to sales or distributions of assets outside the ordinary course of
business), (C) Consolidated Interest Expense of such Person and its Restricted
Subsidiaries for such period and (D) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period); less (iii)(A) all
non-cash items of such Person or any of its Restricted Subsidiaries increasing
such Consolidated Net Income for such period and (B) all cash payments during
such period relating to non-cash items that were added back in determining
Consolidated EBITDA in any prior period.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person, for any
period, the sum of: (i) the amount of interest in respect of Indebtedness
(including amortization of original issue discount, fees payable in connection
with financings, including commitment, availability and similar fees, and
amortization of debt issuance costs, capitalized interest, non-cash interest
payments on any Indebtedness and the interest portion of any deferred payment
obligation and after taking into account the effect of elections made under, and
the net costs associated with, any Interest Rate Agreement, however denominated,
with respect to such Indebtedness); (ii) the amount of Redeemable Dividends of
such Person; (iii) the amount
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of Preferred Equity dividends in respect of all Preferred Equity of Restricted
Subsidiaries held by Persons other than the referent Person or a Restricted
Subsidiary thereof, commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing; and (iv) the
interest component of rentals in respect of any Capital Lease Obligation, in
each case, that was paid, accrued or scheduled to be paid or accrued by such
Person during such period, determined on a consolidated basis in accordance with
GAAP. For purposes of this definition, interest on a Capital Lease Obligation
will be deemed to accrue at an interest rate reasonably determined by the
referent Person to be the rate of interest implicit in such Capital Lease
Obligation in accordance with GAAP consistently applied.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"CONSOLIDATED TOTAL INDEBTEDNESS" means the sum (without duplication) of (i)
the total amount of Indebtedness and the aggregate liquidation value of all
Disqualified Capital Stock of such Person plus all Indebtedness and the
aggregate liquidation value of all Preferred Equity of its Restricted
Subsidiaries, all as shown on a consolidated balance sheet of such Person, plus
(ii) the total amount of Indebtedness shown on the balance sheet of the primary
obligor on such Indebtedness, to the extent that such Indebtedness has been
guaranteed by such Person or one of its Restricted Subsidiaries. The
Indebtedness of the Company and its Restricted Subsidiaries shall not include
any Indebtedness of Unrestricted Subsidiaries so long as such Indebtedness is
Non-Recourse Debt.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuation in the values of the
currencies of the countries (other than the United States) in which the Company
does business.
"DEBT TO CASH FLOW RATIO" means, as to any Person, for any period of
determination, the ratio of (i) the Consolidated Total Indebtedness of such
Person as of the date of calculation to (ii) the Consolidated Annualized EBITDA
of such Person.
"DEFAULT" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"DESIGNATED SENIOR DEBT" means Senior Debt of the Company that is permitted
under section (iv) of "The Exchange Offer--Certain Covenants--Limitation on
Indebtedness and Issuance of Disqualified Capital Stock" and that has been
designated by the Company as "DESIGNATED SENIOR DEBT."
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock to the extent that, by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the Holder thereof, in whole or in part, on or prior
to the Stated Maturity of the Notes.
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"EQUITY INTERESTS" means, collectively, Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"FAIR MARKET VALUE" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and a willing buyer under no
compulsion to buy.
"FULL ACCRETION DATE" means October 1, 1999.
"GAAP" means 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 have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations fully
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"HOLDER" means a Person in whose name a Note is registered.
"INDEBTEDNESS" means (without duplication), with respect to any Person, any
indebtedness, secured or unsecured, contingent or otherwise, that is for
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof), or evidenced by bonds,
notes, debentures or similar instruments or representing the balance deferred
and unpaid of the purchase price of any property (excluding any such balance
that constitutes an accrued expense or trade payable) if and to the extent any
of the foregoing indebtedness would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, and shall also include, to the
extent not otherwise included: (i) any Capital Lease Obligations; (ii)
Indebtedness of any other Person secured by a Lien to which the property or
assets owned or held by the referent Person is subject, whether or not the
obligation or obligations secured thereby shall have been assumed (the amount of
such Indebtedness being deemed to be the lesser of the value of such property or
assets or the amount of the Indebtedness so secured); (iii) Guarantees by such
Person of Indebtedness of any other Person; (iv) the aggregate liquidation
preference of any Disqualified Capital Stock; (v) all obligations of such Person
in respect of letters of credit, bankers' acceptance or other similar
instruments or credit transactions (including reimbursement obligations with
respect thereto); and (vi) any Hedging Obligation of such Person applicable to
any of the foregoing. In no event shall "Indebtedness" be deemed to include
trade credit or credit on open account for which payment is not overdue by more
than 60 days or endorsements for deposit in the ordinary course of business.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
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"ISSUE DATE" means the date on which the Notes are initially issued.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction), but excluding any
such filings in respect of operating leases or similar notice or precautionary
filings relating to transactions or arrangements that do not give rise to
Indebtedness.
"LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant to the
Registration Rights Agreement.
"MATERIAL RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that would
be a "SIGNIFICANT SUBSIDIARY" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect
on the date of this Indenture.
"MOODY'S" means Moody's Investors Service, Inc. and any successor to the
rating agency business thereof.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Equity dividends, excluding, however, any extraordinary
gain (or loss), together with any related provision for taxes on such
extraordinary gain (or loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, sales commissions and legal,
accounting and investment banking fees) and any relocation expenses incurred as
a result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise) or (c) constitutes the lender; and (ii) as to which the lenders have
been notified in writing that they will not have any recourse to the stock or
assets of the Company or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING" means the Offering of the Notes by the Company.
"OFFERING MEMORANDUM" means the Offering Memorandum of the Company, dated
October 22, 1996, with respect to the Notes.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers, at least
one of whom shall be the principal executive officer, principal accounting
officer or principal financial officer of the Company that meets the
requirements of Section 11.05 of the Indenture.
"OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 11.05 of the
Indenture. The counsel may be an employee of or counsel to the Company or the
Trustee.
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"PERMITTED INVESTMENTS" means any of the following: (i) Investments in cash
and Cash Equivalents; (ii) Investments by the Company or by any Restricted
Subsidiary in any Person that is or will become immediately after such
Investment a Restricted Subsidiary; (iii) any Investments in the Company or in a
wholly owned Restricted Subsidiary of the Company; (iv) Investments existing on
the Issue Date; (v) accounts receivable created or acquired in the ordinary
course of business of the Company or any Restricted Subsidiary and on ordinary
business terms; (vi) Investments arising from transactions by the Company or any
Restricted Subsidiaries with trade creditors or customers in the ordinary course
of business; (vii) Investments made as the result of non-cash consideration
received from an Asset Sale; and (viii) additional Investments in Unrestricted
Subsidiaries, joint ventures or similar business entities not exceeding $10
million plus the net proceeds received by the Company from issuance of Capital
Stock since the Issue Date (other than from the issuance of Disqualified Capital
Stock).
"PERMITTED REFINANCING DEBT" means any Indebtedness of the Company or any of
its Restricted Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Debt does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Debt has a period
until its final maturity date no shorter than the final maturity date of, and
has a Weighted Average Life to Maturity no shorter than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Debt has a final maturity date
on or later than the final maturity date of, and is subordinated in right of
payment to, such Notes on terms at least as favorable to the Holders of such
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or the Restricted Subsidiary that
was the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"PERSON" means any individual, corporation, company (including limited
liability company), partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof (including any subdivision or ongoing business of
any such entity or substantially all of the assets of any such entity,
subdivision or business).
"PREFERRED EQUITY" means any Capital Stock of a Person, however designated,
that entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"PRINCIPAL" means Mr. Jens H. Molbak.
"PROPERTY" means, with respect to any Person, any interest of such Person in
any kind of property or asset, whether real, personal or mixed, or tangible or
intangible, including, without limitation, Capital Stock in any other Person
(but excluding Capital Stock or other securities issued by such Person).
"PUBLIC EQUITY OFFERING" means the consummation of an offering of Equity
Interests (other than Disqualified Capital Stock) by the Company to the public
pursuant to a registration statement filed with the SEC, the aggregate gross
proceeds of which exceed $25 million.
"PUBLIC MARKET" means the condition that exists at any time after a Public
Equity Offering has been consummated and at least 20% of the Company's Capital
Stock (i) has been distributed pursuant to an effective registration statement
under the Securities Act or (ii) is saleable pursuant to Rule 144 promulgated
under the Securities Act.
"RELATED PARTY" means, with respect to any Principal, (i) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal
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or (ii) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Principal and/ or such other
Persons referred to in the immediately preceding clause (i).
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
officer within the corporate trust department of the Trustee (or any successor
group of the Trustee) or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is not
designated to be an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"SENIOR DEBT" means any Indebtedness that is permitted to be incurred by the
Company pursuant to the Indenture unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes. Notwithstanding anything to the
contrary in the foregoing, Senior Debt shall not include (x) any Indebtedness of
the Company to any of its Subsidiaries or other Affiliates, (y) any obligations
incurred for the purchase of goods or materials or for services obtained in the
ordinary course of business, which obligations do not constitute Indebtedness,
and (z) any Indebtedness that is incurred in violation of this Indenture.
"STANDARD AND POOR'S" means Standard and Poor's Rating Group, a division of
McGraw Hill Inc., and any successor to the rating agency business thereof.
"STATED MATURITY" means October 1, 2006.
"SUBSIDIARY," with respect to any Person, means (i) any corporation, a
majority of whose voting stock (defined as any class or classes of capital stock
having voting power under ordinary circumstances to elect a majority of the
Board of Directors) is owned, directly or indirectly, by the Company, by one or
more of its Subsidiaries, or by the Company and one or more of its Subsidiaries
and (ii) any other Person (other than a corporation) in which the Company, one
or more of its Subsidiaries, or the Company and one or more Subsidiaries,
directly or indirectly, has at least a majority ownership interest entitled to
vote in the election of directors, managers or trustees thereof. As of the Issue
Date, the Company as no Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section77aaa-77bbbb)
as in effect on the date on which this Indenture is qualified under the TIA,
except as provided in Section 9.03 hereof.
"TOTAL GROSS ASSETS" means, as of any date of determination, the total
assets of the Company plus total accumulated depreciation on Coinstar units,
computer and information systems and office equipment, less (i) all goodwill,
trade names, patents and any other intangibles and (ii) any assets of, or Equity
Interests in, any Subsidiary of the Company or any Investment in any other
Person, all as would be set forth on a balance sheet of the Company on an
unconsolidated basis as of such date of determination in accordance with GAAP;
provided, however, that Total Gross Assets shall not include (x) for any date of
determination prior to January 1, 1999, any of the Company's Coinstar units
which the Company acquired, or any capital expenditure invested in Coinstar
units expended or incurred, more than five years prior to the date of
determination; (y) for any date of determination from and after January 1, 1999,
any of the Company's Coinstar units that the Company acquired, or any capital
expenditure invested in Coinstar units expended or incurred, more than seven
years prior to the date of determination; and (z) any Coinstar unit (or any
portion of the revenue from any such unit) that has been (1) pledged or
encumbered to secure obligations of any Person other than the Company or (2)
leased, assigned or is otherwise subject to a transaction such that as a result
of such lease, assignment or other transaction any other Person shall be
entitled on a non-contingent basis to receive directly all or a portion of the
revenue generated by such Coinstar unit.
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"TRUSTEE" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
resolution of the Board of Directors, but only to the extent that such
Subsidiary: (i) has no Indebtedness other than Non-Recourse Debt; (ii) is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding comply with the provisions of
Section 4.11 of the Indenture; (iii) is a Person with respect to which neither
the Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (a) to subscribe for additional Equity Interests or (b) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (iv) has not Guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (v) in the case of a
Subsidiary that is a corporation, such Subsidiary has at least one director on
its board of directors that is not a director or Executive Officer of the
Company or any of its Restricted Subsidiaries. Any such designation by the Board
of Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Section 4.15 of the
Indenture. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter be
deemed a Restricted Subsidiary for all purposes of this Indenture, including
that any Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of the Company as of such date (and, if such Indebtedness
is not permitted to be incurred as of such date under Section 4.09 of the
Indenture, the Company shall be in default of such Section).
"VOTING STOCK" means, with respect to any specified Person, Capital Stock
with voting power, under ordinary circumstances and without regard to the
occurrence of any contingency, to elect the directors or other managers or
trustees of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
DESCRIPTION OF NEW NOTES
The terms of the New Notes will be identical in all material respects to
those of the Old Notes, except that (i) the Old Notes have not been registered
under the Securities Act, are subject to certain restrictions on transfer and
are entitled to certain registration rights under the Registration Rights
Agreement (which rights will terminate upon consummation of the Exchange Offer,
except to the extent that the Initial Purchaser may have certain registration
rights under limited circumstances) and (ii) the Old Notes provide for an
increase in the interest rate thereon pursuant to the Registration Rights
Agreement. In that regard, the Old Notes provide that, in the event that the
Exchange Offer is not consummated or a shelf registration statement (the "Shelf
Registration Statement") with respect to the resale of the Old Notes is not
declared effective on or prior to October 1, 1999, the interest rate on the Old
Notes will increase by 0.50% per annum following October 1, 1999; provided,
however, that if the Company requests Holders of Old Notes to provide certain
information called for by the Registration Rights Agreement for inclusion in any
such Shelf Registration Statement, then the Old Notes owned by Holders who do
not deliver such information to the Company or who do not provide comments on
the Shelf Registration Statement when required pursuant to the Registration
Rights Agreement will not be entitled to any such increase in the interest rate
pursuant to the Registration Rights Agreement. The New Notes are not entitled to
any such
103
<PAGE>
increase in the interest rate thereon. Holders of Old Notes should review the
information set forth under "Summary--Certain Consequences of a Failure to
Exchange Old Notes" and "Summary--Terms of New Notes."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain U.S. Federal income tax
considerations to holders of the New Notes who are subject to U.S. net income
tax with respect to the New Notes ("U.S. persons") and who will hold the New
Notes as capital assets. There can be no assurance that the U.S. Internal
Revenue Service (the "IRS") will take a similar view of the purchase, ownership
or disposition of the New Notes. This discussion is based upon the provisions of
the Internal Revenue Code of 1986, as amended, and regulations, rulings and
judicial decisions now in effect, all of which are subject to change. It does
not include any description of the tax laws of any state, local or foreign
governments or any estate or gift tax considerations that may be applicable to
the New Notes or holders thereof, it does not discuss all aspects of U.S.
Federal income taxation that may be relevant to a particular investor in light
of its particular investment circumstances or to certain types of investors
subject to special treatment under the U.S. Federal income tax laws (for
example, dealers in securities or currencies, S corporations, life insurance
companies, tax-exempt organizations, taxpayers subject to the alternative
minimum tax and non-U.S. persons) and also does not discuss the treatment of New
Notes held as a hedge against currency risks or as part of a straddle with other
investments or as part of a "synthetic security" or other integrated investment
(including a "conversion transaction") comprised of a New Note and one or more
other investments, or situations in which the functional currency of the holders
is not the U.S. dollar.
Holders of Old Notes contemplating acceptance of the Exchange Offer should
consult their own tax advisors with respect to their particular circumstances
and with respect to the effects of state, local or foreign tax laws to which
they may be subject.
EXCHANGE OF NOTES
The exchange of the Old Notes for the New Notes should not be a taxable
event to Holders for federal income tax purposes. The exchange of the Old Notes
for the New Notes pursuant to the Exchange Offer should not be treated as an
"exchange" for federal income tax purposes because the New Notes should not be
considered to differ materially in kind or extent from the Old Notes. If,
however, the exchange of the Old Notes for the New Notes were treated as an
exchange for federal income tax purposes, such exchange should constitute a
recapitalization for federal income tax purposes. Accordingly, a holder should
have the same adjusted basis and holding period in the New Notes as it had in
the Old Notes immediately before the exchange.
ORIGINAL ISSUE DISCOUNT
The New Notes will be issued with a deep original issue discount, and each
Holder will be required to include in its gross income original issue discount
income as described below.
Original issue discount on each New Note will equal the excess of the stated
redemption price at maturity of the New Note over the Holder's adjusted tax
basis in the New Note. A Holder of a New Note must include original issue
discount in income as ordinary interest income as it accrues on the basis of a
constant yield to maturity. Generally, original issue discount must be included
in income in advance of the receipt of cash representing such income.
In general, a Holder's adjusted tax basis in the New Note will equal the
Holder's adjusted basis for the Holder's Old Note increased by any original
issue discount or market discount previously included in income by such Holder
with respect to such New Note and decreased by any payments received thereon.
The stated redemption price at maturity will include all payments required to be
made on the New Notes,
104
<PAGE>
as the case may be, whether denominated as principal or interest (other than
payments subject to remote or incidental contingencies).
The Holder of a New Note must include in gross income, for all days during
its taxable year in which it holds such New Note, the sum of the "daily
portions" of original issue discount. The "daily portions" are determined by
allocating to each day in an "accrual period" (generally the period between
interest payments or compounding dates) a PRO RATA portion of the original issue
discount that accrued during such accrual period. The amount of original issue
discount that will accrue during an accrual period is the product of the
"adjusted issue price" of the New Note at the beginning of the accrual period
and its yield to maturity (determined on the basis of compounding at the end of
each accrual period and properly adjusted for the length of the particular
accrual period). The adjusted issue price of a New Note is the sum of the issue
price of the Old Note exchanged for the New Note plus prior accruals of original
issue discount, reduced by the total payments made with respect to such New Note
and Old Note in all prior periods and on the first day of the current accrual
period. Each payment on a New Note will be treated as a payment of original
issue discount to the extent that original issue discount has accrued as of the
date such payment is due and has not been allocated to prior payments, and any
excess will be treated as a payment of principal.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT
A Holder may elect to treat all "interest" on any New Note as original issue
discount and calculate the amount includable in gross income under the method
described above. For this purpose, "interest" includes stated and unstated
interest, original issue discount, acquisition discount, market discount and DE
MINIMIS market discount, as adjusted by any acquisition premium.
ACQUISITION PREMIUM
A Holder that purchases a New Note at a purchase price greater than the
adjusted issue price will be considered to have purchased the New Note at an
"acquisition premium" equal to such excess. A Holder will reduce the original
issue discount otherwise includable for each accrual period by an amount equal
to the product of (i) the amount of such original issue discount otherwise
includable for such period, and (ii) a fraction, the numerator of which is the
acquisition premium and the denominator of which is the excess of the amounts
payable on the New Note after the purchase date over the adjusted issue price.
MARKET DISCOUNT
A Holder that purchases a New Note at a purchase price less than the
adjusted issue price will be considered to have purchased the New Note at a
"market discount" equal to such difference. Market discount, however, will be
considered to be zero if less than 0.25% of the stated redemption price at
maturity of a Note multiplied by the number of complete years to maturity
remaining after the date of its purchase.
Any principal payment or gain realized by a Holder on disposition or
retirement of a New Note will be treated as ordinary income to the extent that
there is accrued market discount on the New Note. Unless a Holder elects to
accrue under a constant-interest method, accrued market discount is the total
market discount multiplied by a fraction, the numerator of which is the number
of days the Holder has held the obligation and the denominator of which is the
number of days from the date the Holder acquired the obligation until its
maturity. A Holder may be required to defer a portion of its interest deductions
for the taxable year attributable to any indebtedness incurred or continued to
purchase or carry a New Note purchased with market discount. Any such deferred
interest expenses would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includable in income. If the Holder elects to
include market discount
105
<PAGE>
in income currently as it accrues on all market discount instruments acquired by
the Holder in that taxable year or thereafter, the interest deferral rule
described above will not apply.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a New Note, the Holder generally
will recognize gain or loss equal to the difference between the amount realized
on the sale, exchange or retirement (which does not include any amount
attributable to accrued but unpaid interest) and the Holder's adjusted tax basis
in the New Note.
Gain or loss realized on the sale, exchange or retirement of a New Note will
be capital (subject to the market discount rules, discussed above). The
deductibility of capital losses is subject to limitations. A Holder's capital
gain holding period for a New Note will generally include the period of time
such Holder held the Old Note exchanged for the New Note. In the case of
individuals, capital gain will be long-term if the New Note has been held for
more than eighteen months (and taxed at a maximum rate of 20%), will be mid-term
capital gain if held for more than one year but not more than eighteen months
(and taxed at a maximum rate of 28%) and otherwise will be short-term (and taxed
at ordinary income rates).
BACKUP WITHHOLDING
A holder of a New Note may be subject to backup withholding at the rate of
31% with respect to interest paid on the New Note and proceeds from the sale,
exchange, redemption or retirement of the New Note, unless such holder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates that fact or (b) provides a correct taxpayer identification number,
certifies as to no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules. A holder
of a New Note who does not provide the Company with its correct taxpayer
identification number may be subject to penalties imposed by the IRS.
A holder of a New Note who is not a U.S. person will generally be exempt
from backup withholding and information reporting requirements, but may be
required to comply with certification and identification procedures in order to
obtain an exemption from backup withholding and information reporting.
Any amount paid as backup withholding will be creditable against the
holder's U.S. Federal income tax liability.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in connection
with the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by Participating
Broker-Dealers during the period referred to below in connection with resales of
the New Notes received in exchange for Old Notes if such Old Notes were acquired
by such Participating Broker-Dealers for their own accounts as a result of
market making activities or other trading activities. The Company has agreed
that this Prospectus, as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in connection with resales of such
New Notes for a period ending 90 days after the Expiration Date (subject to
extension under certain limited circumstances described herein) or, if earlier,
when all such New Notes have been disposed of by such Participating
Broker-Dealer. See "The Exchange Offer--Terms of the Exchange Offer."
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. New Notes received by broker-dealers for their own
accounts in connection with the Exchange Offer may be sold from time to time in
one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at
106
<PAGE>
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any such New Notes. Any broker-dealer that resells New Notes that were received
by it for its own account in connection with the Exchange Offer and any broker
or dealer that participates in a distribution of such New Notes may be deemed to
be an "underwriter" within the meaning of the Securities Act, and any profit on
any such resale of New Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Cooley Godward LLP, Menlo Park, California. Certain partners and
associates of Cooley Godward LLP beneficially own approximately 35,020 shares of
the Company's Common Stock.
EXPERTS
The financial statements of Coinstar, Inc. as of December 31, 1996 and 1995,
and for each of the years in the three year period ended December 31, 1996
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
107
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Interim Financial Statements (Unaudited):
Balance Sheets as of June 30, 1997 and December 31, 1996................................................... F-2
Statements of Operations for the Three and Six Months Ended June 30, 1997 and 1996......................... F-3
Statement of Stockholders' Equity (Deficit) for the Six Months Ended June 30, 1997......................... F-4
Statements of Cash Flows for the Six Months Ended June 30, 1997 and 1996................................... F-5
Notes to Financial Statements for the Three and Six Months Ended June 30, 1997 and 1996.................... F-6
Audited Financial Statements:
Independent Auditors' Report............................................................................... F-8
Balance Sheets as of December 31, 1996 and 1995............................................................ F-9
Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994.............................. F-10
Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1996, 1995 and 1994..................................................... F-11
Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994.............................. F-12
Notes to Financial Statements for the Years Ended December 31, 1996, 1995 and 1994......................... F-13
</TABLE>
F-1
<PAGE>
COINSTAR, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, -------------------------
1996 1997
------------ ----------- 1997
------------
(PRO FORMA)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................ 23,867,763 16,271,057 16,271,057
Short-term investments available for sale................................ 32,441,912 23,080,853 23,080,853
Prepaid expenses and other current assets................................ 865,000 1,837,032 1,837,032
------------ ----------- ------------
Total current assets................................................... 57,174,675 41,188,942 41,188,942
PROPERTY AND EQUIPMENT, net................................................ 22,459,254 34,568,664 34,568,664
------------ ----------- ------------
OTHER ASSETS............................................................... 2,897,177 3,345,379 3,345,379
------------ ----------- ------------
TOTAL.................................................................. 82,531,106 79,102,985 79,102,985
------------ ----------- ------------
------------ ----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable......................................................... 1,779,702 2,843,092 2,843,092
Accrued liabilities...................................................... 7,690,288 14,132,412 14,132,412
Current portion of long-term debt and capital lease obligations.......... 910,535 1,546,649 1,546,649
------------ ----------- ------------
Total current liabilities.............................................. 10,380,525 18,522,153 18,522,153
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS............................... 69,154,936 73,082,574 73,082,574
------------ ----------- ------------
MANDATORILY REDEEMABLE PREFERRED STOCK..................................... 24,972,084 24,972,084 --
COMMITMENTS AND CONTINGENCIES (Notes 5, 6 and 11):
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)....................................... (21,976,439) (37,473,826) (12,501,742)
------------ ----------- ------------
TOTAL................................................................ 82,531,106 79,102,985 79,102,985
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
See notes to financial statements
F-2
<PAGE>
COINSTAR, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
----------------------------- ----------------------------
1996 1997 1996 1997
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUE............................................. $ 2,133,643 $ 9,288,582 $ 1,387,982 $ 5,293,558
EXPENSES:
Direct operating.................................. 2,208,420 7,415,653 1,320,530 3,965,509
Regional sales and marketing...................... 614,756 1,601,824 406,602 971,916
Product research and development.................. 1,422,337 3,080,297 761,797 1,639,655
Selling, general, and administrative.............. 1,939,614 5,157,287 1,068,012 2,629,624
Depreciation and amortization..................... 1,294,977 3,842,538 795,793 2,158,210
------------- -------------- ------------- -------------
Loss from operations.............................. (5,346,461) (11,809,017) (2,964,752) (6,071,356)
OTHER INCOME (EXPENSE):
Interest income................................... 254,553 1,019,707 94,592 439,669
Interest expense.................................. (254,936) (4,758,676) (167,573) (2,414,608)
------------- -------------- ------------- -------------
NET LOSS............................................ $ (5,346,844) $ (15,547,986) $ (3,037,733) $ (8,046,295)
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
UNAUDITED PRO FORMA INFORMATION (Note 1):
Pro forma net loss per share........................ $ (0.51) $ (1.49) $ (0.29) $ (0.77)
------------- -------------- ------------- -------------
Pro forma weighted average shares outstanding..... 10,459,883 10,459,883 10,459,883 10,459,883
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
COINSTAR, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SERIES A SERIES B
COMMON STOCK PREFERRED STOCK PREFERRED STOCK CONTRIBUTED
-------------------- -------------------- --------------------- CAPITAL FOR ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT WARRANTS DEFICIT
--------- --------- --------- --------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1996.................... 793,059 $ 18,396 649,775 $ 649,775 895,506 $3,582,034 $2,621,160 $(28,847,804)
Exercise of stock
options................. 190,953 75,331 -- -- -- -- -- --
Unrealized loss on short-
term investments
available for sale...... -- -- -- -- -- -- -- (24,732)
Net loss.................. -- -- -- -- -- -- -- (15,547,986)
BALANCE, June 30, 1997.... 984,012 $ 93,727 649,775 $ 649,775 895,506 $3,582,034 $2,621,160 $(44,420,522)
--------- --------- --------- --------- --------- ---------- ----------- ------------
--------- --------- --------- --------- --------- ---------- ----------- ------------
<CAPTION>
TOTAL
------------
<S> <C>
BALANCE, December 31,
1996.................... $(21,976,439)
Exercise of stock
options................. 75,331
Unrealized loss on short-
term investments
available for sale...... (24,732)
Net loss.................. (15,547,986)
BALANCE, June 30, 1997.... $(37,473,826)
------------
------------
</TABLE>
See notes to financial statements.
F-4
<PAGE>
COINSTAR, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
------------------------------
JUNE 30, 1996 JUNE 30, 1997
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss........................................................................ $ (5,346,844) $ (15,547,986)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization................................................. 1,294,185 3,842,538
Debt discount amortization.................................................... 7,558 4,445,130
Accrued investment income..................................................... 21,195 60,091
Cash provided (used) by changes in operating assets and liabilities:
Prepaid expenses and other current assets................................... $ (131,146) $ (972,033)
Other assets................................................................ 9,034 (586,555)
Accounts payable............................................................ 966,662 1,063,389
Accrued liabilities......................................................... 2,781,247 6,442,123
-------------- --------------
Net cash provided (used) by operating activities................................ $ (398,109) $ (1,253,303)
INVESTING ACTIVITIES:
Purchase of short-term investments.............................................. -- $ (11,916,020)
Sale of short-term investments.................................................. -- 21,192,254
Purchase of fixed assets........................................................ $ (9,651,190) (15,392,219)
Payment of security deposit..................................................... (134,072) --
-------------- --------------
Net cash used by investing activities........................................... $ (9,785,262) $ (6,115,985)
FINANCING ACTIVITIES:
Repayment of equipment loans.................................................... $ (392,566) $ (302,749)
Proceeds from long-term debt.................................................... 3,547,823 --
Proceeds from Series D Warrants exercised....................................... 128,148 --
Proceeds from exercise of stock options......................................... 63,520 75,331
-------------- --------------
Net cash provided (used) by financing activities................................ $ 3,346,925 $ (227,418)
-------------- --------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................................. $ (6,836,446) $ (7,596,706)
CASH AND CASH EQUIVALENTS:
Beginning of period............................................................. $ 14,119,532 $ 23,867,763
-------------- --------------
End of period................................................................... $ 7,283,086 $ 16,271,057
-------------- --------------
-------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest........................................ $ 252,131 $ 344,395
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Purchase of equipment financed by capital lease obligation...................... $ 140,792 $ 421,376
</TABLE>
See notes to financial statements.
F-5
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS
ENDED JUNE 30, 1996 AND 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PREPARATION: The financial statements as of and for the
three and six months ended June 30, 1997 and 1996 are unaudited, but in the
opinion of management include all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the financial position and results of
operations and cash flows for the periods presented.
These statements have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. These financial statements should be
read in conjunction with management's discussion and analysis and with the
Company's audited financial statements and the accompanying notes for the years
ended December 31, 1996, 1995 and 1994. The results of operations for the three
and six months ended June 30, 1997, are not necessarily indicative of the
results to be expected for the entire year.
UNAUDITED PRO FORMA BALANCE SHEET: The accompanying pro forma balance sheet
as of June 30, 1997, which is unaudited, is presented as if the conversion of
preferred stock into common stock occurred on such date, and excludes warrants
to purchase 2,693,420 shares of common stock at a weighted average exercise
price of $2.96 per share which expire upon the July 9, 1997 closing of the
Company's initial public offering or 90 days thereafter. Such warrants may be
exercised for cash or on a cashless basis at the option of the warrant holder.
UNAUDITED PRO FORMA NET LOSS PER SHARE: Pro forma net loss per share is
based on the weighted average number of shares outstanding during the period
after consideration of the dilutive effect, if any, of options and warrants
issued and outstanding, and after giving pro forma effect to the conversion of
the Company's outstanding preferred stock, as described above, as if such
conversion had occurred at the beginning of the periods presented. Pursuant to
rules of the Securities Exchange Commission, all common stock warrants, and
options issued by the Company at a price less than the initial public offering
price during the 12 months preceding the closing date (using the treasury stock
method until shares are issued) have been included in the calculation of common
and common equivalent shares outstanding for the periods presented, regardless
of their dilutive effect.
RECLASSIFICATIONS: Certain reclassifications have been made to the 1996
financial statements to conform to the presentation used in 1997.
NEW ACCOUNTING PRONOUNCEMENTS: Statement of Financial Accounting Standards
(SFAS) No. 128, "EARNINGS PER SHARE," was recently issued and is effective for
the Company's fiscal year ending December 31, 1997. This Statement requires a
change in the presentation of earnings per share. Early adoption of this
statement is not permitted. Management believes that the impact of the adoption
of this Statement on the financial statements, taken as a whole, will not be
material.
SFAS No. 130, "REPORTING COMPREHENSIVE INCOME" and SFAS No. 131,
"DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION," were also
recently issued and are effective for the Company's year ending December 31,
1998. The Company is currently evaluating the effects of these Standards,
however, management believes the impact of adoption will not be material to the
financial statements, taken as a whole.
F-6
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2: INITIAL PUBLIC OFFERING
In July 1997, the Company completed its Initial Public Offering of 3,000,000
shares of Common Stock at a purchase price of $10.50 per share for net proceeds
of approximately $28.5 million (including approximately $1.0 million of
estimated expenses.) The net proceeds received by the Company will be used (i)
predominantly to fund capital expenditures and working capital in connection
with the continued expansion of the Coinstar network, (ii) for product research
and development, and deployment of enhancements to the Coinstar unit and the
coin processing network and (iii) for general corporate purposes.
Upon the July 9, 1997 closing of the offering, the preferred stock
outstanding at June 30, 1997 was converted into common stock and certain common
and preferred stock warrants are expected to be exercised.
NOTE 3: EXCHANGE OFFER
On October 22, 1996, the Company completed a private placement offering of
95,000 units, each of which consisted of a $1,000 principal amount of 13% senior
subordinated discount notes, due at maturity in 2006, and warrants to purchase
seven shares of common stock of the Company, at an exercise price of $.01 per
warrant share, subject to adjustment under certain circumstances.
Pursuant to a related Registration Rights Agreement between the Company and
the initial purchaser of the notes, the Company was required to agree to offer
to exchange the notes (not registered under the Securities Act) for otherwise
substantially identical notes registered under the Securities Act (the "Exchange
Act"). The Registration Rights Agreement also identified certain events,
including the Company's initial public offering, that require the Company to
consummate such Exchange Offer.
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Coinstar, Inc.
Bellevue, Washington
We have audited the accompanying balance sheets of Coinstar, Inc. (the
"Company") as of December 31, 1995 and 1996, and the related statements of
operations, stockholders' equity (deficit), and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1995 and 1996,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ DELOITTE & TOUCHE LLP
Seattle, Washington
February 14, 1997
(May 28, 1997, as to Notes 1 and 9
and June 27, 1997 as to Notes 2 and 11)
F-8
<PAGE>
COINSTAR, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................ $14,119,532 $23,867,763
Short-term investments available for sale............................................ -- 32,441,912
Prepaid expenses and other current assets............................................ 251,516 865,000
----------- -----------
Total current assets............................................................. 14,371,048 57,174,675
PROPERTY AND EQUIPMENT:
Coinstar units....................................................................... 6,200,246 24,843,112
Computers............................................................................ 396,131 1,653,768
Office furniture and equipment....................................................... 135,242 413,317
Leasehold improvements............................................................... -- 29,953
Coinstar components.................................................................. -- 840,167
----------- -----------
6,731,619 27,780,317
Accumulated depreciation............................................................. (1,582,842) (5,321,063)
----------- -----------
5,148,777 22,459,254
OTHER ASSETS, net of accumulated amortization of $16,680, $78,497 and $147,672......... 81,044 2,897,177
----------- -----------
TOTAL............................................................................ $19,600,869 $82,531,106
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable..................................................................... $ 910,674 $ 1,779,702
Accrued liabilities.................................................................. 955,910 7,690,288
Current portion of long-term debt and capital lease obligations...................... 593,208 910,535
----------- -----------
Total current liabilities........................................................ 2,459,792 10,380,525
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion and net of
unamortized discounts of $29,322, $28,831,550 and $26,661,797........................ 1,064,308 69,154,936
----------- -----------
Total liabilities................................................................ 3,524,100 79,535,461
MANDATORY REDEEMABLE PREFERRED STOCK:
Preferred stock, $.001 par value--Authorized, 16,000,000 shares: Series
C--Designated, 6,100,000 shares; issued and outstanding, 4,567,016, 4,659,324 and
4,659,324 shares (preferred in liquidation, $15,142,803), pro forma none
outstanding........................................................................ 14,094,787 14,509,472
Series D--Designated, 3,500,000 shares; issued and outstanding 2,500,000, 2,556,471
and 2,556,471 shares (preference in liquidation, $10,225,884), pro forma none
outstanding....................................................................... 9,452,977 9,862,612
Series E-1--Designated, issued, and outstanding, 100,000 shares (preference in
liquidation, $600,000), pro forma none outstanding................................ -- 600,000
Series E-2--Designated, 350,000 shares; none issued and outstanding................ -- --
Series E-3--Designated, 550,000 shares; none issued and outstanding................ -- --
----------- -----------
Total mandatorily redeemable preferred stock..................................... 23,547,764 24,972,084
COMMITMENTS AND CONTINGENCIES (Notes 5, 6 and 11)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.001 par value--Authorized, 16,000,000 shares Series A--Designated,
issued, and outstanding, 649,775 shares (preference in liquidation, $649,775), pro
forma none outstanding............................................................. 649,775 649,775
Series B--Designated, 974,258 shares; issued and outstanding, 895,506 shares
(preference in liquidation, $3,582,034), pro forma none outstanding................ 3,582,034 3,582,034
Common stock, $.001 par value--Authorized, 22,000,000 shares; issued and outstanding,
779,559, 793,059 and 984,012 shares; pro forma, 9,972,976 shares................... 14,346 18,396
Contributed capital for warrants..................................................... 1,163,319 2,621,160
Accumulated deficit.................................................................. (12,880,469) (28,847,804)
----------- -----------
Total stockholders' equity (deficit)............................................. (7,470,995) (21,976,439)
----------- -----------
TOTAL.......................................................................... $19,600,869 $82,531,106
----------- -----------
----------- -----------
</TABLE>
See notes to financial statements
F-9
<PAGE>
COINSTAR, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996
------------- ------------- --------------
<S> <C> <C> <C>
REVENUE............................................................. $ 324,810 $ 1,062,865 $ 8,312,080
EXPENSES:
Direct operating.................................................. 488,467 1,335,721 7,258,406
Regional sales and marketing...................................... 85,691 349,131 1,504,633
Product research and development.................................. 1,647,923 1,830,153 3,969,185
Selling, general, and administrative.............................. 1,716,407 2,789,538 5,351,476
Depreciation and amortization..................................... 439,378 1,117,655 4,133,904
------------- ------------- --------------
Loss from operations.............................................. (4,053,056) (6,359,333) (13,905,524)
OTHER INCOME (EXPENSE):
Interest income................................................... 34,364 398,305 848,194
Interest expense.................................................. (297,758) (207,687) (2,661,374)
------------- ------------- --------------
Net loss before extraordinary item.............................. (4,316,450) (6,168,715) (15,718,704)
EXTRAORDINARY ITEM--
Loss related to early retirement of debt.......................... -- -- 248,631
------------- ------------- --------------
NET LOSS............................................................ $ (4,316,450) $ (6,168,715) $ (15,967,335)
------------- ------------- --------------
------------- ------------- --------------
UNAUDITED PRO FORMA INFORMATION (Note 2):
Pro forma net loss per share before extraordinary item............ $ (1.47)
Pro forma extraordinary item per share............................ (0.02)
--------------
Pro forma net loss per share...................................... $ (1.49)
--------------
--------------
Pro forma weighted average shares outstanding..................... 10,714,705
--------------
--------------
</TABLE>
See notes to financial statements.
F-10
<PAGE>
COINSTAR, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SERIES A SERIES B
COMMON STOCK PREFERRED STOCK PREFERRED STOCK CONTRIBUTED
---------------------- -------------------- -------------------- CAPITAL FOR ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT WARRANTS DEFICIT
--------- ----------- --------- --------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994...... 726,225 $ 7,262 649,775 $ 649,775 895,506 $3,582,034 $ -- $(2,395,304)
Contributed capital for
warrants.................... -- -- -- -- -- -- 272,678 --
Net loss...................... -- -- -- -- -- -- -- (4,316,450)
--------- ----------- --------- --------- --------- --------- ----------- ------------
BALANCE, December 31, 1994.... 726,225 7,262 649,775 649,775 895,506 3,582,034 272,678 (6,711,754)
Exercise of stock options..... 53,334 7,084 -- -- -- -- -- --
Contributed capital for
warrants.................... -- -- -- -- -- -- 890,641 --
Net Loss...................... -- -- -- -- -- -- -- (6,168,715)
--------- ----------- --------- --------- --------- --------- ----------- ------------
BALANCE, December 31, 1995.... 779,559 14,346 649,775 649,775 895,506 3,582,034 1,163,319 (12,880,469)
Exercise of stock options..... 13,500 4,050 -- -- -- -- -- --
Exercise of Series C Preferred
stock warrants.............. -- -- -- -- -- -- (45,453) --
Exercise of Series D Preferred
stock warrants.............. -- -- -- -- -- -- (34,329) --
Contributed capital for
warrants.................... -- -- -- -- -- -- 1,537,623 --
Net Loss...................... -- -- -- -- -- -- -- (15,967,335)
--------- ----------- --------- --------- --------- --------- ----------- ------------
BALANCE, December 31, 1996.... 793,059 $ 18,396 649,775 $ 649,775 895,506 $3,582,034 $2,621,160 ($28,847,804)
Exercise of stock options..... 190,953 75,331 -- -- -- -- -- --
Unrealized loss on short-term
investments available for
sale........................ -- -- -- -- -- -- -- (46,228)
Net loss...................... -- -- -- -- -- -- -- (7,501,691)
--------- ----------- --------- --------- --------- --------- ----------- ------------
BALANCE, March 31, 1997....... 984,012 $ 93,727 649,775 $ 649,775 895,506 $3,582,034 $2,621,160 ($36,395,723)
--------- ----------- --------- --------- --------- --------- ----------- ------------
--------- ----------- --------- --------- --------- --------- ----------- ------------
<CAPTION>
TOTAL
-----------
<S> <C>
BALANCE, January 1, 1994...... $ 1,843,767
Contributed capital for
warrants.................... 272,678
Net loss...................... (4,316,450)
-----------
BALANCE, December 31, 1994.... (2,200,005)
Exercise of stock options..... 7,084
Contributed capital for
warrants.................... 890,641
Net Loss...................... (6,168,715)
-----------
BALANCE, December 31, 1995.... (7,470,995)
Exercise of stock options..... 4,050
Exercise of Series C Preferred
stock warrants.............. (45,453)
Exercise of Series D Preferred
stock warrants.............. (34,329)
Contributed capital for
warrants.................... 1,537,623
Net Loss...................... (15,967,335)
-----------
BALANCE, December 31, 1996.... $(21,976,439)
Exercise of stock options..... 75,331
Unrealized loss on short-term
investments available for
sale........................ (46,228)
Net loss...................... (7,501,691)
-----------
BALANCE, March 31, 1997....... $(29,449,027)
-----------
-----------
</TABLE>
See notes to financial statements.
F-11
<PAGE>
COINSTAR, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996
------------- ------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss......................................................... $ (4,316,450) $ (6,168,715) $ (15,967,335)
Adjusted to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization.................................. 439,378 1,117,655 4,133,904
Debt discount amortization..................................... 211,757 88,545 1,819,457
Accrued investment income...................................... -- -- (263,063)
Cash provided (used) by changes in operating assets and
liabilities:
Prepaid expenses and other current assets.................... (167,365) (28,956) (613,494)
Other assets................................................. (31,384) (867) (64,803)
Accounts payable............................................. 916,637 (205,791) 869,029
Accrued liabilities.......................................... 314,445 670,839 6,734,378
------------- ------------- --------------
Net cash provided(used) by operating activities.................. (2,632,982) (4,527,290) (3,351,917)
INVESTING ACTIVITIES:
Purchase of short-term investments............................... -- -- (32,245,346)
Sale of short-term investments................................... -- -- --
Purchase of fixed assets......................................... (2,162,585) (3,823,307) (20,819,556)
Payment of security deposit...................................... -- (33,975) (98,791)
------------- ------------- --------------
Net cash used by investing activities............................ (2,162,585) (3,857,282) (53,163,693)
FINANCING ACTIVITIES:
Borrowings under short-term debt agreements...................... 4,448,424 100,000 --
Payments on short-term debt...................................... -- (460,000) --
Payments on long-term debt....................................... -- -- (6,462,640)
Borrowings under long-term debt obligations, net of financing
costs.......................................................... -- 1,549,055 69,840,270
Proceeds from sale of Series C Preferred stock................... -- 9,621,737 369,232
Proceeds from sale of Series D Preferred stock................... -- 9,452,977 375,306
Proceeds from sale of Series E Preferred stock................... -- -- 600,000
Proceeds from exercise of stock options.......................... -- 7,084 4,050
Contributed capital for warrants................................. 272,678 890,641 1,537,623
------------- ------------- --------------
Net cash provided (used) by financing activities................. 4,721,102 21,161,494 66,263,841
------------- ------------- --------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................... (74,465) 12,776,922 9,748,231
CASH AND CASH EQUIVALENTS:
Beginning of period.............................................. 1,417,075 1,342,610 14,119,532
------------- ------------- --------------
End of period.................................................... $ 1,342,610 $ 14,119,532 $ 23,867,763
------------- ------------- --------------
------------- ------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest......................... -- $ 119,142 $ 832,061
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Conversion of debt and accrued interest to Series C Preferred
stock.......................................................... -- 4,473,050 --
Purchase of equipment financed by capital lease obligation....... -- 117,267 553,065
</TABLE>
See notes to financial statements.
F-12
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION AND BUSINESS
GENERAL: Coinstar, Inc. (the "Company") develops, owns and operates a
network of automated, self-service coin counting and processing machines that
provide consumers with a convenient means to convert loose coins into cash. The
Company has increased its store installation base every year since inception,
and as of December 31, 1996, had an installed base of 1,501 units located in
supermarkets in 18 states.
INITIAL PUBLIC OFFERING: On March 28, 1997, the Company's Board of
Directors authorized the filing of a registration statement for the initial
underwritten public offering of its common stock. Upon the closing of the
offering, the presently outstanding preferred stock will convert into common
stock and certain common and preferred stock warrants are expected to be
exercised.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS: The Company considers all highly liquid
securities purchased with a maturity of three months or less to be cash
equivalents. Cash and cash equivalents includes funds in transit, which
represent amounts being processed by armored car carriers or residing in
Coinstar units, of $767,000 and $5.5 million at December 31, 1995 and 1996,
respectively.
SECURITIES AVAILABLE FOR SALE: The Company's investments are all classified
as available for sale and are stated at fair value in accordance with Statement
of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. This statement specifies that
available for sale securities are reported at fair value with changes in
unrealized gains and losses recorded directly to stockholders' equity. All of
the Company's investments have maturities of one year or less. Unrealized gains
or losses at December 31, 1996, were insignificant, and there were no realized
gains or losses on investments in 1996. Fair value is based upon quoted market
prices.
PROPERTY AND EQUIPMENT: Property and equipment are depreciated using the
following methods and useful lives:
<TABLE>
<CAPTION>
TYPE OF ASSET METHOD USEFUL LIFE
- --------------------------------------------------- -------------------------- ------------
<S> <C> <C>
Coinstar units purchased prior to January 1, 1996 150% declining balance 60 months
Coinstar units purchased subsequent to January 1,
1996 Straight-line 60 months
Installation costs for Coinstar units Straight-line 36 months
Furniture and equipment Straight-line 60 months
Computer equipment Straight-line 36 months
</TABLE>
In order to achieve volume discounts, the Company prepurchases certain
components of the Coinstar units. When a component is placed into service, the
cost is transferred to the appropriate Coinstar equipment account and
depreciated accordingly.
OTHER ASSETS: Other assets include deferred financing fees for the issuance
of the Company's 13% senior subordinated discount notes (the "Notes") and
amounts capitalized relating to organizational and patent costs. Such amounts
are amortized on a straight- line basis over ten and five years, respectively.
F-13
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LONG-LIVED ASSETS: The Company periodically reviews long-lived assets,
including identified intangible assets, for impairment to determine whether any
events or circumstances indicate that the carrying amount of the assets may not
be recoverable. Such review includes estimating expected future cash flows.
During 1996, the Company discontinued its preprinted coupon distribution
business line. As a result, a provision for additional depreciation in the
amount of $329,096 was made to write down the recorded value of coupon
dispensing components of the Coinstar units, which are no longer being used in
operations, to their estimated fair value.
REVENUE RECOGNITION: Coin processing fees are recognized at the time the
customers' coins are counted by the Coinstar unit. Units in service with two
retail distribution partners accounted for approximately 14.9% and 12.7%,
respectively, of the Company's 1996 revenue. One member of the Company's Board
of Directors also serves on the Board of Directors of one of these retail
distribution partners.
FAIR VALUE OF FINANCIAL INSTRUMENTS: Financial instruments of the Company
for which the recorded amount approximates the fair value include cash
equivalents, short-term investments available for sale, accounts payable and
long-term debt. The interest rates on the loans and the Notes approximate
current market rates for such debt instruments with similar terms and
maturities.
STOCK-BASED COMPENSATION: The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees.
SFAS No. 123, Accounting for Stock-Based Compensation, has been adopted by the
Company for disclosure of certain additional information related to its stock
option plan.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS: Certain reclassifications have been made to the 1994 and
1995 financial statements to conform to the presentation used in 1996.
UNAUDITED PRO FORMA NET LOSS PER SHARE: Pro forma net loss per share is
based on the weighted average number of shares outstanding during the period
after consideration of the dilutive effect, if any, of options and warrants
issued and outstanding, and after giving pro forma effect to the conversion of
the Company's outstanding preferred stock, as described above, as if such
conversion had occurred at the beginning of the periods presented. Pursuant to
rules of the Securities and Exchange Commission, all common stock, warrants, and
options issued by the Company at a price less than the estimated initial public
offering price during the 12 months preceding the offering date (using the
treasury stock method until shares are issued) have been included in the
calculation of common and common equivalent shares outstanding for the periods
presented, regardless of their dilutive effect. Unaudited pro forma net loss per
share for the years ended December 31, 1994 and 1995 are not presented due to
the lack of comparability.
NEW ACCOUNTING PRONOUNCEMENT: Statement of Financial Accounting Standard
(SFAS) No. 128, Earnings per Share, was recently issued and is effective for the
Company's fiscal year ending December 31, 1997. This Statement requires a change
in the presentation of earnings per share. Early adoption of this
F-14
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Statement is not permitted. Management believes that the impact of the adoption
of this Statement on the financial statements, taken as a whole, will not be
material.
NOTE 3: ACCRUED LIABILITIES
Accrued liabilities consisted of the following at the respective dates:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
---------- ------------
<S> <C> <C>
Funds in transit.................................................... $ 766,666 $ 5,490,260
Accrued liabilities to service contract providers................... -- 661,449
Accrued liabilities to manufacturers................................ -- 502,500
Other............................................................... 189,244 1,036,079
---------- ------------
$ 955,910 $ 7,690,288
---------- ------------
---------- ------------
</TABLE>
NOTE 4: LONG-TERM DEBT
Long-term debt, including current portion, consisted of the following at
December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------------ -------------
<S> <C> <C>
Senior subordinated discount notes, net of unamortized discount
of $28,783,847................................................. $ -- $ 66,216,153
Equipment loans, net of unamortized discount of $29,322 and
$47,703........................................................ 1,165,834 2,994,998
------------ -------------
1,165,834 69,211,151
Less current portion............................................. 552,773 553,500
------------ -------------
Long-term debt................................................... $ 613,061 $ 68,657,651
------------ -------------
------------ -------------
</TABLE>
BRIDGE LOANS: During 1994, the Company obtained unsecured bridge financing
to meet its working capital requirements for aggregate proceeds of $4,806,381.
These loans and accrued interest were either converted to Series C Preferred
stock or repaid on February 15, 1995. In connection with the bridge loans, the
Company also issued 460,504 detachable warrants to purchase shares of Series C
Preferred stock at exercise prices ranging from $3.00 to $4.00 to certain
holders of bridge loans. Certain of these bridge loans were from officers and
stockholders of the Company.
EQUIPMENT LOANS: During 1995, the Company entered into a loan agreement
which allowed for maximum borrowings of $2,000,000 to be drawn under specific
notes and was secured by certain Coinstar equipment. The Company executed three
such notes during 1995 for a total of $1,363,200. Two additional notes were
executed in 1996 for $603,750. All such notes had an effective annual interest
rate of 17.5% and were due in monthly installments through February 1999. The
notes were paid in full in the fourth quarter of 1996. In connection with these
notes, the Company issued 49,231 detachable warrants to purchase shares of
Series C Preferred stock at an exercise price of $3.25.
In January 1996, the Company entered into a loan agreement which allows for
maximum borrowings of $3,000,000 under specific notes secured by certain
Coinstar equipment. During the first six months of
F-15
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4: LONG-TERM DEBT (CONTINUED)
1996, the Company drew the entire $3,000,000. This loan has an effective annual
interest rate of 16.6% and is due in monthly installments through October 1999.
In connection with this loan, the Company issued 93,750 detachable warrants to
purchase shares of Series D Preferred stock at an exercise price of $4.00.
In August 1996, the Company entered into an agreement with a commercial bank
which provides for a term loan allowing for maximum borrowings of $7,000,000 and
an operating line of credit allowing for maximum borrowings of $250,000. The
Company drew $4,473,306 on the term loan and repaid such amount in full during
1996. In connection with the agreement described above, the Company issued
51,176 detachable warrants to purchase shares of Series D Preferred stock at an
exercise price of $4.25 per share. The values of the warrants issued in
connection with the equipment loans described above are recorded as contributed
capital and represent discounts which are being amortized over the terms of such
loans. Such loans are secured by certain intangible assets of the Company.
EARLY RETIREMENT OF DEBT: In December 1996, the Company repaid an aggregate
of $5,838,050 in equipment loans prior to scheduled maturity. As a result of the
early repayment, the Company recognized an extraordinary loss of $248,631, which
included early termination penalties of $200,763 and write-off of related
discounts of $47,868.
SENIOR SUBORDINATED DISCOUNT NOTES: On October 22, 1996, the Company
completed a private placement offering of 95,000 units, each of which consisted
of a $1,000 principal amount of 13% senior subordinated discount notes, due at
maturity in 2006, and warrants to purchase seven shares of common stock of the
Company, at an exercise price of $.01 per warrant share, subject to adjustment
under certain circumstances. Imputed interest on the discount notes, as
represented by the original issue discount of $29,413,154, accrues until October
1999, at which time interest is payable in semi-annual installments through
maturity. If the Company does not complete an initial public offering with
proceeds of at least $25,000,000 before October 22, 1998, the holders are
entitled to additional warrants to purchase 285,000 shares of common stock.
The Notes are not redeemable at the option of the Company prior to October
1, 2001, other than from the proceeds of a public equity offering. The Notes are
redeemable at the option of the Company, in whole or in part, at any time on and
after October 1, 2001, at specified redemption prices for the relevant year of
redemption, plus accrued and unpaid interest to the date of redemption.
In the event of a change of control (as defined), each holder of the Notes
has the option to require the Company to repurchase such holder notes at 101% of
the accreted value thereof on the date of repurchase plus liquidated damages.
The Notes are subordinate in rank to all existing and future senior indebtedness
of the Company. The Indenture pursuant to which the Notes were issued contains
certain covenants that, among other things, limit the ability of the Company to
make dividend payments, make investments, repurchase outstanding shares of
stock, prepay other debt obligations, incur additional indebtedness, effect
asset dispositions, engage in sale and leaseback transactions, consolidate,
merge or sell all or substantially all of the Company's assets, engage in
transactions with affiliates, or effect certain transactions by its restricted
subsidiaries.
The Notes were recorded net of discount of $30,410,654, and the warrants
issued in connection with these notes were recorded as $997,500 of contributed
capital, each as determined by the relative fair values of the Notes and the
warrants as of the closing date. In addition, the Company has recorded deferred
financing fees related to the Notes of $2,714,354, which are being amortized
over the term of the Notes.
F-16
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4: LONG-TERM DEBT (CONTINUED)
The discount attributable to the value of the warrants of $997,500 is also being
amortized over the term of the Notes.
PRINCIPAL PAYMENTS: Scheduled principal payments on long-term debt for the
next five years ending December 31, are as follows:
<TABLE>
<S> <C>
1997................................................... $ 553,500
1998................................................... 1,032,710
1999................................................... 1,456,491
2000................................................... --
2001................................................... --
Thereafter............................................. 95,000,000
----------
98,042,701
Less unamortized discount.............................. 28,832,550
----------
$69,211,151
</TABLE>
NOTE 5: COMMITMENTS
LEASE COMMITMENTS: The Company leases its current office space under an
operating lease which expires October 1997. In February 1997, the Company
entered into two lease agreements for additional office space commencing April
1, 1997, and September 1, 1997, and expiring on March 31, 2002, and August 31,
2004, respectively. The agreements require the Company to pay a portion of
operating costs and require monthly payments of $17,843 and $84,462,
respectively, which escalate annually based on a stated schedule.
The Company has entered into capital lease agreements to finance the
acquisition of certain Coinstar equipment and computer equipment. Title to such
assets is retained by the Company. These capital leases have terms of 36 months
at imputed interest rates which range from 18.6% to 24.9%. Assets under capital
lease obligations aggregated $1,178,937, net of $639,059 accumulated
amortization, at December 31, 1996.
F-17
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5: COMMITMENTS (CONTINUED)
A summary of the Company's minimum lease obligations as of December 31,
1996, and the two lease agreements for additional office space signed in
February 1997, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASE
------------ ------------
<S> <C> <C>
1997.............................................................. $ 499,809 $ 818,376
1998.............................................................. 391,673 1,240,050
1999.............................................................. 180,267 1,244,261
2000.............................................................. -- 1,272,393
2001.............................................................. -- 1,300,520
Thereafter........................................................ -- 3,014,786
------------ ------------
Total minimum lease commitments................................... 1,071,749 $ 8,890,386
------------
------------
Less amounts representing interest................................ 217,429
------------
Present value of lease obligations................................ 854,320
Less current portion.............................................. 357,035
Long-term portion................................................. $ 497,285
------------
------------
</TABLE>
Rental expense was $146,433, $298,931, and $359,842 for the years ended
December 31, 1994, 1995, and 1996, respectively.
SERVICE PROVIDERS: As of December 31, 1996, the Company had outstanding
service contracts with several service providers. These contracts generally
cover a one- to two-year period and have cancellation clauses ranging from 30 to
60 days.
PURCHASE COMMITMENTS: The Company has entered into certain purchase
agreements with suppliers of Coinstar units which require aggregate purchases in
the amount of $8,733,586 in 1997.
CONCENTRATION OF SUPPLIERS: The Company currently buys a significant
component of the Coinstar unit from a single supplier. Although there are a
limited number of suppliers for the component, management believes that other
suppliers could provide similar equipment which would require certain
modifications. Accordingly, a change in suppliers could cause a delay in
manufacturing and a possible slow-down of growth, which could materially
adversely affect future operating results.
NOTE 6: MANDATORILY REDEEMABLE PREFERRED STOCK
In conjunction with the issuances of Series C, D, and E Preferred stock, the
Company has provided for redemption features solely at the option of the holders
of such series of stock. These features require that the Company shall, at a
time no sooner than 2007 and provided the holders of more than 50% of the then
outstanding shares of Series C, D and E Preferred stock request in writing,
redeem the shares of Series C, D and E Preferred stock held by all holders
requesting such redemption at a price of $3.25, $4.00, and $6.00 per share,
respectively, plus an additional amount equal to 10% of such price for each year
held. Payments are due in 12 equal quarterly installments. No accretion of the
preferred return has been recorded based on management's determination of the
low probability of redemption at the present time due to the Company's
contemplated underwritten initial public offering of common stock and the
automatic conversion of all preferred stock into common stock upon the closing
of such offering.
F-18
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6: MANDATORILY REDEEMABLE PREFERRED STOCK (CONTINUED)
In February 1995, the Company issued 3,190,693 shares of Series C Preferred
stock and warrants to purchase 954,344 additional shares of Series C Preferred
stock at exercise prices ranging from $3.00 to $4.00 per share, for an aggregate
issue price of $3.25 per share. The proceeds received from this issue, net of
issuance costs of $300,000, were $9,621,737 for the shares and $448,015 for the
warrants. In addition, holders of certain bridge loans converted their
outstanding principal and accrued interest to Series C Preferred stock at a rate
of one share per $3.25 of debt, resulting in the issuance of an additional
1,376,323 shares.
In December 1995, the Company issued 2,500,000 shares of Series D Preferred
stock and 705,891 warrants to purchase shares of Series D Preferred stock at an
exercise price of $4.25 per share, for an aggregate issue price of $4.00 per
share. The proceeds received from this issue were $9,452,977 for the shares and
$411,719 for the warrants.
In August 1996, the Company issued 100,000 shares of Series E-1 Preferred
stock for $6.00 per share; warrants to purchase 350,000 shares of Series E-2
Preferred stock, with an exercise price of $11.40 per share, for $0.60 per
warrant; and warrants to purchase 550,000 shares of Series E-3 Preferred stock,
with an exercise price of $15.61 per share, for $0.39 per warrant. The Company
has the right to repurchase such warrants if certain events, including
additional capital financings, do not take place as outlined in the Series E
Preferred Stock and Warrant Purchase Agreement.
In December 1996, the Company issued 92,308 shares of Series C Preferred
stock at a price of $4.00 per share and 56,471 shares of Series D Preferred
stock at a price of $4.25 per share as a result of the exercise of certain
warrants.
All warrants have been recorded at their fair market values as contributed
capital, at their date of issuance.
Holders of Series C, D, E-1, E-2 and E-3 Preferred shares are entitled to
noncumulative cash dividends at an annual rate of $.325, $.40, $.60, $1.20, and
$1.60 per share, respectively, when and as declared by the Board of Directors.
Such holders are entitled to such dividends in preference to all other classes
of stock. No dividends have been declared or paid as of December 31, 1996.
In the event of liquidation of the Company, the holder of each share of
Preferred stock is entitled to receive, out of the assets of the Company
available for distribution to stockholders, a liquidation preference before any
distribution of assets to the holders of common stock. Holders of Series D and
E-1 have liquidation preference over any other preferred and common stockholders
at $4.00 and $6.00 per share, respectively. Holders of Series C have liquidation
preference over Series A and B Preferred stockholders and common stockholders at
$3.25 per share.
Pursuant to the terms of the Series C, D and E Preferred stock agreements,
all shares of Preferred stock will convert to common stock at the closing of a
firm commitment underwritten public offering at a minimum price of $9.75 per
share and at least $10,000,000 in gross proceeds. Shares may also be converted
upon written notice given by the holder. Such shares are convertible into shares
of the Company's common stock on a one-for-one basis.
Holders of Series C, D and E Preferred stock are also entitled to special
voting rights with regard to the Company's equity transactions as outlined in
the Company's Articles of Incorporation.
F-19
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7: STOCKHOLDERS' EQUITY
Holders of Series A and B Preferred shares are entitled to noncumulative
cash dividends at an annual rate of $.10 and $.40, per share, respectively, when
and as declared by the Board of Directors. Holders of Series A and B are
entitled to such dividends in preference to the common stockholders. No
dividends have been declared or paid as of December 31, 1996.
In the event of liquidation of the Company, the holder of each share of
Series A and B Preferred stock is entitled to receive, out of the assets of the
Company available for distribution to stockholders, a liquidation preference
before any distribution of assets to the holders of common stock at the
liquidation price of $1.00 and $4.00 per share, respectively.
Pursuant to the terms of the Series A and B Preferred stock agreements, all
shares of Preferred stock will convert to common stock at the closing of a firm
commitment underwritten public offering at a minimum price of $9.75 per share
and at least $10,000,000 in gross proceeds. Shares may also be converted upon
written notice given by the holder. Series A shares are convertible into shares
of the Company's common stock on a one-for-one basis, and Series B shares are
convertible at 1.142857 shares of common stock for each share of preferred stock
being converted.
In connection with various financing transactions, the Company issued
warrants which entitle the holders to purchase shares of the Company's common
stock and Series B, C, D, E-2, and E-3 Preferred stock. A summary of the
warrants outstanding for the three years in the period ended December 31, 1996,
is as follows:
<TABLE>
<CAPTION>
SERIES B SERIES C
COMMON STOCK PREFERRED STOCK PREFERRED STOCK
------------------------ ------------------------ -----------------------
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
----------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
OUTSTANDING, January 1, 1994.................... -- $ -- 43,752 $ 4.00 -- $ --
Issued........................................ -- -- -- 465,120 3.00-4.00
----------- --- ----------- ----- ---------- -----------
OUTSTANDING, December 31, 1994.................. -- -- 43,752 4.00 465,120 3.00-4.00
Issued........................................ -- -- 954,249 3.25-4.00
----------- --- ----------- ----- ---------- -----------
OUTSTANDING, December 31, 1995.................. -- -- 43,752 4.00 1,419,369 3.00-4.00
Issued........................................ 665,000 .01 -- -- -- --
Exercised..................................... -- -- -- -- (92,308) 4.00
----------- --- ----------- ----- ---------- -----------
OUTSTANDING, December 31, 1996.................. 665,000 $ .01 43,752 $ 4.00 1,327,061 $ 3.00-4.00
----------- --- ----------- ----- ---------- -----------
----------- --- ----------- ----- ---------- -----------
</TABLE>
F-20
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7: STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
SERIES D SERIES E-2 SERIES E-3
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
------------------------ ------------------------ ------------------------
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OUTSTANDING, January 1, 1994..................... -- $ -- -- $ -- -- $ --
Issued......................................... -- -- -- -- -- --
OUTSTANDING, December 31, 1994................... -- -- -- -- -- --
Issued......................................... 705,891 4.25 -- -- -- --
-----------
OUTSTANDING, December 31, 1995................... 705,891 4.25 -- -- -- --
Issued......................................... 144,926 4.00-4.25 350,000 11.40 550,000 15.61
Exercised...................................... (56,471) 4.25 -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
OUTSTANDING, December 31, 1996................... 794,346 $ 4.00-4.25 350,000 $ 11.40 550,000 $ 15.61
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
Such warrants have expiration dates from June 28, 1998, to December 15,
2000, and have been recorded at amounts which reflect management's best estimate
of fair value on the date of issuance.
NOTE 8: INCOME TAXES
The components of the Company's deferred tax asset at December 31, 1995 and
1996 were as follows:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Tax loss and credit carryforwards............................... $ 4,510,000 $ 10,629,000
Depreciation and amortization................................... (115,000) (863,000)
Other........................................................... 39,000 111,000
------------- -------------
4,434,000 9,877,000
Valuation allowance............................................. (4,434,000) (9,877,000)
------------- -------------
$ -- $ --
------------- -------------
------------- -------------
</TABLE>
A valuation allowance in the full amount of the net deferred tax asset
balances has been established as it is uncertain that the Company will be able
to realize such tax assets in the future. At December 31, 1996, the Company had
net operating loss and credit carryforwards in the amount of $31,143,000, which
expire through 2011.
The Company recorded deferred tax benefits of $1,472,000, $2,107,000, and
$5,422,000 for each of the years ended December 31, 1994, 1995 and 1996,
respectively, which were fully allowed for each year.
As a result of the anticipated completion of the Company's planned initial
public offering, the Company may incur a change in ownership as defined under
Section 382 of the Internal Revenue Code. Such change in ownership may impose
certain limitations on the utilization of the Company's net operating loss and
credit carryforwards.
F-21
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9: STOCK OPTION PLAN
In March 1997, the Company adopted the 1997 Equity Incentive Plan, under
which options vest over four years and expire after 10 years. The Equity
Incentive Plan is an amendment and restatement of the Company's 1992 Stock
Option Plan, as amended. The Company has reserved a total of 2,900,000 shares of
Common Stock for issuance under the 1997 Equity Incentive Plan. Stock options
have been granted to officers and employees to purchase common stock at prices
ranging from $.10 to $10.00 per share and to directors to purchase Series B
Preferred stock at $4.00 per share, which represented management's best estimate
of fair market value at the dates of grant.
The price ranges of options exercised were $.10 to $.25 in 1995 and $.25 to
$.40 in 1996. At December 31, 1996, there were 1,333,166 shares of unissued
common stock reserved for issuance under the plan, of which options for the
purchase of 718,216 shares were available for future grants. Numbers of shares
under the plan are as follows as of December 31:
<TABLE>
<CAPTION>
1994 1995 1996
---------------------- ----------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ----------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Number of common shares under option:
Outstanding, beginning of year.................. 133,500 $ 0.19 192,225 $ 0.25 376,550 $ 0.37
Granted......................................... 78,725 0.36 265,300 0.40 254,850 0.74
Exercised....................................... (53,334) 0.13 (13,500) 0.30
Canceled or expired............................. (20,000) 0.31 (27,641) 0.26 (2,950) 0.51
--------- ---------- ---------
Outstanding, end of year........................ 192,225 0.25 376,550 0.37 614,950 0.52
--------- ---------- ---------
--------- ---------- ---------
Exercisable, end of year........................ 59,386 $ 0.16 44,875 $ 0.26 84,017 $ 0.32
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
The following table summarizes information about common stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS WEIGHTED AVERAGE NUMBER OF OPTIONS
OUTSTANDING AT REMAINING EXERCISABLE AT
EXERCISE PRICE DECEMBER 31, 1996 CONTRACTUAL LIFE DECEMBER 31, 1996
- ------------------------------------- ----------------- ------------------- -----------------
<S> <C> <C> <C>
$0.25................................ 60,250 7 51,553
0.40................................ 315,250 9 29,753
0.70................................ 221,950 10 2,711
1.50................................ 17,500 10 --
------- ------
614,950 9 84,017
------- ------
------- ------
</TABLE>
F-22
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9: STOCK OPTION PLAN (CONTINUED)
<TABLE>
<CAPTION>
1994 1995 1996
---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Number of Series B Preferred shares under option
Outstanding, beginning of year....................... -- $ -- 35,000 $ 4.00 35,000 $ 4.00
Granted.............................................. 35,000 4.00 -- -- -- --
--------- ----- --------- ----- --------- -----
Outstanding, end of year............................... 35,000 4.00 35,000 4.00 35,000 4.00
--------- --------- ---------
--------- --------- ---------
Exercisable, end of year............................... 35,000 $ 4.00 35,000 $ 4.00 35,000 $ 4.00
--------- --------- ---------
--------- --------- ---------
</TABLE>
At December 31, 1996, there are 35,000 stock options for Series B Preferred
outstanding with a remaining contractual life of seven years.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its stock option grants. Had compensation costs for the Company's
stock-based compensation plan been determined based on the fair value at the
grant dates for awards under those plans consistent with the method prescribed
in SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company's net loss
and pro forma net loss per share would have increased to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1995 1996
------------ -------------
<S> <C> <C>
Net loss:
As reported.................................................... $ 6,168,715 $ 15,967,335
Pro forma...................................................... 6,173,058 15,981,530
Pro forma net loss per share:
As reported.................................................... $ -- $ 1.46
Pro forma...................................................... -- 1.46
</TABLE>
The weighted average fair value of options granted during 1995 and 1996 were
$0.11 and $0.20, respectively. The fair value of each option granted during 1995
and 1996 is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: five year expected life
from date of grant; no stock volatility; risk-free interest rates from 5.17% to
6.95%; and no dividends during the expected term.
In January 1997, the Board of Directors approved an agreement for
acceleration of exercise provisions for stock options granted to certain
employees. Under the terms of the agreement, these employees are allowed to
exercise unvested stock options. Any shares purchased by an employee relating to
unvested stock options will be held in escrow until such options are vested. In
addition, the Company has the right to repurchase such shares prior to the
applicable date of vesting should the employee terminate their employment
status. The agreement has not established a new measurement date for the
affected stock options.
F-23
<PAGE>
COINSTAR, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9: STOCK OPTION PLAN (CONTINUED)
During the three month period ended March 31, 1997, the Company granted
4,500 and 497,750 common stock options to employees and directors of the Company
at exercise prices of $1.50 and $10.00 per share, respectively.
In March 1997, the Company adopted the Non-Employee Directors' Stock Option
Plan, under which the Board of Directors have provided for the automatic grant
of options to purchase shares of Common Stock to non-employee directors of the
Company. The Company has reserved a total of 100,000 shares of Common Stock for
issuance under the Non-Employee Directors' Stock Option Plan. No options have
been granted under this plan.
In March 1997, the Company adopted the Employee Stock Purchase Plan under
Section 423 of the Internal Revenue Code. Under the Employee Stock Purchase
Plan, the Board of Directors may authorize participation by eligible employees,
including officers, in periodic offerings. The Company has reserved a total of
200,000 shares of Common Stock for issuance under the Employee Stock Purchase
Plan. No amounts have been deferred by employees nor have any shares been issued
under this plan as of May 28, 1997.
NOTE 10: RETIREMENT PLAN
In July 1995, the Company adopted a tax-qualified employee savings and
retirement plan under Section 401(k) of the Internal Revenue Code of 1986 (the
"Plan"), available to all eligible employees. No amounts have been contributed
to the Plan.
NOTE 11: SUBSEQUENT EVENT
On June 18, 1997, the Company filed a complaint in the United States
District Court, Northern District of California, against CoinBank Automated
Systems, Inc. ("CoinBank"), one of its competitors, for infringement of one of
the Company's United States patents. CoinBank responded to the Company by
letter, dated June 23, 1997, demanding, among other things, that the Company
withdraw the complaint and indicating that if the complaint is not withdrawn by
a specified date, CoinBank will file a counterclaim against the Company for
damages related to tortious interference. On June 27, 1997, CoinBank answered
such complaint and counterclaimed for declaratory judgment of noninfringement,
invalidity and unenforceability of the subject patent and filed a claim for
breach of warranty against Scan Coin AB, one of the Company's suppliers. Company
management, on advice of counsel, believes this litigation or any other
threatened litigation is without merit and would intend to vigorously defend
itself in connection with any such litigation. Further, it is the opinion of
Company management that the ultimate resolution of the above matter will not
have a material adverse effect on the Company's financial condition or results
of operations.
F-24
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 5
Additional Information......................... 5
Prospectus Summary............................. 6
Risk Factors................................... 15
The Company.................................... 25
Use of Proceeds................................ 25
Dividend Policy................................ 25
Capitalization................................. 26
Selected Financial and Other Data.............. 27
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 29
Business....................................... 41
Management..................................... 57
Certain Relationships and Transactions......... 67
Principal Stockholders......................... 68
The Exchange Offer............................. 71
Description of Old Notes....................... 78
Description of New Notes....................... 103
Certain U.S. Federal Income Tax
Considerations............................... 104
Plan of Distribution........................... 106
Legal Matters.................................. 107
Experts........................................ 107
Index to Financial Statements.................. F-1
</TABLE>
$95,000,000
PRINCIPAL AMOUNT AT MATURITY
COINSTAR, INC.
13% SENIOR DISCOUNT NOTES
DUE 2006
[LOGO]
---------------------
PROSPECTUS
---------------------
, 1997
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act").
The Registrant's Amended and Restated Certificate of Incorporation and
By-laws include provisions to (i) eliminate the personal liability of its
directors for monetary damages resulting from breaches of their fiduciary duty
to the extent permitted by Section 102(b)(7) of the General Corporation Law of
Delaware (the "Delaware Law") and (ii) require the Registrant to indemnify its
directors and officers to the fullest extent permitted by Section 145 of the
Delaware Law, including circumstances in which indemnification is otherwise
discretionary. Pursuant to Section 145 of the Delaware Law, a corporation
generally has the power to indemnify its present and former directors, officers,
employees and agents against expenses incurred by them in connection with any
suit to which they are or are threatened to be made, a party by reason of their
serving in such positions so long as they acted in good faith and in a manner
they reasonably believed to be in or not opposed to, the best interests of the
corporation and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. The Registrant believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers. These provisions do not eliminate the directors' duty of care,
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware Law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for acts or omissions that the director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from which
the director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the director's duty to the Registrant or its
stockholders when the director was aware or should have been aware of a risk of
serious injury to the Registrant or its stockholders, for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the Registrant or its stockholders, for improper
transactions between the director and the Registrant and for improper
distributions to stockholders and loans to directors and officers. The provision
also does not affect a director's responsibilities under any other law, such as
the federal securities law or state or federal environmental laws.
The Registrant has entered into indemnity agreements with each of its
directors and executive officers that require the Registrant to indemnify such
persons against expenses, judgments, fines, settlements and other amounts
incurred (including expenses of a derivative action) in connection with any
proceeding, whether actual or threatened, to which any such person may be made a
party by reason of the fact that such person is or was a director or an
executive officer of the Registrant or any of its affiliated enterprises,
provided that such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Registrant and, with respect to any criminal proceeding, had no reasonable cause
to believe his conduct was unlawful. The indemnification agreements also set
forth certain procedures that will apply in the event of a claim for
indemnification thereunder.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or Director.
The Registrant has an insurance policy covering the officers and directors
of the Registrant with respect to certain liabilities, including liabilities
arising under the Securities Act or otherwise.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ --------------------------------------------------------------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Registrant in
effect after the closing of the Initial Public Offering.
3.2 Amended and Restated Bylaws of the Registrant.
4.1 Reference is made to Exhibits 3.1 through 3.2.
4.2 Specimen Stock Certificate.
4.3 Second Amended and Restated Investor Rights Agreement, dated August 27,
1996, between the Registrant and certain investors, as amended October
22, 1996.
4.4 Indenture between Registrant and The Bank of New York dated October 1,
1996.
4.5 Warrant Agreement between Registrant and The Bank of New York dated
October 22, 1996.
4.6 Notes Registration Rights Agreement between Registrant and Smith Barney
Inc. dated October 22, 1996.
4.7 Warrant Registration Rights Agreement between Registrant and Smith Barney
Inc. dated October 22, 1996.
4.8* Specimen 13% Senior Discount Note Due 2006.
5.1 Opinion of Cooley Godward LLP.
10.1 Registrant's 1997 Equity Incentive Plan.
10.2 Registrant's 1997 Employee Stock Purchase Plan.
10.3 Registrant's 1997 Non-Employee Directors' Stock Option Plan.
10.4 Form of Indemnity Agreement to be entered into between the Registrant and
its executive officers and directors.
10.5 Series E Preferred Stock and Warrant Purchase Agreement between Registrant
and Acorn Ventures, Inc., dated August 27, 1996.
10.6 Office Building Lease between Registrant and Factoria Heights dated June
1, 1994, as amended on January 24, 1997.
10.7 Sublease between Registrant and Maruyama U.S., Inc. dated January 15,
1997.
10.8 Lease agreement between Registrant and Spieker Properties, L.P. dated
January 29, 1997.
10.9 Lease agreement between Registrant and Spieker Properties, L.P. dated
January 29, 1997.
10.10 Manufacturing Agreement between Registrant and SeaMed Corporation dated
September 1, 1996.
10.11+ Letter of Intent between Registrant and Scan Coin AB dated March 5, 1997.
10.12+ Agreement between Registrant and Scan Coin AB dated April 30, 1993, as
amended.
10.13 Purchase Agreement between Registrant and Smith Barney Inc. dated October
22, 1996.
11.1 Computation of Earnings Per Share.
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP, Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to the Signature page.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ --------------------------------------------------------------------------
<C> <S>
25.1* Statement of Eligibility of Trustee.
27.1 Financial Data Schedule.
99.1* Form of Letter of Transmittal with respect to Exchange Offer.
99.2* Form of Notice of Guaranteed Delivery.
99.3* Form of Exchange Agreement.
</TABLE>
- ------------------------
* To be filed by amendment.
+ Confidential Treatment granted.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information to be
set forth therein is not applicable or is shown in the financial statements or
notes thereto.
ITEM 22. UNDERTAKING
1. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
2. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
3. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
4. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bellevue,
County of King, State of Washington on the 8th day of August, 1997.
<TABLE>
<S> <C> <C>
By: /s/ JENS H. MOLBAK
-----------------------------------------
Jens H. Molbak
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jens H. Molbak and Kirk A. Collamer and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments, exhibits thereto and other documents in connection therewith) to
this Registration Statement and any subsequent registration statement filed by
the registrant pursuant to Rule 462(b) of the Securities Act of 1933, as
amended, which relates to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the require of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
President, Chief Executive
/s/ JENS H. MOLBAK Officer and Director
- ------------------------------ (PRINCIPAL EXECUTIVE August 8, 1997
Jens H. Molbak OFFICER)
Vice President and Chief
/s/ KIRK A. COLLAMER Financial Officer
- ------------------------------ (PRINCIPAL FINANCIAL AND August 8, 1997
Kirk A. Collamer ACCOUNTING OFFICER)
/s/ GEORGE H. CLUTE
- ------------------------------ Director August 8, 1997
George H. Clute
/s/ LARRY A. HODGES
- ------------------------------ Director August 8, 1997
Larry A. Hodges
/s/ DAVID E. STITT
- ------------------------------ Director August 8, 1997
David E. Stitt
/s/ RONALD A. WEINSTEIN
- ------------------------------ Director August 8, 1997
Ronald A. Weinstein
II-4
<PAGE>
COINSTAR, INC.
REGISTRATION STATEMENT ON FORM S-4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Registrant in
effect after the closing of the Initial Public Offering.
3.2 Amended and Restated Bylaws of the Registrant.
4.1 Reference is made to Exhibits 3.1 through 3.2.
4.2 Specimen Stock Certificate.
4.3 Second Amended and Restated Investor Rights Agreement, dated August 27,
1996, between the Registrant and certain investors, as amended October
22, 1996.
4.4 Indenture between Registrant and The Bank of New York dated October 1,
1996.
4.5 Warrant Agreement between Registrant and The Bank of New York dated
October 22, 1996.
4.6 Notes Registration Rights Agreement between Registrant and Smith Barney
Inc. dated October 22, 1996.
4.7 Warrant Registration Rights Agreement between Registrant and Smith Barney
Inc. dated October 22, 1996.
4.8* Specimen 13% Senior Discount Note Due 2006.
5.1 Opinion of Cooley Godward LLP.
10.1 Registrant's 1997 Equity Incentive Plan.
10.2 Registrant's 1997 Employee Stock Purchase Plan.
10.3 Registrant's 1997 Non-Employee Directors' Stock Option Plan.
10.4 Form of Indemnity Agreement to be entered into between the Registrant and
its executive officers and directors.
10.5 Series E Preferred Stock and Warrant Purchase Agreement between Registrant
and Acorn Ventures, Inc., dated August 27, 1996.
10.6 Office Building Lease between Registrant and Factoria Heights dated June
1, 1994, as amended on January 24, 1997.
10.7 Sublease between Registrant and Maruyama U.S., Inc. dated January 15,
1997.
10.8 Lease agreement between Registrant and Spieker Properties, L.P. dated
January 29, 1997.
10.9 Lease agreement between Registrant and Spieker Properties, L.P. dated
January 29, 1997.
10.10 Manufacturing Agreement between Registrant and SeaMed Corporation dated
September 1, 1996.
10.11+ Letter of Intent between Registrant and Scan Coin AB dated March 5, 1997.
10.12+ Agreement between Registrant and Scan Coin AB dated April 30, 1993, as
amended.
10.13 Purchase Agreement between Registrant and Smith Barney Inc. dated October
22, 1996.
11.1 Computation of Earnings Per Share.
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP, Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to the Signature page.
25.1* Statement of Eligibility of Trustee.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
27.1 Financial Data Schedule.
99.1* Form of Letter of Transmittal with respect to Exchange Offer.
99.2* Form of Notice of Guaranteed Delivery.
99.3* Form of Exchange Agreement.
</TABLE>
- ------------------------
* To be filed by amendment.
+ Confidential Treatment granted.
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COINSTAR, INC.
I.
The name of this corporation is Coinstar, Inc.
II.
The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle, and the
name of the registered agent of the corporation in the State of Delaware at such
address is the The Prentice-Hall Corporation System, Inc.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is fifty million
(50,000,00) shares. Forty five million (45,000,000) shares shall be Common
Stock, each having a par value of one-tenth of one cent ($.001). Five million
(5,000,000) shares shall be Preferred Stock, each having a par value of one-
tenth of one cent ($.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such
1.
<PAGE>
decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "1933 Act"),
covering the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Closing of
the Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the Closing of the Initial
Public Offering, the term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting.
Notwithstanding the foregoing provisions of this Article, each
director shall serve until his successor is duly elected and qualified or until
his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. Subject to the rights of the holders of any series of Preferred
Stock, no director shall be removed without cause. Subject to any limitations
imposed by law, the Board of Directors or any individual director may be removed
from office at any time
2.
<PAGE>
with cause by the affirmative vote of the holders of a majority of the voting
power of all the then-outstanding shares of voting stock of the corporation,
entitled to vote at an election of directors (the "Voting Stock").
4. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
B.
1. Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of
the then-outstanding shares of the Voting Stock. The Board of Directors shall
also have the power to adopt, amend, or repeal Bylaws.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws and following the closing of the Initial Public Offering no action
shall be taken by the stockholders by written consent.
4. Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption), and shall be held at such place, on such date, and at
such time as the Board of Directors shall fix.
5. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the
3.
<PAGE>
stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
4.
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
COINSTAR, INC.
(A DELAWARE CORPORATION)
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. OFFICES. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Registered Office. . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices. . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. CORPORATE SEAL . . . . . . . . . . . . . . . . . . . . 1
Section 3. Corporate Seal . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III. STOCKHOLDERS' MEETINGS . . . . . . . . . . . . . . . . 1
Section 4. Place of Meetings. . . . . . . . . . . . . . . . . . . 1
Section 5. Annual Meetings. . . . . . . . . . . . . . . . . . . . 1
Section 6. Special Meetings . . . . . . . . . . . . . . . . . . . 3
Section 7. Notice of Meetings . . . . . . . . . . . . . . . . . . 4
Section 8. Quorum . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 9. Adjournment and Notice of Adjourned Meetings . . . . . 4
Section 10. Voting Rights. . . . . . . . . . . . . . . . . . . . . 5
Section 11. Joint Owners of Stock. . . . . . . . . . . . . . . . . 5
Section 12. List of Stockholders . . . . . . . . . . . . . . . . . 5
Section 13. Action Without Meeting . . . . . . . . . . . . . . . . 5
Section 14. Organization . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV. DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . 6
Section 15. Number and Term of Office. . . . . . . . . . . . . . . 6
Section 16. Classes Of Directors . . . . . . . . . . . . . . . . . 6
Section 17. Powers . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 18. Vacancies. . . . . . . . . . . . . . . . . . . . . . . 7
Section 19. Resignation. . . . . . . . . . . . . . . . . . . . . . 7
Section 20. Removal. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 21. Meetings . . . . . . . . . . . . . . . . . . . . . . . 8
Section 22. Quorum and Voting. . . . . . . . . . . . . . . . . . . 9
Section 23. Action Without Meeting . . . . . . . . . . . . . . . . 9
Section 24. Fees and Compensation. . . . . . . . . . . . . . . . . 9
Section 25. Committees . . . . . . . . . . . . . . . . . . . . . . 9
Section 26. Organization . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V. OFFICERS . . . . . . . . . . . . . . . . . . . . . . . 11
Section 27. Officers Designated. . . . . . . . . . . . . . . . . . 11
Section 28. Tenure and Duties of Officers. . . . . . . . . . . . . 11
Section 29. Delegation of Authority. . . . . . . . . . . . . . . . 12
Section 30. Resignations . . . . . . . . . . . . . . . . . . . . . 13
Section 31. Removal. . . . . . . . . . . . . . . . . . . . . . . . 13
i.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE VI. EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION . . . . . . . . . . . . . . . 13
Section 32. Execution of Corporate Instruments . . . . . . . . . . 13
Section 33. Voting of Securities Owned by the Corporation. . . . . 13
ARTICLE VII. SHARES OF STOCK. . . . . . . . . . . . . . . . . . . . 14
Section 34. Form and Execution of Certificates . . . . . . . . . . 14
Section 35. Lost Certificates. . . . . . . . . . . . . . . . . . . 14
Section 36. Transfers. . . . . . . . . . . . . . . . . . . . . . . 15
Section 37. Fixing Record Dates. . . . . . . . . . . . . . . . . . 15
Section 38. Registered Stockholders. . . . . . . . . . . . . . . . 15
ARTICLE VIII. OTHER SECURITIES OF THE CORPORATION. . . . . . . . . . 16
Section 39. Execution of Other Securities. . . . . . . . . . . . . 16
ARTICLE IX. DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . 16
Section 40. Declaration of Dividends . . . . . . . . . . . . . . . 16
Section 41. Dividend Reserve . . . . . . . . . . . . . . . . . . . 16
ARTICLE X. FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . 17
Section 42. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE XI. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . 17
Section 43. Indemnification of Directors, Executive Officers,
Other Officers, Employees and Other Agents . . . . . . 17
ARTICLE XII. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . 20
Section 44. Notices. . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XIII. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . 22
Section 45. Amendments . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XIV. LOANS TO OFFICERS. . . . . . . . . . . . . . . . . . . 22
Section 46. Loans to Officers. . . . . . . . . . . . . . . . . . . 22
ii.
<PAGE>
BYLAWS
OF
COINSTAR, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETINGS.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To
be properly brought before an annual meeting, business must be: (A) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (B) otherwise properly brought before the
meeting by or at the direction of the Board of Directors, or (C) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought
1.
<PAGE>
before an annual meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; PROVIDED, HOWEVER, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 5. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a director: (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the corporation
which are beneficially owned by such
2.
<PAGE>
person, (D) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nominations are to be made by the stockholder,
and (E) any other information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the 1934 Act (including
without limitation such person's written consent to being named in the proxy
statement, if any, as a nominee and to serving as a director if elected); and
(ii) as to such stockholder giving notice, the information required to be
provided pursuant to paragraph (b) of this Section 5. At the request of the
Board of Directors, any person nominated by a stockholder for election as a
director shall furnish to the Secretary of the corporation that information
required to be set forth in the stockholder's notice of nomination which
pertains to the nominee. No person shall be eligible for election as a director
of the corporation unless nominated in accordance with the procedures set forth
in this paragraph (c). The chairman of the meeting shall, if the facts warrant,
determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare at the meeting, and the defective nomination
shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption), and shall be held at such place, on such date, and at
such time as the Board of Directors, shall fix.
(b) If a special meeting is called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within sixty (60) days after the receipt of the request, the person or
persons requesting the meeting may set the time and place of the meeting and
give the notice. Nothing contained in this paragraph (b) shall be construed as
limiting,
3.
<PAGE>
fixing, or affecting the time when a meeting of stockholders called by action of
the Board of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a
quorum, any meeting of stockholders may be adjourned, from time to time, either
by the chairman of the meeting or by vote of the holders of a majority of the
shares represented thereat, but no other business shall be transacted at such
meeting. The stockholders present at a duly called or convened meeting, at
which a quorum is present, may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. Except as otherwise provided by law, the Certificate of Incorporation
or these Bylaws, all action taken by the holders of a majority of the vote cast,
excluding abstentions, at any meeting at which a quorum is present shall be
valid and binding upon the corporation; PROVIDED, HOWEVER, that directors shall
be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors. Where a separate vote by a class or classes or series is required,
except where otherwise provided by the statute or by the Certificate of
Incorporation or these Bylaws, a majority of the outstanding shares of such
class or classes or series, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter and, except where otherwise provided by the statute or by the Certificate
of Incorporation or these Bylaws, the affirmative vote of the majority
(plurality, in the case of the election of directors) of the votes cast,
including abstentions, by the holders of shares of such class or classes or
series shall be the act of such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting
of stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting, the corporation may transact any business
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which might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING. No action shall be taken by the
stockholders except at an annual or special meeting of stockholders called in
accordance with these Bylaws, and no action shall be taken by the stockholders
by written consent.
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SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting chosen by a
majority in interest of the stockholders entitled to vote, present in person or
by proxy, shall act as chairman. The Secretary, or, in his absence, an
Assistant Secretary directed to do so by the President, shall act as secretary
of the meeting.
(b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
SECTION 16. CLASSES OF DIRECTORS. Subject to the rights of the holders
of any series of Preferred Stock to elect additional directors under specified
circumstances, the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the
adoption and filing of this Certificate of Incorporation, the term of office of
the Class I directors shall expire and Class I directors shall be elected for a
full term of three years. At the second annual meeting of stockholders
following the adoption and filing of this Certificate of Incorporation, the term
of office of the Class II directors shall expire and Class II directors shall be
elected for a full term of three years. At the third annual meeting of
stockholders following the adoption and filing of this Certificate of
Incorporation, the term of office of the Class III directors shall expire and
Class III
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directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 17. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 18. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A
vacancy in the Board of Directors shall be deemed to exist under this Bylaw in
the case of the death, removal or resignation of any director.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When
one or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 20. REMOVAL. Subject to the rights of the holders of any series
of Preferred Stock, no director shall be removed without cause. Subject to any
limitations imposed by law, the Board of Directors or any individual director
may be removed from office at any time with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock").
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SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such meeting is held. No notice of an
annual meeting of the Board of Directors shall be necessary and such meeting
shall be held for the purpose of electing officers and transacting such other
business as may lawfully come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors
(d) TELEPHONE MEETINGS. Any member of the Board of Directors,
or of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
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SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; PROVIDED, HOWEVER, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, including without limitation the power or
authority to declare a dividend, to authorize the issuance of stock and to adopt
a certificate of ownership and merger, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the
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designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
bylaws of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, from time to time appoint
such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall such committee have the powers denied to the Executive Committee
in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to the provisions of
subsections (a) or (b) of this Bylaw may at any time increase or decrease the
number of members of a committee or terminate the existence of a committee. The
membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of
any committee may be waived in writing at any time before or after the
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meeting and will be waived by any director by attendance thereat, except when
the director attends such special meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. A majority of the authorized number
of members of any such committee shall constitute a quorum for the transaction
of business, and the act of a majority of those present at any meeting at which
a quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer or the Treasurer, all of
whom shall be elected at the annual organizational meeting of the Board of
Directors. The Board of Directors may also appoint one or more Assistant
Secretaries, Assistant Treasurers, Assistant Controllers and such other officers
and agents with such powers and duties as it shall deem necessary. The Board of
Directors may assign such additional titles to one or more of the officers as it
shall deem appropriate. Any one person may hold any number of offices of the
corporation at any one time unless specifically prohibited therefrom by law.
The salaries and other compensation of the officers of the corporation shall be
fixed by or in the manner designated by the Board of Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
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(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume
and perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors and shall record all
acts and proceedings thereof in the minute book of the corporation. The
Secretary shall give notice in conformity with these Bylaws of all meetings of
the stockholders and of all meetings of the Board of Directors and any committee
thereof requiring notice. The Secretary shall perform all other duties given
him in these Bylaws and other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time. The President may direct any
Assistant Secretary to assume and perform the duties of the Secretary in the
absence or disability of the Secretary, and each Assistant Secretary shall
perform other duties commonly incident to his office and shall also perform such
other duties and have such other powers as the Board of Directors or the
President shall designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order
of the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties
commonly incident to his office and shall also perform such other duties and
have such other powers as the Board of Directors or the President shall
designate from time to time. The President may direct the Treasurer or any
Assistant Treasurer, or the Controller or any Assistant Controller to assume and
perform the duties of the Chief Financial Officer in the absence or disability
of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and
each Controller and Assistant Controller shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
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SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any
time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositories on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock
and other securities of other corporations owned or held by the corporation for
itself, or for other parties in
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any capacity, shall be voted, and all proxies with respect thereto shall be
executed, by the person authorized so to do by resolution of the Board of
Directors, or, in the absence of such authorization, by the Chairman of the
Board of Directors, the Chief Executive Officer, the President, or any Vice
President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
14.
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SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
15.
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ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 33), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; PROVIDED, HOWEVER, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
16.
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ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND OFFICERS. The corporation shall indemnify its
directors and officers to the fullest extent not prohibited by the Delaware
General Corporation Law; PROVIDED, HOWEVER, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
officers; and, PROVIDED, FURTHER, that the corporation shall not be required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized by the Board of
Directors of the corporation, (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law or (iv) such
indemnification is required to be made under subsection (d).
(b) EMPLOYEES AND OTHER AGENTS. The corporation shall have
power to indemnify its employees and other agents as set forth in the Delaware
General Corporation Law.
(c) EXPENSES. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or officer,
of the corporation, or is or was serving at the request of the corporation as a
director or executive officer of another corporation, partnership, joint
venture, trust or other enterprise, prior to the final disposition of the
proceeding, promptly following request therefor, all expenses incurred by any
director or officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
officer of the corporation (except by reason of the fact that such officer is
or was a director of the corporation in which event this paragraph shall not
apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts
17.
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known to the decision-making party at the time such determination is made
demonstrate clearly and convincingly that such person acted in bad faith or in a
manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
(d) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or officer. Any right to indemnification or
advances granted by this Bylaw to a director or officer shall be enforceable by
or on behalf of the person holding such right in any court of competent
jurisdiction if (i) the claim for indemnification or advances is denied, in
whole or in part, or (ii) no disposition of such claim is made within ninety
(90) days of request therefor. The claimant in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an officer of the
corporation (except in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such executive
officer is or was a director of the corporation) for advances, the corporation
shall be entitled to raise a defense as to any such action clear and convincing
evidence that such person acted in bad faith or in a manner that such person did
not believe to be in or not opposed to the best interests of the corporation, or
with respect to any criminal action or proceeding that such person acted without
reasonable cause to believe that his conduct was lawful. Neither the failure of
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct. In any suit brought by a director or
officer to enforce a right to indemnification or to an advancement of expenses
hereunder, the burden of proving that the director or officer is not entitled to
be indemnified, or to such advancement of expenses, under this Article XI or
otherwise shall be on the corporation.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law.
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(f) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
(h) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(i) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(ii) The term "expenses" shall be broadly construed and
shall include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and expenses
of any nature or kind incurred in connection with any proceeding.
(iii) The term the "corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger
which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so
that any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under the provisions of this Bylaw with respect to
the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(iv) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such
19.
<PAGE>
person is serving at the request of the corporation as, respectively, a
director, executive officer, officer, employee, trustee or agent of another
corporation, partnership, joint venture, trust or other enterprise.
(v) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by
a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the name
and address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing,
and all notices given by facsimile, telex or telegram shall be deemed to have
been given as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be
20.
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employed in respect of any one or more, and any other permissible method or
methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by
the corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever
notice is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom
(i) notice of two consecutive annual meetings, and all notices of meetings or of
the taking of action by written consent without a meeting to such person during
the period between such two consecutive annual meetings, or (ii) all, and at
least two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
21.
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ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the Voting Stock. The
Board of Directors shall also have the power to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the Board of Directors shall approve, including, without limitation, a pledge
of shares of stock of the corporation. Nothing in these Bylaws shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.
22.
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EXHIBIT 4.2
COMMON STOCK COMMON STOCK
CSR [LOGO] COINSTAR
SEE REVERSE SIDE FOR CERTAIN
DEFINITIONS AND A STATEMENT OF
RIGHTS, PREFERENCES, AND PRIVILEGES
Cusip 19259P300
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.001, OF
COINSTAR, INC.
transferable on the books of the Corporation by the record hereof in
person or by duly authorized attorney upon surrender of this Certificate
properly endorsed. This Certificate is not valid until countersigned and
registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
DATED:
[SEAL]
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
P.O. BOX 1696, DENVER, COLORADO 80201
BY
TRANSFER AGENT AND REGISTRAR AUTHORIZED SIGNATURE
<PAGE>
The Corporation is authorized to issue Common Stock and Preferred Stock.
The Board of Directors has authority to fix the number of shares and the
designation of any series of Preferred Stock and to determine or alter the
rights, preferences, privileges and restrictions granted to or imposed upon
any unissued shares of Preferred Stock.
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights as established, from time to time, by the
Certificate of Incorporation of the Corporation and by any certificate of
determination, the number of shares constituting each class and series, and
the designations thereof, may be obtained by the holder hereof upon request
and without charge at the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______________ Custodian ___________________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act ________________________________________
in common (State)
UNIF TRF MIN ACT - ______________ Custodian (until age________)
(Cust)
______________ under Uniform Transfers
(Minor)
to Minors Act _____________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ____________________________________________ hereby
sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________
________________________________________
______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
______________________________________________________________________________
______________________________________________________________________________
_______________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_____________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ___________________________
_______________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature Guaranteed:
__________________________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE
GUARANTEE PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
COINSTAR, INC.
SECOND AMENDED AND RESTATED INVESTOR'S RIGHTS AGREEMENT
AUGUST 27, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
1. AMENDMENT AND RESTATEMENT. . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Amendment and Restatement.. . . . . . . . . . . . . . . . . . . . . .1
2. CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .2
3. TRANSFERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
3.1 Restrictions on Transferability.. . . . . . . . . . . . . . . . . . .3
3.2 Restrictive Legend. . . . . . . . . . . . . . . . . . . . . . . . . .3
3.3 Notice of Proposed Transfers. . . . . . . . . . . . . . . . . . . . .4
4. REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
4.1 Requested Registration. . . . . . . . . . . . . . . . . . . . . . . .4
4.2 Company Registration. . . . . . . . . . . . . . . . . . . . . . . . .7
4.3 Form S-3 Registration.. . . . . . . . . . . . . . . . . . . . . . . .8
4.4 Expenses of Registration. . . . . . . . . . . . . . . . . . . . . . .9
4.5 Registration Procedures.. . . . . . . . . . . . . . . . . . . . . . .9
4.6 Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.7 Information by Holder.. . . . . . . . . . . . . . . . . . . . . . . 14
4.8 "Market Stand-off" Agreement. . . . . . . . . . . . . . . . . . . . 14
4.9 Transfer of Registration Rights.. . . . . . . . . . . . . . . . . . 15
4.10 Termination of Registration Rights. . . . . . . . . . . . . . . . . 15
4.11 Limitation on Subsequent Registration Rights. . . . . . . . . . . . 15
5. RIGHT OF FIRST REFUSAL ON COMPANY ISSUANCES. . . . . . . . . . . . . . . 16
5.1 Right of First Refusal. . . . . . . . . . . . . . . . . . . . . . . 16
6. COVENANTS OF THE COMPANY.. . . . . . . . . . . . . . . . . . . . . . . . 17
6.1 Maintenance of Books and Records. . . . . . . . . . . . . . . . . . 17
6.2 Financial Information and Reporting.. . . . . . . . . . . . . . . . 17
6.3 Additional Information Rights.. . . . . . . . . . . . . . . . . . . 18
6.4 Inspection Rights.. . . . . . . . . . . . . . . . . . . . . . . . . 19
6.5 Employee Agreements.. . . . . . . . . . . . . . . . . . . . . . . . 19
6.6 Board Meetings; Expenses. . . . . . . . . . . . . . . . . . . . . . 19
6.7 Termination of Covenants. . . . . . . . . . . . . . . . . . . . . . 19
7. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 Governing Law; Submission to Jurisdiction.. . . . . . . . . . . . . 20
7.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 20
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
7.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.4 Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.5 Delays or Omissions.. . . . . . . . . . . . . . . . . . . . . . . . 20
7.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.8 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ii.
<PAGE>
COINSTAR, INC.
SECOND AMENDED AND RESTATED INVESTOR'S RIGHTS AGREEMENT
This Second Amended and Restated Investors' Rights Agreement (the
"Agreement") is entered into as of August 27, 1996, by and among Coinstar, Inc.,
a Delaware corporation (the "Company"), Jens H. Molbak (the "Founder") and those
persons and entities set forth on the Schedule of Investors attached hereto as
Exhibit A (the "Investors"). This Agreement is being entered into pursuant to
Section 5.1 of that certain Series E Preferred Stock and Warrant Purchase
Agreement of even date herewith between the Company and the Purchasers set forth
on Exhibit A thereto (the "Series E Agreement").
RECITALS
WHEREAS, certain of the Investors hold shares of the Company's Series A
Preferred Stock (the "Series A Preferred"), Series B Preferred Stock (the
"Series B Preferred"), Series C Preferred Stock (the "Series C Preferred"),
Series D Preferred Stock (the "Series D Preferred") and/or shares of Common
Stock issued upon conversion thereof and possess registration rights,
information rights and other rights pursuant to that certain Amended and
Restated Investors' Rights Agreement dated as of December 15, 1995 between the
Company and such Investors (the "Prior Agreement");
WHEREAS, the Company and the undersigned Investors who hold Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred desire
to terminate the Prior Agreement and to accept the rights created pursuant
hereto in lieu of the rights granted to them under the Prior Agreement; and
WHEREAS, certain of the Investors are parties to the Series E Agreement,
and certain of the Company's and such Investors' obligations under the Series E
Agreement are conditioned upon the execution and delivery by such Investors, the
holders of at least a majority of the Series A Preferred, the Series B
Preferred, Series C Preferred, Series D Preferred and the Company of this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the Investors who are parties to the Prior Agreement hereby agree
that the Prior Agreement shall be superseded and replaced in its entirety by
this Agreement, and the parties hereto further agree as follows:
1.
<PAGE>
1. AMENDMENT AND RESTATEMENT.
1.1 AMENDMENT AND RESTATEMENT. Effective upon the closing of the sale and
issuance of the Series E Preferred pursuant to the Series E-1 Agreement, all
provisions of, rights granted and covenants made in the Prior Agreement and any
other agreement between the Company, the Investors and the Founder, are hereby
waived released and terminated in their entirety and shall have no further force
or effect whatsoever. The rights and covenants contained in this Agreement set
forth the sole and entire agreement among the Company, the Investors and the
Founder on the subject matter hereof and supersede any and all rights granted or
covenants made under any prior agreement.
2. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the following
respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Holder" shall mean any holder of Registrable Securities.
"Registrable Securities" means shares of Common Stock issued or issuable
pursuant to the conversion or exercise of Restricted Securities.
Notwithstanding the foregoing, Registrable Securities shall not include any
securities sold by a person in a transaction (a) pursuant to Rule 144, (b)
pursuant to a registration statement on file with the Commission or (c) in which
such person's rights under this Agreement are not transferred.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement by the Commission.
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with Sections 4.1, 4.2 and 4.3 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company) and the reasonable fees of one counsel selected by the
selling stockholders.
"Restricted Securities" shall mean the (i) Shares, (ii) any shares of
Common Stock issued or issuable pursuant to the conversion or exercise of the
Shares, (iii) any
2.
<PAGE>
Shares issued upon exercise of the Warrants and (iv) any shares of capital stock
issued in respect thereof, whether by way of dividend, distribution, exchange,
replacement or otherwise.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Series E Preferred" shall mean the Series E-1 Preferred Stock, Series E-2
Preferred Stock and Series E-3 Preferred Stock of the Company.
"Shares" shall mean the (i) Series A Preferred, Series B Preferred, Series
C Preferred, Series D Preferred and Series E Preferred held by the Investors as
of the date hereof or subsequently acquired by the Investors, (ii) the Series C
Preferred held by Phoenix Leasing Incorporated as of the date hereof or
subsequently acquired upon exercise of a Warrant and (iii) the Series D
Preferred held by Dominion Ventures, Inc. and Silicon Valley Bank as of the date
hereof or subsequently acquired upon exercise of a Warrant.
"Warrants" shall mean (i) the warrants to purchase Series C Preferred,
Series D Preferred and Series E Preferred held by the Investors, (ii) the
warrant to purchase up to 49,231 shares of Series C Preferred held by Phoenix
Leasing Incorporated and (iii) the Warrant to purchase shares of Series D
Preferred held by Dominion Ventures, Inc. and Silicon Valley Bank.
3. TRANSFERABILITY.
3.1 RESTRICTIONS ON TRANSFERABILITY. The Shares and any securities into
which the Shares may be convertible, shall not be transferable except upon the
conditions specified in this Agreement, which conditions are intended to insure
compliance with the provisions of the Securities Act, or, in the case of Section
4.8 hereof, to assist in an orderly distribution. Each Investor will cause any
proposed transferee of the Shares (or of the securities into which the Shares
may be converted) held by an Investor to agree to take and hold such securities
subject to the provisions and upon the conditions specified in this Agreement.
For purposes of this Agreement, the term "transfer" shall be construed broadly
and shall include any transfer (whether voluntary, involuntary or by operation
of law) of securities or any interest therein, including without limitation, by
way of issuance, sale, participation, pledge, gift, bequeath, intestate
transfer, distribution, liquidation, merger or consolidation.
3.
<PAGE>
3.2 RESTRICTIVE LEGEND. Each certificate representing Restricted
Securities shall (unless otherwise permitted by the provisions of Section 3.3
below) be stamped or otherwise imprinted with a legend in substantially the
following form (in addition to any legend required under applicable state
securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR, IN THE OPINION OF COUNSEL OR BASED ON OTHER WRITTEN EVIDENCE IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
3.3 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 3.3. Prior to any proposed
transfer of any Restricted Securities, unless there is in effect a registration
statement under the Securities Act covering the proposed transfer, the holder
thereof shall give written notice to the Company of such holder's intention to
effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail, and shall be
accompanied by either (i) an unqualified written opinion of legal counsel who
shall be reasonably satisfactory to the Company addressed to the Company and
reasonably satisfactory in form and substance to the Company's counsel, to the
effect that the proposed transfer of the Restricted Securities may be effected
without registration under the Securities Act, (ii) a "no action" letter from
the Commission to the effect that the distribution of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, or (iii) such other showing that may
be reasonably satisfactory to legal counsel to the Company, whereupon the holder
of such Restricted Securities shall be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by the holder to
the Company. Each certificate evidencing the Restricted Securities transferred
as above provided shall bear the appropriate restrictive legend set forth in
Section 3.2 above, except that such certificate shall not bear such restrictive
legend if in the opinion of counsel for the Company such legend is not required
in order to establish compliance with any provisions of the Securities Act. All
Restricted Securities transferred as above that continue to bear the restrictive
legend set forth in Section 3.2 shall continue to be subject to the provisions
of this Section 3.3 in the same manner as before such transfer.
4.
<PAGE>
4. REGISTRATION RIGHTS.
4.1 REQUESTED REGISTRATION. Subject to the conditions of this Section
4.1, (i) if the Company shall receive prior to the first underwritten public
offering of the Company's securities (the "Initial Offering"), a written request
from the Holders of not less than fifty percent (50%) of the Registrable
Securities issued or issuable pursuant to the conversion of the Series C
Preferred, Series D Preferred and Series E Preferred (the "Initiating Holders"),
that the Company effect a registration covering the registration of a number of
Registrable Securities equal to at least twenty percent (20%) of the Registrable
Securities held by such Holders on the date hereof or having an anticipated
aggregate offering price to the public of at least ten million dollars
($10,000,000) or (ii) if the Company shall receive subsequent to the Initial
Offering, a written request of Holders of a number of Registrable Securities
equal to not less than twenty percent (20%) of the Registrable Securities issued
or issuable pursuant to the conversion of the Series C Preferred, Series D
Preferred and Series E Preferred, the Company will:
(a) promptly give written notice of the proposed registration to all
other Holders; and
(b) use its diligent best efforts to effect, as soon as practicable,
the registration (including, without limitation, the execution of an undertaking
to file post-effective amendments, appropriate qualification under applicable
blue sky or other state securities laws and appropriate compliance with
applicable regulations issued under the Securities Act) of the Registrable
Securities specified in such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as are
specified in a written request given within fifteen (15) days after receipt of
such written notice from the Company; provided that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 4.1:
(i) If at the time of the request to register Registrable
Securities the Company gives notice within ten (10) days of such request that it
is then engaged or has fixed plans to engage within thirty (30) days of the time
of the request in an initial firmly underwritten registered public offering as
to which the Holders may include Registrable Securities pursuant to Sections 4.1
or 4.2.
Subject to the foregoing clause (i) and to Section 4.1(d), the
Company shall file a registration statement covering the Registrable Securities
so requested to be registered as soon as practicable after receipt of the
request of the Initiating Holders.
5.
<PAGE>
(c) Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 4.1 and the Company shall include such information in the written notice
referred to in Section 4.1(a). The right of any Holder to registration pursuant
to Section 4.1 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent requested (unless otherwise mutually agreed by a
majority in interest of the Holders and such Holder) to the extent provided
herein.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting jointly by the Company and the Initiating Holders. Notwithstanding
any other provision of this Section 4.1, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten and so advises the Initiating Holders in writing, then the
Initiating Holders shall so advise all Holders (except those Holders who have
indicated to the Company their decision not to distribute any of their
Registrable Securities through such underwriting) and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated among all such Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities owned by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration.
If any Holder disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The Registrable Securities and/or other securities
so withdrawn from such underwriting shall also be withdrawn from such
registration; provided, however, that, if by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used above in determining the
underwriter limitation; and, provided further that in the event that the
withdrawal of a Holder, and the subsequent inclusion of additional Registrable
Securities by other Holders, results in less than 20% of the Registrable
Securities or in an anticipated aggregate offering price to the public of less
than ten million dollars ($10,000,000), the Company shall no longer be required
to effect such registration pursuant to this Section 4.1.
6.
<PAGE>
If the underwriter has not limited the number of Registrable Securities to
be underwritten, the Company may include securities for its own account or the
account of others in such registration if the underwriter so agrees and if the
number of Registrable Securities which would otherwise have been included in
such registration and underwriting will not thereby be limited.
(d) Delay of Registration. If the Company shall furnish to the
Initiating Holders a certificate signed by the President of the Company stating
that, in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company and its shareholders for such
registration statement to be filed on or before the date filing would be
required and it is therefore essential to defer the filing of such registration
statement, then the Company may direct that such request for registration be
delayed for a period not in excess of ninety (90) days, such right to delay a
request to be exercised by the Company not more than once in any twelve-month
period.
4.2 COMPANY REGISTRATION.
(a) If at any time the Company shall determine to file a registration
statement under the Securities Act for purposes of a public offering of
securities of the Company, either for its own account or the account of a
security holder or holders exercising their respective demand registration
rights (including, but not limited to, the Initial Offering, registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to employee benefit plans and
corporate reorganizations), the Company will:
(i) promptly give to each Holder and the Founder written notice
thereof (which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities or Founder's Common Stock specified in a
written request or requests, made within twenty (20) days after receipt of such
written notice from the Company, by any Holder or Holders (or by the Founder as
to any of his shares of Common Stock that are not Registrable Securities).
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders and the Founder as a part of the written
notice given pursuant to Section 4.2(a)(i). In such event the right of any
Holder or the Founder to registration pursuant to Section 4.2 shall be
conditioned upon such Holder's or Founder's participation in such
7.
<PAGE>
underwriting and the inclusion of such Holder's Registrable Securities or shares
of such Founder's Common Stock in the underwriting to the extent provided
herein. Each Holder and Founder proposing to distribute their securities
through such underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section 4.2, if the underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten, the
underwriter may limit the number of Registrable Securities and shares of Common
Stock to be included in the registration and underwriting to (i) in the case of
the first underwritten public offering of the securities of the Company, any
amount that the underwriter may determine, or (ii) in the case of any
registration subsequent to the first underwritten public offering of the
securities of the Company, to not less than twenty percent (20%) of the total
securities covered by the registration. The Company shall so advise all Holders
and the Founder (except with respect to each of those Holders or the Founder who
has indicated to the Company its decision not to distribute any of its
Registrable Securities or Common Stock through such underwriting), and the
number of shares of Registrable Securities and Common Stock that may be included
in the registration and underwriting shall be allocated in proportion, as nearly
as practicable, to the respective amounts of Registrable Securities owned by the
Holders and the number of shares of Common Stock held by the Founder at the time
of filing the registration statement; provided, however, that if the underwriter
limits the number of shares of Common Stock held by the Founder to be included
in the registration, such number of shares to be excluded from the registration
shall be reallocated to the Holders.
No Registrable Securities or Founder's Common Stock excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. If any Holder or the Founder disapproves of the
terms of any such underwriting, such person may elect to withdraw therefrom by
written notice to the Company and the underwriter. The securities so withdrawn
from such underwriting shall also be withdrawn from such registration; provided,
however, that, if by the withdrawal of such securities a greater number of
Registrable Securities held by other Holders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters),
then the Company shall offer to all Holders who have included Registrable
Securities in the registration the right to include additional Registrable
Securities in the same proportion used above in determining the underwriter
limitation.
4.3 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
8.
<PAGE>
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 4.3: (i) if
Form S-3 is not available for such offering by the Holders, (ii) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of less than
$500,000 or (iii) if the Company shall furnish to the Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its shareholders for such Form S-3 Registration to be effected
at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more than
ninety (90) days after receipt of the request of the Holder or Holders under
this Section 4.3 (such notice may not be delivered more than once in any 12
month period).
4.4 EXPENSES OF REGISTRATION. The Company shall bear all Registration
Expenses incurred in connection with the first three registrations pursuant to
Section 4.1 and the first five registrations pursuant to Section 4.2 and Section
4.3. All Selling Expenses incurred in connection with any registrations
hereunder, shall be borne by the holders of the securities so registered
pro-rata on the basis of the number of shares so registered. The Company shall
not, however, be required to pay for expenses of any registration proceeding
begun pursuant to Section 4.1, the request of which has been subsequently
withdrawn by the Initiating Holders (unless the withdrawal is based upon
material adverse information concerning the Company of which the Initiating
Holders were not aware at the time of such request or unless the Holders of a
majority of Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 4.1 in which event such right shall be
forfeited by all Holders), in which case such expenses shall be borne by the
holders of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which registration was
requested.
4.5 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 4,
the Company will keep each Holder (or Founder, if including shares of Common
Stock under Section 4.2)
9.
<PAGE>
advised in writing as to the initiation of each registration, qualification and
compliance and as to the completion thereof. At its expense the Company will:
(a) use its best efforts to cause a registration statement that
registers such Registrable Securities to become and remain effective for a
period of 120 days or until all of such Registrable Securities have been
disposed of (if earlier);
(b) furnish, at least five business days before filing a registration
statement that registers such Registrable Securities, a prospectus relating
thereto or any amendments or supplements relating to such a registration
statement or prospectus, to one counsel selected by a majority of the Holders
(the "Investors' Counsel"), copies of all such documents proposed to be filed
(it being understood that such five-business-day period need not apply to
successive drafts of the same document proposed to be filed so long as such
successive drafts are supplied to the Investors' Counsel in advance of the
proposed filing by a period of time that is customary and reasonable under the
circumstances);
(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
at least a period of 120 days or until all of such Registrable Securities have
been disposed of (if earlier) and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of such Registrable
Securities;
(d) notify in writing the Investors' Counsel promptly of (i) the
receipt by the Company of any notification with respect to any comments by the
Commission with respect to such registration statement or prospectus or any
amendment or supplement thereto or any request by the Commission for the
amending or supplementing thereof or for additional information with respect
thereto, (ii) the receipt by the Company of any notification with respect to the
issuance by the Commission of any stop order suspending the effectiveness of
such registration statement or prospectus or any amendment or supplement thereto
or the initiation or threatening of any proceeding for that purpose and (iii)
the receipt by the Company of any notification with respect to the suspension of
the qualification of such Registrable Securities for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purposes;
(e) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
the holders of Registrable Securities included in such registration statement
reasonably request and do any and all other acts and things which may be
reasonably necessary or advisable to enable the holders of Registrable
Securities included in such registration statement to consummate the disposition
in such jurisdictions of the Registrable Securities owned by
10.
<PAGE>
them; provided, however, that the Company will not be required to qualify
generally to do business, subject itself to general taxation or consent to
general service of process in any jurisdiction where it would not otherwise be
required to do so but for this clause (e) or to provide any material undertaking
or make any changes in its Bylaws or Certificate of Incorporation which the
Board of Directors determines to be contrary to the best interests of the
Company;
(f) furnish to the holders of such Registrable Securities such number
of copies of a summary prospectus, if any, or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such holders may reasonably request in order to
facilitate the public sale or other disposition of such Registrable Securities;
(g) use its best efforts to cause such Registrable Securities to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of the Company to
enable the holders of such Registrable Securities to consummate the disposition
of such Registrable Securities;
(h) notify the holders of such Registrable Securities on a timely
basis at any time when a prospectus relating to such Registrable Securities is
required to be delivered under the Securities Act within the appropriate period
mentioned in clause (a) of this Section 4.5, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing and, at the
request of such holders, prepare and furnish to such holders a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the offerees of such shares, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
(i) subject to the execution of confidentiality agreements in form
and substance satisfactory to the Company, make available upon reasonable notice
and during normal business hours, for inspection by the holders of such
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by such holders or underwriter (collectively, the "Inspectors"),
all pertinent financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all
11.
<PAGE>
information (together with the Records, the "Information") reasonably requested
by any such Inspector in connection with such registration statement. Any of
the Information which the Company determines in good faith to be confidential,
and of which determination the Inspectors are so notified, shall not be
disclosed by the Inspectors unless (i) the disclosure of such Information is
necessary to avoid or correct a misstatement or omission in the registration
statement, (ii) the release of such Information is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction or (iii) such
Information has been made generally available to the public; the holders of such
Registrable Securities agree that they will, upon learning that disclosure of
such Information is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Information deemed confidential;
(j) use its best efforts to obtain from its independent certified
public accountants "cold comfort" letters in customary form and at customary
times and covering matters of the type customarily covered by cold comfort
letters;
(k) use its best efforts to obtain from its counsel an opinion or
opinions in customary form naming the holders of such Registrable Securities as
additional addressees or parties who may rely thereon;
(l) provide a transfer agent and registrar (which may be the same
entity and which may be the Company) for such Registrable Securities;
(m) issue to any underwriter to which the holders of such Registrable
Securities may sell shares in such offering certificates evidencing such
Registrable Securities;
(n) list such Registrable Securities on any national securities
exchange or automated quotation system on which any shares of the Common Stock
are listed; or, if the Common Stock is not listed on a national securities
exchange, use its best efforts to qualify such Registrable Securities for
inclusion on the automated quotation system of the National Association of
Securities Dealers, Inc. (the "NASD"), or any national securities exchange;
(o) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make available to its
securityholders, as soon as reasonably practicable, earnings statements (which
need not be audited) covering a period of 12 months beginning within three
months after the effective date of the registration statement, which earnings
statements shall satisfy the provisions of Section 11(e) of the Securities Act;
and
12.
<PAGE>
(p) use its best efforts to take all other steps necessary to effect
the registration of such Registrable Securities contemplated hereby.
Each holder of the Registrable Securities included in any registration
statement, upon receipt of any notice from the Company of any event of the kind
described in Section 4.5(h) hereof, shall forthwith discontinue disposition of
the Registrable Securities pursuant to the registration statement converting
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 4.5(h) hereof, and,
if so directed by the Company, such holder shall deliver to the Company all
copies, other than permanent file copies then in such holder's possession, of
the prospectus covering such Registrable Securities at the time of receipt of
such notice.
4.6 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each person controlling
such Holder and their respective officers, directors, partners and legal counsel
(the "Indemnified Persons"), with respect to which registration, qualification
or compliance has been effected pursuant to this Section 4, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on (i) any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other similar document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, or (ii) any violation by
the Company of any federal, state or common law rule or regulation applicable to
the Company in connection with any such registration, qualification or
compliance, and will reimburse each such Indemnified Person, for any legal and
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, as incurred,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein or furnished by the Holder to the Company in
response to a request by the Company stating specifically that such information
will be used by the Company therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each legal counsel and independent accountant of the Company, each
person who controls the Company within the meaning of the Securities Act, and
each other such Holder and each
13.
<PAGE>
person controlling such Holder and their respective officers, directors, and
partners, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other similar document, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and will reimburse the
Company, such Holders, such directors, officers, persons, or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, as
incurred, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by such Holder and stated to be
specifically for use therein or furnished by the Holder to the Company in
response to a request by the Company stating specifically that such information
will be used by the Company therein.
(c) Each party entitled to indemnification under this Section 4.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has received written notice of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld). The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
shall bear the expense of such defense of the Indemnified Party if
representation of both parties by the same counsel would be inappropriate due to
actual or potential conflicts of interest. The failure of any Indemnified Party
to give notice as provided herein shall relieve the Indemnifying Party of its
obligations under this Section 4.6 only to the extent that such failure to give
notice shall materially adversely prejudice the Indemnifying Party in the
defense of any such claim or any such litigation. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
(d) To the extent any Founder participates in a registration under
Section 4.2 hereof, such Founder shall be deemed to be a "Holder" for purposes
of this Section 4.6.
14.
<PAGE>
4.7 INFORMATION BY HOLDER. Each Holder or Founder, including securities
of the Company in any registration shall furnish to the Company such information
regarding such Holder or Founder and the distribution proposed by such Holder or
Founder as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Section 4.
4.8 "MARKET STAND-OFF" AGREEMENT Each Holder and Founder agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by it for a period not to exceed one hundred twenty (120)
days following the effective date of a registration statement of the Company
filed under the Securities Act if so requested by the Company and underwriter of
Common Stock (or other securities) of the Company, provided that such agreement
shall apply only to the first underwritten registered public offering of the
Company.
4.9 TRANSFER OF REGISTRATION RIGHTS.
(a) Except as otherwise provided herein, the rights contained in this
Section 4 may be assigned or otherwise conveyed to a transferee or assignee of
Registrable Securities, who shall be considered a "Holder" for purposes of this
Section 4, provided that (i) the prospective transferee or assignee must acquire
an amount of Registrable Securities not less than twenty percent (20%) of the
total number of Registrable Securities acquired by the original Holder thereof
directly from the Company, (ii) such transfer is effected in accordance with
applicable federal and state securities laws and (iii) such transferee or
assignee becomes a party to this Agreement or agrees in writing to be subject to
the terms hereof to the same extent as if he were an original purchaser
hereunder and, provided further, that the Company is given written notice at the
time of or within a reasonable time after said transfer, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned.
(b) The right contained in Section 4.2 allowing the Founder to
include his shares of the Company's Common Stock in a registration may not be
assigned or otherwise conveyed to a transferee of such shares, and such right
shall expire with respect to such shares upon the transfer of such shares.
Notwithstanding the foregoing, such rights may be assigned or otherwise conveyed
to any or all of his ancestors, descendants or spouse or to a trust for the
benefit of such persons or the Founder in connection with the transfer of Common
Stock to such persons; provided that such transfer is effected in accordance
with applicable federal and state securities laws and that the Company is given
written notice at the time of or within a reasonable time after said transfer,
stating the name of said transferee or assignee and identifying the securities
with respect to which such registration rights are being assigned.
15.
<PAGE>
4.10 TERMINATION OF REGISTRATION RIGHTS. All rights and duties provided
for in this Section 4 shall terminate for each Holder or the Founder on December
15, 2005, as applicable, or upon such earlier date on which all Registrable
Securities held by such Holder or the Founder may immediately be sold during any
90-day period under Commission Rule 144 (excluding paragraph (k) of Rule 144).
4.11 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. The Company shall not,
without the prior written consent of the Holders of a majority of the
Registrable Securities, grant or enter into any agreement that would grant to
any holder or prospective holder of any securities of the Company (a)
registration rights superior to the registration rights granted herein, (b)
registration rights that would reduce the number of Shares includable by the
Holders in a Company registration pursuant to Section 4.2 or (c) registration
rights that would allow any other holder to register shares in a registration
initiated under Section 4.1 or 4.3.
5. RIGHT OF FIRST REFUSAL ON COMPANY ISSUANCES.
5.1 RIGHT OF FIRST REFUSAL. The Company hereby grants to each Investor
(solely for purposes of this Section 5, the terms "Investor" and "Investors"
shall include the Founder) a right of first refusal to purchase, pro rata, all
(or any part) of New Securities (as defined in this Section 5.1) that the
Company may, from time to time propose to sell and issue. Each Investor's pro
rata share, for purposes of this right of first refusal, is the ratio, the
numerator of which is the number of shares of Common Stock then owned by such
Investor (assuming full conversion of the Preferred Stock of the Company then
owned by such Investor and the exercise of any Warrants if the issuance price of
the New Securities implies a value per share of Common Stock in excess of the
exercise price under such Warrants), and the denominator of which is the total
number of shares of Common Stock outstanding immediately prior to the issuance
of the New Securities, assuming full conversion of all outstanding shares of
Preferred Stock of the Company and the exercise of any Warrants if the issuance
price of the New Securities implies a value per share of Common Stock in excess
of the exercise price under such Warrants. This right of first refusal shall be
subject to the following provisions:
(a) "New Securities" shall mean any capital stock of the Company,
whether now authorized or not, and rights, options, or warrants to purchase said
capital stock, and securities of any type whatsoever that are, or may become,
convertible into said capital stock; provided, however, that "New Securities"
does not include (i) securities issuable upon conversion of or with respect to
any series of Preferred Stock or upon exercise of any existing rights, options
or warrants to purchase Common Stock or Preferred Stock; (ii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets, or other reorganization whereby the
Company owns more than fifty percent (50%) of the voting
16.
<PAGE>
power of the surviving corporation; (iii) up to 286,541 shares of the Company's
Common Stock reserved for issuance subsequent to the date hereof to employees,
officers, directors, consultants or other service providers to the Company in
the form of stock issuances or options; (iv) shares of the Company's Common
Stock or Preferred Stock issued in connection with any stock split, stock
dividend, or similar recapitalization by the Company; (v) up to 200,000 shares
of equity securities issued in connection with lease financing arrangements or
similar debt financing arrangements with institutional lenders; or (vi)
securities issued in connection with strategic transactions involving the
Company and other entities, including (A) joint ventures, manufacturing,
marketing or distribution arrangements or (B) technology transfer or development
arrangements.
(b) In the event that the Company proposes to undertake an issuance
of New Securities, it shall give each Investor written notice of its intention,
describing the type of New Securities, the price, and the general terms upon
which the Company proposes to issue the same. Each Investor shall have thirty
(30) days from the date of mailing of any such notice to agree to purchase its
full pro rata share of such New Securities for the price and upon the general
terms specified in the notice by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased.
(c) In the event that Investors fail to exercise in full the right of
first refusal within said thirty (30) day period the Company shall have ninety
(90) days thereafter to sell or enter into an agreement providing for the
closing of the sale of the New Securities respecting which the Investors' rights
were not exercised at a price and upon general terms no more favorable to the
purchasers thereof than specified in the Company's notice. In the event the
Company has not sold the New Securities within such ninety (90) day period, the
Company shall not thereafter issue or sell any New Securities, without first
offering such securities to the Investors in the manner provided above.
(d) The right of first refusal granted under this Agreement (i) shall
not apply to and shall expire upon the first firmly underwritten public offering
of Common Stock of the Company that is pursuant to a registration statement on
Form S-1 or any successor form filed with, and declared effective by, the
Commission under the Securities Act, and (ii) shall not apply to and shall
expire upon the closing of the Company's sale of all or substantially all of its
assets or the acquisition of the Company (other than relating to a
reincorporation of the Company) by another entity by means of merger or
consolidation resulting in the exchange of the outstanding shares of the
Company's capital stock for securities or consideration issued, or caused to be
issued, by the acquiring entity or its subsidiary.
6. COVENANTS OF THE COMPANY.
17.
<PAGE>
6.1 MAINTENANCE OF BOOKS AND RECORDS. The Company will maintain true
books and records of account in which full and correct entries will be made of
all its business transactions pursuant to a system of accounting established and
administered in accordance with generally accepted accounting principles
consistently applied, and will set aside on its books all such proper accruals
and reserves as shall be required under generally accepted accounting principles
consistently applied.
6.2 FINANCIAL INFORMATION AND REPORTING. For so long as an Investor shall
hold or have the right to acquire Restricted Securities representing 153,846
shares of Common Stock:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 90 days thereafter, the Company will furnish
each such Investor an audited consolidated balance sheet of the Company, as at
the end of such fiscal year, and an audited consolidated statement of income and
an audited consolidated statement of cash flows of the Company, for such year,
all prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail. Such financial statements shall be
accompanied by a report and opinion thereon by independent public accountants of
national standing selected by the Company's Board of Directors.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company, and in
any event within 30 days thereafter, the Company will furnish each such Investor
the following prepared in accordance with generally accepted accounting
principles (with the exception that no notes need be attached to such statements
and year end audit adjustments may not have been made), (i) a consolidated
balance sheet of the Company as of the end of each such quarterly period, (ii) a
consolidated statement of income, (iii) a consolidated statement of cash flows
of the Company for such period and for the current fiscal year to date and (iv)
a comparison between the actual figures for such quarterly accounting period and
the comparable figures (with respect to clauses (i) and (ii) only) for the prior
year (if any) and budget for such quarterly accounting period, with an
explanation of any material differences between them.
(c) As soon as practicable after the end of each month, and in any
event within 30 days thereafter, the Company will furnish each such Investor the
following prepared in accordance with generally accepted accounting principles
(with the exception that no notes need be attached to such statements and year
end audit adjustments may not have been made) (i) a consolidated balance sheet
of the Company as of the end of each such monthly period, (ii) a consolidated
statement of income, (iii) a consolidated statement of cash flows of the Company
for such period and for the current fiscal year to date and (iv) a comparison
between the actual figures for such monthly accounting period
18.
<PAGE>
and the comparable figures (with respect to clauses (i) and (ii) only) for the
prior year (if any) and budget for such monthly accounting period, with an
explanation of any material differences between them.
(d) As soon as practicable prior to the beginning of each fiscal
year, and in any event at least 30 days prior thereto, the Company will furnish
each such Investor an annual budget and operating plans for such fiscal year.
6.3 ADDITIONAL INFORMATION RIGHTS.
(a) Upon the request of any Investor, the Company will promptly (and
in any event within 10 days of such request) furnish to such Investor all
information necessary in order for such Investor to prepare and file SBA Form
468 and any other information requested or required by any governmental
authority.
(b) The Company shall provide to Olympic Venture Partners III, L.P.,
within 30 days after the end of each calendar year, a list of all holders of all
equity interests and rights to acquire equity interests in the Company as of the
end of such calendar year, and the type and amount of such securities held by
each such holder.
6.4 INSPECTION RIGHTS. For so long as an Investor is eligible to receive
reports under Section 6.2, it shall have the right to visit and inspect any of
the properties of the Company or any of its subsidiaries, and to discuss the
affairs, finances and accounts of the Company or any of its subsidiaries with
its officers, all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 6.4 with respect to information which the Board of Directors determines
in good faith is confidential and should not, therefore, be disclosed unless the
requesting Investor shall sign an acceptable confidentiality agreement or with
respect to a competitor of the Company.
6.5 EMPLOYEE AGREEMENTS. All future employees of the Company shall be
required to execute a Proprietary Information and Inventions Agreement in the
form provided by legal counsel to the Company with such amendments thereto as
the Board of Directors may from time to time deem appropriate.
6.6 BOARD MEETINGS; EXPENSES.
(a) The Company shall call, or use its best efforts to have, regular
meetings of its Board of Directors not less often than quarterly. The Company
shall give reasonable notice of meetings of its Board of Directors to each
Investor which holds at least 153,846 shares of Series C Preferred or Series D
Preferred or at least 100,000 shares of Series E Preferred and/or Common Stock
issued upon conversion of Series C Preferred, Series D Preferred and Series E
Preferred (a "Qualified Investor"). Each
19.
<PAGE>
Qualified Investor shall be entitled to designate one observer to attend all
meetings of the Company's Board of Directors and all committees thereof.
(b) The Company shall pay the reasonable out-of-pocket expenses
incurred in connection with attending the meetings of the Board to (i) each
Board member designated by the Series C Preferred and (ii) one observer
designated by each Qualified Investor on a four times a year basis during the
first year after the date of this Agreement and on a twice per year basis
thereafter.
6.7 TERMINATION OF COVENANTS. The covenants provided in this Section VI
shall terminate upon the first date that the Company shall become subject to the
filing requirements of the Securities Exchange Act of 1934, as amended.
7. MISCELLANEOUS
7.1 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of Washington
applicable to contracts between Washington residents entered into and to be
performed entirely within the State of Washington. Each of the parties hereto
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Western District of Washington and of any Washington state court
sitting in the county of King, State of Washington, for the purposes of all
legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each of the parties hereto irrevocably
waives, to the fullest extent permitted by applicable law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
7.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
7.3 ENTIRE AGREEMENT. This Agreement, the Series E Agreement and each of
the documents contemplated by the Series E Agreement constitute the full and
entire understanding and agreement among the parties with regard to the subjects
hereof and thereof.
7.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by registered or
certified mail, return receipt requested, postage prepaid, and, if to an address
outside the United States of America, by telex or facsimile transmitted
substantially concurrently with the mailing of such written notice, addressed:
(a) if to a Holder, at such Holder's address as set forth on the Company's
records, or at such other address as such Holder shall have furnished to the
20.
<PAGE>
Company in writing or (b) if to the Company, at its address as set forth at the
end of this Agreement, or at such other address as the Company shall have
furnished to the Holders in writing.
7.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party, upon any breach or default of any other
party under this Agreement, shall impair any such right, power or remedy of such
party nor shall it be construed to be a waiver of any such breach or default, or
an acquiescence therein, or of or in any similar breach or default thereunder
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
7.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Investors,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
7.7 SEVERABILITY. In the case any provision of this Agreement 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.
7.8 AMENDMENTS. Except as otherwise provided herein, the provisions of
this Agreement may be amended at any time and from time to time, and particular
provisions of this Agreement may be waived, with and only with an agreement or
consent in writing signed by the Company and by the holders of not less than a
majority of the number of shares of Registrable Securities outstanding as of the
date of such amendment or waiver. In addition to the waiver and amendment
provisions set forth in the preceding sentence, and without in any way limiting
such provisions, in the event of any issuances of New Securities (as defined in
Article V) in which no holder of Series C Preferred, Series D Preferred and
Series E Preferred participates, the provisions of Article V may be waived on
behalf of all Investors with respect to any such issuance by a writing signed by
the Company and the holders of a majority of the outstanding Series C Preferred,
Series D Preferred and Series E Preferred. Each Investor acknowledges that by
the operation of this Section 7.8 the holders of a majority of the outstanding
Registrable Securities may have the right and power to diminish or eliminate all
rights of such Investor under this Agreement; provided, however, that any
amendment which would adversely affect the Founder in a manner different than
the Holders of Registrable Securities, shall
21.
<PAGE>
additionally require the consent of the Founder. This Agreement may be amended
with no further action on the part of the Investors for the sole purpose of
including as Investors hereunder any future holders of the Company's Series E
Preferred.
22.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC. /s/ Jens H. Molbak
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: /s/ Jens H. Molbak INVESTORS:
-------------------------------------
Jens H. Molbak
President
Jens H. Molbak
-----------------------------------
[Print name of Investor]
By: /s/ Jens H. Molbak
--------------------------------
[signature]
Title:
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
-----------------------------------
[Print name of Investor]
By:
--------------------------------
[signature]
Title:
-----------------------------
ACORN VENTURES
By: /s/
--------------------------------
[signature]
Title: President
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
Alaskan Copper Companies, Inc.
-----------------------------------
[Print name of Investor]
By: /s/
--------------------------------
[signature]
Title: Vice President
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
BENAROYA CAPITAL COMPANY, L.L.C.
Larry R. Benaroya
-----------------------------------
[Print name of Investor]
By: /s/ Larry R. Benaroya
--------------------------------
[signature]
Title: Manager
-----------------------------
Benaroya Capital Company, L.L.C.
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
CIBC Wood GundyVentures, Inc.
-----------------------------------
[Print name of Investor]
By: /s/
--------------------------------
[signature]
Title: Director
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
Coin Partners, G.P.
-----------------------------------
[Print name of Investor]
By: /s/
--------------------------------
[signature]
Title: General Partner
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
EOS Partners SBIC, L.P.
-----------------------------------
[Print name of Investor]
By: /s/
--------------------------------
[signature]
Title: General Partner of General
Partner
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
FLUKE CAPITAL MANAGEMENT, L.P.
By: Fluke Management Corporation -----------------------------------
Managing Partner [Print name of Investor]
By: /s/ By:
------------------------------------- --------------------------------
Vice President [signature]
Title:
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
-----------------------------------
[Print name of Investor]
By: /s/
--------------------------------
[signature]
Title:
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
OLYMPIC VENTURE PARTNERS III, L.P. -----------------------------------
By OVMC III, L.P. Its G.P. [Print name of Investor]
By /s/ By:
-------------------------------- --------------------------------
Its General Partner [signature]
Title:
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
OSCCO III, L.P.
-----------------------------------
[Print name of Investor]
By: /s/
--------------------------------
[signature]
Title: General Partner
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
OVP III ENTREPRENEURS FUND -----------------------------------
By OVMC III, L.P. Its G.P. [Print name of Investor]
By /s/ By:
-------------------------------- --------------------------------
Its General Partner [signature]
Title:
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
Roanoke Investors' Limited
Partnership
By: Roanoke Capital, Ltd.
Its General Partner
-----------------------------------
[Print name of Investor]
By: /s/
--------------------------------
[signature]
Title: Principal
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
Vencap, Inc.
-----------------------------------
[Print name of Investor]
By: /s/
--------------------------------
[signature]
Title: Vice President VP & CFO
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
RONALD WEINSTEIN
-----------------------------------
[Print name of Investor]
By: /s/
--------------------------------
[signature]
Title:
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
The foregoing Amended and Restated Investors Rights' Agreement is
hereby executed as of the date first above written.
COMPANY: FOUNDER:
COINSTAR, INC.
13231 SE 36th Street, Ste. 200 -----------------------------------
Bellevue, WA 98006-1323 Jens H. Molbak
By: INVESTORS:
-------------------------------------
Jens H. Molbak
President
Weinstein Family Partnership
-----------------------------------
[Print name of Investor]
By: /s/
--------------------------------
[signature]
Title: General Partner
-----------------------------
ACORN VENTURES
By:
--------------------------------
[signature]
Title:
-----------------------------
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
23.
<PAGE>
EXHIBIT A
Acorn Ventures
John T. Carleton
Vencap Equities Alberta Ltd.
Olympic Venture Partners III, L.P.
OVP III Entrepreneurs Fund
Roanoke Investors' Limited Partnership
Eos Partners SBIC, L.P.
Fluke Capital Management, L.P.
CIBC Wood Gundy Ventures, Inc.
OSCCO III, L.P.
Dain Bosworth Incorporated
James L. Addington
Alaskan Copper Companies, Inc.
Alan and Linda Alhadeff
Jeanette Ann Alhadeff
Victor D. Alhadeff
Elizabeth C. Anderson
Robert M. Arnold
B & P Investments
Donald Barnard
Natalie P. Bartlett
David Benoliel Co., Inc. Pension Trust
Gregg Bennett
Rod Brooks
Gerald W. Bush
Harry A. Caraco
Catherine S. Carleton
Coin Partners, GP
Julie P. Cordonnier
Lee Clayton Cuthbert
Dominion Ventures, Inc.
Elizabeth Carr Driscoll
William L. Driscoll
David A. Ederer
Harvey Eisen
Peter W. Eising
Suzanne Eitel Trust UDT 2/20/67
David M. & Lisa S. Eskenazy
3.
<PAGE>
Aaron R. Finch
Edward L. Fisher
Thomas B. Foster
Fosterville Investments Ltd.
Ray Galante
G C & H Investments
Robert M. & Dorothy L. Gerrity
Alvin Goldfarb
Warren M. Gordon
Daniel F. & Margaret Ann Gruen
Terry Heckler
Richard C. Hedreen
Montgomery R. Hester
Edward Hewson
George P. Hutchinson
Richard Loeb
David E. Maryatt
John R. Miller
Egon and Laina Molbak
John P. Morbeck
Larry Mounger
Douglas E. Norberg
Richard J. Nordlund
Scott Oki
Kirsten Paterson
Mildred B. Perkins
Richard Perkins
Jonathan H. Poorvu
William J. Poorvu
Thomas W. Porter
Morris Piha Inc. Pension Trust
David Rubin
Stephen P. Sander
Herman Sarkowsky
James Scherer
Charles J. Sodequist
Stusser Group
Craig D. Tall
Irwin L. and Betty Lou Treiger
Timothy J. Tucker
Weinstein Family Partnership
4.
<PAGE>
Ronald and Devorah Weinstein
Stuart L. Weinstein
Sarah R. Werner
Harry R. Wilker
Wynot Investors
5.
<PAGE>
AMENDMENT TO
SECOND AMENDED AND RESTATED
INVESTOR'S RIGHTS AGREEMENT
Pursuant to Section 4.11 of that certain Second Amended and Restated
Investor's Rights Agreement, dated as of August 27, 1996 (the "Rights
Agreement"), the undersigned Holder (as defined in the Rights Agreement) of
Registrable Securities (as defined in the Rights Agreement) of Coinstar, Inc.
(the "Company"), hereby agrees to the amendments set forth below effective as of
the date set forth below.
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. The second paragraph of Section 4.1(c) is hereby amended by adding the
underlined text such that the amended Section 4.1(c) shall read in its entirety
as follows:
"The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting jointly by the Company and the Initiating Holders. Notwithstanding
any other provision of this Section 4.1, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten and so advises the Initiating Holders in writing, then the
Initiating Holders shall so advise all Holders (except those Holders who have
indicated to the Company their decision not to distribute any of their
Registrable Securities through such underwriting) and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated: (i) FIRST among all such Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities owned by such
Holders, AND (ii) SECOND AMONG THE HOLDERS OF WARRANT SHARES (AS DEFINED IN THE
WARRANT REGISTRATION RIGHTS AGREEMENT EXPECTED TO BE DATED ON OR ABOUT OCTOBER
8, 1996 BY AND BETWEEN THE COMPANY AND SMITH BARNEY INC. (THE "WARRANT RIGHTS
AGREEMENT")) IN PROPORTION, AS NEARLY AS PRACTICABLE, TO THE RESPECTIVE NUMBER
OF WARRANT SHARES OWNED BY THE HOLDERS THEREOF at the time of filing the
registration statement. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration.
2. The first paragraph of Section 4.2(b) is hereby amended by adding the
underlined text and deleting the strike-through text such that Section 4.2(b)
shall read in its entirety as follows:
"(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders and the Founder as a part of the written
notice given pursuant to Section 4.2(a)(i). In such event the right of any
Holder or the Founder to registration pursuant to Section 4.2 shall be
conditioned upon such Holder's or Founder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities or shares of such
Founder's Common Stock in the underwriting to the extent provided herein. Each
Holder and Founder proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
Section 4.2, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the
<PAGE>
underwriter may limit the number of Registrable Securities and shares of Common
Stock to be included in the registration and underwriting to (i) in the case of
the first underwritten public offering of the securities of the Company, any
amount that the underwriter may determine, or (ii) in the case of any
registration subsequent to the first underwritten public offering of the
securities of the Company, to not less than twenty percent (20%) of the total
securities covered by the registration. The Company shall so advise all Holders
and the Founder (except with respect to each of those Holders or the Founder who
has indicated to the Company its decision not to distribute any of its
Registrable Securities or Common Stock through such underwriting), and the
number of shares of Registrable Securities and Common Stock that may be included
in anythe registration and underwriting INITIATED (i) BY THE COMPANY FOR ITS OWN
ACCOUNT, (II) PURSUANT TO A REQUEST MADE UNDER SECTION 4.3, OR (iii) PURSUANT TO
A DEMAND MADE BY ANY PERSON OTHER THAN A PARTY TO THE WARRANT RIGHTS AGREEMENT
shall be allocated in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities owned by the Holders, and the number of shares
of Common Stock held by the Founder AND THE NUMBER OF WARRANT SHARES OWNED BY
THE HOLDERS THEREOF COVERED BY THE WARRANT RIGHTS AGREEMENT at the time of
filing the registration statement; provided, however, that if the underwriter
limits the number of shares of Common Stock held by the Founder to be included
in the registration, such number of shares to be excluded from the registration
shall be reallocated to the Holders AND THE HOLDERS OF THE WARRANT SHARES. IN
CONNECTION WITH ANY REGISTRATION MADE PURSUANT TO A DEMAND MADE UNDER THE
WARRANT RIGHTS AGREEMENT, THE HOLDERS AND THE FOUNDER SHALL BE CUT BACK PRIOR TO
ANY CUT BACK OF THE HOLDERS UNDER THE WARRANT RIGHTS AGREEMENT.
IN WITNESS WHEREOF, the undersigned has executed this AMENDMENT as of the
_____ day of October, 1996.
----------------------------------------
(Print Name of Stockholder)
----------------------------------------
(Signature)
----------------------------------------
(Title, if applicable)
2.
<PAGE>
COINSTAR, INC.
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT (the "Agreement") is made as of March 10, 1997, by
and among COINSTAR, INC., a Delaware corporation (the "Company"), certain
holders of the Company's Preferred Stock (the "Investors") and Jens Molbak (the
"Founder").
WHEREAS, the Company, the Investors and the Founder have entered into that
certain Second Amended and Restated Investors' Rights Agreement dated August 27,
1996 and amended on October 22, 1996 attached hereto as Exhibit A (the
"Investors' Rights Agreement");
WHEREAS, in connection with a proposed initial public offering, the
underwriters have requested that all stockholders of the Company agree not to
sell any securities of the Company for a period of 180 days following the
effectiveness of the initial public offering; and
WHEREAS, in accordance with Section 7.8 of the Investors' Rights Agreement,
the Company, the Investors and the Founder wish to amend such agreement as set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and of other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
1. AMENDMENT
Section 4.8 of the Investors' Rights Agreement is hereby amended to read in
its entirety as follows:
4.8 "MARKET STAND-OFF" AGREEMENT. Each Holder and Founder agrees
not to sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by it for a period not to exceed one hundred
eighty (180) days following the effective date of a registration statement of
the Company filed under the Securities Act if so requested by the Company and
underwriter of Common Stock (or other securities) of the Company, provided that
such agreement shall apply only to the first underwritten registered public
offering of the Company.
2. This Agreement may be executed in two or more components, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
1.
<PAGE>
IN WITNESS WHEREOF, this AMENDMENT AGREEMENT is hereby executed as of the
date first above written.
COMPANY: INVESTOR:
COINSTAR, INC. -----------------------------------
(PRINT NAME OF INVESTOR)
By: By:
------------------------------- --------------------------------
Jens Molbak, President (SIGNATURE)
Title:
-----------------------------
(IF APPLICABLE)
FOUNDER:
-----------------------------------
Jens Molbak
2.
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COINSTAR, INC.
13% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2006
-----------------
INDENTURE
Dated as of October 1, 1996
-----------------
The Bank of New York
Trustee
-----------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06;7.07
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06;11.02
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03;11.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.21
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . .11.03;11.04;11.05
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05;11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence) . . . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A). . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B). . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions. . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.03. Incorporation by Reference of Trust Indenture Act. . . . . . . 12
Section 1.04. Rules of Construction. . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . 14
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . 14
Section 2.04. Paying Agent to Hold Money in Trust. . . . . . . . . . . . . . 15
Section 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . 15
Section 2.07. Replacement Notes. . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.08. Outstanding Notes. . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.09. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.10. Temporary . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.13. CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.02. Selection of Notes to Be Redeemed. . . . . . . . . . . . . . . 23
Section 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . 23
Section 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . . . 24
Section 3.05. Deposit of Redemption Price. . . . . . . . . . . . . . . . . . 24
Section 3.06. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . 25
Section 3.07. Optional Redemption. . . . . . . . . . . . . . . . . . . . . . 25
Section 3.08. Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . 26
Section 3.09. Offer to Purchase by Application of Excess Proceeds. . . . . . 26
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.02. Maintenance of Office or Agency. . . . . . . . . . . . . . . . 28
Section 4.03. Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.04. Compliance Certificate . . . . . . . . . . . . . . . . . . . . 29
Section 4.05. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.06. Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . 30
Section 4.07. Restricted Payments. . . . . . . . . . . . . . . . . . . . . . 30
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries 32
Section 4.09. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . 32
Section 4.10. Asset Sales. . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.11. Transactions with Affiliates . . . . . . . . . . . . . . . . . 34
Section 4.12. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . 34
i
<PAGE>
Section 4.13. Offer to Repurchase Upon Change of Control . . . . . . . . . . 35
Section 4.14. No Senior Subordinated Debt. . . . . . . . . . . . . . . . . . 36
Section 4.15. Designation of Restricted and Unrestricted Subsidiaries. . . . 36
Section 4.16. Asset Maintenance Test.. . . . . . . . . . . . . . . . . . . . 37
Section 4.17. Limitation on Changes in Capital Structure . . . . . . . . . . 38
Section 4.18. Contingent Warrants. . . . . . . . . . . . . . . . . . . . . . 38
Section 4.19. Calculation of Original Issue Discount . . . . . . . . . . . . 38
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets . . . . . . . . . . . 38
Section 5.02. Successor Corporation Substituted. . . . . . . . . . . . . . . 39
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . 42
Section 6.05. Control by Majority. . . . . . . . . . . . . . . . . . . . . . 42
Section 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . 43
Section 6.07. Rights of Holders of Notes to Receive Payment. . . . . . . . . 43
Section 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . 43
Section 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . 44
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . 46
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . 47
Section 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.06. Reports by Trustee to Holders of the Notes . . . . . . . . . . 47
Section 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . 47
Section 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . 48
Section 7.09. Successor Trustee by Merger, etc . . . . . . . . . . . . . . . 49
Section 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . . . 49
Section 7.11. Preferential Collection of Claims Against The Company. . . . . 50
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance . . . 50
Section 8.02. Legal Defeasance and Discharge . . . . . . . . . . . . . . . . 50
Section 8.03. Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . . 50
Section 8.04. Conditions to Legal or Covenant Defeasance . . . . . . . . . . 51
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.. . . . . . . . . . . . . . . . 52
Section 8.06. Repayment to Company . . . . . . . . . . . . . . . . . . . . . 53
Section 8.07. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . 53
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ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes. . . . . . . . . . . . . . 54
Section 9.02. With Consent of Holders of Notes . . . . . . . . . . . . . . . 54
Section 9.03. Compliance with Trust Indenture Act. . . . . . . . . . . . . . 56
Section 9.04. Revocation and Effect of Consents. . . . . . . . . . . . . . . 56
Section 9.05. Notation on or Exchange of Notes . . . . . . . . . . . . . . . 56
Section 9.06. Trustee to Sign Amendments, etc. . . . . . . . . . . . . . . . 56
ARTICLE 10
SUBORDINATION
Section 10.01 Agreement to Subordinate . . . . . . . . . . . . . . . . . . . 57
Section 10.02 Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . . . 57
Section 10.03 Default on Designated Senior Debt. . . . . . . . . . . . . . . 57
Section 10.04 Acceleration of Notes. . . . . . . . . . . . . . . . . . . . . 58
Section 10.05 When Distribution Must be Paid Over. . . . . . . . . . . . . . 58
Section 10.06 Notice by Company. . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.07 Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.08 Relative Rights. . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.09 Subordination May Not Be Impaired by Company . . . . . . . . . 60
Section 10.10 Distribution or Notice to Representative . . . . . . . . . . . 60
Section 10.11 Rights of Trustee and Paying Agent . . . . . . . . . . . . . . 61
Section 10.12 Authorization to Effect Subordination. . . . . . . . . . . . . 61
Section 10.13 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 11
MISCELLANEOUS
Section 11.01 Trust Indenture Act Controls . . . . . . . . . . . . . . . . . 61
Section 11.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.03 Communication by Holders of Notes with Other Holders of Notes. 63
Section 11.04 Certificate and Opinion as to Conditions Precedent . . . . . . 63
Section 11.05 Statements Required in Certificate or Opinion. . . . . . . . . 63
Section 11.06 Rules by Trustee and Agents. . . . . . . . . . . . . . . . . . 64
Section 11.07 No Personal Liability of Directors, Officers, Employees,
Partners and Stockholders. . . . . . . . . . . . . . . . . . . 64
Section 11.08 Governing Law; Consent to Jurisdiction . . . . . . . . . . . . 64
Section 11.09 No Adverse Interpretation of Other Agreements. . . . . . . . . 65
Section 11.10 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.12 Counterpart Originals. . . . . . . . . . . . . . . . . . . . . 65
Section 11.13 Table of Contents, Headings, etc . . . . . . . . . . . . . . . 65
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B CERTIFICATE OF TRANSFEROR
Exhibit C
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INDENTURE dated as of October 22, 1996 between Coinstar, Inc., a
Delaware corporation (the "Company"), and The Bank of New York, a New York
banking corporation, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 13% Senior
Subordinated Discount Notes due 2006 (the "Original Notes") and the 13% Senior
Subordinated Discount Notes due 2006 to be issued to Holders pursuant to the
Exchange Offer (the "New Notes" and, together with the Original Notes, the
"Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACCRETED VALUE" means, with respect to any Note, as of any date of
determination prior to the Full Accretion Date, the sum of (i) the initial
offering price of such Note and (ii) the portion of the excess of the principal
amount of each Note over such initial offering price that shall have been
accreted thereon through such date, such amount to be so accreted on a daily
basis at the rate of 13% per annum of the initial offering price of such Note,
compounded semi-annually on each October 1 and April 1 from the Issue Date of
the Notes through the date of determination; PROVIDED that on and after the Full
Accretion Date, the Accreted Value shall be equal to the principal amount of
such Note.
"ACQUIRED DEBT" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person; and (ii) Indebtedness
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "CONTROL"
(including, with correlative meanings, the terms "CONTROLLING," "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control and, PROVIDED, FURTHER, that the Principal shall be
deemed an Affiliate of the Company so long as the Principal directly or
indirectly owns at least 3% of the Equity Interests of the Company and Mr. Rufus
Lumry and any Person of which at least 5% of the Equity Interests of such Person
is directly or indirectly owned by Mr. Lumry or any Affiliate of Mr. Lumry shall
be deemed an affiliate of the Company so long as Mr. Lumry or any affiliate of
Mr. Lumry is a member of the Board of Directors of the Company or directly or
indirectly owns at least 3% of the Equity Interests of the Company.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"BANKRUPTCY CUSTODIAN" means any receiver, trustee, assignee,
liquidator or similar officer under any Bankruptcy Law.
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"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or
state law, as amended from time to time, and applicable to the relevant case,
providing for the relief of debtors.
"BOARD OF DIRECTORS" means the board of directors of the Company, or
any authorized committee of such board of directors.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet of the
lessee in accordance with GAAP.
"CAPITAL STOCK" means: (i) in the case of a corporation, corporate
stock; (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock; (iii) in the case of a partnership or limited
liability company, partnership interests (whether general or limited) or other
membership interests; and (iv) any other interest or participation that confers
on a Person the right to receive a share of the profits and losses of, or
distributions of assets of (other than any such distributions in respect of
Indebtedness), the issuing Person.
"CASH EQUIVALENTS" means: (i) United States dollars; (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than twelve months from the date of acquisition; (iii) certificates of
deposit and eurodollar time deposits with maturities of twelve months from the
date of acquisition by the Company thereof or less from the date of
acquisition, bankers' acceptances with maturities not exceeding twelve months
and overnight bank deposits, in each case with any domestic commercial bank
having combined capital and surplus in excess of $500 million and a Thomson
Bank Watch Rating of "B" or better; (iv) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (ii) and (iii) above entered into with any financial institution
meeting the qualifications specified in clause (iii) above; (v) commercial
paper having a rating of at least P-1 from Moody's or a rating of at least A-1
from Standard & Poor's on the date of acquisition by the Company thereof; (vi)
auction-rate preferred stocks of any corporation maturing within 49 days after
the date of acquisition by the Company thereof, having a rating of at least
AAA by Standard & Poor's or a rating of at least aaa from Moody's on the date
of such acquisition; (vii) debt obligations of any corporation maturing within
twelve months after the date of acquisition by the Company thereof, having a
rating of at least P-1 or aaa from Moody's or A-1 or AAA from Standard &
Poor's on the date of such acquisition; and (viii) mutual funds and money
market accounts investing 100% of the funds under management in instruments of
the types described in clauses (i) through (v) above and, in each case,
maturing within the period specified above for such instrument after the date
of acquisition by the Company thereof.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" or "group" (within the meanings of Sections 13(d)(3) and
14(d)(2), respectively, of the Exchange Act) other than (y) the holders of the
Company's Capital Stock as of the date of this Indenture, or (z) the Principal
or any Related Party, (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company and (iii) the consummation of any transaction
(including any merger or consolidation) the result of which is that any "person"
or "group" (as defined above), other than (y) the holders of the Company's
Capital Stock as of the date of this Indenture, or (z) the Principal and any
Related Party, becomes the "beneficial owner" (as such term is defined in Rules
13(d)-3 and 13(d)-5 of the Exchange Act) directly or indirectly, of more than
50% of the Voting Stock of the Company or (iv) during
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any consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election to such Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a vote of a majority
of the directors of the Company 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.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSOLIDATED ANNUALIZED EBITDA" means, with respect to any Person,
such Person's Consolidated EBITDA for the most recently completed full fiscal
quarter for which internal financial statements are available ending not more
than 135 days prior to the transaction or event giving rise to the need to
calculate Consolidated Annualized EBITDA, multiplied by four.
"CONSOLIDATED EBITDA" means, with respect to any Person for any
period, the sum (without duplication) of (i) Consolidated Net Income of such
Person for such period; PLUS, (ii) to the extent that any of the following shall
have been included in determining such Consolidated Net Income, (A) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), (B) all income taxes for such Person and its
Restricted Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sales or distributions of assets
outside the ordinary course of business), (C) Consolidated Interest Expense of
such Person and its Restricted Subsidiaries for such period and (D)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period); LESS (iii)(A) all non-cash items of such Person or any of
its Restricted Subsidiaries increasing such Consolidated Net Income for such
period and (B) all cash payments during such period relating to non-cash items
that were added back in determining Consolidated EBITDA in any prior period.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person, for any
period, the sum of: (i) the amount of interest in respect of Indebtedness
(including amortization of original issue discount, fees payable in connection
with financings, including commitment, availability and similar fees, and
amortization of debt issuance costs, capitalized interest, non-cash interest
payments on any Indebtedness and the interest portion of any deferred payment
obligation and after taking into account the effect of elections made under, and
the net costs associated with, any Interest Rate Agreement, however denominated,
with respect to such Indebtedness); (ii) the amount of Redeemable Dividends of
such Person; (iii) the amount of Preferred Equity dividends in respect of all
Preferred Equity of Restricted Subsidiaries held by Persons other than the
referent Person or a Restricted Subsidiary thereof, commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; and (iv) the interest component of rentals in respect of
any Capital Lease Obligation, in each case, that was paid, accrued or scheduled
to be paid or accrued by such Person during such period, determined on a
consolidated basis in accordance with GAAP. For purposes of this definition,
interest on a Capital Lease Obligation will be deemed to accrue at an interest
rate reasonably determined by the referent Person to be the rate of interest
implicit in such Capital Lease Obligation in accordance with GAAP consistently
applied.
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"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"CONSOLIDATED TOTAL INDEBTEDNESS" means the sum (without duplication)
of (i) the total amount of Indebtedness and the aggregate liquidation value of
all Disqualified Capital Stock of such Person plus all Indebtedness and the
aggregate liquidation value of all Preferred Equity of its Restricted
Subsidiaries, all as shown on a consolidated balance sheet of such Person, plus
(ii) the total amount of Indebtedness shown on the balance sheet of the primary
obligor on such Indebtedness, to the extent that such Indebtedness has been
guaranteed by such Person or one of its Restricted Subsidiaries. The
Indebtedness of the Company and its Restricted Subsidiaries shall not include
any Indebtedness of Unrestricted Subsidiaries so long as such Indebtedness is
Non-Recourse Debt.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuation in the values of the
currencies of the countries (other than the United States) in which the Company
does business.
"CUSTODIAN OR NOTE CUSTODIAN" means the Trustee, as custodian with
respect to the Notes in global form, or any successor entity thereto.
"DEBT TO CASH FLOW RATIO" means, as to any Person, for any period of
determination, the ratio of (i) the Consolidated Total Indebtedness of such
Person as of the date of calculation to (ii) the Consolidated Annualized EBITDA
of such Person.
"DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DEFINITIVE NOTES" means Notes that are in the form of the Notes
attached hereto as Exhibit A, that do not include the information called for by
footnotes 1 and 2 thereof.
"DEPOSITORY" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depository with respect to the Notes, until a
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successor shall have been appointed and become such pursuant to the applicable
provision of this Indenture, and, thereafter, "Depository" shall mean or include
such successor.
"DESIGNATED SENIOR DEBT" means Senior Debt of the Company that is
permitted under Section 4.09(iv) hereof and that has been designated by the
Company as "Designated Senior Debt."
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock to the extent
that, by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable), or upon the happening of any event, matures or
is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or redeemable at the option of the Holder thereof, in whole or in part, on or
prior to the Stated Maturity of the Notes.
"ELIGIBLE INSTITUTION" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt (or the debt of whose holding company) is rated "A"
(or higher) according to Standard and Poor's or "A2" (or higher) by Moody's at
the time as of which any investment or rollover therein is made.
"EQUITY INTERESTS" means, collectively, Capital Stock and all
warrants, options or other rights to acquire Capital Stock (but excluding any
debt security that is convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXCHANGE OFFER" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange New Notes for Original
Notes.
"EXECUTIVE OFFICER" means, for any Person, the chief financial
officer, chief operating officer or chief executive officer of such Person.
"FAIR MARKET VALUE" means, with respect to any asset or property, the
sale value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and a willing buyer
under no compulsion to buy.
"FULL ACCRETION DATE" means October 1, 1999.
"GAAP" means 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 have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"GLOBAL NOTE" means a Note that contains the paragraph referred to in
footnote 1 and the additional schedule referred to in footnote 2 to the form of
the Note attached hereto as Exhibit A.
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"GOVERNMENT SECURITIES" means direct obligations of, or obligations
fully guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States is
pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"HOLDER" means a Person in whose name a Note is registered.
"INDEBTEDNESS" means (without duplication), with respect to any
Person, any indebtedness, secured or unsecured, contingent or otherwise, that is
for borrowed money (whether or not the recourse of the lender is to the whole of
the assets of such Person or only to a portion thereof), or evidenced by bonds,
notes, debentures or similar instruments or representing the balance deferred
and unpaid of the purchase price of any property (excluding any such balance
that constitutes an accrued expense or trade payable) if and to the extent any
of the foregoing indebtedness would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, and shall also include, to the
extent not otherwise included: (i) any Capital Lease Obligations; (ii)
Indebtedness of any other Person secured by a Lien to which the property or
assets owned or held by the referent Person is subject, whether or not the
obligation or obligations secured thereby shall have been assumed (the amount of
such Indebtedness being deemed to be the lesser of the value of such property or
assets or the amount of the Indebtedness so secured); (iii) Guarantees by such
Person of Indebtedness of any other Person; (iv) the aggregate liquidation
preference of any Disqualified Capital Stock; (v) all obligations of such Person
in respect of letters of credit, bankers' acceptance or other similar
instruments or credit transactions (including reimbursement obligations with
respect thereto); and (vi) any Hedging Obligation of such Person applicable to
any of the foregoing. In no event shall "Indebtedness" be deemed to include
trade credit or credit on open account for which payment is not overdue by more
than 60 days or endorsements for deposit in the ordinary course of business.
"INDENTURE" means this Indenture, as amended or supplemented from time
to time.
"INDEPENDENT APPRAISER" means an investment banking firm of national
standing with non-investment grade debt underwriting experience or any third
party appraiser of national standing; PROVIDED, HOWEVER, that such firm or
appraiser is not an Affiliate of the Company.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
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"ISSUE DATE" means the date on which the Notes are initially issued.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction), but
excluding any such filings in respect of operating leases or similar notice or
precautionary filings relating to transactions or arrangements that do not give
rise to Indebtedness.
"LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant
to Section 5 of the Notes Registration Rights Agreement.
"MATERIAL RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that
would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation
is in effect on the date of this Indenture.
"MOODY'S" means Moody's Investors Service, Inc. and any successor to
the rating agency business thereof.
"NET INCOME" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Equity dividends, excluding, however, any extraordinary
gain (or loss), together with any related provision for taxes on such
extraordinary gain (or loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, sales commissions
and legal, accounting and investment banking fees) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"NEW NOTES" has the meaning ascribed to such term in the preamble
hereto.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or
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otherwise) or (c) constitutes the lender; and (ii) as to which the lenders have
been notified in writing that they will not have any recourse to the stock or
assets of the Company or any of its Restricted Subsidiaries.
"NOTE CUSTODIAN" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"NOTES REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement with respect to the Notes issued hereby, dated as of October 22, 1996,
by and among the Company and the other parties named on the signature pages
thereof, as such agreement may be amended, modified or supplemented from time to
time.
"NOTES" has the meaning ascribed to such term in the preamble hereto.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING" means the Offering of the Notes by the Company.
"OFFERING MEMORANDUM" means the Offering Memorandum of the Company,
dated October 22, 1996, with respect to the Notes.
"OFFICER" means the President, Chief Executive Officer, Chief
Financial Officer, Treasurer or any Executive Vice President or Vice President
of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers, at
least one of whom shall be the principal executive officer, principal accounting
officer or principal financial officer of the Company that meets the
requirements of Section 11.05 hereof.
"OPINION OF COUNSEL" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company or
the Trustee.
"ORIGINAL DIRECTOR" has the meaning ascribed to such term in the
definition of "Continuing Director" contained herein.
"ORIGINAL NOTES" has the meaning ascribed to such term in the preamble
hereto.
"PERMITTED INVESTMENTS" means any of the following: (i) Investments
in cash and Cash Equivalents; (ii) Investments by the Company or by any
Restricted Subsidiary in any Person that is or will become immediately after
such Investment a Restricted Subsidiary; (iii) any Investments in the Company or
in a wholly owned Restricted Subsidiary of the Company; (iv) Investments
existing on the Issue Date; (v) accounts receivable created or acquired in the
ordinary course of business of the Company or any Restricted Subsidiary and on
ordinary business terms; (vi) Investments arising from transactions by the
Company or any Restricted Subsidiaries with trade creditors or customers in the
ordinary course of business; (vii) Investments made as the result of non-cash
consideration received from an Asset Sale; and (viii) additional Investments in
Unrestricted Subsidiaries, joint ventures or similar business entities not
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exceeding $10 million PLUS the net proceeds received by the Company from
issuance of Capital Stock since the Issue Date (other than from the issuance of
Disqualified Capital Stock).
"PERMITTED REFINANCING DEBT" means any Indebtedness of the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries; PROVIDED
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Debt does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Debt has a period
until its final maturity date no shorter than the final maturity date of, and
has a Weighted Average Life to Maturity no shorter than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Debt has a final maturity date
on or later than the final maturity date of, and is subordinated in right of
payment to, such Notes on terms at least as favorable to the Holders of such
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or the Restricted Subsidiary that
was the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"PERSON" means any individual, corporation, company (including limited
liability company), partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof (including any subdivision or ongoing business of
any such entity or substantially all of the assets of any such entity,
subdivision or business).
"PREFERRED EQUITY" means any Capital Stock of a Person, however
designated, that entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"PRINCIPAL" means Mr. Jens H. Molbak.
"PROPERTY" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock in any
other Person (but excluding Capital Stock or other securities issued by such
Person).
"PUBLIC EQUITY OFFERING" means the consummation of an offering of
Equity Interests (other than Disqualified Capital Stock) by the Company to the
public pursuant to a registration statement filed with the SEC, the aggregate
gross proceeds of which exceed $25 million.
"PUBLIC MARKET" means the condition that exists at any time after a
Public Equity Offering has been consummated and at least 20% of the Company's
Capital Stock (i) has been distributed pursuant to an effective registration
statement under the Securities Act or (ii) is saleable pursuant to Rule 144
promulgated under the Securities Act.
"RELATED PARTY" means, with respect to any Principal, (i) any
controlling stockholder, 80% (or more) owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such
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Principal or (ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of such Principal and/or such
other Persons referred to in the immediately preceding clause (i).
"REPRESENTATIVE" means the indenture trustee or other trustee, agent
or representative for any Senior Debt.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means
any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is
not designated to be an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SENIOR DEBT" means any Indebtedness that is permitted to be
incurred by the Company pursuant to this Indenture unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a parity
with or subordinated in right of payment to the Notes. Notwithstanding
anything to the contrary in the foregoing, Senior Debt shall not include (x)
any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates, (y) any obligations incurred for the purchase of goods or
materials or for services obtained in the ordinary course of business, other
than obligations constituting Indebtedness (except Indebtedness arising from
trade credit or credit on open account), and (z) any Indebtedness that is
incurred in violation of this Indenture.
"STANDARD AND POOR'S" means Standard and Poor's Rating Group, a
division of McGraw Hill Inc., and any successor to the rating agency business
thereof.
"STATED MATURITY" means October 1, 2006.
"SUBSIDIARY," with respect to any Person, means (i) any corporation, a
majority of whose voting stock (defined as any class or classes of capital stock
having voting power under ordinary circumstances to elect a majority of the
Board of Directors) is owned, directly or indirectly, by the Company, by one or
more of its Subsidiaries, or by the Company and one or more of its Subsidiaries
and (ii) any other Person (other than a corporation) in which the Company, one
or more of its Subsidiaries, or the Company and one or more Subsidiaries,
directly or indirectly, has at least a majority ownership interest entitled to
vote in the election of directors, managers or trustees thereof. As of the
Issue Date, the Company as no Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA, except as provided in Section 9.03 hereof.
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"TOTAL GROSS ASSETS" means, as of any date of determination, the total
assets of the Company plus total accumulated depreciation on Coinstar units,
computer and information systems and office equipment, less (i) all goodwill,
trade names, patents and any other intangibles and (ii) any assets of, or Equity
Interests in, any Subsidiary of the Company or any Investment in any other
Person, all as would be set forth on a balance sheet of the Company on an
unconsolidated basis as of such date of determination in accordance with GAAP;
PROVIDED, HOWEVER, that Total Gross Assets shall not include (x) for any date of
determination prior to January 1, 1999, any of the Company's Coinstar units
which the Company acquired, or any capital expenditure invested in Coinstar
units expended or incurred, more than five years prior to the date of
determination; (y) for any date of determination from and after January 1, 1999,
any of the Company's Coinstar units that the Company acquired, or any capital
expenditure invested in Coinstar units expended or incurred, more than seven
years prior to the date of determination; and (z) any Coinstar unit (or any
portion of the revenue from any such unit) that has been (1) pledged or
encumbered to secure obligations of any Person other than the Company or (2)
leased, assigned or is otherwise subject to a transaction such that as a result
of such lease, assignment or other transaction any other Person shall be
entitled on a non-contingent basis to receive directly all or a portion of the
revenue generated by such Coinstar unit.
"TRANSFER RESTRICTED SECURITIES" means securities that bear or are
required to bear the legend set forth in Section 2.06(g) hereof.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
resolution of the Board of Directors, but only to the extent that such
Subsidiary: (i) has no Indebtedness other than Non-Recourse Debt; (ii) is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding comply with the provisions of
Section 4.11 hereof; (iii) is a Person with respect to which neither the Company
nor any of its Restricted Subsidiaries has any direct or indirect obligation (a)
to subscribe for additional Equity Interests or (b) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; (iv) has not Guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries; and (v) in the case of a Subsidiary that is a
corporation, such Subsidiary has at least one director on its board of directors
that is not a director or Executive Officer of the Company or any of its
Restricted Subsidiaries. Any such designation by the Board of Directors shall
be evidenced to the Trustee by filing with the Trustee a certified copy of the
resolution of the Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by Section 4.15 hereof. If, at any time,
any Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter be deemed a Restricted Subsidiary
for all purposes of this Indenture, including that any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09 hereof, the Company shall be in
default of such Section).
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"VOTING STOCK" means, with respect to any specified Person, Capital
Stock with voting power, under ordinary circumstances and without regard to the
occurrence of any contingency, to elect the directors or other managers or
trustees of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction". . . . . . . . . . . . 4.11
"Asset Sale" . . . . . . . . . . . . . . . . . 4.10
"Asset Sale Offer" . . . . . . . . . . . . . . 3.09
"Asset Sale Offer Purchase Date" . . . . . . . 3.09
"Asset Sale Offer Trigger Date". . . . . . . . 4.10
"Change of Control Offer". . . . . . . . . . . 4.13
"Change of Control Offer Purchase Price" . . . 4.13
"Change of Control Payment Date" . . . . . . . 4.13
"Contingent Warrants". . . . . . . . . . . . . 4.18
"Covenant Defeasance". . . . . . . . . . . . . 8.03
"DTC". . . . . . . . . . . . . . . . . . . . . 2.03
"Event of Default" . . . . . . . . . . . . . . 6.01
"Excess Proceeds". . . . . . . . . . . . . . . 4.10
"incur". . . . . . . . . . . . . . . . . . . . 4.09
"Legal Defeasance" . . . . . . . . . . . . . . 8.02
"Offer Amount" . . . . . . . . . . . . . . . . 3.09
"Offer Period" . . . . . . . . . . . . . . . . 3.09
"Paying Agent" . . . . . . . . . . . . . . . . 2.03
"Payment Blockage Notice". . . . . . . . . . . 10.03
"Registrar". . . . . . . . . . . . . . . . . . 2.03
"Restricted Payment" . . . . . . . . . . . . . 4.07
"Surviving Person" . . . . . . . . . . . . . . 5.01
"Warrant Agreement". . . . . . . . . . . . . . 4.18
SECTION 1.03. 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.
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The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder of a Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee;
"OBLIGOR" on the Notes means the Company and any successor obligor
upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. 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;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor sections or rules
adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. Each
Note shall be dated the date of its authentication. The Notes shall be issued
in minimum denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
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Notes issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the text referred to in footnotes 1 and 2
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without including the text referred to in
footnotes 1 and 2 thereto). Each Global Note shall represent such principal
amount at maturity of the outstanding Notes as shall be specified therein and
each shall provide that it shall represent the aggregate principal amount at
maturity of outstanding Notes from time to time endorsed thereon and that the
aggregate principal amount at maturity of outstanding Notes represented thereby
may from time to time be reduced or increased, as appropriate, to reflect
exchanges and redemptions. Any endorsement of a Global Note to reflect the
amount of any increase or decrease in the principal amount at maturity of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers of the Company shall sign the Notes, by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an
Officer of the Company, authenticate Notes for original issue up to the
aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("REGISTRAR") and an
office or agency where Notes may be presented for payment ("PAYING AGENT"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any 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. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
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The Company initially appoints The Depository Trust Company ("DTC") to
act as Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.04. 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
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company 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 or a Subsidiary
thereof) shall have no further liability for the money. If the Company or a
Subsidiary thereof acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon the commencement of any proceedings under Bankruptcy Law by
or against the Company, or the appointment of any Bankruptcy Custodian for the
Company for all or substantially all of its assets, the Trustee shall serve as
Paying Agent for the Notes.
SECTION 2.05. HOLDER 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
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date 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 the Holders of
Notes and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES. When Definitive
Notes are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal
amount of Definitive Notes of other authorized
denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; PROVIDED, HOWEVER, that the
Definitive Notes presented or surrendered for register of transfer or exchange:
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(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his
attorney, duly authorized in writing; and
(ii) in the case of a Definitive Note that is a Transfer
Restricted Security, such request shall be accompanied
by the following additional information and documents,
as applicable:
(A) if such Transfer Restricted Security is being
delivered to the Registrar by a Holder for
registration in the name of such Holder, without
transfer, a certification to that effect from such
Holder (in substantially the form of Exhibit B
hereto); or
(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act)
in accordance with Rule 144A under the Securities
Act or pursuant to an exemption from registration
in accordance with Rule 144 or Rule 904 under the
Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit B hereto); or
(C) if such Transfer Restricted Security is being
transferred in reliance on another exemption from
the registration requirements of the Securities
Act, a certification to that effect from such
Holder (in substantially the form of Exhibit B
hereto) and an Opinion of Counsel from such Holder
or the transferee reasonably acceptable to the
Company and to the Registrar to the effect that
such transfer is in compliance with the Securities
Act.
(b) TRANSFER OF A DEFINITIVE NOTE FOR A BENEFICIAL INTEREST IN A
GLOBAL NOTE. A Definitive Note may not be exchanged for a
beneficial interest in a Global Note except upon satisfaction of
the requirements set forth below. Upon receipt by the Trustee of
a Definitive Note, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Trustee,
together with:
(i) if such Definitive Note is a Transfer Restricted Security, a
certification from the Holder thereof (in substantially the form
of Exhibit B hereto) to the effect that such Definitive Note is
being transferred by such Holder to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Note is a Transfer Restricted
Security, written instructions from the Holder thereof directing
the Trustee to make, or to direct the Note Custodian to make, an
endorsement on the Global Note to reflect an increase in the
aggregate principal amount of the Notes represented by the Global
Note,
in which case the Trustee shall cancel such Definitive Note in accordance with
Section 2.11 hereof and cause, or direct the Note Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depository and the Note Custodian, the aggregate principal amount of Notes
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represented by the Global Note to be increased accordingly. If no Global Notes
are then outstanding, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the Trustee shall
authenticate, a new Global Note in the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL NOTES. The transfer and exchange
of Global Notes or beneficial interests therein shall be effected through the
Depository, in accordance with this Indenture and the procedures of the
Depository therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL NOTE FOR A
DEFINITIVE NOTE.
(i) Any Person having a beneficial interest in a Global Note may
upon request exchange such beneficial interest for a
Definitive Note. Upon receipt by the Trustee of written
instructions or such other form of instructions as is
customary for the Depository, from the Depository or its
nominee on behalf of any Person having a beneficial interest
in a Global Note, and, in the case of a Transfer Restricted
Security, the following additional information and documents
(all of which may be submitted by facsimile):
(A) if such beneficial interest is being transferred
to the Person designated by the Depository as
being the beneficial owner, a certification to
that effect from such Person (in substantially the
form of Exhibit B hereto); or
(B) if such beneficial interest is being transferred
to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act
or pursuant to an exemption from registration in
accordance with Rule 144 or Rule 904 under the
Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from the transferor
(in substantially the form of Exhibit B hereto);
or
(C) if such beneficial interest is being transferred
in reliance on another exemption from the
registration requirements of the Securities Act, a
certification to that effect from the transferor
(in substantially the form of Exhibit B hereto)
and an Opinion of Counsel from the transferee or
transferor reasonably acceptable to the Company
and to the Registrar to the effect that such
transfer is in compliance with the Securities Act,
in which case the Trustee or the Note Custodian, at the
direction of the Trustee, shall, in accordance with the
standing instructions and procedures existing between the
Depository and the Note Custodian, cause the aggregate
principal amount of Global Notes to be reduced accordingly
and, following such reduction, the Company shall execute
and, upon receipt of an authentication order in accordance
with Section 2.02 hereof, the Trustee shall authenticate and
deliver to the transferee a Definitive Note in the
appropriate principal amount.
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(ii) Definitive Notes issued in exchange for a beneficial
interest in a Global Note pursuant to this Section 2.06(d)
shall be registered in such names and in such authorized
denominations as the Depository, pursuant to instructions
from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes
are so registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), a Global Note may not be
transferred as a whole except 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 or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(f) AUTHENTICATION OF DEFINITIVE NOTES IN ABSENCE OF DEPOSITORY. If
at any time:
(i) the Depository for the Notes notifies the Company that the
Depository is unwilling or unable to continue as Depository
for the Global Notes and a successor Depository for the
Global Notes is not appointed by the Company within 90 days
after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive
Notes under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) LEGENDS.
(i) Except as permitted by the following paragraphs (ii) and
(iii), each Note certificate evidencing Global Notes and
Definitive Notes (and all Notes issued in exchange therefor
or substitution thereof) shall bear legends in substantially
the following form:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE NOTE EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.
THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH NOTE MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (A) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
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RULE 144A, (B) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (D) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
"FOR PURPOSES OF SECTION 1272, 1273 AND 1275 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS SECURITY
IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH
$1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE ISSUE PRICE
IS $679.89, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS
$320.11, THE ISSUE DATE IS OCTOBER 22, 1996 AND THE YIELD
TO MATURITY IS 13.2139% PER ANNUM."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a
Global Note) pursuant to Rule 144 under the Securities Act
or pursuant to an effective registration statement under the
Securities Act:
(A) in the case of any Transfer Restricted Security that is
a Definitive Note, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted
Security for a Definitive Note that does not bear the
first legend set forth in (i) above and rescind any
restriction on the transfer of such Transfer Restricted
Security; and
(B) in the case of any Transfer Restricted Security
represented by a Global Note, such Transfer Restricted
Security shall not be required to bear the first legend
set forth in (i) above, but shall continue to be
subject to the provisions of Section 2.06(c) hereof;
PROVIDED, HOWEVER, that with respect to any request for
an exchange of a Transfer Restricted Security that is
represented by a Global Note for a Definitive Note that
does not bear the first legend set forth in (i) above,
which request is made in reliance upon Rule 144, the
Holder thereof shall certify in writing to the
Registrar that such request is being made pursuant to
Rule 144 (such certification to be substantially in the
form of Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon consummation of the
Exchange Offer, the Company shall issue and, upon
receipt of an authentication order in accordance with
Section 2.02 hereof, the Trustee shall authenticate New
Notes in exchange for Original
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Notes accepted for exchange in the Exchange Offer,
which New Notes shall not bear the legend set forth in
(i) above, and the Registrar shall rescind any
restriction on the transfer of such Notes, in each case
unless the Holder of such Original Notes is either (A)
a broker-dealer, (B) a Person participating in the
distribution of the Original Notes or (C) a Person who
is an affiliate (as defined in Rule 144A) of the
Company.
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as
all beneficial interests in Global Notes have been exchanged for Definitive
Notes, redeemed, repurchased or cancelled, all Global Notes shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for Definitive Notes, redeemed, repurchased or cancelled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the Trustee
or the Note Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall
authenticate Definitive Notes and Global Notes at the
Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer
taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 3.07, 4.10,
4.13 and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for
redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive
Notes or Global Notes shall be the valid obligations of
the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the
Definitive Notes or Global Notes surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer of or to
exchange Notes during a period beginning at the
opening of business 15 days before the day of any
selection of Notes for redemption under Section
3.02 hereof and ending at the close of business on
the day of selection; or
(B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in
part, except the unredeemed portion of any Note
being redeemed in part; or
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(C) to register the transfer of or to exchange a Note
between a record date and the next succeeding
interest payment date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the
Company may deem and treat the Person in whose name
any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of
principal of and interest on such Notes, and neither
the Trustee, any Agent nor the Company shall be
affected by notice to the contrary.
(vii) The Trustee shall authenticate Definitive Notes and
Global Notes in accordance with the provisions of
Section 2.02 hereof.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the Company, or
if the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers thereof, shall authenticate a
replacement Note 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 and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate thereof
holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If any portion of principal amount of any Note is considered paid
under Section 4.01 hereof, such portion ceases to be outstanding and interest on
it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes (or portions thereof) payable on that date, then on and
after that date such Notes (or such portions) shall be deemed to be no longer
outstanding and shall cease to accrue interest.
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SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Affiliate of the Company, 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
Notes that the Trustee actually knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until Definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate Definitive Notes in exchange for
temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall retain
cancelled Notes or return them to the Company at the written request of the
Company. The Company may not issue, and the Trustee may not authenticate, new
Notes to replace Notes that the Company has paid or that have been delivered to
the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Company shall fix or cause to be
fixed each such special record date and payment date, PROVIDED that no such
special record date shall be less than 10 days prior to the related payment date
for such defaulted interest. At least 15 days before the special record date,
the Company (or, upon the written request of the Company, the Trustee in the
name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
SECTION 2.13. CUSIP NUMBERS.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of
redemption as a convenience to Holders; PROVIDED
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that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Notes or as contained in
any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Notes, and any such redemption shall not
be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 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 (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
PRO RATA basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate; PROVIDED that no Notes of $1,000 or less will be
redeemed in part. In the event that less than all of the Notes are to be
redeemed by lot, the particular Notes 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 Notes not previously called
for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes 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 Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address. Failure to receive such
notice or any defect in the notice to any such Holder shall not affect the
validity of the proceedings for the redemption of any other Notes or portion
thereof.
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The notice shall identify the Notes to be redeemed (including CUSIP
number) and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes
in principal amount equal to the unredeemed portion shall be
issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption shall cease to
accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on
the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that the
Company shall have delivered to the Trustee, at least 45 days (unless the
Trustee and the Company agree to a shorter period) 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 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, through the redemption date. A notice of
redemption may not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
No later than one Business Day prior to the redemption date, the
Company shall deposit with the Trustee or with the Paying Agent money sufficient
to pay the redemption price of and accrued interest and Liquidated Damages, if
any, on all Notes to be redeemed on that date. The Trustee or the Paying Agent
shall promptly return to the Company any money deposited with the Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and any accrued interest and Liquidated Damages on, all
Notes to be redeemed.
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If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest and Liquidated Damages, if
any, shall be paid to the Person in whose name such Note was registered at the
close of business on such record date. If any Note 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 shall accrue on the
principal portion of the redemption price, from the redemption date until such
principal is paid, and to the extent lawful on any interest not paid on such
unpaid principal, in each case at the rate provided in the Note and in Section
4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note 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 Note equal in principal amount to the unredeemed portion of the
Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the
Company shall not have the option to redeem the Notes pursuant to this Section
3.07 prior to October 1, 2001. On and after October 1, 2001, the Company
shall have the option to redeem the Notes, in whole or in part, upon not less
than 30 nor more than 60 days' written notice, at the following respective
redemption prices (expressed as percentages of principal amount), plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the date of
repurchase, during the twelve-month period commencing October 1 of each of the
years indicated below:
YEAR PERCENTAGE
---- ----------
2001 . . . . . . . . . . . . . . . . . . . . 108.000%
2002 . . . . . . . . . . . . . . . . . . . . 105.333%
2003 . . . . . . . . . . . . . . . . . . . . 102.667%
2004 and thereafter. . . . . . . . . . . . . 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, in the event that the Company consummates a Public Equity Offering after
which there is a Public Market, the Company may redeem at its option from the
proceeds thereof at any time prior to October 1, 1999 up to 100% of the
aggregate principal amount of Notes originally issued at a redemption price
equal to 118.00% of the Accreted Value thereof, plus accrued and unpaid
Liquidated Damages, if any, to the date of redemption; PROVIDED, HOWEVER, that
such redemption occurs within 60 days after the date of the completion of such
Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Sections 3.01 through 3.06 hereof.
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SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.13 hereof, the Company
shall not be required to make mandatory redemption payments or sinking fund
payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an offer to all Holders to purchase Notes (an "ASSET
SALE OFFER"), it shall follow the procedures specified below.
The Asset Sale Offer shall be made to all Holders and shall remain
open for a period of 20 Business Days following its commencement and no longer,
except to the extent that a longer period is required by applicable law (the
"OFFER PERIOD"). No later than five Business Days after the termination of the
Offer Period (the "ASSET SALE OFFER PURCHASE DATE"), the Company shall purchase
the principal amount of Notes required to be purchased pursuant to Section 4.10
hereof (the "OFFER AMOUNT") or, if less than the Offer Amount has been tendered,
all Notes tendered in response to the Asset Sale Offer. Payment for any Notes
so purchased shall be made in the same manner as interest payments are made.
If the Asset Sale Offer Purchase Date is on or after an interest
record date and on or before the related interest payment date, accrued and
unpaid interest and Liquidated Damages thereon, if any, shall be paid to the
Person in whose name a Note is registered at the close of business on such
record date, and no additional interest shall be payable to Holders who tender
Notes pursuant to the Asset Sale Offer.
Within 10 days following any Asset Sale Offer Trigger Date, the
Company shall send, by first class mail, a notice to each of the Holders at such
Holder's registered address, with a copy to the Trustee. The notice, which
shall govern the terms of the Asset Sale Offer, shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer, and shall state:
(a) that the Asset Sale Offer Trigger Date has occurred pursuant
to Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and Asset Sale Offer
Purchase Date;
(c) that any Note subject to the Asset Sale Offer not tendered
shall continue to accrete or accrue interest;
(d) that, unless the Company defaults in the payment of the
purchase price for the Notes payable pursuant to the Asset Sale Offer, any
such Notes accepted for payment pursuant to the Asset Sale Offer shall
cease to accrete or accrue interest on the Asset Sale Offer Purchase Date;
(e) that any Holder electing to have a Note purchased pursuant
to an Asset Sale Offer may only elect to have all of such Note purchased
and may not elect to have only a portion of such Note purchased;
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(f) that any Holder electing to have a Note purchased pursuant
to any Asset Sale Offer shall be required, in the case of a Definitive
Note, to surrender such Note, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Note completed, or, in the case of an
interest in a Global Note, to transfer such interest by book-entry transfer
to the Company, a depositary, if appointed by the Company, or a Paying
Agent at the address specified in the notice at least three days before the
Purchase Date;
(g) that any Holder shall be entitled to withdraw its election
if the Company, the depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that
such Holder is withdrawing its election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Offer Amount or less than all of the Notes tendered
pursuant to the Asset Sale Offer are accepted for payment by the Company
for any reason consistent with this Indenture, the Trustee shall select the
Notes to be purchased in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if
the Notes are not so listed, on a pro rata basis, by lot or by such method
as the Trustee deems fair and appropriate; PROVIDED that Notes accepted for
payment in part will only be purchased in integral multiples of $1,000; and
(i) that Holders whose Notes were purchased only in part shall
be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
On the Asset Sale Offer Purchase Date, the Company shall: (i) accept
for payment the Notes (or portions thereof selected by the Trustee pursuant to
clause (h) of this Section 3.09); (ii) deposit with the Paying Agent the
aggregate purchase price of all Notes or portions thereof accepted for payment;
and (iii) deliver or cause to be delivered to the Trustee all Notes tendered
pursuant to the Asset Sale Offer. The Company, the depository or the Paying
Agent, as the case may be, shall promptly mail to each Holder of Notes or
portions thereof accepted for payment an amount equal to the purchase price for
such Notes and the Trustee shall promptly authenticate and mail to any such
Holder of Notes accepted for payment in part a new Note equal in principal
amount to any unpurchased portion of the Notes, and any Note not accepted for
payment in whole or in part shall be promptly returned to the Holder of such
Note. The Company shall announce the results of the Asset Sale Offer to Holders
of the Notes on or as soon as practicable after the Asset Sale Offer Purchase
Date. The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act, and any other securities laws or
regulations, in connection with any Asset Sale Offer.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
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ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay
all Liquidated Damages, if any, in the same manner on the dates and in the
amounts set forth in the Notes Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1.0% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; PROVIDED,
HOWEVER, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03 hereof.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Company shall furnish to the Trustee
and to all Holders of Notes: (i) for so long as the Company is not subject to
the reporting requirements of the Exchange Act, all quarterly and annual
financial information that would be required to be contained in a filing with
the SEC on Forms 10-Q and
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10-K if the Company were required to file such forms and, with respect to the
annual information only, a report thereon by the Company's certified independent
accountants; and (ii) once the Company becomes subject to the reporting
requirements of the Exchange Act, all quarterly and annual financial information
that would be required to be contained in a filing with the SEC on Forms 10-Q
and 10-K if the Company were required to file such forms (without exhibits
unless requested), including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and its Restricted
Subsidiaries and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants. In addition, whether or not
required by the rules and regulations of the SEC, the Company shall file a copy
of all such information and reports with the SEC for public availability (unless
the SEC will not accept such a filing) and shall promptly make such information
available to all securities analysts and prospective investors upon request.
The Company shall at all times comply with TIA Section 314(a).
(b) For so long as any Transfer Restricted Securities remain
outstanding, the Company shall furnish to all Holders and prospective purchasers
of the Notes designated by the Holders of Transfer Restricted Securities,
promptly upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
(c) Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of the covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company 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
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred and is continuing, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action the Company is taking or proposes to take with respect thereto), and
including, in reasonable detail, calculations evidencing the basis for such
statement with respect to financial covenants, and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the
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Company has violated any provisions of Article 4 hereof or, if any such
violation has come to their attention, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of any
such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution(s) on shares of the Company's
Capital Stock to holders of such Capital Stock (other than dividends or
distributions payable solely in shares of Capital Stock (other than Disqualified
Capital Stock)), (ii) purchase, redeem or otherwise acquire or retire for value
any Capital Stock of the Company, (iii) make any principal payment on, or
purchase, defease, redeem, or otherwise acquire or retire for value any
Indebtedness of the Company that is subordinate in right of payment to the
Notes, or (iv) make any Investment (other than Permitted Investments) (each of
the foregoing prohibited actions set forth in clauses (i), (ii), (iii) and (iv)
being referred to as a "RESTRICTED PAYMENT"), if at the time of such proposed
Restricted Payment or immediately after giving effect thereto, (a) a Default or
an Event of Default has occurred and is continuing or would result therefrom, or
(b) the Company is not, or would not be, able to incur at least $1.00 of
additional Indebtedness under the Debt to Cash Flow Ratio test or (c) the
aggregate amount of Restricted Payments made subsequent to the Issue Date
(excluding Restricted Payments permitted by clauses (w) and (x) below) exceeds
or would exceed the sum of: (1) the difference between (A) the cumulative
Consolidated EBITDA of the Company as of the date of such Restricted Payment
since the Issue Date, minus (B) the product of 1.75 times cumulative
Consolidated Interest Expense of the Company as of the date of such Restricted
Payment since the Issue Date, PLUS (2) 100% of the aggregate net proceeds
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received by the Company from sales of Capital Stock of the Company since the
Issue Date (other than net proceeds from the sale of Disqualified Capital Stock
and net proceeds invested pursuant to clause (viii) of the definition of
"Permitted Investments" contained herein and net proceeds with respect to which
Indebtedness has been issued pursuant to clause (x) of Section 4.09 hereof).
The Company shall not, and shall not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, declare or pay any dividend or make any
other payment or distribution(s) on any shares of the Company's Preferred Equity
(other than dividends or distributions payable solely in shares of Preferred
Equity of the same series (other than Disqualified Capital Stock)) prior to the
Full Accretion Date.
Notwithstanding the foregoing, the provisions set forth above shall not
prohibit (u) the payment of any dividend within 60 days of the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture, (v) dividends and distributions
made by any Wholly Owned Subsidiary of the Company or a Restricted Subsidiary,
(w) the redemption, repurchase, retirement or other acquisition of any Equity
Interests of the Company in exchange for, or out of the proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of, or
the substantially concurrent conversion of, other Equity Interests of the
Company (other than Disqualified Capital Stock), (x) the defeasance, redemption
or repurchase of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness or the substantially concurrent
sale (other than to a Subsidiary of the Company) of Equity Interests of the
Company (other than Disqualified Capital Stock); PROVIDED, HOWEVER, that the
amount of any such net cash proceeds that are utilized for any redemption,
repurchase, retirement or defeasance pursuant to clauses (w) or (x) above shall
be excluded from clause (c)(2) above, (y) the repurchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company or any
Subsidiary of the Company held by any employee, consultant or other service
provider of the Company; PROVIDED that the aggregate price paid for all such
Capital Stock shall not exceed $1 million, and (z) with respect to any
Restricted Subsidiary organized as a partnership or limited liability company or
similar organization, distributions in respect of partners' or members' income
tax liability or such distributions as may be required by law in an amount not
to exceed $1 million; PROVIDED, HOWEVER, in each case, that no Default or Event
of Default shall have occurred and be continuing at the time of such Restricted
Payment pursuant to any of the above clauses (u) though (z) and would not result
therefrom.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the first paragraph of this Section 4.07 were computed, which
calculations may be based upon the Company's most recently available financial
statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to: (i)(a) pay dividends or make any other distributions
to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to the Company
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or any of its Restricted Subsidiaries; (ii) make loans or advances to the
Company or any of its Restricted Subsidiaries; or (iii) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (a)
Indebtedness as in effect on the Issue Date, (b) this Indenture and the Notes,
(c) applicable law, (d) any Indebtedness permitted by the terms of this
Indenture to be incurred, PROVIDED that the restrictions contained in the
agreements governing such other Indebtedness are no more restrictive than those
contained in Exhibit C hereto, (e) customary provisions in leases or
purchase-money or installment sales financings permitted hereunder and entered
into in the ordinary course of business and consistent with past practices,
restricting the transfer, assignment or disposition of the assets so financed,
assets directly related thereto (such as related insurance), proceeds, products
and replacements thereof and accessions thereto, but not otherwise imposing
restrictions on any transfers of properties or assets to the Company or any of
its Restricted Subsidiaries, and not imposing restrictions of the kinds
contemplated by clauses (i) or (ii) above, in each case, more restrictive than
those set forth in Exhibit C hereto, or (f) Permitted Refinancing Debt, PROVIDED
that the restrictions contained in the agreements governing such Permitted
Refinancing Debt are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced.
SECTION 4.09. LIMITATION ON INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED CAPITAL
STOCK.
The Company shall not, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "INCUR"), any
Indebtedness (including Acquired Debt), or issue any Disqualified Capital Stock,
and the Company shall not cause or permit any of its Restricted Subsidiaries to
incur any Indebtedness or issue any shares of Preferred Equity; PROVIDED,
HOWEVER, that the Company may incur Indebtedness (including Acquired Debt) and
the Company may issue Disqualified Capital Stock if: (i) no Default or Event of
Default shall have occurred and be continuing; and (ii) immediately after giving
pro forma effect to such proposed incurrence and the receipt and application of
the net proceeds therefrom, the Company's Debt to Cash Flow Ratio would not
exceed (a) 7.0 to 1.0 from the Issue Date until the Full Accretion Date, and (b)
5.0 to 1.0 thereafter. The foregoing limitation shall not apply to (i) the
Notes; (ii) Indebtedness of the Company outstanding on the Issue Date; (iii)
Indebtedness incurred by the Company or its Restricted Subsidiaries to finance
the purchase of Coinstar units; PROVIDED, HOWEVER, that (a) the aggregate
principal amount of such Indebtedness does not exceed 100% of the fair market
value (on the date of such incurrence) of the Coinstar units acquired, plus
marketing costs incurred within 120 days after the initial regional marketing
launch for the designated marketing area in which such Coinstar units are
installed, PROVIDED that such marketing costs shall not exceed $2,500 for each
Coinstar unit installed, and (b) the Company has budgeted the proceeds of the
Offering in accordance with the "Use of Proceeds" section of the Offering
Memorandum and as projected and described in Exhibit A to the Offering
Memorandum; (iv) Indebtedness incurred by the Company for working capital
purposes pursuant to a revolving credit facility in an aggregate principal
amount that, when taken together with the principal amount of all other
Indebtedness incurred pursuant to this clause (iv) and then outstanding, does
not exceed $10 million; (v) Indebtedness of the Company's Restricted
Subsidiaries to the Company or to any Wholly Owned Restricted Subsidiary of the
Company; (vi) additional Indebtedness incurred by the Company or its Restricted
Subsidiaries to the extent that the aggregate principal amount or accreted value
thereof, as applicable (measured as of the date of issuance), does not exceed
$10 million at any one time outstanding; (vii) Permitted Refinancing
Indebtedness; (viii) Hedging Obligations entered into by the Company not as
speculative investments but as hedging transactions designed to protect the
Company against fluctuations in interest rates in connection with Permitted
Indebtedness; (ix) Indebtedness of the Company or a Restricted Subsidiary under
any Currency
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Agreements; PROVIDED that (a) such Currency Agreements relate to Indebtedness
otherwise permitted under this Indenture or the purchase of Coinstar units by
the Company or a Restricted Subsidiary in the ordinary course of business and
(b) such Currency Agreements do not increase the Indebtedness or other
obligations of the Company or a Restricted Subsidiary outstanding other than as
a result of fluctuations in foreign currency exchange rates or by reason of
fees, indemnities and compensation payable thereunder; and (x) additional
indebtedness equal to the aggregate amount of net cash proceeds received from
the sale of Capital Stock other than Disqualified Capital Stock since the Issue
Date (provided that the net proceeds from such sales of Capital Stock will be
excluded from the clause (c)(ii) of the first paragraph of Section 4.07 hereof
and the basket created by clause (viii) of the definition of Permitted
Investments).
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any Restricted Subsidiary
to: (i) sell, lease, convey or otherwise dispose of any assets (including,
without limitation, by way of a sale and leaseback or similar arrangement) other
than in the ordinary course of business, PROVIDED that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole shall be governed by
the provisions of Sections 4.13 and 5.01 hereof and not by the provisions of
this Section 4.10; or (ii) issue or sell Equity Interests of any of the
Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions (a) that have a fair
market value in excess of $1 million or (b) for aggregate net proceeds in excess
of $1 million (each of the foregoing an "ASSET SALE"), unless (x) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value (as evidenced by
a resolution of the Company's Board of Directors set forth in an Officers'
Certificate delivered to the Trustee) of the assets, or other property or Equity
Interests issued or sold or otherwise disposed of in the Asset Sale; and (y) at
least 100% in the case of a sale of accounts (except for a sale of past-due
accounts for collection), and 75% in the case of a sale of other assets, of such
consideration is in the form of cash or Cash Equivalents or any combination
thereof. Notwithstanding the foregoing, any Restricted Payment or Permitted
Investment that is permitted by Section 4.07 hereof shall not be deemed to be an
Asset Sale. Notwithstanding the foregoing, the consideration received by the
Company or any Restricted Subsidiary in respect of any transaction which would
constitute an Asset Sale but for the fact that the fair market value of the
property of which disposition is made, or the amount of aggregate net proceeds
yielded thereby, is less than $1 million, shall, unless such transaction is
permitted as a Restricted Payment or Permitted Investment under Section 4.07
hereof, equal to at least the fair market value of such property.
Within 270 days after any Asset Sale, the Company or such Subsidiary
shall apply the Net Proceeds from such Asset Sale, to (a) reinvest in the
business of the Company (or any Restricted Subsidiary of the Company) that the
Company was engaged in on the date of this Indenture or (b) permanently reduce
borrowings and commitments under Indebtedness permitted to be incurred pursuant
to Section 4.09 hereof. Pending the final application of any such Net Proceeds,
the Company may temporarily invest such Net Proceeds in any manner not
prohibited by this Indenture. Any Net Proceeds from an Asset Sale not applied
or invested as provided in the first sentence of this paragraph will be deemed
to constitute "EXCESS PROCEEDS."
Within five Business Days after any date that the aggregate amount of
Excess Proceeds exceeds $5 million (an "ASSET SALE OFFER TRIGGER DATE"), the
Company shall commence an Asset Sale Offer pursuant to Section 3.09 hereof to
purchase the maximum principal amount of Notes that may be
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purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to (if prior to the Full Accretion Date) 100% of the Accreted Value
thereof on the date of repurchase, plus accrued and unpaid Liquidated Damages
thereon, if any, or (if on or after the Full Accretion Date) 100% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of repurchase, in each case in accordance
with the procedures set forth in Section 3.09 hereof. To the extent that the
aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company (or such Subsidiary) may use the remaining
Excess Proceeds for any purpose not prohibited by this Indenture. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
deemed to be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, conduct any business or enter into or
suffer to exist any transaction or series of transactions (including the
purchase, sale, transfer, lease or exchange of any Property or the rendering of
any service) with or for the benefit of any Affiliate (each, an "AFFILIATE
TRANSACTION") other than any Affiliate Transaction that is on terms that are
fair and reasonable and no less favorable to the Company or such Restricted
Subsidiary than those that might reasonably have been obtained at such time in a
comparable transaction or series of related transactions on an arms-length basis
from a Person that is not such an Affiliate; PROVIDED, HOWEVER, that any
Affiliate Transaction involving aggregate consideration of $1 million or more
shall require approval by a majority of the disinterested members of the
Company's Board of Directors; and PROVIDED, FURTHER, that any Affiliate
Transaction involving aggregate consideration of $10 million or more in the
event that a Public Equity Offering shall have been consummated or $5 million or
more prior to the consummation of a Public Equity Offering, shall require a
fairness opinion from an accounting, appraisal or investment banking firm of
national standing. Notwithstanding the foregoing, transactions between or among
any combination of the Company and its Restricted Subsidiaries will not be
deemed Affiliate Transactions, and any transaction among any combination of the
Company and its Restricted Subsidiaries, on one hand, and any one or more
Unrestricted Subsidiaries on the other hand, shall not be deemed an Affiliate
Transaction if it is on terms that are fair and reasonable to the Company or any
such Restricted Subsidiary and would be permitted under Section 4.07 hereof.
SECTION 4.12. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses
and franchises of the Company and its Restricted Subsidiaries; PROVIDED,
HOWEVER, that the Company shall not be required to preserve any such right,
license or franchise, or the corporate, partnership or other existence of any of
its Restricted Subsidiaries, 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 its Restricted Subsidiaries, taken as a whole, and that the loss
thereof is not adverse in any material respect to the Holders of the Notes.
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SECTION 4.13. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Within 30 days of the occurrence of a Change of Control, the
Company shall notify the Trustee in writing of such proposed occurrence and
shall make an offer to purchase (a "CHANGE OF CONTROL OFFER") the Notes at a
purchase price equal to (if prior to the Full Accretion Date) 101% of the
Accreted Value thereof plus accrued and unpaid Liquidated Damages thereon, if
any, to the Change of Control Payment Date or (if on or after the Full Accretion
Date) 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the Change of Control
Payment Date (in either case, the "CHANGE OF CONTROL PURCHASE PRICE"). Within
50 days of the occurrence of a Change of Control, the Company shall also: (i)
cause a notice of the Change of Control Offer to be sent at least once to the
Dow Jones News Service or similar business news service in the United States and
(ii) send by first-class mail, postage prepaid, to the Trustee and to each
registered Holder of Notes, at its address appearing in the register of the
Notes maintained by the Registrar, a notice stating: (A) that the Change of
Control Offer is being made pursuant to this Section 4.13 and that all Notes
tendered will be accepted for payment, subject to the terms and conditions set
forth herein; (B) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 30 days and no later than 60 days
after the date on which such notice is mailed) (the "CHANGE OF CONTROL PAYMENT
DATE"); (C) that any Note not tendered will continue to accrue interest (or, if
such Change of Control Offer is prior to the Full Accretion Date, the Accreted
Value will continue to accrete); (D) that unless the Company defaults in the
payment of the Change of Control Purchase Price, any such Notes accepted for
payment pursuant to the Change of Control Offer will cease to accrue interest or
accrete in value after the Change of Control Payment Date; (E) that Holders
accepting the offer to have their Notes purchased pursuant to a Change of
Control Offer will be required to surrender such Notes to the Paying Agent at
the address specified in the notice prior to the close of business on the
Business Day preceding the Change of Control Payment Date; (F) that Holders
will be entitled to withdraw their acceptance if the Paying Agent receives, not
later than the close of business on the second Business Day preceding the Change
of Control Payment Date, a facsimile transmission or letter setting forth the
name of the Holder, the principal amount of such Notes delivered for purchase,
and a statement that such Holder is withdrawing its election to have such Notes
purchased; (G) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered, PROVIDED that each Note purchased and each such new Note
issued shall be in an original principal amount in denominations of $1,000 and
integral multiples thereof; and (H) any other procedures that a Holder must
follow to accept a Change of Control Offer or effect withdrawal of such
acceptance. The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
and regulations in connection with the repurchase of Notes in connection with a
Change of Control and, to the extent that the provisions of such securities laws
or regulations conflict with this Section 4.13, the Company shall not be deemed
to have breached their obligations under this Section 4.13 by virtue thereof.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment all the Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so accepted and (iii) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof tendered to the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
accepted payment in an amount equal to the purchase price for the Notes, and the
Trustee shall promptly authenticate and mail (or cause to be transferred by book
entry) to such Holder a new Note equal in
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principal amount to any unpurchased portion of the Notes surrendered by such
Holder, if any; PROVIDED, that each such new Note shall be in a principal amount
of $1,000 or an integral multiple thereof. The Company shall publicly announce
the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date.
(c) The Change of Control provisions described herein shall be
applicable whether or not any other provisions of this Indenture are applicable.
SECTION 4.14. NO SENIOR SUBORDINATED DEBT.
Notwithstanding the provisions of Section 4.09 hereof, the Company
shall not incur any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt and senior in any respect in right of payment to the
Notes.
SECTION 4.15. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES.
The Board of Directors of the Company may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary at any time; PROVIDED, HOWEVER, that
immediately after giving effect to such designation on a pro forma basis as if
the same had occurred at the beginning of the most recently ended full fiscal
quarter of the Company for which consolidated financial statements are
available, (i) the Company would be permitted to incur at least $1.00 of
additional Indebtedness under the Debt to Cash Flow Ratio test and (ii) an
Officers' Certificate with respect to such designation is delivered to the
Trustee within 75 days after the end of the fiscal quarter of the Company in
which such designation is made (or, in the case of a designation made during the
last fiscal quarter of the Company's fiscal year, within 120 days after the end
of such fiscal year), which Officers' Certificate states the effective date of
such designation; and PROVIDED, FURTHER, that such designation shall be deemed
to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if no Default or Event of Default would be
in existence following such designation.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default;
PROVIDED, HOWEVER, that immediately after giving effect to such designation on a
pro forma basis, the Company would be in compliance with Section 4.07 hereof.
For purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash or
in the form in which such Investment was originally made) in the Subsidiary so
designated, whether made before or after the Issue Date, shall be deemed to be
Restricted Payments at the time of such designation and shall reduce the amount
available for Restricted Payments. All such outstanding Investments shall be
deemed to constitute Investments in an amount equal to the greatest of (i) the
net book value of such Investments at the time of such designation, (ii) the
fair market value of such Investments at the time of such designation and (iii)
the original fair market value of such Investments at the time they were made.
Such designation shall only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
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SECTION 4.16. ASSET MAINTENANCE TEST.
Notwithstanding any other provision of this Indenture, the Company
shall not (i) effect any sale, lease, transfer or other disposition of any of
its property or assets to a Subsidiary or (ii) make any Permitted Investment
(except (a) the initial $10 million permitted by clause (viii) of the definition
thereof and (b) an aggregate of $1 million for Investments in Restricted
Subsidiaries solely for the creation and maintenance thereof) or (iii) make any
Restricted Payment (except a Restricted Payment permitted by clauses (u)-(z) of
the second paragraph of Section 4.07 hereof), if, as a result thereof or
immediately upon giving effect thereto, Total Gross Assets would be less than
the amounts set forth below during the twelve-month period commencing January 1
of each year set forth below:
YEAR TOTAL GROSS ASSETS
---- -----------------
1996 $60.0 million
1997 60.0 million
1998 70.0 million
1999 92.5 million
2000 and thereafter 100.0 million
In the event the Company redeems or repurchases, or effects a Legal
Defeasance or Covenant Defeasance with respect to, less than 100% of the Notes,
the amounts set forth under the caption "Total Gross Assets" above shall be
reduced by multiplying each such amount by a fraction the denominator of which
shall be the then outstanding aggregate Accreted Value (if prior to the Full
Accretion Date) or principal amount (if on or after the Full Accretion Date) of
the Notes and the numerator of which shall be the Accreted Value (if prior to
the Full Accretion Date) or principal amount (if on or after the Full Accretion
Date) of the Notes so redeemed, repurchased or defeased.
Within 30 days after the consummation by the Company of any
transaction of a type described in any of clause (i), (ii) or (iii) above, the
Company shall deliver, or cause to be delivered, to the Trustee, an Officers'
Certificate stating that such transaction complies with this Section 4.16 and
that all conditions precedent in this Indenture relating to such transaction
has been complied with.
SECTION 4.17. LIMITATION ON CHANGES IN CAPITAL STRUCTURE.
The Company shall not issue any Disqualified Capital Stock prior to
the Full Accretion Date (except for Disqualified Capital Stock issuable upon
exercise of warrants outstanding on the Issue Date), and the Company shall not
directly or indirectly amend or modify its Amended and Restated Certificate of
Incorporation with respect to the redemption provisions in effect as of the
Issue Date relating to the Preferred Equity of the Company.
SECTION 4.18. CONTINGENT WARRANTS.
If the Company has not consummated a Public Equity Offering by October
1, 1998 and an Exercise Event (as defined in the Warrant Agreement) has not
otherwise occurred, the Company shall issue warrants (the "Contingent Warrants")
to holders of the Notes pursuant to the provisions of the Warrant Agreement,
dated as of the date hereof, by and between the Company and the Initial
Purchaser (the
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"Warrant Agreement"). The Contingent Warrants shall be exercisable initially
for 285,000 shares of Common Stock of the Company and shall not be
transferrable separately from the Notes.
SECTION 4.19. CALCULATION OF ORIGINAL ISSUE DISCOUNT.
The Company shall deliver to the Trustee, contemporaneously with the
delivery of annual financial information pursuant to section 4.03 hereof, a
written notice specifying the amount of original issue discount (including
daily rates and accrual periods) accrued on outstanding Notes as of the end of
such year.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate with or merge with or into any
Person (whether or not the Company is the surviving Person) or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets (whether as an entirety or substantially as an entirety in
a transaction or a series of related transactions) to any Person or adopt a Plan
of Liquidation unless: (i) either (a) the Company will be the surviving or
continuing corporation (the "SURVIVING PERSON") or (b) the Surviving Person (if
other than the Company) formed by or surviving any such consolidation or merger
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall expressly assume, by supplemental indenture, executed and
delivered to the Trustee and in form satisfactory to the Trustee, all of the
obligations of the Company under the Notes, this Indenture and the Notes
Registration Rights Agreement, and the obligations under the Notes, this
Indenture, and the Notes Registration Rights Agreement remain in full force and
effect, (ii) immediately after giving effect to such transaction and the
assumption contemplated above, the Company or such Surviving Person shall have a
Debt to Cash Flow Ratio equal to or less than the Debt to Cash Flow Ratio of the
Company immediately preceding the transaction; (iii) immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
or be continuing; and (iv) immediately after giving effect to such transaction,
the Surviving Person shall continue to operate the business of the Company that
was the principal business of the Company immediately preceding such
transaction.
In connection with any consolidation, merger or transfer contemplated
by this provision, the Company shall deliver, or cause to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent in this
Indenture provided for relating to such transaction or transactions have been
complied with.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the Surviving Person
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and
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be substituted for (so that from and after the date of such consolidation,
merger, sale, lease, conveyance or other disposition, the provisions of this
Indenture referring to "the Company" shall refer instead to the Surviving Person
and not to the Company), and may exercise every right and power of the Company
under this Indenture with the same effect as if such Surviving Person had been
named as the Company herein; PROVIDED, HOWEVER, that the Company shall not be
relieved from the obligation to pay the principal of and interest on the Notes
except in the case of a sale of all of the Company's assets that meets the
requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" shall occur upon the happening of any of the
following:
(a) (i) the Company defaults in the payment when due of interest
or Liquidated Damages on any Note on any day and such default
continues for a period of 30 days or more after the same becomes due
and payable;
(b) the Company defaults in the payment when due of principal or
Accreted Value of any Note, when such principal or Accreted Value
becomes due and payable, at maturity, upon redemption (including in
connection with an offer to purchase), pursuant to an Asset Sale
Offer, a Change of Control Offer or otherwise;
(c) the Company defaults in the observance or performance of any
other covenant, representation, warranty or agreement contained in
this Indenture or the Notes, which default continues for a period of
45 days after the Company receives written notice specifying the
default (and requiring that such default be remedied) from the Trustee
or from the Holders of not less than 25% in Accreted Value (if prior
to the Full Accretion Date) or aggregate principal amount (if on or
after the Full Accretion Date) of the Notes then outstanding;
(d) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any
Material Restricted Subsidiary (or the payment of which is guaranteed
by the Company or any Material Restricted Subsidiary), whether such
Indebtedness or guarantee now exists, or is created after the Issue
Date, which default results in the acceleration of such Indebtedness
prior to its express maturity and the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness the maturity of which has been so accelerated, aggregates
$5 million or more;
(e) one or more judgments are entered by a court or courts of
competent jurisdiction against the Company or any of its Material
Restricted Subsidiaries and such judgment or judgments remain
undischarged, or unstayed or unsatisfied for a period of 60
consecutive days, where such judgment or judgments are for the payment
of money in an aggregate amount in excess of $5
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million (in excess of applicable insurance coverage with respect to
which the Company's insurer has acknowledged coverage in writing);
(f) the Company or any of its Restricted Subsidiaries pursuant to
or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against
it in an involuntary case,
(iii) consents to the appointment of a Bankruptcy Custodian
of such Person or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due;
(g) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Material Restricted Subsidiaries in an involuntary case;
(ii) appoints a Bankruptcy Custodian of the Company or any
of its Material Restricted Subsidiaries for all or substantially
all of the property of the Company or any of its Material
Restricted Subsidiaries; or
(iii) orders the liquidation of the Company or any of its
Material Restricted Subsidiaries;
and the order or decree remains unstayed and in effect for 60
consecutive days; or
(h) any holder of at least $5 million in aggregate principal
amount of Indebtedness of the Company or any Material Restricted
Subsidiary shall commence judicial proceedings to foreclose upon
assets of the Company or any Material Restricted Subsidiary having an
aggregate fair market value, individually or in the aggregate, of at
least $5 million or shall have exercised any right under applicable
law or applicable security documents to take ownership of any such
assets in lieu of foreclosure.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (f) or (g) of Section 6.01 hereof with respect to the Company, any
Material Restricted Subsidiary or any group of Material Restricted Subsidiaries
that, taken as a whole, would constitute a Material Restricted Subsidiary)
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately. Upon any such
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declaration, the Notes shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (f) or
(g) of Section 6.01 hereof occurs with respect to the Company, any Material
Restricted Subsidiary or any group of Material Restricted Subsidiaries that,
taken as a whole, would constitute a Material Restricted Subsidiary), all
outstanding Notes shall be due and payable immediately without further action or
notice. The Holders of a majority in aggregate principal amount of the then
outstanding Notes by written notice to the Trustee may on behalf of all of the
Holders rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of any principal, interest or premium that has become due
solely because of the acceleration) have been cured or waived.
If an Event of Default occurs on or after October 1, 2001 by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to October 1,
2001 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable in an amount, for each of the years beginning on October 1 of the years
set forth below, as set forth below (expressed as a percentage of the Accreted
Value to the date of payment that would otherwise be due but for the provisions
of this sentence):
YEAR PERCENTAGE
---- ----------
1997. . . . . . . . . . . . . . . . . . . . . 113.000%
1998. . . . . . . . . . . . . . . . . . . . . 111.750%
1999. . . . . . . . . . . . . . . . . . . . . 110.500%
2000 . . . . . . . . . . . . . . . . . . . . 109.250%
2001. . . . . . . . . . . . . . . . . . . . . 108.000%
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note 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. All remedies
are cumulative to the extent permitted by law.
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SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate Accreted Value (if
prior to the Full Accretion Date) or principal amount (if on or after the Full
Accretion Date) of the then outstanding Notes by notice to the Trustee may on
behalf of the Holders of all of the Notes waive an existing Default or Event of
Default and its consequences hereunder, except a continuing Default or Event of
Default in the payment of the principal of, premium and Liquidated Damages, if
any, or interest on the Notes (including in connection with an offer to
purchase). Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Note for or as an inducement to
any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes, unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in aggregate Accreted Value (if prior to the
Full Accretion Date) or aggregate principal amount (if on or after the Full
Accretion Date) of the then outstanding Notes may direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee or exercising any trust or power conferred on it. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture
that the Trustee determines may be unduly prejudicial to the rights of other
Holders of Notes or that may involve the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Note only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in Accreted Value (if prior to the
Full Accretion Date) or principal amount (if on or after the Full Accretion
Date) of the then outstanding Notes make a written request to the Trustee
to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in Accreted
Value (if prior to the Full Accretion Date) or principal amount (if on or
after the Full Accretion Date) of the then outstanding Notes do not give
the Trustee a direction inconsistent with the request.
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A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), 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 such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest 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 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to 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 of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
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SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
FIRST: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
SECOND: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any, and
interest, respectively; and
THIRD: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes 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 a 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 and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in Accreted Value (if prior to the Full Accretion Date) or principal
amount (if on or after the Full Accretion Date) of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and 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; and
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(ii) 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,
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) 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:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 7.01;
(ii) 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; and
(iii) 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 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b) and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) 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 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon 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.
(b) 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 of its selection and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
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(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) 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.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, and apply to the SEC
for permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, 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 Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and becomes
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after the Trustee becomes aware
thereof. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, or interest on any Notes, 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 the
Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each September 15 beginning with the September 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if
no event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report
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need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2)
and Section 313(b)(1). The Trustee shall also transmit by mail all reports as
required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA Section 313(d).
The Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time such
compensation as shall be agreed between the Company and the Trustee 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 promptly upon request for all
reasonable disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company shall indemnify each of the Trustee and any predecessor
Trustee against any and all losses, liabilities, damages, claims or expenses,
including taxes (other than taxes based on the income of the Trustee), incurred
by it arising out of or in connection with the acceptance or administration of
its duties under this Indenture, including the costs and expenses of enforcing
this Indenture against the Company (including this Section 7.07) and defending
itself against any claim (whether asserted by the Company or any Holder or any
other Person) or liability in connection with the exercise or performance of any
of its powers or duties hereunder, except to the extent any such loss, liability
or expense may be attributable to its negligence or bad faith. The Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company shall defend the claim and the Trustee
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 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(f) or (g) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
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SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) 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;
(c) a Bankruptcy Custodian or public officer takes charge of the
Trustee or its property;
(d) the Trustee becomes incapable of acting; or
(e) any debt rating of the Trustee is downgraded by two or more
rating classifications.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in Accreted Value (if prior to Full
Accretion Date) or principal amount (if on or after the Full Accretion Date) of
the then outstanding Notes may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder of a Note 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 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 of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, PROVIDED
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
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SECTION 7.09. 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 that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
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), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship 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
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "LEGAL
DEFEASANCE"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (i) -(iv) below, and to have satisfied all of its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions, which shall
survive until otherwise terminated or discharged hereunder: (i) the rights of
Holders of outstanding Notes to receive solely from the trust fund described in
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Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest (including Liquidated
Damages) on such Notes when such payments are due; (ii) the Company's
obligations with respect to such Notes under Article 2 and Section 4.02 hereof;
(iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and the Company's obligations in connection therewith; and (iv) this Article
Eight. Subject to compliance with this Article 8, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11 and 4.13 hereof with respect to the outstanding Notes on and after the date
the conditions set forth below are satisfied (hereinafter, "COVENANT
DEFEASANCE"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes 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 (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Notes, 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 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(c) through 6.01(e) and Section 6.01(h) hereof shall not constitute
Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders, cash in United States
dollars, non-callable Government Securities, or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the
principal of, premium and Liquidated Damages, if any, and interest on
the outstanding Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.02 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published
by, the
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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 of Counsel shall confirm that, the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had
not occurred;
(c) in the case of an election under Section 8.03 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the incurrence of Indebtedness all or
a portion of the proceeds of which will be used to defease the Notes
pursuant to this Article Eight concurrently with such incurrence);
PROVIDED, HOWEVER, that the benefits of any Covenant Defeasance or
Legal Defeasance shall immediately and automatically cease if any
Event of Default under Section 6.01(f) or 6.01(g) hereof shall have
occurred, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any
material agreement or instrument (other than this Indenture) to which
the Company or any of its Restricted Subsidiaries is a party or by
which the Company or any of its Restricted Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that, as of the date such opinion:
after the 91st day following the deposit (assuming that no Holder of
any Notes would be considered an insider of the Company under
applicable Bankruptcy Law), the rights of the Holders will not be
adversely affected in any proceeding under applicable Bankruptcy Law
by reason of such Covenant Defeasance or Legal Defeasance (by
comparison to the rights such Holders would have had such Covenant
Defeasance or Legal Defeasance not been effected);
(g) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by it with
the intent of preferring the Holders of Notes over any other creditors
of the Company or with the intent of defeating, hindering, delaying or
defrauding its creditors or others; and
(h) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with.
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SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest
(including Liquidated Damages), but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof that, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Notes shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in The New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such
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time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.02 or 8.03 hereof, as the case may be; PROVIDED,
HOWEVER, that, if the Company makes any payment of principal of, premium, if
any, or interest on any Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes in the case of a merger or consolidation pursuant to
Article Five hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of a Note; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
9.06 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture or the Notes with the consent of
the Holders of at least a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection with
a tender offer or exchange offer for the Notes) and, subject to Sections 6.04
and 6.07 hereof, any existing Default or Event of Default (other than a Default
or Event of Default in the payment of the principal of, premium, if any, or
interest on the Notes, except a payment default resulting from an acceleration
that has been rescinded) or compliance with any provision of this Indenture or
the Notes may be waived with the
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consent of the Holders of a majority in principal amount of the then outstanding
Notes (including consents obtained in connection with a tender offer or exchange
offer for the Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 9.06 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 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, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement 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 amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Notes. However, without the consent of
each Holder affected, an amendment or waiver may not (with respect to any Notes
held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Notes or alter any provision that, directly or indirectly, affects
the redemption price, redemption date or the Accreted Value (if prior
to the Full Accretion Date) or principal amount (if on or after the
Full Accretion Date) of the Notes;
(c) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes
and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in any currency other than that stated
in the Notes;
(f) make any change in the provisions of this Indenture relating
to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on
the Notes (or, if applicable, Accreted Value);
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(g) waive a redemption payment with respect to any Note (other
than a payment required by Section 4.10 or 4.13 hereof); or
(h) make any change in the foregoing amendment and waiver
provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until its Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01) shall be
fully protected in relying upon an Officers' Certificate and an Opinion of
Counsel stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
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ARTICLE 10
SUBORDINATION
SECTION 10.01 AGREEMENT TO SUBORDINATE.
(a) The Company agrees, and each Holder by accepting a Note agrees,
that the Indebtedness evidenced by the Note is subordinated in right of payment,
to the extent and in the manner provided in this Article 10, to the prior
payment in full of all Senior Debt (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the subordination
is for the benefit of the holders of Senior Debt.
(B) For purposes of this Article 10, a distribution may consist of
cash, securities or other property, by set-off or otherwise.
SECTION 10.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(a) holders of Senior Debt shall be entitled to receive payment in
full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before Holders shall be entitled
to receive any payment with respect to the Notes (except that Holders may
receive (i) securities that are subordinated to at least the same extent as
the Notes to (A) Senior Debt and (B) any securities issued in exchange for
Senior Debt and (ii) payments and other distributions made from any
defeasance trust created pursuant to Article 8 hereof); and
(b) until all Obligations with respect to Senior Debt (as provided in
subsection (a) above) are paid in full, any distribution to which Holders
would be entitled but for this Article 10 shall be made to holders of
Senior Debt (except that Holders may receive securities that are
subordinated to at least the same extent as the Notes to (i) Senior Debt
and (ii) any securities issued in exchange for Senior Debt), as their
interests may appear.
SECTION 10.03 DEFAULT ON DESIGNATED SENIOR DEBT.
The Company may not make any payment or distribution to the Trustee or
any Holder in respect of Obligations with respect to the Notes and may not
acquire from the Trustee or any Holder any Notes for cash or property (other
than (i) securities that are subordinated to at least the same extent as the
Notes to (A) Senior Debt and (B) any securities issued in exchange for Senior
Debt and (ii) payments and other distributions made from any defeasance trust
created pursuant to Section 8.01 hereof) until all principal and other
Obligations with respect to the Senior Debt have been paid in full if:
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(a) a default in the payment of any principal or other Obligations
with respect to Designated Senior Debt occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other document
governing such Designated Senior Debt; or
(b) a default, other than a payment default, on Designated Senior
Debt occurs and is continuing that then permits holders of the Designated
Senior Debt to accelerate its maturity and the Trustee receives a notice of
the default (a "PAYMENT BLOCKAGE NOTICE") from a Person who may give it
pursuant to Section 10.11 hereof. If the Trustee receives any such Payment
Blockage Notice, no subsequent Payment Blockage Notice shall be effective
for purposes of this Section unless and until (i) at least 360 days shall
have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice and (ii) all scheduled payments of principal, premium, if
any, and interest on the Notes that have come due have been paid in full in
cash. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) 179 days have passed after notice is received if the maturity of
such Designated Senior Debt has not been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 10.04 ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Debt of the acceleration.
SECTION 10.05 WHEN DISTRIBUTION MUST BE PAID OVER.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company that would prohibit the making of any payment to or
by the Trustee in respect of the Notes under this Article 10. Failure to give
such notice shall not affect the subordination of the Notes to Senior Debt.
Notwithstanding the provisions of this Article 10 or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment to or by
the Trustee in respect of the Notes, unless and until the Trustee shall have
received a Payment Blockage Notice; and, prior to the receipt of any Payment
Blockage Notice, the Trustee, subject to the provisions of Section 7.01
hereof, shall be entitled in all respects to assume that no such facts exist;
PROVIDED, HOWEVER, that if a Responsible Officer of the Trustee shall not have
received, at least three Business Days prior to the date upon which by the
terms hereof any such money may become payable for any purpose (including,
without limitation, the payment of the principal amount, issue price, accrued
original issue discount, redemption price, purchase price, Change of Control
Offer Purchase Price or interest, if any, as the case may be, in respect of
any Note), a Payment Blockage Notice, then, anything
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herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such money and to apply the same to the purpose
for which such money was received and shall not be affected by any notice to
the contrary that may be received by it within three Business Days prior to
such date.
Subject to the provisions of Section 7.01 hereof, the Trustee shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Debt (or a trustee or agent on
behalf of such holder), or a Representative of any of the foregoing, to
establish that such notice has been given by a holder of Senior Debt (or a
trustee or agent on behalf of any such holder). In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any Person as a holder of Senior Debt to participate in any payment
or distribution pursuant to Article 10, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Debt held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article 10, and if such
evidence is not furnished, the Trustee may defer any payment which it may be
required to make for the benefit of such Person pursuant to the terms of this
Indenture pending judicial determination as to the rights of such Person to
receive such payment.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes at a time when the Trustee or such
Holder, as applicable, has received a Payment Blockage Notice or otherwise has
actual knowledge that such payment is prohibited by Section 10.03 hereof, such
payment shall be held by the Trustee or such Holder, in trust for the benefit
of, and shall be paid forthwith over and delivered, upon written request, to,
the holders of Senior Debt as their interests may appear or their Representative
under the indenture or other agreement (if any) pursuant to which Senior Debt
may have been issued, as their respective interests may appear, for application
to the payment of all Obligations with respect to Senior Debt remaining unpaid
to the extent necessary to pay such Obligations in full in accordance with their
terms, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
SECTION 10.06 NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article 10.
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SECTION 10.07 SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt. A distribution made under this Article 10 to holders of Senior
Debt that otherwise would have been made to Holders is not, as between the
Company and Holders, a payment by the Company on the Notes.
SECTION 10.08 RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and
interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors of the
Company other than their rights in relation to holders of Senior Debt; or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders.
If the Company fails because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
SECTION 10.09 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Note shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
SECTION 10.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative(s).
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness 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 10.
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SECTION 10.11 RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may
do the same with like rights.
SECTION 10.12 AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
6.09 hereof at least 30 days before the expiration of the time to file such
claim, the Representatives are hereby authorized to file an appropriate claim
for and on behalf of the Holders of the Notes.
SECTION 10.13 AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the requisite percentage of the holders of all
Senior Debt in accordance with the terms of the documents governing such Senior
Debt.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Trustee 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), telecopier or
overnight air courier guaranteeing next-day delivery, to the others' address:
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If to the Company:
Coinstar, Inc.
13231 SE 36th Street, Suite 200
Bellevue, Washington 98006
Telecopier No.: (206) 644-9447
Attention: Chief Financial Officer
with a copy to:
Mark P. Tanoury
Cooley Godward Castro Huddleson & Tatum
3000 Sand Hill Road
Building 3, Suite 230
Menlo Park, California 94025
Telecopier No.: (415) 854-2691
and a copy to:
Barry E. Taylor
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Telecopier No.: (415) 493-6811
If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Telecopier No.: (212) 815-5915
Attention: Corporate Trust Trustee Administration
The Company or the Trustee, by notice to the other, may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
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 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 Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next-day delivery, to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed
61
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to any Person described in TIA Section 313(c), to the extent required by the
TIA. Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders.
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 mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) 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 satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
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(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, PARTNERS
AND STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator,
partner or stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes, this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
SECTION 11.08. GOVERNING LAW; CONSENT TO JURISDICTION.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES. Each of the parties hereto hereby
irrevocably and unconditionally: (i) submits itself and its property in any
legal action or proceeding relating to this Indenture, the Notes and the Notes
Registration Rights Agreement, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive jurisdiction of the courts of
the State of New York and the courts of the United States of America for the
Southern District of New York, and appellate courts thereof, and consents and
agrees to such action or proceeding being brought in such courts; and (ii)
waives any objection that it may now or hereafter have to the venue of any such
action or proceeding in any such court or that such action or proceeding was
brought in any inconvenient court and agrees not to plead or claim the same.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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SECTION 11.12. 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.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[signature page follows]
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SIGNATURES
Dated as of October 1, 1996.
COINSTAR, INC.
a Delaware corporation
By: /s/ Jens H. Molbak
----------------------------------------
Jens H. Molbak
President
Dated as of October ___, 1996.
THE BANK OF NEW YORK,
as Trustee
By:
----------------------------------------
Name:
Title:
<PAGE>
SIGNATURES
Dated as of October __,1996 COINSTAR, INC.
a Delaware corporation
By:
----------------------------------------
Jens H. Molbak
President
Dated as of October 1, 1996.
THE BANK OF NEW YORK,
as Trustee
By: /s/ Vivian Georges
----------------------------------------
Name: Vivian Georges
Title: Assistant Vice President
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXHIBIT A
(Face of Note)
13% Senior Subordinated Discount Notes due 2006
FOR PURPOSES OF SECTION 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED, THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT;
FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS NOTE, THE ISSUE PRICE IS $679.89.
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $320.11. THE ISSUE DATE IS OCTOBER
22, 1996 AND THE YIELD TO MATURITY IS 13.2139% PER ANNUM.
CUSIP: 19259P AA0
No. $ 95,000,000
COINSTAR, INC.
promises to pay to CEDE & CO.
or registered assigns,
the principal sum of ninety-five million
dollars on October 1, 2006.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
COINSTAR, INC.
By: ______________________________
Name: Jens H. Molbak
Title: President
Dated as of October ___, 1996
This is one of the
Notes referred to in the
within-mentioned Indenture:
THE BANK OF NEW YORK,
as Trustee
By: ___________________________
Authorized Signatory
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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(Back of Note)
13% Senior Subordinated Discount Notes due 2006
Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except 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 or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be 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.
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE NOTE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE NOTE EVIDENCED
HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE HOLDER
OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN OF RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Coinstar, Inc., a Delaware corporation (the "COMPANY"),
promises to pay interest on the principal amount of this Note at 13% per annum.
Cash interest on this Note will neither accrue nor be payable prior to October
1, 1999. The Company shall pay interest on this Note commencing April 1, 2000
until maturity and shall pay the Liquidated Damages, if any, payable pursuant to
Section 5 of the Notes Registration Rights Agreement referred to below. The
Company will pay interest and Liquidated Damages semi-annually in arrears on
October 1 and April 1 of each year, or if any such day is not a Business Day, on
the next succeeding Business Day (each, an "INTEREST PAYMENT DATE"). Interest
on the Notes shall
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accrue from the most recent date to which interest has been paid or, if no
interest has yet been paid, from October 1, 1999 (the "FULL ACCRETION DATE").
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages, if any, (without regard to any applicable grace periods)
from time to time on demand at the same rate to the extent lawful. Interest
shall be computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the March 15 or
September 15 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes shall be payable as to principal, premium, interest and
Liquidated Damages at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and PROVIDED that payment by wire transfer of immediately available funds
shall be required with respect to principal of and interest, premium and
Liquidated Damages, if any, on, all Global Notes and all other Notes the
Holders of which shall have provided written wire transfer instructions to the
Company or the Paying Agent at least 10 days prior to the applicable payment
date. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; PROVIDED that Liquidated Damages may be paid through the
issuance of additional Notes having an Accreted Value at the time of issuance
equal to the amount of Liquidated Damages so paid.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of October 1, 1996 (the "INDENTURE") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended
(15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement
of such terms. The Notes are obligations of the Company limited to $95
million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to October 15,
2001. On and after October 15, 2001, the Company shall have the option to
redeem the Notes, in whole or in part, upon not less than 30 nor more than 60
days' written notice, at the redemption prices (expressed as percentages of
the principal amount) set forth below, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the applicable redemption date, if
redeemed during the twelve-month period commencing October 1 of each of the
years indicated below:
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YEAR PERCENTAGE
---- ----------
2001. . . . . . . . . . . . . . . . . . . . . 108.000%
2002 . . . . . . . . . . . . . . . . . . . . 105.333%
2003 . . . . . . . . . . . . . . . . . . . . 102.667%
2004 and thereafter . . . . . . . . . . . . . 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph
5, in the event that the Company consummates a Public Equity Offering after
which there is a Public Market, the Company may redeem at its option from the
proceeds thereof at any time prior to October 1, 1999, up to 100% of the
aggregate principal amount of Notes originally issued at 118.000% of the
Accreted Value thereof as of the date of redemption, plus accrued and unpaid
Liquidated Damages, if any, to the date of redemption; PROVIDED, HOWEVER,
that such redemption occurs within 60 days of the date of the closing of such
Public Equity Offering.
6. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption payments or
sinking fund payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "CHANGE OF CONTROL OFFER") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the Accreted Value thereof (if prior to the Full
Accretion Date) plus accrued and unpaid Liquidated Damages thereon, if any, or
(if on or after the Full Accretion Date) 101% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
Change of Control Payment Date (as hereinafter defined) (the "CHANGE OF CONTROL
PURCHASE PRICE"). Within 30 days of the occurrence of a Change of Control, the
Company shall notify the Trustee in writing of such proposed occurrence and
shall make a Change of Control Offer. Within 50 days following the occurrence
of a Change of Control, the Company shall mail a notice to each Holder setting
forth the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Restricted Subsidiary consummates any Asset Sales,
within five days of each Asset Sale Trigger Date, the Company shall commence an
offer to all Holders of Notes (an "ASSET SALE OFFER") pursuant to Section 3.09
of the Indenture to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to (if prior to the Full Accretion Date) 100% of the Accreted Value
thereof on the date of repurchase, plus accrued and unpaid Liquidated Damages
thereon, if any, to the Asset Sale Offer Purchase Date, or (if on or after the
Full Accretion Date) 100% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the Asset Sale Offer
Purchase Date, in each case in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant
to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Subsidiary) may use the remaining Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. Holders of Notes that are the subject of an offer
to purchase shall receive an Asset Sale Offer from the Company prior to any
related purchase date and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes.
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<PAGE>
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30
days but not more than 60 days before a redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest shall cease to accrue on Notes or portions
thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the TIA.
12. DEFAULTS AND REMEDIES. Events of Default include:
(i) default for 30 days in the payment when due of interest or Liquidated
Damages on any Note; (ii) default in payment when due of principal or Accreted
Value of or premium, if any, on the Notes when the same becomes due and
payable, at maturity, upon redemption (including in connection with an offer
to purchase) or otherwise, (iii) failure by the Company for 45 days after
notice to the Company by the Trustee or the Holders of at least 25% in
principal amount of the Notes then outstanding to comply with any other
covenant or agreement in the Indenture or the Notes; (iv) default under
certain other agreements relating to Indebtedness of the Company or any
Material Restricted Subsidiary, which default results in the acceleration of
such Indebtedness prior to its express maturity; (v) certain final judgments
for the payment of money that remain undischarged for a period of 60 days;
(vi) certain events of bankruptcy or insolvency with respect to the Company or
any of its Material Restricted Subsidiaries; and (vii) certain foreclosure
proceedings with respect to the assets of the Company or any Material
Restricted Subsidiary. If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in Accreted Value (if prior to the Full
Accretion Date) or principal amount (if on or after the Full Accretion Date)
of the then outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency with respect
to the Company or any of its Restricted Subsidiaries, all outstanding Notes
will become due and
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<PAGE>
payable immediately without further action or notice. Holders may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in aggregate Accreted Value (if prior
to the Full Accretion Date) or aggregate principal amount (if on or after the
Full Accretion Date) of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate Accreted Value (if prior to the Full Accretion Date) or
aggregate principal amount (if on or after the Full Accretion Date) of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of the principal of, premium or Liquidated Damages, if any, or interest
on the Notes. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is required
upon becoming aware of any Default or Event of Default, to deliver to the
Trustee a statement specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder of the Company, as such, shall
have any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transferred Restricted Securities (as defined in the Notes Registration
Rights Agreement) shall have all the rights set forth in the Notes Registration
Rights Agreement, dated as of October 22, 1996, by and among the Company and the
parties named on the signature pages thereof (the "NOTES REGISTRATION RIGHTS
AGREEMENT").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company shall furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Notes Registration Rights Agreement.
Requests may be made to:
A-6
<PAGE>
Coinstar, Inc.
13231 SE 36th Street, Suite 2000
Bellevue, Washington 98006
Telecopier: (206) 644-9447
Attention: Chief Financial Officer
A-7
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Date: _________________
Your Signature:______________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee.
A-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.13 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.13
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.13 of the Indenture, state the amount you
elect to have purchased: $___________
Date:_________________________ Your Signature:_________________________
(Sign exactly as your name appears on the Note)
Tax Identification No.:_________________
Signature Guarantee.
A-9
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE(1).
The following exchanges of a part of this Global Note for Definitive Notes
have been made:
<TABLE>
<CAPTION>
Date of Exchange Amount of decrease in Amount of increase in Principal Amount of this Signature of
- ---------------- Principal Amount of Principal Amount of Global Note authorized signatory
this Global Note this Global Note following such decrease of Trustee or Note
--------------------- --------------------- (or increase) Custodian
------------------------ --------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------------------
(1) This should be included only if the Note is issued in global form.
A-10
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF NOTES
Re: 13% Senior Subordinated Discount Notes due 2006 of the Company.
This Certificate relates to $_____ principal amount of Notes held in *
________ book-entry or *_______ definitive form by ________________ (the
"TRANSFEROR").
The Transferor*:
/ / has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Note held by the Depository a
Note or Notes in definitive, registered form of authorized
denominations in an aggregate principal amount equal to its beneficial
interest in such Global Note (or the portion thereof indicated above);
or
/ / has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that Transferor is familiar with the Indenture
relating to the above captioned Notes and as provided in Section 2.06 of such
Indenture, the transfer of this Note does not require registration under the
Securities Act (as defined below) because:*
/ / Such Note is being acquired for the Transferor's own account, without
transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture).
/ / Such Note is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933, as amended
(the "SECURITIES ACT")) in reliance on Rule 144A (in satisfaction of
Section 2.06(a)(ii)(B), Section 2.06(b)(i) or Section 2.06(d)(i)(B)
of the Indenture) or pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act (in satisfaction of
Section 2.06(a)(ii)(B) or Section 2.06(d)(i)(B) of the Indenture.)
- --------------------
*Check applicable box.
B-1
<PAGE>
/ / Such Note is being transferred in accordance with Rule 144 under the
Securities Act, or pursuant to an effective registration statement
under the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or
Section 2.06(d)(i)(B) of the Indenture).
/ / Such Note is being transferred in reliance on and in compliance with
an exemption from the registration requirements of the Securities Act,
other than Rule 144A, 144 or Rule 904 under the Securities Act. An
Opinion of Counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate (in
satisfaction of Section 2.06(a)(ii)(C) or Section 2.06(d)(i)(C) of the
Indenture).
_____________________________________________
[INSERT NAME OF TRANSFEROR]
By:__________________________________________
Date:___________________________
- --------------------
*Check applicable box.
B-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXHIBIT C
The Subsidiary shall not, and shall not cause or permit any of its
subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
pay any dividend or make any other payment or distribution(s) on shares of the
Subsidiary's Capital Stock to holders of such Capital Stock (other than
dividends or distributions payable solely in shares of Capital Stock (other
than Disqualified Capital Stock)); (ii) purchase, redeem or otherwise acquire
or retire for value any Capital Stock of the Subsidiary; or (iii) make any
principal payment on, or purchase, defease, redeem, or otherwise acquire or
retire for value any Indebtedness of the Subsidiary that is subordinate in
right of payment to the [Obligations under the Indebtedness documents] (each
of the foregoing prohibited actions set forth in clauses (i), (ii) and (iii)
being referred to as a "RESTRICTED PAYMENT"), if at any time of such proposed
Restricted Payment or immediately after giving affect thereto, (a) a Default
or an Event of Default has occurred and is continuing or would result
therefrom, or (b) the Subsidiary is not, or would not be, able to incur at
least $1.00 of additional Indebtedness under [refer to section that restricts
Indebtedness in documentation evidencing Indebtedness in question], or (c) the
aggregate amount of Restricted Payments made subsequent to the date hereof
exceeds or would exceed the sum of (1) difference between (A) the cumulative
Consolidated EBITDA of the Subsidiary as of the date of such Restricted
Payment since the date hereof, minus (B) the product 2.25 times cumulative
Consolidated Interest Expense of the Subsidiary as of the date of such
Restricted Payment since the date hereof, PLUS (2) 100% of the aggregate net
proceeds received by the Subsidiary from sales of Capital Stock of the
Subsidiary since the date hereof (other than net proceeds from sales of
Disqualified Capital Stock), or (d) the aggregate amount of Restricted
Payments proposed to be made at such time exceeds the amount that is due and
payable (assuming no acceleration) in respect of those certain 13% Senior
Subordinated Discount Notes due 2006 issued by Coinstar, Inc. under the
Indenture dated October 1, 1996, during the calendar quarter in which such
determination is made. Notwithstanding the foregoing, the provisions set
forth above shall not prohibit the payment of any dividend within 60 days of
the date of declaration thereof, if at said date of declaration such payment
would have complied with the provisions of this Agreement.
C-1
<PAGE>
EXECUTION COPY
WARRANT AGREEMENT
Dated as of October 22, 1996
By and Between
COINSTAR, INC.
and
THE BANK OF NEW YORK
AS WARRANT AGENT
Warrants to Purchase 665,000 Shares of Common Stock
$.001 Par Value
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT ("AGREEMENT"), dated as of October 22, 1996 by COINSTAR,
INC., a Delaware corporation (together with any successor thereto, the
"COMPANY"), and The Bank of New York, not in its individual capacity but solely
as warrant agent (with any successor Warrant Agent, the "WARRANT AGENT").
WHEREAS, the Company has entered into a purchase agreement (the
"PURCHASE AGREEMENT") dated October 22, 1996 with Smith Barney Inc. (the
"INITIAL PURCHASER") in which the Company has agreed to sell to the Initial
Purchaser 95,000 units (the "UNITS") consisting in the aggregate of (i)
$95,000,000 aggregate principal amount at maturity of 13% Senior Subordinated
Discount Notes due October 1, 2006 (the "NOTES") of the Company to be issued
under an indenture dated as of October 1, 1996 (the "INDENTURE"), between the
Company and The Bank of New York, as trustee (in such capacity, the "TRUSTEE")
and (ii) 95,000 Warrants (the "INITIAL WARRANTS" and the certificates evidencing
the Initial Warrants being hereinafter referred to as "INITIAL WARRANT
CERTIFICATES"), each representing the right to purchase initially seven shares
of Common Stock, $.001 par value of the Company (the "COMMON STOCK"). In
addition, the Company will be obligated to issue additional warrants to the
holders of the Notes upon the occurrence of the Contingent Event ( as defined
below) (the "CONTINGENT WARRANTS" and the certificates evidencing the Contingent
Warrants being hereinafter referred to as "CONTINGENT WARRANT CERTIFICATES"),
each representing the right to purchase initially three shares of Common Stock.
The Initial Warrants and the Contingent Warrants are referred to herein
collectively as the "WARRANTS," and the Initial Warrant Certificates and the
Contingent Warrant Certificates are referred to herein collectively as the
"WARRANT CERTIFICATES";
WHEREAS, the Company desires the Warrant Agent to assist the Company
in connection with the issuance, exchange, cancellation, replacement and
exercise of the Warrants, and in this Agreement wishes to set forth, among other
things, the terms and conditions on which the Warrants may be issued, exchanged,
canceled, replaced and exercised;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND REGISTRATION
OF WARRANT CERTIFICATES
SECTION 1.1. ISSUANCE OF WARRANTS. The Initial Warrants shall be
issued in connection with the issuance of the Notes.
The Contingent Warrants shall be issued on October 1, 1998 to the then
current holders of the Notes if the Company has not consummated an offering of
Equity Interests (other than Disqualified Capital Stock) to the public pursuant
to a registration statement filed with the Commission, the gross proceeds of
which exceed $25 million, and an Exercise Event has not
<PAGE>
otherwise occurred (the "Contingent Event"). See Section 2.2 for the
definitions of the terms in this sentence.
Each Warrant Certificate shall evidence the number of Warrants specified
therein, and each Warrant evidenced thereby shall represent the right, subject
to the provisions contained herein and therein, to purchase from the Company
(and the Company shall issue and sell to such holder of the Warrant) the number
of fully paid and non-assessable shares of Common Stock stated in the Warrant
(the shares purchasable upon exercise of a Warrant being hereinafter referred to
as the "SHARES" and, where appropriate, such term shall also mean the other
securities or property purchasable and deliverable upon exercise of a Warrant as
provided in Article V) at the price specified herein and therein, in each case
subject to adjustment as provided herein and therein.
SECTION 1.2. FORM OF WARRANT CERTIFICATES. The Warrant Certificates
will initially be issued in global form (the "GLOBAL WARRANTS"), substantially
in the form of EXHIBIT A hereto (with respect to the Initial Warrants) and
EXHIBIT B hereto (with respect to the Contingent Warrants) (in each case,
including footnote 1 thereto). In the future, Warrant Certificates may be
issued in registered form as definitive Warrant certificates (the "DEFINITIVE
WARRANTS"). The Warrant Certificates evidencing the Global Warrants or the
Definitive Warrants to be delivered pursuant to this Agreement shall be
substantially in the form set forth in EXHIBIT A hereto (with respect to the
Initial Warrants) and EXHIBIT B hereto (with respect to the Contingent
Warrants). Such Global Warrants shall represent such of the outstanding
Warrants as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Warrants from time to time
endorsed thereon and that the aggregate amount of outstanding Warrants
represented thereby may from time to time be reduced or increased, as
appropriate. Any endorsement of a Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants represented thereby
shall be made by the Warrant Agent and Depository (as defined below) in
accordance with instructions given by the holder thereof. The Depository Trust
Company shall act as the Depository with respect to the Global Warrants until a
successor shall be appointed by the Company and the Warrant Agent. Upon written
request, a Warrant holder may receive from the Warrant Agent Definitive Warrants
as set forth in Section 1.7 hereof.
SECTION 1.3. EXECUTION OF WARRANT CERTIFICATES. The Warrant
Certificates shall be executed on behalf of the Company by the chairman of its
Board of Directors, its president or any vice president and attested by its
secretary or assistant secretary. Such signatures may be the manual or
facsimile signatures of the present or any future such officers. Typographical
and other minor errors or defects in any such reproduction of any signature
shall not affect the validity or enforceability of any Warrant Certificate that
has been duly countersigned and delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer before the Warrant Certificate so
signed shall be countersigned and delivered by the Warrant Agent or disposed of
by the Company, such Warrant Certificate nevertheless may be countersigned and
delivered or disposed of as though the person who signed such Warrant
Certificate had not ceased to be such officer of the Company; and any Warrant
Certificate may be signed on behalf of the Company by such persons as, at the
actual date of
2
<PAGE>
the execution of such Warrant Certificate, shall be the proper officers of the
Company, although at the date of the execution and delivery of this Agreement
any such person was not such an officer.
SECTION 1.4. AUTHENTICATION AND DELIVERY. Subject to the immediately
following paragraph, Warrant Certificates shall be authenticated by manual
signature and dated the date of authentication by the Warrant Agent and shall
not be valid for any purpose unless so authenticated and dated. The Warrant
Certificates shall be numbered and shall be registered in the Warrant Register
(as defined in Section 1.6 hereof).
Upon the receipt by the Warrant Agent of a written order of the Company,
which order shall be signed by the chairman of its Board of Directors, its
president or any vice president and attested by its secretary or assistant
secretary, and shall specify the amount of Warrants to be authenticated, whether
the Warrants are to be Global Warrants or Definitive Warrants, the date of such
Warrants and such other information as the Warrant Agent may reasonably request,
without any further action by the Company, the Warrant Agent is authorized, upon
receipt from the Company at any time and from time to time of the Warrant
Certificates, duly executed as provided in Section 1.3 hereof, to authenticate
the Warrant Certificates and deliver them. Such authentication shall be by a
duly authorized signatory of the Warrant Agent (although it shall not be
necessary for the same signatory to sign all Warrant Certificates).
In case any authorized signatory of the Warrant Agent who shall have
authenticated any of the Warrant Certificates shall cease to be such authorized
signatory before the Warrant Certificate shall be disposed of by the Company,
such Warrant Certificate nevertheless may be delivered or disposed of as though
the person who authenticated such Warrant Certificate had not ceased to be such
authorized signatory of the Warrant Agent; and any Warrant Certificate may be
authenticated on behalf of the Warrant Agent by such persons as, at the actual
time of authentication of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time of the
execution and delivery of this Agreement any such person is not such an
authorized signatory.
The Warrant Agent's authentication on all Warrant Certificates shall be in
substantially the form set forth in Exhibits A and B.
SECTION 1.5. TEMPORARY WARRANT CERTIFICATES. Pending the preparation
of definitive Warrant Certificates, the Company may execute, and the Warrant
Agent shall authenticate and deliver, temporary Warrant Certificates, which are
printed, lithographed, typewritten or otherwise produced, substantially of the
tenor of the definitive Warrant Certificates in lieu of which they are issued
and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Warrant Certificates may determine, as
evidenced by their execution of such Warrant Certificates.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section 1.9 hereof.
Subject to the
3
<PAGE>
provisions of Section 4.1 hereof, such exchange shall be without charge to the
holder. Upon surrender for cancellation of any one or more temporary Warrant
Certificates, the Company shall execute, and the Warrant Agent shall
authenticate and deliver in exchange therefor, one or more definitive Warrant
Certificates representing in the aggregate a like number of Warrants. Until so
exchanged, the holder of a temporary Warrant Certificate shall in all respects
be entitled to the same benefits under this Agreement as a holder of a
definitive Warrant Certificate.
SECTION 1.6. REGISTRATION. The Company will keep, at the office or
agency maintained by the Company for such purpose, a register or registers in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of, and registration of transfer and exchange
of, Warrants as provided in this Article. Each person designated by the Company
from time to time as a person authorized to register the transfer and exchange
of the Warrants is hereinafter called, individually and collectively, the
"REGISTRAR." The Company hereby initially appoints the Warrant Agent as
Registrar. Upon written notice to the Warrant Agent and any acting Registrar,
the Company may appoint a successor Registrar for such purposes.
The Company will at all times designate one person (who may be the Company
and who need not be a Registrar) to act as repository of a master list of names
and addresses of the holders of Warrants (the "WARRANT REGISTER"). The Warrant
Agent will act as such repository unless and until some other person is, by
written notice from the Company to the Warrant Agent and the Registrar,
designated by the Company to act as such. The Company shall cause each
Registrar to furnish to such repository, on a current basis, such information as
to all registrations of transfer and exchanges effected by such Registrar, as
may be necessary to enable such repository to maintain the Warrant Register on
as current a basis as is practicable.
SECTION 1.7. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) TRANSFER AND EXCHANGE OF DEFINITIVE WARRANTS. When Definitive
Warrants are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number
of Definitive Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested
if the requirements under this Warrant Agreement as set forth in this Section
1.7 hereof for such transactions are met; provided, however, that the Definitive
Warrants presented or surrendered for registration of transfer or exchange:
(x) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Company and the Warrant Agent, duly executed by the
holder thereof or by his attorney, duly authorized in
writing; and
4
<PAGE>
(y) in the case of Warrants the offer and sale of which have
not been registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), and are presented for
transfer or exchange prior to (x) the date which is three
years after the later of the date of original issue and
the last date on which the Company or any affiliate of
the Company was the owner of such Warrant, or any
predecessor thereto and (y) such other date, if any, as
may be required by any subsequent change in applicable
law (the "RESALE RESTRICTION TERMINATION DATE"), such
Warrants shall be accompanied, in the sole discretion of
the Company, by the following additional information and
documents, as applicable, however, it being understood
that the Warrant Agent need not determine which clause
(A) through (D) below is applicable:
(A) if such Warrant is being delivered to the Warrant
Agent by a holder for registration in the name of
such holder, without transfer, a certification
from such holder to that effect (in substantially
the form of Exhibit B hereto); or
(B) if such Warrant is being transferred to a
qualified institutional buyer (as defined in Rule
144A under the Securities Act (a "QIB")) in
accordance with Rule 144A under the Securities Act
or pursuant to an exemption from registration in
accordance with Rule 144 or Rule 904 under the
Securities Act, a certification to that effect (in
substantially the form of EXHIBIT C hereto); or
(C) if such Warrant is being transferred to an
"accredited investor" within the meaning of Rule
501(a) under the Securities Act (an "ACCREDITED
INVESTOR"), delivery of a Certificate of Transfer
in the form of EXHIBIT D hereto and an opinion of
counsel and/or other information satisfactory to
the Company to the effect that such transfer is in
compliance with the Securities Act; or
(D) if such Warrant is being transferred in reliance
on another exemption from the registration
requirements of the Securities Act, a
certification to that effect (in substantially the
form of EXHIBIT C hereto) and an opinion of
counsel reasonably acceptable to the Company to
the effect that such transfer is in compliance
with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE WARRANT FOR A BENEFICIAL
INTEREST IN A GLOBAL WARRANT. A Definitive Warrant may not be exchanged for a
beneficial interest in a Global Warrant except upon satisfaction of the
requirements set forth below. Upon receipt by the
5
<PAGE>
Warrant Agent of a Definitive Warrant, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Warrant Agent,
together with:
(A) certification, substantially in the form of
EXHIBIT C hereto, that such Definitive Warrant is
being transferred to a QIB in accordance with Rule
144A under the Securities Act or to an Accredited
Investor pursuant to another available exemption
under such Act; and
(B) written instructions directing the Warrant Agent
to make, or to direct the Depository to make, an
endorsement on the Global Warrant to reflect an
increase in the aggregate amount of the Warrants
represented by the Global Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or direct
the Depository to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Warrant Agent, the number of
Warrants represented by the Global Warrant to be increased accordingly. If no
Global Warrant is then outstanding, the Company shall issue and the Warrant
Agent shall authenticate a new Global Warrant in the appropriate amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL WARRANTS. The transfer and
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depository, in accordance with this Warrant Agreement (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL WARRANT FOR A
DEFINITIVE WARRANT.
(i) Any person having a beneficial interest in a Global
Warrant may upon request exchange such beneficial
interest for a Definitive Warrant. Upon receipt by the
Warrant Agent of written instructions or such other form
of instructions as is customary for the Depository from
the Depository or its nominee on behalf of any person
having a beneficial interest in a Global Warrant and upon
receipt by the Warrant Agent of a written order or such
other form of instructions as is customary for the
Depository or the person designated by the Depository as
having such a beneficial interest containing registration
instructions and, in the case of any such transfer or
exchange prior to the Resale Restriction Termination
Date, the following additional information and documents,
however, it being understood that the Warrant Agent need
not determine which clause (A) through (D) below is
applicable:
(A) if such beneficial interest is being transferred
to the person designated by the Depository as
being the beneficial owner, a certification from
such person to that effect (in substantially the
form of EXHIBIT C hereto); or
6
<PAGE>
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the
Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act or pursuant to an effective
registration statement in accordance with Rule 144
or Rule 904 under the Securities Act, a
certification to that effect from the transferee
or transferor (in substantially the form of
EXHIBIT C hereto); or
(C) if such beneficial interest is being transferred
to an Accredited Investor, delivery of a
Certificate of Transfer in the form of EXHIBIT D
hereto and an opinion of counsel and/or other
information satisfactory to the Company to the
effect that such transfer is in compliance with
the Securities Act; or
(D) if such beneficial interest is being transferred
in reliance on another exemption from the
registration requirements of the Securities Act, a
certification to that effect from the transferee
or transferor (in substantially the form of
EXHIBIT B hereto) and an opinion of counsel from
the transferee or transferor reasonably acceptable
to the Company to the effect that such transfer is
in compliance with the Securities Act,
then the Warrant Agent will cause, in accordance with the
standing instructions and procedures existing between the
Depository and the Warrant Agent, the aggregate amount of
the Global Warrant to be reduced and, following such
reduction, the Company will execute and, upon receipt of
an authentication order in the form of an Officers'
Certificate (as defined), the Warrant Agent will
authenticate and deliver to the transferee a Definitive
Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial
interest in a Global Warrant pursuant to this Section
1.7(d) shall be registered in such names and in such
authorized denominations as the Depository, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Warrant Agent in writing.
The Warrant Agent shall deliver such Definitive Warrants
to the persons in whose names such Warrants are so
registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL WARRANTS.
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 1.7), a Global Warrant
may not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the
7
<PAGE>
Depository or another nominee of the Depository or by the Depository or any such
nominee to a successor Depository or a nominee of such successor Depository.
(f) AUTHENTICATION OF DEFINITIVE WARRANTS IN ABSENCE OF DEPOSITORY.
If at any time:
(i) the Depository for the Warrants notifies the Company that
the Depository is unwilling or unable to continue as
Depository for the Global Warrant and a successor
Depository for the Global Warrant is not appointed by the
Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of
Definitive Warrants under this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate signed by two officers of the Company (one of whom must be
the principal executive officer, principal financial officer or principal
accounting officer) (an "OFFICERS' CERTIFICATE") requesting the authentication
and delivery of Definitive Warrants, will authenticate and deliver Definitive
Warrants, in an aggregate number equal to the aggregate number of warrants
represented by the Global Warrant, in exchange for such Global Warrant.
(g) LEGENDS.
(i) Except as permitted by the following paragraph (ii), each
Warrant Certificate evidencing the Global Warrants, the
Definitive Warrants (and all Warrants issued in exchange
therefor or substitution thereof) and the Warrant Shares
shall bear a legend substantially to the following
effect:
"THIS SECURITY EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED
HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING
ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR
8
<PAGE>
OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES
TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (1) ABOVE.
(ii) Upon any sale or transfer of a Warrant pursuant to Rule
144 under the Securities Act in accordance with this
Section 1.7 or under an effective registration statement
under the Securities Act:
(A) in the case of any Warrant that is a Definitive
Warrant, the Warrant Agent shall permit the holder
thereof to exchange such Warrant for a Definitive
Warrant that does not bear the legends set forth
above and rescind any related restriction on the
transfer of such Warrant; and
(B) any such Warrant represented by a Global Warrant
shall not be subject to the provisions set forth
in (i) above (such sales or transfers being
subject only to the provisions of Section 1.7(c)
hereof); PROVIDED, HOWEVER, that with respect to
any request for an exchange of a Warrant that is
represented by a Global Warrant for a Definitive
Warrant that does not bear the legends set forth
above, which request is made in reliance upon Rule
144 under the Securities Act, the holder thereof
shall certify in writing to the Warrant Agent that
such request is being made pursuant to Rule 144
under the Securities Act (such certification to be
substantially in the form of EXHIBIT C hereto).
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(iii) Any transfer purported to be effected without compliance
with the foregoing provisions in this paragraph (g) shall
be null and void.
(h) CANCELLATION AND/OR ADJUSTMENT OF A GLOBAL WARRANT. At such time
as all beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or canceled, such Global Warrant
shall be returned to or retained and canceled by the Warrant Agent. At any time
prior to such cancellation, if any beneficial interest in a Global Warrant is
exchanged for Definitive Warrants, redeemed, repurchased or canceled, the number
of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant, by the Warrant Agent to
reflect such reduction.
(i) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF DEFINITIVE
WARRANTS.
(i) To permit registrations of transfers and exchanges, the
Company shall execute, at the Warrant Agent's request,
and the Warrant Agent shall authenticate Definitive
Warrants and Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued upon
any registration, transfer or exchange of Definitive
Warrants or Global Warrants shall be the valid
obligations of the Company, entitled to the same benefits
under this Warrant Agreement as the Definitive Warrants
or Global Warrants surrendered upon the registration of
transfer or exchange.
(iii) Prior to due presentment for registration of transfer of
any Warrant, the Warrant Agent and the Company may deem
and treat the person in whose name any Warrant is
registered as the absolute owner of such Warrant, and
neither the Warrant Agent nor the Company shall be
affected by notice to the contrary.
(j) PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes attributable to the initial issuance of the Shares upon the exercise of
Warrants; PROVIDED, HOWEVER, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any certificates for the Shares in a name
other than that of the registered holder of a Warrant Certificate surrendered
upon the exercise of a Warrant, and the Company shall not be required to issue
or deliver such Warrant Certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid. No service charge shall be imposed for any transfer of
Warrants.
(k) INDEMNIFICATION. Each holder of a Warrant Certificate agrees to
indemnify the Company and the Warrant Agent against any liability that may
result from the transfer, exchange or assignment of such holder's Warrant
Certificate in violation of any provision of this Agreement and/or applicable
U.S. Federal or state securities law.
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SECTION 1.8. LOST, STOLEN, DESTROYED, DEFACED OR MUTILATED WARRANT
CERTIFICATES. Upon receipt by the Company and the Warrant Agent (or any agent
of the Company or the Warrant Agent, if requested by the Company or Warrant
Agent) of evidence satisfactory to them of the loss, theft, destruction,
defacement, or mutilation of any Warrant Certificate and of indemnity
satisfactory to them and, in the case of mutilation or defacement, upon
surrender thereof to the Warrant Agent for cancellation, then, in the absence of
notice to the Company or the Warrant Agent that such Warrant Certificate has
been acquired by a bona fide purchaser or holder in due course, the Company
shall execute, and an authorized signatory of the Warrant Agent shall manually
authenticate and deliver, in exchange for or in lieu of the lost, stolen,
destroyed, defaced or mutilated Warrant Certificate, a new Warrant Certificate
representing a like number of Warrants, bearing a number or other distinguishing
symbol not contemporaneously outstanding. Upon the issuance of any new Warrant
Certificate under this Section, the Company may require the payment from the
holder of such Warrant Certificate of a sum sufficient to cover any tax, stamp
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Warrant Agent and the
Registrar) in connection therewith. Every substitute Warrant Certificate
executed and delivered pursuant to this Section in lieu of any lost, stolen or
destroyed Warrant Certificate shall constitute an additional contractual
obligation of the Company, whether or not the lost, stolen or destroyed Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled to
the benefits of (but shall be subject to all the limitations of rights set forth
in) this Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 1.8 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates and shall preclude (to the
extent lawful) any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement of lost, stolen, destroyed, defaced or mutilated Warrant
Certificates.
The Warrant Agent is hereby authorized to authenticate in accordance with
the provisions of this Agreement, and deliver the new Warrant Certificates
required pursuant to the provisions of this Section.
SECTION 1.9. OFFICES FOR EXERCISE, ETC. So long as any of the
Warrants remain outstanding, the Company will designate and maintain in the
Borough of Manhattan, The City of New York, (a) an office or agency where the
Warrant Certificates may be presented for exercise, (b) an office or agency
where the Warrant Certificates may be presented for registration of transfer and
for exchange (including the exchange of temporary Warrant Certificates for
definitive Warrant Certificates pursuant to Section 1.5 hereof), and (c) an
office or agency where notices and demands to or upon the Company in respect of
the Warrants or of this Agreement may be served. The Company may from time to
time change or rescind such designation, as it may deem desirable or expedient;
PROVIDED, HOWEVER, that an office or agency shall at all times be maintained in
the Borough of Manhattan, The City of New York, as provided in the first
sentence of this Section. In addition to such office or offices or agency or
agencies, the Company may from time to time designate and maintain one or more
additional offices or agencies within or outside The City of New York, where
Warrant Certificates may be presented for exercise or for registration of
transfer or for exchange, and the Company may from time to time change or
rescind such designation, as it may deem desirable or expedient. The Company
will give to the Warrant Agent
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written notice of the location of any such office or agency and of any change of
location thereof. The Company hereby designates the Warrant Agent at its
corporate trust office located at 101 Barclay Street, 21st Floor, New York, NY
10286 (the "WARRANT AGENT OFFICE"), as the initial agency maintained for each
such purpose. In case the Company shall fail to maintain any such office or
agency or shall fail to give such notice of the location or of any change in the
location thereof, presentations and demands may be made and notice may be served
at the Warrant Agent Office and the Company appoints the Warrant Agent as its
agent to receive all such presentations, surrenders, notices and demands.
SECTION 1.10. OWNERSHIP OF WARRANT The Company or the Warrant Agent
may deem and treat the person in whose name the Warrant is registered as the
holder and owner hereof (notwithstanding any notations of ownership or writing
thereon made by any person other than the Company or the Warrant Agent) for all
purposes and shall not be affected by any notice to the contrary, until
presentment of this Warrant for registration of transfer as provided in this
Agreement.
ARTICLE II
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
SECTION 2.1. DURATION OF WARRANTS. Subject to the terms and
conditions established herein, the Warrants shall expire at 5:00 p.m., New York
time, on the earlier to occur of (i) 90 days after an Exercise Event which
causes such Warrants to become exercisable and (ii) October 1, 2006 (such
earlier date, the "EXPIRATION DATE"); PROVIDED, HOWEVER, that if the Company
delivers a notice to holders of Warrants and to the Warrant Agent prior to the
Expiration Date stating that upon advice of legal counsel to the Company, the
Warrants cannot be exercised without the benefit of an effective registration
statement and further stating that the Company does not expect such registration
statement to become effective on or before the Expiration Date, then the
Warrants shall expire on the third Business Day following the effectiveness of
such registration statement. Each Warrant may be exercised on any Business Day
(as defined below) on or after an Exercisability Date (as defined below) and on
or prior to the close of business on the Expiration Date.
Any Warrant not exercised before the close of business on the Expiration
Date shall become void, and all rights of the holder under the Warrant
Certificate evidencing such Warrant and under this Agreement shall cease.
"BUSINESS DAY" shall mean any day on which (i) banks in New York City, (ii)
the principal national securities exchange or market, if any, on which the
Common Stock is listed or admitted to trading and (iii) the principal national
securities exchange or market, if any, on which the Warrants are listed or
admitted to trading are open for business.
SECTION 2.2. EXERCISE, EXERCISE PRICE, SETTLEMENT AND DELIVERY.
(a) Subject to the provisions of this Agreement, a holder of Warrants
shall have the right to purchase from the Company (i) on and for 10 days
following a Co-Sale Event
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the number of fully paid and non-assessable Shares which shall be included in a
sale pursuant to Section 3 or 5 of the Co-Sale Agreement (and in no event
greater than the number of Shares set forth in the applicable Warrant
Certificate) and (ii) on or after the occurrence of an Exercise Event (the date
of the occurrence of an Exercise Event or a Co-Sale Event, as applicable, an
"EXERCISABILITY DATE") and on or prior to the close of business on the
Expiration Date the number of fully paid, registered and non-assessable Shares
set forth in the applicable Warrant Certificate, or, if a Co-Sale Event has
occurred, and a holder of Warrants has exercised a Warrant with respect to less
than all of the Shares set forth in the Warrant Certificate, such number of
remaining Shares, in each case subject to adjustment in accordance with Article
V hereof, at the purchase price of $.01 for each Share for which a Warrant is
exercised (the "EXERCISE PRICE"). The number and kind of Shares for which a
Warrant may be exercised (the "EXERCISE RATE") shall be subject to adjustment
from time to time as set forth in Article V hereof.
"CAPITAL STOCK" means: (i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
of corporate stock; (iii) in the case of a partnership or limited liability
company, partnership interests (whether general or limited) or other
membership interests; and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Subsidiaries
taken as a whole to any "person" or "group" (within the meanings of
Sections 13(d)(3) and 14(d)(2), respectively, of the Exchange Act) other
than (y) the holders of the Company's Capital Stock as of the date of this
Agreement, or (z) the Principal or his Related Parties (as defined below),
(ii) the adoption of a plan relating to the liquidation or dissolution of
the Company and (iii) the consummation of any transaction (including any
merger or consolidation) the result of which is that any "person" or
"group" (as defined above), other than (y) the holders of the Company's
Capital Stock as of the date of this Agreement, or (z) the Principal and
his Related Parties, becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of more than 50% of the Voting Stock of the Company or (iv)
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 new directors whose election to such Board of Directors or whose
nomination for election by the stockholders of the Company was approved by
a vote of a majority of the directors of the Company 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.
For purposes of the foregoing definition of Change of Control, the transfer
(by lease, assignment, sale or otherwise, in a single transaction or series of
related transactions) of all or substantially all of the properties or assets of
one or more Subsidiaries of the Company, the
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Capital Stock of which constitutes all or substantially all of the properties
and assets of the Company, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.
"CO-SALE EVENT" means so long as an Exercise Event shall not have
previously occurred, the seventh day prior to any date on which a holder of
Warrants will sell all or a portion of the Warrants or Shares pursuant to
Sections 3 or 5 of the Amended and Restated Co-Sale Agreement dated as of
December 15, 1995 by and among the Company and the other Persons party thereto,
as amended or supplemented from time to time (the "Co-Sale Agreement").
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock to the extent that, by
is terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the stated maturity of the Notes.
"EQUITY INTERESTS" means, collectively, Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"EXERCISE EVENT" means, with respect to each Warrant, the date of the
earliest of: (1) the seventh day prior to the occurrence of a Change of
Control, (2) the consummation of a Public Equity Offering, (3) a consolidation,
merger or purchase of Assets involving the Company or any of its Subsidiaries
that results in the Common Stock of the Company being subject to registration
under the Exchange Act, (4) the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, or (5) 90 days prior to
October 1, 2006.
"PERSON" means any individual, corporation, company (including limited
liability company), partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or a government or any agency or
political subdivision thereof (including any subdivision or ongoing business of
any such entity or substantially all of the assets of any such entity,
subdivision or business..
"PLAN OF LIQUIDATION" means, with respect to any Person, a plan (including
by operation of law) that provides for, contemplates or the effectuation of
which is preceded or accompanied by (whether or not substantially
contemporaneously) (i) the sale, lease, conveyance or other disposition of all
or substantially all of the assets of such Person otherwise than as an entirety
or substantially as an entirety and (ii) the distribution of all or
substantially all of the proceeds of such sale, lease, conveyance or other
disposition and all or substantially all of the remaining assets of such Person
to holders of Capital Stock of such Person.
"PRINCIPAL" means Mr. Jens H. Molbak.
"PUBLIC EQUITY OFFERING" means the consummation of an offering of Equity
Interests (other than Disqualified Capital Stock) by the Company to the public
pursuant to a registration statement filed with the Commission, the aggregate
gross proceeds of which exceed $10 million.
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"RELATED PARTY" means, with respect to any Principal, (i) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse, or immediate family
member (in the case of an individual) of such Principal or (ii) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Person referred to
in the immediately preceding clause (i).
"SUBSIDIARY," with respect to any Person, means (i) any corporation, a
majority of whose voting stock (defined as any class or classes of capital stock
having voting power under ordinary circumstances to elect a majority of the
Board of Directors) is owned, directly or indirectly, by the Company, by one or
more Subsidiaries, or by the Company and one or more Subsidiaries and (ii) any
other person (other than a corporation) in which the Company, one or more
Subsidiaries, or the Company and one or more Subsidiaries, directly or
indirectly, has at least a majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof. As of the Issue Date, the
Company has no Subsidiaries.
"VOTING STOCK" means, with respect to any specified Person, Capital Stock
with voting power, under ordinary circumstances and without regard to the
occurrence of any contingency, to elect the directors or other managers or
trustees of such Person.
(b) Warrants may be exercised on or after an Exercisability Date by
(i) surrendering at any office or agency maintained for that purpose by the
Company pursuant to Section 1.9 (each a "WARRANT EXERCISE OFFICE") the Warrant
Certificate evidencing such Warrants with the form of election to purchase
Shares set forth on the reverse side of the Warrant Certificate (the "ELECTION
TO EXERCISE") duly completed and signed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney, and in the case of a transfer, such signature shall be
guaranteed by an eligible guarantor institution, and (ii) paying in full the
Exercise Price for each such Warrant exercised and any other amounts required to
be paid pursuant to Section 1.7(j) hereof.
(c) Simultaneously with the exercise of each Warrant, payment in full
of the Exercise Price shall be made in cash or by certified or official bank
check or by wire transfer to be delivered to the office or agency where the
Warrant Certificate is being surrendered. Notwithstanding the foregoing
sentence, a Warrant may also be exercised solely by the surrender of the
Warrant, and without the payment of the Exercise Price in cash, for such number
of Shares equal to the product of (1) the number of Shares for which such
Warrant is exercisable with payment of the Exercise Price as of the date of
exercise and (2) the Cashless Exercise Ratio. For purposes of this Agreement,
the "CASHLESS EXERCISE RATIO" shall equal a fraction, the numerator of which is
the excess of the Current Market Value of the Common Stock on the date of
exercise (calculated as set forth in Section 5.1(o) hereof) over the Exercise
Price Per Share as of the date of exercise and the denominator of which is the
Current Market Value of the Common Stock on the date of exercise (calculated as
set forth in Section 5.1(o) hereof). An exercise of a Warrant in accordance
with the immediately preceding sentences is herein called a "CASHLESS EXERCISE."
Upon surrender of a Warrant Certificate representing more than one Warrant in
connection with the holder's option to elect a Cashless Exercise, the number of
Shares deliverable upon a Cashless Exercise shall be equal to the number of
Warrants that the holder specifies is to be exercised
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pursuant to a Cashless Exercise multiplied by the Cashless Exercise Ratio. All
provisions of this Agreement shall be applicable with respect to an exercise of
a Warrant Certificate pursuant to a Cashless Exercise for less than the full
number of Warrants represented thereby. "EXERCISE PRICE PER SHARE" means the
Exercise Price divided by the number of Shares for which a Warrant is then
exercisable (without giving effect to the Cashless Exercise option). No payment
or adjustment shall be made on account of any dividends on the Shares issued
upon exercise of a Warrant.
(d) Upon such surrender of a Warrant Certificate and payment and
collection of the Exercise Price at any Warrant Exercise Office (other than any
Warrant Exercise Office that also is an office of the Warrant Agent), such
Warrant Certificate and payment shall be promptly delivered to the Warrant
Agent. The "EXERCISE DATE" for a Warrant shall be the date when all of the
items referred to in the first sentence of paragraphs (b) and (c) of this
Section 2.2 are received by the Warrant Agent at or prior to 11:00 a.m., New
York City time, on a Business Day and the exercise of the Warrants will be
effective as of such Exercise Date. If any items referred to in the first
sentence of paragraphs (b) and (c) are received after 11:00 a.m., New York City
time, on a Business Day, the exercise of the Warrants to which such item relates
will be effective on the next succeeding Business Day. Notwithstanding the
foregoing, in the case of an exercise of Warrants on the Expiration Date, if all
of the items referred to in the first sentence of paragraphs (b) and (c) are
received by the Warrant Agent at or prior to 5:00 p.m., New York City time, on
such Expiration Date, the exercise of the Warrants to which such items relate
will be effective on the Expiration Date.
(e) Upon the exercise of a Warrant in accordance with the terms
hereof, the receipt of a Warrant Certificate and payment of the Exercise Price
(or election of the Cashless Exercise option), the Warrant Agent shall: (i)
except to the extent exercise of the Warrant has been effected through Cashless
Exercise, cause an amount equal to the Exercise Price to be paid to the Company
by crediting the same to the account designated by the Company in writing to the
Warrant Agent for that purpose; (ii) advise the Company immediately by telephone
of the amount so deposited to the Company's account and promptly confirm such
telephonic advice in writing; and (iii) as soon as practicable, advise the
Company in writing of the number of Warrants exercised in accordance with the
terms and conditions of this Agreement and the Warrant Certificates, the
instructions of each exercising holder of the Warrant Certificates with respect
to delivery of the Shares to which such holder is entitled upon such exercise,
and such other information as the Company shall reasonably request.
(f) Subject to Section 5.2 hereof, as soon as practicable after the
exercise of any Warrant or Warrants in accordance with the terms hereof, and in
any event within ten (10) days thereafter, the Company shall issue or cause to
be issued to or upon the written order of the registered holder of the Warrant
Certificate evidencing such exercised Warrant or Warrants, a certificate or
certificates evidencing the Shares to which such holder is entitled, in fully
registered form, registered in such name or names as may be directed by such
holder pursuant to the Election to Exercise, as set forth on the reverse of the
Warrant Certificate. Such certificate or certificates evidencing the Shares
shall be deemed to have been issued and any persons who are designated to be
named therein shall be deemed to have become the holder of record of such Shares
as of the close of business on the Exercise Date. After such exercise of any
Warrant or Warrants, the Company shall also issue or cause to be issued to or
upon the written order of the
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registered holder of such Warrant Certificate, a new Warrant Certificate,
countersigned by the Warrant Agent pursuant to written instruction, evidencing
the number of Warrants, if any, remaining unexercised unless such Warrants shall
have expired.
SECTION 2.3. CANCELLATION OF WARRANT CERTIFICATES. In the event the
Company shall purchase or otherwise acquire Warrants, the Warrant Certificates
evidencing such Warrants may thereupon be delivered to the Warrant Agent, and if
so delivered, shall at the Company's written instruction be canceled by it and
retired. The Warrant Agent shall cancel all Warrant Certificates properly
surrendered for exchange, substitution, transfer or exercise. The Warrant Agent
shall deliver such canceled Warrant Certificates to the Company.
SECTION 2.4. NOTICE OF AN EXERCISE EVENT OR CO-SALE EVENT. The
Company shall, to the extent reasonably practicable, not fewer than 30 days nor
more than 60 days prior to the occurrence of an Exercise Event or a Co-Sale
Event, send to the Warrant Agent and each holder of Warrants and to each
beneficial owner of the Warrants to the extent that the Warrants, if any, are
held of record by a depository or other agent, by first-class mail, at the
addresses appearing on the Warrant Register, a notice of the Exercise Event or
Co-Sale Event to occur, which notice shall describe the type of Exercise Event
or Co-Sale Event and the date of the proposed occurrence thereof and the date of
expiration of the right to exercise the Warrants prominently set forth in the
face of such notice.
ARTICLE III.
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.1. ENFORCEMENT OF RIGHTS.
(a) Notwithstanding any of the provisions of this Agreement, any
holder of any Warrant Certificate, without the consent of the Warrant Agent, the
holder of any Shares or the holder of any other Warrant Certificate, may, in and
for his own behalf, enforce, and may institute and maintain any suit, action or
proceeding against the Company suitable to enforce, his right to exercise the
Warrant or Warrants evidenced by his Warrant Certificate in the manner provided
in such Warrant Certificate and in this Agreement.
(b) Except as set forth in this Article III, neither the Warrants nor
any Warrant Certificate shall entitle the holders thereof to any of the rights
of a holder of Shares, including, without limitation, the right to vote or to
receive any dividends or other payments or to consent or to receive notice as
stockholders in respect of the meetings of stockholders or for the election of
directors of the Company or any other matter, or any rights whatsoever as
stockholders of the Company.
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ARTICLE IV.
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.1. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrants and of the Shares
upon the exercise of Warrants; PROVIDED, HOWEVER, that the Company shall not be
required to pay any tax or other governmental charge which may be payable in
respect of any transfer or exchange of any Warrant Certificates or any
certificates for Shares in a name other than the registered holder of a Warrant
Certificate surrendered upon the exercise of a Warrant. In any such case, no
transfer or exchange shall be made unless or until the person or persons
requesting issuance thereof shall have paid to the Company the amount of such
tax or other governmental charge or shall have established to the satisfaction
of the Company that such tax or other governmental charge has been paid or an
exemption is available therefrom.
SECTION 4.2. QUALIFICATION UNDER THE SECURITIES LAWS. The Company
shall comply with the terms and provisions of the Warrant Registration Rights
Agreement by and between the Company and the Initial Purchaser dated as of the
date of this Agreement (the "Warrant Registration Rights Agreement") relating to
the registration or other qualification under the Securities Act of the offer
and sale by the Company of the Shares issuable upon exercise of the Warrants.
SECTION 4.3. REPURCHASE. In the event that the Company has not
consummated a Public Equity Offering by October 1, 2006 (the "Trigger Date"),
the Company shall, at its option, (i) make an offer to purchase, for cash at
fair market value, all outstanding Warrants and Shares issued (if permitted by
applicable law) or (ii) take all necessary action to cause all of the Shares
issued or issuable to be registered or otherwise qualified under the provisions
of the Securities Act pursuant to an effective registration statement within 120
days of the Trigger Date (if permitted by applicable law), in accordance with
the procedures set forth in Section 2.2 of the Warrant Registration Rights
Agreement, as if such registration were a Demand Registration as such term is
defined therein.
SECTION 4.4. RULES 144 AND 144A. The Company covenants that it will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Securities and
Exchange Commission thereunder in a timely manner in accordance with the
requirements of the Securities Act and the Exchange Act and, if at any time the
Company is not required to file such reports, it will, upon the request of any
holder or beneficial owner of Warrants, make available such information
necessary to permit sales pursuant to Rule 144A under the Securities Act. The
Company further covenants that it will take such further action as any holder or
beneficial owner of Warrants may reasonably request, all to the extent required
from time to time to enable such holder or beneficial owner to sell Warrants
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities Act,
as such Rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission (it being
expressly understood that the foregoing shall not create any
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obligation on the part of the Company to file periodic or other reports under
the Exchange Act at any time that it is not then required to file such reports
pursuant to the Exchange Act).
SECTION 4.5. REPORTS. For long as the Company is not subject to the
reporting requirements of the Exchange Act, the Company shall furnish to all
holders of Warrants all audited and unaudited quarterly and annual financial
information that would be required to be contained in a filing with the
Securities and Exchange Commission on Forms 10-Q and 10-K if the Company were
required to file such forms.
SECTION 4.6. RIGHT OF FIRST REFUSAL. The Company hereby waives and
agrees not to exercise its right of first refusal pursuant to Section 45 of the
Company's Amended and Restated Bylaws with respect to any transfer of the
Warrants or the Warrant Shares.
ARTICLE V.
ADJUSTMENTS
SECTION 5.1. ADJUSTMENT OF EXERCISE RATE; NOTICES. The Exercise Rate
is subject to adjustment from time to time as provided in this Section.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If, after the date
hereof, the Company:
(i) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares;
(iv) pays a dividend or makes a distribution on its Common
Stock in shares of its Capital Stock (other than Common
Stock or rights, warrants, or options for its Common
Stock to the extent such issuance or distribution is
covered by Section 5.3); or
(v) issues by reclassification of its Common Stock any shares
of its Capital Stock (other than rights, warrants or
options for its Common Stock);
then the Exercise Rate in effect immediately prior to such action shall be
adjusted so that the holder of a Warrant thereafter exercised may receive the
number of shares of Capital Stock of the Company which such holder would have
owned immediately following such action if such holder had exercised the Warrant
immediately prior to such action or immediately prior to the record date
applicable thereto, if any (regardless of whether the Warrants are then
exercisable and without giving effect to the Cashless Exercise option).
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The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification. In the event
that such dividend or distribution is not so paid or made or such subdivision,
combination or reclassification is not effected, the Exercise Rate shall again
be adjusted to be the Exercise Rate which would then be in effect if such record
date or effective date had not been so fixed. Any adjustment made pursuant to
this subsection (a) shall become effective immediately after the effective date
of such event retroactive to the record date, if any, for such event.
If after an adjustment a holder of a Warrant upon exercise of such Warrant
may receive shares of two or more classes of Capital Stock of the Company, the
Exercise Rate shall thereafter be subject to adjustment upon the occurrence of
an action taken with respect to any such class of Capital Stock as is
contemplated by this Article V with respect to the Common Stock, on terms
comparable to those applicable to Common Stock in this Article V.
(b) ADJUSTMENT FOR SALE OF COMMON STOCK BELOW CURRENT MARKET
VALUE. If, after the date hereof, the Company sells any Common Stock or any
securities convertible into or exchangeable or exercisable for the Common
Stock (other than (1) Contingent Warrants, (2) pursuant to the exercise of
the Warrants, any Common Stock or any security convertible into, or
exchangeable or exercisable for, the Common Stock as to which the issuance
thereof has previously been the subject of any required adjustment pursuant
to this Article V, (3) the issuance of Common Stock upon the conversion,
exchange or exercise of convertible, exchangeable or exercisable securities
of the Company outstanding on the date of this Agreement, including the
Warrants and Contingent Warrants issued pursuant to the Indenture (to the
extent in accordance with the terms of such securities as in effect on the
date of this Agreement), (4) any equity securities issued in connection with
an underwritten public offering at a price which a nationally -recognized
managing underwriter determines to equal the fair market value of such
securities, (5) Common Stock or options, warrants or other Common Stock
purchase rights, or the Common Stock issued pursuant to such options,
warrants or other rights, granted or sold to employees, officers or directors
of, or consultants or advisors to, the Company or any subsidiary pursuant to
stock purchase, stock option or other plans or arrangements that are approved
by the Board of Directors of the Company (collectively, "EMPLOYEE EQUITY
ARRANGEMENTS") or (6) equity securities issued in connection with strategic
transactions between the Company and one or more other entities (but not
including Affiliates (as defined in the Indenture)) that have been approved
by the Board of Directors of the Company (collectively, "STRATEGIC
TRANSACTIONS"), including (A) joint ventures, manufacturing, marketing or
distribution arrangements or (B) technology transfer or development
arrangements; PROVIDED, HOWEVER, that this exception shall not be applicable
to the extent that the aggregate number of shares of Common Stock issued or
issuable pursuant to Employee Equity Arrangements and Strategic Transactions
at less than current market value shall exceed 134,755 shares of Common
Stock) then, unless the Board of Directors determines in good faith that,
taking into account all relevant circumstances, the Company has not sold any
such securities for less than the Current Market Value, the Exercise Rate
shall be adjusted in accordance with the formula below:
E' = E x (O + N)
---------------
(O + (N x P/M))
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where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding (including shares
issuable upon conversion, exchange or exercise of convertible,
exchangeable or exerciseable securities of the Company) on the date of
sale of Common Stock at a price per share less than the Current Market
Value to which this paragraph (b) applies;
N = the number of shares of Common Stock so sold or the maximum stated
number of shares of Common Stock issuable upon the conversion,
exchange, or exercise of any such convertible, exchangeable or
exercisable securities, as the case may be;
P = the offering price per share pursuant to any such convertible,
exchangeable or exercisable securities so sold or the sale price of
the shares so sold, as the case may be, PLUS the consideration paid to
acquire such securities, if applicable; and
M = the Current Market Value as of the Time of Determination or at the
time of sale, as the case may be.
If the Exercise Rate is required to be adjusted, in determining the price
per share at which Common Stock or other securities are sold for the purposes of
such adjustment, (i) to the extent the price consists of cash, such price shall
be the amount of cash received by the Company before deduction of any
underwriting or similar commissions, concessions or compensation determined by
the Board of Directors to be paid or allowed by the Company in connection
therewith; (ii) to the extent the price consists of consideration other than
cash, such price shall be the fair market value of such consideration as
determined in good faith by the Board of Directors, taking into account all
relevant circumstances; and (iii) if Common Stock or other securities are sold
in a transaction involving other assets or consideration, such price shall be
the fair market value of the aggregate consideration received by the Company
which the Board of Directors determines in good faith to be allocable to such
Common Stock or other securities, taking into account all relevant
circumstances.
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The adjustment shall become effective immediately after the record date for
the determination of stockholders entitled to receive the rights, warrants or
options to which this paragraph (b) applies or upon consummation of the sale of
Common Stock, as the case may be. To the extent that shares of Common Stock are
not delivered after the expiration of such rights, options or warrants, the
Exercise Rate shall be readjusted to the Exercise Rate which would otherwise be
in effect had the adjustment made upon the issuance of such rights, options or
warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered. In the event that such rights, options or
warrants are not so issued, the Exercise Rate shall again be adjusted to be the
Exercise Rate which would then be in effect if such date fixed for determination
of stockholders entitled to receive such rights, options or warrants had not
been so fixed.
No adjustment shall be made under this paragraph (b) if the application of
the formula stated above in this paragraph (b) would result in a value of E'
that is lower than the value of E.
(c) NOTICE OF ADJUSTMENT. Whenever the Exercise Rate is adjusted,
the Company shall promptly mail to holders of Warrants at the addresses
appearing on the Warrant Register a notice of the adjustment. The Company shall
file with the Warrant Agent and any other Registrar such notice and a
certificate from the Company's independent public accountants briefly stating
the facts requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence that the adjustment is correct.
Neither the Warrant Agent nor any such Registrar shall be under any duty or
responsibility with respect to any such certificate except to exhibit the same
during normal business hours to any holder desiring inspection thereof.
(d) MINIMUM ADJUSTMENT OF EXERCISE RATE. If the amount of the
Exercise Rate adjustment required pursuant to this Section would be less than
one percent (1%) of the Exercise Rate in effect at the time such adjustment is
otherwise so required to be made, such amount shall be carried forward and
adjustment with respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least 1% of such Exercise Rate
PROVIDED that, upon the exercise of this Warrant, all adjustments carried
forward and not theretofore made up to and including the date of such exercise
shall be made to the nearest one-one thousandth of a share.
(e) REORGANIZATION OF COMPANY; SPECIAL DISTRIBUTIONS. If the
Company, in a single transaction or through a series of related transactions,
consolidates with or merges with or into any other person or transfers (by
lease, assignment, sale or otherwise) all or substantially all of its properties
and assets to another person or group of affiliated persons (other than a sale
of all or substantially all of the assets of the Company in a transaction in
which the holders of Common Stock immediately prior to such transaction do not
receive securities, cash, or other assets of the Company or any other person) or
is a party to a merger or binding share exchange which reclassifies or changes
its outstanding Common Stock, the person obligated to deliver securities, cash
or other assets upon exercise of Warrants shall enter into a supplemental
warrant agreement. If the issuer of securities deliverable upon exercise of
Warrants is an affiliate of the successor Company, that issuer shall join in the
supplemental warrant agreement.
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The supplemental warrant agreement shall provide that the holder of a
Warrant may exercise it for the kind and amount of securities, cash or other
assets which such holder would have received immediately after the
consolidation, merger, binding share exchange or transfer if such holder had
exercised the Warrant immediately before the effective date of the transaction
(whether or not the Warrants were then exercisable and without giving effect to
the Cashless Exercise option), assuming (to the extent applicable) that such
holder (i) was not a constituent person or an affiliate of a constituent person
to such transaction; (ii) made no election with respect thereto; and (iii) was
treated alike with the plurality of non-electing holders. The supplemental
warrant agreement shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
V. The successor Company shall mail to holders of Warrants at the addresses
appearing on the Warrant Register a notice briefly describing the supplemental
warrant agreement.
If this paragraph (e) applies paragraph (a) shall not apply.
(f) COMPANY DETERMINATION FINAL. Any determination that the Company
or the Board of Directors of the Company must make pursuant to this Article V is
conclusive, in the absence of manifest error.
(g) WARRANT AGENT'S ADJUSTMENT DISCLAIMER. The Warrant Agent has no
duty to determine when an adjustment under this Article V should be made, how it
should be made or what it should be. The Warrant Agent has no duty to determine
whether a supplemental warrant agreement under paragraph (e) need be entered
into or whether any provisions of any supplemental warrant agreement are
correct. The Warrant Agent shall not be accountable for and makes no
representation as to the validity or value of any securities or assets issued
upon exercise of Warrants. The Warrant Agent shall not be responsible for the
Company's failure to comply with this Article V.
(h) ADJUSTMENT FOR TAX PURPOSES. The Company may make such increases
in the Exercise Rate, in addition to those otherwise required by this Section,
as it determines in its sole discretion to make in order that any event treated
for Federal income tax purposes as a dividend of stock or stock rights shall not
be taxable to the recipients.
(i) UNDERLYING SHARES. The Company shall at all times reserve and
keep available, free from preemptive rights, out of its authorized but unissued
Common Stock or Common Stock held in the treasury of the Company, for the
purpose of effecting the exercise of Warrants, the full number of Shares then
deliverable upon the exercise of all Warrants then outstanding (without giving
effect to the Cashless Exercise Option), and the shares so deliverable shall be
fully paid and nonassessable and free from all liens and security interests.
(j) SPECIFICITY OF ADJUSTMENT. Irrespective of any adjustments in
the number or kind of shares purchasable upon the exercise of the Warrants,
Warrant Certificates theretofore or thereafter issued may continue to express
the same number and kind of Shares per Warrant as are stated on the Warrant
Certificates initially issuable pursuant to this Agreement.
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(k) ADJUSTMENTS TO PAR VALUE. The Company shall make such
adjustments to the par value of the Common Stock in order that, upon exercise of
the Warrants, the Shares will be fully paid and non-assessable.
(l) VOLUNTARY ADJUSTMENT. The Company from time to time may increase
the Exercise Rate by any number and for any period of time (PROVIDED, that such
period is not less than 20 Business Days). Whenever the Exercise Rate is so
increased, the Company shall mail to holders at the addresses appearing on the
Warrant Register and file with the Warrant Agent a notice of the increase. The
Company shall give the notice at least 15 days before the date the increased
Exercise Rate takes effect. The notice shall state the increased Exercise Rate
and the period it will be in effect. A voluntary increase in the Exercise Rate
does not change or adjust the Exercise Rate otherwise in effect as determined by
this Section 5.1.
(m) NO OTHER ADJUSTMENT FOR DIVIDENDS. Except as provided in this
Article V, no payment or adjustment will be made for dividends on any Common
Stock.
(n) MULTIPLE ADJUSTMENTS. After an adjustment to the Exercise Rate
under this Article V, any subsequent event requiring an adjustment under this
Article V shall cause an adjustment to the Exercise Rate as so adjusted.
(o) DEFINITIONS.
"CURRENT MARKET VALUE" per share of Common Stock or of any other security
at any date shall be (1) if the security is not registered under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), (i) the value of the
security determined reasonably and in good faith by a disinterested majority of
the Board of Directors of the Company and certified in a board resolution, or,
if at the time there are not at least three disinterested members of the Board
of Directors, by a nationally recognized investment banking firm or appraisal
firm which is not an affiliate of the Company ("INDEPENDENT FINANCIAL EXPERT"),
or (2) if the security is registered under the Exchange Act, the lesser of (A)
the average of the daily closing bid prices for each Business Day during the
period commencing 15 Business Days before such date and ending on the date one
day prior to such date or, if the security has been registered under the
Exchange Act for less than 15 consecutive Business Days before such date, then
the average of the daily closing bid prices for all of the Business Days before
such date for which daily closing bid prices are available or (B) the closing
price on the date of issuance, except that in connection with any Employee
Equity Arrangement (as defined in Section 5.1(b), Current Market Value shall
equal 100% of the closing price of the Common Stock on the date such Employee
Equity Arrangement is awarded. If the closing bid is not determinable for at
least 10 Business Days in such period, the Current Market Value of the security
shall be determined as if the security were not registered under the Exchange
Act. For purposes of this definition, a director shall be deemed to be
"disinterested" if he or she is not, either directly or indirectly, purchasing
shares of Common Stock or other securities in connection with the transaction
giving rise to the requirement that the Board of Directors make a determination
of the value of such securities.
(p) Any adjustment to the Exercise Rate under this Article V which is
effective prior to the issuance of the Contingent Warrants shall be deemed
effective upon issuance of the
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Contingent Warrants such that the Exercise Rate with respect to the Contingent
Warrants shall be the same as the Exercise Rate with respect to the Initial
Warrants on the date of issuance of the Contingent Warrants.
"TIME OF DETERMINATION" means the time and date of the determination of
stockholders entitled to receive rights, warrants, or options or a distribution,
in each case, to which paragraph (b) applies.
SECTION 5.2. FRACTIONAL SHARES. The Company will not be required to
issue fractional Shares upon exercise of the Warrants or distribute Share
certificates that evidence fractional Shares. In lieu of fractional Shares, if
the Company so elects, there shall be paid to the registered holders of Warrant
Certificates at the time Warrants evidenced thereby are exercised as herein
provided an amount in cash equal to the same fraction of the Current Market
Value, as defined in paragraph (o) of Section 5.1 of this Agreement, per Share
on the Business Day preceding the date the Warrant Certificates evidencing such
Warrants are surrendered for exercise. Such payments will be made by check or
by transfer to an account maintained by such registered holder with a bank in
The City of New York. If any holder surrenders for exercise more than one
Warrant Certificate, the number of Shares deliverable to such holder may, at the
option of the Company, be computed on the basis of the aggregate amount of all
the Warrants exercised by such holder.
SECTION 5.3. CERTAIN DISTRIBUTIONS. If at any time the Company
grants, issues or sells options, convertible securities, or rights to purchase
Capital Stock, warrants or other securities pro rata to the record holders of
the Common Stock (the "DISTRIBUTION RIGHTS") or, without duplication, makes any
dividend or otherwise makes any distribution ("DISTRIBUTION") on shares of
Common Stock (whether in cash, property, evidences of indebtedness or
otherwise), then the Company shall grant, issue, sell or make to each registered
holder of Warrants the aggregate Distribution Rights or Distribution, as the
case may be, which such holder would have acquired if such holder had held the
maximum number of Shares acquirable upon complete exercise of such holder's
Warrants (regardless of whether the Warrants are then exercisable and without
giving effect to the Cashless Exercise option) immediately before the record
date for the grant, issuance or sale of such Distribution Rights or
Distribution, as the case may be, or, if there is no such record date, the date
as of which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Distribution Rights or Distribution, as the case
may be. If in connection with any Distribution the Company offers to the
holders of the Common Stock to include in a registration statement under the
Securities Act of 1933 any of the Distribution Rights or any securities issued
or issuable upon the exercise, conversion or exchange of Distribution Rights,
then the Company shall offer to all holders of Warrants the opportunity to have
their Distribution Rights or such other securities included in such registration
statement on a basis that is no less favorable than that offered to the holders
of Common Stock.
ARTICLE VI.
CONCERNING THE WARRANT AGENT
SECTION 6.1. WARRANT AGENT. The Company hereby appoints The Bank of
New York, as Warrant Agent of the Company in respect of the Warrants and the
Warrant Certificates upon
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the terms and subject to the conditions herein and in the Warrant Certificates
set forth; and The Bank of New York hereby accepts such appointment. The
Warrant Agent shall have the powers and authority specifically granted to and
conferred upon it in the Warrant Certificates and hereby and such further
powers and authority to act on behalf of the Company as the Company may
hereafter grant to or confer upon it and it shall accept in writing. All of the
terms and provisions with respect to such powers and authority contained in the
Warrant Certificates are subject to and governed by the terms and provisions
hereof.
SECTION 6.2. CONDITIONS OF WARRANT AGENT'S OBLIGATIONS. The Warrant
Agent accepts its obligations herein set forth upon the terms and conditions
hereof and in the Warrant Certificates, including the following, to all of which
the Company agrees and to all of which the rights hereunder of the holders from
time to time of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall be entitled to compensation to be agreed
upon with the Company in writing for all services rendered by it and the Company
agrees promptly to pay such compensation and to reimburse the Warrant Agent for
its reasonable out-of-pocket expenses (including reasonable fees and expenses of
counsel) incurred without gross negligence or willful misconduct on its part in
connection with the services rendered by it hereunder. The Company also agrees
to indemnify the Warrant Agent and any predecessor Warrant Agent, their
directors, officers, affiliates, agents and employees for, and to hold them and
their directors, officers, affiliates, agents and employees harmless against,
any loss, liability or expense of any nature whatsoever (including, without
limitation, fees and expenses of counsel) incurred without gross negligence or
willful misconduct on the part of the Warrant Agent, arising out of or in
connection with its acting as such Warrant Agent hereunder and its exercise of
its rights and performance of its obligations hereunder. The obligations of the
Company under this Section 6.2 shall survive the exercise and the expiration of
the Warrant Certificates and the resignation and removal of the Warrant Agent.
(b) In acting under this Agreement and in connection with the Warrant
Certificates, the Warrant Agent is acting solely as agent of the Company and
does not assume any obligation or relationship of agency or trust for or with
any of the owners or holders of the Warrant Certificates.
(c) The Warrant Agent may consult with counsel of its selection and
any advice or written opinion of such 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 accordance with such advice or
opinion.
(d) The Warrant Agent shall be fully protected and shall incur no
liability for or in respect of any action taken or omitted to be taken or thing
suffered by it in reliance upon any Warrant Certificate, notice, direction,
consent, certificate, affidavit, opinion of counsel, instruction, statement or
other paper or document reasonably believed by it to be genuine and to have been
presented or signed by the proper parties.
(e) The Warrant Agent, and its officers, directors, affiliates and
employees ("WARRANT AGENT RELATED PARTIES"), may become the owners of, or
acquire any interest in,
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Warrant Certificates, shares or other obligations of the Company with the same
rights that it or they would have it if were not the Warrant Agent hereunder
and, to the extent permitted by applicable law, it or they may engage or be
interested in any financial or other transaction with the Company and may act
on, or as depository, trustee or agent for, any committee or body of holders of
shares or other obligations of the Company as freely as if it were not the
Warrant Agent hereunder. Nothing in this Agreement shall be deemed to prevent
the Warrant Agent or such Warrant Agent Related Parties from acting in any other
capacity for the Company.
(f) The Warrant Agent shall not be under any liability for interest
on, and shall not be required to invest, any monies at any time received by it
pursuant to any of the provisions of this Agreement or of the Warrant
Certificates.
(g) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement (or any term or provision hereof) or
the execution and delivery hereof (except the due execution and delivery hereof
by the Warrant Agent) or in respect of the validity or execution of any Warrant
Certificate (except its authentication thereof).
(h) The recitals and other statements contained herein and in the
Warrant Certificates (except as to the Warrant Agent's authentication thereon)
shall be taken as the statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of the same. The Warrant Agent does not make
any representation as to the validity or sufficiency of this Agreement or the
Warrant Certificates, except for its due execution and delivery of this
Agreement; PROVIDED, HOWEVER, that the Warrant Agent shall not be relieved of
its duty to authenticate the Warrant Certificates as authorized by this
Agreement. The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant.
(i) Before the Warrant Agent acts or refrains from acting with
respect to any matter contemplated by this Warrant Agreement, it may require:
(i) an Officers' Certificate (as defined in the Indenture)
stating on behalf of the Company that, in the opinion of
the signers, all conditions precedent, if any, provided
for in this Warrant Agreement relating to the proposed
action have been complied with; and
(ii) if reasonably necessary in the sole judgment of the
Warrant Agent, an opinion of counsel for the Company
stating that, in the opinion of such counsel, all such
conditions precedent have been complied with provided
that such matter is one customarily opined on by counsel.
Each Officers' Certificate or, if requested, an opinion of counsel with
respect to compliance with a condition or covenant provided for in this Warrant
Agreement shall include:
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(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 or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she has made
such examination or investigation as is necessary to enable him or her 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.
(j) The Warrant Agent shall be obligated to perform such duties as
are herein and in the Warrant Certificates specifically set forth and no
implied duties or obligations shall be read into this Agreement or the Warrant
Certificates against the Warrant Agent. The Warrant Agent shall not be
accountable or under any duty or responsibility for the use by the Company of
any of the Warrant Certificates authenticated by the Warrant Agent and delivered
by it to the Company pursuant to this Agreement. The Warrant Agent shall have
no duty or responsibility in case of any default by the Company in the
performance of its covenants or agreements contained in the Warrant Certificates
or in the case of the receipt of any written demand from a holder of a Warrant
Certificate with respect to such default, including, without limiting the
generality of the foregoing, any duty or responsibility to initiate or attempt
to initiate any proceedings at law or otherwise or, except as provided in
Section 7.2 hereof, to make any demand upon the Company.
(k) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the Company
made or given under any provision of this Agreement shall be sufficient if
signed by its chairman of the Board of Directors, its president, its treasurer,
its controller or any vice president or its secretary or any assistant
secretary.
(l) The Warrant Agent shall have no responsibility in respect of any
adjustment pursuant to Article V hereof.
(m) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts, instruments and assurances as may reasonably be
required by the Warrant Agent for the carrying out or performing by the Warrant
Agent of the provisions of this Agreement.
(n) The Warrant Agent is hereby authorized and directed to accept
written instructions with respect to the performance of its duties hereunder
from any one of the chairman of the Board of Directors, the president, the
treasurer, the controller, any vice president or the secretary of the Company or
any other officer or official of the Company reasonably believed to be
authorized to give such instructions and to apply to such officers or officials
for advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions with respect to any matter arising in
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connection with the Warrant Agent's duties and obligations arising under this
Agreement. Such application by the Warrant Agent for written instructions from
the Company may, at the option of the Warrant Agent, set forth in writing any
action proposed to be taken or omitted by the Warrant Agent with respect to its
duties or obligations under this Agreement and the date on or after which such
action shall be taken and the Warrant Agent shall not be liable for any action
taken or omitted in accordance with a proposal included in any such application
on or after the date specified therein (which date shall be not less than 10
Business Days after the Company receives such application unless the Company
consents to a shorter period), provided that (i) such application includes a
statement to the effect that it is being made pursuant to this paragraph (m) and
that unless objected to prior to such date specified in the application, the
Warrant Agent will not be liable for any such action or omission to the extent
set forth in such paragraph (m) and (ii) prior to taking or omitting any such
action, the Warrant Agent has not received written instructions objecting to
such proposed action or omission.
(o) Whenever in the performance of its duties under this Agreement
the Warrant Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed on behalf of the Company by any one of the
chairman of the Board of Directors, the president, the treasurer, the
controller, any vice president or the secretary of the Company or any other
officer or official of the Company reasonably believed to be authorized to give
such instructions and delivered to the Warrant Agent; and such certificate shall
be full authorization to the Warrant Agent for any action taken or suffered in
good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(p) The Warrant Agent shall not be required to risk or expend its own
funds in the performance of its obligations and duties hereunder.
SECTION 6.3. RESIGNATION AND APPOINTMENT OF SUCCESSOR.
(a) The Company agrees, for the benefit of the holders from time to
time of the Warrant Certificates, that there shall at all times be a Warrant
Agent hereunder.
(b) The Warrant Agent may at any time resign as Warrant Agent by
giving written notice to the Company of such intention on its part, specifying
the date on which its desired resignation shall become effective; PROVIDED,
HOWEVER, that such date shall be at least 60 days after the date on which such
notice is given unless the Company agrees to accept less notice. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
Warrant Agent, qualified as provided in Section 6.3(d) hereof, by written
instrument in duplicate signed on behalf of the Company, one copy of which shall
be delivered to the resigning Warrant Agent and one copy to the successor
Warrant Agent. As provided in Section 6.3(d) hereof, such resignation shall
become effective upon the earlier of (x) the acceptance of the appointment by
the successor Warrant Agent or (y) 60 days after receipt by the Company of
notice of such resignation. The Company may, at any time and for any reason,
and shall, upon any event set forth in the next succeeding sentence, remove the
Warrant Agent and appoint a successor
29
<PAGE>
Warrant Agent by written instrument in duplicate, specifying such removal and
the date on which it is intended to become effective, signed on behalf of the
Company, one copy of which shall be delivered to the Warrant Agent being removed
and one copy to the successor Warrant Agent. The Warrant Agent shall be removed
as aforesaid if it shall become incapable of acting, or shall be adjudged a
bankrupt or insolvent, or a receiver of the Warrant Agent or of its property
shall be appointed, or any public officer shall take charge or control of it or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation. Any removal of the Warrant Agent and any appointment of a
successor Warrant Agent shall become effective upon acceptance of appointment by
the successor Warrant Agent as provided in Section 6.3(d). As soon as
practicable after appointment of the successor Warrant Agent, the Company shall
cause written notice of the change in the Warrant Agent to be given to each of
the registered holders of the Warrants in the manner provided for in Section 7.4
hereof.
(c) Upon resignation or removal of the Warrant Agent, if the Company
shall fail to appoint a successor Warrant Agent within a period of 60 days after
receipt of such notice of resignation or removal, then the holder of any Warrant
Certificate or the retiring Warrant Agent may apply to a court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to the Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company.
(d) Any successor Warrant Agent, whether appointed by the Company or
by a court, shall be a bank or trust company in good standing, incorporated
under the laws of the United States of America or any State thereof and having,
at the time of its appointment, a combined capital surplus of at least $50
million. Such successor Warrant Agent shall execute and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder and all the provisions of this Agreement, and thereupon such successor
Warrant Agent, without any further act, deed or conveyance, shall become vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as Warrant Agent hereunder,
and such predecessor shall thereupon become obligated to (i) transfer and
deliver, and such successor Warrant Agent shall be entitled to receive, all
securities, records or other property on deposit with or held by such
predecessor as Warrant Agent hereunder and (ii) upon payment of the amounts then
due it pursuant to Section 6.2(a) hereof, pay over, and such successor Warrant
Agent shall be entitled to receive, all monies deposited with or held by any
predecessor Warrant Agent hereunder.
(e) Any corporation or bank into which the Warrant Agent hereunder
may be merged or converted, or any corporation or bank with which the Warrant
Agent may be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or any
corporation or bank to which the Warrant Agent shall sell or otherwise transfer
all or substantially all of its corporate trust business, shall be the successor
to the Warrant Agent under this Agreement (provided that such corporation or
bank shall be qualified as aforesaid) without the execution or filing of any
document or any further act on the part of any of the parties hereto.
30
<PAGE>
(f) No Warrant Agent under this Warrant Agreement shall be personally
liable for any action or omission of any successor Warrant Agent.
ARTICLE VII.
MISCELLANEOUS
SECTION 7.1. AMENDMENT. This Agreement and the terms of the Warrants
may be amended by the Company and the Warrant Agent, without the consent of the
holder of any Warrant Certificate, for the purpose of curing any ambiguity, or
of curing, correcting or supplementing any defective or inconsistent provision
contained herein or therein, or to effect any assumptions of the Company's
obligations hereunder and thereunder by a successor corporation under the
circumstances described in Section 5.1(e) hereof or in any other manner which
the Company may deem necessary or desirable and which shall not adversely affect
the interests of the holders of the Warrant Certificates.
The Company and the Warrant Agent may modify this Agreement and the terms
of the Warrants with the consent of the holders of not less than a majority in
number of the then outstanding Initial Warrants and/or majority in number of the
then outstanding Contingent Warrants, each voting as a separate class, as
applicable, for the purpose of adding any provision to or changing in any manner
or eliminating any of the provisions of this Agreement or modifying in any
manner the rights of the holders of the outstanding Initial Warrants and/or
Contingent Warrants, as applicable, PROVIDED, HOWEVER, that no such modification
that decreases the Exercise Rate, increases the Exercise Price, reduces the
period of time during which the Warrants are exercisable hereunder, otherwise
materially and adversely affects the rights of the holders of the Warrants,
reduces the percentage required for modification, or effects any change to this
Section 7.1 may be made with respect to an outstanding Warrant without the
consent of the holder of such Warrant. Notwithstanding any other provision of
this Agreement, the Warrant Agent's consent must be obtained regarding any
supplement or amendment which alters the Warrant Agent's rights or duties (it
being expressly understood that the foregoing shall not be in derogation of the
right of the Company to remove the Warrant Agent in accordance with Section 6.3
hereof).
The Warrant Agent shall provide written notice, which notice shall first be
provided by the Company to the Warrant Agent, to the Warrant holders describing
any modification or amendment to this Agreement pursuant to this Section 7.1.
Any modification or amendment made in accordance with this Agreement will
be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
31
<PAGE>
SECTION 7.2. NOTICES AND DEMANDS TO THE COMPANY AND WARRANT AGENT. If
the Warrant Agent shall receive any notice or demand addressed to the Company by
the holder of a Warrant Certificate pursuant to the provisions hereof or of the
Warrant Certificates, the Warrant Agent shall promptly forward such notice or
demand to the Company.
SECTION 7.3. ADDRESSES FOR NOTICES TO PARTIES AND FOR TRANSMISSION OF
DOCUMENTS. All notices hereunder to the parties hereto shall be deemed to have
been given when sent by certified or registered mail, postage prepaid, or by
facsimile transmission, confirmed by first class mail, postage prepaid,
addressed to any party hereto as follows:
To the Company:
Coinstar, Inc.,
13231 SE 36th Street, Suite 200
Bellevue, Washington 98006
Attention: Jens H. Molbak
with a copy to:
Mark P. Tanoury
Cooley Godward LLP
3000 Sand Hill Road
Building 3, Suite 230
Menlo Park, California 94025
Telecopier No.: 415/854-2691
and a copy to:
Meredith Jackson
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Telecopier No.: 415/493-6811
To the Warrant Agent:
The Bank of New York
Corporate Trust Division
101 Barclay Street
21st Floor
New York, New York 10286
Telecopier No.: 212/815-5915
Attention: Vivian Georges
or at any other address of which either of the foregoing shall have notified the
other in writing.
32
<PAGE>
SECTION 7.4. NOTICES TO HOLDERS. Notices to holders of Warrants shall
be mailed to such holders at the addresses of such holders as they appear in the
Warrant Register. Any such notice shall be sufficiently given if sent by
first-class mail, postage prepaid.
SECTION 7.5. APPLICABLE LAWS; JURISDICTION. THE VALIDITY,
INTERPRETATION AND PERFORMANCE OF THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED HEREUNDER AND OF THE RESPECTIVE TERMS AND PROVISIONS THEREOF SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PROVISIONS THEREOF.
Each of the parties hereto hereby irrevocably and unconditionally: (i)
submits itself and its property in any legal action or proceeding relating to
this Warrant Agreement or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive jurisdiction of the courts of the State of
New York and the courts of the United States of America for the Southern
District of New York, and appellate courts thereof, and consents and agrees to
such action or proceeding being brought in such courts; and (ii) waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in
any inconvenient court and agrees not to plead or claim the same.
SECTION 7.6. PERSONS HAVING RIGHTS UNDER AGREEMENT. Nothing in this
Agreement expressed or implied and nothing that may be inferred from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person or corporation other than the Company, the Warrant Agent and the
holders of the Warrant Certificates any right, remedy or claim under or by
reason of this Agreement or of any covenant, condition, stipulation, promise or
agreement hereof; and all covenants, conditions, stipulations, promises and
agreements in this Agreement contained shall be for the sole and exclusive
benefit of the Company and the Warrant Agent and their successors and of the
holders of the Warrant Certificates.
SECTION 7.7. HEADINGS. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
SECTION 7.8. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
SECTION 7.9. INSPECTION OF AGREEMENT. A copy of this Agreement shall
be available during regular business hours at the principal corporate trust
office of the Warrant Agent, for inspection by the holder of any Warrant
Certificate. The Warrant Agent may require such holder to submit his Warrant
Certificate for inspection by it.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
33
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the day and year first above written.
COINSTAR, INC.
By: /s/ Jens H. Molbak
--------------------------
Name: Jens H. Molbak
--------------------------
Title: CEO and President
--------------------------
THE BANK OF NEW YORK,
as Warrant Agent
By: /s/ Vivian Georges
--------------------------
Name: Vivian Georges
--------------------------
Title: Assistant Vice President
--------------------------
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
[Unless and until it is exchanged in whole or in part for Warrants
in certificated form, this Warrant may not be transferred except 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
or by the Depository or any such nominee to a successor Depository or a
nominee of such successor Depository. Unless this certificate is
presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC"), to the issuer or its agent for
registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or 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.](1)
"THIS SECURITY EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION PROVIDED BY RULE 144A UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY
SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH THE
- --------------------
(1) This paragraph is to be included only if the Warrant is in global
form.
<PAGE>
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (1) ABOVE.
CUSIP# [ ]
<PAGE>
NO. [ ] [ ] WARRANTS
WARRANT CERTIFICATE
This Warrant Certificate certifies that [ ], or
registered assigns, is the registered holder of [ ] Warrants (the
"WARRANTS") to purchase shares of Common Stock, $.001 par value (the
"COMMON STOCK"), of COINSTAR, INC., a Delaware corporation (the
"COMPANY"). Each Warrant entitles the holder to purchase from the
Company at any time from 9:00 a.m. until 5:00 p.m. New York City time
(i) on or after the occurrence of an Exercise Event, on the earlier to
occur of (a) 90 days after an Exercise Event and (b) October 1, 2006
(unless otherwise extended as provided for herein) (the "EXPIRATION
DATE"), seven fully paid and nonassessable shares of Common Stock (the
"SHARES," which may also include any other securities or property
purchasable upon exercise of a Warrant, such adjustment and inclusion
each as provided in the Warrant Agreement) and (ii) on and for 10 days
following a Co-Sale Event, the number of fully paid and non-assessable
Shares which shall be included in a sale pursuant to Section 3 or 5 of
the Co-Sale Agreement, in each case at the exercise price (the "EXERCISE
PRICE") of $.01 per share upon surrender of this Warrant Certificate and
payment of the Exercise Price at any office or agency maintained for
that purpose by the Company (the "WARRANT AGENT OFFICE"), subject to the
conditions set forth herein and in the Warrant Agreement.
Notwithstanding the foregoing, a Warrant may also be exercised solely by
the surrender of the Warrant, and without the payment of the Exercise
Price in cash, for such number of Shares equal to the product of (1) the
number of Shares for which such Warrant is exercisable with payment of
the Exercise Price as of the date of exercise and (2) the Cashless
Exercise Ratio. For purposes of this Warrant, the "CASHLESS EXERCISE
RATIO" shall equal a fraction, the numerator of which is the excess of
the Current Market Value of the Common Stock on the date of exercise
(calculated as set forth in Section 5.1(o) of the Warrant Agreement)
over the Exercise Price Per Share as of the date of exercise and the
denominator of which is the Current Market Value of the Common Stock on
the date of exercise (calculated as set forth in Section 5.1(o') of the
Warrant Agreement). An exercise of a Warrant in accordance with the
immediately preceding sentences is herein called a "CASHLESS EXERCISE."
Upon surrender of a Warrant Certificate representing more than one
Warrant in connection with the Holder's option to elect a Cashless
Exercise, the number of Shares deliverable upon a Cashless Exercise
shall be equal to the number of Warrants that the Holder specifies is to
be exercised pursuant to a Cashless Exercise multiplied by the Cashless
Exercise Ratio. All provisions of the Warrant Agreement shall be
applicable with respect to an exercise of a Warrant Certificate pursuant
to a Cashless Exercise for less than the full number of Warrants
represented hereby.
"CO-SALE AGREEMENT" means that certain Amended and Restated Co-Sale
Agreement dated as of December 15, 1995 by and among the Company and the
other persons party thereto, as amended or supplemented from time to
time.
"CO-SALE EVENT" means so long as an Exercise Event shall not have
previously occurred, the seventh day prior to any date on which a holder
of Warrants will sell all or a portion of the Warrants or Shares
pursuant to Sections 3 or 5 of the Amended and Restated Co-Sale
Agreement dated as of December 15, 1995 by and among the Company and the
other Persons party thereto, as amended or supplemented from time to
time (the "Co-Sale Agreement").
"EXERCISE EVENT" means, with respect to each Warrant, the date of
the earliest of: (1) the seventh day prior to the occurrence of a
Change of Control, (2) the consummation of a Public Equity Offering, (3)
a consolidation, merger or purchase of assets involving the Company or
any of its Subsidiaries that results in the Common stock of the Company
being subject to registration, (4) the
<PAGE>
voluntary or involuntary dissolution, liquidation or winding up of the
affairs of the Company, or (5) the 90th day prior to October 1, 2006.
To the extent an exercise of a Warrant is not effected through the
Cashless Exercise, the Exercise Price shall be payable by certified
check or official bank check or by such other means as is acceptable to
the Company in the lawful currency of the United States of America which
as of the time of payment is legal tender for payment of public or
private debts. The Company has initially designated the principal
corporate trust office of the Warrant Agent in the Borough of Manhattan,
The City of New York, as the initial Warrant Agent Office. The number
of Shares issuable upon exercise of the Warrants ("EXERCISE RATE") is
subject to adjustment upon the occurrence of certain events set forth in
the Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York City
time, on October 1, 2006 (unless otherwise extended as provided for in
the Warrant Agreement) shall thereafter be void.
Terms used and not otherwise defined in this Warrant Certificate
shall have the meanings given them in the Warrant Agreement.
<PAGE>
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Warrant Certificate shall not be valid unless authenticated by
the Warrant Agent, as such term is used in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS PROVISIONS THEREOF.
WITNESS the facsimile signatures of its duly authorized officers.
COINSTAR, INC.,
By: ________________________________
Name:______________________________
Title:_____________________________
Attest:
By: ___________________________
Name: _____________________
Title:_____________________
Dated: _____________________, 1996
Certificate of Authentication:
This is one of the Warrants
referred to in the within
mentioned Warrant Agreement:
THE BANK OF NEW YORK,
as Warrant Agent
By: _____________________________
Authorized Signatory
<PAGE>
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
COINSTAR, INC.,
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring at 5:00 p.m., New York City
time, on the earlier to occur of (a) 90 days after an Exercise Event
which causes such Warrants to become exercisable and (b) October 1,
2006 (unless otherwise extended as provided for herein). The Warrants
are issued pursuant to a Warrant Agreement dated as of October 1, 1996
(the "WARRANT AGREEMENT"), duly executed and delivered by the Company to
The Bank of New York as Warrant Agent (the "WARRANT AGENT"), which
Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities
thereunder of the Warrant Agent, the Company and the holders (the words
"holders" or holder" meaning the registered holders or registered
holder) of the Warrants, and the terms set forth in this Warrant
Certificate are qualified by reference to the terms of the Warrant
Agreement.
Warrants may be exercised by (i) surrendering at any Warrant Agent
Office this Warrant Certificate with the form of Election to Exercise
set forth hereon duly completed and executed and (ii) to the extent
such exercise is not being effected through a Cashless Exercise, paying
in full the Warrant Exercise Price for each such Warrant exercised and
any other amounts required to be paid pursuant to the Warrant Agreement.
If all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior to
11:00 a.m., New York City time, on a Business Day, the exercise of the
Warrant to which such items relate will be effective on such Business
Day. If any items referred to in the last sentence of the preceding
paragraph are received after 11:00 a.m., New York City time, on a
Business Day, the exercise of the Warrants to which such item relates
will be deemed to be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on
October 1, 2006, if all of the items referred to in the last sentence of
the preceding paragraph are received by the Warrant Agent at or prior to
5:00 p.m., New York City time, on such Expiration Date, the exercise of
the Warrants to which such items relate will be effective on the
Expiration Date.
As soon as practicable after the exercise of any Warrant or
Warrants, the Company shall issue or cause to be issued to or upon the
written order of the registered holder of this Warrant Certificate, a
certificate or certificates evidencing the Share or Shares to which such
holder is entitled, in fully registered form, registered in such name or
names as may be directed by such holder pursuant to the Election to
Exercise, as set forth on the reverse of this Warrant Certificate, and
upon payment of any applicable transfer taxes required pursuant to the
Warrant Agreement. Such certificate or certificates evidencing the
Share or Shares shall be deemed to have been issued and any persons who
are designated to be named therein shall be deemed to have become the
holder of record of such Share or Shares as of the close of business on
the date upon which the exercise of this Warrant was deemed to be
effective as provided in the preceding paragraph.
The Company will not be required to issue fractional shares of
Common Stock upon exercise of the Warrants or distribute Share
certificates that evidence fractional shares of Common Stock. In lieu
of fractional shares of Common Stock, at the Company's election, there
shall be paid to the registered Holder of this Warrant Certificate at
the time such Warrant Certificate is exercised an amount in cash equal
to the same fraction of the Current Market Value (as defined in the
Warrant
<PAGE>
Agreement) per share on the Business Day preceding the date this Warrant
Certificate is surrendered for exercise.
Warrant Certificates, when surrendered at any office or agency
maintained by the Company for that purpose by the registered holder
thereof in person or by legal representative or attorney duly authorized
in writing, may be exchanged for a new Warrant Certificate or new
Warrant Certificates evidencing in the aggregate a like number of
Warrants, in the manner and subject to the limitations provided in the
Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Warrant
Certificate at any office or agency maintained by the Company for that
purpose, a new Warrant Certificate evidencing in the aggregate a like
number of Warrants shall be issued to the transferee in exchange for
this Warrant Certificate, subject to the limitations provided in the
Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder hereof as the absolute owner of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made
by anyone) for the purpose of any exercise hereof and for all other
purposes, and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
The term "Business Day" shall mean any day on which (i) banks in
New York City, (ii) the principal national securities exchange or market
on which the Common Stock is listed or admitted to trading and (iii) the
principal national securities exchange or market on which the Warrants
are listed or admitted to trading are open for business.
<PAGE>
(FORM OF ELECTION TO EXERCISE)
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise [ ] of
the Warrants represented by this Warrant Certificate and purchase the
whole number of Shares issuable upon the exercise of such Warrants and
herewith tenders payment for such Shares in the amount of $[ ] in
cash or by certified or official bank check, in accordance with the
terms hereof. In lieu of payment of the cash exercise price, the holder
hereof is electing to exercise [ ] Warrants pursuant to a Cashless
Exercise (as defined in the Warrant Agreement) for [ ] shares of
Common Stock at the current Cashless Exercise Ratio. The undersigned
requests that a certificate representing such Shares be registered in
the name of _____________________ whose address is ___________________
____________________________ and that such certificate be delivered to
_________________________ whose address is _________________________.
Any cash payments to be paid in lieu of a fractional Share should be
made to __________________ whose address is _______________________ and
the check representing payment thereof should be delivered to
____________________ whose address is ______________________.
Dated __________________, 19__
Name of holder of
Warrant Certificate: _______________________________
(Please Print)
Tax Identification or
Social Security Number: ____________________________
Address: ___________________________________________
___________________________________________
Signature: _________________________________________
Note: The above signature must correspond with the name
as written upon the face of this Warrant
Certificate in every particular, without
alteration or enlargement or any change whatever
and if the certificate representing the Shares or
any Warrant Certificate representing Warrants not
exercised is to be registered in a name other than
that in which this Warrant Certificate is
registered, or if any cash payment to be paid in
lieu of a fractional share is to be made to a
person other than the registered holder of this
Warrant Certificate, the signature of the holder
hereof must be guaranteed as provided in the
Warrant Agreement.
Dated ____________________, 19__
Signature: __________________________________________________
Note: The above signature must correspond with
the name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever.
Signature Guaranteed:_________________________________________
<PAGE>
FORM OF ASSIGNMENT
For value received _____________________ hereby sells, assigns and
transfers unto _____________________ the within Warrant Certificate,
together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint __________________________ attorney,
to transfer said Warrant Certificate on the books of the within-named
Company, with full power of substitution in the premises.
Dated ____________________, _____
Signature: _________________________________________________
Note: The above signature must correspond with
the name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever.
Signature Guaranteed: _____________________________________
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS(2)
The following exchanges of a part of this Global Warrant for
certificated Warrants have been made:
<TABLE>
<CAPTION>
NUMBER OF
AMOUNT OF AMOUNT OF WARRANTS OF THIS
DECREASE IN INCREASE IN GLOBAL WARRANT SIGNATURE OF
NUMBER OF NUMBER OF FOLLOWING SUCH AUTHORIZED
DATE OF WARRANTS OF THIS WARRANTS OF THIS DECREASE (OR SIGNATORY OF
EXCHANGE GLOBAL WARRANT GLOBAL WARRANT INCREASE) WARRANT AGENT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------------------
(2) This is to be included only if the Warrant is in global form.
<PAGE>
EXHIBIT B
[FORM OF WARRANT CERTIFICATE]
[FACE]
[Unless and until it is exchanged in whole or in part for Warrants
in certificated form, this Warrant may not be transferred except 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
or by the Depository or any such nominee to a successor Depository or a
nominee of such successor Depository. Unless this certificate is
presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC"), to the issuer or its agent for
registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or 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.](3)
"THIS SECURITY EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION PROVIDED BY RULE 144A UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY
SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH THE
- --------------------
(3) This paragraph is to be included only if the Warrant is in global
form.
<PAGE>
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (1) ABOVE.
CUSIP# [ ]
<PAGE>
NO. [ ] [ ] WARRANTS
WARRANT CERTIFICATE
This Warrant Certificate certifies that [ ], or
registered assigns, is the registered holder of [ ] Warrants (the
"WARRANTS") to purchase shares of Common Stock, $.001 par value (the
"COMMON STOCK"), of COINSTAR, INC., a Delaware corporation (the
"COMPANY"). This Warrant shall not be issued unless the Company has not
consummated an offering of Equity Interests (as defined in the Warrant
Agreement) (other than Disqualified Capital Stock (as defined in the
Warrant Agreement)) by the Company to the public pursuant to a
registration statement filed with the Securities and Exchange Commission
by October 1, 1998, the gross proceeds of which exceed $25 million, and
an Exercise Event (as defined below) has not otherwise occurred. Each
Warrant entitles the holder to purchase from the Company at any time
from 9:00 a.m. until 5:00 p.m. New York City time (i) on or after the
occurrence of an Exercise Event, on the earlier to occur of (a) 90 days
after an Exercise Event and (b) October 1, 2006 (unless otherwise
extended as provided for herein) (the "EXPIRATION DATE"), three fully
paid and nonassessable shares of Common Stock (the "SHARES," which may
also include any other securities or property purchasable upon exercise
of a Warrant, such adjustment and inclusion each as provided in the
Warrant Agreement) and (ii) on and for 10 days following a Co-Sale
Event, the number of fully paid and non-assessable Shares which shall be
included in a sale pursuant to Section 3 or 5 of the Co-Sale Agreement,
in each case at the exercise price (the "EXERCISE PRICE") of $.01 per
share upon surrender of this Warrant Certificate and payment of the
Exercise Price at any office or agency maintained for that purpose by
the Company (the "WARRANT AGENT OFFICE"), subject to the conditions set
forth herein and in the Warrant Agreement. Notwithstanding the
foregoing, a Warrant may also be exercised solely by the surrender of
the Warrant, and without the payment of the Exercise Price in cash, for
such number of Shares equal to the product of (1) the number of Shares
for which such Warrant is exercisable with payment of the Exercise Price
as of the date of exercise and (2) the Cashless Exercise Ratio. For
purposes of this Warrant, the "CASHLESS EXERCISE RATIO" shall equal a
fraction, the numerator of which is the excess of the Current Market
Value of the Common Stock on the date of exercise (calculated as set
forth in Section 5.1(o) of the Warrant Agreement) over the Exercise
Price Per Share as of the date of exercise and the denominator of which
is the Current Market Value of the Common Stock on the date of exercise
(calculated as set forth in Section 5.1(o`) of the Warrant Agreement).
An exercise of a Warrant in accordance with the immediately preceding
sentences is herein called a "CASHLESS EXERCISE." Upon surrender of a
Warrant Certificate representing more than one Warrant in connection
with the Holder's option to elect a Cashless Exercise, the number of
Shares deliverable upon a Cashless Exercise shall be equal to the number
of Warrants that the Holder specifies is to be exercised pursuant to a
Cashless Exercise multiplied by the Cashless Exercise Ratio. All
provisions of the Warrant Agreement shall be applicable with respect to
an exercise of a Warrant Certificate pursuant to a Cashless Exercise for
less than the full number of Warrants represented hereby.
"CO-SALE AGREEMENT" means that certain Amended and Restated Co-Sale
Agreement dated as of December 15, 1995 by and among the Company and the
other persons party thereto, as amended or supplemented from time to
time.
"CO-SALE EVENT" means so long as an Exercise Event shall not have
previously occurred, the seventh day prior to any date on which a holder
of Warrants will sell all or a portion of the Warrants or Shares
pursuant to Sections 3 or 5 of the Amended and Restated Co-Sale
Agreement dated as of
<PAGE>
December 15, 1995 by and among the Company and the other Persons party
thereto, as amended or supplemented from time to time (the "Co-Sale
Agreement").
"EXERCISE EVENT" means, with respect to each Warrant, the date of
the earliest of: (1) the seventh day prior to the occurrence of a
Change of Control, (2) the consummation of a Public Equity Offering, (3)
a consolidation, merger or purchase of assets involving the Company or
any of its Subsidiaries that results in the Common stock of the Company
being subject to registration, (4) the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company, or
(5) the 90th day prior to October 1, 2006.
To the extent an exercise of a Warrant is not effected through the
Cashless Exercise, the Exercise Price shall be payable by certified
check or official bank check or by such other means as is acceptable to
the Company in the lawful currency of the United States of America which
as of the time of payment is legal tender for payment of public or
private debts. The Company has initially designated the principal
corporate trust office of the Warrant Agent in the Borough of Manhattan,
The City of New York, as the initial Warrant Agent Office. The number
of Shares issuable upon exercise of the Warrants ("EXERCISE RATE") is
subject to adjustment upon the occurrence of certain events set forth in
the Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York City
time, on October 1, 2006 (unless otherwise extended as provided for in
the Warrant Agreement) shall thereafter be void.
Terms used and not otherwise defined in this Warrant Certificate
shall have the meanings given them in the Warrant Agreement.
<PAGE>
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Warrant Certificate shall not be valid unless authenticated by
the Warrant Agent, as such term is used in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS PROVISIONS THEREOF.
WITNESS the facsimile signatures of its duly authorized officers.
COINSTAR, INC.,
By: ________________________________
Name: _____________________________
Title: ____________________________
Attest:
By: ___________________________
Name: _____________________
Title: ____________________
Dated: _______________________, 1996
Certificate of Authentication:
This is one of the Warrants
referred to in the within
mentioned Warrant Agreement:
THE BANK OF NEW YORK,
as Warrant Agent
By: _____________________________
Authorized Signatory
<PAGE>
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
COINSTAR, INC.,
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring at 5:00 p.m., New York City
time, on the earlier to occur of (a) 90 days after an Exercise Event
which causes such Warrants to become exercisable and (b) October 1,
2006 (unless otherwise extended as provided for herein), each of which
represents the right to purchase at any time on or after an
Exercisability Date (as defined in the Warrant Agreement) and on or
prior to such date [three] shares of Common Stock of the Company,
subject to adjustment as set forth in the Warrant Agreement. The
Warrants are issued pursuant to a Warrant Agreement dated as of October
22, 1996 (the "WARRANT AGREEMENT"), duly executed and delivered by the
Company to The Bank of New York as Warrant Agent (the "WARRANT AGENT"),
which Warrant Agreement is hereby incorporated by reference in and made
a part of this instrument and is hereby referred to for a description of
the rights, limitation of rights, obligations, duties and immunities
thereunder of the Warrant Agent, the Company and the holders (the words
"holders" or holder" meaning the registered holders or registered
holder) of the Warrants, and the terms set forth in this Warrant
Certificate are qualified by reference to the terms of the Warrant
Agreement.
Warrants may be exercised by (i) surrendering at any Warrant Agent
Office this Warrant Certificate with the form of Election to Exercise
set forth hereon duly completed and executed and (ii) to the extent
such exercise is not being effected through a Cashless Exercise, paying
in full the Warrant Exercise Price for each such Warrant exercised and
any other amounts required to be paid pursuant to the Warrant Agreement.
If all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior to
11:00 a.m., New York City time, on a Business Day, the exercise of the
Warrant to which such items relate will be effective on such Business
Day. If any items referred to in the last sentence of the preceding
paragraph are received after 11:00 a.m., New York City time, on a
Business Day, the exercise of the Warrants to which such item relates
will be deemed to be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on
October 1, 2006, if all of the items referred to in the last sentence of
the preceding paragraph are received by the Warrant Agent at or prior to
5:00 p.m., New York City time, on such Expiration Date, the exercise of
the Warrants to which such items relate will be effective on the
Expiration Date.
As soon as practicable after the exercise of any Warrant or
Warrants, the Company shall issue or cause to be issued to or upon the
written order of the registered holder of this Warrant Certificate, a
certificate or certificates evidencing the Share or Shares to which such
holder is entitled, in fully registered form, registered in such name or
names as may be directed by such holder pursuant to the Election to
Exercise, as set forth on the reverse of this Warrant Certificate, and
upon payment of any applicable transfer taxes required pursuant to the
Warrant Agreement. Such certificate or certificates evidencing the
Share or Shares shall be deemed to have been issued and any persons who
are designated to be named therein shall be deemed to have become the
holder of record of such Share or Shares as of the close of business on
the date upon which the exercise of this Warrant was deemed to be
effective as provided in the preceding paragraph.
The Company will not be required to issue fractional shares of
Common Stock upon exercise of the Warrants or distribute Share
certificates that evidence fractional shares of Common Stock. In
<PAGE>
lieu of fractional shares of Common Stock, at the Company's election,
there shall be paid to the registered Holder of this Warrant Certificate
at the time such Warrant Certificate is exercised an amount in cash
equal to the same fraction of the Current Market Value (as defined in
the Warrant Agreement) per share on the Business Day preceding the date
this Warrant Certificate is surrendered for exercise.
Warrant Certificates, when surrendered at any office or agency
maintained by the Company for that purpose by the registered holder
thereof in person or by legal representative or attorney duly authorized
in writing, may be exchanged for a new Warrant Certificate or new
Warrant Certificates evidencing in the aggregate a like number of
Warrants, in the manner and subject to the limitations provided in the
Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Warrant
Certificate at any office or agency maintained by the Company for that
purpose, a new Warrant Certificate evidencing in the aggregate a like
number of Warrants shall be issued to the transferee in exchange for
this Warrant Certificate, subject to the limitations provided in the
Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder hereof as the absolute owner of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made
by anyone) for the purpose of any exercise hereof and for all other
purposes, and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
The term "Business Day" shall mean any day on which (i) banks in
New York City, (ii) the principal national securities exchange or market
on which the Common Stock is listed or admitted to trading and (iii) the
principal national securities exchange or market on which the Warrants
are listed or admitted to trading are open for business.
<PAGE>
(FORM OF ELECTION TO EXERCISE)
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise [ ] of
the Warrants represented by this Warrant Certificate and purchase the
whole number of Shares issuable upon the exercise of such Warrants and
herewith tenders payment for such Shares in the amount of $[ ] in
cash or by certified or official bank check, in accordance with the
terms hereof. In lieu of payment of the cash exercise price, the holder
hereof is electing to exercise [ ] Warrants pursuant to a Cashless
Exercise (as defined in the Warrant Agreement) for [ ] shares of
Common Stock at the current Cashless Exercise Ratio. The undersigned
requests that a certificate representing such Shares be registered in
the name of _____________________ whose address is ___________________
____________________________ and that such certificate be delivered to
_________________________ whose address is _________________________.
Any cash payments to be paid in lieu of a fractional Share should be
made to __________________ whose address is _______________________ and
the check representing payment thereof should be delivered to
____________________ whose address is ______________________.
Dated __________________, 19__
Name of holder of
Warrant Certificate: _______________________________
(Please Print)
Tax Identification or
Social Security Number: ____________________________
Address: ___________________________________________
___________________________________________
Signature: _________________________________________
Note: The above signature must correspond with
the name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever and if the certificate
representing the Shares or any Warrant
Certificate representing Warrants not
exercised is to be registered in a name
other than that in which this Warrant
Certificate is registered, or if any cash
payment to be paid in lieu of a fractional
share is to be made to a person other than
the registered holder of this Warrant
Certificate, the signature of the holder
hereof must be guaranteed as provided in
the Warrant Agreement.
Dated ____________________, 19__
Signature: _______________________________________________
Note: The above signature must correspond
with the name as written upon the
face of this Warrant Certificate in
every particular, without alteration
or enlargement or any change
whatever.
Signature Guaranteed:_________________________________________
<PAGE>
FORM OF ASSIGNMENT
For value received _____________________ hereby sells, assigns and
transfers unto _____________________ the within Warrant Certificate,
together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint __________________________ attorney,
to transfer said Warrant Certificate on the books of the within-named
Company, with full power of substitution in the premises.
Dated ____________________, _____
Signature: ______________________________________________
Note: The above signature must correspond
with the name as written upon the
face of this Warrant Certificate in
every particular, without alteration
or enlargement or any change
whatever.
Signature Guaranteed: _____________________________________
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS(4)
The following exchanges of a part of this Global Warrant for
certificated Warrants have been made:
<TABLE>
<CAPTION>
NUMBER OF
AMOUNT OF AMOUNT OF WARRANTS OF THIS
DECREASE IN INCREASE IN GLOBAL WARRANT SIGNATURE OF
NUMBER OF NUMBER OF FOLLOWING SUCH AUTHORIZED
DATE OF WARRANTS OF THIS WARRANTS OF THIS DECREASE (OR SIGNATORY OF
EXCHANGE GLOBAL WARRANT GLOBAL WARRANT INCREASE) WARRANT AGENT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------------------
(4) This is to be included only if the Warrant is in global form.
<PAGE>
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "WARRANTS") of COINSTAR,
INC.,
This Certificate relates to ____ Warrants held in* ___ book-entry
or* _______ certificated form by ______ (the "TRANSFEROR").
The Transferor:*
/ / has requested the Warrant Agent by written order to deliver in
exchange for its beneficial interest in the Global Warrant held by the
Depository a Warrant or Warrants in definitive, registered form of
authorized denominations and an aggregate number equal to its beneficial
interest in such Global Warrant (or the portion thereof indicated
above); or
/ / has requested the Warrant Agent by written order to exchange
or register the transfer of a Warrant or Warrants.
/ / In connection with such request and in respect of each such
Warrant, the Transferor does hereby certify that Transferor is familiar
with the Warrant Agreement relating to the above captioned Warrants and
the restrictions on transfers thereof as provided in Section 1.7 of such
Warrant Agreement, and that the transfer of this Warrant does not
require registration under the Securities Act of 1933, as amended (the
"ACT") because[*]:
/ / Such Warrant is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 1.7(a)(y)(A) or
Section 1.7(d)(i)(A) of the Warrant Agreement).
/ / Such Warrant is being transferred to a qualified institutional
buyer (as defined in Rule 144A under the Act), in reliance on Rule 144A.
/ / Such Warrant is being transferred in accordance with Rule 144
under the Act.
/ / Such Warrant is being transferred in accordance with Rule 904
under the Act..
/ / Such Warrant is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the
Act, other than Rule 144A, Rule 144 or Rule 904 under the Act. An
opinion of counsel to the effect that such transfer does not require
registration under the Act accompanies this Certificate.
______________________________
[INSERT NAME OF TRANSFEROR]
By: _________________________
Date: _____________
*Check applicable box.
<PAGE>
EXHIBIT D
TRANSFEREE LETTER OF REPRESENTATION
COINSTAR, INC.,
13231 SE 36th Street, Suite 200
Bellevue, WA 98006
Ladies and Gentlemen:
Re: _______________________________________________
In connection with [our] [my] proposed purchase of warrants to
purchase Common Stock, par value $.001 per share, (the "SECURITIES") of
Coinstar, Inc., (the "COMPANY") [we] [I] confirm that:
1. [We] [I] understand that the Securities have not been
registered under the Securities Act of 1933, as amended (the "SECURITIES
ACT") and, unless so registered, may not be sold except as permitted in
the following sentence. [We] [I] agree on [our] [my] own behalf and on
behalf of any investor account for which [we are] [I am] purchasing
Securities to offer, sell or otherwise transfer such Securities prior to
the date which is three years after the later of the date of original
issue and the last date on which the Company or any affiliate of the
Company was the owner of such Securities, or any predecessor thereto
(the "RESALE RESTRICTION TERMINATION DATE") only (a) to the Company, (b)
pursuant to a registration statement which has been declared effective
under the Securities Act, (c) so long as the Securities are eligible for
resale pursuant to Rule 144A, under the Securities Act, to a person [we]
[I] reasonably believe is a qualified institutional buyer under Rule
144A (a "QIB") that purchases for its own account or for the account of
a QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) to an "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that
is purchasing for his own account or for the account of such another
"accredited investor," or (e) pursuant to any other available exemption
from the registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or
accounts be at all times within our or their control and to compliance
with any applicable state securities laws. The foregoing restrictions
on resale will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Securities is
proposed to be made pursuant to clause (d) above prior to the Resale
Restriction Termination Date, the transferor shall deliver a letter from
the transferee substantially in the form of this letter to the warrant
agent under the Warrant Agreement pursuant to which the Securities were
issued (the "WARRANT AGENT") which shall provide, among other things,
that the transferee is an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and
that it is acquiring such Securities for investment purposes and not for
distribution in violation of the Securities Act. The Warrant Agent and
the Company reserve the right prior to any offer, sale or other transfer
prior to the Resale Restriction Termination Date of the Securities
pursuant to clauses (c), (d), or (e) above to require the delivery of a
written opinion of counsel, certifications, and or other information
satisfactory to the Company and the Warrant Agent.
2. [We are] [I am] an "accredited investor" (as defined in Rule
501(a) of Regulation D under the Securities Act) purchasing for [our]
[my] own account or for the account of another
<PAGE>
"accredited investor," and [we are] [I am] acquiring the Securities for
investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act and
[we] [I] have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of [our]
[my] investment in the Securities, and [we] [I] and any accounts for
which [we are] [I am] acting are each able to bear the economic risk of
our or its investment for an indefinite period.
3. [We are] [I am] acquiring the Securities purchased by [us]
[me] for [our] [my] own account or for one or more accounts as to each
of which [we] [I] exercise sole investment discretion.
4. You and your counsel are entitled to rely upon this letter and
you are irrevocably authorized to produce this letter or a copy hereof
to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
(Name of Purchaser)
By: ______________________
Date: _____________________
Upon transfer the Securities would be registered in the name of the
new beneficial owner as follows:
Name:_______________________________
Address:____________________________
Taxpayer ID Number:_________________
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Execution Copy
NOTES REGISTRATION RIGHTS AGREEMENT
Dated as of October 22, 1996
By and Between
COINSTAR, INC.
and
SMITH BARNEY INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. EXCHANGE OFFER. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. SHELF REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . 8
4. LIQUIDATED DAMAGES. . . . . . . . . . . . . . . . . . . . . . . . . 11
5. REGISTRATION PROCEDURES . . . . . . . . . . . . . . . . . . . . . . 12
6. REGISTRATION EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 19
7. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8. RULES 144 AND 144A. . . . . . . . . . . . . . . . . . . . . . . . . 23
9. UNDERWRITTEN REGISTRATIONS. . . . . . . . . . . . . . . . . . . . . 24
10. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
i
<PAGE>
NOTES REGISTRATION RIGHTS AGREEMENT
This NOTES REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is dated as
of October 22, 1996, by and between COINSTAR, INC., a Delaware corporation (the
"COMPANY"), and SMITH BARNEY INC. (the "INITIAL PURCHASER").
This Agreement is made pursuant to the Purchase Agreement, dated as of
October 22, 1996 (the "PURCHASE AGREEMENT"), among the Company and the Initial
Purchaser (the "PURCHASE AGREEMENT"), relating to, among other things, the sale
by the Company to the Initial Purchaser of an aggregate of 95,000 Units,
consisting of (i) $95,000,000 aggregate principal amount at maturity of 13%
Senior Subordinated Discount Notes due October 1, 2006 (the "NOTES") and (ii)
95,000 Warrants (the "INITIAL WARRANTS"), each representing the right to
purchase initially seven shares of Common Stock, $.001 par value of the Company
(the "COMMON STOCK"). In addition, the Company will be obligated to issue
additional warrants to holders of the Notes upon the occurrence of the
Contingent Event (as defined in that certain Warrant Agreement dated as of the
date hereof between the Company and The Bank of New York as warrant agent, the
"WARRANT AGREEMENT") (the "CONTINGENT WARRANTS," and together with the Initial
Warrants, the "WARRANTS"). In order to induce the Initial Purchaser to enter
into the Purchase Agreement, the Company has agreed to provide to the Initial
Purchaser and the Holders (as defined herein), among other things, the
registration rights for the Notes set forth in this Agreement. The execution
and delivery of this Agreement is a condition to the obligations of the Initial
Purchaser under the Purchase Agreement.
In consideration of the foregoing, the parties hereby agree as
follows:
1. DEFINITIONS
As used in this Agreement, the following defined terms shall have the
following meanings:
ACCRETED VALUE: With respect to any Note, as of any date of the
determination prior to the Full Accretion Date, the sum of (a) the Initial
Offering Price of each Note and (b) the portion of the excess of the principal
amount of such Note over the Initial Offering Price as shall have been accreted
thereto through such date, such amount to be so accreted on a daily basis at the
rate of 13% per annum, compounded semi-annually on each October 1 and April 1
from the Issue Date through the date of determination; provided that on and
after the Full Accretion Date, the Accreted Value of such Note shall be equal to
the principal amount of the outstanding such Note.
ADVICE: See Section 5 hereof.
AGREEMENT: See the introductory paragraphs hereto.
APPLICABLE PERIOD: See Section 2(b) hereof.
1
<PAGE>
COMPANY: See the introductory paragraphs hereto.
EFFECTIVENESS DATE: With respect to any Registration Statement, the
90th day after the Filing Date with respect thereto.
EFFECTIVENESS PERIOD: See Section 3 hereof.
EVENT DATE: See Section 4(b) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2(a) hereof.
EXCHANGE OFFER: See Section 2(a) hereof.
EXCHANGE REGISTRATION STATEMENT: See Section 2(a) hereof.
FILING DATE: (A) If no Registration Statement has been filed by the
Company pursuant to this Agreement, the 30th day after the Trigger Date;
provided, however, that if a Shelf Notice is given within 10 days prior to the
Filing Date, then the Filing Date with respect to the Initial Shelf Registration
shall be the 15th calendar day after the date of the giving of such Shelf
Notice; and (B) in each other case (which may be applicable notwithstanding the
consummation of an Exchange Offer), the 30th day after the delivery of a Shelf
Notice.
FULL ACCRETION DATE: October 1, 1999.
HOLDER: Any holder of a Registrable Note or Registrable Notes.
INDEMNIFIED PERSON: See Section 7(c) hereof.
INDEMNIFYING PERSON: See Section 7(c) hereof.
INDENTURE: The Indenture, of even date herewith, between the Company
and The Bank of New York, as trustee, pursuant to which the Notes are being
issued, as amended or supplemented from time to time in accordance with the
terms thereof.
INITIAL PURCHASER: See the introductory paragraphs hereto.
INITIAL OFFERING PRICE: $690.39 for each Unit.
INITIAL SHELF REGISTRATION: See Section 3(a) hereof.
INSPECTORS: See Section 5(n) hereof.
ISSUE DATE: October 22, 1996.
LIQUIDATED DAMAGES: See Section 4(a) hereof.
2
<PAGE>
NASD: See Section 5(s) hereof.
NOTES: See the introductory paragraphs hereto.
PARTICIPANT: See Section 7(a) hereof.
PARTICIPATING BROKER-DEALER: See Section 2(b) hereof.
PERSON: An individual, trustee, corporation, partnership, joint stock
company, limited liability company, trust, unincorporated association, union,
business association, firm or other legal entity.
PRIVATE EXCHANGE: See Section 2(b) hereof.
PRIVATE EXCHANGE NOTES: See Section 2(b) hereof.
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
PUBLIC OFFERING: A public offering (whether or not underwritten, but
excluding any offering pursuant to Form S-4 or S-8 under the Securities Act) of
securities of the Company pursuant to an effective registration statement under
the Securities Act, the aggregate gross proceeds of which equal or exceed $10
million.
PURCHASE AGREEMENT: See the introductory paragraphs hereto.
RECORDS: See Section 5(n) hereof.
REGISTRABLE NOTES: Each Note upon its original issuance and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until in the case of any such Note, Exchange Note or Private
Exchange Note, as the case may be, the earliest to occur of (i) a Registration
Statement (other than, with respect to any Exchange Note as to which Section
2(c)(iv) hereof is applicable, the Exchange Registration Statement) covering
such Note, Exchange Note or such Private Exchange Note has been declared
effective by the SEC and such Note, Exchange Note or such Private Exchange Note,
as the case may be, has been disposed of in accordance with such effective
Registration Statement, (ii) such Note, Exchange Note or Private Exchange Note,
as the case may be, may at the time of determination be sold to the public
pursuant to Rule 144(k) without the lapse of any further time or the
satisfaction of any condition, (iii) such Note has been exchanged for an
Exchange Note or Exchange Notes
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pursuant to an Exchange Offer which may be resold without restriction under
state and federal securities laws, or (iv) such Note, Exchange Note or Private
Exchange Note, as the case may be, ceases to be outstanding for purposes of the
Indenture.
REGISTRATION STATEMENT: Any registration statement of the Company,
including, but not limited to, the Exchange Registration Statement, filed with
the SEC pursuant to the provisions of this Agreement, including the Prospectus,
all amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
RULE 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
SHELF NOTICE: See Section 2(c) hereof.
SHELF REGISTRATION: See Section 3(b) hereof.
SUBSEQUENT SHELF REGISTRATION: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRIGGER DATE: The earliest to occur of (i) the consummation of Public
Offering, (ii) the Company or any of its subsidiaries shall effect any offering
of securities and immediately thereafter shall be subject to the reporting
requirements of Section 13 or 15 of the Exchange Act (whether pursuant to the
Exchange Act or by contractual obligation) or (iii) October 1, 1999; provided,
however, that October 1, 1999 shall not be a Trigger Date if, in the written
opinion of counsel to the Company (a copy of which shall be delivered to the
Holders not later than the 30th day after October 1, 1999), the Registrable
Notes may on and
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after such date be sold to the public pursuant to Rule 144(k) without the lapse
of any further time or the satisfaction of any conditions;
TRUSTEE: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. EXCHANGE OFFER
(a) The Company shall file with the SEC no later than the Filing
Date, an offer to exchange (the "EXCHANGE OFFER") any and all of the Registrable
Notes (other than Private Exchange Notes, if any) for a like aggregate Accreted
Value or principal amount of debt securities of the Company which are
substantially identical in all respects to the Notes (the "EXCHANGE NOTES"),
except that the Exchange Notes shall have been registered pursuant to an
effective Registration Statement under the Securities Act and shall contain no
restrictive legend thereon, and which are entitled to the benefits of the
Indenture, or a trust indenture which is substantially identical in all material
respects to the Indenture (other than such changes to the Indenture or any such
identical trust indenture as are necessary to comply with any requirements of
the SEC or applicable law to effect or maintain the qualification thereof under
the TIA) and which, in either case, has been qualified under the TIA. The
Exchange Offer shall be registered under the Securities Act on the appropriate
form (the "EXCHANGE REGISTRATION STATEMENT") and shall comply with all
applicable tender offer rules and regulations under the Exchange Act and other
applicable law. The Company shall use its best efforts to (x) cause the
Exchange Registration Statement to be declared effective under the Securities
Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at
least 30 days (or longer if required by applicable law) after the date that
notice of the Exchange Offer is mailed to Holders; and (z) consummate the
Exchange Offer on or prior to the 45th day following the date on which the
Exchange Registration Statement is declared effective by the SEC. The Exchange
Offer shall be deemed to have been consummated upon the earlier to occur of (i)
the Company having exchanged the Exchange Notes for all outstanding Registrable
Securities pursuant to the Exchange Offer and (ii) the Company having exchanged,
pursuant to the Exchange Offer, Exchange Notes for all Registrable Securities
that have been tendered and not withdrawn before the expiration of the Exchange
Offer, which shall be on a date that is at least 30 days following the
commencement of the Exchange Offer. For purposes of this Section 2(a) only, if
after such Exchange Registration Statement is initially declared effective by
the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Exchange Registration
Statement shall be deemed not to have become effective for purposes of this
Agreement.
Each Holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no
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arrangement or understanding with any Person to participate in the distribution
of the Exchange Notes in violation of the provisions of the Securities Act, and
that such Holder is not an affiliate of the Company within the meaning of the
Securities Act, and to make any additional representations which may then be
required by applicable law.
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, MUTATIS
MUTANDIS, solely with respect to Registrable Notes that are Private Exchange
Notes and Exchange Notes held by Participating Broker-Dealers, and the Company
shall have no further obligation to register Registrable Notes (other than
Private Exchange Notes and other than in respect of any Exchange Notes as to
which clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof.
No securities other than the Exchange Notes shall be included in the
Exchange Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchaser, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "PARTICIPATING
BROKER-DEALER"), whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies represent the
prevailing views of the staff of the SEC. Such "Plan of Distribution" section
shall also expressly permit the use of the Prospectus by all Persons subject to
the prospectus delivery requirements of the Securities Act, including all
Participating Broker-Dealers, and include a statement describing the means by
which Participating Broker-Dealers may resell the Exchange Notes.
The Company shall use its reasonable best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein in order to permit such Prospectus to be lawfully delivered by
all Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as is necessary to comply with applicable law in
connection with any resale of the Exchange Notes; PROVIDED, HOWEVER, that such
period shall not exceed 180 days after the Exchange Registration Statement is
declared effective (or such longer period if extended pursuant to the last
paragraph of Section 5 hereof) (the "APPLICABLE PERIOD").
If, prior to consummation of the Exchange Offer, the Initial Purchaser
holds any Notes acquired by it and having, or which are reasonably likely to be
determined to have, the status of an unsold allotment in the initial
distribution, or any other Holder is not entitled to participate in the Exchange
Offer, the Company upon the request of the Initial Purchaser or any such Holder
shall simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to the Initial Purchaser and any such Holder, in
exchange (the "PRIVATE EXCHANGE") for such Notes held by the Initial Purchaser
and any such Holder, a like aggregate Accreted Value or principal amount of debt
securities of the Company that are
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substantially identical in all material respects to the Exchange Notes (the
"PRIVATE EXCHANGE NOTES") (and which are issued pursuant to the same indenture
as the Exchange Notes). The Private Exchange Notes shall bear the same CUSIP
number as the Exchange Notes.
In connection with the Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(3) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(1) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may be,
equal in aggregate Accreted Value or principal amount to the Notes of such
Holder so accepted for exchange.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or the Private Exchange,
as the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding is
instituted or threatened in any court or by any governmental agency which might
materially impair the ability of the Company to proceed with the Exchange Offer
or the Private Exchange and no material adverse development has occurred in any
existing action or proceeding with respect to the Company and (iii) all
governmental approvals have been obtained, which approvals the Company deems
necessary for the consummation of the Exchange Offer or Private Exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture substantially identical in all material
respects to the Indenture, which in either event shall provide that the Exchange
Notes shall not be subject
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to the transfer restrictions set forth in the Indenture. The Indenture or such
indenture shall provide that the Exchange Notes, the Private Exchange Notes and
the Notes shall vote and consent together on all matters as one class and that
neither the Exchange Notes, the Private Exchange Notes or the Notes will have
the right to vote or consent as a separate class on any matter.
(c) If (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Company is not permitted to effect
an Exchange Offer, (ii) the Exchange Offer is not consummated within 135 days of
the Filing Date, (iii) any holder of Private Exchange Notes so requests, or (iv)
in the case of any Holder that participates in the Exchange Offer, such Holder
does not receive Exchange Notes on the date of the exchange that may be sold
without restriction under state and federal securities laws, in the case of each
of clauses (i) to and including (iv) of this sentence, then the Company shall
promptly deliver to the Holders and the Trustee written notice thereof (the
"SHELF NOTICE") and shall file a Shelf Registration pursuant to Section 3
hereof.
(d) In the event that no Trigger Date occurs by virtue of the proviso
to clause (iii) of the definition of Trigger Date, then the Company shall cause
a registration statement pursuant to the Exchange Act in respect of the Notes to
be filed with the SEC and to become effective, and so long as any of the Notes
shall be outstanding shall thereafter file all reports required to be filed
pursuant to Section 13 of the Exchange Act by an issuer subject to such Section
13 (whether or not the Company is then subject to the reporting requirements of
Section 13 of the Exchange Act).
3. SHELF REGISTRATION
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) SHELF REGISTRATION. The Company shall file with the SEC on or
prior to the Filing Date a "shelf" Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 covering all of the Registrable
Notes (the "INITIAL SHELF REGISTRATION"). The Initial Shelf Registration shall
be on Form S-1 or another appropriate form permitting registration of such
Registrable Notes for resale by Holders in the manner or manners designated by
them (including, without limitation, one or more underwritten offerings). The
Company shall not permit any securities other than the Registrable Notes to be
included in the Initial Shelf Registration or any Subsequent Shelf Registration
(as defined below).
The Company shall use its reasonable best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act on or prior
to the Effectiveness Date and to keep the Initial Shelf Registration
continuously effective and useable under the Securities Act until the date which
is 24 months from the Effectiveness Date; subject to extension pursuant to the
last paragraph of Section 5 hereof (the "EFFECTIVENESS PERIOD"), or such shorter
period ending when (i) all Registrable Notes covered by the Initial Shelf
Registration have been sold in the manner set forth and as contemplated in the
Initial Shelf
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Registration or (ii) a Subsequent Shelf Registration covering all of the
Registrable Notes has been declared effective under the Securities Act;
PROVIDED, HOWEVER, that the Effectiveness Period shall be extended to the extent
required to permit dealers to comply with the applicable prospectus delivery
requirements of Rule 174 under the Securities Act and as otherwise provided
herein.
The Company shall be entitled to suspend any Initial Shelf
Registration and the duration of such suspension shall be excluded from the
calculation of the twenty-four month period described in the previous paragraph.
Such suspension may be effected only if the Board of Directors of the Company
determines reasonably and in good faith that the Initial Shelf Registration
would materially impede, delay or interfere with any material financing, offer
or sale of securities by the Company, acquisition, corporate reorganization or
other significant transaction involving the Company or any of its Subsidiaries,
which material financing, offer or sale of securities, acquisition, corporate
reorganization or other significant transaction is under active consideration by
the Company at the time of such suspension described above; PROVIDED, HOWEVER,
that the Company shall not be entitled to more than two suspensions, each of no
longer than 6 weeks duration, in such twenty-four month period. If the Company
shall so suspend the Initial Shelf Registration it shall, as promptly as
possible, deliver a certificate signed by the Chief Executive Officer or
President of the Company to the selling Holders as to such determination, and
the Holders shall receive an extension of the registration period equal to the
number of days of the suspension.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), the Company shall use its
reasonable best efforts to obtain the prompt withdrawal of any order suspending
the effectiveness thereof, and in any event shall within 45 days of such
cessation of effectiveness use its reasonable best efforts to amend the Initial
Shelf Registration in a manner to obtain the withdrawal of the order suspending
the effectiveness thereof, or file an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Notes (a "SUBSEQUENT SHELF
REGISTRATION"). If a Subsequent Shelf Registration is filed, the Company shall
use its best efforts to cause the Subsequent Shelf Registration to be declared
effective under the Securities Act as soon as practicable after such filing and
to keep such Registration Statement continuously effective and usable for a
period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration or any
Subsequent Shelf Registration was previously continuously effective and usable.
As used herein the term "SHELF REGISTRATION" means the Initial Shelf
Registration and any Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
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(d) HOLD-BACK AGREEMENTS
(i) RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTRABLE NOTES.
Each Holder of Registrable Notes whose Registrable Notes are covered by a
Shelf Registration filed pursuant to Section 3 hereof (which Registrable
Notes are not being sold in the underwritten offering described below)
agrees, if requested (pursuant to a timely written notice) by the managing
underwriter or underwriters in an underwritten primary offering of
nonconvertible debt securities of the Company, not to effect any public
sale or distribution of any Registrable Notes, including a sale pursuant to
Rule 144 or Rule 144A (except as part of such underwritten offering),
during the period beginning 10 days prior to, and ending 90 days after, the
closing date of such underwritten offering, to the extent timely notified
in writing by the Company or by the managing underwriter or underwriters;
PROVIDED, HOWEVER, that each holder of Registrable Notes shall be subject
to the hold-back restrictions of this Section 3(d)(i) only once during the
term of this Agreement.
The foregoing provisions shall not apply to any Holder of Registrable Notes
if such Holder is prevented by applicable statute or regulation from
entering into any such agreement; PROVIDED, HOWEVER, that any such Holder
shall undertake, in its request to participate in any such underwritten
offering, not to effect any public sale or distribution of the class of
securities covered by such Shelf Registration (except as part of such
underwritten offering) during such period unless it has provided 45 days'
prior written notice of such sale or distribution to the Company or the
managing underwriter or underwriters, as the case may be.
(ii) RESTRICTIONS ON THE COMPANY AND OTHERS. The Company agrees
(A) not to effect any public sale or distribution of any securities the
same as or similar to those covered by a Shelf Registration filed pursuant
to Section 3 hereof, or any securities convertible into or exchangeable or
exercisable for such securities, during the 10 days prior to, and during
the 90-day period beginning on, the commencement of an underwritten public
distribution of Registrable Notes, where the managing underwriter or
underwriters so requests; and (B) to include in any agreements entered into
by the Company on or after the date of this Agreement (other than any
underwriting agreement relating to a public offering registered under the
Securities Act) pursuant to which the Company issues or agrees to issue
securities the same as or similar to the Notes a provision that each holder
of such securities that are the same as or similar to Notes issued at any
time on or after the date of this Agreement agrees not to effect any public
sale or distribution, or request or demand the registration, of any such
securities (or any securities convertible into or exchangeable or
exercisable for such securities) during the period referred to in clause
(A) of this Section 3(d)(ii), including any sale pursuant to Rule 144 or
Rule 144A.
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4. LIQUIDATED DAMAGES
(a) The Company and the Initial Purchaser agree that the Holders of
Registrable Notes will suffer damages if the Company fails to fulfill its
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay, as liquidated damages, in the form of additional
interest on the Notes ("LIQUIDATED DAMAGES") under the circumstances and to the
extent set forth below (each of which shall be given independent effect):
(i) if (A) neither the Exchange Registration Statement nor the
Initial Shelf Registration has been filed on or prior to the applicable
Filing Date or (B) notwithstanding that the Company has consummated or will
consummate an Exchange Offer, the Company is required to file a Shelf
Registration and such Shelf Registration is not filed on or prior to the
Filing Date applicable thereto, then, commencing on the day after any
Filing Date, Liquidated Damages shall accrue on the Accreted Value (if
prior to the Full Accretion Date in effect from time to time) or principal
amount (if on or after the Full Accretion Date) of the Notes affected
thereby at a rate of .50% per annum (which shall be in addition to the
stated interest per annum for such events on or after the Full Accretion
Date) for the first 90 days immediately following each such Filing Date,
such Liquidated Damages rate increasing by an additional .50% per annum at
the beginning of each subsequent 90-day period;
(ii) if (A) neither the Exchange Registration Statement nor the
Initial Shelf Registration is declared effective by the SEC on or prior to
the applicable Effectiveness Date or (B) notwithstanding that the Company
has consummated or will consummate an Exchange Offer, the Company is
required to file a Shelf Registration and such Shelf Registration is not
declared effective by the SEC on or prior to the Effectiveness Date in
respect of such Shelf Registration, then, commencing on the day after such
Effectiveness Date, Liquidated Damages shall accrue on the Accreted Value
(if prior to the Full Accretion Date in effect from time to time) or
principal amount (if on or after the Full Accretion Date) of the Notes
included or which should have been included in such Registration Statement
at a rate of .50% per annum (which shall be in addition to the stated
interest per annum for such events on or after the Full Accretion Date) for
the first 90 days immediately following the day after such Effectiveness
Date, such Liquidated Damages rate increasing by an additional .50% per
annum at the beginning of each subsequent 90-day period; and
(iii) if (A) the Company has not exchanged Exchange Notes for
all Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to the 45th day after the date on which the Exchange
Registration Statement was declared effective or (B) if applicable, the
Shelf Registration has been declared effective and such Shelf Registration
ceases to be effective at any time during the Effectiveness Period, then
Liquidated Damages shall accrue on the Accreted Value (if prior to the Full
Accretion Date) or principal amount (if on or after the Full Accretion
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Date) of the Notes at a rate of .50% per annum (which shall be in addition
to the stated interest per annum for such events on or after the Full
Accretion Date) for the first 90 days commencing on the (x) 46th day after
such effective date, in the case of (A) above, or (y) the day such Shelf
Registration ceases to be effective in the case of (B) above, such
Liquidated Damages rate increasing by an additional .50% per annum at the
beginning of each such subsequent 90-day period;
PROVIDED, HOWEVER, that the Liquidated Damages rate may not at any one time
exceed in the aggregate 3.0% per annum; PROVIDED, FURTHER, HOWEVER, that (1)
upon the filing of the Exchange Registration Statement or the Shelf Registration
as required hereunder (in the case of clause (a)(i) of this Section 4), (2) upon
the effectiveness of the Exchange Registration Statement or the Shelf
Registration as required hereunder (in the case of clause (a)(ii) of this
Section 4), or (3) upon the exchange of Exchange Notes for all Notes tendered
(in the case of clause (a)(iii)(A) of this Section 4), or upon the effectiveness
of the Shelf Registration which had ceased to remain effective (in the case of
(a)(iii)(B) of this Section 4), Liquidated Damages on the Notes as a result of
such clause (or the relevant subclause thereof), as the case may be, shall cease
to accrue.
The Company shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Liquidated
Damages are required to be paid (an "EVENT DATE"). Any amounts of Liquidated
Damages due pursuant to clause (a)(i), (a)(ii) or (a)(iii) of this Section 4
will be payable in cash semi-annually on each October 1 and April 1 (to the
holders of record on the September 15 and March 15 immediately preceding such
dates), commencing with the first such payment date occurring after any such
Liquidated Damages commences to accrue. The amount of Liquidated Damages will
be determined by multiplying the applicable Liquidated Damages rate by the
Accreted Value applicable to such period (if prior to the Full Accretion Date)
or the principal amount (if on or after the Full Accretion Date) of the
Registrable Notes, multiplied by a fraction, the numerator of which is the
number of days such Liquidated Damages rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months
and, in the case of a partial month, the actual number of days elapsed), and the
denominator of which is 360.
5. REGISTRATION PROCEDURES
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company shall effect such registrations to permit
the sale of the securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Registration Statement filed by the Company hereunder the Company
shall:
(a) Prepare and file with the SEC prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Sections 2 or
3 hereof, and use its diligent best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein; PROVIDED,
HOWEVER, that, if (1) such filing is pursuant to Section 3
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hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, before filing any Registration Statement or
Prospectus or any amendments or supplements thereto, the Company shall furnish
to and afford the Holders of the Registrable Notes covered by such Registration
Statement or each such Participating Broker-Dealer, as the case may be, not more
than one counsel and the managing underwriters, if any, a reasonable opportunity
to review copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be filed
(in each case at least five business days prior to such filing). The Company
shall not file any Registration Statement or Prospectus or any amendments or
supplements thereto if the Holders of a majority in aggregate principal amount
of the Registrable Notes covered by such Registration Statement, or any such
Participating Broker-Dealer, as the case may be, their counsel, or the managing
underwriters, if any, shall reasonably object in writing to any information
contained therein.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement, as the
case may be, as may be necessary to keep such Registration Statement
continuously effective and usable for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented by
any Prospectus supplement required by applicable law, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act applicable to it with respect to the
disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus. The Company shall be deemed not to have used
its diligent best efforts to keep a Registration Statement effective and usable
during the Applicable Period if the Company voluntarily takes any action that
would result in selling Holders of the Registrable Notes covered thereby or
Participating Broker-Dealers seeking to sell Exchange Notes not being able to
sell such Registrable Notes or such Exchange Notes during that period unless
(i) such action is required by applicable law or (ii) such action is taken by
the Company in good faith and for valid business reasons (not including
avoidance of the Company's obligations hereunder).
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, notify the selling Holders of Registrable
Notes, or each such Participating Broker-Dealer, as the case may be, their
counsel and the managing underwriters, if any, promptly (but in any event within
two business days), and confirm such notice in writing, (i) when a Prospectus or
any Prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective under the Securities Act (including in such notice a
written statement that any Holder may, upon request, obtain, at the sole expense
of the Company, one conformed copy of such Registration Statement or
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post-effective amendment including financial statements and schedules, documents
incorporated or deemed to be incorporated by reference and exhibits), (ii) of
the issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for that purpose,
(iii) if at any time when a prospectus is required by the Securities Act to be
delivered in connection with sales of the Registrable Notes or resales of
Exchange Notes by Participating Broker-Dealers the representations and
warranties of the Company contained in any agreement (including any underwriting
agreement), contemplated by Section 5(n) hereof cease to be true and correct in
all material respects, (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable Notes or the
Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale
in any jurisdiction, or the initiation or threatening of any proceeding for such
purpose, (v) of the happening of any event, or any information becoming known
that makes any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in or amendments or supplements to such Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(vi) of the Company's determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use its diligent best efforts to prevent the
issuance of any order suspending the effectiveness of a Registration Statement
or of any order preventing or suspending the use of a Prospectus or suspending
the qualification (or exemption from qualification) of any of the Registrable
Notes or the Exchange Notes to be sold by any Participating Broker-Dealer, for
sale in any jurisdiction, and, if any such order is issued, to use its diligent
best efforts to obtain the withdrawal of any such order at the earliest
practicable moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter or underwriters (if any), the Holders of a
majority in aggregate principal amount of the Registrable Notes being sold in
connection with an underwritten offering or any Participating Broker-Dealer,
(i) promptly incorporate in a prospectus supplement or post-effective amendment
such information as the managing underwriter or underwriters (if any), such
Holders, any Participating Broker-Dealer or counsel for any of them determine is
reasonably necessary to be included therein, (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
practicable after the
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Company has received notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment, and (iii) supplement or make
amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, furnish to each selling Holder of
Registrable Notes and to each such Participating Broker-Dealer who so requests
and to their respective counsel and each managing underwriter, if any, at the
sole expense of the Company, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, deliver to each selling Holder of
Registrable Notes, or each such Participating Broker-Dealer, as the case may be,
their respective counsel, and the underwriters, if any, at the sole expense of
the Company, as many copies of the Prospectus or Prospectuses (including each
form of preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers (if any), in connection with the offering and sale of the
Registrable Notes covered by, or the sale by Participating Broker-Dealers of the
Exchange Notes pursuant to, such Prospectus and any amendment or supplement
thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use its reasonable best efforts to register or qualify,
and to cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes for offer and sale under the securities
or blue sky laws of such jurisdictions within the United States as any selling
Holder, Participating Broker-Dealer, or the managing underwriter or underwriters
reasonably request; PROVIDED, HOWEVER, that where Exchange Notes held by
Participating Broker-Dealers or Registrable Notes are offered other than through
an underwritten offering, the Company agrees to cause the Company's counsel to
perform blue sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 5(h); keep each such registration
or qualification (or exemption therefrom) effective
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during the period such Registration Statement is required to be kept effective
and do any and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the applicable
Registration Statement; PROVIDED, HOWEVER, that the Company shall not be
required to (A) qualify generally to do business in any jurisdiction where it is
not then so qualified, or (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may request.
(j) Use its diligent best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be reasonably necessary to
enable the seller or sellers thereof or the underwriter or underwriters, if any,
to consummate the disposition of such Registrable Notes, except as may be
required solely as a consequence of the nature of such selling Holder's
business, in which case the Company will cooperate in all reasonable respects
with the filing of such Registration Statement and the granting of such
approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable
prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole
expense of the Company, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Notes being sold thereunder or to the purchasers of the Exchange
Notes to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(l) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates for
the Registrable Notes in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes.
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(m) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in underwritten offerings of debt securities similar to the Notes and
take all such other actions as are reasonably requested by the managing
underwriter or underwriters in order to expedite or facilitate the registration
or the disposition of such Registrable Notes and, in such connection, (i) make
such representations and warranties to, and covenants with, the underwriters
with respect to the business of the Company and its subsidiaries (including any
acquired business, properties or entity, if applicable) and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings of debt securities similar to
the Notes, and confirm the same in writing if and when requested; (ii) obtain
the written opinions of counsel to the Company in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters, addressed
to the underwriters covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by the managing underwriter or underwriters; (iii) obtain "comfort"
letters and updates thereof in form, scope and substance reasonably satisfactory
to the managing underwriter or underwriters from the independent certified
public accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial data are,
or are required to be, included or incorporated by reference in the Registration
Statement), addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "comfort"
letters in connection with underwritten offerings and such other matters as
reasonably requested by the managing underwriter or underwriters as permitted by
the Statement on Auditing Standards No. 72; and (iv) if an underwriting
agreement is entered into, the same shall contain indemnification provisions and
procedures no less favorable than those set forth in Section 7 hereof (or such
other provisions and procedures acceptable to Holders of a majority in aggregate
principal amount of Registrable Notes covered by such Registration Statement and
the managing underwriter or underwriters or agents) with respect to all parties
to be indemnified pursuant to said Section. The above shall be done at each
closing under such underwriting agreement, or as and to the extent required
thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, make available for inspection by any selling
Holder of such Registrable Notes being sold, or each such Participating
Broker-Dealer, as the case may be, any underwriter participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant or other
agent retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"INSPECTORS"), at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
instruments of the Company and its subsidiaries (collectively, the "RECORDS") as
shall be reasonably necessary to conduct a reasonable investigation within the
meaning of Section 11 of the Securities Act, and cause the officers, directors
and employees of the Company and its subsidiaries to supply all
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information reasonably requested by any such Inspector in connection with such
Registration Statement.
(o) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange Offer
or the first Registration Statement relating to the Registrable Notes; and
execute, and use its best efforts to cause such trustee to execute, all forms
and documents as may be required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(q) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, that the Exchange Notes or Private Exchange Notes,
as the case may be, and the related indenture constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with its respective terms, subject to customary exceptions and
qualifications.
(r) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to such
other Person as directed by the Company) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Company shall mark, or cause
to be marked, on such Registrable Notes that such Registrable Notes are being
canceled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall such Registrable Notes be marked as paid or
otherwise satisfied.
(s) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings required to be made with the National Association of Securities
Dealers, Inc. (the "NASD").
(t) Use its diligent best efforts to take all other steps necessary
or advisable to effect the registration of the Exchange Notes and/or Registrable
Notes covered by a Registration Statement contemplated hereby.
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The Company may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Notes as the
Company may, from time to time, reasonably request. The Company may exclude
from such registration the Registrable Notes of any seller so long as such
seller fails to furnish such information within a reasonable time after
receiving such request. Each seller as to which any Shelf Registration is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such seller not materially misleading.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such Holder by name or otherwise is not required by the
Securities Act or any similar federal statute then in force, the deletion of the
reference to such Holder in any amendment or supplement to the Registration
Statement filed or prepared subsequent to the time that such reference ceases to
be required.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon actual receipt
of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "ADVICE") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event the Company shall give any such notice,
each of the Effectiveness Period and the Applicable Period shall be extended by
the number of days during such periods from and including the date of the giving
of such notice to and including the date when each seller of Registrable Notes
covered by such Registration Statement or Exchange Notes to be sold by such
Participating Broker-Dealer, as the case may be, shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(k)
hereof or (y) the Advice.
6. REGISTRATION EXPENSES
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation, (i) all
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registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or blue sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Notes or Exchange Notes, (ii) printing expenses, including, without
limitation, expenses of printing certificates for Registrable Notes or Exchange
Notes in a form eligible for deposit with The Depository Trust Company and of
printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any
Registration Statement or in respect of Registrable Notes or Exchange Notes to
be sold by any Participating Broker-Dealer during the Applicable Period, as the
case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and fees and disbursements of one
special counsel for all of the sellers of Registrable Notes, (v) fees and
disbursements of all independent certified public accountants referred to in
Section 5(n)(iii) hereof (including, without limitation, the expenses of any
special audit and "comfort" letters required by or incident to such
performance), (vi) Securities Act liability insurance, if the Company desires
such insurance, (vii) fees and expenses of all other Persons retained by the
Company, (viii) internal expenses of the Company (including, without limitation,
all salaries and expenses of officers and employees of the Company performing
legal or accounting duties), (ix) the expense of any annual audit, (x) the fees
and expenses incurred in connection with the listing of the securities to be
registered on any securities exchange, if applicable, and (xi) the expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, indentures and any other documents
necessary in order to comply with this Agreement. Notwithstanding the
foregoing, the sellers of the Registrable Notes being registered shall pay all
brokerage fees and commissions and underwriting discounts and commissions
attributable to the sale of such Notes and the fees and disbursements of any
counsel or other advisors or experts retained by such holders (severally or
jointly), other than the counsel and experts specifically referred to above,
transfer taxes on resale of any of the Notes by such sellers and any advertising
expenses incurred by or on behalf of such holders in connection with any offers
they may make.
7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Notes and each Participating Broker-Dealer selling Exchange Notes
during the Applicable Period, the officers and directors of each such Person,
and each Person, if any, who controls any such Person within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act (each,
a "PARTICIPANT"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, the reasonable legal fees and other
expenses actually incurred in connection with any suit, action or proceeding or
any claim asserted) caused by, arising out
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of or based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment thereto) or
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, or caused by,
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the case of the Prospectus in light of the circumstances under which
they were made, not misleading, except insofar as such losses, claims, damages
or liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
relating to any Participant furnished to the Company in writing by such
Participant expressly for use therein; PROVIDED, HOWEVER, that the Company will
not be liable if such untrue statement or omission or alleged untrue statement
or omission was contained or made in any preliminary prospectus and corrected in
the Prospectus or any amendment or supplement thereto and the Prospectus does
not contain any other untrue statement or omission or alleged untrue statement
or omission of a material fact that was the subject matter of the related
proceeding and any such loss, liability, claim, damage or expense suffered or
incurred by the Participants resulted from any action, claim or suit by any
Person who purchased Registrable Notes or Exchange Notes which are the subject
thereof from such Participant and it is established in the related proceeding
that such Participant failed to deliver or provide a copy of the Prospectus (as
amended or supplemented) to such Person with or prior to the confirmation of the
sale of such Registrable Notes or Exchange Notes sold to such Person if required
by applicable law, unless such failure to deliver or provide a copy of the
Prospectus (as amended or supplemented) was a result of noncompliance by the
Company with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each Person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to each Participant,
but only with reference to information relating to such Participant furnished to
the Company in writing by such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of Registrable
Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "INDEMNIFIED PERSON") shall promptly
notify the Person against whom such indemnity may be sought (the "INDEMNIFYING
PERSON") in writing, and the Indemnifying Person, shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the Indemnified
Person and any others the Indemnifying Person may reasonably designate in such
proceeding and shall pay the reasonable fees and expenses actually incurred by
such counsel related to such proceeding; PROVIDED, HOWEVER, that the failure to
so notify the Indemnifying Person shall not relieve it of any obligation or
liability which it may have hereunder or otherwise. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
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mutually agreed to the contrary, (ii) the Indemnifying Person shall have failed
within a reasonable period of time to retain counsel reasonably satisfactory to
the Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both the Indemnifying Person and the
Indemnified Person or any affiliate and representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Person shall
not, in connection with any one such proceeding or separate but substantially
similar related proceeding in the same jurisdiction arising out of the same
general allegations, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Indemnified Persons,
and that all such fees and expenses shall be reimbursed promptly as they are
incurred. Any such separate firm for the Indemnified Persons shall be
designated in writing by Participants who sold a majority in interest of
Registrable Notes and Exchange Notes sold by all such Participants and
reasonably acceptable to the Company and any such separate firm for the Company,
its directors, its officers and such control Persons of the Company shall be
designated in writing by the Company. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its prior written
consent (which consent shall not be unreasonably withheld or delayed), but if
settled with such consent or if there be a final judgment for the plaintiff for
which the Indemnified Person is entitled to indemnification pursuant to this
Agreement, the Indemnifying Person agrees to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. No Indemnifying Person shall, without the prior written
consent of the Indemnified Persons (which consent shall not be unreasonably
withheld), effect any settlement or compromise of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party, or indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement involves only the payment of money damages that are
actually paid by the indemnifying party or includes an unconditional written
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the offering of
the Registrable Notes or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, not only such relative benefits but also
the relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative fault of the parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a
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material fact relates to information supplied by the Company on the one hand or
such Indemnified Person, as the case may be, on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and any other equitable considerations appropriate
in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by PRO RATA allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the Indemnifying Person to the Indemnified Person as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any of the Initial Purchaser or any person
who controls the Initial Purchaser, the Company, their respective directors or
officers or any person controlling the Company, and (ii) any termination of this
Agreement.
(g) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. RULES 144 AND 144A
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner in accordance with
the requirements of the Securities Act and the Exchange Act and, if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder or beneficial owner of Registrable Notes, make available such
information necessary to permit sales pursuant to Rule 144A under the Securities
Act. The Company further covenants that it will take such further action as any
Holder of
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Registrable Notes may reasonably request, all to the extent required from time
to time to enable such holder to sell Registrable Notes without registration
under the Securities Act within the limitation of the exemptions provided by (a)
Rule 144(k) and Rule 144A under the Securities Act, as such Rules may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC (it being expressly understood that the foregoing shall not
create any obligation on the part of the Company to file periodic reports or
other reports under the Exchange Act at any time that it is not then required to
file such reports pursuant to the Exchange Act).
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and reasonably acceptable to the Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and
(b) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements and consistent with the terms of this Agreement.
10. MISCELLANEOUS
(a) REMEDIES. The Company agrees that monetary damages (including
the liquidated damages contemplated hereby) would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company has not, as of the date
hereof, and the Company shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements.
(c) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Company shall not,
directly or indirectly, take any action, or permit any change to occur, with
respect to the Registrable Notes as a class that would materially and adversely
affect the ability of the Holders of Registrable Notes to include such
Registrable Notes in a registration undertaken pursuant to this Agreement.
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<PAGE>
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (I) the Company and (II)(A) the Holders of not less than a majority
in aggregate principal amount of the then outstanding Registrable Notes and
(B) in circumstances that would adversely affect the Participating
Broker-Dealers, the Participating Broker-Dealers holding not less than a
majority in aggregate principal amount of the Registrable Notes held by all
Participating Broker-Dealers; PROVIDED, HOWEVER, that Section 7 and this
Section 10(d) may not be amended, modified or supplemented without the prior
written consent of each Holder and each Participating Broker-Dealer (including
any person who was a Holder or Participating Broker-Dealer of Registrable Notes
or Exchange Notes, as the case may be, disposed of pursuant to any Registration
Statement) affected by any such amendment, modification or supplement.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders of Registrable Notes whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Notes may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Notes being sold by such Holders pursuant to such Registration
Statement.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telecopier, or air courier
guaranteeing overnight delivery:
1. if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchaser as follows:
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Facsimile No.: (212) 816-7816
Attention: Corporate Finance Department
2. if to the Initial Purchaser, at the address specified in Section
10(e)(1);
3. if to the Company, at the address as follows:
Coinstar, Inc.
13231 SE 36th Street, Suite 200
Bellevue, WA 98006
Facsimile No.: 206/644-9447
Attention: Jens H. Molbak
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<PAGE>
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers; PROVIDED, HOWEVER,
that this Agreement shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless and to the extent such successor or
assign holds Registrable Notes.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO
CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
Each of the parties hereto hereby irrevocably and unconditionally: (i)
submits itself and its property in any legal action or proceeding relating to
this Notes Registration Rights Agreement or for recognition and enforcement of
any judgment in respect thereof, to the non-exclusive jursidiction of the courts
of the State of New York and the courts of the United States of America for the
Southern District of New York, and appellate courts thereof, and consents and
agrees to such action or proceeding being brought in such courts; and (ii)
waives any objection that it may now or hereafter have to the venue of any such
action or proceeding in any such court or that such action or proceeding was
brought in any inconvenient court and agrees not to plead or claim the same.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
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<PAGE>
(k) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage.
(l) THIRD PARTY BENEFICIARIES. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(m) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth of referred to herein with respect to
the registration rights granted by the Company with respect to the Registrable
Notes. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COINSTAR, INC.
By: /s/ Jens H. Molbak
-------------------------------------
Name: Jens H. Molbak
-------------------------------------
Title: CEO and President
-------------------------------------
SMITH BARNEY INC.
By: /s/ Edward P. Massaro
-------------------------------------
Name: Edward P. Massaro
-------------------------------------
Title: Vice President
-------------------------------------
<PAGE>
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- --------------------------------------------------------------------------------
EXECUTION COPY
WARRANT REGISTRATION RIGHTS AGREEMENT
Dated as of October 22, 1996
By and Among
COINSTAR, INC.
and
SMITH BARNEY INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
WARRANT REGISTRATION RIGHTS AGREEMENT
THIS WARRANT REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made and
entered into as of October 22, 1996, by and among COINSTAR, INC., a Delaware
corporation (the "COMPANY"), and SMITH BARNEY INC. (the "INITIAL PURCHASER").
This Agreement is made pursuant to the Purchase Agreement dated October
22, 1996, among the Company and the Initial Purchaser (the "PURCHASE
AGREEMENT"), relating to, among other things, the sale by the Company to the
Initial Purchaser of an aggregate of 95,000 Units, consisting in the aggregate
of (i) $95,000,000 principal amount at maturity of 13% Senior Subordinated
Discount Notes due October 1, 2006 (the "NOTES") and (ii) 95,000 Warrants (the
"INITIAL WARRANTS"), each representing the right to purchase initially seven
shares of Common Stock, $.001 par value of the Company (the "COMMON STOCK").
In addition, the Company will be obligated to issue additional warrants to
holders of the Notes upon the occurrence of the Contingent Event (as defined
in that certain Warrant Agreement dated as of the date hereof between the
Company and The Bank of New York as warrant agent, the "WARRANT AGREEMENT")
(the "CONTINGENT WARRANTS", and together with the Initial Warrants, the
"WARRANTS"). In order to induce the Purchaser to enter into the Purchase
Agreement, the Company has agreed to provide to the Purchaser and the Holders
(as defined herein), among other things, the registration rights for the
Warrant Shares (as defined herein) set forth in this Agreement. The execution
and delivery of this Agreement is a condition to the obligations of the
Purchaser under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
As used in this agreement, the following defined terms shall have the
following meanings:
"ADVICE" has the meaning ascribed to such term in the last paragraph of
Section 4 hereof.
"AFFILIATE" means, when used with reference to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, the referent Person or such other Person, as the
case may be. For the purposes of this definition, the term "CONTROL" when
used with respect to any specified Person means the power to direct or cause
the direction of management or policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "AFFILIATED," "CONTROLLING" and "CONTROLLED" have
meanings correlative of the foregoing. The Purchaser nor any of its
Affiliates shall be deemed to be an Affiliate of the Company or of any of its
subsidiaries or Affiliates.
"BUSINESS DAY" shall mean a day that is not a Legal Holiday.
"CAPITAL STOCK" means any and all shares, interests, rights to purchase,
warrants, options, participations, or other equivalents of or interests
(however designated) of corporate stock of the Company, including each class
of common stock and preferred stock of the Company, together with any
warrants, rights, or options to purchase or acquire any of the foregoing.
<PAGE>
"COMMON STOCK" has the meaning ascribed to such term in the preamble
hereof.
"COMPANY" shall have the meaning ascribed to that term in the preamble of
this Agreement and shall also include the Company's permitted successors and
assigns.
"CONTINGENT WARRANTS" has the meaning ascribed to such term in the
preamble hereof.
"DEMAND REGISTRATION" has the meaning ascribed to such term in Section
2.2(a) hereof.
"DISQUALIFIED CAPITAL STOCK" has the meaning ascribed to such term in the
Warrant Agreement.
"DTC" has the meaning ascribed to such term in Section 4(i) hereof.
"EQUITY INTERESTS" has the meaning ascribed to such term in the Warrant
Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXERCISE EVENT" has the meaning ascribed to such term in the Warrant
Agreement.
"HOLDER" shall mean the Purchaser, for so long as it owns any Warrants or
Warrant Shares, and each of its successors, assigns and direct and indirect
transferees who become registered owners of such Warrants or Warrant Shares.
"INCLUDED SECURITIES" has the meaning ascribed to such term in Section
2.2(a) hereof.
"INDEMNIFIED PARTY" has the meaning ascribed to such term in Section 5(c)
hereof.
"INDEMNIFYING PARTY" has the meaning ascribed to such term in Section
5(c) hereof.
"INDENTURE" means the Indenture, of even date herewith, between the
Company and The Bank of New York as Trustee, pursuant to which the Notes are
issued.
"INITIAL PURCHASER" has the meaning ascribed to such term in the preamble
hereof.
"INITIAL WARRANTS" has the meaning ascribed to such term in the preamble
hereof.
"INSPECTORS" has the meaning ascribed to such term in Section 4(a) hereof.
"INVESTORS' RIGHTS AGREEMENT" means that certain Second Amended and
Restated Investors' Rights Agreement dated August 27, 1996, as amended on
October 22, 1996, among Jens H. Molbak and the investors listed on Exhibit A
thereto.
"LEGAL HOLIDAY" shall mean a Saturday, a Sunday or a day on which banking
institutions in New York, New York are required by law, regulation or
executive order to remain closed.
"NOTES" has the meaning ascribed to such term in the preamble hereof.
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<PAGE>
"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
"PIGGY-BACK REGISTRATION" has the meaning ascribed to such term in
Section 2.3 hereof.
"PROSPECTUS" means the prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule
430A promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"PUBLIC EQUITY OFFERING" means the consummation of an offering of Equity
Interests (other than Disqualified Capital Stock) by the Company to the public
pursuant to a registration statement filed with the Commission, the aggregate
proceeds of which exceed $10 million.
"PURCHASE AGREEMENT" has the meaning ascribed to such term in the
preamble hereof.
"REGISTRABLE SECURITIES" means any of (i) the Warrant Shares and (ii) any
other securities issued or issuable with respect to any Warrant Shares by way
of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise, unless, in each case, such Warrant Shares and securities, if any,
have been offered and sold to the Holder pursuant to an effective Registration
Statement under the Securities Act declared effective prior to the
exercisability of the Warrants or such Warrant Shares and securities, if any,
may be sold to the public pursuant to Rule 144 without any restriction on the
amount of securities which may be sold by such Holder or the satisfaction of
any condition. As to any particular Registrable Securities held by a Holder,
such securities shall cease to be Registrable Securities when (i) a
Registration Statement with respect to the exercise or offering of such
securities by the Holder thereof shall have been declared effective under the
Securities Act and such securities shall have been exercised and/or disposed
of by such Holder pursuant to such Registration Statement, (ii) such
securities may at the time of determination be sold to the public pursuant to
Rule 144 without any restriction on the amount of securities which may be sold
by such Holder (or any similar provision then in force, but not Rule 144A)
promulgated under the Securities Act without the lapse of any further time or
the satisfaction of any condition, (iii) such securities shall have been
otherwise transferred by such Holder and new certificates for such securities
not bearing a legend restricting further transfer shall have been delivered by
the Company or its transfer agent and subsequent disposition of such
securities shall not require registration or qualification under the
Securities Act or any similar state law then in force or (iv) such securities
shall have ceased to be outstanding.
"REGISTRATION EXPENSES" shall mean all expenses incident to the Company's
performance of or compliance with this Agreement, including, without
limitation, all SEC and stock exchange or National Association of Securities
Dealers, Inc. registration and filing fees and expenses, fees and expenses of
compliance with securities or blue sky laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications
3
<PAGE>
of the Registrable Securities), printing expenses, messenger, telephone and
delivery expenses, fees and disbursements of counsel for the Company and all
independent certified public accountants, the fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (but not
including any underwriting discounts or commissions or transfer taxes, if any,
attributable to the sale of Registrable Securities by Holders of such
Registrable Securities) and other reasonable out-of-pocket expenses of Holders
(it being understood that Registration Expenses shall not include, as to the
fees and expenses of counsel, the fees and expenses of more than one counsel
for the Holders).
"REGISTRATION STATEMENT" shall mean any appropriate registration
statement of the Company filed with the SEC pursuant to the Securities Act
which covers any of the Registrable Securities pursuant to the provisions of
this Agreement and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"REQUISITE SECURITIES" shall mean a number of Registrable Securities
equal to not less than 25% of the Registrable Securities held in the aggregate
by all Holders; PROVIDED, HOWEVER, that with respect to any action to be taken
at the request of the Holders of the Registrable Securities prior to such time
as the Warrants have expired pursuant to the terms thereof and of the Warrant
Agreement, each Warrant outstanding shall be deemed to represent that number
of Registrable Securities for which such Warrant would be then exercisable
(without giving effect to the Cashless Exercise feature referred to in the
Warrant Agreement).
"RULE 144" shall mean Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule 144A) or regulation hereafter adopted by the SEC providing for offers and
sales of securities made in compliance therewith resulting in offers and sales
by subsequent holders that are not affiliates of an issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
"RULE 144A" shall mean Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule 144) or regulation hereafter adopted by the SEC.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time.
"SELLING HOLDER" shall mean a Holder who is selling Registrable
Securities in accordance with the provisions of Section 2.1, 2.2 or 2.3.
"SHELF REGISTRATION" has the meaning ascribed to such term in Section
2.1(a) hereof.
"WARRANTS" has the meaning ascribed to such term in the preamble hereof.
"WARRANT AGENT" means The Bank of New York and any successor Warrant
Agent for the Warrants pursuant to the Warrant Agreement.
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<PAGE>
"WARRANT AGREEMENT" has the meaning ascribed to such term in the preamble
hereof.
"WARRANT SHARE PROSPECTUS" means the prospectus included in any Warrant
Share Registration Statement (including, without limitation, any prospectus
subject to completion and a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, and
all other amendments and supplements to the Warrant Share Prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Warrant Share
Prospectus.
"WARRANT SHARE REGISTRATION STATEMENT" has the meaning ascribed to that
term in Section 5(a) hereof.
"WARRANT SHARES" means the shares of Common Stock delivered or
deliverable upon exercise of the Warrants; PROVIDED that Warrant Shares shall
not include such shares of Common Stock deliverable upon exercise of the
Contingent Warrants until the Contingent Warrants have been issued.
SECTION 2. REGISTRATION RIGHTS
SECTION 2.1. REGISTRATION IN CONNECTION WITH A PUBLIC EQUITY
OFFERING
If an Exercise Event occurs as a result of a Public Equity Offering, Holders
owning, individually or in the aggregate, not less than the Requisite Securities
may request that the Company:
(a) file and use its best efforts to cause to become effective under
the Securities Act a "shelf" Registration Statement with respect to all
Registrable Securities on any appropriate form pursuant to Rule 415 (or similar
rule that may be adopted by the SEC) (the "Shelf Registration") covering the
issuance of the Warrant Shares by the Company upon exercise, or if such issuance
is not then permitted to be registered by applicable rule or policy of the SEC,
covering resales of the Warrant Shares. The Company shall use its best efforts
to keep the Shelf Registration continuously effective and usable for 30 days
following the consummation of the Public Equity Offering, and to the extent that
the Shelf Registration is not kept effective for one or more days during such
period, the Company shall be required to extend the effectiveness of the Shelf
Registration for a like number of days after the expiration of such 30 day
period. In addition, such 30-day period shall be extended on a day for day
basis for every day that Holders of Registrable Securities not sold in the
underwritten offering are subject to the holdback provided for in Section 2.5
below; and
(b) include the issuance of the Warrant Shares by the Company upon
exercise, or if such issuance is not then permitted to be registered by
applicable rule or policy of the SEC, the resale of the Warrant Shares, in the
Registration Statement filed in connection with the Public Equity Offering. In
such event, and if the managing underwriters determine that marketing factors
require a limitation of the number of shares to be underwritten and so advises
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<PAGE>
the Company, then there shall be included in such underwritten offering the
amount of such Registrable Securities which in the opinion of such underwriters
can be sold, and such amount shall be allocated pro rata among the Holders of
such Registrable Securities and all other holders of other securities of the
Company which have a right to request inclusion therein on the basis of the
number of Registrable Securities and the number of shares of common stock
underlying such other securities of the Company held by such Holders and such
other holders.
SECTION 2.2. DEMAND REGISTRATION AFTER PUBLIC EQUITY OFFERING
(a) At any time and from time to time after the occurrence of a
Public Equity Offering, Holders owning, individually or in the aggregate, not
less than the Requisite Securities may make a written request, on two occasions
(each, a "Demand Registration"), that the Company register the issuance of the
Warrant Shares by the Company upon exercise, or if such issuance is not then
permitted to be registered by applicable rule or policy of the SEC, the resale
of the Warrant Shares, under the Securities Act. The Company shall file with
the SEC and use its best efforts to cause to become effective under the
Securities Act a Registration Statement with respect to such Registrable
Securities within (i) 45 days of receipt of such written request for a Demand
Registration if the Company is then eligible to register an offering pursuant to
Form S-3 under the Securities Act; (ii) 90 days of receipt of such written
request for a Demand Registration if the Company is not then eligible to
register an offering pursuant to Form S-3 under the Securities Act but is then
qualified as a reporting company under the Exchange Act; or (iii) 180 days of
receipt of such written request for a Demand Registration in any other case.
Any such request will specify the number of Registrable Securities proposed to
be sold and will also specify the intended method of disposition thereof. The
Company shall give written notice of such registration request to all other
Holders of Registrable Securities within 15 days after the receipt thereof.
Within 20 days after receipt by any Holder of Registrable Securities of such
notice from the Company, such Holder may request in writing that such Holder's
Registrable Securities be included in such Registration Statement and the
Company shall include in such Registration Statement the Registrable Securities
of any such Holder requested to be so included (the "Included Securities").
Each such request by such other Holders shall specify the number of Included
Securities proposed to be sold and the intended method of disposition thereof.
Subject to Sections 2.2(b) and 2.2(f) hereof, the Company shall be required to
register Registrable Securities pursuant to this Section 2.2(a) on a maximum of
two separate occasions; provided, however, that the Company may be required on
one additional occasion to register Registrable Securities issued or issuable in
connection with the Contingent Warrants if the holders of such Registrable
Securities have not been offered an opportunity to include such Registrable
Securities in a Registration Statement pursuant to a Demand Registration.
Subject to Section 2.2(f) hereof, no other securities of the Company
except (i) Registrable Securities held by any Holder, (ii) equity securities
to be offered and sold for the account of the Company and (iii) any equity
securities of the Company held by the parties to the Investors' Rights
Agreement or by any Person having "piggy-back" registration rights pursuant to
any contractual obligation of the Company shall be included in a Demand
Registration. The inclusion of any such securities for the account of the
Company or any other Person shall be on the same terms as that of the
Registrable Securities.
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(b) EFFECTIVE REGISTRATION. A Registration Statement will not be
deemed to have been effected as a Demand Registration unless it has been
declared effective by the SEC and the Company has complied in all material
respects with all of its obligations under this Agreement with respect thereto;
PROVIDED, HOWEVER, that if, after such Registration Statement has become
effective, the offering of Registrable Securities pursuant to such Registration
Statement is or becomes the subject of any stop order, injunction or other order
or requirement of the SEC or any other governmental or administrative agency or
court that prevents, restrains or otherwise limits the sale of Registrable
Securities pursuant to such Registration Statement for any reason not
attributable to any Holder participating in such registration and such
Registration Statement has not become effective within a reasonable time period
thereafter (not to exceed 30 days), such Registration Statement will be deemed
not to have been effected. If (i) a registration requested pursuant to this
Section 2.2 is deemed not to have been effected or (ii) a Demand Registration
does not remain effective under the Securities Act until at least the earlier of
(A) an aggregate of 180 days after the effective date thereof or (B) the
consummation of the distribution by the Holders of all of the Registrable
Securities covered thereby, then such registration shall not count towards
determining if the Company has satisfied its obligation to effect two Demand
Registrations pursuant to this Section 2.2. For purposes of calculating the
180-day period referred to in the preceding sentence, any period of time during
which such Registration Statement was not in effect shall be excluded. The
Holders of Registrable Securities shall be permitted to withdraw all or any part
of the Registrable Securities from a Demand Registration at any time prior to
the effective date of such Demand Registration PROVIDED, HOWEVER, that should
the Holders of Registrable Securities remaining after such withdrawal own,
individually or in the aggregate, less than the Requisite Securities, the
Company shall have the right to terminate or withdraw any registration initiated
by it under Section 2.2 prior to the effectiveness of such registration.
(c) RESTRICTIONS ON SALE BY HOLDERS. Each Holder of Registrable
Securities whose Registrable Securities are covered by a Registration Statement
filed pursuant to Section 2.1 or 2.2 and are to be sold by the Holder thereunder
agrees, if and to the extent reasonably requested by the managing underwriter or
underwriters in an underwritten primary offering of common stock or common
equivalents the gross proceeds of which equal at least $10 million, not to
effect any public sale or distribution of Registrable Securities of the Company
of the same class as any securities included in such Registration Statement,
including a sale pursuant to Rule 144 (except as part of such underwritten
offering), during the 10 day period prior to, and during the 120 day period
beginning on, the closing date of each underwritten offering made pursuant to
such Registration Statement, to the extent timely notified in writing by the
Company or such managing underwriter or underwriters.
The foregoing provisions of Section 2.2(c) shall not apply to any Holder
of Registrable Securities if such Holder is prevented by applicable statute or
regulation from entering into any such agreement; PROVIDED, HOWEVER, that any
such Holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or distribution of any
Registrable Securities commencing on the date of sale of such Registrable
Securities unless it has provided 45 days' prior written notice of such sale
or distribution to the underwriter or underwriters.
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(d) UNDERWRITTEN REGISTRATIONS. If any of the Registrable Securities
covered by a Demand Registration are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Holders of not less than a majority of the
Registrable Securities to be sold thereunder and will be reasonably acceptable
to the Company.
No Holder of Registrable Securities may participate in any underwritten
registration pursuant to a Registration Statement filed under this Agreement
unless such Holder (a) agrees to (i) sell such Holder's Registrable Securities
on the basis provided in and in compliance with any underwriting arrangements
approved by the Holders of not less than a majority of the Registrable
Securities to be sold thereunder and (ii) comply with Rules 10b-6 and 10b-7
under the Exchange Act and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements;
PROVIDED, HOWEVER, that no Holder of Registrable Securities shall be required
to enter into a custody or escrow agreement or power of attorney with respect
to Registrable Securities to be sold in connection with such underwriting
arrangements.
(e) EXPENSES. The Company will pay all Registration Expenses in
connection with the registrations requested pursuant to Sections 2.1, 2.2 and
2.3 hereof. Each Holder of Registrable Securities shall pay all underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to a Registration
Statement requested pursuant to Section 2.1 or 2.2.
(f) PRIORITY IN DEMAND REGISTRATION. In a registration pursuant to
Section 2.2 hereof involving an underwritten offering, if the managing
underwriter or underwriters of such underwritten offering have informed, in
writing, the Company and the Selling Holders who have requested such Demand
Registration or who have sought inclusion therein that in such underwriter's or
underwriters' opinion the total number of securities which the Selling Holders
and any other Person desiring to participate in such registration intend to
include in such offering is such as to adversely affect the success of such
offering, including the price at which such securities can be sold, then the
Company will be required to include in such registration only the amount of
securities which it is so advised should be included in such registration. In
such event, securities shall be registered in such registration in the following
order of priority: (i) FIRST, the securities which have been requested to be
included in such registration by the Holders of Registrable Securities,
(ii) SECOND, provided that no securities sought to be included by the Holders of
Registrable Securities have been excluded from such registration, the securities
of the parties of the Investors' Rights Agreement, (iii) THIRD, provided that no
securities sought to be included by the Holders or the other parties to the
Investors' Rights Agreement have been excluded from such registration, the
securities of other Persons entitled to exercise "piggy-back" registration
rights pursuant to contractual commitments of the Company (pro rata based on the
amount of securities held by such Persons) and (iv) fourth, provided that no
securities of any other Person sought to be included therein have been excluded
from such registration, securities to be offered and sold for the account of the
Company.
If 25% or more of the Registrable Securities which the Holders have
requested to be included in a registration statement pursuant to Section 2.2
hereof have been excluded from such
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registration statement pursuant to the provisions of the foregoing paragraph,
then such registration shall not count towards determining whether the Company
has satisfied its obligation to effect two Demand Registrations pursuant to
Section 2.2 hereof.
SECTION 2.3. PIGGY-BACK REGISTRATION
(a) If at any time the Company proposes to file a Registration
Statement under the Securities Act with respect to an offering by the Company
for its own account or for the account of any of its security holders of any
class of its common equity securities (other than (i) a Registration Statement
filed by the Company in connection with the Company's initial Public Equity
Offering, (ii) a Registration Statement on Form S-4 or S-8 (or any substitute
form that may be adopted by the SEC) or (iii) a Registration Statement filed in
connection with an exchange offer or offering of securities solely to the
Company's existing security holders), then the Company shall give written
notice of such proposed filing to the Holders of Registrable Securities as soon
as practicable (but in no event fewer than 15 days before the anticipated filing
date or 10 days if the Company is subject to filing reports under the Exchange
Act and able to use Form S-3 under the Securities Act), and such notice shall
offer such Holders the opportunity to register such number of shares of
Registrable Securities as each such Holder may request in writing not later than
15 days prior to the anticipated effective date of the Registration Statement
(or eight days of the notice of the proposed filing if the Company is subject to
filing reports under the Exchange Act and able to use Form S-3 under the
Securities Act) after receipt of such written notice from the Company (which
request shall specify the Registrable Securities intended to be disposed of by
such Selling Holder and the intended method of distribution thereof) (a "Piggy-
Back Registration"). The Company shall use its best efforts to keep such Piggy-
Back Registration continuously effective under the Securities Act until at least
the earlier of (A) 180 days after the effective date thereof or (B) the
consummation of the distribution by the Holders of all of the Registrable
Securities covered thereby. The Company shall use its commercially reasonable
efforts to cause the managing underwriter or underwriters, if any, of such
proposed offering to permit the Registrable Securities requested to be included
in a Piggy-Back Registration to be included on the same terms and conditions as
any similar securities of the Company or any other security holder included
therein, subject to the restrictions set forth in Section 2.3(b), and to permit
the sale or other disposition of such Registrable Securities in accordance with
the intended method of distribution thereof. Any Selling Holder shall have the
right to withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 2.3 by giving written notice to
the Company of its request to withdraw. The Company may withdraw a Piggy-Back
Registration at any time prior to the time it becomes effective or the Company
may elect to delay the registration; PROVIDED, HOWEVER, that the Company shall
give prompt written notice thereof to participating Selling Holders. The
Company will pay all Registration Expenses in connection with each registration
of Registrable Securities requested pursuant to this Section 2.3, and each
Holder of Registrable Securities shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to a Registration Statement
effected pursuant to this Section 2.3.
No registration effected under this Section 2.3, and no failure to effect
a registration under this Section 2.3, shall relieve the Company of its
obligation to effect a registration upon the
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request of Holders of Registrable Securities pursuant to Section 2.1 or 2.2
hereof, and no failure to effect a registration under this Section 2.3 and to
complete the sale of securities registered thereunder in connection therewith
shall relieve the Company of any other obligation under this Agreement.
(b) PRIORITY IN PIGGY-BACK REGISTRATION.
In a registration pursuant to Section 2.3 hereof involving an
underwritten offering, if the managing underwriter or underwriters of such
underwritten offering have informed, in writing, the Company and the Selling
Holders requesting inclusion in such offering that in such underwriter's or
underwriters' opinion the total number of securities which the Company, the
Selling Holders and any other Persons desiring to participate in such
registration intend to include in such offering is such as to adversely affect
the success of such offering, including the price at which such securities can
be sold, then the Company will be required to include in such registration
only the amount of securities which it is so advised should be included in
such registration. In such event: (x) in cases only involving the
registration for sale of securities for the Company's own account (other than
pursuant to the exercise of piggyback rights herein and in other contractual
commitments of the Company), securities shall be registered in such offering
in the following order of priority: (i) FIRST, the securities which the
Company proposes to register, (ii) SECOND, provided that no securities sought
to be included by the Company have been excluded from such registration, the
securities which have been requested to be included in such registration by
the Holders of Registrable Securities and the parties to the Investors' Rights
Agreement, pro rata between the Holders and the parties to the Investors'
Rights Agreement based upon the respective amounts of Registrable Securities
and securities held by such Holders and parties, and (iii) THIRD, provided
that no securities sought to be included by the Company or the Holders or the
parties to the Investors' Rights Agreement have been excluded from such
registration, the securities of other Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments of the
Company (pro rata based on the amount of securities held by such Persons); (y)
in cases not involving the registration for sale of securities for the
Company's own account only, not for the account of any party to the Investors'
Rights Agreement, securities shall be registered in such offering in the
following order of priority: (i) FIRST, the securities of any Person whose
exercise of a "demand" registration right pursuant to a contractual commitment
of the Company is the basis for the registration (provided that if such Person
is a Holder of Registrable Securities, as among Holders of Registrable
Securities there shall be no priority and Registrable Securities sought to be
included by Holders of Registrable Securities shall be included pro rata based
on the amount of securities held by such Persons), (ii) SECOND, provided that
no securities of such Person referred to in the immediately preceding clause
(i) have been excluded from such registration, the securities which have been
requested to be included in such registration by the Holders of Registrable
Securities and the parties to the Investors' Rights Agreement, pro rata
between the Holders and the parties to the Investors' Rights Agreement based
upon the respective amounts of Registrable Securities and securities held by
such Holders and parties, and (iii) THIRD, provided that no securities of such
Person referred to in the immediately preceding clause (i) or of the Holders
or of the parties to the Investors' Rights Agreement have been excluded from
such registration, securities of other Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments (pro rata
based on the amount of securities held by such Persons) and (iv) FOURTH,
provided that no securities of any other Person have been excluded from
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such registration, the securities which the Company proposes to register; and
(z) in cases involving the registration for sale of securities for a party to
the Investors' Rights Agreement, securities shall be registered in such offering
in the following order of priority: (i) FIRST, the securities which have been
requested to be included in such registration by the Holders and by the parties
to the Investors' Rights Agreement pro rata based upon the respective amounts of
Registrable Securities and securities held by such Holders and parties, and (ii)
SECOND, provided that no securities of the Holders or of the parties to the
Investors' Rights Agreement have been excluded from such registration,
securities of other Persons entitled to exercise "piggy-back" registration
rights pursuant to contractual commitments (pro rata based on the amount of
securities held by such Persons) and (iii) THIRD, provided that no securities of
any other Person has been excluded from such registration, the securities which
the Company proposes to register; PROVIDED, HOWEVER, that in cases involving the
registration for sale of securities pursuant to Section 4.3 of the Investors'
Rights Agreement, securities shall be registered in such offering in the
following order of priority: (i) FIRST, the securities requested to be included
in such registration by the Holders pursuant to this Agreement, by the parties
to the Investors' Rights Agreement and by other Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments, pro rata
based upon the number of securities held by such Holders, parties and other
Persons, respectively and (ii) SECOND, provided that no securities of any other
Person has been excluded from such registration, the securities which the
Company proposes to register.
If, as a result of the provisions of this Section 2.3(b), any Selling
Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Selling Holder has requested to be included,
such Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration.
SECTION 2.4. LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO
OBLIGATIONS UNDER REGISTRATION COVENANTS. The obligations of the Company set
forth in Sections 2.2 and 2.3 hereof are subject to each of the following
limitations, conditions and qualifications:
(i) Subject to the next sentence of this paragraph, the Company shall
be entitled to postpone, for a reasonable period of time, the filing or
effectiveness of, or suspend the rights of any Holders to make sales pursuant
to, any Registration Statement otherwise required to be prepared, filed and made
and kept effective by it pursuant to Section 2.2 or 2.3 thereunder; provided,
however, that the duration of such postponement or suspension may not exceed the
earlier to occur of (A) 15 days after the cessation of the circumstances
described in the next sentence of this paragraph on which such postponement or
suspension is based or (B) 90 days after the date of the determination of the
Board of Directors referred to in the next sentence, and the duration of such
postponement or suspension shall be excluded from the calculation of the 180-day
period described in Section 2.2(b) and the 30-day period described in Section
2.1(a) hereof. Such postponement or suspension may be effected only if the
Board of Directors of the Company determines reasonably and in good faith that
the filing or effectiveness of, or sales pursuant to, such Registration
Statement would materially impede, delay or interfere with any material
financing, offer or sale of securities, acquisition, corporate reorganization or
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other significant transaction involving the Company or any of its Subsidiaries
which material financing, offer or sale of securities, acquisition, corporate
reorganization or other significant transaction is under active consideration at
the time of such postponement or suspension; provided, however, that the Company
shall not be entitled to such postponement or suspension more than twice in any
twelve-month period. If the Company shall so postpone the filing of a
Registration Statement it shall, as promptly as possible, deliver a certificate
signed by the Chief Executive Officer or President of the Company to the Selling
Holders as to such determination, and the Selling Holders shall (y) have the
right, in the case of a postponement of the filing or effectiveness of a
Registration Statement, upon the affirmative vote of the Holders of not less
than a majority of the Registrable Securities to be included in such
Registration Statement, to withdraw the request for registration by giving
written notice to the Company within 10 days after receipt of such notice or (z)
in the case of a suspension of the right to make sales, receive an extension of
the registration period equal to the number of days of the suspension. Any
Demand Registration as to which the withdrawal election referred to in the
preceding sentence has been effected shall not be counted for purposes of the
two Demand Registrations the Company is required to effect pursuant to Section
2.2 hereof;
(ii) The Company shall not be required by this Agreement to file a
registration statement with respect to a Demand Registration during the period
starting with the date of filing of, and within 90 days immediately following,
the effective date of any registration statement under the Securities Act
pertaining to a firmly underwritten offering of equity securities of the Company
for its own account; PROVIDED that this clause (ii) shall not apply from and
after April 1, 2006.
(iii) The Company shall not be required by this Agreement to file
a registration statement with respect to a Demand Registration during the period
starting with the date of filing of, and within 60 days immediately following,
the effective date of any registration statement pertaining to a firmly
underwritten offering of Common Stock of the Company for the account of any
security holder of the Company; PROVIDED, HOWEVER, that the Company shall not be
entitled to invoke this clause (iii) more than once during any 12-month period.
(iv) The Company's obligations shall be subject to the obligations of
the Selling Holders, which the Selling Holders acknowledge, to furnish all
information and materials required of such Selling Holders and to take any and
all actions required of such Selling Holders as may be required under
applicable federal and state securities laws and regulations to permit the
Company to comply with all applicable requirements of the SEC and to obtain any
acceleration of the effective date of such Registration Statement; and
(v) The Company shall not be obligated to cause any special audit to
be undertaken in connection with any registration pursuant to this Agreement
unless such audit is required by the SEC or requested by the underwriters with
respect to such registration.
SECTION 2.5. RESTRICTIONS ON SALE BY THE COMPANY AND OTHERS. The
Company covenants and agrees that (i) it shall not, and that it shall not cause
or permit any of its subsidiaries to, effect any public sale or distribution of
any securities of the same class as any of the Registrable Securities or any
securities convertible into or exchangeable or exercisable for
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such securities (or any option or other right for such securities), other than
any Common Stock and/or options, warrants or other Common Stock purchase rights,
and the Common Stock issued pursuant to such option, warrants or other rights,
to employees, officers or directors of, or consultants or advisors to the
Company or any subsidiary pursuant to stock purchase or stock option plans or
other arrangements that are approved by the Board of Directors of the Company,
during the 10-day period prior to, and during the 120-day period beginning on,
the commencement of any underwritten offering of Registrable Securities pursuant
to a Demand Registration which has been requested pursuant to this Agreement,
prior to the Company or any of its subsidiaries publicly announcing its
intention to effect any such public sale or distribution; (ii) the Company will
not, and the Company will not cause or permit any subsidiary of the Company to,
after the date hereof, enter into any agreement or contract that conflicts with
or limits or prohibits the full and timely exercise by the Holders of
Registrable Securities of the rights herein to request a Shelf Registration or
Demand Registration or to join in any Piggy-Back Registration subject to the
other terms and provisions hereof except that the Investors' Rights Agreement
may be modified or amended to name additional investors as parties to that
Agreement; and (iii) that it shall use its reasonable best efforts to secure the
written agreement of each of its officers and directors to not effect any public
sale or distribution of any securities of the same class as the Registrable
Securities (or any securities convertible into or exchangeable or exercisable
for any such securities), or any option or right for such securities during the
period described in clause (i) of this Section 2.5.
SECTION 2.6. RULE 144 AND RULE 144A. The Company covenants that it
will file the reports required to be filed by it under the Securities Act and
the Exchange Act and the rules and regulations adopted by the SEC thereunder in
a timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder or beneficial owner of
Registrable Securities, make available such information necessary to permit
sales pursuant to Rule 144A under the Securities Act. The Company further
covenants that it will take such further action as any Holder of Registrable
Securities may reasonably request, all to the extent required from time to time
to enable such Holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144(k) and Rule 144A under the Securities Act, as such Rules may be amended from
time to time, or (b) any similar rule or regulation hereafter adopted by the SEC
(it being expressly understood that the foregoing shall not create any
obligation on the part of the Company to file periodic reports or other reports
under the Exchange Act at any time that it is not then required to file such
reports pursuant to the Exchange Act). Upon the request of any Holder of
Registrable Securities, the Company will in a timely manner deliver to such
Holder a written statement as to whether it has complied with such information
requirements.
SECTION 3. "MARKET STAND-OFF" AGREEMENT.
(a) Each Holder hereby agrees that it shall not, to the extent
requested by a managing underwriter of common stock or common equivalents of the
Company, sell or otherwise transfer or dispose of any Registrable Securities of
the Company then owned by such Holder (other than to donees or partners of the
Holder who agree to be similarly bound) for up to 180 days following the date of
the final Prospectus in connection with the Registration Statement
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of the Company filed under the Securities Act; PROVIDED, HOWEVER, that such
agreement (i) shall be applicable only to the first such registration statement
of the Company that covers shares of stock to be sold on its behalf to the
public in an underwritten offering, (ii) shall not be applicable to Registrable
Securities sold pursuant to such registration statement, and (iii) shall only be
applicable if the managing underwriters request such agreement from each Holder.
(b) In order to enforce the foregoing covenant, the Company shall
have the right to impose stop transfer instructions with respect to the
Registrable Securities (and the Registrable Securities of every other person
subject to the foregoing restriction) until the end of such period. The
provisions of this Section 3 shall be binding upon any transferee of any
Registrable Securities.
SECTION 4. REGISTRATION PROCEDURES. In connection with the obligations
of the Company with respect to any Registration Statement pursuant to
Sections 2.1, 2.2, 2.3 and 2.6 hereof, the Company shall, except as otherwise
provided:
(a) Prepare and file with the SEC as soon as practicable each such
Registration Statement (but in any event on or prior to the date of filing
thereof required under this Agreement) and cause such Registration Statement to
become effective and remain effective as provided herein; PROVIDED, HOWEVER,
that before filing any such Registration Statement or any Prospectus (for
registrations pursuant to Sections 2.1, 2.2 and 2.3 hereof) or any amendments or
supplements thereto (only for registrations pursuant to Section 2.1 and 2.2
hereof) (including documents that would be incorporated or deemed to be
incorporated therein by reference, including such documents filed under the
Exchange Act that would be incorporated therein by reference), the Company shall
afford promptly to the Holders of the Registrable Securities covered by such
Registration Statement, their counsel and the managing underwriter or
underwriters, if any, an opportunity to review copies of all such documents
proposed to be filed a reasonable time prior to the proposed filing thereof.
The Company shall not file any Registration Statement or Prospectus (for
registrations pursuant to Sections 2.1, 2.2 and 2.3 hereof) or any amendments or
supplements thereto (only for registrations pursuant to Section 2.1 and 2.2
hereof) if the Holders of a majority of the Registrable Securities covered by
such Registration Statement, their counsel, or the managing underwriter or
underwriters, if any, shall reasonably object in writing to any information
contained therein or omitted therefrom unless failure to file any such amendment
or supplement would likely result, in the Company's reasonable judgment based on
the advice of counsel, in a violation of the Securities Act or other applicable
law.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods prescribed
hereby; cause the related Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
and comply with the provisions of the Securities Act, the Exchange Act and the
rules and regulations of the SEC promulgated thereunder applicable to it with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such prospectus as so supplemented.
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(c) Notify the Holders of Registrable Securities, their counsel and
the managing underwriter or underwriters, if any, promptly (but in any event
within two (2) Business Days), and confirm such notice in writing, (i) when a
Prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective (including in such notice a
written statement that any Holder may, upon request, obtain, without charge, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules and exhibits), (ii) of the issuance
by the SEC of any stop order suspending the effectiveness of such Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus or the initiation or threatening of any proceedings for that purpose,
(iii) if at any time when a prospectus is required by the Securities Act to be
delivered in connection with sales of the Registrable Securities the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated by Section 4(m) below, to
the knowledge of the Company, cease to be true and correct in any material
respect, (iv) of the receipt by the Company of any notification with respect to
(A) the suspension of the qualification or exemption from qualification of the
Registration Statement or any of the Registrable Securities covered thereby for
offer or sale in any jurisdiction, or (B) the initiation of any proceeding for
such purpose, (v) of the happening of any event, the existence of any condition
or information becoming known that requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case of such
Registration Statement, it will conform in all material respects with the
requirements of the Securities Act and it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, not misleading, and that in
the case of the Prospectus, it will conform in all material respects with the
requirements of the Securities Act and it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (vi) of the
Company's reasonable determination that a post-effective amendment to such
Registration Statement would be appropriate.
(d) Use every reasonable effort to prevent the issuance of any order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities covered
thereby for sale in any jurisdiction, and, if any such order is issued, to
obtain the withdrawal of any such order at the earliest practicable moment.
(e) If requested by the managing underwriter or underwriters, if any,
or the Holders of a majority of the Registrable Securities being sold in
connection with an underwriting offering (only for registrations pursuant to
Section 2.1 and 2.2 hereof), (i) promptly incorporate in a prospectus supplement
or post-effective amendment such information as the managing underwriter or
underwriters, if any, or such Holders reasonably request to be included therein
to comply with applicable law, (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
prospectus supplement or post- effective amendment, and (iii) supplement or make
amendments to such Registration Statement.
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(f) Furnish to each Holder of Registrable Securities who so requests
and to counsel for the Holders of Registrable Securities and each managing
underwriter, if any, without charge, upon request, one conformed copy of the
Registration Statement and each post-effective amendment thereto, including
financial statements and schedules, and of all documents incorporated or deemed
to be incorporated therein by reference and all exhibits (including exhibits
incorporated by reference).
(g) Deliver to each Holder of Registrable Securities, their counsel
and each underwriter, if any, without charge, as many copies of each Prospectus
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and, subject to the last paragraph of this
Section 4, the Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the Holders of Registrable Securities
and the underwriter or underwriters or agents, if any, in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities, to register or
qualify, and cooperate with the Holders of Registrable Securities, the
underwriter or underwriters, if any, and their respective counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of, such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
the managing underwriter or underwriters reasonably request in writing, or, in
the event of a non-underwritten offering, as the Holders of a majority of the
Registrable Securities may request; PROVIDED, HOWEVER, that where Registrable
Securities are offered other than through an underwritten offering, the Company
agrees to cause its counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this Section
4(h); keep each such registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the securities covered thereby; PROVIDED, HOWEVER, that the Company will not be
required to (A) qualify generally to do business in any jurisdiction where it is
not then so qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
(C) become subject to taxation in any jurisdiction where it is not then so
subject.
(i) Cooperate with the Holders of Registrable Securities and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold, which certificates shall not bear any restrictive legends whatsoever
and shall be in a form eligible for deposit with The Depository Trust Company
("DTC"); and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriter or underwriters, if any, or
Holders may reasonably request at least two business days prior to any sale of
Registrable Securities in a firm commitment underwritten public offering.
(j) [Intentionally Omitted]
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(k) Upon the occurrence of any event contemplated by Section 4(c)(v)
or 4(c)(vi) above, as promptly as practicable prepare a supplement or post-
effective amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and, subject to Section 4(a) hereof, file such with the SEC so that,
as thereafter delivered to the purchasers of Registrable Securities being sold
thereunder, such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(l) Prior to the effective date of a Registration Statement,
(i) provide the registrar for the Registrable Securities with certificates for
such securities in a form eligible for deposit with DTC and (ii) provide a CUSIP
number for such securities.
(m) Enter into an underwriting agreement in form, scope and substance
as is customary in underwritten offerings and take all such other actions as
are reasonably requested by the managing underwriter or underwriters in order to
expedite or facilitate the registration or disposition of such Registrable
Securities in any underwritten offering to be made of the Registrable Securities
in accordance with this Agreement, and in such connection, (i) make such
representations and warranties to the underwriter or underwriters, with respect
to the business of the Company and the subsidiaries of the Company, and the
Registration Statement, Prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if and when requested; (ii) use reasonable
efforts to obtain opinion of counsel to the Company, addressed to the
underwriter or underwriters covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by underwriters; (iii) use reasonable efforts to obtain "cold comfort"
letters from the independent certified public accountants of the Company (and,
if applicable, the subsidiaries of the Company) and, if necessary, any other
independent certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement, addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings and such other
matters as reasonably requested by the managing underwriter or underwriters and
as permitted by the Statement of Auditing Standards No. 72; and (iv) if an
underwriting agreement is entered into, the same shall contain customary
indemnification provisions and procedures with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at each closing
under such underwriting agreement, or as and to the extent required thereunder.
(n) Make available for inspection by a representative of the Holders
of Registrable Securities being sold, any underwriter participating in any such
disposition of Registrable Securities, if any, and any attorney or accountant
retained by such representative of the Holders or underwriter (collectively, the
"INSPECTORS"), at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of the Company and the subsidiaries of the Company, and cause the
officers, directors and employees of the Company and the subsidiaries of the
Company to supply all
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information in each case reasonably requested by any such Inspector in
connection with such Registration Statement; PROVIDED, HOWEVER, that all
material non-public information shall be kept confidential by such Inspector and
shall not be used for any purpose other than as contemplated hereby, except to
the extent that (i) the disclosure of such information is necessary or advisable
to avoid or correct a misstatement or omission in the Registration Statement or
in any Prospectus; PROVIDED, HOWEVER, that prior notice is given to the Company,
and the Company's legal counsel and such Holder's legal counsel concur that
disclosure is required, (ii) the release of such information is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction,
(iii) disclosure of such information is necessary or advisable in connection
with any action, claim, suit or proceeding, directly or indirectly, involving or
potentially involving such Inspector and arising out of, based upon, relating to
or involving this Agreement or any of the transactions contemplated hereby or
arising thereunder; PROVIDED, HOWEVER, that prior notice shall be provided as
soon as practicable to the Company of the potential disclosure of any
information by such Inspector pursuant to clauses (ii) or (iii) of this sentence
to permit the Company to obtain a protective order (or waive the provisions of
this paragraph (n)) and that such Inspector shall take all actions as are
reasonably necessary to protect the confidentiality of such information (if
practicable) to the extent such action is otherwise not inconsistent with, an
impairment of or in derogation of the rights and interests of the Holder or any
Inspector, or (iv) such information has been made generally available to the
public.
(o) Comply with all applicable rules and regulations of the SEC and
make generally available to its security holders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than
forty-five (45) days after the end of any 12 month period (or ninety (90) days
after the end of any 12 month period if such period is a fiscal year)
(i) commencing at the end of any fiscal quarter in which Registrable Securities
are sold to an underwriter or to underwriters in a firm commitment or best
efforts underwritten offering and (ii) if not sold to an underwriter or to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of the relevant
Registration Statement, which statements shall cover said 12 month periods.
(p) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on each securities exchange, if any,
on which similar securities issued by the Company are then listed.
(q) Cooperate with the Selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends and
registered in such names as the Selling Holders may reasonably request at least
one business day prior to the closing of any sale of Registrable Securities.
Each seller of Registrable Securities as to which any registration is being
effected agrees, as a condition to the registration obligations with respect to
such Holder provided herein, to furnish to the Company such information
regarding such seller and the distribution of such Registrable Securities as the
Company may, from time to time, reasonably request in writing to comply with the
Securities Act and other applicable law. The Company may exclude from such
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registration the Registrable Securities of any seller for so long as such seller
fails to furnish such information within a reasonable time after receiving such
request. If the identity of a seller of Registrable Securities is to be
disclosed in the Registration Statement, such seller shall be permitted to
include all information regarding such seller as it shall reasonably request.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(c)(ii), 4(c)(iv),
4(c)(v), or 4(c)(vi) hereof, such Holder will forthwith discontinue disposition
of such Registrable Securities covered by the Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 4(k) hereof), or until it is advised
in writing (the "ADVICE") by the Company that the use of the applicable
prospectus may be resumed, and has received copies of any amendments or
supplements thereto, and, if so directed by the Company, such Holder will, at
the Company's expense, deliver to the Company all copies, other than permanent
file copies, then in such Holder's actual possession of the Prospectus covering
such Registrable Securities current at the time of receipt of such notice;
PROVIDED, HOWEVER, that nothing herein shall create any obligation on the part
of any Holder to undertake to retrieve or return any such Prospectus not within
the actual possession or control of such Holder. In the event the Company shall
give any such notice, the period of time for which a Registration Statement is
required thereunder to be effective shall be extended by the number of days
during such periods from and including the date of the giving of such notice to
and including the date when each seller of Registrable Securities covered by
such Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 4(k) hereof or (y)
the Advice.
SECTION 5. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each Holder
and each Person, if any, who controls such Holder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, or is
under common control with, or is controlled by, such Holder, from and against
all losses, claims, damages and liabilities (including, without limitation,
and subject to clause (c) of this Section 5 below, the reasonable legal fees
and other reasonable out-of-pocket expenses actually incurred by any Holder or
any such controlling or affiliated Person in connection with any suit, action
or proceeding or any claim asserted), caused by, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto) pursuant to which
Registrable Securities were registered under the Securities Act, or caused by
any omission or alleged omission to state in any such Registration Statement a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or caused by any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state in any such preliminary prospectus or Prospectus a
material fact required to be stated in any such preliminary prospectus or
Prospectus or necessary to make the statements in any such preliminary
prospectus or Prospectus in light of the circumstances under which they were
made not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
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information relating to any Holder furnished to the Company in writing by such
Holder expressly for use in any such Registration Statement or Prospectus;
PROVIDED, HOWEVER, that the Company shall not be required to indemnify any such
Person if such untrue statement or omission or alleged untrue statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus, or any amendment or supplement thereto and the Prospectus does
not contain any other untrue statement or omission or alleged untrue statement
or omission of a material fact that was the subject matter of the related
proceeding and any such loss, liability, claim, damage or expense suffered or
incurred by such indemnified Person resulted from any action, claim or suit by
an Person who purchased Registrable Securities which are the subject thereof
from such indemnified Person and it is established in the related proceeding
that such indemnified Person failed to deliver or provide a copy of the
Prospectus (as amended or supplemented) to such Person with or prior to the
confirmation of the sale of such Registrable Securities sold to such Person if
required by applicable law, unless such failure to deliver or provide a copy of
the Prospectus (as amended or supplemented) was a result of noncompliance by the
Company with Section 4 hereof or as a result of the failure of the Company to
provide such Prospectus.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign any Registration
Statement, and each Person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to such Holder, but
only with reference to information relating to such Holder furnished to the
Company in writing by such Holder expressly for use in any Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto). The liability of any Holder under this paragraph shall in
no event exceed the proceeds received by such Holder from sales of Registrable
Securities giving rise to such obligations.
(c) In case any suit, action, proceeding (including any governmental
or regulatory investigation), claim or demand shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to either paragraph
(a) or (b) above, such Person (the "INDEMNIFIED PARTY") shall promptly notify
the Person against which such indemnity may be sought (the "INDEMNIFYING PARTY")
in writing and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
reasonably designate in such proceeding and shall pay the reasonable fees and
expenses actually incurred of such counsel relating to such proceeding;
PROVIDED, HOWEVER, that the failure to so notify the indemnifying party shall
not relieve it of any obligation or liability which it may have thereunder or
otherwise. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the contrary, (ii) the
indemnifying party shall have failed to retain within a reasonable period of
time counsel reasonably satisfactory to such indemnified party or parties or
(iii) the named parties to any such proceeding (including any impleaded parties)
include both such indemnified party or parties and the indemnifying parties or
an affiliate of the indemnifying parties or such indemnified parties and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between the indemnifying party or
parties and the indemnified party or parties. It is understood that the
indemnifying parties shall not, in connection with any one
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such proceeding or separate but substantially similar or related proceedings in
the same jurisdiction, arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel) at any time for such
indemnified party or parties and that all such fees and expenses shall be
reimbursed within reasonable time of the request after the incurrence thereof.
Any such separate firm for the Holders and such control Persons of the Holders
shall be designated in writing by Holders who sold a majority in interest of
Registrable Securities sold by all such Holders and reasonably acceptable to the
Company and any such separate firm for the Company, its directors, its officers
and such control Persons of the Company shall be designated in writing by the
Company. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its prior written consent (which consent shall not
be unreasonably withheld or delayed) but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify and hold harmless the indemnified party from and against any loss or
liability by reason of such settlement or judgment. No indemnifying party
shall, without the prior written consent of the indemnified party (which consent
shall not be unreasonably withheld), effect any settlement or compliance of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party, or indemnity could have been sought thereunder by such
indemnified party, unless such settlement or compliance involves only the
payment of money damages that are actually paid by the indemnifying party or
includes an unconditional written release of such indemnified party in form and
substance reasonably satisfactory to such indemnified party of such indemnified
party from all liability or claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 5 is unavailable to, or insufficient to hold harmless, an
indemnified party in respect of any losses, claims, damages or liabilities, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder and in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect (i) the relative benefits received by
the Company on the one hand and the Holders on the other hand from the offering
of such Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, not only such relative benefits but
also the relative fault of the Company on the one hand and the Holders on the
other hand in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Holders on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (net of discounts and commissions but before
deducting expenses) of the Warrants sold pursuant to the Purchase Agreement
received by the Company bears to the total proceeds received by such Holder from
the sale of Registrable Securities, as the case may be. The relative fault of
the Company on the one hand and the Holders on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the Holders
and the parties' relative intent, knowledge, access to information and
21
<PAGE>
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
(e) The Company and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 5 were determined by PRO RATA
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in Section 5(d) above. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages
and liabilities referred to in Section 5(d) above shall be deemed to include,
subject to the limitations set forth above, any reasonable legal or other
expenses actually incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, in no event shall a Holder be required to
contribute any amount in excess of the amount by which proceeds received by such
Holder from sales of Registrable Securities exceeds the amount of any damages
that such Holder has otherwise been required to pay or has paid by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 5 are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any indemnified party at law or
in equity.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 5 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 5 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Purchaser or any person who controls a
Purchaser, the Company, their respective directors or officers or any person
controlling the Company and (ii) any termination of this Agreement.
SECTION 6. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company represents and warrants
to the Holders that it has not entered into nor will the Company on or after the
date of this Agreement enter into, or cause or permit any of its subsidiaries to
enter into, any agreement which is inconsistent with the rights granted to the
Holders of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Holders thereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's other issued and outstanding securities, if any, under
any such agreements.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given unless the Company has obtained the prior
written consent of Holders of not less than a majority in number of the then
outstanding Initial Warrants and/or majority in number of the then outstanding
Contingent Warrants, each voting as a separate class,
22
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as applicable, for the purpose of adding any provision to or changing in any
manner or eliminating any of the provisions of this Agreement or modifying in
any manner the rights of the holders of the outstanding Initial Warrants and/or
Contingent Warrants, as applicable; PROVIDED, HOWEVER, that Section 5 hereof and
this Section 6(b) may not be amended, modified or supplemented without the prior
written consent of each Holder (including any Person who was a Holder of
Registrable Securities disposed of pursuant to any Registration Statement)
affected by such amendment, modification or supplement. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Securities may be given by the Holders of not less than a
majority of the Registrable Securities proposed to be sold by such Holders
pursuant to such Registration Statement.
(c) NOTICES. All notices and other communications provided for or
permitted thereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address of Holder as set forth
in the register for the Warrants or the Warrant Shares, which address initially
is, with respect to the Purchaser, the address set forth in the Purchase
Agreement; and (ii) if to the Company, initially at the address set forth below
the Company's name on the signature pages hereto and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 6(c), and thereafter at such other address notice of which is given in
accordance with the provisions of this Section 6(c).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if Personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders. If any transferee of any Holder shall
acquire Warrants and/or Registrable Securities, in any manner, whether by
operation of law or otherwise, such Warrants and/or Registrable Securities shall
be held subject to all of the terms of this Agreement, and by taking and holding
such Warrants and/or Registrable Securities such Person shall be conclusively
deemed to have agreed to be bound by and to perform all of the terms and
provisions of this Agreement and such Person shall be entitled to receive the
benefits hereof.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
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(f) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
Each of the parties hereto hereby irrevocably and unconditionally: (i)
submits itself and its property in any legal action or proceeding relating to
this Warrant Rights Registration Agreement or for recognition and enforcement of
any judgment in respect thereof, to the non-exclusive jurisdiction of the courts
of the State of New York and the courts of the United States of America for the
Southern District of New York, and appellate courts thereof, and consents and
agrees to such action or proceeding being brought in such courts; and (ii)
waives any objection that it may now or hereafter have to the venue of any such
action or proceeding in any such court or that such action or proceeding was
brought in any inconvenient court and agrees not to plead or claim the same.
(h) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(i) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement, the Warrant Agreement and, solely with respect to the Contingent
Warrants, the Indenture is intended by the parties as a final expression of
their agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. This Agreement, the Purchase Agreement,
the Warrant Agreement and, solely with respect to the Contingent Warrants, the
Indenture supersede all prior agreements and understandings between the parties
with respect to such subject matter.
(j) ATTORNEYS' FEES. As between the parties to this Agreement, in
any action or proceeding brought to enforce any provision of this Agreement, or
where any provision hereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees in addition to
its costs and expenses and any other available remedy.
(k) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities or Warrants is required thereunder, Registrable Securities or
Warrants held by the Company or by any of its
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<PAGE>
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted (in either the numerator or the denominator) in determining
whether such consent or approval was given by the Holders of such required
percentage.
(l) REMEDIES. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder, in addition to being entitled to
exercise all rights provided herein, in the Purchase Agreement or granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of any of the provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
COINSTAR, INC.
By: /s/ Jens H. Molbak
---------------------------------
Name: Jens H. Molbak
---------------------------------
Title: CEO and President
---------------------------------
Address for Notices:
13231 SE 36th Street, Suite 200
Bellevue, WA 98006
SMITH BARNEY INC.
Address for Notices:
By: /s/ Edward P. Massaro
---------------------------------
Name: Edward P. Massaro
---------------------------------
Title: Vice President
---------------------------------
388 Greenwich Street
New York, New York 10013
<PAGE>
[COOLEY GODWARD LLP LETTERHEAD]
August 8, 1997
Coinstar, Inc.
13231 SE 36th Street, Suite 200
Bellevue, WA 98006
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Coinstar, Inc. (the "Company") of a Registration Statement
on Form S-4 (the "Registration Statement") with the Securities and Exchange
Commission (the "Commission"), including a prospectus to be filed with the
Commission pursuant to Rule 424(b) of Regulation C promulgated under the
Securities Act of 1933, as amended (the "Prospectus") with respect to the
offering of 13% Senior Discount Notes Due October 1, 2006 (the "New Notes")
in exchange for the Company's 13% Senior Discount Notes Due October 1, 2006
currently outstanding (the "Old Notes"). The Old Notes and the New Notes are
collectively referred to hereinafter as the "Notes."
In connection with this opinion, we have reviewed the form of Notes, the
Indenture, the Registration Statement and Prospectus and the originals or
copies certified to our satisfaction, of such records, documents,
certificates, memoranda and other instruments as in our judgment are
necessary or appropriate to enable us to render the opinion expressed below.
We have assumed the genuineness and authenticity of all documents submitted
to us as originals, the conformity to originals of all documents submitted to
us as copies thereof, and the due execution, delivery and binding effect of
all documents where due execution and delivery are a prerequisite to the
effectiveness thereof. With respect to the opinion expressed below, we have
assumed that the Old Notes have been, and the New Notes will be, duly
authenticated and delivered by the Trustee.
Our opinion is expressed only with respect to the federal laws of the United
States of America, the General Corporation Law of the State of Delaware and
the laws of the State of California. We express no opinion as to whether the
laws of any particular jurisdiction other than those identified above are
applicable to the subject matter hereof. With your permission, we have
assumed that the laws of the State of New York are the same in all material
respects as the laws of the State of California.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the New Notes, when issued in accordance with the Registration Statement
and related Prospectus, will be duly authorized, executed and delivered and
are valid and binding obligations of the Company, subject to applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other
similar laws affecting creditors' rights, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance.
<PAGE>
August 8, 1997
Page Two
We consent to the reference to our firm under the caption "Legal Matters" in
the Prospectus included in the Registration Statement and to the filing of
this opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By:/s/ MARK P. TANOURY
------------------------
Mark P. Tanoury
<PAGE>
COINSTAR, INC.
1997 EQUITY INCENTIVE PLAN
ADOPTED MARCH 28, 1997
APPROVED BY STOCKHOLDERS JUNE 9, 1997
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors and Consultants may be given an opportunity to benefit
from increases in value of the common stock of the Company ("Common Stock")
through the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses, and (iv) rights to purchase restricted stock.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants, to secure and retain
the services of new Employees, Directors and Consultants, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to Section 6,
and a separate certificate or certificates will be issued for shares purchased
on exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Coinstar, Inc., a Delaware corporation.
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(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
employment or relationship as a Director or Consultant is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Director or Consultant shall be considered interrupted in
the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their successors.
(h) "DIRECTOR" means a member of the Board.
(i) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(k) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock of the Company determined as follows:
(1) If the Common Stock is listed on any established stock exchange,
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in Common Stock) on the day of determination, as reported in the Wall
Street Journal or such other source as the Board deems reliable;
(2) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(l) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(m) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
of 1933 ("Regulation S-K"), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
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(n) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(o) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "OPTION" means a stock option granted pursuant to the Plan.
(q) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(r) "OPTIONEE" means a person to whom an Option is granted pursuant to the
Plan.
(s) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(t) "PLAN" means this Coinstar, Inc. 1997 Equity Incentive Plan.
(u) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(v) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus and any right to purchase restricted stock.
(w) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock
or a combination of the foregoing; the provisions of each Stock Award
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granted (which need not be identical), including the time or times when a person
shall be permitted to receive stock pursuant to a Stock Award and the number of
shares with respect to which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 13.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee or
committees ("Committee") of one or more members of the Board. In the discretion
of the Board, a Committee may consist solely of two or more Outside Directors,
in accordance with Code Section 162(m), or solely of two or more Non-Employee
Directors, in accordance with Rule 16(b)-3. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate Two Million Nine Hundred Thousand (2,900,000) shares
of Common Stock. If any Stock Award shall for any reason expire or otherwise
terminate, in whole or in part, without having been exercised in full (or vested
in the case of Restricted Stock), the stock not acquired under such Stock Award
shall revert to and again become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Stock
Awards other than Incentive Stock Options may be granted only to Employees,
Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock
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of the Company or of any of its Affiliates unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value of
such stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than one million (1,000,000) shares of the Common Stock in any calendar
year. This subsection 5(c) shall not apply until (i) the earliest of: (A) the
first material modification of the Plan (including any increase to the number of
shares reserved for issuance under the Plan in accordance with Section 4); (B)
the issuance of all of the shares of Common Stock reserved for issuance under
the Plan; (C) the expiration of the Plan; or (D) the first meeting of
stockholders at which directors are to be elected that occurs after the close of
the third calendar year following the calendar year in which occurred the first
registration of an equity security under Section 12 of the Exchange Act; or (ii)
such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted and the exercise price
of each Nonstatutory Stock Option shall be not less than eighty-five percent
(85%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Option may be granted
with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other Common Stock of the Company,
(B) according to a deferred payment or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other Common Stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest,
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under any applicable provisions of the Code, of any amounts other than amounts
stated to be interest under the deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option may be transferred
to the extent provided in the Option Agreement; provided that if the Option
Agreement does not expressly permit the transfer of a Nonstatutory Stock Option,
the Nonstatutory Stock Option shall not be transferable except by will, by the
laws of descent and distribution or pursuant to a domestic relations order
satisfying the requirements of Rule 16 of the Exchange Act and shall be
exercisable during the lifetime of the person to whom the Option is granted only
by such person or any transferee pursuant to a domestic relations order.
Notwithstanding the foregoing, the person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it at the date of termination) but only within such period
of time ending on the earlier of (i) the date three (3) months after the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant (other than upon the Optionee's death or
disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Act, then the
Option shall terminate on the earlier of (i) the expiration of the term of the
Option set forth in the first paragraph of this subsection 6(f), or (ii) the
expiration of a period of three (3) months
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after the termination of the Optionee's Continuous Status as an Employee,
Director or Consultant during which the exercise of the Option would not be in
violation of such registration requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date twelve (12)
months following the date of death (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for issuance
under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option Agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent
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(100%) of the Fair Market Value of the Common Stock subject to the Re-Load
Option on the date of exercise of the original Option. Notwithstanding the
foregoing, a Re-Load Option which is an Incentive Stock Option and which is
granted to a 10% stockholder (as described in subsection 5(b)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five (5)
years.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board or Committee may designate at the time of the grant
of the original Option; PROVIDED, HOWEVER, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 11(d) of the Plan and in Section 422(d) of the
Code. There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load
Option shall be subject to the availability of sufficient shares under
subsection 4(a) and shall be subject to such other terms and conditions as the
Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement, but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or, if the agreement so provides, pursuant to a domestic
relations order satisfying the requirements of Rule 16b-3 so long as stock
awarded under such agreement remains subject to the terms of the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the
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Committee to which administration of the Plan has been delegated may award stock
pursuant to a stock bonus agreement in consideration for past services actually
rendered to the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee.
(e) TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at any
time and from time to time, (i) the repricing of any outstanding Options under
the Plan and/or (ii) with the consent of any adversely affected holders of
Options, the cancellation of any outstanding Options under the Plan and the
grant in substitution therefor of new Options under the Plan covering the same
or different numbers of shares of stock, but having an exercise price per share
not less than eighty-five percent (85%) of the Fair Market Value for a
Nonstatutory Stock Option, one hundred percent (100%) of the Fair Market Value
for an Incentive Stock Option or, in the case of an Incentive Stock Option held
by a 10% stockholder (as described in subsection 5(b)), not less than one
hundred ten percent (110%) of the Fair Market Value per share of stock on the
new grant date. Notwithstanding the foregoing, the Board or the Committee may
grant an Option with an exercise price lower than that set forth above if such
Option is granted as part of a transaction to which section 424(a) of the Code
applies.
(b) Shares subject to an Option canceled under this Section 8 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The repricing of an Option
under this Section 8, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and the grant of a substitute
Option; in the event of such repricing, both the original and the substituted
Options shall be counted against the maximum awards of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 8(b) shall be applicable only to the extent required by Section
162(m) of the Code.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
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(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares under Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
of 1933, as amended (the "Securities Act") either the Plan, any Stock Award or
any stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such Stock Awards unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
11. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee, Director nor a Consultant nor any person to whom
a Stock Award is transferred in accordance with the Plan shall be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares subject to such Stock Award unless and until such person has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Consultant or other holder of
Stock Awards any right to continue in the employ of the Company or any Affiliate
or to continue serving as a Consultant and Director, or shall affect the right
of the Company or any Affiliate to terminate the employment of any Employee with
or without notice and with or without cause, or the right to terminate the
relationship of any Consultant pursuant to the terms of such Consultant's
agreement with the Company or Affiliate or service as a Director pursuant to the
Company's By-laws.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred in accordance with the Plan,
as a condition of exercising or acquiring stock under any Stock Award, (1) to
give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
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knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the Common Stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the Common Stock
of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a) and the maximum
number of shares subject to award to any person during any calendar year
pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of shares and price per share
of stock subject to such outstanding Stock Awards. Such adjustments shall be
made by the Board or the Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then to the extent permitted by applicable law: (i) any
surviving corporation or a parent of such surviving corporation shall assume any
Stock Awards outstanding under the Plan or shall
11.
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substitute similar Stock Awards for those outstanding under the Plan, or
(ii) such Stock Awards shall continue in full force and effect. In the event
any surviving corporation or its parent refuses to assume or continue such Stock
Awards, or to substitute similar Stock Awards for those outstanding under the
Plan, then, with respect to Stock Awards held by persons then performing
services as Employees, Directors or Consultants, the time during which such
Stock Awards may be exercised shall be accelerated, the vesting of such Stock
Awards shall be accelerated if so determined by the Board and the Stock Awards
terminated if not exercised prior to such event.
13. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder regarding the exclusion of performance-based compensation
from the limit on corporate deductibility of compensation paid to certain
executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees,
Directors or Consultants with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) Rights under any Stock Award granted before amendment of the Plan
shall not be impaired by any amendment of the Plan unless (i) the Company
requests the consent of the person to whom the Stock Award was granted and (ii)
such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Awards; provided, however, that the rights under any Stock
Award shall not be impaired by any such amendment unless (i) the Company
requests the consent of the person to whom the Stock Award was granted and (ii)
such person consents in writing.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate ten (10) years from the date the
Plan is adopted by the Board or approved by the stockholders of the Company,
whichever is earlier. No Stock Awards may be granted under the Plan while the
Plan is suspended or after it is terminated.
12.
<PAGE>
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Stock Award was granted.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the date adopted by the Board, but no
Stock Awards granted under the Plan shall be exercised unless and until the Plan
has been approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board.
13.
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COINSTAR, INC.
EMPLOYEE STOCK PURCHASE PLAN
ADOPTED MARCH 28, 1997
APPROVED BY THE STOCKHOLDERS ON JUNE 9, 1997
1. PURPOSE.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Coinstar, Inc., a Delaware corporation
(the "Company"), and its Affiliates, as defined in subparagraph 1(b), which are
designated as provided in subparagraph 2(b), may be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
1.
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(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be treated
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate Two Hundred Thousand (200,000) shares
of the Company's common stock (the "Common Stock"). If any right granted under
the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(a) The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.
2.
<PAGE>
(b) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;
(ii) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of
this subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
3.
<PAGE>
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined by the Board for each Offering) during the
period which begins on the Offering Date (or such later date as the Board or the
Committee determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no later than the end of the Offering. The
Board or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
4.
<PAGE>
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings (as defined
by the Board for each Offering) during the Offering. The payroll deductions
made for each participant shall be credited to an account for such participant
under the Plan and shall be deposited with the general funds of the Company. A
participant may reduce (including to zero) or increase such payroll deductions,
and an eligible employee may begin such payroll deductions, after the beginning
of any Offering only as provided for in the Offering. A participant may make
additional payments into his or her account only if specifically provided for in
the Offering and only if the participant has not had the maximum amount withheld
during the Offering.
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board or the Committee in the Offering. Upon such
withdrawal from the Offering by a participant, the Company shall distribute to
such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the Offering, without
interest.
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant Offering,
each participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares
5.
<PAGE>
which is less than the amount required to purchase one share of stock on the
final Purchase Date of an Offering shall be held in each such participant's
account for the purchase of shares under the next Offering under the Plan,
unless such participant withdraws from such next Offering, as provided in
subparagraph 7(b), or is no longer eligible to be granted rights under the Plan,
as provided in paragraph 5, in which case such amount shall be distributed to
the participant after such final Purchase Date, without interest. The amount,
if any, of accumulated payroll deductions remaining in any participant's account
after the purchase of shares which is equal to the amount required to purchase
whole shares of stock on the final Purchase Date of an Offering shall be
distributed in full to the participant after such Purchase Date, without
interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
6.
<PAGE>
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights hereunder are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) the acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or any Affiliate of the Company)
of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then, as determined by the Board in its
sole discretion (i) any surviving or acquiring corporation may assume
outstanding rights or substitute similar rights for those under the Plan,
(ii) such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the
Plan;
7.
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(ii) Modify the provisions as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in
order for the Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code); or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan at any
time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to
8.
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comply with any laws or governmental regulation, or except as necessary to
ensure that the Plan and/or rights granted under the Plan comply with the
requirements of Section 423 of the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day that the Company's initial
public offering of shares of common stock becomes effective (the "Effective
Date"), but no rights granted under the Plan shall be exercised unless and until
the Plan has been approved by the stockholders of the Company within twelve (12)
months before or after the date the Plan is adopted by the Board or the
Committee, which date may be prior to the Effective Date.
9.
<PAGE>
COINSTAR, INC.
1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED ON MARCH 28, 1997
APPROVED BY STOCKHOLDERS ON JUNE 9, 1997
1. PURPOSE.
(a) The purpose of the 1997 Non-Employee Directors' Stock Option Plan (the
"Plan") is to provide a means by which each director of Coinstar, Inc., a
Delaware corporation (the "Company") who is not otherwise an employee of the
Company or of any Affiliate of the Company (each such person being hereafter
referred to as a "Non-Employee Director") will be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to secure and retain the
services of persons capable of serving as Non-Employee Directors of the Company,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board").
(b) The Board may delegate administration of the Plan to a committee
composed of one (1) or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate One Hundred Thousand (100,000) shares
of the Company's common stock. If any option granted under the Plan shall for
any reason expire or otherwise terminate without having been exercised in full,
the stock not purchased under such option shall again become available for the
Plan.
1.
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(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS.
(a) Each person who is, after the date that the registration of the
initial offering of shares of the Company's common stock for sale to the public
becomes effective (the "Effective Date"), elected for the first time to be a
Non-Employee Director automatically shall, upon the date of his or her initial
election to be a Non-Employee Director by the Board or stockholders of the
Company, be granted an option to purchase ten thousand (10,000) shares of common
stock of the Company on the terms and conditions set forth herein.]
(b) On the date of each Annual Meeting of Stockholders of the Company,
commencing with the Annual Meeting of Stockholders occurring in 1998, each
person who is then a Non-Employee Director automatically shall be granted an
option to purchase five thousand (5,000) shares of common stock of the Company
on the terms and conditions set forth herein. If the Non-Employee Director has
not served for twelve months prior to such date, then the number of shares
subject to that Non-Employee Director's option under this subparagraph 5(b)
shall be equal to the number set forth in the previous sentence, adjusted by a
fraction, the numerator of which fraction shall be equal to the number of days
on which the individual was a Non-Employee Director during the preceding twelve
months and the denominator of which fraction shall be three hundred sixty five
(365), increased to the next higher whole number of shares.
6. OPTION PROVISIONS.
Each option shall contain the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") ten (10) years from the date of grant. If the optionee's service as a
Director or as an employee of or consultant to the Company or any Affiliate of
the Company terminates for any reason or for no reason, the option shall
terminate on the earlier of the Expiration Date or the date three (3) months
following the date of termination of service; PROVIDED, HOWEVER, that if such
termination of service is due to the optionee's death, the option shall
terminate on the earlier of the Expiration Date or twelve (12) months following
the date of the optionee's death. In any and all circumstances, an option may
be exercised following termination of the optionee's service as a Director of
the Company only as to that number of shares as to which it was exercisable on
the date of termination of such service under the provisions of subparagraph
6(e).
(b) The exercise price of each option shall be one hundred percent (100%)
of the fair market value of the stock subject to such option on the date such
option is granted.
2.
<PAGE>
(c) The optionee may elect to make payment of the exercise price under one
of the following alternatives:
(i) Payment of the exercise price per share in cash at the time
of exercise; or
(ii) Provided that at the time of the exercise the Company's
common stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at fair market value on
the date preceding the date of exercise; or
(iii) Payment by a combination of the methods of payment specified
in subparagraph 6(c)(i) and 6(c)(ii) above.
Notwithstanding the foregoing, this option may be exercised pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
which results in the receipt of cash (or check) by the Company prior to the
issuance of shares of the Company's common stock.
(d) An option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person or by his or her
guardian or legal representative, unless otherwise specified in the option, in
which case the option may be transferred upon such terms and conditions as are
set forth in the option, as the Board or the Committee shall determine in its
discretion, including (without limitation) pursuant to a "domestic relations
order." Notwithstanding the foregoing, the person to whom an option is granted
may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the optionee,
shall thereafter be entitled to exercise the option.
(e) The option shall be fully vested and exercisable at all times.
(f) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6(d), as a condition of exercising any such
option: (i) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-currently-effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then-applicable securities laws.
3.
<PAGE>
(g) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; PROVIDED, HOWEVER, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall impair any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any Non-
Employee Director.
(c) No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through such Non-Employee
Director, shall have any right, title or interest in or to any option reserved
for the purposes of the Plan except as to such shares of common stock, if any,
as shall have been reserved for such Non-Employee Director pursuant to any
previous option grant.
(d) In connection with each option made pursuant to the Plan, it shall be
a condition precedent to the Company's obligation to issue or transfer shares to
a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make
4.
<PAGE>
arrangements satisfactory to the Company to insure that the amount of any
federal or other withholding tax required to be withheld with respect to such
sale or transfer, or such removal, is made available to the Company for timely
payment of such tax.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan, without the receipt of consideration by the
Company (through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan, and the outstanding options will be
appropriately adjusted in the class(es) and number of shares and price per share
of stock subject to such outstanding options. Such adjustments shall be made by
the Board or the Committee, the determination of which shall be final, binding
and conclusive. (The conversion of any convertible securities of the Company
shall not be treated as a "transaction not involving the receipt of
consideration by the Company".)
(b) In the event of: (1) a merger or consolidation in which the Company
is not the surviving corporation; (2) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise; or (3) any other capital reorganization in which more than fifty
percent (50%) of the shares of the Company entitled to vote are exchanged, the
terms of options outstanding under the Plan may be exercised shall be
accelerated and the options terminated if not exercised prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
Except as provided in paragraph 10 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy any Nasdaq or securities exchange listing requirements.
(b) Rights and obligations under any option granted before any amendment
of the Plan shall not be altered or impaired by such amendment unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the tenth (10th) anniversary of
its adoption by the Board. No options may be granted under the Plan while the
Plan is suspended or after it is terminated.
5.
<PAGE>
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
stockholders of the Company.
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
6.
<PAGE>
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this day of , 1997 by
and between COINSTAR, INC., a Delaware corporation (the "Corporation"), and
________ ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in ______
capacity as ________ of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as _________ of the
Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as _________
after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as ________
of the Corporation or as a director, officer or other fiduciary of an affiliate
of the Corporation (including any employee benefit plan of the Corporation)
faithfully and to the best of his ability so long as he is duly elected and
qualified in accordance with the provisions of the Bylaws or other applicable
charter documents of the Corporation or such affiliate; PROVIDED, HOWEVER, that
Agent may at any time and for any reason resign from such position (subject to
any contractual obligation that Agent may have assumed apart from this
Agreement) and that the Corporation or any affiliate shall have no obligation
under this Agreement to continue Agent in any such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
1.
<PAGE>
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay because of any claim or
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent by
the Corporation under the non-exclusivity provisions of the Code and Section 41
of the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(b) on account of Agent's conduct that was knowingly fraudulent or
deliberately dishonest or that constituted willful misconduct;
(c) on account of Agent's conduct that constituted a breach of
Agent's duty of loyalty to the Corporation or resulted in any personal profit or
advantage to which Agent was not legally entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect, both the
Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the
2.
<PAGE>
proceeding was authorized by the Board of Directors of the Corporation, (iii)
such indemnification is provided by the Corporation, in its sole discretion,
pursuant to the powers vested in the Corporation under the Code, or (iv) the
proceeding is initiated pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this Agreement
to indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at its
own expense;
(b) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded that there may be a conflict of interest
between the Corporation and Agent in the conduct of the defense of such action
or (iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and
3.
<PAGE>
expenses of Agent's separate counsel shall be at the expense of the Corporation.
The Corporation shall not be entitled to assume the defense of any action, suit
or proceeding brought by or on behalf of the Corporation or as to which Agent
shall have made the conclusion provided for in clause (ii) above; and
(c) the Corporation shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof (other than an action brought
to enforce a claim for expenses pursuant to Section 8 hereof, PROVIDED THAT the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of
Directors or its stockholders) to have made a determination prior to the
commencement of such enforcement action that indemnification of Agent is proper
in the circumstances, nor an actual determination by the Corporation (including
its Board of Directors or its stockholders) that such indemnification is
improper shall be a defense to the action or create a presumption that Agent is
not entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
4.
<PAGE>
12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement. Only
one such counterpart need be produced to evidence the existence of this
Agreement.
17. HEADINGS. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
5.
<PAGE>
(a) If to Agent, at the address indicated on the signature page
hereof.
(b) If to the Corporation, to
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or to such other address as may have been furnished to Agent by the Corporation.
6.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
COINSTAR, INC.
By:
-------------------------------------
Title:
----------------------------------
AGENT
[NAME OF OFFICER]
----------------------------------------
Address:
----------------------------------------
----------------------------------------
7.
<PAGE>
COINSTAR, INC.
SERIES E PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
<PAGE>
TABLE OF CONTENTS
1. AGREEMENT TO SELL AND PURCHASE. . . . . . . . . . . . . . . . . . . . . . 1
1.1 Authorization of Shares. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale and Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. CLOSING, DELIVERY AND PAYMENT.. . . . . . . . . . . . . . . . . . . . . . 2
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.. . . . . . . . . . . . . . 2
3.1 Organization, Good Standing and Qualification. . . . . . . . . . . . 2
3.2 Capitalization; Voting Rights. . . . . . . . . . . . . . . . . . . . 2
3.3 Authorization of the Financing Documents; Binding Obligations. . . . 3
3.4 No Consent or Approval Required. . . . . . . . . . . . . . . . . . . 3
3.5 Compliance with Other Instruments. . . . . . . . . . . . . . . . . . 4
3.6 Offering Valid . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . . . . . . . . 4
4.1 Requisite Power and Authority. . . . . . . . . . . . . . . . . . . . 4
4.2 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 Investment Representations . . . . . . . . . . . . . . . . . . . . . 5
4.4 Purchaser Bears Economic Risk. . . . . . . . . . . . . . . . . . . . 5
4.5 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . . 5
4.6 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.7 Company Information. . . . . . . . . . . . . . . . . . . . . . . . . 6
4.8 Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . . 6
4.9 Transfer Restrictions. . . . . . . . . . . . . . . . . . . . . . . . 6
5. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Conditions to Purchaser's Obligations at the Closing . . . . . . . . 6
5.2 Conditions to Obligations of the Company . . . . . . . . . . . . . . 7
6. AFFIRMATIVE COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . . 8
6.1 Rights of First Refusal. . . . . . . . . . . . . . . . . . . . . . . 8
7. THE COMPANY'S RIGHT TO REPURCHASE . . . . . . . . . . . . . . . . . . . . 9
7.1 Repurchase Option. . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.2 Exercise of Repurchase Option. . . . . . . . . . . . . . . . . . . .10
8. MISCELLANEOUS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
8.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
8.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
8.3 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . .11
8.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . .12
8.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .12
8.6 Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
<PAGE>
TABLE OF CONTENTS, CONT.
PAGE
8.7 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . .12
8.8 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . .12
8.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
8.10 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
8.11 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . .13
8.12 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . .13
8.13 Pronouns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
8.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
8.15 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
2
<PAGE>
INDEX OF EXHIBITS
Schedule of Purchasers Exhibit A
Restated Certificate Exhibit B
Form of Warrants Exhibit C
Second Amended and Restated
Investor's Rights Agreement Exhibit D
Second Amended and
Restated Voting Agreement Exhibit E
<PAGE>
COINSTAR, INC.
SERIES E PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS SERIES E PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the
"Agreement") is entered into as of August 27, 1996, by and among Coinstar, Inc.,
a Delaware corporation (the "Company"), and Acorn Ventures ("Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of (i) up
to an aggregate of 100,000 shares of its Series E-1 Preferred Stock (the
"Shares"); (ii) warrants to purchase up to an aggregate of 350,000 shares of
its Series E-2 Preferred Stock (the "$12 Warrants") and (iii) warrants to
purchase up to an aggregate of 550,000 shares of its Series E-3 Preferred
Stock (the $16 Warrants") (unless noted otherwise, the $12 Warrants and $16
Warrants are hereinafter referred to collectively as the "Warrants" and the
Series E-1 Preferred Stock, Series E-2 Preferred Stock and Series E-3
Preferred Stock are hereinafter referred to collectively as the "Series E
Preferred Stock");
WHEREAS, Purchaser desires to purchase the Shares and the Warrants
on the terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares and the
Warrants to Purchaser on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing, the
Company shall have authorized (i) the sale and issuance to Purchaser of the
Shares and the Warrants, and (ii) the issuance of such additional shares of
Series E Preferred Stock to be issued pursuant to the exercise of the
Warrants (the "Warrant Shares") and (iii) the issuance of such shares of
Common Stock to be issued for conversion of the Shares and the Warrant Shares
(the "Conversion Shares"). The Shares, the Warrant Shares and the Conversion
Shares shall have the rights, preferences, privileges and restrictions set
forth in the Amended and Restated Certificate of Incorporation of the
Company, as amended, in the form attached hereto as Exhibit B (the "Restated
Certificate"). The Warrants shall be in the form and have the rights set
forth in the form of warrant agreement attached hereto as Exhibit C.
1.2 SALE AND PURCHASE. Subject to the terms and conditions
hereof, at the Closing (as hereinafter defined) the Company hereby agrees to
issue and sell to the Purchaser and the Purchaser agrees to purchase from the
Company, the number of Shares and the Warrants set forth
1.
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opposite such Purchaser's name on Exhibit A, at the purchase price of six
dollars ($6.00) for each share of Series E-1 Preferred Stock, sixty cents
($0.60) for each share purchasable under the $12 Warrant and $0.388636 for
each share purchasable under the $16 Warrant. The aggregate purchase price
for the Shares and Warrants being acquired by the Purchaser shall also be set
forth on Exhibit A.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING DATE. The purchase and sale of the Shares and
Warrants hereunder shall take place on the date hereof or at such other time
upon which the Company and the Purchaser shall agree (the "Closing").
2.2 DELIVERY. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to Purchaser certificates representing the
number of Shares and warrant certificates or agreements representing the
Warrants to be purchased at the Closing by Purchaser, against payment of the
purchase price therefor by cashier's check or wire transfer made payable to
the order of the Company, or by cancellation of Company indebtedness. At the
Closing, the Company will deliver a certificate dated as of such Closing
Date, signed by the President of the Company, certifying that the
representations and warranties set forth in Section 3 of the Agreement are
true and correct as of the Closing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser as
follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite corporate power
and authority to own and operate its properties and assets, to execute and
deliver this Agreement, the Second Amended and Restated Investors' Rights
Agreement in the form attached hereto as Exhibit D, the Second Amended and
Restated Voting Agreement in the form attached hereto as Exhibit E (the
Second Amended and Restated Investors' Rights Agreement and the Second and
Amended Voting Agreement are collectively referred to hereinafter as the
"Financing Documents"), to issue and sell the Shares and the Warrants
hereunder, to issue the Warrant Shares upon exercise of the Warrants, to
issue the Conversion Shares, to carry out the provisions of the Financing
Documents and the Restated Certificate and to carry on its business as
presently conducted and as presently proposed to be conducted. The Company
is duly qualified and is authorized to do business and is in good standing as
a foreign corporation in all jurisdictions in which the nature of its
activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to
do so would not have a material adverse effect on the Company or its
business. The Company has never, nor does it presently, directly or
indirectly own more than ten percent of the equity securities of any other
corporation, partnership or similar entity, joint venture or similar
arrangement.
2.
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3.2 CAPITALIZATION; VOTING RIGHTS. The capital structure of the
Company, immediately upon consummation of the Closing, will be as set forth
on Schedule 3.2. All issued and outstanding shares of the Company's Common
Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock have been duly authorized and validly
issued, are fully paid and nonassessable, and were issued in compliance with
all applicable state and federal laws concerning the issuance of securities.
The rights, preferences, privileges and restrictions of the Shares and the
Warrant Shares are as stated in the Restated Certificate. The Conversion
Shares have been duly and validly reserved for issuance. Except as set forth
on Schedule 3.2, and except as may be granted pursuant to the Financing
Documents, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
stockholder agreements, or agreements of any kind for the purchase or
acquisition from the Company of any of its securities or any stock
appreciation rights or other equity linked arrangements. When issued in
compliance with the provisions of this Agreement and the Restated
Certificate, the Shares, the Warrant Shares and the Conversion Shares will be
validly issued, fully paid and nonassessable, and will be free of any liens
or encumbrances; provided, however, that the Shares, the Warrants, the
Warrant Shares and the Conversion Shares may be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein or as
otherwise required by such laws at the time a transfer is proposed.
3.3 AUTHORIZATION OF THE FINANCING DOCUMENTS; BINDING OBLIGATIONS.
All corporate action on the part of the Company, its officers, directors and
stockholders necessary for the authorization of the Financing Documents, the
performance of all obligations of the Company thereunder and the
authorization, sale, issuance and delivery of the Shares, the Warrants and
the Warrant Shares pursuant hereto and the Conversion Shares pursuant to the
Restated Certificate has been taken or will be taken prior to the Closing.
The Financing Documents, when executed and delivered, will be valid and
binding obligations of the Company enforceable in accordance with their
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; (ii) general principles of equity that
restrict the availability of equitable remedies; and (iii) to the extent that
the enforceability of the indemnification provisions in Section 4.6 of the
Second Amended and Restated Investors' Rights Agreement may be limited by
applicable laws. The execution, delivery and performance of the Financing
Documents, the consummation of the transactions contemplated thereby and
compliance with the provisions thereof by the Company, and the issuance, sale
and delivery of the Shares, the Warrant Shares and the Conversion Shares will
not (a) violate any provision of law, statute, rule or regulation, or any
ruling, writ, injunction or other judgment or decree of any court,
administrative agency or other governmental body applicable to the Company or
any of its properties or assets or (b) conflict with or result in any breach
of any of the terms, conditions or provisions of, or constitute (with due
notice or lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in the creation
of any lien or encumbrance upon any of the properties or assets of the
Company under, the Restated Certificate or Bylaws, or any contract by which
the Company or any of its assets or properties is bound. The sale of the
Shares, the Warrants, the Warrant Shares and the subsequent conversion of
Shares and Warrant Shares into Conversion Shares are not and will not be
subject to any preemptive rights or rights
3.
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of first refusal other than the preemptive right set forth in the Amended and
Restated Investors' Rights Agreement dated December 15, 1995 which has been
properly waived or complied with.
3.4 NO CONSENT OR APPROVAL REQUIRED. Except for the filing of the
Restated Certificate as specified herein, no consent of any person and no
consent, approval or authorization of, or declaration to or filing with, any
governmental or regulatory authority is required for the valid authorization,
execution and delivery by the Company of any Financing Document or for the
consummation of the transactions contemplated thereby or for the valid
authorization, issuance and delivery of the Shares or for the valid
authorization, reservation, issuance and delivery of the Warrant Shares or
the Conversion Shares, other than those consents, approvals, authorizations,
declarations or filings which have been obtained or made, as the case may be.
3.5 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any term of its Restated Certificate (and was not in
default under its certificate of incorporation immediately prior to the
filing of the Restated Certificate) or Bylaws, or of any provision of any
mortgage, indenture, lease, purchase or similar order or any other agreement,
instrument or contract to which it is party or by which the Company or any of
its properties is bound or of any judgment, decree, order or writ applicable
to the Company which would materially and adversely affect (individually, or
in the aggregate) the business, assets, liabilities, financial condition,
operations or prospects of the Company. The execution, delivery, and
performance of and compliance with the Financing Documents and the issuance
and sale of the Shares, Warrants, Warrant Shares and of the Conversion Shares
pursuant to the Restated Certificate, will not result in any such material
violation, or be in conflict with or constitute a default under any such
term, or result in the creation of any mortgage, pledge, lien, encumbrance or
charge upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit license,
authorization or approval applicable to the Company, its business or
operations or any of its assets or properties. There is no condition, event
or act which constitutes, or to the best knowledge of the Company which after
notice, lapse of time or both would constitute a default under any of the
foregoing.
3.6 OFFERING VALID. Assuming the accuracy of the representations
and warranties of the Purchaser contained in Section 4.3 hereof, the offer,
sale and issuance of the Shares and the Warrants, the sale and issuance of
the Warrant Shares upon exercise of the Warrants and the issuance of the
Conversion Shares will be exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") and will have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all
applicable state securities laws. Neither the Company nor any agent on its
behalf has solicited or will solicit any offers to sell or has offered to
sell or will offer to sell all or any part of the Shares, the Warrants or the
Warrant Shares to any person or persons so as to bring the sale of such
Shares, Warrant or Warrant Shares by the Company within the registration
provisions of the Securities Act.
4.
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4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Purchaser hereby
represents and warrants to the Company as follows (which representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Financing Documents and to carry out their
provisions. All action on Purchaser's part required for the lawful execution
and delivery of this Agreement and the Financing Documents have been or will
be effectively taken prior to the Closing. Upon their execution and
delivery, this Agreement and the Financing Documents will be valid and
binding obligations of Purchaser, enforceable in accordance with their terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights, (ii) general principles of equity that restrict the
availability of equitable remedies, and (iii) to the extent that the
enforceability of the indemnification provisions of the Investors' Rights
Agreement may be limited by applicable laws.
4.2 CONSENTS. All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings with any
governmental or banking authority on the part of Purchaser required in
connection with the consummation of the transactions contemplated in the
Agreement or the Financing Documents have been or shall have been obtained
prior to and be effective as of the Closing.
4.3 INVESTMENT REPRESENTATIONS. Purchaser understands that
neither the Shares, Warrants, Warrant Shares nor the Conversion Shares have
been registered under the Securities Act. Purchaser also understands that
the Shares and the Warrants are being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in this Agreement. Purchaser
hereby represents and warrants as follows:
4.4 PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk
of this investment indefinitely unless the Shares and the Warrant Shares (or
the Conversion Shares) are registered pursuant to the Securities Act, or an
exemption from registration is available. Purchaser understands that the
Company has no present intention of registering the Shares, the Warrants, the
Warrant Shares, the Conversion Shares or any shares of its Common Stock.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any
portion of the Shares, Warrant Shares or the Conversion Shares under the
circumstances, in the amounts or at the times Purchaser might propose.
4.5 ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities
Act.
5.
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4.6 INVESTMENT. Purchaser is acquiring the Shares (or any of the
Common Stock into which the Shares or the Warrant Shares are convertible) for
investment for its own account and not with a view to, or for resale in
connection with, any distribution thereof, and Purchaser has no present
intention of selling or distributing the Shares, the Warrants and, if issued,
the Warrant Shares (or any of the Common Stock into which the Shares or the
Warrant Shares are convertible). Purchaser understands that the Shares, the
Warrants and, if issued, the Warrant Shares (and the Common Stock into which
the Shares or the Warrant Shares are convertible) to be purchased by it have
not been registered under the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent as expressed herein.
4.7 COMPANY INFORMATION. Purchaser has received and read the
Company's Business Plan and Financial Statements and has had an opportunity
to discuss the Company's business, management and financial affairs with
directors, officers and management of the Company and has had the opportunity
to review the Company's operations and facilities. Purchaser has also had
the opportunity to ask questions of and receive answers from, the Company and
its management regarding the terms and conditions of this investment.
4.8 RESTRICTED SECURITIES. Purchaser acknowledges and agrees that
the Shares, the Warrants and, if issued, the Warrant Shares and the
Conversion Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Purchaser has been advised or is aware of the provisions of Rule
144 promulgated under the Securities Act, which permits limited resale of
shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things: the availability of
certain current public information about the Company, the resale occurring
not less than two years after a party has purchased and paid for the security
to be sold, the sale being through an unsolicited "broker's transaction" or
in transactions directly with a market maker (as said term is defined under
the Securities Exchange Act of 1934) and the number of shares being sold
during any three-month period not exceeding specified limitations.
4.9 TRANSFER RESTRICTIONS. The Purchaser acknowledges and agrees
that the Shares, the Warrants and, if issued, the Warrant Shares and the
Conversion Shares are subject to restrictions on transfer as set forth in the
Second Amended and Restated Investors' Rights Agreement.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING.
Purchaser's obligations to purchase the Shares and the Warrants at each
Closing are subject to the satisfaction, at or prior to the Closing, of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material respects as of the
Closing Date with the same force and effect as if they had been made as of
the Closing Date, and the Company shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to
the Closing.
6.
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(b) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement and the
Financing Documents (except for such as may be properly obtained subsequent
to the Closing).
(c) FILING OF RESTATED CERTIFICATE. The Restated Certificate
shall have been filed with the Secretary of State of the State of Delaware.
(d) CORPORATE DOCUMENTS. The Company shall have delivered to
Purchasers or their counsel, copies of all corporate documents of the Company
as Purchasers shall reasonably request.
(e) RESERVATION OF WARRANT SHARES. The Warrant Shares
issuable upon exercise of the Warrants shall have been duly authorized and
reserved for issuance upon such conversion.
(f) RESERVATION OF CONVERSION SHARES. The Conversion Shares
issuable upon conversion of the Shares and the Warrant Shares shall have been
duly authorized and reserved for issuance upon such conversion.
(g) COMPLIANCE CERTIFICATE. The Company shall have delivered
to Purchasers a Compliance Certificate, executed by the President or the
Chief Financial Officer of the Company, dated the date of the Closing, to the
effect that the conditions to be performed by the Company specified in this
Section 5.1 have been satisfied.
(h) INVESTORS' RIGHTS AGREEMENT. The Second Amended and
Restated Investors' Rights Agreement substantially in the form attached
hereto as Exhibit D shall have been executed and delivered by the parties
thereto.
(i) VOTING AGREEMENT. The Second Amended and Restated Voting
Agreement substantially in the form attached hereto as Exhibit E shall have
been executed and delivered by the parties thereto.
(j) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall
be reasonably satisfactory in substance and form to the Purchasers and their
special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at each Closing is subject to the
satisfaction, on or prior to the Closing, of the following conditions:
7.
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(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by Purchasers in Section 4 hereof shall be true and
correct in all material respects at the date of the Closing, with the same
force and effect as if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchasers shall have
performed and complied with all agreements and conditions herein required to
be performed or complied with by Purchasers on or before the Closing.
(c) INVESTORS' RIGHTS AGREEMENT. The Second Amended and
Restated Investors' Rights Agreement substantially in the form attached
hereto as Exhibit D shall have been executed and delivered by the Purchasers.
(d) VOTING AGREEMENT. The Second Amended and Restated Voting
Agreement substantially in the form attached hereto as Exhibit E shall have
been executed and delivered by the parties thereto.
(e) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement, the
Second Amended and Restated Investors' Rights Agreement and the Second
Amended and Restated Voting Agreement (except for such as may be properly
obtained subsequent to the Closing).
(e) FILING OF RESTATED CERTIFICATE. The Restated Certificate
shall have been filed with the Secretary of State of the State of Delaware.
6. AFFIRMATIVE COVENANTS OF THE COMPANY.
The Company hereby covenants and agrees as follows:
6.1 RIGHTS OF FIRST REFUSAL. At all times prior to the closing of
the Company's first firmly underwritten public offering registered under the
Securities Act, the Company shall maintain in effect with respect to all
outstanding shares of Common Stock a right of first refusal with respect to
any proposed sale or transfer of shares of Common Stock substantially in the
form of Article XIV, Section 45 of the Company's Bylaws. If, at any time
prior to the closing of the Company's first firmly underwritten public
offering registered under the Securities Act, the Company elects not to
exercise the right of first refusal as to the sale or transfer of any shares
of Common Stock, including without limitation, shares issued upon exercise of
employee stock options or pursuant to any employee compensation or stock
purchase program, the Company shall assign such right of first refusal pro
rata among the Purchasers as follows:
(a) Within 10 days following the receipt of a notice from a
holder of Common Stock (a "Transferring Holder") advising the Company of such
holder's desire to transfer any shares of Common Stock subject to the
Company's right of first refusal (an "Offer"), the Company shall make an
election as to whether it chooses to exercise its right to purchase such
8.
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shares, and if the Company elects not to purchase such shares it shall
immediately deliver written notice (a "Notice of Offer") of its election not
to exercise its right of first refusal and of its assignment of such right to
each Purchaser. Each Purchaser shall have the right and option, for a period
of 15 days after delivery of the Notice of Offer to the Purchaser, to accept,
at the purchase price and on the terms specified in the Notice of Offer (A)
such Purchaser's Proportionate Percentage, as defined in Section 6.2(d), of
the securities offered pursuant to the Offer and (B) any of the securities
offered pursuant to the Offer which are not accepted by the other Purchasers,
in which case such securities not deemed to have been offered to and accepted
by the Purchasers shall be deemed to have been offered to and accepted by the
Purchasers which exercised their option under this clause (B), pro rata in
accordance with their respective Proportionate Percentages (excluding, for
the purpose of such calculation, any Purchaser not exercising his option
under this clause (B)). Acceptance of the Offer shall be made by each
Purchaser by the delivery of a written notice to the Company and the
Transferring Holder within said 20-day period, which notice shall indicate
such Purchaser's election to exercise his rights under this Section 6.2 and
shall specify the number of securities which such Purchaser wishes to
purchase and whether such Purchaser wishes to exercise his rights under
clause (B) above.
(b) Transfers of securities under the terms of this Section
6.2(b) shall be made at the offices of the Company on a mutually satisfactory
business day within 15 days after the expiration of the applicable time
periods. Delivery of certificates or other instruments evidencing such
securities duly endorsed for transfer shall be made on such date against
payment of the purchase price therefor.
(c) If effective acceptances shall not be received pursuant
to Section 6.2(b) with respect to all securities offered for sale pursuant to
the aforesaid Notice of Offer, then the Transferring Holder may transfer to a
third party all of the securities so offered for sale or any part thereof at
the price and on the identical terms stated in the original Notice of Offer
and in accordance with Article XIV, Section 45 of the Bylaws.
(d) For purposes of this Section 6.2 only, the term
"Purchaser" shall mean each Purchaser under this Agreement; each Purchaser
under that certain Series C Preferred Stock and Warrant Purchase Agreement,
dated as of February 15, 1995 (the "Series C Agreement") and each Purchaser
under that certain Series D Preferred Stock and Warrant Purchase Agreement
dated as of December 15, 1995 (the "Series D Agreement") and the term
"Proportionate Percentage" shall mean, with respect to a Purchaser, a
fraction (expressed as a percentage) the numerator of which is equal to the
sum of the total number of shares of (A) Shares, Warrant Shares and
Conversion Shares, on an as-converted basis, (B) Shares, Warrant Shares and
Conversion Shares as defined under the Series C Agreement, on an as-converted
basis, and (C) Shares, Warrant Shares and Conversion Shares, defined under
the Series D Agreement, on an as converted basis, (such sum being referred to
hereinafter as the "Series C, Series D and Series E Equivalents") held by
such Purchaser and the denominator of which is the total number of Series C,
Series D and Series E Equivalents held by all Purchasers.
(e) This Section 6.2 may be amended or waived only upon the
written consent of the Company and the holders of a majority of the Series C,
Series D and Series E Equivalents.
9.
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7. THE COMPANY'S RIGHT TO REPURCHASE
7.1 REPURCHASE OPTION. The Warrants and the Warrant Shares are
subject to repurchase by the Company on the following terms (the "Repurchase
Option"):
(a) If the Company has not closed a financing of $20 million
or more prior to December 31, 1996 (a "Qualified Financing"), one-hundred
percent (100%) of the Warrants and the Warrant Shares may be repurchased by
the Company on the terms and for the amount set forth in section 7.2 below.
(b) If the Company has closed a Qualified Financing prior to
December 31, 1996, the Company may repurchase the Warrants and the Warrant
Shares as follows:
IF THE QUALIFIED FINANCING IS: THE COMPANY MAY REPURCHASE:
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$45 million or more 0.00%
at least $40 million but less than $45 million 16.67%
at least $35 million but less than $40 million 33.33%
at least $30 million but less than $35 million 50.00%
at least $25 million but less than $30 million 66.67%
at least $20 million but less than $25 million 83.33%
The repurchase percentage shall be applied equally to the $12
Warrants, the $16 Warrants and the Warrant Shares relating to each. Such
Warrants and Warrant Shares remaining after the Company has exercised its
Repurchase Option shall be referred to as the "Remaining Warrants" and
"Remaining Warrant Shares," respectively. The parties intend to review the
Qualified Financing amounts listed above and such amounts may be revised with
the mutual consent of the parties.
(c) In addition, fifty percent (50%) of the Remaining
Warrants and Remaining Warrant Shares shall be subject to repurchase by the
Company (the "Further Repurchase Option") if the Company Valuation (as
defined below) does not equal or exceed $250 million on December 31, 1997
(the "Final Valuation Date"). The "Company Valuation" shall be equal to the
difference between (i) the number of Shares Outstanding (as defined below)
multiplied by the fair market value of one share of Common Stock (the "Share
Value"), minus (ii) the Equity Proceeds (as defined below) received by the
Company after August 1, 1996. Notwithstanding the foregoing, in the event
that the closing value of the Standard & Poor's 500 Index (the "S&P 500"), as
reported on December 31, 1997, is less than 80% the closing value of the S&P
500 as reported on July 1, 1996, the Final Valuation Date will be extended
until June 30, 1998.
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For the purpose of this Agreement, "Shares Outstanding" shall
mean the number of shares of Common Stock outstanding, assuming the
conversion of all outstanding shares of Preferred Stock and the exercise of
all outstanding options and in-the-money warrants to purchase Common or
Preferred Stock of the Company, and "Equity Proceeds" shall mean the sum of
(i) the fair market value of all consideration received by the Company in
consideration for the issuance of equity securities of the Company and (ii)
the aggregate consideration that the Company would receive upon the exercise
of all outstanding options and in-the-money warrants.
In the event the Company's Common Stock is publicly traded,
the "Share Value" shall be the closing price per share of the Common Stock of
the Company as reported on a national securities exchange or on the
over-the-counter market. In the event the Company's Common Stock is not
publicly traded, the parties shall mutually agree on the Share Value
PROVIDED, HOWEVER, that if the parties are unable to agree on a Share Value
within thirty (30) days of the Final Valuation Date, a mutually agreed upon
independent appraiser shall determine the Share Value.
7.2 EXERCISE OF REPURCHASE OPTION. If the Company elects to
exercise the Repurchase Option, it must notify the Holder not more than
ninety (90) days after the earlier of a Qualified Financing or December 31,
1996. If the Company elects to exercise the Further Repurchase Option, it
must notify the Holder not more than ninety (90) days after the Final
Valuation Date. The notice shall indicate how many of the Warrants and
Warrant Shares are being repurchased, the Repurchase Price (as defined below)
and a date for the closing of the repurchase (such date being not later than
thirty (30) days after the date of the notice). At the closing of either the
Repurchase Option or the Further Repurchase Option, the Holder shall deliver
the Warrants and, if applicable, the certificate(s) representing the Warrant
Shares and the Company shall deliver the Repurchase Price (as defined below)
and a new warrant or stock certificate representing the number of shares not
repurchased by the Company. The "Repurchase Price" shall be equal to the sum
of (A) the number of Warrants being repurchased multiplied by the respective
Warrant Purchase Price for each Warrant being repurchased (I.E., $0.60 for
the $12 Warrants and $0.389 for the $16 Warrants), plus (B) the number of
Warrant Shares being repurchased multiplied by the difference between the
respective Stock Purchase Price and the respective Warrant Purchase Price for
the Warrant Shares being repurchased. The parties acknowledge that the
"Repurchase Price" formula reflects their intent to set the aggregate
repurchase price for the Warrants and Warrant Shares equal to Purchaser's
actual cost in obtaining such Warrants and Warrant Shares.
8. MISCELLANEOUS.
8.1 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, in all respects the laws of the State of
Washington. Each of the parties hereto hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Western District of
Washington and of any Washington state court sitting in the county of King,
State of Washington for the purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby. Each
of the parties hereto irrevocably waives, to the fullest extent permitted by
applicable law, any objection which it may now or
11.
<PAGE>
hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court
has been brought in an inconvenient forum.
8.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation and the closing of the
transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
8.3 INDEMNIFICATION.
(a) The Company shall indemnify, defend and hold the
Purchaser harmless from and against all liability, loss or damage, together
with all reasonable costs and expenses related thereto (including legal and
accounting fees and expenses), (i) arising from the untruth, inaccuracy or
breach of any of the representations or warranties of the Company herein or
any facts or circumstances constituting any such untruth, inaccuracy or
breach, (ii) arising from the breach of any covenant or agreement of the
Company or any facts or circumstances constituting such breach or (iii) with
respect to any liability for any brokers' or finders' fees or compensation
owing or alleged to be owing in connection with the transactions contemplated
hereby.
(b) The Purchaser shall indemnify, defend and hold the Company
harmless from and against all liability, loss or damage, together with all
reasonable costs and expenses related thereto (including legal and accounting
fees and expenses), (i) arising from the untruth, inaccuracy or breach of any of
the representations or warranties of the Purchaser contained in Section 4, or
(ii) arising from the breach of any covenant or agreement of such Purchaser
herein.
8.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto and shall inure to the benefit of and be enforceable by
each person who shall be a holder of the Shares, the Warrants, the Warrant
Shares or the Conversion Shares from time to time.
8.5 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the other Financing Documents and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein
and therein.
8.6 SEPARABILITY. In case any provision of the Agreement 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.
12.
<PAGE>
8.7 AMENDMENT AND WAIVER.
(a) Except as otherwise provided herein, this Agreement may
be amended or modified only upon the written consent of the Company and
holders of at least a majority of the outstanding shares of Series E
Preferred Stock (including any Conversion Shares into which the Shares have
been converted that have not been sold to the public).
(b) The obligations of the Company and the rights of the
holders of the Shares and the Conversion Shares under the Agreement may be
waived only with the written consent of the holders of at least a majority of
the outstanding shares of Series E Preferred Stock (including any Conversion
Shares into which the Shares have been converted that have not been sold to
the public).
8.8 DELAYS OR OMISSIONS. It is agreed that no delay or omission
to exercise any right, power or remedy accruing to any party, upon any
breach, default or noncompliance by another party under this Agreement, the
Financing Documents or the Restated Certificate, shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of or in any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character
on any Purchaser's part of any breach, default or noncompliance under this
Agreement or under the Restated Certificate or any waiver on such party's
part of any provisions or conditions of the Agreement must be in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement, the Restated Certificate, Bylaws,
or otherwise afforded to any party, shall be cumulative and not alternative.
8.9 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (i) upon personal delivery
to the party to be notified; (ii) when sent by confirmed telex or facsimile
if sent during normal business hours of the recipient, if not, then on the
next business day; (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid; or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All communications
shall be sent to the Company at the address as set forth on the signature
page hereof and to Purchaser at the address set forth on Exhibit A attached
hereto or at such other address as the Company or Purchaser may designate by
ten (10) days advance written notice to the other parties hereto.
8.10 EXPENSES. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance
of the Agreement.
8.11 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party
in such dispute shall be entitled to recover from the losing party all
reasonable fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Agreement, including without limitation,
such
13.
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reasonable fees and expenses of attorneys and accountants, which shall
include, without limitation, all fees, costs and expenses of appeals.
8.12 TITLES AND SUBTITLES. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
8.13 PRONOUNS. All pronouns contained herein and any variations
thereof shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the parties hereto may require.
8.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.15 BROKER'S FEES. Each party hereto represents and warrants that
no agent, broker, investment banker, person or firm acting on behalf of or
under the authority of such party hereto is or will be entitled to any
broker's or finder's fee or any other commission directly or indirectly in
connection with the transactions contemplated herein. Each party hereto
further agrees to indemnify each other party for any claims, losses or
expenses incurred by such other party as a result of the representation in
this Section 8.15 being untrue.
[THIS SPACE INTENTIONALLY LEFT BLANK]
14.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the SERIES E
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT as of the date set forth in
the first paragraph hereof.
COMPANY: PURCHASER:
COINSTAR, INC. ACORN VENTURES
By: By:
--------------------------------- ----------------------------------
Jens Molbak, President
13231 S.E. 36th Street Name: --------------------------------
Suite 200
Bellevue, WA 98006 Title:
-------------------------------
Address:
------------------------------
15.
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
$12 $16 AGGREGATE PURCHASE
WARRANT WARRANT PRICE FOR SHARES AND
NAME SHARES SHARES SHARES WARRANTS
- --------------------- ------ ------- ------- --------------------
Acorn Ventures, Inc.
Mr. Rufus Lumry
11400 S.E. 6th Street
Suite 120
Bellevue, WA 98004 100,000 350,000 550,000 $ 1,023,750
------- ------- ------- -----------
TOTAL: 100,000 350,000 550,000 $ 1,023,750
<PAGE>
COINSTAR
NEWPORT HEIGHTS
OFFICE BUILDING LEASE
This LEASE, dated June 1, 1994, is made and entered into by and between
Factoria Heights, a Washington general partnership ("Landlord"), and Coinstar,
Inc. a Delaware corporation ("Tenant").
WITNESSETH, THAT:
1. PREMISES
1.1 PREMISES; USE. Landlord, subject to the terms and conditions hereof,
leases to Tenant and Tenant leases from Landlord the Premises as delineated on
Exhibit "A-1" (the "Premises"), on the second floor of the Newport Heights
Building, 13231 SE 36th Street, Bellevue, Washington 98006 (the "Building"),
Suite 200. Tenant shall use the Premises for its general office and
administrative functions, and for software and product development as permitted
per the zoning requirements of the City of Bellevue. Tenant shall not use or
permit the Premises to be used for any other purpose without the prior written
consent of Landlord. The legal description of the property upon which the
Building is located is described in Exhibit "A" ("Real Property").
1.2 AGREED FLOOR AREAS. The agreed floor area of the Premises is
approximately 16,761 square feet of rentable floor area, subject to final
measurement and space planning, as defined in Exhibit "B", and calculated in
accordance with BOMA standards (the "Agreed Floor Area of the Premises") and
subject to the provisions of Subsection 1.3. The agreed rentable floor area of
the Building is 33,105 rentable square feet, based on BOMA measurements as
described in Exhibit "B." Any final adjustment, per the BOMA measurements as
described in Exhibit "B," to the Building rentable floor area measurement, will
be reflected in an adjustment to Tenant's percentage under Subsection 4.2 of the
Lease (the "Agreed Floor Area of the Building"). For purposes of calculating
Tenant's Allowance under this Lease, the usable square footage of the Premises,
based on BOMA measurements, is approximately 16,673 useable square feet.
1.3 RIGHT OF FIRST OFFER. Provided that Tenant is not in default under
this Lease at the time of exercise of Tenant's right hereunder, and so long as
the space described herein is available, Tenant shall have, during the Initial
Term and any extension thereof, a continuous non-exclusive right of first offer
to lease the entire space located on the first floor of the Building ("Option
Space"), which Option Space Landlord may offer to other prospective tenants.
Tenant's right to lease the Option Space is subject and subordinate to all
encumbrances on the Option Space in existence as of the date of Lease execution.
Landlord represents that all encumbrances related to the right to lease the
Option Space are identified on Exhibit "G." The Option Space, encompassing
approximately 17,000 square feet of rentable floor area, is outlined on Exhibit
"A-2". This right of first offer may be exercised, at Tenant's option, at any
time during the Initial Term and any extension thereof by giving written notice
to Landlord (the "Acceptance"), on the same terms and conditions as those set
forth in this Lease, except as to Basic Rent and tenant improvements (which will
be determined pursuant to the further paragraphs in this Subsection); the Lease
term for the Option Space shall run co-terminous with the Lease.
The rent reserved herein, i.e., the "Basic Rent", for the Option Space shall be
set at a figure which is equal to the then prevailing fair market rental value
for the Premises at the time of the Acceptance, as determined by mutual
agreement between Landlord and Tenant or by arbitration in accordance with the
provisions of this Lease. If Landlord and Tenant are unable to agree upon said
fair market rental value within thirty (30) days from the date of the
Acceptance, then the matter shall be determined by arbitration, pursuant to the
terms of this Subsection. The parties agree to a standard of good faith and
reasonableness in their attempts to affirmatively resolve the issue of Basic
Rent.
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Notwithstanding anything to the contrary in this Lease, Landlord and Tenant
agree that under no circumstances shall the Basic Rent be less for the Option
Space than the Premises.
Arbitration, if required, shall be before one disinterested arbitrator if one
can be agreed upon, otherwise before three disinterested arbitrators, one to be
named by the Landlord, one by the Tenant and one by the two thus chosen. Each
arbitrator shall have at least ten years professional experience and achieved
"MAI" status in the American Institute of Real Estate Appraisers.
In determining the fair market rental value for the Option Space, the arbitrator
or arbitrators shall determine the controversy in accordance with the laws of
the State of Washington as set forth in RCW 7.04 et. seq., or its successor
statute, insofar as they are not inconsistent with the provisions herein. The
parties agree further that the arbitration proceeding shall be subject to
Washington Mandatory Arbitration, Rule 5.2. The expenses of arbitration shall
be shared equally by Landlord and Tenant. Each party shall be responsible for
its own attorney's fees in the arbitration process; however, attorney's fees
incurred in connection with the confirming of any arbitration award or in
enforcing any judgment upon the award shall be borne in accordance with Section
21 of this Lease. Except as otherwise provided herein, any dispute or
controversy concerning the fair market rental value shall be settled by
arbitration in accordance with the Real Estate Valuation Arbitration Rules of
the American Arbitration Association, and judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof.
If Landlord and Tenant are unable to agree upon the Basic Rent for the Option
Space pursuant to this Subsection 1.3, Tenant will pay Basic Rent for the Option
Space at the rate in effect (per square foot) for the Premises immediately prior
to the Acceptance, until the parties agree upon the Basic Rent for the Option
Space, or until the Basic Rent is determined in arbitration pursuant to this
Subsection. The amount of the Basic Rent for the Option Space will be applied
retroactively to the Acceptance, and any rent deficiency will be due and payable
with the next installment of Basic Rent due, following conclusion of
arbitration.
If Tenant takes the Option Space on an "as-is" basis, rent will commence for the
Option Space upon the execution of a Lease amendment for the Option Space; or if
tenant improvements are required, rent for the Option Space will commence upon
the date of substantial completion of the improvements to the Option Space.
If Tenant elects to lease the Option Space at any time during the Initial Term,
at Tenant's option the improvement allowance payable by Landlord and available
to Tenant for improvements to the Option Space, will be as follows (determined
by the date of the Acceptance):
Acceptance Date 16,432 USF
--------------- ----------
At any time from the Commencement
Date through month 12: $5 per useable square foot
At any time during months 13-24: $4 per useable square foot
At any time during months 25 - 36: $3 per useable square foot
At any time during months 37 - 48: $2 per useable square foot
At any time during months 49 - 60: $1 per useable square foot
If Tenant elects to lease the Option Space at any time during the Initial Term,
any tenant improvement work will be planned and constructed under the same terms
and conditions as set forth in the Work Letter Agreement, Exhibit "C;" provided,
the tenant improvement allowance is limited solely to the provisions of this
paragraph.
All rights of Tenant under the provisions of this right of first offer shall
terminate and be of no further force or effect even after Tenant's due and
timely exercise of the right of first offer, if after such exercise, but
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prior to the occupancy of the Option Space, (1) Tenant fails to pay to Landlord
a monetary obligation of Tenant for a period of 10 days after notice from
Landlord that such obligation is due; or (2) Tenant fails to commence to cure a
nonmonetary default within 10 days after the date Landlord, during the term of
this Lease, gives notice to Tenant of such default.
This option is personal to Tenant and may not be exercised or be assigned,
voluntarily or involuntarily, by or to any person or entity other than Tenant;
provided, however, that this option may be assigned in those circumstances
described in Section 8 below under which Landlord's consent to an assignment is
not required. The option herein granted to Tenant is not assignable separate
and apart from this Lease.
1.4 RIGHT OF FIRST REFUSAL. Provided that Tenant is not in default under
this Lease at the time of Tenant's exercise of its right hereunder, Tenant shall
have, during the Initial Term, in addition to the right Tenant has under
Subsection 1.3 above, a continuous right of first refusal to lease all or any
portion of the space located on the first floor of the building ("First Right
Space") in accordance with the terms described below. Tenant's right to lease
the First Right Space is subject and subordinate to all leases and options on
the First Right Space in existence as of the date of Lease execution. Landlord
represents that all encumbrances related to the right to lease the First Right
Space are identified in Exhibit "G." The First Right Space, encompassing
approximately 17,000 square feet of rentable floor area, is outlined on Exhibit
"A-3." If at any time during the Initial Term, Landlord shall receive a bona
fide offer from any third-person to lease the First Right Space, or any portion
thereof, which offer Landlord shall desire to accept, then Landlord shall
promptly provide Tenant with a copy of such offer. Tenant may, within five (5)
business days thereafter, elect to lease the First Right Space on the same terms
and conditions as those set forth in the third-party offer (unless Landlord and
Tenant mutually agree to other terms).
Notwithstanding anything to the contrary in this Lease, Landlord and Tenant
agree that under no circumstances shall the Basic Rent be less for the First
Right Space than the Premises.
Failure of Tenant to exercise its option within the prescribed time shall waive
Tenant's right as to that offer and Landlord shall have the right to lease the
First Right Space to the entity making that offer on essentially the terms
contained in the offer. Tenant's right of first refusal during the Initial Term
shall continue as to the First Right Space and the procedure described in this
Subsection shall be followed if there is any material modification in the terms
of the offer, or a failure to enter into a lease with the third-party making the
offer, or the First Right Space again becomes available at the termination of a
lease.
All rights of Tenant under the provisions of this right of first refusal shall
terminate and be of no further force or effect even after Tenant's due and
timely exercise of its right of first refusal, if after such exercise, but prior
to the occupancy of the First Right Space, (1) Tenant fails to pay to Landlord a
monetary obligation of Tenant for a period of ten (10) days after notice from
Landlord that such obligation is due; or (2) Tenant fails to commence to cure a
nonmonetary default within ten (10) days after the date Landlord, during the
term of this Lease, gives notice to Tenant of such default.
This option is personal to Tenant and may not be exercised or be assigned,
voluntarily or involuntarily, by or to any person or entity other than Tenant;
provided, however, that this option may be assigned in those circumstances
described in Section 8 below under which Landlord's consent to an assignment is
not required. The option herein granted to Tenant is not assignable separate
and apart from this Lease.
Tenant's right of first refusal to lease the First Right Space shall expire and
be of no further force or effect upon the termination of the Initial Term.
1.5 ADDITIONAL SPACE; TERMINATION OPTION. At any time after the Building
can no longer accommodate Tenant's expansion needs of at least 15,000 rentable
square feet but less than 50,000 rentable square feet (whether or not Tenant
shall have leased all or any portion of the Option Space or the First Right
Space), Tenant shall have the option to terminate this Lease by delivering to
Landlord a written
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notice of its intent to terminate this Lease (the "Termination Intention
Notice"). The Termination Intention Notice may not be sent prior to the end of
the twenty-fourth (24th) month following the Commencement Date or after the end
of the twenty-fifth (25th) month following the Commencement Date.
If Tenant's expansion needs are less than 15,000 rentable square feet or more
than 50,000 rentable square feet, then this Subsection 1.5 shall not apply and
Tenant shall have no early Lease termination option hereunder.
The Termination Intention Notice shall state that Tenant needs additional
expansion space ("Additional Space") of at least 15,000 rentable square feet and
shall express Tenant's intention to terminate this Lease if Landlord cannot
secure such Additional Space for Tenant, on terms and conditions and in a
location satisfactory to Tenant in its sole discretion, in the Newport Corporate
complex of which the Building is a part. If Landlord has not made the
Additional Space available to Tenant for occupancy (whether by building an
addition to the Building or relocating Tenant to other space within the Newport
Corporate complex) by the date ("Expansion Deadline") which is twelve (12)
months after delivery of the Termination Intention Notice, Tenant shall have the
option to terminate this Lease upon delivery to Landlord of written notice
("Termination Exercise Notice") to such effect. If Tenant elects to send a
Termination Exercise Notice, it must be given within thirty (30) days after the
Expansion Deadline. The Termination Exercise Notice shall specify the
termination date ("Termination Date") selected by Tenant, which date shall not
be less than one (1) month from the date on which the Termination Exercise
Notice was given to Landlord together with a payment by Tenant to Landlord of an
early termination fee in the amount of Sixty Thousand Dollars ($60,000.00).
Payment in full is due, together with the Termination Exercise Notice, for this
early termination clause to be effective. Failure to comply with either the
requirement of written notice or timely payment in full of the termination fee
shall result in forfeiture of Tenant's early termination right hereunder.
Tenant's early termination right shall expire if Termination Intention Notice
has not been received by Landlord on or before the last day of month twenty-five
(25) following the Commencement Date of the Initial Term.
In the event Tenant elects to terminate this Lease as provided herein, the date
of termination shall operate as if that date were the time originally fixed for
the termination of this Lease and this Lease shall come to an end with the same
force and effect as if the Termination Date was the date herein provided for the
expiration hereof. Further, all provisions of this Lease that are to become
effective on the termination of this Lease shall become operative or effective
on the new termination date.
This option is personal to Tenant and may not be exercised or be assigned,
voluntarily or involuntarily, by or to any person or entity other than Tenant;
provided, however, that this option may be assigned in those circumstances
described in Section 8 below under which Landlord's consent to an assignment is
not required. The option herein granted is not assignable separate and apart
from this Lease.
1.6 ACCEPTANCE OF PROPERTY. Neither Landlord nor its agents have made any
representations with respect to the Building, the land upon which it is erected,
or the leased property except as expressly set forth herein. No rights,
easements, or licenses are acquired by Tenant by implication or otherwise except
as expressly set forth in the provisions of this Lease. Tenant accepts the
Premises "as is" subject to any tenant improvements described in Section 25 of
this Lease, and subject to any punchlist items to be completed by Landlord. The
taking of possession of the leased property by the Tenant shall be conclusive
evidence that the Premises and the Building of which the same form a part were
in good condition at the time possession was taken. Notwithstanding anything to
the contrary in the Lease, Landlord represents as of the date of Lease execution
that (i) the heating, ventilation, and air conditioning, electrical and plumbing
systems, and the roof, structure and foundation are in good repair and operable
condition; and (ii) the Building and Premises comply with all applicable codes
and regulations in effect.
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2. TERM
2.1 INITIAL TERM. The term of this Lease shall be for a period of five
(5) years ("Initial Term"). The Initial Term as well as the Tenant's obligation
to pay rent shall commence on the date when the Improvements described in
Paragraph A of the Scope of Work (Exhibit "C-2") have been substantially
completed as mutually agreed upon by Landlord and Tenant and subject to any
punchlist items (except that if completion of the Improvements described in
Paragraph A of the Scope of Work (see Section 25) is delayed by Tenant's design
decisions, revisions, or additional work of Tenant or its agents, then the
commencement date (hereinafter defined) which would otherwise be established
shall be advanced to an earlier date by the number of days of said delay)
(hereinafter "Commencement Date"). In the event that said date does not occur
on the first day of the month, then the term hereunder shall commence on the
first day of the month next succeeding said date. In that event, however,
Tenant shall pay rent for the fractional month on a per diem basis (calculated
on the basis of a thirty-day month) until the first day of the month when the
term commences and thereafter the Basic Rent, as well as the Tenant's share of
Operating Costs, shall be paid in advance in equal monthly installments on the
first day of each and every month. Upon the commencement of the Initial Term,
the parties shall execute a written summary of this Lease setting forth the
precise commencement and termination dates of this Lease, Basic Rent, etc. Said
summary shall be generally in the form attached hereto as Exhibit "D". Failure
to execute such summary, however, shall not affect Tenant's liability hereunder.
2.2 OPTION TO EXTEND. Landlord does hereby grant to Tenant the right,
privilege, and option to extend this Lease for one period of five (5) years
("Extended Term") from the date of expiration hereof, upon the same terms and
conditions as herein contained, except as to "Basic Rent" which shall be as set
forth in the paragraphs below, and with no tenant improvement allowance
available to Tenant. In the event Tenant desires to exercise its option to
extend this Lease, then at least one hundred eighty (180) days prior to the
expiration of the term hereof, Tenant shall give Landlord a written notice (the
"Extension Notice"), which shall set forth the name of the parties, the Lease
date, and the option period and dates of which Tenant is exercising. There
shall be only one extension option period of five (5) years under this Lease.
In the event that Tenant fails to give the Extension Notice as set forth herein,
then Tenant's right to extend this Lease shall terminate and be of no further
force and effect.
The rent reserved herein, i.e., the "Basic Rent", during the Extended Term shall
be set at a figure which is equal to the then prevailing fair market rental
value for the Premises at the time of commencement of said renewal period, as
determined by mutual agreement between Landlord and Tenant or by arbitration in
accordance with the provisions of this Lease. If Landlord and Tenant are unable
to agree upon said fair market rental value within sixty (60) days from the date
of sending the Extension Notice, then the matter shall be determined by
arbitration pursuant to the terms of this Subsection. The parties agree to a
standard of good faith and reasonableness in their attempts to affirmatively
resolve the issue of Basic Rent.
Arbitration, if required, shall be before one disinterested arbitrator if one
can be agreed upon, otherwise before three disinterested arbitrators, one to be
named by the Landlord, one by the Tenant and one by the two thus chosen. Each
arbitrator shall have at least ten years professional experience and achieved
"MAI" status in the American Institute of Real Estate Appraisers.
In determining the fair market rental value for the Premises the arbitrator or
arbitrators shall determine the controversy in accordance with the laws of the
State of Washington as set forth in RCW 7.04 et. seq., or its successor statute,
insofar as they are not inconsistent with the provisions herein. The parties
agree further that the arbitration proceeding shall be subject to Washington
Mandatory Arbitration, Rule 5.2. The expenses of arbitration shall be shared
equally by Landlord and Tenant. Each party shall be responsible for its own
attorney's fees in the arbitration process; however, attorney's fees incurred in
connection with the confirming of any arbitration award or in enforcing any
judgment upon the award shall be borne in accordance with Section 21 of this
Lease. Except as otherwise provided herein, any dispute or
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<PAGE>
controversy concerning the fair market rental value shall be settled by
arbitration in accordance with the Real Estate Valuation Arbitration Rules of
the American Arbitration Association, and judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof.
If Landlord and Tenant are unable to agree upon the Basic Rent for the
Extended Term pursuant to this Subsection 2.2, Tenant will, during such
Extended Term, pay Basic Rent at the rate in effect for the Premises (per
square foot) immediately prior to the Extended Term until the parties agree
upon the new Basic Rent, or until the Basic Rent is determined in arbitration
pursuant to this Subsection. The amount of the new Basic Rent for the
Extended Term will be applied retroactively to the beginning of the Extended
Term, and any rent deficiency will be due and payable with the next
installment of Basic Rent due, following conclusion of arbitration.
Any option to extend the Lease term may be exercised or be assigned, by or to
any person or entity other than Tenant (in accordance with Section 8 of this
Lease). The option herein granted to Tenant is not assignable separate and
apart from this Lease.
Tenant shall not have the right to exercise the extension option,
notwithstanding anything to the contrary set forth above:
(a) During the time commencing from the date Landlord give to Tenant a
written notice that Tenant is in default under any provisions of this Lease,
and continuing until the default alleged in said notice is cured; or
(b) During the period of time commencing on the day after written
notice from Landlord that a monetary obligation to Landlord is due from
Tenant and unpaid continuing until the obligation is paid.
The period of time within which the option may be exercised shall not be
extended or enlarged by reason of Tenant's inability to exercise the option
because of the foregoing provisions and/or restrictions.
All rights of Tenant under the provisions of this option shall terminate and
be of no further force or effect even after Tenant's due and timely exercise
of the option, if after such exercise, but prior to the commencement date of
the new term, (1) Tenant fails to pay to Landlord a monetary obligation of
Tenant for a period of thirty (30) days after such obligation becomes due
(following written notice from Landlord that such obligation is due); or (2)
Tenant fails to commence to cure a default within thirty (30) days after the
date Landlord, during the term of this Lease, gives notice to Tenant of such
default.
3. BASIC RENT
3.1 ANNUAL/MONTHLY RENT. Tenant shall pay to Landlord as Basic Rent for
the Premises the following net amounts:
<TABLE>
<CAPTION>
Net $ Per Square
Net Monthly Rent Net Annual Rent Foot/Monthly
---------------- --------------- ----------------
<S> <C> <C> <C>
Commencement Date
through Month 12*: $11,179.59 $134,155.04 $.667, triple net
Months 13-24: $14,799.96 $177,599.56 $.883, triple net
Months 25-60: $17,599.05 $211,188.60 $1.05, triple net
</TABLE>
("Basic Rent"). The first installment shall be payable upon the execution of
this Lease and the remaining installments shall be paid, in advance, on the
first day of each and every calendar month during the term hereof. (*First
period includes first partial Lease month, if any.)
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It is hereby agreed that the stated Basic Rent shall be determined on the
basis of a specific annual square foot rate, to-wit:
Net $ Per Square Foot/Annually
------------------------------
Months 1-12: $8.004, triple net
Months 13-24: $10.596, triple net
Months 25-60: $12.60, triple net
and therefore is subject to adjustment in the event the Premises encompass
more or less than 16,761 square feet of rentable floor area.
3.2 PAYMENT OF BASE RENT - NO DEDUCTION OR OFFSET. The Tenant shall
pay said rent to Landlord, at the office of Landlord at 3605 - 132nd Avenue
SE, Suite 300, Bellevue WA 98006, or to such other party or to such other
address as Landlord may designate from time to time by written notice to
Tenant, without demand and without deduction, setoff or counterclaim. If
Landlord shall at any time or times accept said rent after it shall become
due and payable, such acceptance shall not excuse delay upon subsequent
occasions, or constitute, or be construed as a waiver of any or all of
Landlord's rights hereunder. In addition to any "late charges" which may be
incurred hereunder, Tenant shall pay interest at the rate of 18% per annum
compounded on all late payments of rent 30 or more days past due, or such
other maximum allowable interest rate should the aforesaid eighteen (18%)
rate violate any applicable laws or regulations. (See Section 22 as to "Late
Charges.")
4. OPERATING COSTS
4.1 ACKNOWLEDGED TRIPLE NET TERMS. Tenant acknowledges that this Lease
is, in all respects, considered to be a triple net Lease and it is the intent
of the parties that Tenant and the other tenants of the Building collectively
pay for all of the Operating Costs (including property taxes), relating to
the Building and Real Property.
4.2 TENANT SHARE. Tenant shall, for each calendar year of the Initial
Term, or any extension thereof, pay to Landlord Tenant's proportionate share,
as additional rent 50.63% (being the proportion of which the Agreed Floor
Area of the Premises bears to the Agreed Floor Area of the Building) (subject
to adjustment per Subsection 1.2 and 1.3) of the Operating Costs, (defined
below), of the Building and Real Property. If an Operating Cost is not
attributable to 100% of the Building, then Tenant shall pay its proportionate
share thereof. Tenant shall pay 100% of any costs directly allocable to
Tenant's Premises.
4.3 OPERATING COSTS DEFINITION.
(a) The term "Operating Costs" shall include all Operating Costs
incurred in maintaining and operating the Building and Real Property, and
including (without limiting the generality of the foregoing) the following:
all real estate taxes and assessments on the Real Property as described in
Section 1 (land and Building); all charges for management and administrative
fees, heat, air conditioning, utilities, insurance, janitorial and cleaning
services, salaries, wages, payroll taxes, and other personnel cost of
engineers, superintendents, watchmen and other employees in connection with
the maintenance and operation of the Building and Real Property; all charges
under maintenance and service contracts for heating and air conditioning
equipment and controls; exterior window cleaning and Building, plaza and
parking lot maintenance, personal property taxes (if any) in connection with
personal property used in the operation of the Building and Real Property;
and maintenance, operation and repair expenses and supplies for the Building
and Real Property which are deducted for any calendar year (and not
capitalized) for Federal Income Tax Purposes, and capital purchases which are
made for and directly contribute to the lowering of Building Operating Costs;
landscape maintenance, permits and inspection fees; and attorney and
accountants fees. Real estate taxes shall be deemed to be the taxes payable
in the respective calendar years, even though the levy or assessment thereof
may be for a different fiscal year, and shall
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include all real and personal property taxes and assessments imposed by any
government authority or agency on the Building and Real Property (including a
pro rata portion of any taxes levied on the common areas); any assessments
levied in lieu of taxes; any non-progressive tax on or measured by gross
rentals received from the rental of space in the Building; and other costs
levied or assessed by, or at the direction of, any federal, state, or local
government authority in connection with the use or occupancy of the Premises
or the parking facilities serving the Premises; any tax on this transaction
or any document to which Tenant is a party creating or transferring an
interest in the Premises and any expenses, including costs of attorneys or
experts, reasonably incurred by Landlord in seeking reduction by the taxing
authority of the above-referenced taxes, but shall not include any net
income, franchise, capital stock, estate or inheritance taxes.
(b) Operating Costs shall also exclude or have deducted from them:
(i) Managing agents' fees or commissions in excess of the rates
then customarily charged for management for projects of like class and
character to the Premises;
(ii) Executives' salaries above the grade of property, building
and/or facilities manager;
(iii) Expenditures for capital improvements except those which
under generally accepted accounting principles are expenses or regarded as
deferred expenses and except for capital expenditures required by law;
(iv) Amounts received by Landlord through proceeds of insurance
to the extent the proceeds are compensation for expenses which were
previously included in Operating Costs hereunder;
(v) Cost of repair or replacement incurred by reason of fire or
other casualty or by the exercise of the right of eminent domain;
(vi) Unreasonable consulting fees; market study fees and
advertising and promotional expenditures;
(vii) Legal fees in connection with the negotiation and preparation
of leases of space or legal fees in connection with the sale of all or any
portion of the Building in which the Premises are located, or an interest
therein, or the refinancing of Landlord's interest in all or any portion of
the Building in which the Premises is located, or in connection with disputes
with tenants, and legal and auditing fees, other than legal and auditing fees
reasonably incurred in connection with the maintenance and operation of all
or any portion of such Building or in connection with the preparation of the
statements required pursuant to additional rent or lease escalation
provisions contained in leases of space in such Building;
(viii) Costs incurred in performing work or furnishing services for
individual tenants (including Tenant) at such tenant's expense, to the extent
that such work or service is in excess of any work or service Landlord at its
expense is obligated to furnish to Tenant; costs of performing work or
furnishing services to tenants other than Tenant at Landlord's expense to the
extent that such work or service is in excess of any work or service Landlord
is obligated to furnish to Tenant at Landlord's expense; provided, Tenant
shall remain responsible for and shall pay as Operating Costs any amounts
referred to herein for work or service performed for the benefit of Tenant;
(ix) All Operating Costs for which Landlord has received
reimbursement, except by way of Basic Rents or escalation rents;
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(x) Depreciation, except for depreciation on capital purchases
that contribute to the lowering of operating costs;
(xi) Repairs and replacements resulting from the correction of
latent construction defects in all or any portion of the Premises or Building;
(xii) Penalties due to any violation of law by Landlord or other
tenants;
(xiii) Costs of preparing tenant space for tenant occupancy;
(xiv) Costs of any utilities, services, or capital improvements
relating to all or any portion of the Building which were paid directly by
Tenant or any other tenant (provided, this does not constitute an agreement
for Tenant to directly pay for its utilities or services);
(xv) Costs allocable to properties in which Landlord has an
interest other than the Building in which the Premises are located;
(xvi) Damages incurred by Landlord for any default, breach, claim,
judgment or settlement;
(xvii) Costs related to public transportation, transit or van pool
unless imposed by governmental authority or at the request of Tenant;
(xviii) Leasing commissions; and
(xix) Payments of the principal and interest on any mortgages,
deeds of trust or other encumbrances upon the Real Property.
4.4 OPERATING COST AND ADJUSTMENT. Before the commencement of each
calendar year of the Initial Term, or as soon thereafter as practicable,
Landlord will notify Tenant in writing of Landlord's estimate of Operating
Costs, for the next succeeding year (until the following January 1) and the
amount of Tenant's percentage share thereof as set forth in Subsection 4.2.
Effective January 1 and each month thereafter, Tenant shall pay to Landlord
as additional rent 1/12 of Tenant's percentage share of said estimated
Operating Costs. On the next succeeding January 1, or as soon thereafter as
possible or upon sooner termination of the Initial Term, Landlord will
compute Tenant's total rental adjustment for such previous year or portion
thereof if applicable, based on the actual Operating Costs and, shall
provide Tenant with a written statement showing the actual Operating Costs
and Tenant's percentage share of said costs. Such statement shall provide an
itemized breakdown of the actual Operating Costs and shall be in generally
the form attached hereto as Exhibit "F". If the total amount of Tenant's
additional rental paid for such previous year or portion thereof is less than
Tenant's percentage share of actual Operating Costs, then Tenant shall pay
Landlord any deficiency. If the total amount paid by Tenant for such previous
year or portion thereof exceeds the Tenant's percentage share of actual
Operating Costs, then Landlord shall credit such excess to the payment of
rent and additional rent which may thereafter become due. Any adjustment
payment required to be made pursuant to this Subsection shall be made within
15 days after Landlord has notified Tenant thereof. Landlord shall make
available for Tenant's review and upon request by Tenant, the accounting
information on which any Operating Cost adjustment is based. If this Lease
commences at a time other than at the commencement of a calendar year, or
expires at a time other than the expiration of the calendar year, Landlord
shall estimate Tenant's contributions for that portion of the calendar year
contained in the Initial Term and Tenant shall pay such charge in equal
monthly installments on the first day of those months of that calendar year
which are in the Initial Term. If at any time Landlord obtains or receives
additional information regarding the actual amount of the contributions,
Landlord may, at its election, adjust the amount of the monthly installments
due during the balance of the calendar year of the Initial Term to reflect
such additional information.
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Even though the term has expired and Tenant has vacated the Premises, when
the final determination is made of Tenant's percentage share of Operating
Costs for the year in which this Lease terminates, Tenant shall pay within 5
days of written notice any increase due over the estimated expenses paid and,
conversely, if Tenant has otherwise complied with all other terms and
conditions of this Lease, Landlord shall refund any excess (any over-payment
in the event said expense decrease) to Tenant.
Any increase in rental pursuant to this Section shall be deemed additional
rent payable by Tenant hereunder, and in the event of nonpayment thereof,
Landlord shall have similar rights with respect to such nonpayment as it has
with respect to any other nonpayment of rent hereunder.
5. SECURITY DEPOSIT
Upon the execution of this Lease, Tenant shall deposit with Landlord a cash
Security Deposit ("Initial Deposit") in the amount of One Hundred Thousand
and No/100 Dollars ($100,000.00). Within five (5) business days after Tenant
provides evidence to Landlord, to Landlord's reasonable satisfaction, that
Tenant has obtained a minimum of Six Million and No/100 Dollars
($6,000,000.00) in financing for its operations (such financing to represent
new cash available since April 1, 1994), Landlord shall return to Tenant the
sum of Sixty-Five Thousand Dollars ($65,000.00), plus interest (see paragraph
below). Such sum shall bear interest at the rate of 18% per annum if not paid
within such five (5) business days. The balance of Thirty-Five Thousand
Dollars ($35,000.00), which represents approximately two month's rent (based
on the rent in effect during the last two months of the Initial Term), shall
be retained by Landlord for the remainder of the Lease term, and any
extensions thereof, as a Security Deposit ("Security Deposit"). For purposes
of this Section 5, Landlord agrees that Tenant shall have provided sufficient
evidence of financing if Tenant submits a written statement from Deloitte &
Touche (or other "Big 6" firm) that Tenant has obtained the requisite
$6,000,000.00 in financing since April 1, 1994.
Landlord may apply the Security Deposit to any charges due or any defaults of
Tenant. If Landlord uses any part of the Security Deposit, Tenant shall
restore the Security Deposit to its full amount within five (5) days after
Landlord's written request. Tenant's failure to do so shall be a material
default under this Lease. Of the total One Hundred Thousand Dollars
($100,000.00), Landlord shall deposit Sixty-Five Thousand Dollars
($65,000.00) into a separate interest-bearing account in favor of Tenant. The
sum of Thirty-Five Thousand Dollars ($35,000.00) shall be kept with
Landlord's general funds and Tenant shall not be entitled to interest
thereon. Upon termination of this Lease and after Tenant has vacated the
Premises, Landlord shall refund or credit to Tenant (or Tenant's successor)
the unused portion of the Security Deposit. The cost of any work required to
restore the Premises to its original condition (normal wear and tear
excepted), shall be deducted from Tenant's Security Deposit.
In the event of termination of Landlord's interest in this Lease, and subject
to Landlord's right of offset under the preceding paragraph, Landlord shall
transfer the Initial Deposit or the Security Deposit (as the case may be) to
Landlord's successor in interest, whereupon Tenant agrees to release Landlord
from all liability for the return of such deposit or the accounting thereof.
6. UTILITIES AND SERVICES
Provided that Tenant is not in default under any of the material terms,
covenants, conditions, provisions or agreements of this Lease, Landlord will
provide the following services:
(a) Maintain normal and usual Building business hours, Monday through
Friday, from 8:00 a.m. to 5:00 p.m. and on Saturday from 8:00 a.m. to noon;
Sundays and holidays excepted; provided, however, that Tenant shall have
access to the Building 24 hours a day, 7 days a week.
(b) Furnish utilities to provide for lighting, convenience power, and
heat and air conditioning capable of maintaining a temperature in accordance
with the Washington Energy Code. Tenant's
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electrical consumption shall be monitored and billed to Tenant with reference
to zones within the Building and meters for Tenant's consumption.
(c) Provide non-attended passenger elevator facilities during all
working days (Saturday, Sunday and holidays one elevator subject to call) (if
applicable).
(d) Provide janitorial service similar to that furnished in comparable
general office space within the general area. Any and all additional
janitorial service desired by Tenant shall be contracted for by Tenant
directly with Landlord's janitorial agent, or a janitorial agent chosen by
Tenant and subject to Landlord's reasonable approval, and the cost and
payment thereof shall be Tenant's responsibility.
(e) Make all normal repairs to the Premises, excluding repairs to or any
special treatment of walls, floors or ceilings made by or at the request of
Tenant and excluding repairs to any fixtures or other improvements installed
or made by or at the request of Tenant, including any plumbing fixtures in
the Premises. In the event any repairs are required because of any negligent
or reckless act or omission of Tenant, its agents, employees, customers, or
invitees, Landlord may make such repairs and add the cost thereof to the next
installment of rent.
(f) Provide water for drinking, lavatory and toilet purposes drawn
through fixtures installed by Landlord.
(g) Maintain the foundations, roof and all structural portions of the
Building (subject to the reimbursement limitations by Tenant under Section 4).
(h) Maintain the Building and Real Property in compliance with all
governmental codes, rules and regulations.
(i) It is understood that Landlord does not warrant that any of the
services referred to above will be free from interruption by virtue of a
strike or a labor trouble or any other cause whatsoever. Such interruption of
service shall never be deemed an eviction or disturbance of Tenant's use or
possession of the Premises, or any part thereof, nor shall it render Landlord
liable to Tenant for damages, by abatement or reduction of rent or otherwise,
nor shall it relieve Tenant from performance of Tenant's obligations under
this Lease, nor shall Tenant be relieved from the performance of any covenant
or agreement in this Lease because of such failure or interruption. Landlord
reserves the right to stop service of the elevator, plumbing, ventilation,
air-conditioning, and electrical systems, when necessary, by reason of
accident or emergency, or for repairs, alterations or improvements, which are
in the reasonable judgment of Landlord desirable or necessary, until said
repairs alterations or improvements shall have been completed; provided,
Landlord shall use its good faith efforts to minimize interruption to
Tenant's business operations.
(j) To the extent it is required, Landlord shall be responsible for
complying with the Americans with Disabilities Act for the Building, common
areas, parking lot and the restrooms on the second floor (as such exist on
the date of Lease execution).
(k) Tenant shall be entitled to use the common showers in the One
Newport Building free of charge, and shall also be entitled to use all the
common tenant amenities currently available or to be built throughout the
entire Newport Corporate Center for the benefit of the commercial tenants.
(l) Payment for all services rendered under this Section shall be in
accordance with Section 4 of this Lease.
7. CARE OF PREMISES
Tenant agrees that it shall:
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(a) Not use or occupy the Premises in violation of law or of the
certificate of occupancy issued for the Building, and shall, upon written
notice from Landlord, discontinue any use of the Premises which is declared
by any governmental authority having jurisdiction to be a violation of law or
of said certificate of occupancy. Tenant shall comply with any direction of
any governmental authority having jurisdiction which shall, by reason of the
nature of Tenant's use or occupancy of the Premises, impose any duty upon
Tenant or Landlord with respect to the Premises or with respect to the use or
occupation thereof.
(b) Give Landlord access to the Premises at all reasonable times and on
reasonable prior notice, without charge or diminution of rent, to enable
Landlord to examine the same and to make such repairs, additions and
alterations as Landlord may deem advisable, including the right to show the
Premises for the purpose of a potential sale or lease.
(c) Keep the Premises in good order and condition and replace all broken
glass (within the Premises) with glass of the same quality as that broken
(where glass was broken by Tenant or its employees, agents, contractors or
invitees), save only glass broken by fire and extended coverage type risks.
(d) Recognize that improvements attached to the Premises (and
specifically excluding Tenant's personal property, trade fixtures and
equipment) become the property of the Building and may not be removed without
approval of Landlord which approval may be subject to the Tenant's paying for
the cost of repairs resulting from the removal of such improvements.
(e) Upon the termination of this Lease in any manner whatsoever, remove
Tenant's property and those of any other person claiming under Tenant, and
quit and deliver up the Premises to Landlord peaceably and quietly in as good
order and condition as the same is now in or hereafter may be put in by
Landlord or Tenant, reasonable use and wear thereof excepted. Property not
removed by Tenant at the termination of this Lease, however terminated, shall
be considered abandoned and Landlord may dispose of the same as it deems
expedient with reasonable cost to be billed to the Tenant.
(f) Not place signs on the Premises except as authorized and approved by
Landlord and subject to all applicable governmental rules and restrictions,
as well as the "Building Rules and Regulations" as set forth in Exhibit "E".
(g) Not make any alteration of, improvements to, or addition to the
Premises without the prior written approval of Landlord; see also Section 25A
herein.
(h) Not install or authorize the installation of any coin operated
vending machine without obtaining prior written consent from Landlord and
coordinating all details of the installation (including but not limited to
the necessary wiring and actual moving of the machine(s) in the Building or
Premises) with Landlord. The vending machine shown on Tenant's space plan has
been approved by Landlord.
(i) Not do or permit anything to be done in or about the Premises which
will in any way obstruct or interfere with the rights of other tenants or
occupants of the Building, or injure or annoy them, or use or allow the
Premises to be used for any improper, unlawful or objectionable purpose, nor
shall Tenant cause, maintain or permit any nuisance in, on or about the
Premises. Tenant shall not commit or suffer to be committed any waste in or
upon the Premises.
(j) Not do or permit to be done anything which will invalidate or
increase the cost of any fire, extended coverage or any other insurance
policy covering the Building and/or property located therein. Tenant shall
promptly, upon demand, reimburse Landlord for any additional premium charges
for such policy by reason of Tenant's failure to comply with the provisions
of this Subsection.
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(k) Observe the "Building Rules and Regulations" described in Exhibit
"E", and which may be modified by Landlord from time to time upon reasonable
notice from Landlord to Tenant.
(l) Monitor issuance of keys. Unless specifically provided otherwise in
the Lease, all initial keys and/or Building security card devices for access
to the Premises and Building are provided at Tenant's cost. Any re-keying of
the Premises and/or Building due to lost or missing keys shall be at Tenant's
cost. No additional locks shall be placed upon any doors without the written
consent of Landlord. Additional keys and/or Building security card devices
shall be furnished at Tenant's cost. Upon termination of this Lease, all keys
and Building security card devices shall be surrendered to Landlord.
(m) Remove, upon Landlord's request, all cabling provided by or on
behalf of Tenant in Tenant's Premises, at Tenant's sole cost, upon Lease
termination.
(n) Not place any other equipment of any kind or nature whatsoever which
will or may necessitate any changes, replacements or additions to or require
the use of the water system, plumbing system, heating system, air
conditioning system or the electrical system of the Premises or Building
without the prior written consent of Landlord.
(o) To the extent it is required, Tenant shall be responsible for
complying with the Americans Disabilities Act for any work in the Premises
arising out of Tenant's possession, use or occupancy of the Premises.
8. ASSIGNMENT AND SUBLETTING
(a) Tenant shall not, either voluntarily or by operation of law, assign,
hypothecate or transfer this Lease, or sublet the Premises or any part
thereof, without the prior written consent of Landlord in each instance.
Landlord's consent is governed by the provisions of Subsection 8(c) below.
(b) In the event Tenant desires to assign, hypothecate or otherwise
transfer this Lease or sublet the Premises, then at least 10 days prior to
the date when Tenant desires the assignment or sublease to be effective (the
"Assignment Date"), Tenant shall give Landlord a notice (the "Assignment
Notice"), which shall set forth the name, address and business of the
proposed assignee or sublessee, verification that the proposed assignee or
sublessee's use is not inconsistent with permitted uses hereunder,
information (including references) concerning the character, ownership, and
financial condition of the proposed assignee or sublessee, the Assignment
Date, any ownership or commercial relationship between Tenant and the
proposed assignee or sublessee, and the consideration and all other material
terms and conditions of the proposed assignment or sublease, all in such
detail as Landlord shall reasonably require. If Landlord requests additional
detail, the Assignment Notice shall not be deemed to have been received until
Landlord receives such additional detail and Landlord may withhold consent to
any assignment or sublease until such information is provided to it.
(c) Landlord shall not unreasonably withhold or delay consent to any
subletting, assignment, hypothecation or transfer of this Lease; however, the
parties agree that if Landlord withholds consent based upon Landlord's
disapproval of the proposed assignee's or subtenant's financials, or the
proposed assignee's or subtenant's incompatible use of the Building
(including restrictions in other tenant's leases), or Tenant's rental rate
being below fair market rate (without an appropriate increase in rate being
paid by Tenant to Landlord) such withholding of consent shall not be deemed
unreasonable. The subletting of substantially all of the premises for all or
any part of the remaining term of this Lease shall be deemed an assignment
rather than a sublease for purposes of this clause. Notwithstanding the
foregoing, Landlord shall consent to the assignment or transfer, if the
Assignment Notice states that Tenant desires to assign the Lease to Tenant's
parent or a wholly-owned subsidiary of Tenant or such parent or to any entity
into which Tenant is merged, with which Tenant is consolidated or which
acquired all or substantially all of the assets of Tenant, provided that the
assignee first executes, acknowledges and delivers to Landlord an agreement
whereby the assignee agrees to be bound by all of the covenants and
agreements in this
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Lease which Tenant has agreed to keep, observe or perform, that the assignee
agrees that the provisions of this Section shall be binding upon it as if it
were the original Tenant hereunder and that the assignee shall have a net
worth (determined in accordance with generally accepted accounting principles
consistently applied) immediately after such assignment which is at least
equal to the net worth (as so determined) of Tenant immediately prior to the
assignment.
(d) If Tenant shall sublet all or any portion of the Premises that
Tenant has occupied for its own use at any time, then any net consideration
paid by the sublessee (i.e., after deducting Tenant's reasonable legal,
marketing, tenant improvement and other costs) for the portion of the
Premises being sublet that previously was occupied by Tenant that exceeds
110% of the Basic Rent and rental adjustments provided by this Lease for such
portion of the Premises being sublet shall be due, owning and payable from
Tenant to Landlord when paid or owing by the sublessee under the sublease.
The parties intend that the preceding sentence shall not apply to any
sublease rentals respecting a portion of the Premises that, during the entire
term of this Lease, was not occupied by Tenant for its own use, but was
always subleased by Tenant and/or kept vacant. For the purpose of this
section, the rent for each square foot of floor space in the Premises shall
be deemed equal.
(e) Any sale, assignment, hypothecation or transfer of this Lease or
subletting of the Premises that is not in compliance with the provisions of
this Section shall be void and shall, at the option of Landlord, terminate
this Lease. The consent by Landlord to any assignment or subletting shall not
be construed as relieving Tenant or any assignee of this Lease or sublessee
of the Premises from obtaining the express written consent of Landlord to any
further assignment or subletting or as releasing Tenant or any assignee or
sublessee of Tenant from any liability or obligation hereunder whether or not
then accrued. In the event Landlord shall consent to any assignment or
sublease, Tenant shall pay Landlord as Additional Rent a reasonable fee for
costs incurred in connection herewith, including but not limited to costs for
attorneys, accountants, architects, tenant improvement oversight and
administration. This Section shall be fully applicable to all further sales,
hypothecations, transfers, assignments and subleases of any portion of the
Premises by any successors or assignee of Tenant, or any sublessee of the
Premises.
The term "assign," as used herein, shall include (i) an assignment of a part
of interest in this Lease, as well as any assignment from one co-tenant to
another; and (ii) an assignment to any prior owner of the Tenant's interest
herein or part thereof.
Landlord's consent shall not be required if any of the stock (or the
securities) of Tenant are sold, transferred or otherwise conveyed (but Tenant
shall give Landlord written notice if there occurs one or more sales or
transfers within a twelve (12) month period, by operation of law or
otherwise, or creation of new stock, by which an aggregate of fifty percent
(50%) or more of Tenant's voting stock shall be vested in a party or parties
who are nonstockholders as of the date hereof).
9. DELAY IN POSSESSION
If Landlord shall be unable to give possession of the Premises on the
date of the commencement of the term hereof by reason of the fact that: the
Building has not been sufficiently completed to make the Premises ready for
occupancy; a certificate of occupancy has not been procured; there has
occured a holding over or retention of possession by any prior tenant; or
repairs, improvements or decorations of the Premises or the Building, are not
completed; or, for any other reason, then Landlord shall not be subject to
any liability for the failure to give possession on said date. Under such
circumstances the rent reserved and covenanted to be paid herein shall not
commence until the date of possession of the Premises is given or the
Premises are available for occupancy by Tenant, and not such failure to give
possession on the date of commencement of the term shall in any other respect
affect the validity of this Lease or the obligation of Tenant hereunder, nor
shall same be construed in any way to extend the term of this Lease.
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10. DAMAGE OR DESTRUCTION
(a) In the event the Building and/or the Premises is damaged by fire or
other perils covered by Landlord's insurance, Landlord shall:
In the event of a partial destruction of the Building and/or the Premises, to
an extent not exceeding 25% of the full insurable value thereof, and if the
damage thereto is such tat the Building and/or the Premises may be repaired,
reconstructed or restored within a period of one hundred twenty (120) days
from the date of the happening of such casualty and if Landlord will receive
insurance proceeds sufficient to cover the cost of such repairs, then
Landlord shall commence and proceed diligently with the work of repair,
reconstruction or restoration and this Lease shall continue in full force and
effect. If such repair, reconstruction, or restoration shall require a period
longer than one hundred twenty (120) days or exceeds twenty-five percent
(25%) of the full insurable value thereof, or if said insurance proceeds will
not be sufficient to cover the cost of such repairs, then Landlord either may
elect to so repair, reconstruct or restore and the Lease shall continue in
full force and effect or Landlord may elect not to repair, reconstruct, or
restore and the Lease shall then terminate. Under any of the conditions of
this Subsection (a), Landlord shall give written notice to Tenant of its
intention within ninety (90) days after the occurrence of such damage or
destruction. In the event Landlord elects not to restore the Building and/or
the Premises, this Lease shall be deemed to have terminated as of the date of
such partial destruction. If the Building and/or Premises is destroyed or
damaged (as described in this paragraph) and the Building and/or Premises
cannot be repaired, reconstructed or restored within twelve (12) months of
the date of such damage or destruction, then Tenant shall have the right to
terminate this Lease by giving written notice of termination to Landlord
within fifteen (15) days after the expiration of the twelve (12) month
period; the effective termination date shall be retroactive to the date of
the damage or destruction.
In the event Tenant elects to terminate this Lease as provided herein, the
date of termination shall be the day of such damage or destruction occurred
as if that date were the time originally fixed for termination of this Lease
and this Lease shall come to an end with the same force and effect as if the
early termination date was the date provided for the expiration hereof.
Further, all provisions of this Lease that are to become effective on the
termination of this Lease shall become operative as effective on the new
termination date.
(b) Upon any termination of this Lease under any of the provisions of
this Section 10, the parties shall be released without further obligation to
the other from the date possession of the Premises is surrendered to Landlord
except for items which have therefore accrued and are then unpaid.
(c) In the event of repair, reconstruction, or restoration by Landlord
as herein provided, the rental payable under this Lease shall be abated
proportionately with the degree to which Tenant's use of the Premises is
impaired during the period of such repair, reconstruction or restoration.
Tenant's recovery for damages, if any, is limited to rental abatement. Tenant
shall not be entitled to any compensation or damages for loss in the use of
the whole or any part of the Premises and/or any inconvenience or annoyance
occasioned by any damage, repair, reconstruction or restoration.
(d) Tenant shall not be released from any of its obligations under this
Lease except to the extent and upon the conditions expressly stated in this
Section 10. Notwithstanding anything to the contrary contained in this
Section 10, if Landlord is delayed or prevented from repairing or restoring
the damaged Premises within one year after the occurrence of such damage or
destruction by reason of acts of God, war, governmental restrictions,
inability to procure the necessary labor or materials, or other cause beyond
the control of Landlord, Landlord shall be relieved of its obligation to make
such repair or restoration and Tenant shall be released from its obligations
under this Lease as of the end of said one year period and this Lease shall
be deemed terminated.
(e) If damage is due to any cause other than fire or other peril covered
by extended coverage insurance, Landlord may elect to terminate this Lease.
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(f) If Landlord is obligated to or elects to repair or restore as
herein provided, Landlord shall be obligated to make repair or restoration
only of those portions of the Building and/or the Premises which were
originally provided at Landlord's expense, and the repair and restoration of
items not provided at Landlord's expense shall be the obligation of Tenant.
(g) Notwithstanding anything to the contrary contained in this Section
10, Landlord shall not have any obligation whatsoever to repair, reconstruct
or restore the Premises when the damage resulting from any casualty covered
under this Section 10 occurs during the last twelve (12) months of the then
current term of this Lease. However, if Landlord chooses not to restore,
Tenant may elect to terminate this Lease.
11. INDEMNIFICATION
Tenant shall indemnify, defend and hold Landlord harmless from all claims
arising from Tenant's use of the Premises or the conduct of its business or
from any activity, work, or thing done, permitted or suffered by Tenant in or
about the Premises. Tenant shall further indemnify, defend and hold Landlord
harmless from all claims arising from any breach or default in the
performance of any obligation to be performed by Tenant under the terms of
this Lease, or arising from any act, neglect, fault or omission of Tenant or
of its agents or employees, and from and against all costs, attorneys' fees,
expenses, and liabilities incurred in or about such claim or any action or
proceeding brought thereon. In case any action or proceeding shall be brought
against Landlord by reason of any such claim, Tenant upon notice from
Landlord shall defend the same at Tenant's expense by counsel reasonably
approved in writing by Landlord; provided that the foregoing provision shall
not be construed to make Tenant responsible for loss, damage, liability or
expense resulting from injuries to third parties caused by the negligence or
willful misconduct of Landlord, or its officers, contractors, agents or
employees.
12. DAMAGE TO TENANT'S PROPERTY
Notwithstanding anything in this Lease to the contrary, Landlord or its
agents shall not be liable for any damage to Tenant's property which is
caused by the following: (i) any damage to any property entrusted to
employees of Landlord, (ii) loss or damage to any property by theft or
otherwise, or (iii) any injury or damage to property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water or rain which may
leak from any part of the Building or from the pipes, appliances or plumbing
work therein or from the roof, street or sub-surface or from any other place
or resulting from dampness. Landlord or its agents shall not be liable for
interference with light or other incorporeal hereditaments, nor shall
Landlord be liable for any latent defect in the Premises or in the Building.
Tenant shall give prompt notice to Landlord in case of fire or accidents in
the Premises or in the Building or of defects therein or in the fixtures or
equipment.
13. TENANT'S INSURANCE
(a) Tenant shall, during the term hereof and any other period of
occupancy, at its sole cost and expense, keep in full force and effect the
following insurance:
(1) Comprehensive General Liability Insurance insuring Tenant
against any liability arising out of lease, use, occupancy or maintenance of
the Premises and all areas appurtenant thereto. Such insurance shall be in
the amount of not less than $1,000,000.00 Combined Single Limit for injury
to, or death of one or more persons in an occurrence, and for damage to
tangible property (including loss of use) in an occurrence. The policy shall
insure the hazards of Premises and operations, independent contractors,
contractual liability (covering the indemnity contained in Section 11 hereof)
and shall (1) name Landlord as an additional insured, and (2) contain a
provision that "the insurance provided Landlord hereunder shall be primary
and non-contributing with any other insurance available to Landlord."
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(2) Any other forms of insurance (other than earthquake) and in
such amounts as Landlord or any mortgagees of Landlord may reasonably require
from time to time.
(b) All policies shall be written in a form satisfactory to Landlord
and shall be taken out with insurance companies holding a General
Policyholders Rating of "A" and a Financial Rating of "A5" or better, as set
forth in the most current issue of Bests Insurance Guide. Within 5 days after
occupancy of the Premises, Tenant shall deliver to Landlord copies of
policies or certificates evidencing the existence of the amounts and forms of
coverage satisfactory to Landlord. No such policy shall be cancelable or
reducible in coverage except after 30 days prior written notice to Landlord.
Tenant shall within 10 days prior to the expiration of such policies, furnish
Landlord with renewals or "binders" thereof, and if not delivered within that
time, Landlord may order such insurance and charge the cost thereof to Tenant
as additional rent. If Landlord obtains any insurance that is the
responsibility of Tenant under this Section, Landlord shall deliver to Tenant
a written statement setting forth the cost of any such insurance and showing
in reasonable detail the manner in which it has been computed.
14. WAIVER OF SUBROGATION
Tenant and Landlord agree to mutually release each other from liability, and
to waive all right of recovery against the other, for any loss of or damage
to the property of each, including earnings derived therefrom, caused by or
resulting from fire, the perils of the commonly referred to Extended Coverage
Endorsement and leakage from automatic sprinkler systems, if any, or from
perils insured against under any insurance policies maintained by the parties
hereto, regardless of the cause of such loss or damage even though it results
from some act or negligence of a party hereto, its agents or representatives;
provided, however, that this provision shall be inapplicable if it should
have the effect, but only to the extent that it would have the effect, of
invalidating any insurance coverage of the parties thereto.
15. EMINENT DOMAIN
If more than twenty-five percent (25%) of the Building containing the
Premises shall be taken or condemned for public or quasi-public use, under
any statute or by right of eminent domain, or private purchase in lieu
thereof, by any competent authority, Tenant shall have no claim against
Landlord and shall not have any claim or right to any portion of the amount
that may be awarded as damages or paid as a result of any such condemnation.
All rights of the Tenant to damages therefor are hereby assigned by the
Tenant to Landlord; provided, nothing contained in this Section 15 shall be
deemed to give Landlord any interest in any award made to Tenant for the
taking of personal property and fixtures belonging to Tenant. Upon such
condemnation or taking, the term of this Lease shall cease and terminate from
the date such governmental agency takes possession, and the Tenant shall have
no claim against Landlord for the value of any unexpired term of the Lease.
If less than twenty-five percent (25%) of the Building shall be so taken, but
if such taking shall substantially affect the Premises or the means of access
thereto, or if such taking shall be of a substantial part of the Premises,
Landlord or Tenant shall have the right, by delivery of notice in writing to
the other party, to terminate this Lease as of the date when possession shall
be so taken. If neither party shall so elect, this Lease shall be and remain
unaffected by such taking except that, effective as of the date when
possession shall be so taken, the rent payable hereunder shall be diminished
by an amount which shall bear the same ratio to the rent as the area of the
part of the Premises taken bears to the area of the Premises before such
taking.
16. BANKRUPTCY
If Tenant shall file a petition in bankruptcy under any provision of the
Bankruptcy Code as then in effect, or if Tenant shall be adjudicated bankrupt
in involuntary bankruptcy proceedings and such adjudication shall not have
been vacated within thirty (30) days from the date thereof, or if a receiver
or trustee shall be appointed of Tenant's property and the order appointing
such receiver or trustee shall not be set aside or vacated within thirty (30)
days after the entry thereof, or if Tenant shall assign Tenant's estate or
effects for the benefit of creditors, or if this Lease shall, by operation of
law or otherwise, pass to any person or
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persons other than Tenant, then in any such event Landlord may terminate this
Lease, if Landlord so elects, with or without notice of such election and
with or without entry or action by Landlord. In such case, notwithstanding
any other provisions of this Lease, Landlord, in addition to any and all
rights and remedies allowed by law or equity, shall, upon such termination,
be entitled to recover damages in the amount provided for by Section 17 of
this Lease. Neither Tenant nor any person claiming through or under Tenant or
by virtue of any statute or order of any court shall be entitled to
possession of the Premises but shall surrender the Premises to Landlord.
Nothing contained herein shall limit or prejudice the right of Landlord to
recover damages by reason of any such termination equal to the maximum
allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be proved; whether or
not such amount is greater, equal to, or less than the amount of damages
recoverable under the provisions of this Section 16.
17. DEFAULT AND RE-ENTRY: REMEDIES
(a) The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant:
(i) The abandonment of the Premises by Tenant. Abandonment is
herein defined to include, but is not limited to, any absence by Tenant from
the Premises for five (5) business days or longer while Tenant is in default
of any provisions or term of this Lease.
(ii) The failure by Tenant to make any payment of rent or
additional rent or any other payment required to be made by Tenant hereunder,
within five (5) days of receipt of written notice of default. Notwithstanding
the foregoing, if twice within any twelve-month period during the Initial
Term, or any extension thereof, Tenant shall have received written notice of
default, then written notice shall no longer be required and Tenant shall be
in monetary default for failure to pay any obligation on the date due.
(iii) The failure by Tenant to observe or perform any of the express
or implied covenants or provisions of this Lease to be observed or performed
by Tenant, other than as specified in (i) or (ii) above, where such failure
shall continue for a period of 10 days after written notice thereof from
Landlord to Tenant. If the nature of Tenant's default is such that more than
10 days are reasonably required for its cure, then Tenant shall not be deemed
to be in default if Tenant shall commence such cure within said 10 day period
and thereafter diligently prosecute such cure to completion.
(iv) Subject to Section 365(b)(2) and (e)(1), Bankruptcy Reform Act
of 1978, as amended by the Bankruptcy Amendments and Federal Judgeship Act of
1984, (a) The making by Tenant of any general assignment for the benefit of
creditors; (b) the filing by or against Tenant of a petition to have Tenant
adjudged a bankrupt or a petition for reorganization or arrangement under any
law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within 30 days); (c) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's
assets located at the Premises or of Tenant's interest in this Lease, where
possession is not restored to Tenant within 30 days; or (d) the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease where such
seizure is not discharged within 30 days.
(b) In the event of any such default by Tenant, then Landlord may elect
either (i) to cancel and terminate this Lease, (ii) to terminate Tenant's
right to possession only without terminating the Lease, or (iii) pursue any
other remedy available at law or equity.
In the event of election under (b)(ii) above to terminate Tenant's right to
possession only, Landlord may, at Landlord's option, enter into the Premises,
change the locks and take and hold possession of the Premises in accordance
with applicable law, without such entry into possession terminating this Lease
or releasing Tenant in whole or in part from Tenant's obligation to pay the
rent hereunder for the full stated
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term. Upon such re-entry, Landlord may remove all persons and property from
the Premises, and such property may be removed and stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant. No
re-entry or taking possession of the Premises by Landlord pursuant to this
Section shall be construed as an election to terminate this Lease unless a
written notice of such intention is given to Tenant or unless the termination
thereof is decreed by a court of competent jurisdiction. Upon and after entry
into possession without termination of the Lease, Landlord shall use
reasonable efforts to relet the Premises, or any part thereof, for the account
of Tenant, to any person, firm or corporation, other than Tenant, for such
rent, for such time and upon such terms as Landlord, using reasonable
discretion, shall determine, but Landlord shall not be required to accept any
tenant offered by Tenant or to observe any instruction given by Tenant about
such reletting. In any such case, Landlord may make repairs and redecorate
the Premises to the extent reasonably necessary to secure a replacement
tenant, and Tenant shall, upon demand, pay the costs thereof, together with
all of Landlord's expenses of reletting, including but not limited to,
reasonable brokerage fees and legal expenses. In the event that Landlord
shall have terminated Tenant's right to possession only, Landlord shall have
the right to further pursue any remedy at law or in equity that may be
available to Landlord.
(c) In the event that Landlord shall elect to terminate this Lease,
then upon such termination Tenant shall (if it has not already done so) quit
and surrender the Premises to Landlord and Landlord may recover from Tenant:
(i) The worth at the time of award of any unpaid rent which had
been earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have
been reasonably avoided; plus
(iii) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided;
plus
(iv) Any other amount necessary to compensate Landlord for all the
damage proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom.
As used in (c)(i) and (ii) above, the "worth at the time of award" is
computed by allowing interest at 12% per annum compounded or such other
maximum allowable interest rate should the aforesaid 12% rate violate any
applicable laws or regulations. As used in (c)(iii) above, the "worth at the
time of award" is computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of award plus 1%.
(e) All rights, options and remedies of Landlord contained in this
Lease shall be construed and held to be cumulative, and no one of them shall
be exclusive of the other, and Landlord shall have the right to pursue any
one or all of such remedies or any other remedy or relief which may be
provided by law, whether or not stated in this Lease. No waiver or any
default of Tenant hereunder shall be implied from any acceptance by Landlord
of any rent or other payments due hereunder or any omission by Landlord to
take any action on account of such default if such default persists or is
repeated, and no express waiver shall affect defaults other than as specified
in said waiver. The consent or approval of Landlord to or of any act by
Tenant requiring Landlord's consent or approval shall not be deemed to waive
or render unnecessary Landlord's consent or approval to or of any subsequent
similar acts by Tenant.
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18. LIEN
Landlord agrees to waive its rights on all property of Tenant placed in the
Building with the exception of Landlord's statutory lien rights, which are
hereby expressly preserved.
19. SUBORDINATION, QUIET ENJOYMENT
This Lease is subject to and is hereby subordinated to all present and future
mortgages, deeds of trust and other encumbrances affecting the Premises or
the land and buildings of which said Premises are a part subject to Tenant's
right to quiet enjoyment so long as Tenant is not in default hereunder.
Tenant will, upon demand by Landlord, execute such instruments as may be
required at any time, and from time to time, to subordinate the rights and
interests of the Tenant under this Lease to the lien of any mortgage or trust
deed at any time placed on the land of which the Premises are a part;
provided however, that such subordination shall not affect Tenant's right to
possession, use and occupancy of the Premises so long as Tenant shall not be
in default under any of the terms and conditions of this Lease. Tenant further
agrees:
(a) That any such subordination agreement will contain a provision
satisfactory to Landlord's financing lender whereby Tenant will agree, in the
event of foreclosure of any such mortgage or trust deed to attorn to and
recognize as its landlord under the terms of this Lease said lender or any
purchaser of the leased property at a foreclosure sale of their heirs,
successors, or assigns; and
(b) That it will execute and deliver to such lender an Estoppel
Certificate in form reasonably satisfactory to such lender.
Landlord shall provide to Tenant within thirty (30) days of Lease execution,
two subordination, nondisturbance and attornment agreements, in substantially
similar form as that attached as Exhibit "I," to be executed thereafter by
Tenant and Principal Mutual Life Insurance Company and Union Bank. Landlord
shall exercise best efforts to obtain the signatures of both such financial
institutions.
20. ESTOPPEL CERTIFICATES
Tenant shall, from time to time, upon written request of Landlord, execute,
acknowledge and deliver to Landlord or its designee a written statement
stating: the date this Lease was executed; the Initial Term Commencement
Date, as well as the date of Initial Term expiration; the date Tenant entered
into occupancy of the Premises; the amount of minimum monthly rental and the
date through which such rental has been paid; and certifying: that this Lease
is in full force and effect and has not been assigned, modified, supplemented
or amended in any way (or specifying the date of the agreement so affecting
this Lease); that this Lease represents the entire agreement between the
parties as to this leasing; whether all conditions under this Lease to be
performed by Landlord have been satisfied; whether all required contributions
by Landlord to Tenant on account of Tenant's improvements have been received;
whether on this date there are existing defenses or offsets which the Tenant
has against the enforcement of this Lease by Landlord, and whether more than
one month's rental has been paid in advance. It is intended that any such
statement delivered pursuant to this paragraph may be relied upon by a
prospective purchaser of Landlord's interest or a mortgage of Landlord's
interest or assignee of any mortgage upon Landlord's interest in the
Building. If Tenant shall fail to respond within 10 days of receipt by Tenant
of a written request by Landlord as herein provided, Tenant shall be deemed
to have given such certificate as above provided without modification and
shall be deemed to have admitted the accuracy of any information supplied by
Landlord to a prospective purchaser or mortgagee, that this Lease is in full
force and effect, that there are no uncured defaults in Landlord's
performance, that the security deposit is as stated in this Lease, and that
not more than one month's rental has been paid in advance.
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21. ATTORNEY'S FEES
(a) PAYMENT TO PREVAILING PARTY. If either party shall bring an action
or proceeding (including, without limitation, any cross-complaint,
counterclaim or third party claim) against any other party by reason of the
breach or alleged violation of any covenant, term or obligation hereof, or
for the enforcement of any provision hereof, or to interpret, or otherwise
arising out of this Lease, the Prevailing Party in such action or proceeding
shall be entitled to is costs and expenses of suit, including but not limited
to reasonable attorneys' fees, which shall be payable whether or not such
action is prosecuted to judgment. "Prevailing Party" within the meaning of
this Section shall include, without limitation, a party who dismisses an
action for recovery hereunder in exchange for payment of the sums allegedly
due, performance of covenants allegedly breached or consideration
substantially equal to the relief sought in the action.
(b) ATTORNEYS' FEES IN THIRD PARTY LITIGATION. If either party is
required to initiate or defend any action or proceeding with a third party
(including, without limitation, any cross-complaint, counterclaim or third
party claim) because of the other party's breach of this Lease, or otherwise
arising out of this Lease, and such party is the Prevailing Party in such
action or proceeding, then the party so initiating or defending shall be
entitled to reasonable attorneys' fees from the other party.
(c) SCOPE OF FEES. Attorneys' fees under this Section shall include
attorneys' fees on any appeal, and, in addition, a party entitled to
attorneys' fees shall be entitled to all other reasonable costs and expenses
occurred in connection with such action.
22. LATE CHARGES
Tenant acknowledges that a late payment of rent or other sums due hereunder
will cause Landlord to incur costs not contemplated by this Lease, the exact
amount of which is difficult to ascertain. Such costs may include, but not be
limited to, processing and accounting charges, and penalties imposed by terms
of any contracts, mortgages or deeds of trust covering the Building.
Therefore, in the event Tenant should fail to pay any installment of rent or
any sum due hereunder for five (5) days after such amount is due, then Tenant
shall pay Landlord as additional rent, a late charge equal to five percent
(5%) of the amount owing. Notwithstanding the above, nothing contained in
this Section shall be deemed to preclude Landlord from exercising any other
right or remedy Landlord may have under this Lease in law or equity, in
addition to or in lieu of the above late charges.
23. NOTICES
All bills, statements, notices or communications which Landlord may desire or
be required to give to Tenant shall be deemed sufficiently given or rendered
if in writing and either delivered to Tenant personally or sent by
registered or certified mail, return receipt requested, addressed to Tenant
at the Building (Attention: President), all such notices being effective upon
delivery, or three (3) business days after mailing. Any notice by Tenant
shall be sent by registered or certified mail, return receipt requested,
addressed to Landlord, or personally delivered, at the address where the last
previous rental hereunder was payable or in the case of subsequent change
upon notice given, to the latest address furnished.
24. HOLDING OVER
Should Tenant continue to occupy the Premises after expiration or termination
of the Initial Term or any renewal or renewals thereof, or after a forfeiture
should occur, such tenancy shall be from month-to-month at a monthly rent
equal to twice the rent paid for the last month of the term of this Lease and
all other charges due hereunder for each month or any part thereof of any
such holdover period. In the event of any unauthorized holding over by
Tenant, Tenant shall indemnify Landlord against all claims for damages by any
other tenant to whom Landlord may have leased all or any part of the Premises
covered hereby effective upon termination of this Lease.
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25. CONSTRUCTION OF IMPROVEMENTS
Landlord will contribute up to $5.00 per useable square foot (the
"Allowance") toward the cost of the tenant improvements set forth in the
Scope of Work (Exhibit "C-2"), the Space Plan (Exhibit "C-1") and any related
working drawings (the "Improvements"). Landlord shall have no additional
responsibility or obligation to pay any amounts in excess of said $5.00 per
useable square foot. Any costs or expenses incurred by Tenant in excess of
said figure shall be the sole and exclusive responsibility of Tenant, payable
in accordance with a progress payment schedule to be mutually agreed upon by
Landlord and Tenant. All construction progress payments by Tenant, if any,
must be timely made in order for construction work to continue on schedule.
After execution of the Lease, Landlord shall enter into a construction
contract with a mutually agreed upon contractor as general contractor, for
the construction of said Improvements, or any portion thereof as mutually
agreed upon by Landlord and Tenant, in accordance with the Work Letter
Agreement and the Scope of Work attached as Exhibit "C" and Exhibit "C-2";
Landlord shall thereafter monitor the completion of such work.
Tenant shall appoint in writing its designated representative to act on
its behalf and represent its interest with respect to Tenant's right to
review all bids, costs, prices, change orders, etc. No consent, authorization
or other action by Tenant with respect to matters set forth in Section 25
shall bind Tenant unless in writing and signed by the aforementioned
representative.
Only those improvements described in Paragraph A of the Scope of Work,
Exhibit "C-2," will be constructed prior to the Commencement Date. All
improvements described in Paragraph B of the Scope of Work, Exhibit "C-2,"
not constructed as of the Commencement Date may, at Tenant's option, be
constructed at a time to be mutually agreed upon by Landlord and Tenant under
the same terms and conditions as set forth in this Section 25; provided, the
Allowance is one lump sum available to Tenant for work described under both
Paragraphs A and B of the Scope of Work, Exhibit "C-2."
In the event the total costs and expenses of the improvements do not equal or
exceed the Allowance contributed by Landlord, and Tenant elects to lease the
Option Space or First Right Space (under Subsections 1.3 or 1.4,
respectively) at any time during the Initial Term, Tenant may utilize any
remaining portion of the Allowance for tenant improvement work in the Option
Space. The remainder of the Allowance, if there exists a remainder under this
Section 25, shall be in addition to whatever other allowance is available to
Tenant under Subsections 1.3 or 1.4 herein.
Landlord's collection rights to all amounts due under Section 25 shall be
deemed the same as for additional rent under the Lease.
At Landlord's sole cost, Landlord shall replace the light bulbs in the
Premises, as necessary, to provide uniform and comfortable light throughout
the Premises prior to the Commencement Date.
At Landlord's sole cost, Landlord shall be responsible for the cost of
seismic upgrades to the Premises, if required. Landlord shall also be
responsible for the cost of all work identified in Exhibit "C-2" as
Landlord's Work-Phase I (20 - 22) and Landlord's Work-Phase II (36 and 37).
Legal title to all such improvements (including any improvements paid for by
Tenant) shall immediately vest in Landlord upon substantial completion
thereof.
25A. CONSTRUCTION OF FUTURE IMPROVEMENTS.
This Section 25A shall be effective following substantial completion of all
work described in Section 25 above.
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(a) APPROVAL PROCESS.
(i) INTERIOR FINISHES UNDER $25,000.00. Tenant may make or cause
to be made interior finish work (alterations, additions or improvements) to
the Premises including paint, carpet, floor, wall and window coverings
without the prior written approval of Landlord when such alterations,
additions or improvements cost under Twenty-Five Thousand Dollars
($25,000.00). All contractors shall be licensed and bonded and approved, in
advance of any work, by Landlord. All contractors shall provide Landlord with
a certificate of insurance complying with Landlord's insurance requirements
prior to commencement of any work. Tenant shall notify Landlord at least ten
(10) business days in advance of such work to ensure proper coordination of
work in the Building and Premises.
(ii) INTERIOR FINISHES OVER $25,000.00 OR STRUCTURAL WORK. Tenant
may make or cause to be made interior finish work (alterations, additions or
improvements) to the Premises costing in excess of Twenty-Five Thousand
Dollars ($25,000.00) or structural interior alterations (structural interior
alterations include but are not limited to alterations involving the Building
electrical, mechanical, plumbing, fire safety, life or other Building
systems), with the prior written approval of Landlord. All contractors shall
be licensed and bonded and approved, in advance of any work, by Landlord.
Tenant shall provide Landlord with written notice of its intent to make
changes at least thirty (30) days prior to the start of any proposed work.
Notice shall include detailed information concerning the following items:
(A) General description of the changes to be made
including the description of any demolition work.
(B) List of proposed licensed and bonded contractors to
do the work (Tenant is required to select from
Landlord's third-party contractors for any
electrical, mechanical, fire or life safety systems
work); all contractors shall provide Landlord with a
certificate of insurance complying with Landlord's
insurance requirements prior to commencement of any
work.
(C) Estimate of the cost of work;
(D) Intended work schedule including duration and
indicating whether the work will be accomplished
during "normal Building hours" or on an off-hours
basis; and
(E) Plans and specifications for the work, including all
architectural, plumbing, mechanical, electrical,
cabling, fire alarm and sprinkler (unless work
involves, e.g., decorating, floorings, wall
coverings, carpeting, painting, where plans and
specifications are not applicable).
(b) WORK AT TENANT'S RISK. Tenant shall complete any work done
pursuant to Subsection 25A(a) at Tenant's sole risk, cost and expense, and
shall keep the Premises, Building and Real Property free and clear of liens
of any kind. If any such liens are filed, Tenant shall have thirty (30) days
(or ten (10) days if Landlord is in the process of refinancing) from the
receipt of notice from Landlord informing Tenant of such filing to either
remove such liens or to provide a bond (or other security acceptable to
Landlord and its lender) in the amount of 150% of the lien claim (or a
greater amount, if so required by Landlord's lender) indemnifying Landlord as
security for the removal or certification thereof. Tenant covenants and
agrees that all work done shall comply with the requirements of all
governmental agencies, offices and boards having jurisdiction over the
Premises. Further, Tenant shall provide to Landlord, within thirty (30) days
of completion of any work, copies of all as-builts and plans and
specifications (including all
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cabling and electrical plans), as applicable. Tenant agrees to hold harmless
and indemnify Landlord in the event of any breach of Tenant's obligations.
(c) TITLE TO PROPERTY. Landlord shall notify Tenant prior to the
commencement of any improvements under Section 25A if Tenant will be required
to remove such additions, alterations or improvements at the end of the Lease
term and restore the Premises to the same condition it was in prior to such
installation. Notwithstanding the foregoing sentence, Tenant shall be
obligated to remove, at Tenant's cost, all cabling installed by or on behalf
of Tenant within the Premises, and to restore the Premises to its original
condition in connection with such removal. At the expiration or earlier
termination of this Lease, all alterations, additions or improvements made by
Tenant after the Commencement Date shall, at Tenant's option (unless
otherwise required by Landlord pursuant to the previous sentence,) either be
removed and the Premises returned to their original configuration (normal wear
and tear and damage due to fire or other casualty excepted), or shall become
the property of Landlord, free and clear of liens, claims and encumbrances,
to remain upon and be surrendered with the Premises. Notwithstanding anything
to the contrary herein, all movable partitions, business and trade fixtures,
machinery and equipment, communications equipment and office equipment
affixed to or located within the Premises, which can be removed without
damage to the Building, shall remain the property of Tenant; provided, Tenant
shall promptly repair any damage to the Premises and building upon their
removal. Furniture, furnishings and other articles of personal property owned
by Tenant and located in the Premises shall be and remain the property of
Tenant and may be removed by Tenant at any time during the Initial Term and
any extensions thereof.
Legal title to all such Improvements (including any improvements paid for by
Tenant) shall immediately vest in Landlord upon substantial completion
thereof.
26. RENT TAX
If during the term of this Lease Agreement, any tax be imposed upon the
privilege of renting the space leased hereunder or upon the amount of rentals
collected therefore, Tenant will pay as additional Rent each month a sum
equal to such tax or charge that is so imposed, but nothing herein shall be
taken to require Tenant to pay any income tax imposed upon Landlord.
27. PRIOR AGREEMENT, AMENDMENTS
Neither party hereto has made any representations or promises except as
contained herein or in some further writing signed by the party making such
representation or promises. No agreement hereinafter made shall be effective
to change, modify, discharge or effect an abandonment of this Lease, in
whole or in part, unless such agreement is in writing and signed by or on
behalf of the party against whom enforcement of the charge, modification,
discharge or abandonment is sought.
28. PERSONAL PROPERTY TAXES
Tenant shall pay, or cause to be paid, before delinquency, any and all taxes
levied or assessed which become payable during the term hereof upon all
Tenant's leasehold improvements, equipment, furniture, fixtures and personal
property located in the Premises; except that which has been paid for by
Landlord and is standard in the building. In the event any of the Tenant's
leasehold improvements, equipment, furniture, fixtures and personal property
shall be assessed and taxed with the Building, tenant shall pay to Landlord
its share of such taxes within ten (10) days after delivery to Tenant by
Landlord of a statement in writing setting forth the amount of such taxes
applicable to Tenant's property.
29. SUCCESSORS
All of the covenants, agreements, terms and conditions contained in this
Lease shall apply to and be binding upon Landlord and Tenant and their
respective heirs, executors, administrators, legal
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representatives, successors and assigns and upon any person or persons coming
into ownership or possession of any interest in the Premises by operation of
law or otherwise.
30. RIGHT TO PERFORM
If Tenant shall fail to pay any sum of money, other than Basic Rent and
additional rent required to be paid by it hereunder, or shall fail to perform
hereunder, and such failure shall continue for ten (10) days after notice
thereof by Landlord, Landlord may, but shall not be obligated so to do, and
without waiving or releasing Tenant from any obligations of Tenant, make any
such payment or perform any such other act on Tenant's part to be made or
performed as provided in this Lease. Landlord shall have (in addition to any
other right or remedy of Landlord) the same rights and remedies in the event
of nonpayment of sums due under this Section as in the case of default by
Tenant in the payment of rent.
31. FORCE MAJEURE
Whenever performance is required of either party hereunder, that party shall
use all due diligence to perform and shall take all necessary measures in
good faith to perform; provided, however, that if completion of performance
shall be delayed at any time by reason of acts of God, war, civil commotion,
riots, strikes, picketing, or other labor disputes, or damage to work in
progress by reason of fire or other casualty, or cause beyond the reasonable
control of said party (financial inability or negligence excepted), then the
time for performance as herein specified shall be appropriately extended by
the amount of the delay actually so caused.
32. LIMITATION ON LIABILITY
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that, in the event of any actual or
alleged failure, breach or default hereunder by Landlord:
(a) The sole and exclusive remedy shall be against Landlord's interest
in the Building and Real Property;
(b) No general or limited partner of Landlord shall be sued or named as
a party in any suit or action (except as may be necessary to secure
jurisdiction of the partnership);
(c) No service or process shall be made against any general or limited
partner of Landlord (except as may be necessary to secure jurisdiction of the
partnership);
(d) No general or limited partner of Landlord shall be required to
answer or otherwise plead to any service or process;
(e) No judgment will be taken against any general or limited partner of
Landlord;
(f) Any judgment taken against any general or limited partner of
Landlord may be vacated and set aside at any time nunc pro tunc;
(g) No writ of execution will ever be levied against the asset of any
general or limited partner of Landlord; and
(h) These covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
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33. MODIFICATION BY LENDER
If, in connection with obtaining construction, interim or permanent financing
for the Building the lender shall request reasonable modification of this
Lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such
modification(s) do not increase any obligation of Tenant hereunder or
materially and/or adversely affect the leasehold interest hereby created or
Tenant's rights hereunder.
34. MISCELLANEOUS
34.01 DEFINITION OF "TENANT". The word "Tenant", wherever used in this
Lease, shall be construed to mean tenants in all cases where there is more
than one tenant, and the necessary grammatical changes required to make the
provisions hereof apply to corporations, partnerships or individuals, men or
women, shall in all cases be assumed as though in each case fully expressed.
Each provision hereof shall extend to and shall, as the case may require,
obligate or inure to the benefit of Landlord and Tenant and their respective
agents and employees.
34.02 BROKERAGE COMMISSIONS. Tenant represents and warrants to
Landlord that it has not engaged any broker, finder or other person who would
be entitled to any commission or fees (except Dale Behar of Behar Company
Commercial Real Estate Services, collectively referred to as "Broker") in
respect of the negotiation, execution or delivery of this Lease and shall
indemnify and hold harmless Landlord against any loss, cost, liability or
expense, including attorneys' fees, incurred by Landlord as a result of any
claim asserted by any broker, finder or other person other than Broker on the
basis of any arrangement or agreements made or alleged to have been made by
or on behalf of Tenant. The provisions of this Subsection shall not apply to
brokers with whom Landlord has an express written brokerage agreement.
Landlord agrees to pay all commissions or fees payable to Broker, pursuant
to a separate agreement.
34.03 DEFINITION OF "LANDLORD". The term "Landlord", as used in this
Lease, so far as covenants or obligations on the part of Landlord are
concerned, shall be limited to mean and include only the owner or owners, at
the time in question, of the fee title of the Premises or the lessees under
any ground lease, if any. In the event of any transfer, assignment or other
conveyance or transfers of any such title, and provided the Initial Deposit
or Security Deposit, whichever is applicable, subject to any Landlord right
of offset under this Lease, is transferred to the grantee, Landlord herein
named (and in case of any subsequent transfers or conveyances, the then
grantor) shall be automatically freed and relieved from and after the date of
such transfer, assignment or conveyance of all liability as respects the
performance of any covenants or obligations on the part of Landlord contained
in this Lease thereafter to be performed. Without further agreement, the
transferee of such title shall be deemed to have assumed and agreed to
observe and perform any and all obligations of Landlord hereunder, during its
ownership of the Premises. Landlord may transfer its interest in the
Premises without the consent of the Tenant and such transfer or subsequent
transfer shall not be deemed a violation on Landlord's part of any of the
terms and conditions of this Lease.
34.04 CAPTIONS. The captions of the paragraphs in this Lease are
inserted and included solely for convenience and shall never be considered or
given any effect in construing or interpreting the provisions hereof if any
question of intent should arise.
34.05 WAIVERS. The waiver by Landlord of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
any subsequent breach of the same or any other term, covenant or condition
herein contained, nor shall any custom or practice which may grow up between
the parties in the administration of the terms hereof be deemed a waiver of
or in any way affect the right of Landlord to insist upon the performance by
Tenant in strict accordance with said terms. The subsequent acceptance of
rent hereunder by Landlord shall not be deemed to be a waiver of any
preceding breach by
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Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of
such rent.
34.06 PARKING. Landlord shall provide Tenant with three (3) unreserved
parking stalls per 1,000 square feet, per local code requirements, free of
charge during the Initial Term and any extended term. In addition, Landlord
shall provide Tenant four (4) reserved parking stalls at no charge, to be
mutually agreed upon by Landlord and Tenant and subject to all applicable
governmental codes, near the front Building entrance. Landlord does not have
an obligation to monitor the use of the reserved stall(s), but Landlord will
provide appropriate signage for the reserved stalls.
34.07 EXAMINATION OF LEASE. Submission of this instrument for
examination or signature by Tenant does not constitute a reservation of or
option of Lease, and it is not effective as a Lease or otherwise until
execution by and delivery to both Landlord and Tenant.
34.08 TIME. Time is of the essence of this Lease with respect to the
performance of every provision of this Lease in which time or performance is
a factor.
34.09 SEVERABILITY. Any provision of this Lease which shall prove to
be invalid, void or illegal in no way affects, impairs, or invalidates any
other provision hereof, and such other provisions shall remain in full force
and effect.
34.10 RECORDING. Landlord hereby consents to Tenant recording a short
form memorandum of this Lease in the form attached as Exhibit "H."
34.11 CONSENTS. Unless a section of this Lease specifically provides
to the contrary, whenever the consent or approval of either party is required
hereunder such consent shall not be unreasonably withheld.
34.12 LIGHT AND AIR. This Lease does not grant any right of access to
light, air, or view, over the property, and Landlord shall not be liable for
any diminution of such light, air, or view by an adjacent structure and/or
vegetation. Tenant agrees and covenants that no diminution of light, air or
view by any structure which may hereafter be erected shall entitle Tenant to
any reduction in Basic or Additional Rent under this Lease, result in any
liability or obligation of Landlord to Tenant, or in any way affect this
Lease or Tenant's obligations hereunder.
34.13 NAME. Tenant shall not, without the written consent of Landlord,
use the name of the Building or the Project for any purpose other than as the
address of the business to be conducted by Tenant in the Premises, and in no
event shall Tenant acquire any rights in or to such names.
34.14 CONSTRUCTION. This Lease shall be construed in accordance with
the laws of the State of Washington.
34.15 MERGER. This Lease supersedes any and all other agreements,
either oral or in writing between parties hereto with respect to the Premises
and contains all of the covenants, agreements and other obligations between
the parties with respect to the Premises.
34.16 ACCORD AND SATISFACTION. No payment by Tenant or receipt by
Landlord of a a lesser amount than the rent payment herein stipulated shall be
deemed to be other than on account of the rent, 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's right to recover
the balance of such rent or pursue any other remedy provided in this Lease,
shall be unaffected by said payment, endorsement or statement. Landlord
reserves the right, in the absence of instructions to the contrary, to apply
payment received from Tenant in whatever manner Landlord chooses.
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34.17 RULE AGAINST PERPETUITIES. If this Lease has not been previously
terminated pursuant to the terms and provisions contained herein, and the term
of this Lease and/or the accrual of rent hereunder shall not have commenced
within two (2) years from the date appearing on Page 1 of this Lease, then
and in that event this Lease shall thereupon become null and void and have no
further force and effect whatsoever in law or equity.
34.18 AUTHORITY.
(a) TENANT. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants
that she/he is duly authorized to execute and deliver this Lease on behalf of
said corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation in accordance with the Bylaws of said
corporation, and that this Lease is binding upon said corporation in
accordance with its terms. Concurrently with the execution of this Lease,
Tenant shall deliver to Landlord a certified copy of a resolution of the
Board of Directors of said corporation authorizing the execution of this
Lease. If Tenant is a partnership, each individual executing this Lease on
behalf of said partnership represents and warrants that she/he is duly
authorized to execute and deliver this Lease on behalf of said partnership
and that this Lease is binding upon said partnership in accordance with its
terms, and concurrently with the execution of this Lease, Tenant shall
deliver to Landlord such evidence of authorization as Landlord may require.
If Tenant is a marital community, or a member of a marital community, both
members of the marital community shall execute this Lease, or concurrently
with execution off this Lease, Tenant shall deliver to Landlord such evidence
as Landlord may require that the member signing this Lease has the authority
to sign on behalf of the marital community or, with Landlord's prior written
consent, that Tenant's interest in this Lease is to be the separate estate of
the signing member.
(b) LANDLORD. Landlord is a general partnership. The
individual executing on behalf of Landlord represents and warrants that
she/he is duly authorized to execute and deliver this Lease on behalf of said
partnership and that this Lease is binding upon said partnership in
accordance with the terms of the partnership agreement.
34.19 EXHIBITS. All exhibits attached to this Lease are incorporated
herein by reference.
34.20 PARTIAL INVALIDITY. If any term, covenant or condition of this
Lease or the application of such term, covenant or condition to persons or
circumstances other than those as to which it is held invalid or
unenforceable, the Lease shall not be affected thereby and each term,
covenant or condition of this Lease shall be valid and be enforceable to the
fullest extent of the law.
35. HAZARDOUS MATERIALS
a. "Hazardous Material" means any substance, waste or material which
is deemed hazardous, toxic, a pollutant or a contaminate, under any federal,
state, or local statute, law, ordinance, rule regulation, or judicial or
administrative order or decision, now or hereafter in effect.
b. Tenant shall not cause of permit any Hazardous Material to be
brought upon, kept or used in or about the Premises, Building and/or Real
Property by Tenant, its agents, employees, contractors, or invitees without
the prior written consent of Landlord. In order to obtain Landlord's
consent, Tenant must demonstrate to Landlord's reasonable satisfaction that
such Hazardous Material is necessary or useful to Tenant's business and will
be used, kept, and stored in a manner that complies with all laws regulating
any such Hazardous Material so brought upon or used or kept in or about the
Premises. Provided, Tenant shall not be in violation of the foregoing by its
use and storage of lubricants, cleaners and standard office products,
otherwise defined as hazardous, which products are used by Tenant with due
care and in accordance with the instructions of the product manufacturer, in
the reasonable and prudent conduct of Tenant's business on the Premises,
Building and/or Real Property.
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36. RIDERS
36.1 SIGNAGE. Tenant may affix, at its sole cost and expense, one (1)
sign on the Building. The exterior sign, including design, plans,
specifications, location and manner of attachment to the Building, shall be
subject to Landlord review and approval and shall comply with all applicable
codes and governmental requirements. The exterior Building sign will employ
channel illuminated letters. Tenant shall be solely responsible for all
costs and expenses relating to the sign, including but not limited to the
installation, maintenance, electrical consumption and removal of Tenant's
Building signage, whether during the term of the Lease or upon an earlier
termination of the Lease or Tenant's vacation of its Premises (for whatever
reason). Tenant shall be responsible for all costs of Building restoration
with respect to the sign as part of its obligation hereunder.
36.2 SECURITY SYSTEM. Tenant, at its sole cost and expense, may
install a security system within its Premises. The security system,
including design, plans, specifications, location and manner of installation,
shall be subject to Landlord review and approval and shall comply with all
applicable codes and governmental requirements. Notwithstanding the
foregoing, Tenant may elect to use the security system currently existing in
the Premises, at no additional charge, and Landlord will not remove such
system unless and until directed by Tenant. Tenant shall be solely
responsible for all costs and expenses relating to the security system,
including but not limited to the installation, maintenance, electrical
consumption and removal of the security system from the Building, whether
during the term of the Lease or upon an earlier termination of the Lease or
Tenant's vacation of its Premises (for whatever reason). Tenant shall be
responsible for all costs of Building restoration with respect to the
security system as part of its obligation hereunder. However, if Tenant
utilizes the security system in place at the date of Lease execution, Tenant
shall not be obligated to remove the system upon Lease termination.
Clauses, plats and riders, if any, signed by Landlord or Tenant and affixed
to this Lease are a part hereof.
IN WITNESS WHEREOF, the respective parties hereto have executed this Lease or
caused this Lease to be executed by their duly authorized representatives the
day and year first hereon written.
LANDLORD: TENANT:
Factoria Heights, Coinstar, Inc.,
a Washington general partnership a Delaware corporation
By: /s/ Cheryl SXXXXXXXXXX By: /s/ Warren M. Gordon
---------------------------- -----------------------------
as attorney in fact for Name: WARREN M. GORDON
Basil D. Vyzis Its: CHIEF FINANCIAL OFFICER
Managing General Partner ----------------------------
3605 132nd Avenue S.E., Suite 300 13231 SE 36th Street, Suite 200
Bellevue, WA 98006-1323 Bellevue, WA 98006
(206) 643-4300
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****TENANT'S ACKNOWLEDGMENT****
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 1st day of June, 1994, before me the undersigned, a Notary
Public in and for the State of Washington, duly commissioned and sworn,
personally appeared Warren M. Gordon to me known to be the Chief Financial
Officer and __________________ to me known to be the ____________________ of
Coinstar, Inc., the corporation that executed the within and foregoing
instrument, and acknowledged the same instrument to be the free and voluntary
act and deed of said corporation for the uses and purposes therein
mentioned, and on oath stated that he is authorized to execute said
instrument.
IN WITNESS WHEREOF my hand and official seal hereto affixed the day and
year in this instrument above written.
/s/ Sheila J. Gill
---------------------------------------
NOTARY PUBLIC in and for the State of
[STAMP] Washington, residing at Kirkland
My commission expires: 5-25-96
Type or Print Name as signed:
Sheila J. Gill
---------------------------------------
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STATE OF WASHINGTON )
)
COUNTY OF KING )
On this 1st day of June, 1994, before me, the undersigned, a Notary
Public in and for the State of Washington, duly commissioned and qualified,
personally appeared CHERYL A. SMITH to me known to be the individual
described in and who executed the within and foregoing instrument as
Attorney-in-Fact for BASIL D. VYZIS to me known to be the individual who
executed the within and foregoing instrument as Managing General Partner of
Factoria Heights, a Washington general partnership, and acknowledged to me
that she signed and sealed the same as her free and voluntary act and deed as
Attorney-in-Fact for said principal for the uses and purposes therein
mentioned, and on oath stated that the Power of Attorney authorizing the
execution of this instrument has not been revoked and that said principal is
now living and is not insane.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed by official
seal, the day and year first above written.
Sheila J. Gill
---------------------------------------
Notary Public in and for the State of
Washington, residing at Kirkland
---------------
My commission expires: 5-25-96
---------------
[SEAL]
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
This exhibit is a continuation of that certain Lease dated June 1, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement.
LEGAL DESCRIPTION: NEWPORT HEIGHTS
Lot B of Short Plat No. 83-24, according to the Short Plat Survey recorded
under King County Recording No. 8407179002;
Situate in the City of Bellevue, County of King, State of Washington.
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EXHIBIT "A-1"
PREMISES
This exhibit is a continuation of that certain Lease dated June 1, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement.
[FLOOR PLAN]
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EXHIBIT "A-2"
OPTION SPACE
This exhibit is a continuation of that certain Lease dated June 1, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement.
[FLOOR PLAN]
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EXHIBIT "A-3"
FIRST RIGHT SPACE
This exhibit is a continuation of that certain Lease dated May __, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement.
[FLOOR PLAN]
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EXHIBIT "B"
BUILDING AREA
This exhibit is a continuation of that certain Lease dated June 1, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement.
1. The term "USEABLE AREA" when used in the Lease shall mean:
The entire area included within the Premises covered by such Lease,
being the area bounded by the inside surface of any exterior glass walls (or
the inside surface of the permanent exterior wall where there is no glass)
of the Building bounding such Premises, the exterior of all walls separating
such Premises from any public corridors or other public areas on such floor
and the centerline of all walls separating such Premises from other areas
leased or to be leased to other tenants on such floor.
2. The term "RENTABLE AREA" when used in the Lease shall mean:
(a) As to each floor of the Building on which the entire space
rentable to tenants is or will be leased to one tenant (hereinafter referred
to as "Single Tenant Floor") Rentable Area shall be the entire area bounded
by the inside surface of the exterior glass wall (of the inside surface of
the permanent exterior wall where there is no glass) on such floor, including
all areas used for elevator lobbies, corridors, special stairways, elevators,
restrooms, mechanical rooms, electrical rooms and telephone closets without
deduction for columns and other structural portions of the Building or
vertical penetrations that are included for the special use of Tenant but
excluding the area contained within the exterior walls of the Building
stairs, fire towers, vertical ducts, elevator shafts, flues, vents, stacks
and pipe shafts.
(b) As to each floor of the Building on which space is or will be
leased to more than one tenant (hereinafter referred to as "Multi-Tenant
Floor"), Rentable Area attributable to each such Lease shall be the total of:
(i) Usable Area as defined above in paragraph 1, and (ii) A pro rata portion
of the area covered by the lobbies, corridors, restrooms, mechanical rooms,
electrical rooms and telephone closets in the Building.
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EXHIBIT "C"
WORK LETTER AGREEMENT
This exhibit is a continuation of that certain Lease dated June 1, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement.
This Work Letter Agreement is entered into upon the date this Lease is fully
executed by and between Landlord and Tenant.
RECITALS
A. Concurrently with the execution of this Work Letter Agreement, Landlord
and Tenant have entered into a lease (the "Lease") covering certain premises
(the "Premises") more particularly described in the Lease.
B. In order to induce Tenant to enter into the Lease (which is hereby
incorporated by reference to the extent that the provisions of this Work
Letter Agreement may apply thereto) and in consideration of the mutual
covenants herein after contained, Landlord and Tenant hereby agree:
1. COMPLETION SCHEDULE. Within five (5) days after the date of final
execution of the Lease, that Tenant will furnish to Landlord for Landlord's
use, its finalized requirements for partitions, electric, telephone and all
other requirements. Thereafter, Landlord shall deliver to Tenant, for
Tenant's timely review and approval, a schedule (the "Work Schedule") setting
forth a time table for planning and completion of the installation of the
Improvements, or any portion thereof as mutually agreed upon by Landlord and
Tenant, to be constructed in the Premises. The Work Schedule shall set forth
each of the various items of work to be done by or approvals to be given by
Landlord and Tenant in connection with the completion of the Improvements.
Upon approval by both Landlord and Tenant, the Work Schedule shall become the
basis for completing the Improvement work. If Tenant shall fail to approve
the Work Schedule, as it may be modified after discussions between Landlord
and Tenant, within ten (10) working days after the date such schedule is
submitted to Tenant, then the commencement of the term (Commencement Date),
and the payment of Basic Rent and all other charges and/or expenses required
by the terms and conditions of this Lease shall be ACCELERATED by the number
of days of such delay. A Preliminary Work Schedule is set forth in Paragraph
7 of this Work Letter Agreement.
2. PLANS AND SPECIFICATIONS FOR THE PREMISES.
(a) Landlord shall, at its sole cost and expense (and not as part
of the Allowance described in Paragraph 4 below or Section 25 of the Lease),
provide Tenant with one space plan and minor revisions. In addition, Landlord
shall provide two sets of copies of construction documents, provided by
Landlord's architect. Any additional plans or revisions shall be at Tenant's
sole cost and expense.
(b) Immediately after the execution of the Lease Tenant agrees to
meet and cooperate with Landlord's planners and engineers, who shall prepare
detailed interior Improvement drawings for the Premises which shall include,
but not be limited to, locations of doors, partitioning, reflected ceiling,
electrical fixtures, outlets and switches, telephone outlets, plumbing
fixtures, extraordinary floor loads, and other special requirements. The
Improvements require use of Building standard construction details and finish
materials. Tenant shall approve such drawings in writing as required by the
Work Schedule described in paragraph 1 above. Tenant may provide a space plan
and/or interior Improvement drawings at its expense prior to approval dates
specified in the Work Schedule. Landlord shall be entitled, in all respects
to rely upon all plans, drawings, and information so supplied.
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(c) After the preparation of the interior Improvement drawings and
after Tenant's written approval thereof, in accordance with the Work
Schedule, Landlord shall cause its space planner to coordinate the
preparation of the final working drawings and specifications. All working
drawings shall be prepared by Landlord's space planner or engineer, which
working drawings shall include as required architectural, mechanical,
electrical and structural engineering drawings. Such working drawings shall
be approved by Landlord and Tenant in accordance with the Work Schedule and
shall thereafter be submitted by Landlord to the appropriate governmental
agency for plan checking and a building permit. Required changes shall be
reviewed with the Tenant and modifications mutually agreed upon. The
Improvement completion schedule, as well as the occupancy date shall be
revised and extended as required to reflect time lost, if any, in the
revision process. Concurrent with the plan checking, Landlord shall prepare a
final pricing schedule for Tenant's approval. After final approval of the
working drawings, no further changes to the Improvement plans may be made
without the prior written approval from both Landlord and Tenant, and then
only after agreement by Tenant to pay any excess costs resulting from changes
requested by Tenant.
(d) All plans and specifications referred to hereinabove are
subject to Landlord's approval, which approval shall not be unreasonably
withheld.
3. CONSTRUCTION OF THE IMPROVEMENTS. After the Improvement plans have
been prepared and approved, and a building permit for the Improvements has
been issued, if necessary, Landlord shall enter into a construction contract
with a mutually agreed upon contractor as general contractor, for the
installation of the Improvements in accordance with the Improvement plans.
Tenant shall pay to Landlord a construction management fee for overhead and
coordination of the Improvements equal to the lesser of $1,500.00 or a rate
of $80.00 per hour for Landlord's construction management services. Landlord
shall monitor the completion of such work and shall use its best efforts to
secure completion of the work in accordance with the Work Schedule. Tenant's
designated representative under Section 25 of the Lease shall have the right
to review all bids, costs, prices, change orders, etc. prior to any contracts
being let.
4. IMPROVEMENT WORK AT LANDLORD'S COST & EXPENSE. Landlord agrees, at
its expense, to furnish and install the Improvement work limited to the $5.00
per useable square foot Allowance in the Lease, including costs associated
with: (i) actual cost of constructing the Improvements, (ii) governmental
fees and permits; and (iii) taxes.
5. ADDITIONAL WORK AT TENANT'S COST AND EXPENSE. If Tenant requests and
Landlord approves additional tenant improvement work outside the scope of the
Improvements ("Additional Improvements), Landlord shall cause Additional
Improvements to be installed by Landlord's Contractor; however, it is hereby
agreed that any such work (including (i) construction documents; (ii) actual
cost of constructing the Additional Improvements; (iii) all required fees and
permits; and (iv) all applicable taxes) will be done at Tenant's sole cost
and expense. Prior to commencing any such additional work, Landlord shall
submit to Tenant a written estimate of the cost thereof. If Tenant approves
such estimate, it shall notify Landlord in writing within 7 days and
Landlord's Contractor shall process such work. If Tenant shall fail to
approve any such estimate in writing within 7 days after submission thereof,
such failure shall be deemed a disapproval thereof, and Landlord's Contractor
shall not proceed with such work or the Improvement work affected thereby. It
is understood that Tenant shall thereupon be liable for the delay and
increased cost, if any, in completing the affected additional work. Tenant
shall also be responsible for the design, function and maintenance of such
Additional Improvements, whether or not installed by Landlord at Tenant's
request. Tenant agrees to pay Landlord for any work beyond the scope of the
Improvements requested by Tenant within 5 days of receipt of written notice
from Landlord. Tenant shall pay to Landlord a construction management fee
(equal to 5% of the total cost of Additional Improvements) for overhead and
coordination of the Additional Improvements.
6. COMPLETION AND RENTAL COMMENCEMENT DATE. It is agreed that
notwithstanding the date provided in the Lease for the commencement of the
term thereof, such term shall not commence until the
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substantial completion of all Tenant Improvements as hereinabove defined, and
the termination date shall be extended for a period of time equal to the
period of any such delay in commencement of the term thereof; provided,
however, that if Landlord shall be delayed in substantially completing said
work as a result of (i) Tenant's failure to approve any item or perform any
other obligation in accordance with and by the date specified in the Work
Schedule, (ii) Tenant's request for materials, finishes or installations
other than those readily available; or (iii) Tenant's changes in the Tenant
Improvement plans after their approval by Tenant, then the commencement date
shall be advanced to an earlier date by the number of days of such delay.
7. WORK SCHEDULE. A preliminary work schedule for the completion of
Tenant Improvements is set forth below. This schedule will be finalized in
accordance with Paragraph 1 of this Exhibit. [DATES TO BE PROVIDED WITHIN
FOURTEEN (14) DAYS FOLLOWING LEASE EXECUTION.]
Date/Time Frame Approval
- --------------- --------
________ Space Plan ________
________ Preliminary construction estimate ________
________ Contract documents (plans and specifications) ________
________ Submit building permit application ________
________ Obtain contractor and subcontractor bids ________
________ Prepare final budget, select contractor; obtain ________
Tenant approval of budget, if applicable
________ Commence pre-permit demolition, if applicable ________
(and approved by government agency)
________ Obtain building permit ________
________ Commence construction ________
________ Substantial completion ________
________ Certificate of Occupancy from governmental authority ________
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<PAGE>
EXHIBIT "C-1"
SPACE PLAN
This exhibit is a continuation of that certain Lease dated June 1, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement.
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<PAGE>
[FLOOR PLAN]
-39A-
<PAGE>
EXHIBIT "C-2"
SCOPE OF WORK
This exhibit is a continuation of that certain Lease dated June 1, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement.
A. Improvements to be completed prior to the Commencement Date:
PHASE I OF WORK BEFORE MOVE-IN
1. Hardware at conference room
2. CFO - demo wall & patch
3. Copy-fax-printer- demo wall & patch
4. Remove countertop at copy fax
5. Relocate upper cabinets
6. Relocate 1/2 (+\-) countertop to copy fax
7. Relocate cabinets east of reception to copy fax room
8. Demo walls, doors & relites at lab (not 3 gang relite & doors)
9. VCT at workroom and lab
10. Add locks at work room
11. Demo walls and add doors at lab, add locks
12. Paint entire Premises
13. Patch floors
14. Stretch & clean carpet
15. VCT & locks at computer & parts rooms
16. Patch blue carpet
17. Miscellaneous carpet patches
18. Install relite at VPRR if possible
19. Install relite at NSD&VPS if possible
Note: Tenant's vendors for cabling and installation of Tenant's furniture
shall be allowed access in accordance with an agreed work schedule.
LANDLORD'S WORK PHASE I (LANDLORD'S COST)
20. Label visitor parking
21. Paint immediate lobby walls
22. Replace rusted out sinks
B. Improvements to be constructed as soon as possible (but not later than
August 1, 1994) following the Commencement Date:
PHASE II WORK AFTER MOVE-IN
23. Cost to install glass at 2nd floor lobby demising wall
24. Replace glass at reception area - etched- delete Attachmate logo
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<PAGE>
25. Move doors at CEO & conference - add relites at CEO & conference
26. Build wall @ CFO, add door and relite
27. Build CTO office
28. Insulate lab for sound
29. Relocate reception area Wt. board
30. Admin off - fix wallpaper
31. Fix all wall paper DA/CEO/CF
32. Add relite at Admin
33. HVAC - work room & lab - separate zone
34. All electrical work
35. Repair blinds as required
LANDLORD'S WORK PHASE II (LANDLORD'S COST)
36. Demise 1st floor lobby (temporary walls)
37. Demise 2nd Floor Lobby - drywall & door
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<PAGE>
EXHIBIT "D"
Summary of Lease Terms
This exhibit is a continuation of that certain Lease dated June 1, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement. The summary of
Lease terms herein shall not vary the terms, provisions and/or obligations of
the Lease.
Tenant: Project: Suite:
------------------------- ---------------------
- -----------
Rentable Square Footage: Pocket Space: (See Section of
-------- ------------ ----
Lease)
Use of Premises: Guarantor:
------------------------ -----------------------------
Term: Commences: Terminates:
-------------------- --------------------- -----------
Substantial Completion: Rent Commences:
----------------------- ------------------
Free Rent or CAM: CAM Reconciliation Time Limit:
----------------------- ---------
Options(s) to Extend: Notice Req.:
------------------- ---------------------------
Right of First Refusal/Offer: (See Section of
--------------------------- ----
Lease)
Early Termination: Notice/Fee:
------------------------------ --------------------
Building Pro Rata: Base Year: CAM Commences: Type: NNN / S /
------ ------ --------
FS
Expense Stops/Caps/Limitations:
-------------------------------------------------
Security Deposit: No. of Days/Late Fees: Holdover Rate:
----------- ---------
- -------------
TIME PERIOD MONTHLY ANNUALLY P.S.F.
----------- ------- -------- ------
- ------------------------ --------------- -------------- ------------
- ------------------------ --------------- -------------- ------------
- ------------------------ --------------- -------------- ------------
- ------------------------ --------------- -------------- ------------
- ------------------------ --------------- -------------- ------------
OTHER CHARGES:
Storage: Satellite: Parking:
------------------ ------------------ ----------------
Excess Utility: After Hours: Premises:
----------- ---------------- ---------------
Equipment/Furniture:
-------------------------
Signage Installation/Maintenance/Electrical Charges:
-----------------------------
Tenant Contribution to TI's: Cnstn. Mgmt. Fee:
--------------------------- -------
NOTES:
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Tenant Contact: Phone No.: Emergency:
----------------- ----------------- ---------
Billing Contact: Phone No.:
---------------- -----------------
Billing Address: Notices to:
----------------------- ----------------------
----------------------- ----------------------
----------------------- ----------------------
LANDLORD: TENANT:
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<PAGE>
EXHIBIT "E"
BUILDING RULES AND REGULATIONS
This exhibit is a continuation of that certain Lease dated June 1, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement.
1. The sidewalks, entries, passages, court corridors, stairways and
elevators shall not be obstructed by Tenant, its employees or agents, or used
by them for purposes other than ingress and egress to and from Premises.
2. Tenant will notify Landlord of all contractors, contractors'
representatives and installation technicians rendering any service on or to
the Premises for Tenant to Landlord for Landlord's approval and supervision
before performance of any contractual service. This provision shall apply to
all work performed in the Building, including installation of telephones,
telegraph equipment, electrical devices and attachments and installations of
any nature affecting floors, walls woodwork, trim, windows, ceilings, or any
other physical portion of the Building. Such approval, if given, shall in no
way make Landlord a party to any contract between Tenant and any such
contractor, and Landlord shall have no liability therefor. In the event a
contractor is hired by Tenant, the Tenant and the contractor shall execute
Landlord's standard form Hold Harmless Agreement, which indemnifies Landlord,
its agents and invitees from any and all liability in connection with
contractors work.
3. Except as otherwise indicated herein, no signs, advertisement or
notice shall be inscribed, painted or affixed on any part of the inside or
outside of the Building unless of such color, size and style and in such
place upon or in the Building as shall first be designated in writing by
Landlord; there shall be no obligation or duty on Landlord to allow any sign,
advertisement notice to be inscribed, painted or affixed on any part of the
inside or outside of the Building. Signs on doors will be painted for the
Tenant by a sign writer approved by Landlord, the cost of the painting to be
paid by the Tenant. No furniture shall be placed in front of the Building or
in any lobby or corridor without the prior written consent of Landlord.
Landlord shall have the right to remove all other signs and furniture without
notice to Tenant at the expense of Tenant.
4. Landlord's acceptance of any name for listing on the Building
Directory will not be deemed, nor will it substitute for, Landlord's consent,
as required by this Lease, to any sublease, assignment, or other occupancy of
the Premises.
5. Subject to Section 34.06 of the Lease, Tenant shall have the
non-exclusive use in common with Landlord, other tenants, their guests and
invitees, of the automobile parking areas, driveways and footways, subject to
reasonable rules and regulations for the use thereof as prescribed from time
to time by Landlord. Landlord shall have the right to designate parking areas
for the use of the Building tenants and their employees, and the tenants and
their employees shall not park in parking areas not so designated,
specifically including driveways, fire lanes, load/unloading areas,
handicapped zones, walkways and building entrances. Tenant agrees that upon
written notice from Landlord, it will furnish to Landlord, within 5 days from
receipt of such notice, the state automobile license numbers assigned to the
automobiles of the Tenant and its employees. Landlord shall not be liable for
any vehicle of the Tenant or its employees that Landlord shall have towed from
the Premises. Landlord will not be liable for damage to vehicles in the parking
areas or for theft of vehicles, personal property from vehicles, or equipment of
vehicles. Cars parked overnight may be towed, at Tenant's expense, unless
Tenant has prior written permission from Landlord.
6. No Tenant shall do or permit anything to be done in the Premises, or
bring or keep anything therein, which will in any way increase the rate of
casualty insurance on the Building, or on
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<PAGE>
property kept therein, or obstruct or interfere with the rights of other
tenants, or in any way injure or annoy them, or conflict with the laws
relating to fire, or with any regulations of the fire department, or with any
insurance policy upon said buildings or any part thereof, or conflict with
any rules and ordinances of any governmental agency or department.
7. No windows or other openings that reflect or admit light into the
corridors or passageways shall be covered or obstructed by Tenant.
8. No person shall disturb the occupants of the Building by the making
of loud or objectionable noises, or any other unreasonable or offensive
conduct or activity. No dogs or other animals or pets of any kind will be
allowed in the Building.
9. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any damage
resulting to them from misuse, or by the defacing or injury of any part of
the Building, shall be borne by the Tenant who, or whose employees or agents
shall have caused it.
10. No vehicles will be allowed in the Newport Heights Building.
11. Nothing shall be thrown out the windows of the Building or down the
stairways or other passages.
12. Subject to Section 35 of the Lease, Tenant shall not be permitted
to use or to keep in the Building any kerosene, gasoline or any inflammable or
combustible fluids or materials, without the prior written consent of
Landlord.
13. If any Tenant desires, at its cost, telegraphic, telephonic,
security system or other electric connections, Landlord or its agents will
direct the electricians as to where and how the wires may be introduced, and
without such directions, no boring or cutting for wires will be permitted.
14. If Tenant desires, at its cost, shades, draperies, or awnings, they
must be of such shape, color, materials and make as shall be designated by
Landlord. Any outside awning may be prohibited by Landlord. Landlord or its
agents shall have the right to enter the Premises to examine the same or to
make such repairs, alterations or additions as Landlord shall deem necessary
for the safety, preservation or improvement of the Building. Landlord or its
agents may show said Premises and may place on the windows or doors thereof,
a notice "For Rent" for six months prior to the expiration of the Lease.
15. No portion of the Building shall be used for the purpose of lodging
rooms or for any unlawful purposes.
16. All glass, locks and trimmings in or about the doors and windows and
all electric fixtures belonging to the Building shall be kept whole, and
whenever broken by anyone shall be immediately replaced or repaired and put
in order by Tenant under the direction and to the satisfaction of Landlord,
and on removal shall be left whole and in good repair.
17. Landlord reserves the right at any time to take one elevator out of
service for the exclusive use by the Building management in servicing the
Building.
18. All safes or other heavy articles shall be carried up or into the
Premises only at such times and in such manner as shall be prescribed by
Landlord. Landlord shall in all cases have the right to specify the proper
weight and position of any such safe or other heavy article. Any damage done
to the Building by taking in or removing any such equipment or form
overloading any floor in any way shall be the responsibility of the Tenant.
Defacing or injuring in any way any part of the Building by the Tenant, its
agents or employees, shall be paid for by the Tenant.
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<PAGE>
19. Landlord may waive any one or more of these Rules and Regulations
for the benefit of Tenant or any other tenant, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of
Tenant or any other tenant, nor prevent Landlord from thereafter enforcing
any such Rules and Regulations against any or all of the tenants of the
Building.
20. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of Tenant's Lease of its Premises in the
Building.
21. Landlord reserves the right to make such other and reasonable Rules
and Regulations as, in its judgment, may from time to time be needed for
safety and security, for care and cleanliness of the Building and for the
preservation of good order therein. Tenant agrees to abide by all such Rules
and Regulations hereinabove stated and any additional rules and regulations
which are adopted.
22. Tenant shall be responsible for the observance of all of the
foregoing rules by Tenant's employees, agents, contractors, clients,
customers, invitees and guests.
23. If Tenant's use of heating, cooling or convenience power exceeds the
design load parameters of the Building and a service call is requested, then
Tenant is responsible for such service as a direct Tenant cost.
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<PAGE>
EXHIBIT "F"
OPERATING EXPENSES
This exhibit is a continuation of that certain Lease dated June 1, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement.
COMMON AREA OPERATING EXPENSES:
Assessments
Real Estate Taxes
Insurance
Administration Fee
TOTAL ASSES., TAXES & INSURANCE $
Disposal & Refuse
Electricity
Sewer
Water
Storm Water & Drainage
Telephone - Elevator & Other
TOTAL COMMON AREA UTILITIES $
Building and Facilities Management
Property Services Labor Contract
Building & Common Area Repair
Elevator
Security
HVAC Maintenance
HVAC Repair
Janitorial Service
Janitorial Supplies
Interior Plant Service
TOTAL COMMON AREA BLDG./PROPERTY MAINTENANCE $
Landscape Labor Contract
Landscape Materials
Landscaping Irrigation
TOTAL COMMON AREA LANDSCAPING MAINTENANCE $
Fire Protection
Parking Lot Repair & Maintenance
Pest Control
Window Washing
Signage
Miscellaneous
TOTAL OTHER MAINTENANCE/COMMON AREA $
DIRECT TENANT EXPENSES
Disposal & Refuse
Electricity
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<PAGE>
Sewer
Water
TOTAL TENANT UTILITIES $
Building and Facilities Management
Property Services Labor Contract
Building & General Repairs
Electrical Repairs & Maintenance
HVAC Maintenance
HVAC Repair
Janitorial Service
Janitorial Supplies
TOTAL TENANT REPAIRS & MAINTENANCE $
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<PAGE>
EXHIBIT "G"
ENCUMBRANCES RELATED TO RIGHT TO LEASE
This exhibit is a continuation of that certain Lease dated June 1, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement.
Attachmate Corporation has a right of first offer on the Option Space and
First Right Space (under Subsections 1.3 and 1.4 of the Lease) at the time of
Lease execution. Upon receipt of written notice from Landlord that Landlord
has a bona fide offer it wishes to accept, Attachmate Corporation has five
(5) business days to notify Landlord of Attachmate's intention to exercise
its option.
-48-
<PAGE>
EXHIBIT "H"
MEMORANDUM OF LEASE
This exhibit is a continuation of that certain Lease dated June 1, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement.
THIS MEMORANDUM OF LEASE is made and entered into this ____ day of May,
1994, by and between Factoria Heights ("Landlord") and Coinstar, Inc.
("Tenant") and is intended to serve as notice to all interested persons
concerning that certain Lease dated this date, the terms of which including
the following:
1. PREMISES. The Premises, as defined in the Lease, containing
approximately 16,761 rentable square feet, is located in the Newport Heights
Building on real property legally described on the attached Exhibit "A" and
incorporated by this reference. The street address of the Newport Heights
Building is 13231 SE 36th Street, Bellevue, Washington 98006.
2. LEASE TERM. The initial term of this Lease is five (5) years. The
Tenant has the option to extend the Lease term for one term of five (5) years
on the terms set forth in the Lease.
3. ADDITIONAL PROVISIONS. Reference to the Lease should be made for
further provisions and conditions set forth therein. In the event of any
inconsistency between the Lease and this Memorandum of Lease, the terms of
the Lease shall prevail.
LANDLORD: TENANT:
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<PAGE>
EXHIBIT "I"
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
This exhibit is a continuation of that certain Lease dated June 1, 1994,
between Factoria Heights, a Washington general partnership, and Coinstar,
Inc., a Delaware corporation, on real property in King County, Washington,
and by this reference shall become part of that agreement.
[See attached agreement.]
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<PAGE>
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the a-_____ day of _____,
19__, by and between Principal Mutual Life Insurance Company, an Iowa
corporation with its principal office at 711 High Street, Des Moines, Iowa
50392 (hereinafter called "Mortgagee"), b-_____, with its principal office at
c-____ (hereinafter called "Lessor") and d-____, having its pricipal office
at e-____(hereinafter called "Lessee");
WITNESSETH:
WHEREAS, Lessee has by a written lease dated f-____, 19___ (hereinafter
called the "Lease") leased from Lessor all or part of certain real estate
and improvements thereon located in the City of g-______, as more
particularly described in Exhibit A attached hereto (the "Demised
Premises"); and
WHEREAS, Lessor is encumbering the Demised Premises as security for a
loan in the original principal amount of $ h-____from Mortgagee to Lessor (the
"Mortgage"); and
WHEREAS, Lessee, Lessor and Mortgagee have agreed to the following with
respect to their mutual rights and obligations pursuant to the Lease and the
Mortgage;
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) paid by
each party to the other and the mutual covenants and agreements herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto do hereby covenant and agree as
follows:
(1) Lessee's interest in the Lease and all rights of Lessee thereunder
shall be and are hereby declared subject and subordinate to the Mortgage upon
the Demised Premises and its terms, and the term "Mortgage" as used herein
shall also include any amendment, supplement, modification, renewal or
replacement thereof.
(2) In the event of any foreclosure of the Mortgage or any conveyance in
lieu of foreclosure, provided that the Lessee shall not then be in default
beyond any grace period under the Lease, Lessee shall not be made a party in
any action or proceeding to remove or evict Lessee or to disturb its
possession, nor shall the leasehold estate of Lessee created by the Lease be
affected in any way, and the Lease shall continue in full force and effect as
a direct lease between Lessee and Mortgagee.
(3) After the receipt by Lessee of notice from Mortgagee of any
foreclosure of the Mortgage or any conveyance in lieu of foreclosure, Lessee
will thereafter attorn to and recognize Mortgagee or any purchaser from
Mortgagee at any foreclosure sale or otherwise as its substitute Lessor, and
having thus attorned, Lessee's possession shall not thereafter be disturbed
provided, and so long as, Lessee shall continue to timely pay all rentals
under the Lease and otherwise observe and perform the covenants, terms and
conditions of the Lease.
(4) Lessee shall not prepay any of the rents under the Lease more than
one month in advance except with the prior written consent of Mortgagee.
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<PAGE>
-2-
(5) In no event shall Mortgagee be liable for any act or omission of
the Lessor, nor shall Mortgagee be subject to any offsets or deficiencies
which Lessee may be entitled to assert against the Lessor as a result of any
act or omissions of Lessor occurring prior to Mortgagee's obtaining
possession of the premises.
(6) No conveyance of Lessor's interest in the Demised Premises or any
part thereof to Lessee shall, insofar as Mortgagee is concerned, cause the
fee estate and leasehold estate created by the Lease to merge, rather said
estates shall remain separate and distinct and the Lease shall continue in
full force and effect notwithstanding the vesting of the leasehold and fee
estates in any single person or entity by reason of such conveyance or
otherwise.
(7) The Lease may not be amended, altered, or terminated without the
prior written consent of Mortgagee.
(8) This Agreement and its terms shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
including without limitation, any purchaser at any foreclosure sale.
IN WITNESS WHEREOF, this Agreement has been fully executed under seal on
the day and year first above written.
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY,
an Iowa Corporation, Mortgagee
By:___________________________________
By:___________________________________
a-______
By:___________________________________
By:___________________________________
b-______
By:___________________________________
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-3-
By:___________________________________
STATE OF IOWA :
:ss.
COUNTY OF POLK :
On this a-____ day of ____, 19___ before me, a Notary Public in and for
said County, personally appeared b-____ and c-____, to me personally known to
be the identical persons whose names are subscribed to the instrument as
officers for the Mortgagee herein named, who being each by me duly sworn did
say that they are the d-_____ and e-_____ respectively of PRINCIPAL MUTUAL
LIFE INSURANCE COMPANY, a corporation, and that said instrument was signed on
behalf of said corporation by authority of its Board of Directors, and the
aforesaid officers each acknowledged the execution of said instrument to be
the duly authorized act and deed of said corporation, by it and by each of
them voluntarily executed.
_______________________________________
Notary Public in and for Polk Co., Iowa
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COINSTAR, INC.
NEWPORT HEIGHTS
FIRST LEASE AMENDMENT
This FIRST LEASE AMENDMENT, dated January 24, 1997, is made and entered
into by and between DHV Real Estate L.L.C., a Washington limited liability
company, as agent for the fee owner/Landlord, Factoria Heights, a Washington
general partnership and Kempton Downs Limited Partnership, a Washington
limited partnership ("Landlord") and COINSTAR, INC., a Delaware corporation
("Tenant") (hereinafter "First Lease Amendment").
THIS FIRST LEASE AMENDMENT relates to and amends that Lease dated June
1, 1994, between Landlord and Tenant, as well as the "Month-to-Month" lease
dated July 31, 1996 (collectively the "Lease").
IN CONSIDERATION OF THE MUTUAL COVENANTS contained herein, and based
upon Tenant's request to exercise its option to terminate the Lease as
provided for in Section 1.5 of the Lease, the Parties agree as follows:
1. Upon execution of this First Lease Amendment, Landlord agrees that
Tenant has exercised its option to terminate the Lease as provided in Section
1.5 thereof and in so doing the parties have effectively established October
1, 1997, as the cancellation date of the Lease ("Effective Cancellation
Date"). The Effective Cancellation Date shall operate as if that date were
the time originally fixed for the termination of the Lease and the Lease
shall come to an end with the same force and effect as if the above-stated
date were the date provided therein for the expiration thereof. Further, all
provisions of the Lease that are to become effective on the termination of
the Lease shall become operative or effective on the Effective Cancellation
Date.
2. This First Lease Amendment shall become effective February 1, 1997.
3. Exhibit A-1 of the Lease is replaced in its entirety by "Exhibit A-1"
attached hereto.
4. Section 2 and 2.1 of the Lease entitled "Term" are hereby amended to
reflect a termination date of October 1, 1997.
5. Section 1.2 of the Lease entitled "Agreed Floor Areas" is hereby
amended to restate the Agreed Floor Area to be a total of 25,179 rentable
square feet. Of said 25,179 rentable square feet, 8,418 rentable square feet
are on Floor One of the Building and 16,761 rentable square feet are on Floor
Two of the Building.
6. Section 1.5 of the Lease entitled "Additional Space: Termination
Option" is hereby amended in its entirety to read as follows:
1.5 TERMINATION FEE. Upon execution of this First Lease
Amendment, Tenant agrees to pay to Landlord a Termination Fee of
$55,000 on or before January 31, 1997. This Amendment shall become
effective upon receipt of full payment in the amount of $55,000
(discounted Termination Fee) from Tenant.
7. Section 3 and 3.1 of the Lease entitled "Basic Rent" or "Rent" are
amended to require the payment of Basic Rent/Rent as follows:
Floor 1: $14.75 triple net, on an "as is" basis from 2/1/97 -
10/1/97
Floor 2: $12.60 triple net, on an "as is" basis from 1/1/97 -
10/1/97
-1-
<PAGE>
8. Section 4.2 of the Lease entitled "Tenant Share" is hereby amended in
its entirety to read as follows:
4.2 TENANT SHARE. Tenant shall, for each calendar year of the
Initial Term, or any extension thereof, pay to Landlord Tenant's
proportionate share, as additional rent 76.06% (being the proportion
of which the Agreed Floor Area of the Premises bears to the Agreed
Floor Area of the Building) of the Operating Costs, of the Building
and Real Property. If an Operating Cost is not attributable to 100% of
the Building, then Tenant shall pay is share thereof. Tenant shall pay
100% of any costs directly allocable to Tenant's Premises.
9. The following sections of the Lease are hereby rescinded and deleted
in their entirety: Section 1.3, "Right of First Offer"; Section 1.4, "Right
of First Refusal"; Section 2.2, "Option to Extend"; and Section 34.02,
"Brokerage Commissions."
10. DUPLICATES AND COUNTERPARTS. This Agreement may be executed in
duplicate, each of which shall be deemed an original and in counterparts,
together which shall constitute one and the same Agreement.
11. Except as is herein amended, the Lease is hereby ratified and
confirmed and all other terms of the Lease shall remain in full force and
effect, unaltered and unchanged by this subsequent agreement.
IN WITNESS WHEREOF, the respective parties hereto have executed this First
Lease Amendment or caused this First Lease Amendment to be executed by their
duly authorized representatives the day and year first hereon written.
LANDLORD: TENANT:
DHV Real Estate L.L.C., a Washington COINSTAR, INC. a Delaware corporation
limited liability company as agent for
the fee owner/Landlord
By: Vyzis Company, a Washington corporation,
Manager
/s/ Darlene H. Vyzis By: /s/ xxxxxx
--------------------------------- ----------------------------
Darlene H. Vyzis, President Name:
JEO Its:
3605 132nd Avenue S.E., Suite 300
Bellevue, WA 98006-1323 13231 SE 36th Street, Suite 200
(206) 643-4300 Bellevue WA 98006
-2-
<PAGE>
****LANDLORD'S ACKNOWLEDGMENT****
STATE OF WASHINGTON )
)
COUNTY OF KING )
On this 30th day of January, 1997, before me the undersigned, a Notary
Public in and for the State of Washington, duly commissioned and sworn,
personally appeared Darlene H. Vyzis to me known to be the President of Vyzis
Company, a Washington corporation, the corporation that executed the within
and foregoing instrument as Manager for DHV Real Estate L.L.C., a Washington
limited liability company the Agent for Fee Owner Landlord, and acknowledged
the same instrument to be the free and voluntary act and deed of said
corporation for the uses and purposes therein mentioned, and on oath stated
that she is authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
/s/ Leslie A. Hurd
-----------------------------------
Printed Name: Leslie A. Hurd
NOTARY PUBLIC in and for the State of
Washington, residing at Seattle
My commission expires 11-29-98
****TENANT'S ACKNOWLEDGEMENT****
STATE OF WASHINGTON )
)ss.
COUNTY OF KING )
On this 30th day of January, 1997, before me the undersigned, a Notary
Public in and for the State of Washington, duly commissioned and sworn
personally appeared xxxx to me known to be the Chief Executive
Officer of Coinstar, Inc., the corporation that executed the within and
foregoing instrument, and acknowledged the same instrument to be the free and
voluntary act and deed of said corporation for the uses and purposes therein
mentioned, and on oath stated that they are authorized to execute said
instrument.
IN WITNESS WHEREOF my hand and official seal hereto affixed the day and
year in this instrument above written.
[NOTARY PUBLIC SEAL] /s/ Kimberly A. Reitz
-----------------------------------
Printed Name: Kimberly A. Reitz
NOTARY PUBLIC in and for the State of
Washington, residing at Bellevue
My commission expires 6/30/2000
-3-
<PAGE>
EXHIBIT "A-1"
PREMISES
This exhibit is a continuation of that certain First Lease Amendment dated
January 1, 1997, between DHV Real Estate L.L.C., a Washington limited
liability company, as agent for the fee owner/Landlord, Factoria Heights, a
Washington general partnership and Kempton Downs Limited Partnership, a
Washington limited partnership ("Landlord") and COINSTAR, INC., a Delaware
corporation ("Tenant") on real property in King County, Washington, and by
this reference shall become part of that agreement.
[FLOOR PLAN]
FIRST FLOOR PLAN
NEWPORT HEIGHTS
[FLOOR PLAN]
SECOND FLOOR PLAN
-4-
<PAGE>
EXHIBIT 10.7
SUBLEASE
THIS SUBLEASE is entered into and executed as of January 15, 1997, by
and between MARUYAMA U.S., INC., a Washington corporation ("Sublessor") and
COINSTAR, INC., a Delaware corporation ("Sublessee").
IN WITNESS WHEREOF, the parties covenant and agree as follows:
1. The premises being subleased hereunder, as outlined on the attached
EXHIBIT B, (the "Premises") are a portion of the premises located at 15436 NE
95th Street, Redmond, Washington 98052, which are the subject of the written
lease (the "Lease") between UVAG Realty Partnership, as successors in
interest to The Equitable Life Assurance Society of the United States as
lessor ("Lessor") and Sublessor as lessee, dated March 21, 1986, as amended
by Amendment Number One, dated April 19, 1988; Amendment No. 2, dated
September 5, 1990; and Amendment No. 3, dated September 1, 1994. The square
footage of the Premises is outlined below in Section 2. The premises are more
particularly described in the Lease, a copy of which is attached hereto as
EXHIBIT A hereof.
2. Sublessor hereby sublets the Premises to Sublessee, and Sublessee
hereby sublets the Premises from Sublessor, the term of this Sublease being a
period of approximately One Year and Two and One-half Months, commencing on
January 16, 1997, and terminating at midnight on March 31, 1998 as follows:
January 16, 1997 - January 31, 1997 - Phase I - approximately 2,603
square feet
February 1, 1997 - March 31, 1998 - Phase 2 - approximately 1,565
additional square feet (for a combined total of approximately 4,168
square feet)
In the event Sublessor is unable to deliver possession of the Premises
at the commencement of the term, Sublessor shall not be liable for any damage
caused thereby, nor shall this Sublease be void or voidable but Sublessee
shall not be liable for rent until such time as Sublessor offers to deliver
possession of the Premises to Sublessee, but the term hereof shall not be
extended by such delay. If Sublessee, with Sublessor's consent, takes
possession prior to the commencement of the term, Sublessee shall do so
subject to all the covenants and conditions hereof and shall pay rent for the
period ending with the commencement of the term at the same rental as that
prescribed for the first month of the term, prorated at the rate of 1/30th
thereof per day.
3. Sublessee shall use the Premises for assembly, storage and
distribution of "Coinstar" machines and for no other purpose without the
prior written consent of Sublessor and Lessor.
Sublessee's business shall be established and conducted throughout the
term hereof in a first class manner. Sublessee shall not use the Premises
for, or carry on, or permit to be carried on, any offensive, noisy, except
the noise generated by renting Coinstar machines or dangerous trade, business,
manufacture or occupation nor permit any auction sale to be held or conducted
on or about the Premises. Sublessee shall not do or suffer anything to be
done upon the Premises which will cause structural injury to the Premises or
the building of which the Premises are a part. The Premises shall not be
overloaded and no machinery, apparatus or other appliance shall be used or
operated in or upon the Premises which will in any manner injure, vibrate or
shake the Premises or the building of which it is a part. No use shall be
made of the Premises which will in any way impair the efficient operation of
the sprinkler system (if any) within the building containing the Premises. No
musical instrument of any sort, or any noise making device, will be operated
or allowed upon the Premises for the purpose of attracting trade or
otherwise. Sublessee shall not use or permit the use of the Premises or any
part thereof for any purpose which will increase the existing rate of
insurance upon the building in which the Premises are located, or cause a
cancellation of any insurance policy covering the building or any part
thereof. If any act on the part of Sublessee or use of the Premises by
Sublessee shall cause, directly or indirectly, any increase of Sublessor's
insurance expense, said additional expense shall be paid by Sublessee to
Sublessor upon demand. No such payment by Sublessee shall limit Sublessor in
the exercise of any other rights or remedies, or constitute a waiver of
Sublessor's right to require Sublessee to discontinue such act or use.
4. Sublessee has inspected the Premises and shall sublease the space in
their current "as
<PAGE>
is" condition, without warranties of any kind or nature, expressed or
implied. Sublessee will be allowed to, in a workman like manner, remove the
drywall demising wall currently separating Sublessor from SeaMED, at
Sublessee's sole cost and expense. In the event that Sublessee requires a
more secure demising wall, they will have the option to construct one at
their sole cost and expense. In addition, Sublessee and/or Sublessor will be
required, in Landlord's sole discretion, to restore the space to its
pre-existing condition upon termination of this Sublease Agreement, including
replacement and finishing of the demising wall currently separating Sublessor
and SeaMED and removal of the demising wall (if any) built between Sublessor
and Sublessee.
5. Sublessee hereby assumes those of the Lessee's obligations under the
Lease that pertain to the Premises (except for rent and for such obligations,
if any, as have accrued and are unpaid as of the date of this Sublease), and
agrees to pay rent and all other sums hereafter due under the Lease and to
fully perform all of the lessee's duties thereunder in accordance with their
terms, causing Sublessor to be named as an additional insured on all
liability policies and as a loss payee on all fire and extended coverage
policies required under terms of the Lease. Sublessee shall furnish Lessor
and Sublessor with evidence of required insurance coverage in the manner, and
with the agreement for Sublessor's benefit, required to be furnished Lessor
in the Lease.
Sublessor shall pay a commission equal to five percent (5%) of the total
rent consideration for this sublease to be split 50/50 between R.J. Hallissey
Co., Inc. and Colliers International, Inc. upon full execution of the
Sublease. Sublessor and Sublessee each represent and warrant to the other
that neither has had any dealings with any other broker other than the firms
whose names are set forth in this paragraph.
6. Sublessee shall pay to Sublessor as rent for the Premises, in advance
on the first day of each calendar month of the term of this Sublease, without
deduction, offset, prior notice of demand, in lawful money of the United
States, the sum of Eight Hundred Ninety Two and No/100 Dollars ($892.00) for
the period January 16, 1997 through January 31, 1997, and Two Thousand Eight
Hundred Fifty Five and No/100 Dollars ($2,855.00) for the period February 1,
1997 through March 31, 1998. Sublessee shall not be responsible for any
operating cost pass-throughs payable by sublessor under the lease.
7. Sublessee and Sublessor shall agree to share all metered electrical
and gas utility expenses associated with the warehouse on a pro rata of
square footage basis which is 4,168 of 8,800 square feet or 47.36% of the
total space leased by Sublessor. In the event that utilities increase
significantly associated with Sublessee's usage, Sublessor shall have the
right to bill Sublessee for the increased amount.
8. Sublessee shall not have any right to exercise any options provided
for in the Lease without Sublessor's prior written consent, which consent may
be withheld in Sublessor's sole discretion.
9. Each party shall immediately furnish the other with a copy of each
notice received from Lessor and from all courts, attorneys and governmental
agencies with respect to the Premises.
10. Sublessee shall not have the right to assign or transfer this
Sublease or to sublet the whole or any part of the Premises, without prior
written consent of Sublessor. No assignment or sublease shall operate or be
construed as to release Sublessee from liability for the nonperformance of
any of the terms or conditions of this Sublease.
11. Sublessor shall not be liable for any injury to any person, or for
any loss of, or damage to, any property (including property of Sublessee)
occurring in or about the Premises from any cause whatsoever at any time from
or after the date of this Sublease unless due to the gross negligence or
willful misconduct of Sublessor. Sublessee shall indemnify, defend and save
Lessor and Sublessor, their agents, employees and contractors harmless from
all claims, causes of action, suits, losses, damages, liabilities, costs and
expenses (including attorneys' fees and other costs incurred in connection
with litigation or the defense of claims, whether claims involve litigation)
resulting from any actual or alleged injury to any person or from any actual
or alleged loss of or damage to any property occurring on or about the
Premises or from Sublessee's breach of its other obligations hereunder. The
indemnification provided for in this paragraph with respect to any acts or
omissions during the term of this Sublease shall survive any termination
<PAGE>
or expiration of this Sublease. Sublessee shall promptly notify Sublessor of
casualties or accidents occurring in or about the Premises.
12. Time is of the essence hereof, and if Sublessee violates or breaches
or fails to keep or perform any covenant, term or condition of this Sublease
or the Lease and such breach is not remedied within three (3) days (or, if no
default in the rent is involved, within ten (10) days after notice in writing
thereof given by Lessor or Sublessor to Sublessee specifying the matter
claimed to be in default), Sublessor, at its option, may immediately declare
Sublessee's rights under this Sublease terminated, or re-enter and attempt to
relet, without terminating this Sublease, and remove all persons and property
from the Premises, and otherwise proceed in the same manner and with the same
rights and remedies as are provided for Lessor in Section 21 of the Lease. In
addition, if Sublessor elects to cure each default on Sublessee's behalf, it
shall be permitted to do so on Sublessee's behalf and as its agent, and
Sublessee shall immediately reimburse Sublessor for the cost thereof, plus
interest at eighteen percent (18%) per annum from date advanced.
13. As between Sublessee and Sublessor, from and after the date of this
Sublease, Sublessee shall have and enjoy each and all of the rights,
privileges and benefits of Sublessor under the Lease with respect to the
Premises, subject to the terms thereof, for the duration of this Sublease and
shall keep and perform all of the duties and obligations of Sublessor under
the Lease with respect to the Premises. Sublessor shall not terminate the
Lease prior to the termination of the Sublease without the prior written
consent of Sublessee, and shall keep the Lease in good standing and free of
default by Sublessor.
14. If a party to this Sublease commences any action or proceeding of
any nature to enforce performance of any of the terms or provisions hereof,
or to secure damages for or an injunction against the breach thereof
(including assertion of any counterclaim, cross-claim or cross-complaint, or
claim in a proceeding in bankruptcy, receivership or other proceeding
instituted by a party hereto or by others), the prevailing party in such
action or proceeding shall, in addition to such other relief as it may obtain
therein, be entitled to recover from the other party all of its costs
incurred therein, including reasonable attorney's fees in any such action or
proceeding and on any appeal from any order, award or judgment therein.
15. Whenever any provision of the Lease requires Lessor's consent, such
provision shall be deemed to require Sublessor's consent as well and to
require Sublessee to reimburse Sublessor for the latter's costs incurred in
connection with acting on such consent. If Lessor's consent is required as a
result of Sublessor's actions, Sublessee will not be required to reimburse
Sublessor for costs incurred in connection with Lessor's consent.
16. If the Lease is terminated at any time during the term thereof, all
rights of Sublessee hereunder shall terminate as well, and Sublessor shall
not incur any liability to Sublessee as the result thereof.
17. All notices required or permitted hereunder shall be delivered or
mailed, by registered or certified mail, return receipt requested, addressed
to Sublessor at 15436 NE 95th Street, Redmond, Washington 98052, or to
Sublessee at 13231 S.E. 36th Street, Suite 200, Bellevue Washington, 98006,
attn: Chief Financial Officer, or to such other addresses as a party shall
from time to time advise in writing.
SUBLESSOR
MARUYAMA U.S., INC., a Washington
Corporation
By /s/ Kirby J. Mitchell
-------------------------------------
Its VP-Controller
SUBLESSEE
COINSTAR, INC., a Delaware corporation
By /s/ Warren M. Gorden
-------------------------------------
Its Chief Financial Officer 1-17-97
<PAGE>
EXHIBIT A
Exhibit A to Sublease dated January 15, 1996, by and between Maruyama
U.S., Inc., as Sublessor and Coinstar Inc., as Sublessee.
EXTENSION OF LEASE
AMENDMENT NO. 3
Dated September 1, 1994
In consideration of the sum of ONE DOLLAR by each of the parties hereto
to the other paid, receipt whereof is hereby acknowledged, and of the mutual
promises herein contained, it is hereby agreed by and between 95 RIVERSIDE
PARK LIMITED PARTNERSHIP, PREDECESSORS IN INTEREST TO THE EQUITABLE LIFE
ASSURANCE SOCIETY OF THE UNITED STATES as Landlord, and MARUYAMA U.S., INC.
as Tenant, that a certain lease dated MARCH 21, 1986 between Landlord and
Tenant covering premises described therein AS 15436 N.E. 95TH STREET,
REDMOND, WASHINGTON 98052, CONSISTING OF APPROXIMATELY 8,800 SF, (the term
"lease" includes any amendments or modifications thereof) be and the same is
hereby extended for the term commencing APRIL 1, 1995, and ending MARCH 31,
2000, upon all of the terms, covenants and conditions set forth in said
lease, except that
1. RENT: The base rental during the extended term shall be:
- for the period April 1, 1995 through March 31, 1998, $5,235.00 per
month, and
- for the period April 1, 1998 through March 31, 2000, $5,706.00 per
month
2. OPTION TO CANCEL: Provided the Tenant is not in default hereunder
and notwithstanding any other provision of the Lease to the
contrary, the Tenant may elect to terminate this Lease on March 31,
1998 by providing the Landlord with written notice of its intention
to terminate this Lease on or before September 30, 1997.
3. TENANT IMPROVEMENTS: Landlord shall provide at Landlord's sole cost
and expense the following Tenant Improvements for Tenant's premises.
The construction of the Tenant Improvements shall occur at a time
mutually agreeable between Landlord and Tenant after the execution
of this Extension of Lease Amendment No. 3. Below is a summary of
the Tenant Improvements to be provided by Landlord:
a) Repaint all existing walls in offices and restrooms including
restroom ceilings.
b) Clean all existing carpeting.
<PAGE>
c) Add 10 each warehouse double tubed strip fixtures with electronic
ballast in the warehouse.
d) Provide sound insulation over manager's office.
e) Provide approximately 25 lineal feet of 8 foot high wall and 15
lineal feet of p-lam counter in area of rear roll up door.
Counter to also have standard duplex electrical outlet and
lighting.
f) Final design of counter subject to Landlord and Tenant Approval.
It is understood and agreed between the parties hereto that said lease,
as hereby renewed and extended, shall have the same effect as though the
period for which said lease is extended was included in and made part of the
original term, and all covenants, conditions, remedies, and terms of the
original lease including the security payment provision, if any, shall remain
in full force and effect, except as aforesaid.
THE EQUITABLE LIFE ASSURANCE
MARUYAMA U.S., INC. SOCIETY OF THE UNITED STATES
Tenant Landlord
By: /s/ Kirby J. Mitchell By: /s/ Christopher C. Curtis
------------------------------- ----------------------------
Christopher C. Curtis
Its: Vice President Its: Investment Officer
-------------------------------
<PAGE>
CORPORATE
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 8TH day of SEPTEMBER, 1994, before me personally appeared KIRBY
J. MITCHELL, to me known to be the VICE PRESIDENT of MARUYAMA U.S. INC., the
corporation that executed the within and foregoing instrument, and
acknowledged the said instrument to be the free and voluntary act and deed of
said corporation, for the uses and purposes therein mentioned, and on oath
stated that HE IS authorized to execute the said instrument and that the seal
affixed (if any) is the corporate seal of said corporation.
Witness my hand and official seal hereto affixed the day and year first
above written
Signed: /s/ Lee M. Shephard
-----------------------
Printed Name: Lee M. Shephard
-----------------
NOTARY PUBLIC in and for the
State of Washington
---------------------
residing at Mercer Island
-------------------
My Commission Expires: 7/29/97
--------
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT No. 5907
State of California
---------------------------------------
County of San Francisco
-------------------------------------
On 9/14/94 before me, Amy R. Tanjuaquio, Notary Public,
---------- ---------------------------------------------
DATE NAME, TITLE OF OFFICER - E.G., "JANE DOE, NOTARY PUBLIC"
personally appeared Christopher C. Curtis,
-----------------------------------------------------------
NAME(S) OF SIGNER(S)
/x/ personally known to me - OR - / / proved to me on the basis of
satisfactory evidence to be the
person(s) whose name(s) is/are
subscribed to the within instrument
and acknowledged to me that
he/she/they executed the same
[SEAL] in his/her/their authorized
capacity(ies), and that by
his/her/their signature(s) on the
instrument the person(s), or the
entity upon behalf of which the
person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ Amy R. Tanjuaquio
------------------------------------
SIGNATURE OF NOTARY
- -------------------------------OPTIONAL----------------------------------------
Though the data below is not required by law, it may prove valuable to
persons relying on the document and could prevent fraudulent reattachment of
this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
/ / INDIVIDUAL
/ / CORPORATE OFFICER
Extension of Lease Amendment No. 3
-----------------------------------
------------------------------ TITLE OR TYPE OF DOCUMENT
TITLE(S)
/ / PARTNER(S) / / LIMITED
/ / GENERAL 2
-----------------------------------
/ / ATTORNEY-IN-FACT NUMBER OF PAGES
/ / TRUSTEE(S)
/ / GUARDIAN/CONSERVATOR
/x/ OTHER: Investment Officer September 1, 1994
------------------------- -----------------------------------
DATE OF DOCUMENT
-------------------------
-------------------------
SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES) Kirby J. Mitchell (Tenant)
Maruyama U.S., Inc.
-----------------------------------
The Equitable Life Assurance SIGNER(S) OTHER THAN NAMED ABOVE
- -----------------------------------
Society of the United States (Landlord)
- -----------------------------------
<PAGE>
EXTENSION OF LEASE
AMENDMENT NO. 2
Dated September 5, 1990
In consideration of the sum of ONE DOLLAR by each of the parties hereto
to the other paid, receipt whereof is hereby acknowledged, and of the mutual
promises herein contained, it is hereby agreed by and between 95 RIVERSIDE
PARK LIMITED PARTNERSHIP, PREDECESSOR IN INTEREST TO THE EQUITABLE LIFE
ASSURANCE SOCIETY OF THE UNITED STATES as Landlord, and MARUYAMA U.S., INC.
as Tenant, that a certain lease dated MARCH 21, 1986 between Landlord and
Tenant covering premises described therein as 15436 N.E. 95TH Street, Redmond,
Washington 98052, consisting of approximately 8,800 SF, (the term "lease"
includes any amendments or modifications thereof) be and the same is hereby
extended for the term commencing September 1, 1990, and ending March 31,
1995, upon all of the terms, covenants and conditions set forth in said
lease, except that
1. RENT: The base rental during the extended term shall be:
- for the period September 1, 1990 through December 31, 1990, $0
per month, and
- for the period January 1, 1991 through March 31, 1994, $5,235.00
per month, and
- for the period April 1, 1994 through March 31, 1995, the monthly
rent shall be determined by multiplying $5,235.00 by the percentage
increase in the Consumer Price Index (the "CPI") as prepared by the
United States Bureau of Labor Statistics, and by adding such
product to $5,235.00. The CPI as used herein shall mean the Consumer
Price Index United States City Average for Urban Consumers, all items
(1967=100), issued by the Bureau of Labor Statistics of the U.S.
Department of Labor. The percentage increase shall be equal to the
fraction resulting from subtracting the CPI for December 1990 from
the CPI for December 1993 and dividing that difference by the CPI
for December 1990. In no event shall the monthly base rental
payable during the period April 1, 1994 through March 31, 1995 be
below $5,235.00
During the period September 1, 1990 through December 31, 1990,
Additional Rent for taxes, assessments, and other charges shall
continue to be due and payable.
2. OPTION TO CANCEL: Provided the Tenant is not in default hereunder and
notwithstanding any other provision of the Lease to the contrary, the
Tenant may elect to terminate this Lease on April 1, 1993 by
providing the Landlord with written notice of its intention to
terminate this Lease on or before September 30, 1992. In the event
such option is exercised, Tenant agrees to make a payment to the
Landlord in the amount of $5,235 simultaneous with the giving of said
termination notice.
<PAGE>
3. RIGHT OF REFUSAL - Landlord hereby gives to Tenant the right of
refusal throughout the term of this Lease, to lease the adjoining
first floor premises currently occupied by Valmet Automation (the
"Option Space") as shown on Exhibit A attached, in the event that
Valmet Automation should vacate the premises at the end of their
lease term. At such time as the Option Space is vacant and Landlord
has an offer to lease such space, Landlord shall notify Tenant of the
offer being made by a third party, including commencement date, term,
minimum rent, additional rent, rent abatement provisions and other
material terms, the Tenant shall have five (5) days from receipt of
written notice in which to notify Landlord of its desire to match
such offer. At the end of the 5-day written notice period, Tenant's
right of first refusal shall expire as to that offer.
Said Right of Refusal shall be predecated upon there being no uncured
default by Tenant on date that Option Space becomes available and at
the time of commencement of the term for such space it shall further
be predecated upon ETMA waiving their Right of First Refusal on the
Option Space.
4. SECURITY DEPOSIT: That the Security Deposit as provided for in
Paragraph 5 of the Lease shall be increased to $5,235, and
It is understood and agreed between the parties hereto that said lease,
as hereby renewed and extended, shall have the same effect as though the
period for which said lease is extended was included in and made part of the
original term, and all covenants, conditions, remedies, and terms of the
original lease including the security payment provision, if any, shall remain
in full force and effect, except as aforesaid.
THE EQUITABLE LIFE ASSURANCE
MARUYAMA U.S., INC. SOCIETY OF THE UNITED STATES
Tenant Landlord
By: Kirby J. Mitchell By: William G. Williams III
-------------------------- --------------------------------
William G. Williams III
Its: VP-Op Its: Attorney in Fact
-------------------------
<PAGE>
STATE OF WASHINGTON)
) ss.
COUNTY OF KING )
THIS IS TO CERTIFY that on the 28 day of September, 1990, before me, the
undersigned, a Notary Public in and for the State of Washington, personally
appeared WILLIAM G. WILLIAMS, III, to me known to be the Attorney in Fact for
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, the corporation
that executed the within and foregoing instrument and acknowledged the said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath stated that he was
authorized to execute said instrument.
WITNESS MY HAND AND NOTARIAL SEAL the day and year first hereinabove
written.
Lisa Jarris
-------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at xxxxxx.
-------------
My commission expires: 3-7-93
--------------
CORPORATE
STATE OF WASHINGTON)
) ss.
COUNTY OF KING )
THIS IS TO CERTIFY that on the 13 day of September, 1990, before me, the
undersigned, a Notary Public in and for the State of Washington, personally
appeared KIRBY MITCHELL, to me known to be the VICE PRESIDENT of MARUYAMA US.
INC, the corporation that executed the within and foregoing instrument and
acknowledged the said instrument to be the free and voluntary act and deed of
said corporation for the uses and purposes therein mentioned, and on oath
stated that HE authorized to execute said instrument.
WITNESS MY HAND AND NOTARIAL SEAL the day and year first hereinabove
written.
XXXXXXXXXXXXXXXXX
-------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at XXXXX
[SEAL] -------------
My commission expires: May 12, 1993
--------------
<PAGE>
[FLOOR PLAN]
EXHIBIT A
TO EXTENSION OF LEASE, AMENDMENT NO. 2, DATED SEPTEMBER 5, 1990 BY AND
BETWEEN THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, LANDLORD,
AND MARUYAMA U.S., INC., TENANT
<PAGE>
AGREEMENT FOR ADDITIONAL SPACE AND
EXTENSION OF LEASE
AMENDMENT NUMBER ONE
AGREEMENT made and entered into this 19th day of April, 1988 and between
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, successor in
interest to 95 Riverside Park Investors Limited Partnership, a Washington
limited partnership, as Landlord and Maruyama U.S., Inc., as Tenant.
WITNESSETH
WHEREAS, the parties hereto have entered into a certain Indenture of
Lease (the "Lease") dated March 21, 1986, demising certain Premises in the
building, at 15436 N.E. 95th Street, Redmond, Washington 98032 and
WHEREAS, it is the desire of the parties to amend said Lease,
NOW THEREFORE, the parties hereto agree as follows:
1. PREMISES: The Premises, as defined in said Lease, as amended, shall
be enlarged to include the Additional Premises as shown by
crosshatched lines on Exhibit "A" attached hereto.
2. COMMENCEMENT: The commencement date of the Additional Premises and
increased rent shall be May 1, 1988.
3. RENT: Section 4 of said Lease, is hereby amended to increase the
Base Rent stipulated therein from thirty-three thousand Dollars
($33,000.00) per annum payable in equal monthly installments of
two thousand, seven hundred, fifty Dollars ($2,750.00) to
fifty-two thousand, nine hundred, twenty Dollars ($52,920.00) per
annum payable in equal monthly installments of four thousand, four
hundred, ten Dollars ($4,410.00) subject to the provisions of
Section 30 which at the commencement of this Amendment increases the
above Base Rent to $52,920.00 per annum or $4,410.00 per month
commencing May 1, 1988.
Tenant's pro-rata share of the increase in Taxes and Operating
Expenses as defined in said Lease, shall be amended to
nine and 63/100 percent (9.63%).
4. ALTERATIONS: See Workletter attached hereto as Exhibit "B".
<PAGE>
5. PARKING: As Provided in Section N/A of said Lease, the Tenant's right
to rent parking spaces at monthly rates and upon terms and conditions
as may from time to time be established by the Landlord (or garage
operator) shall be increased to the right to rent N/A spaces.
6. EXTENSION: The Lease term of the entire Premises, inclusive of the
Additional Premises, as defined in said Lease, as amended, is hereby
extended for the term commencing March 21, 1989 and ending March 20,
1991 upon all of the terms, covenants and conditions set forth in said
lease, except that with regard to any provisions therein granting
Tenant any right or privilege to renew or extend said lease, and, any
provisions therein for alterations, repairs or decorations, it is
agreed that such provisions have been complied with by Landlord
and Tenant and are not carried over and made a part of said lease as
extended, and except, further, that the base rental during the
extended term shall be fifty-seven thousand, one hundred, eight
dollars ($50,108.00) per annum, payable in equal monthly installments
of four thousand, seven hundred, fifty-nine dollars ($4,759.00) and
subject to all of the escalation and other additional rent provisions
of this lease.
It is understood and agreed between the parties hereto that said
lease, as hereby renewed and extended, shall have the same effect
as though the period for which said lease is extended was included
in and made part of the original term, and all covenants, conditions,
remedies, and terms of the original lease including the security
payment provision, if any, shall remain in full force and effect,
except as aforesaid.
All other terms and conditions of said Indenture of Lease, as
supplemented, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
Landlord
By: XXXXXXXXXXXXXXX
-------------------------
ATTORNEY IN FACT
MARUYAMA U.S., INC.
----------------------------
Tenant
By: Taizo Imanishi
-------------------------
TAIZO IMANISHI
<PAGE>
STATE OF WASHINGTON)
) ss.
COUNTY OF KING )
THIS IS TO CERTIFY that on the 25th day of April, 1988, before me, the
undersigned, a Notary Public in and for the State of Washington, personally
appeared William G. Williams, III, known to me and to me known to be the
Attorney in Fact, of The Equitable Life Assurance Society of the United
States, and known to me to be the individual named in and who executed the
foregoing document and he acknowledged to me that he was authorized to
execute the foregoing document by authority granted him in the Bylaws or by
resolutions of the Board of Directors for the uses and purposes therein set
forth.
WITNESS MY HAND AND NOTORIAL SEAL the day and year first hereinabove
written.
Karen M. Tinsl
-----------------------------------
NOTARY PUBLIC IN AND FOR WASHINGTON
RESIDING AT SEATTLE
My commission expires: 12-29-90
STATE OF WASHINGTON)
) ss.
COUNTY OF KING )
THIS IS TO CERTIFY that on the 21st day of April, 1988, before me, the
undersigned, a Notary Public in and for the State of Washington, personally
appeared TAIZO IMANISHI, known to me and to me know to be the PRESIDENT of
MARUYAMA U.S. INC., and known to me to be the individual named in and who
executed the foregoing document and he acknowledged to me that he was
authorized to execute the foregoing document by authority granted him in the
Bylaws or by resolutions of the Board of Directors for the uses and purposes
therein set forth.
WITNESS MY HAND AND NOTORIAL SEAL the day and year first hereinabove
written.
Diane L. Stiffan
-----------------------------------
NOTARY PUBLIC IN AND FOR WASHINGTON
RESIDING AT RENTON
My commission expires: 08/27/91
<PAGE>
EXHIBIT A
[FLOOR PLAN]
<PAGE>
EXHIBIT B
Work Letter
Maruyama U.S., Inc.
95 Riverside Park, Building B
Redmond, Washington 98052
The following is a list of qualifications and clarifications for the Tenant
Improvement work to be completed by the Landlord at Landlord's expense on
the above-referenced project, in accordance with the plans, dated March 12,
1988, prepared by Lance Mueller and Associates, attached hereto.
OFFICE IMPROVEMENTS
1. 1000 Square feet of new office space. Walls to be insulated at noted, and
finished to match existing.
2. Five new 3'x7' S.C. doors and frames, finished to match existing colors.
Relocate one existing door as noted.
3. New roof-top mounted HVAC.
4. New suspended ceiling to match existing.
5. Sprinklers per code.
6. Relocate counter from existing location to new.
7. New bathroom.
8. New rod and shelf closet.
9. New cabinet with laminated top.
WAREHOUSE IMPROVEMENTS
1. Remove existing wall to structure as required.
2. Gas fired unit heater existing.
3. Fluorescent lights existing.
4. Sealed concrete floors existing.
5. Ceilings open to structure.
<PAGE>
[FLOOR PLAN]
<PAGE>
1
1. PARTIES
This Lease is entered into this 21st day of March, 1986, by and between
95 Riverside Park Limited Partnership, a Washington limited partnership
(hereinafter designated "Landlord") and Maruyama U.S., Inc., a Washington
corporation (hereinafter designated "Tenant").
2. PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
that certain space (hereinafter designated the "Premises") containing
approximately 5,600 square feet of floor area. The Premises constitute a
portion of a building (the "Building") located at 15436 N.E. 95th Street,
Redmond, Washington 98052 and situated upon the real property legally
described on Exhibit A attached hereto and incorporated herein by this
reference (the "Land"). (The term "Project" as used in this Lease means the
improvements constructed or which may be constructed upon the Land from time
to time, including, without limitation, the Building.) the Premises are shown
on Exhibit B (drawing dated February 4, 1986) attached hereto and
incorporated herein by this reference. the Landlord will build out the
Premises at its own expense pursuant to the specifications, terms, and
conditions shown in Exhibit D.
The following areas adjacent or located in or on the Premises Building,
Project or Land shall constitute common areas available for tenant's
non-exclusive use including without limitation: walkways, hallways,
stairways, driveways, lavatories, landscaped areas and grounds, parking
areas, and all other areas used in common by the tenants, landlord, invitees
and employees of the Tenants of the Building and the Project. All common
areas shall be subject to Landlord's sole management and control and shall be
operated and maintained in such manner as Landlord, in is sole discretion
shall determine. Landlord may, from time to time in Landlord's sole
discretion alter, modify or change the dimensions and location of the common
areas.
3. LEASE TERM AND COMMENCEMENT DATA
This Lease shall be for three years and shall commence on March 21, 1986
(the "Commencement Date") and shall end on March 20, 1989. Landlord shall not
be liable for failure to give possession of the Premises on the Commencement
Date by reason of the fact that the Premises on the Commencement Date by
reason of the fact that the Premises are not ready for occupancy, or due to a
prior tenant wrongfully holding over or any other persons wrongfully
occupying the Premises or for any other reason. In such event, payment of
rent and other charges hereunder shall not commence until the day
<PAGE>
2
that possession is given or is available to Tenant and the Commencement Date
shall be postponed until that day. Notwithstanding the foregoing, if Landlord
shall not have delivered possession of the Premises by within 180 days from
the commencement date, Tenant may at Tenant's option by notice in writing to
Landlord within ten (10) days thereafter, cancel this Lease. If either party
cancels the Lease as herein provided, the Landlord shall return any and all
monies previously deposited or paid by Tenant and the parties shall each be
discharged and released from all obligations hereunder. If possession is
delayed the termination date shall be postponed so that the length of the
Lease term remains as provided for hereinabove.
4. RENT
Tenant shall pay rent to Landlord as follows:
(1) Tenant agrees to pay Landlord as minimum rent, without notice or
demand, the monthly sum $2,750.00 beginning 120 days after the date of
possession (July 1, 1986, if date of possession is March 1, 1986) in advance
on or before the first day of each month of the lease term, except that the
first month's rent shall be paid upon the execution hereof. Rent for any
portion during the term hereof which is for less than one month shall be
prorated portion of the monthly installment herein, based on a 30-day month.
All rent shall be paid to Landlord without deduction or offset in lawful
money of the United States of America at such place as Landlord may from time
to time designated in writing.
(2) Additional charges as described below shall be deemed additional
rent and shall be paid at the same time and in accordance with the terms of
this paragraph. In the event that any rent, either minimum or additional
rent, is not paid when due, interest at the rate of 3% per annum above the
publicly announced prime rate charged by Seattle-First National Bank from
time to time shall accrue from the date due until all rent and interest has
been paid in full. Acceptance by Landlord of partial payment of rent and/or
interest thereon shall not constitute a waiver of any remaining unpaid rent
and/or interest.
5. SECURITY DEPOSIT
Tenant has deposited with Landlord the sum of $2,750. Said sum shall be
held by Landlord as security for the faithful performance by Tenant of all
the terms, covenants, and conditions of this Lease to be dept and performed by
<PAGE>
3
Tenant during the term hereof. If Tenant defaults with respect to any
provision of this Lease, including, but not limited to, the provisions
relating to payment of rent, Landlord may (but shall not be required to) use,
apply, or retain all or any part of this security deposit for payment of rent
or any other sum in default or for the payment of any amount which Landlord
may spend or become obligated to spend by reason of Tenant's default or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of said deposit is so used or
applied, Tenant shall, within five days after written demand thereof, deposit
cash with Landlord in an amount sufficient to restore the security deposit to
its original amount and Tenant's failure to do so shall be a default under
this Lease. Landlord shall not be required to keep the security deposit
separate from its general funds. Tenant shall receive any and all interest
accruing on such deposit. If Tenant shall fully and faithfully perform every
provision of this Lease to be performed by it, the security deposit or any
balance thereof shall be returned to Tenant or, at Landlord's option, to the
last assignee of Tenant's interest hereunder (within 10 days following
expiration of the lease term). In the event of termination of Landlord's
interest in this Lease, Landlord shall transfer said deposit to Landlord's
successor in interest. The use by Landlord of all or a portion of the
security deposit shall not constitute a limitation on Tenant's liabilities.
6. USE OF PREMISES
Tenant's use and occupancy of the Premises shall be for warehousing of
agricultural sprayers and repair, maintenance and storage of products and
equipment and other activities related to Tenant's business and related
office functions. Tenant shall not use or permit the Premises to be used for
any other purpose without the prior written consent of Landlord. At least
five parking stalls in the parking areas adjacent to the Premises shall be
available to Tenant as shown on Exhibit B, with access thereto, and shall be
used for vehicle parking only and not for storage, and garbage and refuse
awaiting collection shall be stored only in dumpster-type containers which
shall be placed in areas away from public view.
7. ADDITIONAL RENT
In addition to the minimum rent provided in subparagraph 4 (1) hereinabove,
and commencing at occupancy, Tenant shall pay to Landlord the following
items, herein called additional rent:
<PAGE>
Mr. Kirby Mitchell
April 2, 1986
Page -2-
Agreed to and accepted this 8th day of April, 1986.
MARUYAMA U.S., INC.
By: /s/ Taizo Imanishi
-----------------------------------
Taizo Imanishi, President
/ds
EXCEPTION:
The original payment from Maruyama U.S., Inc. covered the first month
rent of $2,750.00 and security deposit of $2,730.00 (ref. check #301,
dated 2/4/86, totaling $5,480 attached).
Four (4) months rent at no charge - March 21, 1986 to July 20, 1986, with
July 21, 1986 to August 20, 1986 already paid per above exception.
The next payment due from Maruyama U.S., Inc. should cover the period of
August 21, 1986 to September 30, 1986 in the amount of $3,575.00. this
is $2,750 regular rent and $825 prorated March rent ($2,750 DIVIDED BY
30 = $91.666 x 9 days = $825.00) due by September 1, 1986.
Common area expense of $255.00 will be paid monthly starting April 1, 1986
and then will be added to the regular monthly rent check starting
September 1, 1986.
<PAGE>
1
1. PARTIES
This Lease is entered into this 21st day of March, 1986, by and between
95 Riverside Park Limited Partnership, a Washington limited partnership
(hereinafter designated "Landlord") and Maruyama U.S., Inc., a Washington
corporation (hereinafter designated "Tenant").
2. PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
that certain space (hereinafter designated the "Premises") containing
approximately 5,600 square feet of floor area. The Premises constitute a
portion of a building (the "Building") located at 15436 N.E. 95th Street,
Redmond, Washington 98052 and situated upon the real property legally
described on Exhibit A attached hereto and incorporated herein by this
reference (the "Land"). (The term "Project" as used in this Lease means the
improvements constructed or which may be constructed upon the Land from time
to time, including, without limitation, the Building.) The Premises are shown
on Exhibit B (drawing dated February 4, 1986) attached hereto and
incorporated herein by this reference. The Landlord will build out the
Premises at its own expense pursuant to the specifications, terms, and
conditions shown in Exhibit D.
The following areas adjacent or located in or on the Premises Building,
Project or Land shall constitute common areas available for Tenant's
non-exclusive use including without limitation: walkways, hallways,
stairways, driveways, lavatories, landscaped areas and grounds, parking areas,
and all other areas used in common by the tenants, landlord, invitees and
employees of the Tenants of the Building and the Project. All common areas
shall be subject to Landlord's sole management and control and shall be
operated and maintained in such manner as Landlord, in its sole discretion
shall determine. Landlord may, from time to time in Landlord's sole
discretion alter, modify or change the dimensions and location of the common
areas.
3. LEASE TERM AND COMMENCEMENT DATE
This Lease shall be for three years and shall commence on March 21, 1986
(the "Commencement Date") and shall end on March 20, 1989. Landlord shall not
be liable for failure to give possession of the Premises on the Commencement
Date by reason of the fact that the Premises are not ready for occupancy, or
due to a prior tenant wrongfully holding over or any other persons wrongfully
occupying the Premises or for any other reason. In such event, payment of
rent and other charges hereunder shall not commence until the day
<PAGE>
2
that possession is given or is available to Tenant and the Commencement Date
shall be postponed until that day. Notwithstanding the foregoing, if Landlord
shall not have delivered possession of the Premises by within 180 days from the
commencement date, Tenant may at Tenant's option by notice in writing to
Landlord within ten (10) days thereafter, cancel this Lease. If either party
cancels the Lease as herein provided, the Landlord shall return any and all
monies previously deposited or paid by Tenant and the parties shall each
be discharged and released from all obligations hereunder. If possession is
delayed the termination date shall be postponed so that the length of the
Lease term remains as provided for hereinabove.
4. RENT
Tenant shall pay rent to Landlord as follows:
(1) Tenant agrees to pay Landlord as minimum rent, without notice
or demand, the monthly sum $2,750.00 beginning 120 days after the date of
possession (July 1, 1986, if date of possession is March 1, 1986) in
advance on or before the first day of each month of the lease term, except
that the first month's rent shall be paid upon the execution hereof. Rent
for any portion during the term hereof which is for less than one month
shall be a prorated portion of the monthly installment herein, based on a
30-day month. All rent shall be paid to Landlord without deduction or
offset in lawful money of the United States of America at such place as
Landlord may from time to time designate in writing.
(2) Additional charges as described below shall be deemed additional
rent and shall be paid at the same time and in accordance with the terms of
this paragraph. In the event that any rent, either minimum or additional
rent, is not paid when due, interest at the rate of 3% annum above the
publicly announced prime rate charged by Seattle-First National Bank from
time to time shall accrue from the date due until all rent and interest has
been paid in full. Acceptance by Landlord of partial payment of rent and/or
interest thereon shall not constitute a waiver of any remaining unpaid rent
and/or interest.
5. SECURITY DEPOSIT
Tenant has deposited with Landlord the sum of $2,750. Said sum shall be
held by Landlord as security for the faithful performance by Tenant of all
the terms, convenants, and conditions of this Lease to be kept and performed
by
<PAGE>
3
Tenant during the term hereof. If Tenant defaults with respect to any
provision of this Lease, including, but not limited to, the provisions
relating to payment of rent, Landlord may (but shall not be required to) use,
apply, or retain all or any part of this security deposit for payment of rent
or any other sum in default or for the payment of any amount which Landlord
may spend or become obligated to spend by reason of Tenant's default or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of said deposit is so used or
applied, Tenant shall, within five days after written demand thereof,
deposit cash with Landlord in an amount sufficient to restore the security
deposit to its original amount and Tenant's failure to do so shall be a
default under this Lease. Landlord shall not be required to keep the security
deposit separate from its general funds. Tenant shall receive any and all
interest accruing on such deposit. If Tenant shall fully and faithfully
perform every provision of this Lease to be performed by it, the security
deposit or any balance thereof shall be returned to Tenant or, at Landlord's
option, to the last assignee of Tenant's interest hereunder (within 10 days
following expiration of the lease term). In the event of termination of
Landlord's interest in this Lease, Landlord shall transfer said deposit to
Landlord's successor in interest. The use by Landlord of all or a portion of
the security deposit shall not constitute a limitation on Tenant's liability.
6. USE OF PREMISES
Tenant's use and occupancy of the Premises shall be for warehousing of
agricultural sprayers and repair, maintenance and storage of products and
equipment and other activities related to Tenant's business and related
office functions. Tenant shall not use or permit the Premises to be used for
any other purpose without the prior written consent of Landlord. At least
five parking stalls in the parking areas adjacent to the Premises shall be
available to Tenant as shown on Exhibit B, with access thereto, and shall be
used for vehicle parking only and not for storage, and garbage and refuse
awaiting collection shall be stored only in dumpster-type containers which
shall be placed in areas away from public view.
7. ADDITIONAL RENT
In addition to the minimum rent provided in subparagraph 4 (1)
hereinabove, and commencing at occupancy, Tenant shall pay to Landlord the
following items, herein called additional rent:
<PAGE>
4
(1) All real estate taxes and insurance premiums on the Premises
including Land, Buildings, Project and other improvements thereon. Real
estate taxes shall include, without limitation, all real estate taxes and
assessments (general or special) that are levied upon and/or assessed against
such property, including all costs and expenses incurred by Landlord in good
faith to contest, resist, or appeal such taxes or assessments and insurance
shall include all insurance premiums for fire, extended coverage, liability,
and any other insurance that Landlord deems necessary on such property. The
costs of such taxes and insurance premiums for the purpose of this provision
shall be reasonably apportioned in accordance with the percentage of the
total floor area of the Premises as it relates to the total rentable floor
area of the Building or Project of which the Premises are a part. If any
tenants in said Building or Project pay taxes directly to any taxing
authority or carry their own insurance, as may be provided in their lease,
their square footage shall not be deemed a part of the floor area. The
apportionment of insurance premiums to be paid by Tenant shall be adjusted to
exclude additional premiums charged as a result of the possible hazardous
nature of business conducted on the property of which the Premises are a part
by any other tenant.
(2) That percent of the total cost of the following items as Tenant's
total floor area bears to the total floor area of the Building or Project of
which the Premises are a part:
(a) All real estate taxes, including assessments, and all
insurance costs relating to common areas, and all costs to maintain,
repair and replace common areas, parking areas, sidewalks, driveways,
exterior walls (including periodic painting thereof), roofs, and other
areas used in common by all tenants of the Building or Project and, in
addition, the structural parts of the Buildings, Project, and other
improvements in which the premises are located, which structural parts
include the foundation, bearing, and exterior walls (including glass
and doors) and subflooring.
(b) All reasonable costs to supervise and administer the
common areas, parking lots, sidewalks, driveways, and other areas used
in common by the tenants of such Building or Project.
<PAGE>
5
Said costs shall include such fees as may be paid to a third party in
connection with same and shall in any event include a fee to Landlord
or Landlord's designee to supervise and administer same in an amount
commensurate with the prevailing rate for such services in the Seattle
areas for each year of the lease term.
(c) Any parking charges, utilities surcharges, or any other
costs levied, assessed, or imposed by or at the direction of or
resulting from statutes or regulations or interpretations thereof
promulgated by any governmental authority in connection with the use
or occupancy of the Premises or the parking facilities serving the
Premises.
Upon commencement of rental, Landlord shall submit to Tenant a statement of
the anticipated monthly additional rent for the period between such
commencement and the following January, which statement shall include the
component figures for additional rent and an explanation of the basis used to
calculate such figures and Tenant shall pay the same and all subsequent
monthly payments concurrently with the payment of minimum rent. Tenant shall
continue to make said monthly payments until notified by Landlord of a change
thereof. By March 1 of each year Landlord shall give Tenant a statement
showing the total additional rent for the Building or project for the prior
calendar year and Tenant's allocable share thereof, prorated from the
commencement of rental which statement shall include the component figures
for additional rent and an explanation of the basis used to calculate such
figures. In the event the total of the monthly payments which Tenant has made
for the prior calendar year is less than Tenant's actual share of such total
additional rent, then Tenant shall pay the difference in a lump sum within
ten days after receipt of such statement from Landlord and shall concurrently
pay the difference in monthly payments made in the then calendar year and the
amount of monthly payments which are then calculated as monthly additional
rent based on the prior year's experience. Any overpayment by Tenant shall be
credited towards the monthly additional rent next coming due.
8. USES PROHIBITED
Tenant shall not do or permit anything to be done in or about the
Premises nor bring or keep anything therein which will in any way increase
the existing rate of or affect any fire or other insurance upon the Building
or any of its
<PAGE>
6
contents or cause a cancellation of any insurance policy covering the
Building or any part thereof or any of its contents. Tenant shall not do or
permit anything to be done in or about the Premises which will in any way
obstruct or interfer with the rights of other tenants or occupants of the
Building or injure or annoy them or use or allow the Premises to be used for
any improper, immoral, unlawful, or objectionable purpose, nor shall Tenant
cause, maintain, or permit any nuisance in, on, or about the Premises. Tenant
shall not commit or allow to be committed any waste in or upon the Premises.
9. COMPLIANCE WITH LAW
Tenant shall not use the Premises or permit anything to be done in or
about the Premises which will in any way conflict with any law, statute,
ordinance, or governmental rule or regulation now in force or which may
hereafter be enacted or promulgated. Tenant shall, at its sole cost and
expense, promptly comply with all laws, statutes, ordinances, and
governmental rules, regulations, or requirements now in force or which may
hereafter be in force and with the requirements of any board of fire
underwriters or other similar bodies now or hereafter constituted relating to
or affecting the condition, use, or occupancy of the Premises. The judgment
of any court of competent jurisdiction or the admission of Tenant in any
action against Tenant, whether Landlord be a party thereto or not, that
Tenant has violated any law, statute, ordinance, or governmental rule,
regulation, or requirement shall be conclusive of that fact as between
Landlord and Tenant.
10. ALTERATIONS AND ADDITIONS
Tenant shall not make or allow to be made any alterations, additions, or
improvements to or of the Premises or any part thereof without the prior
written consent of Landlord, and all improvements, alterations, or changes so
made shall become a part of the leased Premises and shall belong to Landlord
except for trade fixtures and equipment necessary to carry on the business of
Tenant, which trade fixtures and equipment may be removed by Tenant providing
Tenant, with all due diligence and at its sole cost and expense, repairs any
damage to the Premises caused by such removal. In the event Landlord consents
to the making of any alterations, additions, or improvements to the Premises
by Tenant, the same shall be made by Tenant at Tenant's sole cost and expense.
<PAGE>
7
11. MAINTENANCE AND REPAIRS
Responsibility for maintenance and repairs shall be allocated between
Landlord and Tenant as follows:
(1) By entry hereunder, Tenant shall be deemed to have accepted
the Premises as being clean and in good order, condition, and repair.
Tenant shall, at Tenant's sole cost and expense, keep the Premises and
every part thereof in good condition and repair (except as hereinafter
provided with respect to Landlord's obligations) including without
limitation the maintenance, replacement, and repair of any doors,
windows, windows casements, plumbing, pipes, electrical wiring, and
conduits. Tenant shall, upon the expiration or sooner termination of
this Lease, surrender the Premises to Landlord in good condition, broom
clean, ordinary wear and tear and damage from causes beyond the
reasonable control of Tenant only excepted. Any damage to adjacent
premises caused by Tenant's use of the Premises shall be repaired at
the sole cost and expense of Tenant.
(2) Notwithstanding the provisions of subparagraph 11 (1) above,
Landlord shall, subject to the provisions of paragraph 7 hereinabove,
arrange for the repair and maintenance of the structural portions of
the Building or Project, including the exterior walls, roof, and
foundation. In the event the Building or Project of which the Premises
are a part is occupied by third parties, in addition to Tenant, and in
the event such maintenance and repairs are necessitated in whole or in
part by the acts, neglect, fault, or omission of any duty by Tenant,
its agents, servants, employees, invitees, or any damage caused by
breaking and entering, Tenant shall pay to Landlord the entire cost of
such maintenance and repairs rather than a prorated portion thereof as
provided in subparagraph 7(2)(a). Except as provided in paragraph 23
hereinbelow relating to reconstruction in the event of fire or other
perils, there shall be no abatement of rent and no liability of
Landlord by reason of any injury to or interference with Tenant's
business arising from the making of any repairs, alterations, or
improvements in or to any portion of the Building or Project or the
Premises or to fixtures, appurtenances, and equipment.
(3) Tenant shall obtain Landlord's written approval with respect
to a choice of contractor before Tenant undertakes the making of any
repairs hereunder,
<PAGE>
8
which approval shall not be unreasonably withheld. To the extent
possible, Tenant agrees to employ Landlord's general contractor with
respect to such repairs, providing that said contractor's rates for
said work are reasonable and competitive.
(4) In the event the Premises or any portion of the Building or
Project should require any repairs which Landlord determines are
subject to cure by contractors' bonds or other warranties available to
Landlord, Tenant shall have the following subrogation rights with
respect to any such warranties: if such repairs are those to be
performed by Tenant, full rights; if such repairs are to be performed
by Landlord and reimbursed by Tenant, pro-rata rights with other
affected tenants. Otherwise, responsibility for repairs shall be as
provided in this Lease.
12. LIENS
Tenant shall keep the Premises and the property on which the Premises
are situated free from any liens arising out of any work performed, materials
furnished, or obligations incurred by Tenant. Landlord may require, at
Landlord's sole option, that Tenant shall provide Landlord, at Tenant's sole
cost and expense, a lien and completion bond in an amount equal to one and
one-half times the estimated cost of any improvements, additions, or
alterations in the Premises which Tenant desires to make, to insure Landlord
against any liability from mechanics' and materialmen's liens, and to insure
completion of the work. On final determination of the lien and claim for
lien, Tenant shall immediately pay any judgment rendered, together with all
proper costs and changes, and shall have the lien released or judgment
satisfied at no cost to Landlord.
13. HOLD HARMLESS
Tenant shall indemnify and hold harmless Landlord against and from any
and all claims arising from Tenant's use of the Premises or from the conduct
of its business or from any activity, work, or other things done, permitted,
or suffered by Tenant in or about the Premises and shall further indemnify
and hold harmless Landlord against and from any and all claims arising from
any breach or default in the performance of any obligation on Tenant's part
to be performed under the terms of this Lease or arising from any act or
negligence of Tenant or any officer, agent, employee, guest, or invitee of
Tenant, and from all costs, attorneys' fees, and liabilities incurred in or
about the defense of any such claim or any action or proceeding brought there
on
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9
and in case any action or proceeding be brought against Landlord by reason of
such claim, Tenant, upon notice from Landlord, shall defend the same at
Tenant's expense by counsel reasonably satisfactory to Landlord. Tenant, as a
material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to persons in, upon, or about the Premises from
any cause other than the negligence of Landlord, its agents, servants, or
employees and Tenant hereby waives all claims in respect thereof against
Landlord. Landlord or its agent shall not be liable for any loss or damage to
persons or property resulting from fire, explosion, falling plaster, steam,
gas, electricity, water, or rain which may leak from any part of the Building
or Project or from the pipes, appliances, or plumbing works therein or from
the roof, street, or subsurface, or from any other place resulting from
dampness, or from any other cause whatsoever, unless caused by or due to the
negligence of Landlord, its agents, servants, or employees. Landlord or its
agent shall not be liable for interference with the light or air, but shall
be responsible for any latent defect in the Premises. Tenant shall give
prompt notice to Landlord in case of casualty or accidents in the Premises.
14. SUBROGATION
As long as their respective insurers so permits, Landlord and Tenant
hereby mutually waive their respective rights of recovery against each other
for any loss insured by fire, extended coverage, and other property insurance
policies existing for the benefit of the respective parties. Each party shall
apply to their insurers to obtain said waivers. Each party shall obtain any
special endorsements, if required by their insurer, to evidence compliance
with the aforementioned waiver.
15. LIABILITY INSURANCE
Tenant shall, at Tenant's sole expense, obtain and keep in force during
the term of this Lease a policy of comprehensive public liability insurance
insuring Landlord and Tenant against any liability arising out of the
ownership, use, occupancy, or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be in an amount not less than
$1,000,000 Combined Single Limit with respect to injuries to or death or
persons, and/or destruction of or damage to property. The limit of any such
insurance shall not, however, limit the liability of Tenant hereunder. Tenant
may provide this insurance under a blanket policy provided said insurance
shall have a landlord's protective liability endorsement attached
<PAGE>
10
thereto. If Tenant shall fail to procure and maintain said insurance,
Landlord may, but shall not be required to, procure and maintain the same,
but at the expense of Tenant. Insurance required hereunder shall be in
companies rated A-XI or better in "Best's Insurance Guide". Tenant shall
deliver to Landlord, prior to right of entry, certificates evidencing the
existence and amounts of such insurance with loss payable clauses
satisfactory to Landlord. No policy shall be cancelable or subject to
reduction of coverage without prior written consent of Landlord. All such
policies shall be written as primary policies not contributing with and not
only in excess of coverage which Landlord may carry.
16. UTILITIES
Tenants shall pay for all water, gas, heat, light, power, sewer charges,
telephone service, and all other services and utilities supplied to the
Premises together with any taxes thereon. If any such services are not
separately metered to Tenant, Tenant shall pay a reasonable proportion to be
determined by Landlord on all charges jointly metered with other premises.
Tenant shall indemnify and save Landlord harmless against any liability or
damages on such accounts.
17. PERSONAL PROPERTY TAXES
Tenant shall pay or cause to be paid before delinquency any and all
taxes levied or assessed and which become payable during the term hereof upon
all tenants' leasehold improvements, equipment, furniture, fixtures, and any
other personal property located in the Premises. In the event any or all
of the Tenants' leasehold improvements, equipment, furniture, fixtures, and
any other personal property shall be assessed and taxed with the real
property, Tenant shall pay to Landlord its share of such taxes within 10 days
after delivery to Tenant by Landlord of a statement in writing setting forth
the amount of such taxes applicable to Tenant's property.
18. ENTRY BY LANDLORD
At any and all reasonable times during regular business, upon 24 hours
prior notice to Tenant, Landlord reserves and shall have the right to enter
the Premises to inspect the same a reasonable number of times, to submit the
Premises to prospective purchasers or tenants, to repair the Premises and any
portion of the Building or Project of which the Premises are a part that
Landlord may deem necessary or desirable, without abatement of rent, and may
for that
<PAGE>
11
purpose erect scaffolding and other necessary structures where reasonably
required by the character of the work to be performed, always providing that
the entrance to the Premises shall not be blocked thereby and further
providing that the business of Tenant shall not be interfered with
unreasonably. Except as provided in paragraph 23 relating to abatement of
minimum rent as a result of damage to the Premises, Tenant hereby waives any
claim for damages or for any injury or inconvenience to or interference with
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises,
and any other loss occasioned thereby. Landlord shall have the right to use
any and all means which Landlord may deem proper to open any doors or
otherwise obtain access to the Premises in an emergency, without liability to
Tenant except for any failure to exercise due care for Tenant's property, and
any entry to the Premises obtained by Landlord by any of said means or
otherwise shall not under any circumstances be construed or deemed to be a
forceable or unlawful entry into or a detainer of the Premises or an eviction
of Tenant from the Premises or any portion thereof.
19. ASSIGNMENT AND SUBLETTING
It is understood and agreed that Landlord may assign its interest in
this Lease as Landlord and Tenant hereby consents to such assignment. Tenant
shall not either voluntarily or by operation of law assign, transfer,
mortgage, pledge, hypothecate, or encumber this Lease or any interest therein
and shall not sublet the Premises or any part thereof or any right or
privilege appurtenant thereto or allow any person (the employees, agents,
servants, and invitees of Tenant excepted) to occupy or use the Premises or
any portion thereof without the prior written consent of Landlord, which
consent shall not be unreasonably withheld. A consent to one assignment,
subletting, occupation, or use by any other person shall not be deemed to be
a consent to any subsequent assignment, subletting, occupation, or use by
another person. Consent to any such assignment or subletting shall in no way
relieve Tenant of any liability under this Lease. Any such assignment or
subletting without such consent shall be void and shall, at the option of
Landlord, constitute a default under the terms of this Lease. Landlord may
assign the rental herein provided to any person, partnership, corporation, or
bank, and Tenant agrees when notified in writing by the assignee of such
assignment to make the rental payments to assignee under the terms of said
assignment.
<PAGE>
12
20. HOLDING OVER
If Tenant remains in possession of the Premises or any part thereof
after the expiration of the term hereof with the express written consent of
Landlord, such occupancy shall be a tenancy from month to month at a rental
in the same amount as the last monthly minimum rent, plus all other charges
payable hereunder, and upon all the terms hereof applicable to a
month-to-month tenancy.
21. TENANT'S DEFAULT
The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease by Tenant.
(1) Tenant vacates or abandons the Premises;
(2) Tenant fails to make any payment of rent or any other payment
required to be made by Tenant hereunder, as and when due, where such
failure shall continue for a period of three days after written notice
thereof by Landlord to Tenant;
(3) Tenant fails to observe or perform any of the covenants,
conditions, or provisions of this Lease to be observed or performed by
Tenant, other than described in subparagraph 21(2) above, where such
failure shall continue for a period of 30 days after written notice
thereof by Landlord to Tenant; provided, however, that if the nature of
Tenant's default is such that more than 30 days are reasonably required
by such cure, then Tenant shall not be deemed to be in default if
Tenant commences such cure within said 30 days and thereafter
diligently prosecutes such cure to completion;
(4) Tenant makes any general assignment or general arrangement
for the benefit of creditors or the filing by or against Tenant of a
petition to have Tenant adjudged a bankrupts, or a petition or
reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is
dismissed within 60 days) or the appointment of a trustee or a receiver
to take possession of substantially all of Tenant's assets located at
the Premises or of Tenant's interest in this Lease, where possession is
not restored to Tenant within 30 days or the attachment, execution, or
other judicial seizure of substantially all of Tenant's assets located
at the Premises or of Tenant's interests
<PAGE>
13
in this Lease where such seizure is not discharged within 30 days:
(5) Tenant makes or has made or furnishes or has furnished any
warranty, representation or statement to Landlord in connection with
this Lease, or any other agreement to which Tenant and Landlord are
parties, which is or was false or misleading in any material respect
when made or furnished;
(6) Tenant transfers any substantial portion of its assets or
incures any material obligation, unless such transfer or obligation is
incurred in the ordinary course of Tenant's business or in good faith
for fair equivalent consideration, or with Landlord's prior written
consent;
(7) Tenant fails to take possession of the Premises when Landlord
delivers the same by notifying Tenant that the Premises are ready for
occupancy.
22. REMEDIES ON DEFAULT
In the event of any such default or breach by Tenant, Landlord may at
any time thereafter with or without notice or demand and without limiting
Landlord in the exercise of a right or remedy which Landlord may have by
reason of such default or breach:
(1) Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such
event, Landlord shall be entitled to recover the costs set forth below;
(2) Maintain Tenant's right to possession, in which case this
Lease shall continue in full force and effect whether or not Tenant
shall have abandoned the Premises. In such event, Landlord shall be
entitled to enforce all of Landlord's rights and remedies under this
Lease including the right to recover the rent and any other charges and
additional rent as may become due hereunder;
(3) In the event of any default, reentry or repossession by
summary proceedings or otherwise, all rent and additional rent shall
become due hereunder and shall be paid up to the time of such reentry
or repossession, together with any such expenses as Landlord may
reasonably incur for attorneys' fees,
<PAGE>
14
advertising expenses, brokerage fees and for putting the Premises in
good order or repairing the same for reletting, together with interest
thereon as provided herein accruing from the date of any such
expenditure by Landlord. Landlord agrees to make best efforts to relet
the premises at the same or higher minimum rent. Landlord's failure or
inability to relet the Premises or any part thereof shall not reduce or
restrict in any way Landlord's right to recover from Tenant all rent
and other charges as provided hereunder and, despite such failure or
inability to so relet the Premises or any part thereof, Tenant shall
pay to Landlord upon demand therefore any and all costs, including
without limitation, expenses of reletting including necessary
renovation and alteration of the Premises, reasonable attorneys' fees,
the amount by which the unpaid rent and other charges, additional rent,
and adjustments called for herein for the balance of the term exceed
the amount of any such loss for the unexpired term of the Lease and the
portion of any leasing commissions paid by Landlord applicable to the
unexpired term of the Lease. Unpaid installments of rent or other sums
due by Tenant to Landlord under this Lease shall bear interest from the
date due until paid in full at the rate of three percent (3%) per annum
over the publicly announced prime rate being charged from time to time
from the date due until paid in full by Seattle-First National Bank or
such other bank as Landlord may designate;
(4) Pursue any other remedy now or hereafter available to
Landlord under the laws or judicial decisions of the state in which the
Premises are located; and
(5) In the event of a retaking of possession of the Premises by
Landlord, Tenant shall remove all personal property located thereon and
upon failure to do so upon demand of Landlord, Landlord may remove and
store the same in any place selected by Landlord, including but not
limited to a public warehouse, at the expense and risk of Tenant. If
Tenant shall fail to pay the cost of storing any such property after it
has been stored for a period of 30 days or more, Landlord may sell any
or all of such property at a public or private sale and shall apply the
proceeds of such sale first to the cost of such sale, secondly to the
payment of the charges for storage, if any, and thirdly to the payment
of any other sums of money which may be due from Tenant to Landlord
under the terms of this Lease, and the balance, if any, to Tenant.
Tenant hereby
<PAGE>
15
waives all claims for damages that may be caused by Landlord's lawfully
reentering and taking possession of the Premises or lawfully removing
and storing the property of Tenant as herein provided and will save
Landlord harmless from loss or damages occasioned by Landlord thereby
and no such lawful reentry shall be considered or construed to be a
forceable entry.
23. DAMAGE AND RECONSTRUCTION
Should the Premises be damaged during the term of this Lease, the
rights and responsibilities of Landlord and Tenant shall be as follows:
(1) In the event the Premises are damaged by fire or other perils
covered by extended coverage insurance, Landlord agrees to commence
repairs within thirty (30) days of the casualty and diligently
prosecute the same to completion and this Lease shall remain in full
force and effect, except that Tenant shall be entitled to a
proportionate reduction of the minimum rent from the date of damage and
while such repairs are being made, such proportionate reduction to be
based upon the extent to which the damage and making of such repairs
shall reasonably interfere with the business carried on by Tenant in
the Premises. If the damage is due to the fault or neglect of Tenant or
its employees, there shall be no abatement of rent.
(2) In the event the Premises are damaged as the result of any
cause other than the perils covered by fire and extended coverage
insurance, or if insurance proceeds are not available to Landlord, then
Landlord shall commence repairs within thirty (30) days of the casualty
and diligently prosecute the same to completion, provided the extent of
the destruction is less than 10% of the then full replacement cost of
the Premises. In the event the destruction of the Premises is to an
extent of 10% or more of the full replacement costs, then Landlord
shall have the option (a) to repair or restore such damage, this Lease
continuing in full force and effect, but the minimum rent to be
proportionately reduced as hereinabove provided, or (b) to give notice
to Tenant at any time within 60 days after such damage, terminating
this Lease as of the date specified in the notice, which date shall be
no more than 30 days after the giving of such notice. In the event of
giving such notice, this Lease shall expire and all interest of the
Tenant in the Premises shall terminate on the date so specified in such
notice and the minimum rent, reduced by a proportionate
<PAGE>
16
reduction, based upon the extent, if any, to which such damage
interfered with the business carried on by Tenant in the Premises,
shall be paid up to the date of such termination.
(3) Notwithstanding anything to the contrary contained in this
paragraph, Landlord shall not have any obligation whatsoever to
repair, reconstruct, or restore the Premises when the damage
resulting from any casualty covered under this paragraph occurs
during the last 12 months of the term of this Lease or any
extension thereof. In such event, Landlord may, at Landlord's
option: (a) terminate this Lease in the manner provided in
subparagraph 23(2) above; or (b) reduce the minimum rent by a
proportion equal to the extent, if any, the damage interferes with
the business carried on by Tenant in the Premises. Landlord shall
not be required to repair any injury or damage by fire or other
cause or to make any repairs or replacements of any leasehold
improvements, fixtures, or other personal property of Tenant.
24. EMINENT DOMAIN
If 25% or more of the Premises shall be taken or appropriated by any
public or quasi-public authority under the power of eminent domain, either
party hereto shall have the right at its option within 60 days after said
taking to terminate this Lease upon 30 days' written notice. If less than 25%
of the Premises are taken (or 25% or more of the Premises are taken and
neither party elects to terminate as herein provided) the minimum rent
thereafter to be paid shall be equitably reduced. If any party of the
Building or Project of which the Premises are a part may be so taken or
appropriated, Landlord shall within 60 days of said taking have the right at
its option to terminate this Lease upon written notice to Tenant. In the
event of any taking or appropriation whatsoever, Landlord shall be entitled
to any and all awards and/or settlements which may be given and Tenant shall
have no claim against Landlord for the value of any unexpired term of this
Lease. Provided, however, that nothing contained herein shall be deemed to
give Landlord any interest in or to require Tenant to assign to Landlord any
interest in or to require Tenant to assign to Landlord any reward made to
Tenant for the taking of personal property or fixtures belonging to Tenant or
for the interruption of or damage to Tenant's business or for Tenant's moving
expenses.
<PAGE>
17
25. SIGNS
Landlord shall provide for and place external signs on the Premises
provided such signs have been approved in advance by Tenant. Landlord shall
pay the costs of removal of such signs upon termination of the Lease and such
signs shall be the property of Tenant. At any time within 180 days prior to
the expiration of this Lease, Landlord may place upon the Premises "for
lease" signs. Landlord may place "for sale" signs on the Premises at any time
during the lease term. Please refer to Exhibit C, Signs Specifications.
26. SUBORDINATION AND MODIFICATION BY LENDER
Tenant agrees that this Lease shall be subordinate to any mortgage or
trust deeds that may hereinafter be placed upon the Premises or the Building
or Project of which the Premises are a part and to any and all advances to be
made thereunder, and to the interest thereon, and all renewals, replacements,
and extensions thereof; provided, the mortgagee or trustee named in said
mortgage or trust deeds shall agree in writing to recognize the Lease of the
Tenant in the event of foreclosure, if Tenant is not in default. In the
event of any mortgagee or trustee electing to have the Lease a prior lien to
its mortgage or deed trust, then and in such event, upon such mortgagee or
trustee notifying Tenant to that effect, this Lease shall be deemed prior in
lien to the said mortgage or trust deed whether or not this Lease is dated
prior to or subsequent to the date of said mortgage or trust deed. Within 15
days of presentation, Tenant agrees to execute any documents which such
mortgagee or trustee may require to effectuate the provisions of this
paragraph. Tenant further agrees that if, in connection with obtaining
financing for the Lands, Building, or Project, a lender or financier shall
request modification of this Lease as a condition to such financing, Tenant
shall not withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder or
adversely affect the leasehold interest hereby created.
27. TENANT'S STATEMENT
Tenant shall at any time and from time to time upon not less than three
days' prior written notice from Landlord execute, acknowledge, and deliver to
Landlord a statement in writing (a) certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease as so
<PAGE>
18
modified is in full force and effect) and the date to which the rental and
other charges are paid in advance, if any, and (b) acknowledging that there
are not, to Tenant's knowledge, any uncured defaults on the part of Landlord
hereunder, or specifying such defaults if any are claimed, and (c) setting
forth the date of commencement of rents in expiration of the term thereof.
Any such statement may be relied upon by any prospective purchaser or
encumbrancer of all or any portion of the Land.
28. AUTHORITY OF TENANT
If Tenant is a corporation, each individual executing this Lease on behalf
of said corporation represents and warrants that he is duly authorized to
execute and deliver this Lease on behalf of said corporation, in accordance
with a certificate of an officer of said corporation, a copy of which is
attached hereto, in accordance with the by-laws of said corporation, and that
this Lease is binding upon said corporation in accordance with its terms.
29. GENERAL PROVISIONS
Landlord and Tenant agree to the following general provisions:
(1) WAIVER. The waiver by Landlord of any term, covenant, or
condition herein contained shall not be deemed to be the waiver of
such term, covenant, or condition or any subsequent breach of the
same or any other term, covenant, or condition herein contained.
The subsequent acceptance of rent hereunder by Landlord shall not
be deemed to be a waiver of any preceding default by Tenant of any
term, covenant, or condition of this Lease, other than the failure
of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding default at the time of the
acceptance of such rent.
(2) JOINT OBLIGATION. If there be more than one tenant, the
obligations hereunder imposed shall be joint and several.
(3) TIME. Time is of the essence of this Lease and each and
all provisions in which performance is a factor.
(4) PARAGRAPH HEADINGS. The paragraph headings of this Lease
are not a part of this Lease and shall have no effect upon the
construction or interpretation or any part hereof.
<PAGE>
19
(5) SUCCESSORS AND ASSIGNS. The covenants and conditions
herein contained, subject to the provisions as to assignment, apply
to and bind the heirs, successors, executors, administrators, and
assigns of the parties hereto.
(6) RECORDATION. Neither Landlord nor Tenant shall record
this Lease, but a short form memorandum hereof may be recorded at
the request of Landlord.
(7) QUIET POSSESSION. Upon Tenant paying the rent reserved
hereunder and performing all of the covenants, conditions, and
provisions on Tenant's part to be observed and performed hereunder,
Tenant shall have quiet possession of the Premises for the entire
term hereof, subject to all the provisions of this Lease.
(8) LATE CHARGES. Tenant hereby acknowledges that late payment
by Tenant to Landlord of rent or other sums due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact
amount of which will be extremely difficult to ascertain. Such
costs include but are not limited to processing and accounting
charges and late charges which may be imposed upon Landlord by
terms of any mortgage or trust deed covering the Premises. Accordingly,
if any installment of rent or any sum due from Tenant should not be
received by Landlord or Landlord's designee within 30 days after
written notice that said amount is past due, then Tenant shall pay
to Landlord a late charge equal to 10% of such overdue amount, plus
any attorney's fees incurred by Landlord by reason of Tenant's
failure to pay rent and/or other charges when due hereunder. The
parties hereby agree that such late charges represent a fair and
reasonable estimate of the cost that Landlord will incur by reason
of the late payment by Tenant. Acceptance of such late charges 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 of the other rights and remedies granted hereunder.
(9) PRIOR AGREEMENTS. This Lease contains all of the
agreements of the parties hereto with respect to any matter covered
or mentioned in this Lease and no prior agreements or
understandings pertaining to any such matters shall be effective
for any purpose. No provisions of this Lease may be amended or
added to except by agreement in writing signed by the parties
<PAGE>
20
hereto or their respective successors in interest. This Lease shall
not be effective or binding upon any party until fully executed by
both parties hereto.
(10) INABILITY TO PERFORM. This Lease and the obligations of
Tenant hereunder shall not be affected or impaired because Landlord
is unable to fulfill any of its obligations hereunder or is delayed
in doing so, if such inability or delay is caused by reason of
strike, labor troubles, acts of God, or any other cause beyond the
reasonable control of the Landlord.
(11) PARTIAL INVALIDITY. Any provision of this Lease which
shall prove to be invalid, void, or illegal shall in no way affect,
impair, or invalidate any other provision hereof and such other
provision shall remain in full force and effect.
(12) CUMULATIVE REMEDIES. No remedy of election hereunder shall
be deemed exclusive but shall whenever possible be cumulative with
all other remedies at law or in equity.
(13) CHOICE OF LAW. This Lease shall be governed by the laws of
the state in which the Premises are located.
(14) ATTORNEYS' FEES. In the event of any action or proceeding
brought by either party against the other under this Lease, the
prevailing party shall be entitled to recover for the fees of its
attorneys in such action or proceeding, including costs of appeal,
if any, in such amount as the court may adjudge reasonable as
attorneys' fees. In addition, should it become necessary for
Landlord to employ legal counsel to enforce any of the provisions
herein contained, Tenant agrees to pay all attorneys' fees and
court costs reasonably incurred. For the purposes of this
provision, the terms "action" or "proceeding" shall include
arbitration, administrative, bankruptcy, and judicial proceedings
including appeals therefrom.
(15) SALE OF PREMISES BY LANDLORD. In the event of any sale of
the Premises by Landlord, Landlord shall be and is hereby entirely
freed and relieved of all liability under any and all of its
covenants and obligations contained in or derived from this Lease
arising out of any act, occurrence, or omission of Landlord
occurring after the consummation of such sale; provided that the
purchaser, at such sale or any subsequent sale of the Premises by
written agreement
<PAGE>
21
between the parties or their successors in interest or between the
parties and any such purchaser, agrees to assume and to carry out
any and all of the covenants and obligations of Landlord under this
Lease.
(16) REAL ESTATE COMMISSION. Tenant warrants that no real
estate broker or agent has been employed or is entitled to receive
any commission of fee with respect to this transaction other than
the brokers or agents to whom Landlord has consented by written
agreement. Tenant shall indemnify and save Landlord harmless from
the claims of any real estate brokers or agents with whom Tenant
may have dealt with respect to this transaction, other than as so
consented to by Landlord. Landlord acknowledges that the firm of
Grubb & Ellis Commercial Brokerage is entitled to receive a real
estate commission from Landlord with respect to this transaction.
(17) EXECUTION. This Lease has been executed in several
counterparts, each of which shall be deemed an original instrument.
(18) NOTICES. All notices to be given hereunder shall be deemed
to have been given when given in writing by depositing the same in
the United States mail, postage prepaid, registered or certified,
and addressed to the party at the respective mailing address as
herein set forth.
To Landlord at:
95 Riverside Park Limited Partnership
c/o Park Properties Management Company
310 Leschi Lakecenter
140 Lakeside Avenue
Seattle, Washington 98122
To Tenant at:
Maruyama U.S., Inc.
15436 N.E. 95th Street
Redmond, Washington 98052
It is understood that each party may change the address to which notices may
be sent by giving a written notice of such change to the other party hereto
in the manner herein provided.
<PAGE>
22
30. RIGHTS OF FIRST REFUSAL
For the term of this Lease, including any extensions thereof, and
provided that Tenant is not in default as determined by Landlord under any of
the terms, conditions or covenants of this Lease, Landlord shall extend to
Tenant the right of first refusal on all, but not a portion of, the 3,200
square feet of space adjacent to the premises ("Option Space"). The Option
space is shown on the attached Exhibit B. At such times as the Option Space
is vacant and Landlord has an offer to lease such space, Landlord shall
notify Tenant of the offer being made by a third party, including
commencement date, term, minimum rent, additional rent, rent abatement
provisions and other material terms, and Tenant shall have five (5) days
(from receipt of written notice) in which to notify Landlord of its desire to
match such offer. At the end of the 5-day notice period, Tenant's right of
first refusal shall expire as to that offer.
31. OPTION TO RENEW
Provided that Tenant is not in default as determined by Landlord under
any of the terms, conditions and covenants of this Lease, Tenant shall have
the right to extend the term of this Lease for an additional two (2) year
term by giving Landlord not less than one hundred eighty (180) days written
notice. The minimum rent during such extension term shall be at market rate
for comparable space in the Redmond area at the time of such renewal;
additional rent and other terms and conditions shall be as provided herein.
In no event, however, shall the minimum rate be less than that payable by
Tenant during the immediately preceding year of the lease term.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day
and year first above written.
TENANT LANDLORD
MARUYAMA U.S., INC. 95 RIVERSIDE PARK
LIMITED PARTNERSHIP
/s/ Tiazo Imanishi /s/ Paul R. Morgan
- -------------------------- -----------------------------
By: Taizo Imanishi By: Paul R. Morgan
----------------------- Its: General Partner
Its: President
-------------------
<PAGE>
23
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this day personally appeared before me Taizo Imanishi, President of
Maruyama U.S., Inc., a Washington corporation, the corporation that executed
the foregoing instrument, and acknowledged the said instrument to be the free
and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that he/she was authorized to executed
the said instrument.
GIVEN under my hand and official seal this 4th day of February, 1986.
/s/ Karen L. Kiel
-------------------------------------
NOTARY PUBLIC in and for the State
of Washington residing at Renton
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this day personally appeared before me Paul R. Morgan, General Partner
of 95 Riverside Park Limited Partnership, a Washington limited partnership,
the limited partnership that executed the foregoing instrument, and
acknowledged the said instrument to be the free and voluntary act and deed of
said limited partnership, for the uses and purposes therein mentioned, and on
oath stated that he was authorized to executed the said instrument.
GIVEN under my hand and official seal this 11th day of March, 1986.
/s/ Diane L. Steffan
-------------------------------------
NOTARY PUBLIC in and for the State
of Washington residing at Renton
<PAGE>
24
CERTIFICATE OF OFFICER OF TENANT
The undersigned hereby certified that he or she is the duly elected,
qualified, and acting President/Secretary/other of Maruyama U.S., Inc., a
corporation organized under the laws of the State of Washington; that he or
she was duly elected to such office by the Directors of such corporation on
Feb 3, 1986; that since his or her election he or she has continued to serve
and presently serves in such office and that he or she is fully authorized to
execute for and on behalf of and in the name of the corporation that certain
Lease dated Feb. 4, 1986 between the Maruyama U.S., Inc. as Tenant, and 95
Riverside Park Limited Partnership, as Landlord.
IN WITNESS WHEREOF, the undersigned has set his or her hand and caused
the seal of the corporation to be affixed hereto this 4th day of February
1986.
/s/ [Taizo Imanishi]
-------------------------------------
Subscribed and sworn to before me this 4th day of February, 1986.
/s/ Karen L. Keil
-------------------------------------
NOTARY PUBLIC in and for
State of Washington
Residing at Renton
<PAGE>
EXHIBIT A
PARCEL A
Lots 1 through 4, inclusive, City of Redmond Short Plat No. SS-82-20,
recorded under King County Recording No. 8209150764, being formerly known as
Lot 13, Willows Industrial Center, according to the plat recorded in Volume
103 of Plats, pages 2 through 5, inclusive, in King County, Washington.
PARCEL B
A 30 foot easement for ingress, egress and utilities, as established by
instruments recorded under Recording Nos. 8209150764 and 8212060396, over,
under and across the following described parcel:
Commencing at the Northeast corner of Lot 13, Willows Industrial Park,
according to the plat recorded in Volume 103 of Plats, pages 2 through 5, in
King County, Washington, said point being the true point of beginning; thence
along the East line of said Lot 13 and along the arc of a curve to the right
having a radius of 1,923.50 feet, a delta of 0 DEG. 13'54", a chord bearing
of South 8 DEG. 27'33" East, a chord length of 2.18 feet, an arc length of
2.18 feet; thence South 89 DEG. 47'24" West 578.64 feet to the West line of
said Lot 13 and the Easterly margin of 153rd Avenue Northeast; thence along
said margin North 0 DEG. 14'35" West 23.08 feet to the corner common to Lots
12 and 13 of said plat; thence continuing along said margin and the West line
of said Lot 12 North 0 DEG. 14'35" West 6.93 feet; thence departing said
margin North 89 DEG. 47'24" East 574.09 feet to the East line of said Lot 12
and a point on a curve; thence a long an arc of a curve to the right having a
radius of 1,923.50 feet, a delta of 0 DEG. 50'21", a chart bearing South 3
DEG. 54'40" East, a chord length of 28.17 feet, an arc length of 28.17 feet
to the Northeast corner of said Lot 13 and the true point of beginning;
EXCEPT that portion thereof lying within Parcel A described above.
<PAGE>
EXHIBIT C
SIGNAGE SPECIFICATIONS
1. 16" letter height for up to 15 letters of signage with logo or,
2. if more than 12 letters, 12" letter height, up to 20 letters and,
3. consistent with the signage at Unigard.
Letters must be applied, raised letters not painted on the building.
<PAGE>
EXHIBIT D
TENANT IMPROVEMENTS
The following is a description of the tenant improvements to be provided for
Maruyama in accordance with the drawings provided.
Office Description
- ------------------
Ceilings: Suspended 2 x 4 grid system with standard
acoustical tile
Wall: Painted gyp-board (color to be selected by
tenant)
Floors: Glu-down carpeting in office areas and sheet
vinyl in restrooms
Base: 4" rubber base in carpted areas and vinyl cove
base in restrooms
Doors: Stain grade solid core, birch wood doors,
finished with stain and varnish (3' x 7')
Frames: Stain grade wood frames finished with stain and
varnish
Interior Window: Single pane at conference room
Restrooms: Two per handicapped code
Heat: Air conditioned
Electrical Outlets: As shown on plans
Telephone Outlets: As shown on plans
Lights: 2 x 4 fluorescent fixtures (65 f.c.)
Signage: Provided by Landlord with Tenant's name and logo
to be placed on the exterior of the building above
the office entry, per building standards
Insulation: R-19 over suspended ceiling and R-11 at
perimeter walls of office area only
Counter/Cabinet: Located in conference room with cabinet portion
at either end
Counter/Cabinet w/sink: Located adjacent to restrooms with lower area
cabinet
<PAGE>
EXHIBIT D
page -2-
Sprinkling: Provided in accordance with code requirements
Plumbing: One men's and one women's restroom with fixtures
as shown on plans (toilets to be tank type)
Warehouse Description
- ---------------------
Ceilings: Open to structure
Lights: Hook up existing fluorescent lighting,
reposition for work bench & workstation
Walls: Concrete and gyp board unpainted
Water: Exterior water bib at northeast bay
Floors: Sealed concrete
Heat: Space heaters for freeze protection
Sprinklered: Yes, to meet code requirements
Door System: Dock-high and drive-in, buzzer by main door
Office Window: Sliding glass window for warehouse work station
Construction to be substantially completed not later than March 15, 1986.
<PAGE>
1
1. PARTIES
This Lease is entered into this 21st day of March, 1986, by and between
95 Riverside Park Limited Partnership, a Washington limited partnership
(hereinafter designated "Landlord") and Maruyama U.S., Inc., a Washington
corporation (hereinafter designated "Tenant").
2. PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
that certain space (hereinafter designated the "Premises") containing
approximately 5,600 square feet of floor area. The Premises constitute a
portion of a building (the "Building") located at 15436 N.E. 95th Street,
Redmond, Washington 98052 and situated upon the real property legally
described on Exhibit A attached hereto and incorporated herein by this
reference (the "Land"). (The term "Project" as used in this Lease means the
improvements constructed or which may be constructed upon the Land from time
to time, including, without limitation, the Building.) The Premises are shown
on Exhibit B (drawing dated February 4, 1986) attached hereto and
incorporated herein by this reference. The Landlord will build out the
Premises at its won expense pursuant to the specifications, terms, and
conditions shown in Exhibit D.
The following areas adjacent or located in or on the Premises Building,
Project or Land shall constitute common areas available for Tenant's
non-exclusive use including without limitation: walkways, hallways,
stairways, driveways, lavatories, landscaped areas and grounds, parking
areas, and all other areas used in common by the tenants, landlord, invitees
and employees of the Tenants of the Building and the Project.
All common areas shall be subject to Landlord's sole management and control
and shall be operated and maintained in such manner as Landlord, in its sole
discretion shall determine. Landlord may, from time to time in Landlord's
sole discretion alter, modify or change the dimensions and location of the
common areas.
3. LEASE TERM AND COMMENCEMENT DATE
This Lease shall be for three years and shall commence on March 21, 1986
(the "Commencement Date") and shall end on March 20, 1989. Landlord shall not
be liable for failure to give possession of the Premises on the Commencement
Date by reason of the fact that the Premises are not ready for occupancy, or
due to a prior tenant wrongfully holding over or any other persons wrongfully
occupying the Premises or for any other reason. In such event, payment of
rent and other charges hereunder shall not commence until the day
<PAGE>
2
that possession is given or is available to Tenant and the Commencement Date
shall be postponed until that day. Notwithstanding the foregoing, if Landlord
shall not have delivered possession of the Premises by within 180 days from
the commencement date, Tenant may at Tenant's option by notice in writing to
Landlord within ten (10) days thereafter, cancel this Lease. If either party
cancels the Lease as herein provided, the Landlord shall return any and all
monies previously deposited or paid by Tenant and the parties shall each be
discharged and released from all obligations hereunder. If possession is
delayed the termination date shall be postponed so that the length of the
Lease term remains as provided for hereinabove.
4. RENT
Tenant shall pay rent to Landlord as follows:
(1) Tenant agrees to pay Landlord as minimum rent, without
notice or demand, the monthly sum $2,750.00 beginning 120 days after
the date of possession (July 1, 1986, if date of possession is March 1,
1986) in advance on or before the first day of each month of the lease
term, except that the first month's rent shall be paid upon the
execution hereof. Rent for any portion during the term hereof which is
for less than one month shall be a prorated portion of the monthly
installment herein, based on a 30-day month. All rent shall be paid to
Landlord without deduction or offset in lawful money of the United
States of America at such place as Landlord may from time to time
designate in writing.
(2) Additional charges as described below shall be deemed
additional rent and shall be paid at the same time and in accordance
with the terms of this paragraph. In the event that any rent, either
minimum or additional rent, is not paid when due, interest at the rate
of 3% per annum above the publicly announced prime rate charged by
Seattle-First National Bank from time to time shall accrue from the
date due until all rent and interest has been paid in full. Acceptance
by Landlord of partial payment of rent and/or interest thereon shall
not constitute a waiver of any remaining unpaid rent and/or interest.
5. SECURITY DEPOSIT
Tenant has deposited with Landlord the sum of $2,750. Said sum shall be
held by Landlord as security for the faithful performance by Tenant of all
their terms, covenants, and conditions of this Lease to be kept and performed
by
<PAGE>
3
Tenant during the term hereof. If Tenant defaults with respect to any
provision of this Lease, including, but not limited to, the provisions
relating to payment of rent, Landlord may (but shall not be required to) use,
apply, or retain all or any part of this security deposit for payment of rent
or any other sum in default or for the payment of any amount which Landlord
may spend or become obligated to spend by reason of Tenant's default or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of said deposit is so used or
applied, Tenant shall, within five days after written demand thereof, deposit
cash with Landlord in an amount sufficient to restore the security deposit to
its original amount and Tenant's failure to do so shall be a default under
this Lease. Landlord shall not be required to keep the security deposit
separate from its general funds. Tenant shall receive any and all interest
accruing on such deposit. If Tenant shall fully and faithfully perform every
provision of this Lease to be performed by it, the security deposit or any
balance thereof shall be returned to Tenant or, at Landlord's option, to the
last assignee of Tenant's interest hereunder (within 10 days following
expiration of the lease term). In the event of termination of Landlord's
interest in this Lease, Landlord shall transfer said deposit to Landlord's
successor in interest. The use by Landlord of all or a portion of the
security deposit shall not constitute a limitation on Tenant's liability.
6. USE OF PREMISES
Tenant's use and occupancy of the Premises shall be for warehousing of
agricultural sprayers and repair, maintenance and storage of products and
equipment and other activities related to Tenant's business and related
office functions. Tenant shall not use or permit the Premises to be used for
any other purpose without the prior written consent of Landlord. At least
five parking stalls in the parking areas adjacent to the Premises shall be
available to Tenant as shown on Exhibit B, with access thereto, and shall be
used for vehicle parking only and not for storage, and garbage and refuse
awaiting collection shall be stored only in dumpster-type containers which
shall be placed in areas away from public view.
7. ADDITIONAL RENT
In addition to the minimum rent provided in subparagraph 4 (1)
hereinabove, the commencing at occupancy, Tenant shall pay to Landlord the
following items, herein called additional rent:
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 21st day of January, 1997, before me, the undersigned, a Notary
Public in and for the State of Washington, duly commissioned and sworn
personally appeared Kirby J. Mitchell, known to me to be the VP-Controller of
Maruyama U.S., Inc., the corporation that executed the foregoing instrument,
and acknowledged the said instrument to be the free and voluntary act and
deed of said corporation, for the purposes therein mentioned, and on oath
stated that he was authorized to execute said instrument.
I certify that I know or have satisfactory evidence that the person
appearing before me and making this acknowledgement is the person whose true
signature appears on this document.
WITNESS my hand and official seal hereto affixed the day and year in the
certificate above written.
Karen E. Ockwell Karen E. Ockwell
-----------------------------------------------------
NOTARY PUBLIC in and for the State of Washington,
residing at Woodinville. My commission expires: 4-8-97
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 17th day of January, 1997, before me, the undersigned, a Notary
Public in and for the State of Washington, duly commissioned and sworn
personally appeared Warren M. Gordon, known to me to be the Chief Financial
Officer of Coinstar, the corporation that executed the foregoing instrument,
and acknowledged the said instrument to be the free and voluntary act and
deed of said corporation, for the purposes therein mentioned, and on oath
stated that Warren M. Gordon was authorized to execute said instrument.
I certify that I know or have satisfactory evidence that the person
appearing before me and making this acknowledgement is the person whose true
signature appears on this document.
WITNESS my hand and official seal hereto affixed the day and year in the
certificate above written.
Mary Lorna Meade
-----------------------------------------------------
NOTARY PUBLIC in and for the State of Washington,
residing at Issaquah. My commission expires: 3-13-2000
[SEAL]
<PAGE>
EXHIBIT B
---------
Exhibit B to Sublease dated January 15, 1996, by and between Maruyama
U.S., Inc., as Sublessor and Coinstar Inc., as Sublessee.
[FLOOR PLAN]
<PAGE>
CONSENT TO SUBLEASE
UVAG REALTY PARTNERSHIP, as successors in interest to The Equitable Life
Assurance Society of the United States ("Landlord"), as Landlord under that
certain Lease (the "Lease") dated March 21, 1986, as amended by Amendment
Number One, dated April 19, 1988; Amendment No. 2, dated September 5, 1990;
and Amendment No. 3, dated September 1, 1994, by and between Landlord and
MARUYAMA U.S., INC. ("Tenant"), as Tenant, subject to and specifically
conditioned upon the following terms and conditions hereby grants its consent
to the Sublease dated January 15, 1997 made by and between the Tenant, as
Sublessor, and COINSTAR, INC. ("Sublessee"), as sublessee, a copy of which is
attached hereto as Exhibit A (the "Sublease"), covering certain premises (the
"Premises") as more particularly described in the Sublease, in the building
known as 15436 NE 95th Street, Redmond, Washington 98052.
The capitalized terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Lease. This Consent to Sublease and the
acknowledgment and acceptance of the conditions hereof may be executed in
counterparts, each of which shall be considered an original but constituting
one and the same document.
As conditions to the consent of Landlord to the Sublease, it is understood
and agreed as follows:
1. NO RELEASE. This Consent to Sublease shall in no way release the
Tenant or any person or entity claiming by, through or under
Tenant, including Sublessee, from any of its covenants,
agreements, liabilities and duties under the Lease (including,
without limitation, all duties to cause and keep Landlord and others
named or referred to in the Lease fully insured and indemnified
with respect to any acts or omissions of Sublessee or its agents,
employees or invites or other matters arising by reason of the
Sublease or Sublessee's use or occupancy of the Premises), as the
same may be amended from time to time, without respect to any
provision to the contrary in the Sublease.
2. SPECIFIC PROVISIONS OF LEASE AND SUBLEASE. This Consent to
Sublease consenting to a sublease to Sublessee does not constitute
approval by Landlord of any of the provisions of the Sublease
document or agreement thereto or therewith; nor shall the same be
construed to amend the Lease in any respect, any purported
modifications being solely for the purpose of setting forth the
rights and obligations as between Tenant and Sublessee, but not
binding Landlord.
3. AMENDMENT OF SUBLEASE. Tenant and Sublessee shall not amend in
any respect the Sublease without the prior written approval of
Landlord. In no event shall any such amendment affect or modify or
be deemed to affect or modify the Lease in any respect.
4. LIMITED CONSENT. This Consent to Sublease does not and shall not
be construed or implied to be a consent to any other matter for
which Landlord's consent is required under the Lease, including,
without limitation, any alterations under Section 10 of the Lease.
5. TENANT'S CONTINUING LIABILITY. Tenant shall be liable to
Landlord for any default under the Lease, whether such default is
caused by Tenant or Sublessee or anyone claiming by or through
either Tenant or Sublessee, but the foregoing shall not be deemed
to restrict or diminish any right which Landlord may have against
Sublessee pursuant to the Lease, in law or in equity for violation
of the Lease or otherwise, including, without limitation, the right
to enjoin or otherwise restrain any violation of the Lease by
Sublessee.
6. ACCEPTANCE BY TENANT AND SUBTENANT. Tenant and Sublessee
understand and acknowledge that Landlord has agreed to execute this
Consent to Sublease based upon Tenant's and Sublessee's
acknowledgement and acceptance of the terms and conditions hereof.
<PAGE>
7. SUBORDINATION. The Sublease is, in all respects, subject and
subordinate to the Lease, as the same may be amended. Furthermore,
in the case of any conflict between the provisions of this Consent
to Sublease or the Lease and the provisions of the Sublease, the
provisions of this Consent to Sublease or the Lease, as the case may
be, shall prevail unaffected by the Sublease.
8. ADDITIONAL RENT. Notwithstanding anything to the contrary herein,
Tenant acknowledges and agrees that Tenant will promptly pay to
Landlord as required under Section 7 of the Lease, and otherwise
comply with the provisions of Section 19 and any other Section of
the Lease which may be relevant to the Sublease. Without limiting
the generality of the foregoing, Tenant specifically agrees to pay
all of Landlord's costs, charges and expenses, including attorneys'
fees, incurred in connection with the Sublease and this Consent to
sublease upon submission of bills therefor, and that the failure to
pay the same upon demand shall be a default under the Lease.
9. TERMINATION OF LEASE. If at any time prior to the expiration of
the term of the Sublease the Lease shall terminate or be terminated
for any reason (or Tenant's right to possession shall terminate
without termination of the Lease), the Sublease shall simultaneously
terminate. However, Sublessee agrees, at the election and upon
written demand of Landlord, and not otherwise, to attorn to Landlord
for the remainder of the term of the Sublease, such attornment to be
upon all of the terms and conditions of the Lease. The foregoing
provisions of this paragraph shall apply notwithstanding that, as a
matter of law, the Sublease may otherwise terminate upon the
termination of the Lease and shall be self-operative upon such
written demand of the Landlord, and no further instrument shall be
required to give effect to said provisions. Upon the demand of
Landlord, however, Sublessee agrees to execute, from time to time,
documents in confirmation of the foregoing provisions of this
paragraph satisfactory to Landlord in which Sublessee shall
acknowledge such attornment and shall set forth the terms and
conditions of its tenancy. Nothing contained in this paragraph shall
be construed to impair or modify any right otherwise exercisable by
the Landlord, whether under the Lease, any other agreement or in
law.
10. SERVICES. Tenant hereby agrees that Landlord may furnish to the
Premises services requested by Sublessee other than or in addition
to those to be provided under the Lease, and bill the Sublessee
directly for such services for the convenience of and without notice
to Tenant. Sublessee hereby agrees to pay Landlord all amounts which
may become due for such services on the due dates therefor. If
Sublessee shall fail to do so, however, Tenant agrees to pay such
amounts to Landlord upon demand as Additional Rent under the Lease,
and the failure to pay the same upon demand shall be a payment
default under the Lease.
11. NO WAIVER; NO PRIVITY. Nothing herein contained shall be deemed
a waiver of any of the Landlord's rights under the Lease. In no
event, however, shall Landlord be deemed to be in privity of
contract with Sublessee or owe any obligation or duty to Sublessee
under the Lease or otherwise, any duties of Landlord under the Lease
being in favor of, for the benefit of and enforceable solely by
Tenant.
12. NOTICES. Sublessee agrees to promptly deliver a copy to Landlord
of all notices of default and all other notices sent to Tenant under
the Sublease, and Tenant agrees to promptly deliver a copy to
Landlord of all such notices sent to the Sublessee under the
Sublease. All copies of any such notices shall be delivered
personally or sent by United States registered or certified mail,
postage prepaid, return receipt requested, to UVAG Realty
Partnership, 1201 Third Avenue, Fourteenth Floor, Seattle,
Washington 98101, or to such other place or persons as Landlord or
its agent may from time to time designate.
13. RESERVATION OF RIGHTS. This Consent to Sublease shall be deemed
limited solely to the Sublease, and Landlord reserves the right to
consent or to withhold consent
<PAGE>
and all other rights under the Lease with respect to any other
matters including, without limitation, any proposed alterations and
with respect to any further or additional subleases, assignments or
transfers of the Lease or any interest therein or thereto including,
without limitation, a sublease or any assignment of this Sublease.
14. TENANT AND SUBTENANT BOUND. By executing this Consent to Sublease,
Tenant and Sublessee acknowledge and agree to be bound by all of
the terms and conditions of Landlord's consent to the Sublease as
set forth herein.
Dated the 15th day of January, 1997.
LANDLORD:
By: UVAG REALTY PARTNERSHIP
By: UVAG, Inc., a general partner
By: J. L. Neal Date: 1/21/97
--------------------------------- --------------------
Its: Vice President
------------------------------
TENANT:
MARUYAMA U.S., INC.
By: Kirby J. Mitchell Date: 1-20-97
--------------------------------- --------------------
Its: VP-Controller
------------------------------
SUBLESSEE:
COINSTAR, INC.
By: Warren M. Gordon Date: 1-17-97
--------------------------------- --------------------
Its: Chief Financial Officer
------------------------------
<PAGE>
EXHIBIT 10.8
BASIC LEASE INFORMATION
BELLEFIELD OFFICE PARK
OFFICE LEASE
Lease Date: January 29,1997
Landlord: Spieker Properties, L.P.,
a California limited partnership
Address of Landlord: 915 118th Ave. S.E., Suite 110
Bellevue, WA 98004
Tenant: Coinstar,Inc.,
a Delaware corporation
Address of Tenant: 1800 114th Ave. S.E.
Bellevue, Washington 98004
PRIOR TO TENANT'S OCCUPANCY OF BLDG. N: 13231 SE 36th St.,
Suite 200, Bellevue, WA 98006
Contact: Warren M. Gordon
PARAGRAPH 1 Premises: Approximately 46,070 Rentable Square Feet located
in Suite 100, Building "N".
Building: "(TO BE NAMED)" Building "N"; 1800 114TH AVE. S.E.,
Bellevue, WA
Project: That certain office park commonly known as
Bellefield Office Park located in Bellevue,
Washington on the Property containing 14 office
buildings, including the Building, as it may be
changed from time to time.
Property: The real property on which the Building is
located, as more fully and legally described on
Exhibit E attached.
PARAGRAPH 2 Lease Term: SEVEN (7) Years, commencing on SEPTEMBER 1, 1997
and ending on AUGUST 31, 2004.
PARAGRAPH 3 Base Rent: Years 1&2 $84,462.00/month.
Year 3 $86,381.00/month.
Year 4 $88,301.00/month.
Year 5 $90,220.00/month.
Year 6 $92,140.00/month.
Year 7 $94,060.00/month.
PARAGRAPH 27 "Base Year" for Operating Cost: 1997
"Fiscal Year" for Operating Costs: January 1 - December 31
PARAGRAPH 27(C) "Tenant's Share" of Operating Costs: 11.794%
PARAGRAPH 32 Security Deposit: $94,060.00 (SEE ADDENDUM)
The foregoing Basic Lease Information is hereby incorporated into and made a
part of this Lease. Each reference in this Lease to any of the Basic Lease
Information shall mean the respective information set forth above and shall
be construed to incorporate all of the terms provided under the particular
Lease paragraph pertaining to such information. If there is any conflict
between any Basic Lease Information and the Lease, the Lease shall control.
LANDLORD: TENANT:
Spieker Properties, L.P., Coinstar, Inc.,
A California limited partnership a Delaware corporation
By: Spieker Properties, Inc.,
a Maryland corporation
Its: General Partner
/s/ Donald S. Jefferson /s/ Warren M. Gordon
---------------------------- --------------------------------
By: Donald S. Jefferson By: Warren M. Gordon
Its: Senior Vice President Its: Chief Financial Officer
Date: 2/24/97 Date: February 14, 1997
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TABLE OF CONTENTS
PARAGRAPHS DESCRIPTION PAGE NUMBER
Basic Lease Information 1
Table of Contents 1(A)
1. Occupancy 2
2. Term and Possession 2
3. Rent 2
4. Restrictions on Use 3
5. Compliance with Laws 3
6. Alterations 3
7. Repair 4
8. Liens 4
9. Assignment and Subletting 4
10. Insurance and Indemnification 5
11. Waiver of Subrogation 6
12. Services and Utilities 6
13. Estoppel Certificate 7
14. Holding Over 7
15. Subordination 7
16. Rules and Regulations 8
17. Re-Entry by Landlord 8
18. Insolvency or Bankruptcy 8
19. Default 9
20. Damage by Fire, etc. 10
21. Eminent Domain 11
22. Sale by Landlord 11
23. Right of Landlord to Perform 11
24. Surrender of Premises 11
25. Waiver 12
26. Notices 12
27. Rental Adjustments 12
28. Taxes Payable by Tenant 14
29. Abandonment 15
30. Successors and Assigns 15
31. Attorney's Fees 15
32. Security Deposit 15
33. Substitution Space 15
34. Corporate Authority 16
35. Lease Not an Offer 16
36. Brokerage 16
37. Force Majeure 16
38. Certain Rights Reserved by Landlord 16
39. Personal Liability 17
40. Miscellaneous 17
41. Disclosure 18
Addendum
Notarization Page
Exhibit A Rules and Regulations
Exhibit B Outline of Premises
Exhibit C Improvement Agreement
Exhibit C-1 Improvement Space Plan
Exhibit C-2 Notes to Tenant Improvements
Exhibit D Form of Tenant Certificate
Exhibit E Legal Description
Exhibit F Prior Right of Refusal Area
Exhibit G-1 Form of Letter of Credit
Exhibit G-2 Form of Letter of Credit
Exhibit H Janitorial Specifications
Page 1(A)
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LEASE AGREEMENT
THIS LEASE made as of this 29th day of January, 1997, between SPIEKER
PROPERTIES, L.P., A CALIFORNIA LIMITED PARTNERSHIP (HEREINAFTER CALLED
"LANDLORD") AND COINSTAR, INC., A DELAWARE CORPORATION (HEREINAFTER CALLED
"TENANT").
OCCUPANCY 1. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord those premises (hereinafter called "premises")
outlined in red on Exhibit "B" attached hereto and made a part
hereof, specified in the Basic Lease Information. The
premises are located in that certain building commonly known
as 1800 114th Ave. S.E., Bellevue, Washington ("the Building")
and located within Bellefield Office Park ("the Office Park").
Tenant shall use and occupy the premises for general office
purposes, computer software and hardware related research and
development, limited servicing of Tenant's business equipment
and storage of related materials and for no other use or
purpose without the prior written consent of Landlord.
TERM AND 2. (a) The Term of this Lease shall be for the period specified in
POSSESSION the Basic Lease Information (or until sooner terminated as
herein provided). If Landlord, for any reason whatsoever,
cannot deliver possession of the premises to Tenant at the
commencement of the Term, this lease shall not be void or
voidable, nor shall Landlord or its agent be liable to Tenant
for any loss or damage resulting therefrom. In that event,
however, Tenant shall not be liable for any rent until
Landlord delivers possession of the premises to Tenant. If
Landlord tenders possession of the premises to Tenant prior to
the commencement of the term and Tenant chooses to accept such
possession, then the Term and Tenant's obligations hereunder
shall commence on the date that it accepts such possession.
Any failure to deliver possession at the stated commencement
of the term of this lease or delivery of possession prior to
the stated commencement date shall not in any way affect the
obligations of Tenant hereunder or the expiration date hereof.
(b) Landlord agrees to complete the building now under
construction substantially in accordance with the City of
Bellevue permitted set of drawings by Lance Mueller &
Associates dated 11/26/90 as revised 9/5/96 (the "Permitted
Set of Plans") and in accordance with such design and/or other
changes as may be made by Landlord before and/or during the
construction of the Building, as determined by Landlord (and
shall perform the "Building Standard Work" or "Building
Nonstandard Work" in the premises as provided in the separate
Improvement Agreement attached as Exhibit "C" and made a part
hereof) with diligence, subject to events and delays due to
Force Majeure (defined in Paragraph 37). SEE ADDENDUM.
(c) The premises shall be deemed completed and possession
delivered when Landlord has substantially completed the work
to be constructed or installed pursuant to the provisions of
the Improvement Agreement, subject only to the completion of
items on Landlord's/TENANT'S punch list (and exclusive of the
installation of all computer wiring, telephone and other
communications facilities and equipment and other finish work
or decorating work to be performed by or for Tenant). Tenant
shall accept the premises upon notice from Landlord that the
work to be constructed or installed by Landlord pursuant to
the Improvement Agreement has been substantially completed and
Tenant's obligation to pay rent hereunder shall commence on
the earlier to occur of: (I) the date on which such work has
been substantially completed, or (ii) the date on which Tenant
takes possession of any or all of the premises. Landlord shall
use its best efforts to advise Tenant of the anticipated date
of completion at least five (5) days prior to such date, but
the failure to give such notice shall not constitute a default
by Landlord. At Landlord's request, Tenant will execute,
acknowledge and deliver to Landlord a written statement
specifying the commencement date and expiration date of the
Term. SEE ADDENDUM.
RENT 3. (a) Tenant shall pay to Landlord throughout the term of this
lease Base Rent as specified in the Basic Lease Information,
payable in monthly installments in advance on the first day of
each month during every year of the term hereby demised in
lawful money of the United States, without deduction or offset
whatsoever, to Landlord at the address specified in the Basic
Lease Information, or to such other firm or to such other
place as Landlord may from time to time designate in writing.
If this lease commences on a day other than the first day of a
calendar month or ends on a day other than the last day of a
calendar month, the monthly rental for the fractional month
shall be prorated based on a thirty (30) day month. "Rent"
means Base Rent and Tenant's Share of Operating Costs.
(b) Tenant recognizes that late payment of any Rent or other
sum due hereunder from Tenant to Landlord will result in
administrative expense to Landlord, the extent of which
additional expense is extremely difficult and economically
impractical to ascertain. Tenant therefore agrees that if Rent
or any other payment due hereunder from Tenant to Landlord
remains unpaid ten (10) days after the amount is due, the
amount of unpaid Rent or other payment shall be increased by a
late charge to be paid to Landlord by Tenant as additional
rent in an amount equal to five percent (5%) of the amount of
the delinquent rent or other payment. The amount of the late
charge to be paid to Landlord by Tenant on any unpaid Rent or
other payment shall be reassessed and added to Tenant's
obligation for each successive monthly period accruing after
the date on which the late charge is initially imposed.
Tenant agrees that such amount is a reasonable estimate of the
loss and expense to be suffered by Landlord as a result of
such late payment by Tenant and may be charged by Landlord to
defray its loss and expense. The provisions of this paragraph
in no way relieve Tenant of the obligations to pay Rent or other
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payments on or before the date on which they are due, nor do
the terms of this paragraph in any way affect Landlord's
remedies pursuant to Paragraph 19 of this lease if Rent or
other payment is unpaid after the date due.
RESTRICTIONS 4. Tenant shall not do or permit anything to be done in or
ON USE about the premises that will in any way obstruct or
interfere with the rights of other tenants or occupants of
the building or other buildings within the Office park or
injure them, nor use or allow the premises to be used for
any improper, immoral, OR unlawful purpose, nor shall
Tenant cause or maintain or permit any nuisance in, on, or
about the premises. Tenant shall not commit or suffer the
commission of any waste in, on, or about the premises, nor
permit any use of the premises which may be dangerous to
persons or property. Tenant shall not do nor permit
anything to be done on or about the premises or bring or
keep anything therein which will in any way increase the
rate of any insurance upon the Project or any of its
contents or cause a cancellation of or otherwise affect in
any manner any insurance on the Project. No retail sales
shall be permitted upon the premises without the prior
written consent of Landlord.
COMPLIANCE 5. (a) Tenant shall not use the premises or permit anything to
WITH LAWS be done in or about the premises that will in any way
conflict with any law, statute, ordinance, or governmental
rule or regulation now in force or which may hereafter be
enacted or promulgated. Tenant shall at its sole cost and
expense promptly comply with all laws, statutes, ordinances,
and governmental rules, regulations, or requirements now in
force or which may hereafter be in force, and with the
requirements of any board of fire underwriters or other
similar body now or hereafter constituted relating to or
affecting the condition, use or occupancy of the premises,
excluding structural changes not related to or affected by
alterations or improvements made by or for Tenant or
Tenant's acts. The judgment of any court of competent
jurisdiction or the admission of Tenant in an action against
Tenant, whether Landlord be a party thereto or not, that
Tenant has so violated any such law, statute, ordinance,
rule, regulation, or requirement, shall be conclusive of
such violation as between Landlord and Tenant.
(b) "Accessibility Law" means any local, state or federal
law, regulation, ordinance, order or directive relating to
access, use or enjoyment of the premises by, or employment
there, of disabled persons, or to the removal of any
tangible or intangible barrier or impediment to access, use
or enjoyment of the premises by disabled persons, including
but not limited to, the Americans with Disabilities Act.
(c) Notwithstanding anything in this Lease to the contrary,
Tenant shall make no Tenant Alteration that violates any
provision of any Accessibility Law. Tenant shall not adopt
or otherwise allow to exist any policy or practice related
to its use or occupancy of the premises or the conduct of
its activities thereon that violates any Accessibility Law.
Tenant shall adopt any economically feasible policy or
practice relating to the conduct of its business at the
premises that would cure any existing or future violation of
any Accessibility Law relating to the premises. Tenant
shall bear all cost and expense of performing its duties
under this Paragraph 5. Tenant shall reimburse Landlord on
demand for any cost or expense required to alter any portion
of the Property to comply with any Disability Law as a
result of any Tenant Alteration.
(d) Notwithstanding any contrary provision of this Lease,
Landlord shall have no obligation to approve any Tenant
Alteration if Landlord, in its reasonable sole discretion
determines that the Tenant Alteration would obligate
Landlord to make alterations of or additions to any part of
the Property in order to comply with any Accessibility Law,
unless Tenant agrees to make such alterations or additions
at its cost in the manner provided for other Tenant
Alterations and Tenant deposits with Landlord before
undertaking the design or construction of such alterations a
sum equal to Landlord's estimate of the total costs of
designing and construction of such alterations.
(e) If any claim is asserted against Landlord under any
Accessibility Law relating directly or indirectly to any
violation by Tenant of any of the provisions of this
Paragraph 5, Tenant shall defend, indemnify and hold
harmless Landlord from and against any claims, charges,
liabilities, obligations, penalties, damages, judgments,
costs and expenses (including attorneys fees) arising
directly or indirectly from such violation. Landlord has
made no covenant, representation or warranty regarding the
compliance or extent of noncompliance of any portion of the
Project with any Accessibility Law and hereby disclaims any
implied warranties with respect thereto, including any
implied warranty of habitability or fitness for a particular
purpose. No approval by Landlord of any plans or
specifications for any Tenant Alterations, or failure to
disapprove any such plans, specifications or Tenant
Alterations shall constitute a representation or warranty by
Landlord, whether express or implied, that such plans will
comply with any Accessibility Law. SEE ADDENDUM.
ALTERATIONS 6. Tenant shall not make or suffer to be made any alterations,
additions, or improvements (an "Alteration") in, on, or to
the premises or any part thereof without the prior written
consent of Landlord, which consent shall not be unreasonably
withheld or delayed and Landlord's prior written consent
shall not be required for shelving, whiteboards and bulletin
boards, and similar items; and any such Alteration in, on or
to said premises, except for Tenant's movable furniture and
equipment, shall immediately become Landlord's property and,
at the end of the term hereof, shall remain on the premises
without compensation to Tenant. In the event Landlord
consents to the making of any such Alteration by Tenant, the
same shall be made by Tenant, at Tenant's sole cost and
expense, in
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accordance with plans and specifications approved by
Landlord, and any contractor or person selected by Tenant to
make the same must first be approved in writing by
Landlord. At the time Landlord gives its consent to the
making of any such alterations, Landlord shall designate if
said alterations are to be removed by Tenant upon the
expiration or sooner termination of the Lease Term. Upon
the expiration or sooner termination of the Term, Tenant
shall upon demand by Landlord, at Tenant's sole cost and
expense forthwith and with all due diligence remove any or
all Alterations made by or for the account of Tenant,
designated by Landlord to be removed, and Tenant shall
forthwith and with all due diligence, at its sole cost and
expense, repair and restore the premises to their original
condition, normal wear and tear excepted.
REPAIR 7. By taking possession of the premises, Tenant accepts the
premises as being in the condition in which Landlord is
obligated to deliver them (excepting completion of punch
list items pursuant to Exhibit C and Paragraph 2 of this
Lease) and otherwise in good order, condition and repair.
Tenant shall, at all times during the Term at Tenant's sole
cost and expense, keep the premises and every part thereof
in good order, condition and repair, reasonable wear and
tear excepted. Tenant shall upon the expiration or sooner
termination of the Term, surrender to Landlord the premises
and all repairs, changes, alterations, additions, and
improvements thereto, neat and clean and in the same
condition as when received except for reasonable wear and
tear as reasonably determined by Landlord. Tenant agrees
that Landlord has no obligation to alter, remodel, improve,
repair, decorate, or paint the premises or any part thereof
except as specified in Exhibit "C", Exhibit C-1, OR Exhibit
C-2, and that no representations respecting the condition of
the premises, the Building or the Project have been made by
Landlord to Tenant, except as specifically set forth in this
Lease.
LIENS 8. Tenant shall keep the premises free from any liens arising
out of any work performed, material furnished, or
obligations incurred by Tenant. In the event that Tenant
shall not, within ten (10) days following the imposition of
any such lien, cause the same to be released of record by
payment or posting of a proper bond, Landlord shall have, in
addition to all other remedies provided in this Lease and by
law, the right, but no obligation, to cause the same to be
released by such means as it deems proper, including payment
of the claim giving rise to such lien. All sums paid by
Landlord and all expenses incurred by it in connection
therewith shall be considered additional rent and shall be
payable to it by Tenant on demand with interest at the rate
payable of twelve percent (12%) per annum or four percent
(4%) above the prime rate of Seattle First National Bank,
whichever is more (the "Default Rate"). Landlord shall have
the right at all times to post and keep posted on the
premises any notices permitted or required by law, or which
Landlord shall deem proper, for the protection of Landlord,
the premises, the Project, and any other party having an
interest therein, from mechanics' and materialmen's liens.
Tenant shall give Landlord at least five (5) business days'
notice before commencing any construction on the premises.
ASSIGNMENT 9. (a) Tenant shall not sell, assign, encumber or otherwise
AND transfer by operation of law or otherwise this Lease or any
SUBLETTING interest herein, sublet the premises or any part thereof, or
suffer any person to occupy or use the premises or any
portion thereof, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld
or delayed, as provided herein, nor shall Tenant permit any
lien to be placed on the Tenant's interest by operation of
law. A transfer by the present majority shareholders of
ownership and control of the voting stock of a corporate
tenant, or a transfer of a controlling interest in a
partnership or proprietorship, as applicable, shall be
deemed an assignment for the purposes of this paragraph.
Tenant shall, by written notice, advise Landlord of its
desire from and after a stated date (which shall not be less
than thirty (30) days nor more than ninety (90) days after
the date of Tenant's notice), to assign this Lease or sublet
the premises or any portion thereof for any part of the
Term. Landlord shall have the right, to be exercised by
giving written notice to Tenant ten (10) days after receipt
of Tenant's notice and subject to the limitations in the
Addendum, to terminate this Lease as to the portion of the
premises described in Tenant's notice and such notice shall,
if given, terminate this Lease with respect to the portion
of the premises therein described as of the date stated in
Tenant's notice and sums payable by Tenant under this Lease
shall be prorated to that date. If Tenant proposes to
sublet only a portion of the Premises and Landlord exercises
its right to recapture that portion, the effective date of
recapture by Landlord shall be the effective date of the
proposed subletting, and on such date:
(i) That portion shall not be a part of the
premises;
(ii) The Base Rent payable under this Lease shall be
reduced by the per rentable square foot rental
rate payable for such portion multiplied by the
number of rentable square feet in such portion;
(iii) Tenant's Share of Operating Costs and Real
Estate Taxes shall be reduced proportionately;
and
(iv)
Landlord shall at its sole cost and expense do
all that is necessary to separate the remainder
of the Premises from the portion recaptured by
Landlord.
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Said notice by Tenant shall state the name and address of the
proposed assignee or subtenant, and Tenant shall deliver to
Landlord a true and complete copy of the proposed assignment
or sublease with said notice. If Tenant's notice specifies
all of the premises and Landlord elects to terminate this
Lease, this Lease shall terminate on the date stated in
Tenant's notice. If Landlord, upon receiving Tenant's notice
with respect to any of the premises, shall not exercise its
right to terminate, Landlord will not unreasonably withhold
its consent to Tenant's subletting the premises specified in
said notice. SEE ADDENDUM.
(b) Any assignment or subletting by Tenant shall not result in
Tenant being released or discharged from any liability under
this Lease. As a condition to Landlord's prior written
consent as provided for in this paragraph, the subtenant or
assignee shall agree in writing to comply with and be bound by
all of the terms, covenants, conditions, provisions, and
agreement of this Lease (except Rent in the case of a
sublease), and Tenant shall deliver to Landlord, promptly
after execution, an executed copy of each assignment and
sublease and the agreement to comply of the assignee or
sublessee.
(c) Landlord's consent to any sale, assignment, encumbrance,
subletting, occupation, lien or other transfer shall not
release Tenant from any of Tenant's obligations under this
Lease or be deemed to be a consent to any subsequent
occurrence. Any sale, assignment, encumbrance, subletting,
occupation, lien or other transfer of this Lease which does
not comply with the provisions of this Paragraph 9 shall be
void.
(d) The joint and several liability of Tenant named in this
Lease and any immediate and remote successor in interest of
Tenant (by assignment or otherwise), and the due performance
of the obligations of this Lease on Tenant's part to be
performed or observed, shall not in any way be discharged,
released or impaired by any (a) agreement which modifies any
of the rights or obligations of the parties under this Lease,
(b) stipulation that extends the time within which an
obligation under this Lease is to be performed, (c) waiver of
the performance of an obligation required under this Lease, or
(d) failure to enforce any of the obligations set forth in
this Lease.
(e) Without limiting any of the provisions of this Paragraph
9, if Tenant has entered into any sublease of any portion of
the premises, the voluntary or other surrender of this Lease
by Tenant, or a mutual cancellation by Landlord and Tenant,
shall not work a merger, and shall, at the option of Landlord,
terminate all or any existing subleases or subtenancies or, at
the option of Landlord, operate as an assignment to Landlord
of any or all such subleases or subtenancies.
INSURANCE 10. (a) Landlord shall not be liable to Tenant and Tenant hereby
AND waives all claims against Landlord for any injury or damage to
INDEMNIFICA- any person or property in or about the premises by or from any
TION cause whatsoever, other than Landlord's negligence or willful
acts or omissions, and, without limiting the generality of the
foregoing, whether caused by water leakage of any character
from the roof, walls, basement, or any other portion of the
premises, the Building, or the Office Park, or caused by gas,
fire, oil, or electricity in or about the premises, the
Building or the Project.
(b) Tenant shall indemnify, defend and hold Landlord harmless
from and against any and all claims or liability for any
injury or damage to any person or property whatsoever: (i)
occurring in, on, or about the premises or any part thereof,
(ii) occurring in, on, or about any facilities in the Office
Park (including, without prejudice to the generality of the
term "facilities", elevators, stairways, passageways, or
hallways), the use of which Tenant may have in conjunction
with other tenants of the Building or the Office Park, when
such injury or damage shall be caused in part or in whole by
the act, neglect, fault of, or omission of any duty with
respect to the same by Tenant, its agents, servants,
employees, or invitees. Tenant further agrees to indemnify and
hold harmless Landlord against and from any and all claims by
or on behalf of any person, firm or corporation, arising from
the conduct or management of any work or thing whatsoever done
by the Tenant in or about or from transactions of the Tenant
concerning the premises, and will further indemnify and hold
Landlord harmless against and from any and all claims arising
from any breach or default on the part of the Tenant in the
performance of any covenant or agreement of this Lease on the
part of the Tenant, or any of its agents, contractors,
servants, employees, or licensees and all costs, counsel fees,
expenses and liabilities incurred in connection with any such
claim or action or proceeding brought thereon. If any action
or proceeding is brought against Landlord by reason of any
claim or liability, Tenant agrees to defend such action or
proceeding at Tenant's sole expense by counsel reasonably
satisfactory to Landlord. The provisions of this Paragraph 10
shall survive the expiration or termination of this Lease with
respect to any claims or liability occurring prior to such
expiration or termination.
(c) The indemnification obligations contained in this
Paragraph 10 shall not be limited by any worker's
compensation, benefit or disability laws, and each
indemnifying party hereby waives any immunity that said
indemnifying party may have under the Industrial Insurance
Act, Title 51 RCW and similar worker's compensation, benefit
or disability laws. LANDLORD AND TENANT ACKNOWLEDGE BY THEIR
EXECUTION OF THIS LEASE THAT EACH OF THE INDEMNIFICATION
PROVISIONS OF THIS LEASE (SPECIFICALLY INCLUDING BUT NOT
LIMITED TO THOSE RELATING TO WORKER'S COMPENSATION BENEFITS
AND LAWS) WERE SPECIFICALLY NEGOTIATED AND AGREED TO BY
LANDLORD AND TENANT.
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(d) Landlord shall not be liable for injury to Tenant's
business or loss of income or from damage which may be
sustained by the person, goods, wares, merchandise or property
of Tenant, its authorized representatives, or any other person
in or about the premises, caused by or resulting from fire,
steam, electricity, gas, water or rain, which may leak or flow
from or into any part of the premises, or from the breakage,
leakage, obstruction or other defects of the pipes,
sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures of the same, whether the damage or injury
resulting from conditions arising upon the premises or upon
other portions of the Building or the Project unless such
injury or damage is caused by the negligence or intentional
acts of Landlord or its authorized representatives.
(e) Tenant agrees to purchase at its own expense and to keep
in force during the term of this lease a policy or policies of
worker's compensation and commercial general liability
insurance, including personal injury and property damage,
endorsed to state the insurance is primary over any insurance
carried by Landlord, and to include coverage for
premises/operations, independent contractors and contractual
liability in the amount of TwoMillion Dollars ($2,000,000)
combined single limit. The policies shall: (i) name
Landlord as an additional insured and insure Landlord's
contingent liability under this Lease, (ii) be issued by an
insurance company which is acceptable to Landlord and licensed
to do business in the State of Washington and (iii) provide
that such insurance shall not be canceled unless thirty (30)
days' prior written notice shall have been given to Landlord.
The policy or policies or certificates thereof shall be
delivered to Landlord by Tenant upon commencement of the term
of the Lease and upon each renewal of said insurance.
WAIVER OF 11. Landlord and Tenant hereby waive any right that each may have
SUBROGATION against the other on account of any loss or damage arising in
any manner which is covered by policies of insurance for fire
and extended coverage, theft, public liability, workmen's
compensation or other insurance now or hereafter existing
during the term hereof, provided, however, the parties each
shall first have their respective insurance companies waive
any rights of subrogation that such companies may have against
Landlord or Tenant, as the case may be.
SERVICES AND 12. (a) Landlord shall maintain the public and common areas of
UTILITIES the Building and Project, including lobbies, stairs,
elevators, corridors and restrooms, the windows in the
Building, the mechanical, plumbing and electrical equipment
serving the Building, and the structure itself, INCLUDING THE
ROOF, in reasonably good order and condition except for damage
occasioned by the act of the Tenant, which damage shall be
repaired by Landlord at Tenant's expense.
(b) Subject to the rules and regulations of the Project,
Landlord agrees to furnish to the premises during ordinary
business hours (approximately 7:00 a.m. through 6:00 p.m.,
Monday through Friday, holidays excepted) of generally
recognized business days, to be determined by Landlord (but
exclusive, in any event, of Saturdays, Sundays, and legal
holidays), water and electricity suitable for the intended use
of the premises, heat and air conditioning required in
Landlord's reasonable judgment for the comfortable use and
occupation of the premises, janitorial services (substantially
in accordance with the janitorial specifications attached
hereto as Exhibit H) during the times and in the manner that
such services are, in Landlord's reasonable judgment,
customarily furnished in comparable CLASS A office buildings
in the immediate market area, and automatic elevator service
and, subject to all other provisions of this LEASE, including,
but not limited to interruption or failure as herein provided,
water and electricity suitable for the intended use of the
premises twenty-four (24) hours per day, seven (7) days per
week. Landlord shall make heating and air conditioning
available to Tenant's premises twenty four (24) hours per day,
seven (7) days per week, for which Tenant shall be required to
pay Landlord the actual cost, including utilities, supplies,
maintenance and equipment, for after-hours use as determined
by landlord and currently estimated to be $30.00 per hour,
subject to future adjustment. Tenant agrees to keep and cause
to be kept closed all window coverings when necessary because
of the sun's position, and Tenant also agrees at all times to
cooperate fully with Landlord and to abide by all the
regulations and requirements which Landlord may prescribe for
the proper functioning and protection of the heating,
ventilating, and air-conditioning system. Wherever
heat-generating machines, excess lighting or equipment are
used in the premises (beyond the machines, lighting or
equipment installed pursuant to Exhibit C) which affect the
temperature otherwise maintained by the air-conditioning
system, Landlord reserves the right to install supplementary
air-conditioning units in the premises, and the cost thereof,
including the cost of installation and the cost of operation
and maintenance thereof, shall be paid by Tenant to Landlord
upon demand by Landlord. Landlord shall in no event be liable
for any interruption or failure of utility services on the
premises, including, but not limited to, Tenant's
communication cables in the conduit between the Building and
the Maplewood Building.
(c) Tenant will not without the written consent of Landlord
use any apparatus or device in the premises, including without
limitation, electronic data processing machines and machines
using excess
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lighting or current that will in any way increase the amount
of electricity or water usually furnished or supplied for use
of the premises as general office space; nor connect with
electric current, except through existing electrical outlets
in the premises, or water pipes, or installed pursuant to the
requirements of Exhibit C, any apparatus or device for the
purposes of using electrical current or water. Tenant's
reasonable ordinary use of personal computers, computer
printers, facsimile machines and other office equipment does
not constitute an excess use of electrical current as defined
herein, provided use of such machines or equipment is
otherwise in compliance with the provisions of this Lease,
including this Lease Paragraph 12.(c). If Tenant shall
require water or electric current or any other resource in
excess of that usually furnished or supplied for use of the
premises as general office space, Tenant shall first procure
the consent of Landlord which Landlord may refuse, to the use
thereof, and Landlord may cause a special meter to be
installed in the premises to measure the amount of water,
electric current or other resource consumed for any such other
use. The cost of any such meters and of installation,
maintenance, and repair thereof shall be paid for by Tenant,
and Tenant agrees to pay Landlord promptly upon demand by
Landlord for all such water, electric current or other
resource consumed, as shown by said meters, at the rate
charged by the local public utility, furnishing the same, plus
any additional expense incurred in keeping account of the
water, electric current or other resource so consumed.
Landlord shall not be in default hereunder or be liable for
any damages directly or indirectly resulting from, nor shall
the rental herein reserved be abated by reason of (i) the
installation, use or interruption of use of any equipment in
connection with the furnishing of any of the foregoing
utilities and services, (ii) failure to furnish or delay in
furnishing any utilities or services when the failure or delay
is caused by Force Majeure or by the making of repairs or
improvements to the premises or the Building, or (iii) the
limitation, curtailment, rationing, or restriction on use of
water or electricity, gas or any other form of energy or any
other service or utility whatsoever serving the premises or
the Building. Furthermore, Landlord shall be entitled to
cooperate voluntarily in a reasonable manner with the efforts
of national, state or local governmental agencies or utilities
suppliers in reducing energy or other resources consumption.
provided that Tenant otherwise complies with the provisions of
this Lease, including, but not limited to, the provisions of
Exhibit C, Tenant may use and contract with any telephone
company in arranging for telephone and telecommunication
service to the premises, at Tenant's sole cost and expense.
(d) Any sums payable under this Paragraph 12 shall be
considered additional rent and may be added to any installment
of rent thereafter becoming due.
ESTOPPEL 13. (a) Within ten (10) business days following any written
CERTIFICATE request which Landlord may make from time to time, Tenant
shall execute and deliver to Landlord a certificate
substantially in the form attached as Exhibit "D" and made a
part hereof, indicating thereon any exceptions which may exist
at that time. If Tenant fails to execute and deliver such
certificate when due, Tenant shall be deemed to have accepted
the premises and acknowledged that the statements included in
Exhibit "D" are true and correct without exception . Landlord
and Tenant intend that any statement delivered pursuant to
this paragraph may be relied upon by any mortgagee,
beneficiary, purchaser or prospective purchaser of the
Property or any interest therein.
(b) Within ten (10) days following any written request from
Landlord, Tenant shall furnish current financial statements to
Landlord, provided Landlord signs a confidentiality agreement
reasonably satisfactory to both Tenant and Landlord.
HOLDING OVER 14. (a) Any holding over after the expiration of the term of this
Lease with the written consent of Landlord shall be a tenancy
from month to month. The terms, covenants and conditions of
such tenancy shall be the same except that Basic Rent shall be
the then fair market value of the premises as determined by
Landlord, but in no event less than one hundred fifty percent
(150%) of the monthly Base Rent for the last period prior to
the expiration, plus Tenant's Share of increased Operating
Costs. Acceptance by Landlord of rent after such expiration
shall not result in any other tenancy or any renewal of the
term of this Lease, and the provisions of this paragraph are
in addition to and do not affect Landlord's right of re-entry
or other rights provided under this Lease or by applicable law.
(b) If Tenant retains possession of the premises or any part
thereof without Landlord's consent following the expiration or
sooner termination of this Lease for any reason, then Tenant
shall pay to Landlord double the Basic Rent for the last
period prior to the date of such expiration or termination.
Tenant shall also indemnify and hold Landlord harmless from
any loss or liability resulting from delay by Tenant in
surrendering the premises, including, without limitation, any
claims made by any succeeding tenant founded on such delay.
Acceptance of rent by Landlord following expiration or
termination shall not constitute a renewal of this Lease, and
nothing contained in this paragraph shall waive Landlord's
right of re-entry or any other right. Tenant shall be only a
Tenant at sufferance, whether or not Landlord accepts any rent
from Tenant while Tenant is holding over without Landlord's
written consent.
SUBORDINA- 15. Without the necessity of any additional document being
TION executed by Tenant for the purpose of effecting a
subordination, this lease shall be subject and subordinate at
all times to: (a) all ground leases or underlying leases which
may now exist or hereafter be executed affecting the Building
or the land upon which the Building is situated or both, and
(b) the lien of any mortgage or deed of trust which may now
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exist or hereafter be executed in any amount for which said
Building, land, ground leases or underlying leases, or
Landlord's interest or estate in any of said items, is
specified as security. Notwithstanding the foregoing, Landlord
shall have the right to subordinate or cause to be
subordinated any such ground leases or underlying leases or
any such liens to this Lease. If any ground lease or
underlying lease terminates for any reason or any mortgage or
deed of trust is foreclosed or a conveyance in lieu of
foreclosure is made for any reason, Tenant shall,
notwithstanding any subordination, attorn to and become the
Tenant of the successor in interest to Landlord at the option
of such successor in interest. Tenant covenants and agrees to
execute and deliver, upon demand by Landlord and in the form
requested by Landlord, any additional documents evidencing the
priority or subordination of this lease with respect to any
such ground leases or underlying leases or the lien of any
mortgage or deed of trust. Landlord represents that, on the
date of this Lease, there is no Building specific ground
lease, mortgage or deed of trust covering the Building and the
Premises. Provided Tenant is not in default herein and upon
Tenant's request and Tenant's agreement to pay any reasonable
fees incurred by Landlord, Landlord shall use reasonable
efforts to obtain a commercially reasonable non-disturbance
agreement from any future lender or ground lessor providing
that Tenant shall not be disturbed by any foreclosure or
termination of ground LEASE SO LONG AS Tenant is not in
default of this Lease.
RULES AND 16. Tenant shall faithfully observe and comply with the rules and
REGULATIONS regulations attached to this Lease as Exhibit A and all
reasonable modifications thereof and additions thereto from
time to time put into effect by Landlord. Landlord shall not
be responsible for the nonperformance by any other tenant or
occupant of the Project of the rules and regulations; however,
Landlord shall use reasonable efforts to enforce such rules
and regulations equitably against all Tenants.
RE-ENTRY BY 17. Landlord reserves and shall at all times have the right to
LANDLORD re-enter the premises to inspect the same, to supply janitor
service and any other service to be provided by Landlord to
Tenant hereunder, and upon reasonable notice to Tenant, except
in the case of an emergency, in which event no notice shall be
required, to show the premises to prospective purchasers,
mortgagees or tenants, to post notices of nonresponsibility,
and to alter, improve or repair the premises and any portion
of the building of which the premises are a part, without
abatement of rent, and may for that purpose erect, use and
maintain scaffolding, pipes, conduit, and other necessary
structures in and through the premises where reasonably
required by the character of the work to be performed,
provided that entrance to the premises shall not be blocked
thereby, and further provided that the business of Tenant
shall not be interfered with unreasonably. Tenant waives any
claim for damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or
quiet enjoyment of the premises, and any other loss occasioned
thereby; provided, however, that the foregoing Waiver shall
not apply to any act of negligence or willful misconduct by
Landlord, its agents or employees. For each of the aforesaid
purposes, Landlord shall at all times have and retain a key
with which to unlock all of the doors in the premises,
excluding Tenant's vaults and safes, or special security areas
(designated by Tenant in advance), and Landlord shall have the
right to use whatever means Landlord may deem necessary or
proper to open Tenant's doors in an emergency, in order to
obtain entry to any portion of the premises, and any entry to
the premises, or portions thereof obtained by Landlord by any
means, or otherwise, shall not under any circumstances be
construed or deemed to be a forcible or unlawful entry into,
or a detainer of, the premises, or an eviction, actual or
constructive, of Tenant from the premises or any portions
thereof. If required by law, statute, ordinance, rule,
regulation or requirement of any governmental or
quasi-governmental body or by any board of fire underwriters
or similar body, or as otherwise provided in this Lease,
including, but not limited to, during the initial design and
construction of the Building, Landlord shall also have the
right at any time, without the same constituting an actual or
constructive eviction and without incurring any liability to
Tenant therefor, to change the arrangement and/or location of
entrances, passageways, doors and doorways, and corridors,
elevators, stairs, toilets, or other public parts of the
Building and to change the name, number or designation by
which the Project is commonly known.
INSOLVENCY 18. TO THE EXTENT ALLOWED BY LAW: (a) If Tenant becomes a Debtor
OR under Chapter 7 of the Bankruptcy Code ("Code") or a petition
BANKRUPTCY for reorganization or adjustment of debts is filed concerning
Tenant under Chapters 11 or 13 of the Code, or a proceeding is
filed under Chapter 7 of the Code and is transferred to
Chapters 11 or 13 of the Code, the Trustee or Tenant, as
Debtor and as Debtor-In-Possession, may not elect to assume
this Lease unless, at the time of such assumption, the Trustee
or Tenant has:
(i) Cured all defaults under the Lease and paid all sums
due and owing under the Lease or provided Landlord with
"Adequate Assurance" (as defined below) that: (i) within
ten (10) days from the date of such assumption, the
Trustee or Tenant will completely pay all sums due and
owing under this Lease and compensate Landlord for any
actual pecuniary loss resulting from any existing default
or breach of this Lease, including without limitation,
Landlord's reasonable costs, expenses, accrued interest,
and attorneys' fees incurred as a result of the default
or breach; (ii) within twenty (20) days from the date of
such assumption, the Trustee or Tenant will cure all
non-monetary defaults and breaches under this Lease, or,
if the nature of such non-monetary defaults is such that
more than twenty (20) days are reasonably required for
such cure, that the Trustee or Tenant will commence to
cure such non-monetary defaults within twenty (20) days
and thereafter diligently prosecute such cure to
completion; and (iii) the assumption will be subject to
all of the provisions of this Lease.
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(ii) For purposes of this Paragraph, Landlord and Tenant
acknowledge that, in the context of a bankruptcy
proceeding involving Tenant, at a minimum, "Adequate
Assurance" shall mean: (i) the Trustee or Tenant has and
will continue to have sufficient unencumbered assets
after the payment of all secured obligations and
administrative expenses to assure Landlord that the
Trustee or Tenant will have sufficient funds to fulfill
the obligations of Tenant under this Lease; (ii) the
Bankruptcy Court shall have entered an Order segregating
sufficient cash payable to Landlord and/or the Trustee or
Tenant shall have granted a valid and perfected first
lien and security interest and/or mortgage in or on
property of Trustee or Tenant acceptable as to value and
kind to Landlord, to secure to Landlord the obligation of
the Trustee or Tenant to cure the monetary and/or
non-monetary defaults and breaches under this Lease
within the time periods set forth above; and (iii) the
Trustee or Tenant, at the very minimum, shall deposit a
sum equal to two (2) months' Basic Rent to be held by
Landlord (without any allowance for interest thereon) to
secure Tenant's future performance under the Lease.
(b) If the Trustee or Tenant has assumed the Lease pursuant to
the provisions of this Paragraph for the purpose of assigning
Tenant's interest hereunder to any other person or entity,
such interest may be assigned only after the Trustee, Tenant
or the proposed assignee has complied with all of the terms,
covenants and conditions of this Lease, including, without
limitation, those with respect to additional rent. Landlord
and Tenant acknowledge that such terms, covenants and
conditions are commercially reasonable in the context of a
bankruptcy proceeding of Tenant. Any person or entity to
which this Lease is assigned pursuant to the provisions of the
Code shall be deemed without further act or deed to have
assumed all of the obligations arising under this Lease on and
after the date of such assignment. Any such assignee shall
upon request execute and deliver to Landlord an instrument
confirming such assignment.
(c) Upon the filing of a petition by or against Tenant under
the Code, Tenant, as Debtor and as Debtor-In-Possession, and
any Trustee who may be appointed agree to adequately protect
Landlord as follows: (i) to perform each and every obligation
of Tenant under this Lease until such time as this Lease is
either rejected or assumed by Order of the Bankruptcy Court;
(ii) to pay all monetary obligations required under this
Lease, including without limitation, the payment of Basic
Rent, Tenant's Share of the increase in Operating Costs and
any other sums payable by Tenant to Landlord under this Lease
which is considered reasonable compensation for the use and
occupancy of the Premises; (iii) provide Landlord a minimum of
thirty (30) days prior written notice, unless a shorter period
is agreed to in writing by the parties, of any proceeding
relating to any assumption of this Lease or any intent to
abandon the Premises, which abandonment shall be deemed a
rejection of this Lease; and (iv) to perform to the benefit of
Landlord as otherwise required under the Code. The failure of
Tenant to comply with the above shall result in an automatic
rejection of this Lease.
DEFAULT 19. The failure to perform or honor any covenant, condition or
representation made under this Lease shall constitute a
default hereunder by Tenant. Tenant shall have ten (10) days
grace period within which to cure any default in the payment
of rental or adjustments thereto, and Landlord shall not be
required to give any notice to Tenant of any such default more
than five (5) times during the Lease Term before exercising
any remedies available to Landlord. Tenant shall have a period
of ten (10) days from the date of written notice from Landlord
within which to cure any default under this Lease other than a
default in the payment of rental or adjustments thereto;
provided, however, that with respect to any default which
cannot reasonably be cured within ten (10) days, Tenant shall
have additional time necessary to cure the default so long as
Tenant commences to cure within ten (10) days from Landlord's
notice, and continues diligently to prosecute the cure to
completion. Upon a default under this Lease by Tenant, and
failure to cure the default by Tenant within the permissible
time period, if any, Landlord shall have the following rights
and remedies in addition to, or as an alternative to, any
other rights or remedies available to Landlord at law or in
equity:
(a) The Lease may be terminated at the option of Landlord by
notice in writing to Tenant. The Lease will be deemed
terminated as of the date specified in Landlord's notice and
Tenant shall have no further rights or obligations under the
Lease except as provided in this Paragraph 19 which shall
survive termination of the Lease.
(b) Unless the Lease is terminated as provided in subparagraph
(a), the Lease will continue in full force and effect, except
Tenant's right to possession of the premises may be terminated
at any time, at the option of Landlord, by notice in writing
to Tenant. Tenant's right to possession of the premises will
be deemed terminated as of the date specified in Landlord's
notice, and Landlord, as attorney-in-fact for Tenant, may from
time to time, but shall not be obligated to, sublet the
premises or any part thereof for such term or terms and at
such rent and such other terms as Landlord in its sole
discretion deems advisable, with the right to make alterations
and repairs to the premises. Upon each subletting, at the
option of Landlord, (i) either Tenant shall be immediately
liable to pay to Landlord, in addition to indebtedness other
than rent due hereunder, the cost of such subletting and such
alterations and repairs incurred by Landlord and the amount,
if any, by which the rent hereunder for the period of such
subletting exceeds the amount to be paid as rent for the
premises for such period, or (ii) Landlord shall apply rents
received from such subletting first, to payment of any
indebtedness other than rent due hereunder from Tenant to
Landlord; second, to the payment of any costs of subletting
and of any alterations and repairs; third, to payment of rent
due and unpaid hereunder; and the residue, if any, shall
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be held by Landlord and applied in payment of future rent as
the same becomes due hereunder. If, under option (i), the
rent shall not be promptly paid to Landlord by the
subtenant(s), or if, under option (ii), the rentals received
from the subletting during any month are less than all amounts
owed for that month by Tenant hereunder, Tenant shall pay any
such deficiency to Landlord. Such deficiency shall be
calculated and paid monthly. No taking possession of the
premises by Landlord, , shall be construed as an election on
its part to terminate this Lease unless a written notice of
such intention is given to Tenant as provided in subparagraph
(a). Notwithstanding any action taken by Landlord under this
subparagraph, Landlord may at any time thereafter elect to
terminate this Lease for such previous breach.
(c) Upon termination of the Lease as provided in subparagraph
(a), or upon termination of Tenant's right to possession of
the premises, as provided in subparagraph (b), Landlord may
reenter and take possession of the premises, and may remove
any persons or property by any lawful means and without
liability for damages. Any of Tenant's property remaining on
the premises, including, without limitation, equipment,
inventory, furnishings and trade fixtures, shall be deemed to
have been abandoned by Tenant and shall be and become the
property of Landlord; provided, however, that Landlord may, in
its sole discretion, reject the property and elect instead to
store such property in a public warehouse or elsewhere at the
cost of and for the account of Tenant, and further may, but
shall not be obligated to, sell such property and apply the
proceeds therefrom in accordance with applicable law.
(d) If the Lease is terminated as provided in subparagraph
(a), Landlord shall be entitled to recover immediately,
without waiting until the due date of any future Rent or until
the date fixed for expiration of the Lease Term, the following
amounts as damages:
(1) All past-due rent and other amounts owing by Tenant
to Landlord pursuant to the terms of this Lease as of the
date of termination of the Lease.
(2) All costs associated with Tenant's default, whether
or not suit was commenced, including, without limitation,
costs of reentry and reletting, costs of clean-up,
refurbishing, removal of Tenant's property and fixtures,
other expenses occasioned by Tenant's failure to quit the
premises upon termination and to leave them in the
required condition, any remodeling costs, attorneys' fees
and costs, court costs, broker commissions, and
advertising costs.
(3) The loss of reasonable rental value from the date of
termination of the Lease until a new tenant has been, or
with the exercise of reasonable efforts could have been,
secured.
(4) Any excess of the value of the rent and all of
Tenant's other obligations under this Lease, as if the
Lease has not been terminated, over the reasonable
expected return from the premises for the period
commencing on the earlier of the date of trial or the
date the premises are relet and continuing through the
end of the term. The present value of future amounts
will be computed using a discount rate equal to the
lowest prime interest rate publicly announced by a major
Washington bank on short-term commercial loans for its
most credit-worthy customers, in effect on the earlier of
the date of trial or the date the premises are relet.
(e) Landlord may, in its sole discretion, sue periodically to
recover damages during the period corresponding with the
remainder of the Lease term, whether or not the Lease has been
terminated, and no action for damages shall bar a later action
for damages subsequently accruing.
(f) Landlord may elect to call the entire amount of rental for
the balance of the term, or what would have been the balance
of the term if the Lease had not been terminated as provided
in subparagraph(a), immediately due and payable, which rent
shall be paid, subject to mitigation if required by law, by
Tenant to Landlord as liquidated damages.
DAMAGE BY 20. If the premises or the Building are damaged by fire or other
FIRE, casualty, Landlord shall forthwith repair the same, provided
ETC. such repairs can be made within two hundred ten (210) days
from the date of such damage under the laws and regulations of
the federal, state, and local government authorities having
jurisdiction thereof. In such event, this Lease shall remain
in full force and effect except that Tenant shall be entitled
to a proportionate reduction of rent while such repairs to be
made hereunder by Landlord are being made. The rent reduction
shall be based on the extent to which making repairs by
Landlord interferes with the business carried on by Tenant on
the premises. Within twenty (20) days from the date of such
damage, Landlord shall notify Tenant whether or not repairs
can be made within two hundred ten (210) days from the date of
damage and Landlord's determination thereof shall be binding
on Tenant. If repairs cannot be made within two hundred ten
(210) days from the date of damage, Landlord shall have the
option within thirty (30) days of the date of damage either
to: (a) notify Tenant of Landlord's intention to repair the
damage and diligently prosecute such repairs, in which event
this Lease shall continue in full force and effect and the
rent shall be reduced as provided above or (b) notify Tenant
of Landlord's intention to terminate this Lease as of a date
specified in the notice, which date shall be not less than
thirty (30) days nor more than sixty (60) days after the
notice is given. If Landlord notifies Tenant that repairs
cannot be made within two hundred ten (210) days
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from the date of damage, and the damage occurs during the last
year of the Lease Term or extension hereof, Tenant may
terminate this Lease by notice to Landlord as of a date
specified in the notice which date shall not be less than
thirty (30) days nor more than sixty (60) days after the
notice is given to Landlord. In the event that notice to
terminate is given , this Lease shall terminate on the date
specified in the notice and the rent shall be reduced by a
proportionate amount based upon the extent to which the damage
interfered with the business carried on by Tenant in the
premises, and the Tenant shall pay such reduced rent up to the
date of termination. Landlord shall refund to Tenant any rent
previously paid for any period of time subsequent to the date
of termination. The repairs to be made by Landlord shall not
include, and Landlord shall not be required to repair, any
damage by fire or other cause to the property of Tenant or any
repair or replacement of any alterations, additions, fixtures
or improvements installed on the premises by or at the expense
of Tenant, all of which shall be promptly repaired and
restored by Tenant at its expense.
EMINENT 21. If any part of the Project shall be taken or appropriated
DOMAIN under the power of eminent domain or conveyed in lieu thereof
affecting the Building or the premises or parking ratios or
parking configuration or access to the project, the Building,
the premises or parking areas, Landlord shall have the right
to terminate this lease at its sole option. In such event
Landlord shall receive (and Tenant shall assign to Landlord
upon demand from Landlord) any and all income, rent, award or
any interest thereon which may be paid or owed in connection
with the exercise of such power of eminent domain or
conveyance in lieu thereof, and Tenant shall have no claim
against Landlord or against the agency exercising such power
or receiving such conveyance, for any part of such sum paid by
virtue of such proceedings, whether or not attributable to the
value of the unexpired term of this lease. If a part of the
Project shall be so taken or appropriated or conveyed and
Landlord shall elect not to terminate this Lease, Landlord
shall nonetheless receive (and Tenant shall assign to Landlord
upon demand from Landlord) any and all income, rent, award or
any interest thereon paid or owed in connection with such
taking, appropriation or conveyance and if the premises have
been damaged as a consequence of such partial taking or
appropriation or conveyance, Landlord shall restore the
premises continuing under this lease at Landlord's cost and
expense provided that such restoration can be made, in
Landlord's sole opinion, within 360 days of the time the
property so taken is appropriated or conveyed. If restoration
cannot be made, in Landlord's sole opinion, within three
hundred sixty (360) days from the time of taking, Landlord
shall notify Tenant within sixty (60) days of such taking and
Tenant shall have the right to cancel this lease by giving
Landlord written notice of its intention to cancel within
thirty (30) days of the date of Landlord's notice. If Tenant
elects not to cancel this lease, it shall remain in full force
and effect except that Tenant shall be entitled to an
appropriate reduction in rent while restoration is being made
by Landlord. Such proportionate reduction shall be based upon
the extent to which the restoration being made by Landlord
interferes with the business carried on by Tenant in the
demised premises. Landlord will not be required to repair or
restore any injury or damage to the property of Tenant or make
any repairs or restoration to any alterations, additions,
fixtures or improvements installed in the premises by or at
the expense of Tenant. Notwithstanding anything to the
contrary contained in this paragraph, if the temporary use or
occupancy of any part of the premises is taken or appropriated
under power of eminent domain during the term of this Lease,
this Lease shall be and remain unaffected by the taking or
appropriation and Tenant shall continue to pay in full all
rent payable hereunder by Tenant during the term of this
Lease; in the event of any temporary appropriation or taking,
Tenant shall be entitled to receive that portion of any award
which represents compensation for the use or occupancy of the
premises during the term of this Lease, and Landlord shall be
entitled to receive that portion of any award which represents
the cost of restoration of the premises and the use and
occupancy of the premises after the end of the term of this
Lease. SEE ADDENDUM.
SALE BY 22. A sale or conveyance by Landlord of the Project shall operate
LANDLORD to release Landlord from any future liability under this
Lease, and in such event Tenant agrees to look solely to the
successor in interest of Landlord in and to this Lease. This
Lease shall not be affected by any such sale, and Tenant
agrees to attorn to the purchaser or assignee.
RIGHT OF 23. All covenants and agreements to be performed by Tenant under
LANDLORD TO any of the terms of this Lease shall be performed by Tenant at
PERFORM Tenant's sole cost and expense and without any abatement of
rent. If Tenant fails to pay any sum of money, other than
Basic Rent or Tenant's Share of Operating Costs, required to
be paid by it under this Lease or fails to perform any other
act on its part to be performed under this Lease, and the
failure continues for ten (10) days after notice thereof by
Landlord, Landlord may, but shall not be obligated so to do,
and without waiving or releasing Tenant from any obligations
of Tenant, make the payment or perform the act on Tenant's
part to be made or performed. Tenant shall pay to Landlord on
demand all sums so paid by Landlord and all necessary
incidental costs together with interest thereon at the Default
Rate from the date of payment by Landlord.
SURRENDER OF 24.
PREMISES
(b) At the end of the term or other sooner termination of this
Lease, or upon termination of Tenant's right to possession,
Tenant will peaceably deliver up to Landlord possession of the
premises, together with all improvements or additions upon or
belonging to same, by whomsoever made, in the same condition
as received or first installed, normal wear and tear, damage
by fire, earthquake, or the
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elements alone excepted. Tenant shall, prior to the
termination of this lease or termination of Tenant's right to
possession, remove all movable furniture and equipment
belonging to Tenant, at Tenant's sole cost, title to which
shall be in Tenant until such termination, repairing any
damage caused by removal. Property not so removed upon the
termination of this lease or upon termination of Tenant's
right to possession shall be deemed abandoned by Tenant, and
title to the same at Landlord's election shall thereupon pass
to Landlord. Unless otherwise agreed to in writing by
Landlord, PURSUANT TO THE PROVISIONS OF PARAGRAPH 6 OF THIS
LEASE, Tenant shall remove, at Tenant's sole cost, any or all
permanent improvements or additions to the premises installed
by or at the expense of Tenant and repair any damage resulting
from such removal.
(c) The voluntary or other surrender of this Lease by Tenant,
or a mutual cancellation thereof, shall not work a merger, and
shall, at the option of Landlord, terminate all or any
existing subleases or subtenancies, or may, at the option of
Landlord, operate as an assignment to it of any or all such
subleases or subtenancies.
WAIVER 25. If either Landlord or Tenant waives the performance of any
provision of this Lease, such waiver shall not be deemed a
waiver of any subsequent breach of the same or any other
provision of this Lease. Furthermore, the acceptance of rent
by Landlord shall not constitute a waiver of any preceding
breach by Tenant of any provision of this Lease, regardless of
Landlord's knowledge of such preceding breach at the time
Landlord accepted such rent. Failure by Landlord to enforce
any provision of this Lease for any length of time shall not
be deemed to waive or decrease the right of Landlord to insist
thereafter upon strict performance by Tenant. Waiver by
Landlord of any provision of this Lease may only be made by a
written document signed by Landlord.
NOTICES 26. All notices and demands which may be or are required to be
given by either party to the other hereunder shall be in
writing. All notices and demands by Landlord to Tenant shall
be sent by United States certified or registered mail, postage
prepaid, addressed to Tenant at the address of Tenant
specified in the Basic Lease Information, or to such other
place as Tenant may from time to time designate in a notice to
Landlord. All notices and demands by Tenant to Landlord shall
be sent by United States certified or registered mail, postage
prepaid, addressed to Landlord at the address specified in the
Basic Lease Information, or to such other firm or to such
other place as Landlord may from time to time designate in a
notice to Tenant. All notices and demands shall be deemed
given on the date personally delivered to the address
designated above or THREE (3) DAYS AFTER the date mailed as
provided above.
RENTAL 27. (a) Definition. The terms used in this Paragraph 27 shall
ADJUSTMENTS have the following meanings:
(1) "Operating Costs" means all expenses and costs of
every kind and nature which Landlord shall pay or become
obligated to pay because of or in connection with the
ownership and operation of the Project and Landlord's
personal property used in connection with the Project and
supporting facilities of the Project, and such additional
facilities now and in subsequent years as may be
reasonably determined by Landlord to be necessary to the
Project, including, but not limited to, the following:
(i) All wages, salaries and related expenses
and benefits of all on-site and off-site
employees engaged directly in the operation,
management, maintenance, engineering and security
of the Project, and the costs and rental value of
an office in Project; provided, however, that
Operating Costs shall not include leasing
commissions paid to any real estate broker,
salesperson or agent.
(ii) Supplies, materials, tools and rental of
equipment used in the operation, management and
maintenance of the Project.
(iii) Utilities, including water and power, gas,
sewer, heating, lighting, air conditioning and
ventilating and the cost of electrical surveys of
the Project.
(iv) All maintenance, janitorial and service
agreements for the Project and the equipment
therein, including without limitation, alarm
services, garbage and waste disposal, security
service, water treatment, vermin extermination,
facade maintenance, roof maintenance,
landscaping, window cleaning and elevator
maintenance.
(v) A management cost recovery equal to four
percent (4%) of Gross Rent derived from the
Project.
(vi) Legal expenses, accounting expenses and the
cost of audits by certified public accountants;
provided, however, that legal expenses chargeable
as Basic Operating Cost shall not include the
cost of ANY PROJECT SALE OR FINANCING
TRANSACTION, negotiating leases, collecting
rents, evicting tenants nor shall it include
costs incurred in legal proceedings with or
against any tenant or to enforce the provisions
of any lease.
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(vii) All insurance premiums and costs, including
but not limited to, the premiums and cost of
fire, casualty, flood and liability coverage and
rental abatement and earthquake insurance (if
Landlord elects to provide such coverage)
applicable to the Project and Landlord's personal
property used in connection therewith, and any
deductible payments incurred by reason of loss.
(viii) Repairs, replacements and general
maintenance (excluding capital improvements not
included in Lease Paragraph 27.(a)(xi) and
repairs and general maintenance paid by proceeds
of insurance or by Tenant or other third parties,
and the alterations attributable solely to
tenants of the Project other than Tenant).
(ix) All maintenance costs relating to public
and service areas of the Project, including (but
without limitation) sidewalks, landscaping,
service areas, mechanical rooms and building
exteriors.
(x) All Real Property Taxes. The real property
taxes for the base year shall be adjusted, if
necessary, to reflect a fully assessed value
for the Building.
(xi) Amortization (together with reasonable
financing charges) of capital improvements made to
the Project subsequent to the Term Commencement Date
which will improve the operating efficiency, AS
demonstrated by reduced operating costs of at least
a like amount, of the Project or which may be
required to comply with laws, ordinances, rules or
regulations promulgated, adopted or enforced after
completion of the initial construction of the
Project and improvement of the premises pursuant to
the Office Lease Improvement Agreement.
(xii) All costs of contesting any law applicable to
the Project or the amount of any taxes or
assessments affecting the Project.
Notwithstanding anything to the contrary herein
contained, Operating Costs shall not include (aa)
the initial construction cost of the Office Park;
(bb) depreciation on the initial construction of the
Project; (cc) the cost of providing Tenant
Improvements to Tenant or any other tenant; (dd)
debt service (including, but without limitation,
interest, principal and any impound payments)
required to be made on any mortgage or deed of trust
recorded with respect to the Building, Project or
Property other than debt service and financing
charges imposed pursuant to paragraph 27(a)(1)(xi)
above; and (ee) the cost of special services, goods
or materials provided to any tenant. If the Project
is not fully occupied during any fiscal year of the
Term as determined by Landlord, an adjustment shall
be made in computing the Basic Operating Cost for
such year so that Basic Operating Cost shall be
computed as though the Project had been ninety-five
percent (95%) occupied; provided, however, that in
no event shall Landlord be entitled to collect in
excess of one hundred percent (100%) of the total
Operating Costs from all of the tenants in the
Project including Tenant. All costs and expenses
shall be determined in accordance with generally
accepted accounting principles which shall be
consistently applied (with accruals appropriate to
Landlord's business). Operating Costs shall not
include specific costs incurred for the account of,
separately billed to and paid by specific tenants.
SEE ADDENDUM.
(2) "Real Property Taxes" means any form of tax,
assessment, general assessment, special assessment,
lien, levy, bond obligation, license fee, license
tax, tax or excise on rent, or any other levy,
charge or expense, together with any statutory
interest thereon, (individually and collectively,
the "Impositions"), now or hereafter imposed or
required by any authority having the direct or
indirect power to tax, including any federal, state,
county or city government or any school,
agricultural, lighting, drainage or other
improvement or special assessment district thereof,
(individually and collectively, the "Governmental
Agencies") on any interest of Landlord or Tenant or
both (including any legal or equitable interest of
Landlord or its mortgagee, if any) in the Building,
Office Park or the Property, including without
limitation:
(i) any Impositions upon, allocable to or measured
by the area of the Premises or the Project, or the
rental payable hereunder, including without
limitation, any gross income tax or excise tax
levied by any Governmental Agencies with respect to
the receipt of such rental; or
(ii) any Impositions upon or with respect to the
possession, leasing, operation, management,
maintenance, alteration, repair or use or occupancy
by Tenant of the premises or any portion thereof; or
(iii) any Impositions upon this Lease or this
transaction or any document to which Tenant is a
party creating or transferring an interest or an
estate in the premises; or
(iv) any Impositions by Governmental Agencies
(whether or not such impositions constitute tax
receipts) in substitution, partially or totally, of
any impositions now or
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previously included within the definition of real
property taxes, including those calculated to
increase tax increments to Governmental Agencies and
to pay for such services as fire protection, water
drainage, street, sidewalk and road maintenance,
refuse removal or other governmental services
formerly provided without charge to property owners
or occupants; or
(v) any and all costs, including without
limitation, the fees of attorneys, tax consultants
and experts, incurred by Landlord should Landlord
elect to negotiate or contest the amount of such
real property taxes in formal or informal
proceedings before the Governmental Agency imposing
such real property taxes;
provided, however, that Real Property Taxes shall in no
event include Landlord's general income, inheritance,
estate, gift or franchise taxes.
(3) "Estimated Operating Costs" for any Fiscal Year
shall mean Landlord's estimate of the Operating Costs for
such Fiscal Year. Landlord shall have the right from
time to time to revise its Fiscal Year and interim
accounting periods so long as the periods as so revised
are reconciled with prior periods in accordance with
generally accepted accounting principles applied in a
consistent manner.
(b) Payment of Estimated Basic Operating Cost. During the
last month of each Fiscal Year during the Term, or as soon
thereafter as practicable, Landlord shall give Tenant written
notice of the Estimated Operating Costs for the ensuing Fiscal
Year. The Fiscal Year is specified in the Basic Lease
Information. Commencing in the second Lease Year (I.E., ON
the first anniversary of the Lease Commencement Date), Tenant
shall pay to Landlord, as additional rent, monthly, in
advance, on the first day of each month during the Term, an
amount equal to one-twelfth (1/12th) of Tenant's Share of the
increase in the Operating Costs of the Property for each
Fiscal Year during the Term over the Operating Costs for the
Base Year, which amount is exclusive of any sales, franchise,
business or occupation or other tax based on rents and should
such taxes apply during the Term.
(c) Proration. Tenant's Share of the increase in Operating
Costs shall be prorated on the basis of a 360-day year to
account for any fractional portion of a year included in the
Term at its commencement and expiration. If at any time
during the course of a Fiscal Year, Landlord determines that
Basic Operating Cost will apparently vary from the then
Estimated Operating Costs by more than five percent (5%),
Landlord may, by written notice to Tenant, revise the
Estimated Operating Costs for the balance of the Fiscal Year
and Tenant shall pay Tenant's Share of the Estimated Operating
Costs as so revised for the balance of the then current Fiscal
Year on the first day of each calendar month thereafter, as
additional rent.
(d) Computation of Operating Costs Adjustment. Within one
hundred twenty (120) days after the end of each Fiscal Year or
as soon thereafter as practicable, Landlord shall deliver to
Tenant a statement of Operating Costs for the Fiscal Year just
ended, accompanied by a computation of Tenant's share of
increased Operating Costs. If the statement shows that
Tenant's payment based upon Estimated Operating Costs is less
than Tenant's Share of Operating Costs, then Tenant shall pay
as additional rent the difference within twenty (20) days
after receipt of the statement. If the statement shows that
Tenant's payment of Estimated Operating Costs exceeded
Tenant's Share of Operating Costs, then (provided that Tenant
is not in default under this Lease) Tenant shall receive a
credit for the amount of the overpayment against Tenant's
obligation for payment of Tenant's Share of Estimated
Operating Costs next becoming due hereunder. If this Lease
has been terminated or the Term has expired before the date of
the statement, then the Basic Operating Cost Adjustment shall
be paid by the appropriate party within twenty (20) days after
the date of delivery of the statement.
(e) Tenant Audit. Tenant shall have the right, at Tenant's
expense, and upon not less than seven (7) days prior written
notice to Landlord, to review at reasonable times Landlord's
books and records for any fiscal year, a portion of which
falls within the Term, for purposes of verifying Landlord's
calculation of Basic Operating Cost and Basic Operating Cost
Adjustment. If Tenant disputes the amount set forth in any
statement provided by Landlord under Paragraph 27(c) above,
Tenant shall have the right not later than forty (40) days
following the receipt of such statement, and upon condition
that Tenant shall first deposit with Landlord the full amount
in dispute, to cause Landlord's books and records with respect
to such Fiscal Year to be audited by certified public
accountants selected by Tenant subject to Landlord's
reasonable right of approval. The Basic Operating Cost
Adjustment shall be appropriately adjusted on the basis of the
audit. If the audit discloses a liability for a refund or
credit by Landlord to Tenant in excess of ten percent (10%) of
Tenant's Share of Operating Costs Adjustment previously
reported, the cost of the audit shall be borne by Landlord.
Otherwise the cost of the audit shall be paid by Tenant. If
Tenant does not request an audit in accordance with the
provisions of this Paragraph 27(e) within forty (40) days of
receipt of Landlord's statement provided pursuant to Paragraph
27(d), Landlord's statement shall be final and binding for all
purposes.
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TAXES 28. Tenant shall pay before delinquency any and all taxes levied
PAYABLE or assessed and which become payable by Landlord (or Tenant)
BY TENANT during the term of this Lease (excluding, however, FRANCHISE,
state and federal personal or corporate income taxes measured
by the income of Landlord from all sources, capital stock
taxes, and estate and inheritance taxes), whether or not now
customary or within the contemplation of the parties hereto,
which are based upon, measured by or otherwise calculated with
respect to: (a) the gross or net rent payable under this
Lease, including, without limitation, any gross receipts tax
(TO THE EXTENT THIS TAX REPLACES OR SUPPLEMENTS PROPERTY
TAXES) levied by any taxing authority, or any other gross
income tax or excise tax levied by any taxing authority with
respect to the receipt of the rental hereunder; (b) the value
of Tenant's equipment, furniture, fixtures or other personal
property located in the premises; (c) the possession, Lease,
operation, management, maintenance, alteration, repair, use of
occupancy by Tenant of the premises or any portion thereof;
(d) the value of any leasehold improvements, alterations or
additions made in or to the premises, regardless of whether
title to such improvements, alterations or additions shall be
in Tenant or Landlord; or (e) this transaction or any document
to which Tenant is a party creating or transferring an
interest or an estate in the premises. In the event that it
shall not be lawful for Tenant to so reimburse Landlord, the
rent payable to Landlord under this Lease shall be revised to
net Landlord the same net rent after imposition of any such
tax upon Landlord as would have been payable to Landlord prior
to the imposition of any such tax. All taxes payable by
Tenant under this Paragraph 28 shall be deemed to be, and
shall be paid as, additional rent.
ABANDON 29. Tenant shall not abandon (I.E. VACATE THE PREMISES WITH NO
MENT INTENT TO RE-OCCUPY WITHIN A REASONABLE PERIOD OF TIME NOT TO
EXCEED ONE HUNDRED EIGHTY (180) DAYS) the Premises at any time
during the term, and any such abandonment shall be a breach
of this Lease. If Tenant shall abandon, or surrender said
Premises or be dispossessed by process of law, or otherwise,
any personal property belonging to Tenant and left on the
Premises shall, at the option of Landlord, be deemed to be
abandoned and title thereto shall pass to Landlord, except
such property as may be mortgaged to Landlord.
SUCCESSORS 30. Subject to the provisions of Paragraph 9 hereof, the terms,
AND covenants and conditions contained herein shall be binding
ASSIGNS upon and inure to the benefit of the heirs, successors,
executors, administrators and assigns of the parties hereto.
ATTORNEYS' 31. If this Lease is referred to an attorney for enforcement of
FEES its terms or provisions or if any action must be taken to
enforce any term, covenant or condition of this Lease, the
prevailing party shall be entitled to payment by the other
party of all reasonable costs incurred in connection with
such enforcement, whether or not litigation is commenced,
including, without limitation, reasonable attorneys' fees and
costs.
SECURITY 32. (a) By execution of this Lease, Landlord acknowledges receipt
DEPOSIT of Tenant's security deposit for the faithful performance of
all terms, covenants and conditions of this Lease. The sum of
the security deposit is specified in the Basic Lease
Information. Tenant agrees that Landlord may apply the
security deposit to remedy any failure by Tenant to repair or
maintain the premises or to perform any other provisions of
this Lease. If Tenant has kept and performed all terms,
covenants and conditions of this Lease during the Term,
Landlord will promptly return the security deposit to Tenant
or the last permitted assignee of Tenant's interest hereunder
within thirty (30) days after the expiration of the Lease
Term. Should Landlord use any portion of the security deposit
to cure any default by Tenant, Tenant shall promptly replenish
the security deposit to its original amount. Landlord shall
not be required to keep any security deposit separate from its
general funds, and Tenant shall not be entitled to interest on
any such deposit.
(b) No mortgagee, mortgagee in possession, or successor in
title to the property, shall be accountable for any security
deposit required by the Landlord under this Lease, unless the
deposit has actually been received by such mortgagee or
successor as security for the Tenant's performance of this
lease. SEE ADDENDUM.
SUBSTITUTION
SPACE
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CORPORATE 34. If Tenant is a corporation, each of the persons executing this
AUTHORITY Lease on behalf of Tenant does hereby covenant and warrant
that Tenant is a duly authorized and existing corporation,
that Tenant has and is qualified to do business in Washington,
that the corporation has full right and authority to enter
into this Lease, and that each and both of the persons signing
on behalf of the corporation were authorized to do so. Upon
Landlord's request, Tenant shall provide Landlord with
evidence reasonably satisfactory to Landlord confirming the
foregoing covenants and warranties
LEASE NOT 35. Submission of this instrument for examination or signature by
AN OFFER Tenant does not constitute a reservation of or option for
lease, and it is not effective as a lease or otherwise until
execution and delivery by both Landlord and Tenant.
BROKERAGE 36. Tenant represents and warrants that it has dealt with no
broker, agent or other person in connection with this
transaction, and/or that no broker, agent or other person
brought about this transaction other than Colliers Macaulay
Nicolls International, and Tenant agrees to indemnify and hold
Landlord harmless from and against any claims by any other
broker, agent or other person claiming a commission or other
form of compensation by virtue of having dealt with Tenant
with regard to this leasing transaction. The provisions of
this Article shall survive the termination of this Lease.
FORCE 37. Except for the payment of rent, whenever a period of time is
MAJEURE prescribed for action to be taken by either party EITHER
PARTY shall not be liable or responsible for, and there shall
be excluded from the computation for any 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 causes of any kind whatsoever which
are beyond the control of SUCH PARTY ("Force Majeure").
CERTAIN 38. Landlord shall have the following rights, exercisable without
RIGHTS notice (except Landlord shall use best efforts to notify
RESERVED BY Tenant in the event Landlord shall require access to Tenant's
LANDLORD premises after normal business hours, except in the case of an
emergency, in which case no notice shall be required) and
without liability to Tenant for damage or injury to property,
persons or business and without effecting an eviction,
constructive or actual, or disturbance of Tenant's use or
possession or giving rise to any claim for setoff or abatement
of rent:
(a) To decorate, expand and make repairs, alterations,
additions, changes or improvements, whether structural or
otherwise, in and about the Building and Project, or any part
thereof, and for such purposes to enter upon the leased
premises and, during the continuance of any such work, to
temporarily close doors, entryways, public space and corridors
in the Building, to interrupt or temporarily suspend Building
services and facilities and to change the arrangement and
location of entrances or passageways, doors and doorways,
corridors, elevators, stairs, toilets, or other public parts
of the Building to install, use, maintain, repair, replace and
relocate pipes, ducts, conduits, wires and appurtenant meters
and equipment to other parts of the Building above the ceiling
surfaces, below the floor surfaces or within the walls, all
without abatement of rent or affecting any of Tenant's
obligations hereunder, so long as the leased premises are
reasonably accessible.
(b) To have and retain a paramount title to the premises free
and clear of any act of Tenant purporting to burden or
encumber them.
(c) To make changes to common areas including, without
limitation, changes as otherwise provided in this Lease or as
may be required by any governmental or quasi-governmental law,
statute, ordinance, rule, regulation or requirement or by any
board of fire underwriters or other similar body or, without
limitation, changes related to site conditions, building
structure, safety, fire protection, security, or evacuation
procedures reasonably determined by Landlord, in the location,
size, shape, and number of driveways, entrances, parking
spaces, parking areas, loading and unloading areas, or,
without limitation, to make changes in ingress, egress and
direction of traffic, landscaping and walkways, to close any
common areas temporarily so long as reasonable access to the
Premises remains available, and to use the common areas as a
staging area.
(d) To change the name by which the Building or Project is
designated.
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(e) To grant to anyone the exclusive right to conduct any
business or render any service in or to the Building or
Project, provided the exclusive right does not operate to
exclude Tenant from the use expressly permitted under this
Lease.
(f) To prohibit the placing of vending or dispensing machines
of any kind in or about the premises without the prior written
permission of Landlord, except as contemplated in Exhibit C,
C-1, OR C-2 of this Lease.
(g) To have access for Landlord and other tenants of the
Building to any mail chutes located on the leased premises
according to the rules of the United States Postal Service.
(h) To take all reasonable measures as Landlord may deem
advisable for the security of the Building or Project and its
occupants, including without limitation, the search of all
persons entering or leaving the Building, access to the
premises for cause, suspected cause, or for drill purposes,
the temporary denial of access to the Building or Project, and
the closing of the Building or Project after normal business
hours and on Saturdays, Sundays and holidays, subject,
however, to Tenant's right to admittance when the Building or
Project is closed after normal business hours under such
reasonable regulations as Landlord may prescribe form time to
time which may include by way of example but not of
limitation, that persons entering or leaving the Building,
whether or not during normal business hours, identify
themselves to a security officer by registration or otherwise
and that such persons establish their right to enter or leave
the Building.
PERSONAL 39. Landlord may sell or otherwise transfer all or part of its
LIABILITY interest in the premises and if the proposed purchaser or
transferee shall assume Landlord's obligations under this
Lease for so long as it retains an interest in the premises,
then Landlord shall be relieved of any obligation under this
Lease accruing after the date of transfer. If any security
deposit or prepaid rent has been paid by Tenant and Landlord
shall transfer such security deposit or prepaid rent to
Landlord's successor, then Landlord shall be discharged from
any further liability with respect to such security deposit or
prepaid rent. The liability of Landlord to Tenant for any
default by Landlord under this Lease or arising in connection
with this Lease or any other matter relating to the premises,
shall be limited to the interest of Landlord in the BUILDING
and Landlord shall not be liable personally for any
deficiency. Tenant agrees to look solely to Landlord's
interest in the BUILDING for the recovery of any judgment
against Landlord, and Landlord shall not be personally liable
for any such judgment or deficiency after execution thereon.
In furtherance of the foregoing limitation: (a) no general or
limited partner of Landlord shall be sued or named as a party
in any action or suit (except as may be necessary to secure
jurisdiction of the partnership); (b) no service of process
shall be made against any general or limited partner of
Landlord (except as may be necessary to secure jurisdiction of
the partnership); (c) no general or limited partner of
Landlord shall be required to answer or otherwise plead to any
service of process; (d) no adjustment will be taken against
any general or limited partner of Landlord; (e) any judgment
taken against any general or limited partner of Landlord may
be vacated or set aside at any time NUNC PRO TUNC; (f) no writ
of execution will ever be levied against the assets of any
general or limited partner of Landlord; and (g) these
covenants are enforceable both by Landlord and also by any
partner of Landlord. In addition, Landlord shall not be
liable to Tenant or anyone claiming by or through Tenant for
lost profits or consequential damages incurred due to a breach
of this Lease by Landlord or due to Landlord's acts or
omissions.
MISCELLAN- 40. ADDITIONAL DEFINITIONS.
EOUS
(a) The term "premises" wherever it appears herein includes
and shall be deemed or taken to include (except where such
meaning would be clearly repugnant to the context) the office
space demised and improvements now or at any time hereinafter
comprising or built in the space hereby demised. The term
"Landlord" includes the Landlord, its successors, and assigns.
In any case where this Lease is signed by more than one
person, the obligations hereunder shall be joint and several.
The term "Tenant" or any pronoun used in place thereof shall
indicate and include the masculine or feminine, the singular
or plural number, individuals, firms or corporations, and
their and each of their respective successors, executors,
administrators, and permitted assigns, according to the
context hereof.
(b) Time is of the essence of this lease and all its
provisions. This Lease shall in all respects be governed by
the laws of the State of Washington. Captions are for
convenience of reference only and shall in no way define,
increase, limit or describe the scope or intent of any
provision of this Lease. This Lease, together with its
exhibits, contains all the agreements of the parties and
supersedes any previous negotiations. There have been no
representations made by the Landlord or understandings made
between the parties other than those expressly set forth in
this Lease and its exhibits. This Lease may not be modified
except by a written instrument signed by the parties.
(c) If for any reason any provision of this Lease shall be
unenforceable or ineffective, all of the other provisions
shall be and remain in full force and effect.
(d) The waiver by Landlord of any term or provision of this
Lease shall not be deemed a waiver of the same term or
provision or any subsequent breach thereof or of any other
term or provision of this Lease.
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(e) If, in connection with obtaining construction, interim or
permanent financing for the Property, the lender shall request
modifications in this Lease as a condition to such financing,
Tenant will not unreasonably withhold, delay or defer its
consent thereto, provided that such modifications do not
increase the obligation of Tenant under this Lease or affect
the leasehold interest created or Tenant's rights under this
Lease.
(f) Neither Tenant nor Landlord shall record this Lease
without the written consent of the other party, such consent
not to be unreasonably withheld.
(g) No payment by Tenant or receipt by Landlord of a lesser
amount than the monthly rent or any other sum due Landlord
under this Lease shall be deemed to be other than on account
of the earliest stipulated rent, nor shall any endorsement or
statement of any check or any letter accompanying any check or
payment of rent be deemed an accord and satisfaction or a
modification of Tenant's obligations under this Lease, or a
limitation on Landlord's right to recover the balance of such
rent or pursue any other remedy provided in this Lease.
(h) If Tenant requests Landlord's consent or approval and
Landlord fails or refuses to give such consent or approval,
Tenant shall not be entitled to any damages for any
withholding or delay by Landlord of its consent or approval if
Landlord is entitled to withhold such consent or approval in
its sole discretion or if such consent or approval is not to
be unreasonably withheld or delayed by Landlord and in its
good faith judgment Landlord determines that it is required
under any document evidencing or securing financing of the
Property and the lender withholds its consent or approval. In
any instance where the consent or approval of the lender is
required, Landlord shall not be required to expend money or
make any concession to the lender to induce its consent or
approval.
(i) Landlord shall retain all lien rights available pursuant
to Washington State law affecting all goods, inventory,
equipment, fixtures and other personal property, which are or
may be put on the Premises, to secure the payment of the rent
and additional rent reserved under this Lease.
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Landlord [illegible]
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Tenant [illegible]
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DISCLOSURE 41. The officers and agents of Landlord's property manager and
other related parties are licensed real estate brokers or
salespersons. This disclosure is made pursuant to RCW
18.85.230.
SEE Attached hereto and made a part hereof by this reference.
ADDENDUM
IN WITNESS WHEREOF, the parties hereto have executed this
Lease the day and year first above written.
LANDLORD: TENANT:
Spieker Properties, L.P. Coinstar, Inc.
A California limited partnership a Delaware corporation
By: Spieker Properties, Inc.,
a Maryland corporation
Its: General Partner
/s/ Donald S. Jefferson /s/ Warren M. Gordon
---------------------------- --------------------------------
By: Donald S. Jefferson By: Warren M. Gordon
Its: Senior Vice President Its: Chief Financial Officer
Date: 2/24/97 Date: February 14, 1997
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<PAGE>
STATE OF Washington)
----------
)ss.
COUNTY OF King )
----------
On this 14th day of February, 1997, personally appeared before me
Warren M. Gordon, to me known to be the Chief Financial Officer of Coinstar
the corporation that executed the within and foregoing instrument, and
acknowledged said instrument to be the free and voluntary act and deed of said
corporation, for the uses and purposes therein mentioned, and on oath stated
that _he was authorized to execute said instrument and that the seal affixed
(if any) is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Official
Seal the day and year first above written.
Mary Lorna Meade
-----------------------------
NOTARY PUBLIC in and for the State of
[SEAL] Washington, residing at
Issaquah
My commission expires: 3-13-2000
STATE OF Washington)
) ss.
COUNTY OF King )
On this 24th day of February, 1997, personally appeared before me DONALD
S. JEFFERSON, to me known to be the Senior Vice President of the corporation
that executed the within and foregoing instrument, and acknowledged said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath stated that he was
authorized to execute this instrument and and that seal affixed (if any) is
the corporate seal of said corporation.
/s/ Sara Anne Lemmon
--------------------------------------
Sara Anne Lemmon
NOTARY PUBLIC in and for the State of
WASHINGTON, residing at
17731 N.E. 13th St.
Bellevue Washington
My commission expires: 7-9-97
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Coinstar lease dated January 29, 1997 for Building "N", Suite
<PAGE>
ADDENDUM TO
LEASE AGREEMENT
DATED JANUARY 29, 1997 BETWEEN
SPIEKER PROPERTIES, L.P., A CALIFORNIA LIMITED PARTNERSHIP (LANDLORD)
AND COINSTAR, INC., A DELAWARE CORPORATION (TENANT)
FOR PREMISES LOCATED IN BUILDING "N"
THE FOLLOWING ARE ADDITIONAL TERMS AND CONDITIONS WHICH ARE HEREBY INCORPORATED
INTO THE LEASE. ALL OTHER TERMS AND CONDITIONS OF THE LEASE SHALL REMAIN IN
FULL FORCE AND EFFECT UNLESS EXPRESSLY MODIFIED HEREIN.
ADDENDUM TO PARAGRAPH 2: TERM AND POSSESSION:
The design of the Building to be constructed is substantially as shown by the
Permitted Set of Plans (as defined in this Lease Paragraph 2). It is the
intention of the parties that the Building design be changed by Landlord,
however, with respect to the following areas (the "Design Changes"):
- lobby area stair design
- restroom layout to allow an elevator with two-sided access
- machine room/electrical room layout for potential re-design of
mailroom and storage space at covered garage level
- changes to glazing configuration
- changes to lobby areas (provided size of Tenant Premises area is not
reduced by such changes)
If requested by Tenant, and subject to Landlord's review and approval,
Landlord will upgrade construction of garage-level storage unit partitions at
Tenant's sole cost and expense. The Design Changes made by Landlord shall be
reasonably acceptable to Tenant. Design Changes are subject to review and
approval of the City of Bellevue and/or other governmental or
quasi-governmental authorities which may have jurisdiction. Time is of the
essence and Tenant shall provide Landlord with information and approvals as
may be requested by Landlord in connection with the Design Changes on a
timely basis and in a time frame consistent with Landlord's construction and
delivery schedule. Notwithstanding anything contained herein to the
contrary, Landlord may proceed with construction of the Building (including
any Design Changes and/or other changes as determined by Landlord) absent
Tenant's approval. Notwithstanding anything contained herein to the
contrary, Landlord may delay Design Changes, in its sole discretion, if such
revisions may delay governmental and/or other necessary approvals and/or
construction of the Building.
Notwithstanding anything contained herein to the contrary, Landlord reserves
the right to make changes in the scope of work as shown in the Permitted Set
of Plans without Tenant's review or approval with respect to finishes,
changes in materials, equipment, design elements (including, but not limited
to, the Building skin and/or other exterior design elements/materials) or
other scope of work as may be shown in the Permitted Set of Plans, except as
otherwise provided in this Lease. Landlord will not provide the showers as
shown on the Permitted Set of Plans at its cost and expense. Showers shall
be provided in accordance with Exhibit C of this Lease.
Landlord's Work pursuant to Exhibit C, "Office Lease Improvement Agreement"
shall be deemed substantially completed upon issuance of a signed final
inspection card or building permit signed as "final" or such other document
that shall be comparable to a certificate of occupancy in the applicable
jurisdiction, for the completion of the Premises as outlined in Exhibit C.
Subject to "Force Majeure", for this purpose as defined in Paragraph 48 of
this Lease, in the event Landlord is unable to deliver possession of the
Premises to Tenant by June 1, 1998, Landlord shall so notify Tenant by
December 31, 1997 and Tenant shall have the right, but not the obligation, to
terminate this Lease upon written notice delivered to Landlord no later than
January 6, 1998. Tenant's right to terminate with respect to this Paragraph 2
of the Lease shall be null and void on the earlier to occur of (i) the date
Landlord commences construction of the Building or (ii) January 6, 1998.
Notwithstanding anything stated herein to the contrary, if Landlord is unable
to deliver possession of the Premises by June 1, 1998, and if in Landlord's
reasonable judgment delivery of possession is delayed by the action(s) or
inaction(s) of Tenant or its employees, agents, invitees, and/or contractors,
then Tenant's right to terminate with respect to this Paragraph 2 of the
Lease shall be null and void.
Provided Tenant is not, and has not been, in default of any terms and
conditions of this Lease, Landlord shall permit Tenant access to the Premises
for the sole purpose of "facility set up" approximately ten (10) calendar
days prior to the Commencement Date of this Lease. "Facility set up" for the
purpose of this Lease provision shall mean installation of Tenant's cabling
and telecom equipment only. Notwithstanding anything contained herein to the
contrary, in the event Tenant occupies, conducts business at and/or otherwise
makes beneficial use of the Premises, then the Lease shall commence and the
Lease Commencement Date shall be the date upon which Tenant commenced
occupancy or use of all or
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Landlord [illegible]
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any portion of the Premises. Landlord shall notify Tenant of the date when
Tenant shall be permitted access to the Premises (the "Prior Possession
Date") and Tenant's access to the Premises during the "Prior Possession
Period" (as hereinafter defined) shall be subject to all of the terms and
conditions of the Lease except for the payment of Base Rent which shall not
be due until the Commencement Date. Landlord shall not be required to expend
additional funds in order to substantially complete tenant improvements or
provide "Prior Possession" on a date which is sooner than identified on
Landlord's construction and delivery schedule in order to provide Tenant with
access to the Premises for facility set up. The "Prior Possession Period"
shall be defined as the period which commences on the "Prior Possession Date"
and terminates on the "Lease Commencement Date". Tenant shall cooperate and
coordinate with Landlord during the Prior Possession Period to avoid
interference with completion of tenant improvements by Landlord. Tenant
shall not install furniture, fixtures, and/or equipment prior to the
Commencement Date of this Lease without Landlord's prior written consent
which Landlord may withhold in its sole discretion if such installation will
delay or interfere with completion of tenant improvements and/or governmental
approval of same and/or require Landlord to expend additional funds.
ADDENDUM TO PARAGRAPH 5: COMPLIANCE WITH LAWS.
Landlord shall substantially comply with the provision of the Americans with
Disabilities Act (ADA) for the completion of the Premises as outlined in Exhibit
C, if applicable. Landlord further agrees to comply with the ADA as it applies
to the common areas of the building, and all work outlined in Exhibit C and the
common areas of the building shall be completed by Landlord with the costs
thereof applied in accordance with Paragraph 27. All costs for substantial
compliance with ADA within Tenant's Premises subsequent to Tenant's occupancy
shall be the responsibility of Tenant. Landlord agrees to comply with all
applicable laws and regulations pertaining to Landlord's obligations hereunder.
Landlord shall defend, indemnify and hold harmless Tenant from and against any
claims, charges, liabilities, obligations, penalties, damages, judgments, costs
and expenses (including attorneys fees) related solely to Landlord's initial
construction obligations with respect to the condition of the Premises and the
common areas of the Building on the Lease Commencement Date (but not with
respect to Tenant's use or occupancy) and arising directly and solely from
Landlord's failure to substantially comply with the provision of the ADA for the
completion of the initial construction of the common areas of the Building and
the Premises as outlined in Exhibit C as applicable.
ADDENDUM TO PARAGRAPH 9: ASSIGNMENT AND SUBLETTING.
Notwithstanding the provisions of Lease Paragraph 9 (a.), if Tenant proposes to
sublet a portion of the Premises for less than the entire term of the Lease or
to sublet to an Affiliate (as hereinafter defined) of Tenant, then Landlord
shall not have the right to recapture said portion of the Premises, provided
that Tenant otherwise complies with all other provisions of this Lease,
including, but not limited to, the requirement to obtain the prior written
consent of Landlord with respect to said proposed sublet.
Landlord's consent shall not be required in the event Tenant shall assign the
Lease or sublet the Premises to an "Affiliate" (as herein after defined)
provided Tenant otherwise abides by the provisions of this Lease, including this
Paragraph 9 (including, but not limited to the provisions regarding notice to
Landlord and Tenant's ongoing obligations and liabilities under the Lease), and
Landlord shall not have the right to terminate this Lease as to the portion of
the Premises so sublet or assigned and further provided that (i) in the case of
an assignment, the proposed assignee financial net worth at the time of
assignment is at least equal to the greater of (a) the net worth of Tenant on
the date hereof, or (b) the net worth of Tenant immediately prior to the
assignment and (ii) the proposed use of the Premises by the assignee or
subtenant shall comply with the Lease. The term "Affiliate" means a
corporation, partnership or other entity which (i) is Tenant's parent
organization; or (ii) is a wholly-owned subsidiary of Tenant or such parent; or
(iii) is a corporation of which Tenant or Tenant's parent corporation owns in
excess of fifty percent (50%) of the outstanding capital stock; or (iv) as a
result of a consolidation, merger, asset sale or other reorganization or
transaction with Tenant and/or Tenant's parent organization, shall own all or
substantially all the capital stock of Tenant or Tenant's parent organization or
all or substantially all of Tenant's assets. Provided that Tenant otherwise
abides by the provisions of the Lease, including this Paragraph 9, Landlord
consents to Tenant's transfer of all or any portion of the ownership of stock in
Tenant to the extent such transfer is made pursuant to, or otherwise in
connection with, an initial public offering of the stock of Tenant, or traded
through an exchange or over the counter.
Landlord's consent shall not be required in the event of a transfer by the
present majority shareholders of ownership and control of the voting stock of
Tenant, provided that Tenant otherwise abides by the provisions of the Lease,
including this Paragraph 9 (including, but not limited to the provisions
regarding notice to Landlord and Tenant's ongoing obligations and liabilities
under the Lease), and further provided that the proposed transfer does not
result in a diminution of Tenant's net worth as compared to the greater of (a)
the net worth of Tenant on the date hereof, or (b) the net worth of Tenant
immediately prior to the transfer.
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Landlord [illegible]
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ADDENDUM TO PARAGRAPH 19: DEFAULT.
Any uncured material default (i.e. uncured after the giving of notice, if notice
is required, and the expiration of a cure period, if applicable), defined for
the purpose of this paragraph as abandonment, failure to pay any and all rents
when due, lease termination or non-compliance with a court order for eviction,
by Tenant under its concurrent Lease being entered into with Landlord for the
Premises located at Maplewood Building "M", located at 1687 114th Ave. S.E.,
Bellevue, Washington, shall constitute a default hereunder.
ADDENDUM TO PARAGRAPH 21: EMINENT DOMAIN
Tenant shall have the right to claim and recover from the condemning authority,
but not from Landlord, compensation for improvements paid for by Tenant and then
existing on the Premises, all property of Tenant so taken and any loss to which
Tenant may be put for moving expense, business interruption or taking of
property of Tenant, provided such claim does not reduce Landlord's claim or
recovery thereof. If the condemning authority shall refuse to permit separate
claims to be made, then Landlord shall prosecute the claims of both Landlord and
Tenant, provided that Tenant shall in advance pay its pro rata share of legal
fees, and the proceeds of the award (and the fees of such counsel) shall be
first applied to satisfy all Landlord's claims (including legal fees) with any
balance applied to Tenant's claims.
ADDENDUM TO PARAGRAPH 27: RENTAL ADJUSTMENTS.
Operating Costs shall not include: (ff) expenditures for which and to the
extent that Landlord is reimbursed from any insurance carrier, (gg) advertising
and promotional expenditures; (hh) penalties incurred due to violation by
Landlord of any governmental law, unless said penalties were incurred in
connection with Landlord's good faith efforts to maintain the Office Park and/or
minimize the Operating Costs therein; (ii) the costs of correcting latent
defects in the construction of the Building, except that conditions (not
occasioned by construction defects) resulting from ordinary wear and tear will
not be deemed defects for the purpose of this category.
ADDENDUM TO PARAGRAPH 32: SECURITY DEPOSIT.
This Lease and the concurrent lease being entered into for other premises
located at Maplewood Building "M", at 1687 - 114th Ave. S.E., Bellevue,
Washington (the "Concurrent Lease") shall not be effective unless and until
Tenant shall have provided to Landlord two (2) letters of credit in the total
amount of Five Hundred Thousand and No/100 Dollars ($500,000.00) issued by a
United States bank that is a member of the Federal Reserve System in the forms
attached hereto as Exhibit G-1 and Exhibit G-2, or with such variations as
Landlord may approve in advance in writing, which approval may be withheld for
any or no reason. If both letters of credit are not issued and delivered within
seven (7) days after execution of this Lease, this Lease shall be null, void and
of no force or effect. If, and only if, all of the conditions hereinafter set
forth in this Addendum to Lease Paragraph 32 (the "Conditions") shall have been
met and the Tenant is not then in breach or default under any term of this
Lease, and Landlord shall not by then have presented a draft upon the same,
Landlord shall promptly surrender the original letter of credit in the form of
Exhibit G-2 to Tenant for cancellation. The Conditions are as follows:
A. The Tenant shall have completed its initial public offering of equity
interests pursuant to a registration statement filed with the SEC the
gross proceeds of which exceed Twenty-Five Million and No/100 Dollars
($25,000,000.00). Tenant represents that there is no further or
different criteria regarding its initial public offering included in
its debt instrument placed by Smith Barney.
or
B. The Tenant's achievement of not less than two (2) consecutive quarter
years of the following financial thresholds determined at or as of the
end of each such quarter and evidenced by true, accurate and
tenant-verified financial statements prepared by the Tenant in
accordance with generally accepted accounting principles:
i. Pre-tax profitability of no less than Two Hundred Thousand and
No/100 Dollars ($200,000.00) per quarter and
ii. The Tenant's tangible net worth of Eight Million and No/100 Dollars
($8,000,000.00) or more.
iii. The structure of Tenant's balance sheet shall reflect sufficient
liquidity to meet Tenant's obligations under this Lease and the
Concurrent Lease on a timely basis. Sufficient liquidity shall be
defined as a ratio of net tangible current assets divided by
current liabilities of no less than 1.25 to 1.00.
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ADDITIONAL PARAGRAPH 42: OPTION TO EXTEND.
Provided Tenant is not, and has not been, in uncured default of the Lease,
Tenant shall have the right to extend the term of this Lease for the Premises in
"as is" condition for one (1) consecutive period of five (5) years on the same
terms and conditions as set forth in this Lease except that the base rental for
the option period shall be the then current market rate for comparable space in
the area, including, if applicable, escalations during the term of the
extension, as reasonably determined by Landlord. If requested by Tenant,
Landlord shall provide Tenant with the following information regarding other
transactions in the area considered in Landlord's determination of "then current
market rate for comparable space in the area": location, size of space, rental
rate, transaction date. Notwithstanding the foregoing, Landlord shall not be
obligated to provide to Tenant the names of third party tenant(s) or landlord(s)
in said transactions. In no event shall the rental for the option period be
less than that of the previous period.
Tenant shall give Landlord written notice to exercise its option at least
one hundred eighty (180) days prior to the expiration of the then current lease
term. Within fifteen (15) days after Tenant exercises its option to extend the
Lease, Landlord will provide Tenant with the fair market rental, as determined
by Landlord, as well as terms and conditions for the extended term. Tenant
shall have fifteen (15) days from notification by Landlord of current rent and
conditions to accept Landlord's proposal. If Tenant does not accept Landlord's
rental figure and terms and conditions within the fifteen (15) day period, this
option shall be null and void and Landlord shall have no further obligation to
Tenant and Landlord may enter into a lease for the Premises with a third party.
Notwithstanding anything to the contrary herein contained, Tenant's right to
extend the term by exercise of the foregoing option shall be conditioned upon
the following: (i) at the time of the exercise of the option, and at the time of
the commencement of the extended term, Tenant or an Affiliate of Tenant (as
defined in Lease Paragraph 9) or a "Related Party Subtenant" (defined as a
company whose majority owner is also an officer or majority owner of Tenant or
is a joint venture partner with Tenant and who is subletting no more than fifty
percent (50%) of the Premises) shall be in possession of and occupying the
Premises for the conduct of its business therein and the same shall not be
occupied by any other assignee, subtenant or licensee, the option to extend
being applicable hereunder only with respect to so much of the Premises as is
actually occupied by Tenant or an Affiliate of Tenant or a Related Party
Subtenant; and (ii) the notice of exercise shall constitute a representation by
Tenant to Landlord, effective as of the date of the exercise and as of the date
of commencement of the extended term, that Tenant does not intend to seek to
assign the Lease in whole or in part, or sublet all or any portion of the
Premises, other than to an Affiliate of Tenant or a Related Party Subtenant, the
election to extend being for purposes of utilizing the Premises for Tenant's
purposes in the conduct of Tenant's business therein.
ADDITIONAL PARAGRAPH 43: PARKING
Landlord intends to construct 167 parking stalls shown on the Permitted Set of
Plans. Further, Landlord intends to construct the additional 20 parking stalls
dashed in as potential parking stalls on the Permitted Set of Plans. The
construction of a total of 187 parking stalls is subject to any changes or
restrictions as may be required or imposed by any governmental or quasi-
governmental authority and/or as may be mutually agreed between Landlord and
Tenant. Tenant shall have the right to utilize substantially all the covered
parking stalls (which shall be specifically identified by Landlord for Tenant's
use) at Building "N" at no charge for the Lease Term. Landlord reserves the
right to identify handicap stalls and one (1) covered stall for Landlord's use.
Uncovered, unreserved parking stalls are available at no charge during the term
of the Lease.
ADDITIONAL PARAGRAPH 44. ELECTRICITY
Landlord and Tenant reserve the opportunity to structure their respective
obligations for the cost of electricity on a "net" basis such that Tenant's
usage would be separately metered and Tenant would pay the electricity cost
monthly. In the event Landlord and Tenant decide not to separately meter the
Premises, after hours HVAC shall be billed to Tenant at the actual cost of such
service.
ADDITIONAL PARAGRAPH 45. PICNIC AREA
Landlord will provide its standard picnic area (specifically not a "patio)
outside Building "N" at Landlord's cost. Landlord will provide a lighted paved
path and/or standard cinder trail on both sides of 114th Avenue S.E. to provide
access between Maplewood Building and Building "N" in a location as determined
by Landlord and as allowed by code or other laws that may apply.
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ADDITIONAL PARAGRAPH 46: SATELLITE DISH.
With Landlord's prior written consent, Tenant may install, operate and maintain,
at its sole cost and expense, a satellite dish or communication antenna on the
roof of the building for its exclusive use in a location and configuration
acceptable to and approved by Landlord at any time during the term of the Lease,
provided said use does not interfere with any existing installation on or about
the Building or Project, and provided said satellite dish or communication
antenna is to be utilized for Tenant's equipment operation and not commercial
purposes, at no additional rental cost. Landlord shall have the right to
approve the size and weight of the satellite dish or communication antenna. The
satellite dish or communication antenna shall be installed at Tenant's sole cost
and expense by a method reasonably acceptable to and approved by Landlord, and
in such a manner that it is not visible to the general public, tenants or guests
of the Building or Project. Tenant shall obtain, at its sole cost and expense,
all permits and zoning approvals necessary for the installation and operation of
the satellite dish or communication antenna. If requested by Landlord, a
licensed structural engineer shall be employed at Tenant's cost to ensure the
integrity of the Building area upon which the satellite dish or communication
antenna is located. Tenant shall also pay for any and all screening necessary
to conceal the satellite dish or communication antenna. Landlord agrees to
cooperate with Tenant to obtain necessary approvals, provided that Landlord
shall not be required to incur any costs or expenses related thereto. Tenant
shall be solely responsible for all maintenance, repair, operating and other
costs related to the satellite dish. Tenant shall indemnify, defend and hold
Landlord, its employees, agents, servants and/or guests harmless from claims for
personal injury, death and/or property damage arising from any incidents
occurring on or about or in connection with the satellite dish or communication
antenna.
ADDITIONAL PARAGRAPH 47: SIGNAGE
Tenant's name shall be listed on the suite entry door. Building standard
signage will be provided at Landlord's expense. Tenant's name may be included
on the Building's exterior, at Tenant's sole cost and expense, subject to
Landlord's approval regarding color, size, type, method of attachment and other
design elements and subject to City of Bellevue and other governmental
requirements, as applicable, related to Tenant's signage. Landlord will approve
Tenant's logo colors of green and yellow as shown on Tenant's business cards
provided use of said color(s) for Tenant's signage are approved by the City of
Bellevue and other governmental or quasi-governmental authority having
jurisdiction.
ADDITIONAL PARAGRAPH 48: TEMPORARY SPACE.
If Landlord will be unable to deliver the premises in accordance with Paragraph
2 of this Lease on or before September 1, 1997, Landlord shall notify Tenant no
later than May 1, 1997 (with updates thereafter on no less than a monthly basis)
that such a delay is reasonably expected, and Landlord shall make not less than
three thousand three hundred eighty-five (3,385) rentable square feet
("Temporary Space") available to Tenant at the Maplewood Building, by no later
than June 1, 1997, (or by no later than thirty (30) days after any update notice
given after May 1, 1997) at no charge to Tenant for rent, operating costs or
other additional charges. The Temporary Space shall be delivered to Tenant in
an open configuration ready for occupancy, with building standard ceiling and
lighting completed, and such floor covering, mechanical equipment, and perimeter
electrical outlets as Landlord shall determine in its sole discretion. Any
other improvements to the Temporary Space shall be provided at Tenant's sole
cost and expense. Landlord shall use its best efforts to advise Tenant of the
anticipated date of substantial completion of the Premises at least fifteen (15)
days prior to such date, but the failure to give such notice shall not
constitute a default by Landlord. Tenant shall vacate the Temporary Space
within fifteen (15) days after Landlord's notice of delivery of possession of
the Premises to Tenant in accordance with this Lease.
If Landlord has not delivered possession of the Premises in accordance with
Paragraph 2 of this Lease on or before September 1, 1997, for reasons other than
Force Majeure (as hereinafter defined), then, if Landlord has not provided
Tenant with the Temporary Space, Landlord shall make the Temporary Space
available to Tenant, in accordance with the preceding paragraph, as soon as
practicable thereafter. As used herein, "Force Majeure" shall mean delays due
to strikes, riots, Acts of God, shortages of labor or materials of which
Landlord is not currently aware, fire or other casualty, earthquake, flood or
war, or reasons beyond Landlord's control provided that Landlord has used its
best efforts to avoid delay to the extent within Landlord's control.
Notwithstanding anything to the contrary contained herein, Landlord shall not be
required to expend additional funds and/or change the design, materials, or
labor selections in order to avoid delay(s).
If Landlord is unable to deliver possession of the premises to Tenant by October
1, 1997, for reasons other than Force Majeure, then Landlord shall reimburse
Tenant for its actual verifiable holdover portion of the rent ("Holdover
Payment") paid by Tenant for its existing premises at 13231 S.E. 36th Street,
Bellevue, Washington ("Existing Premises") for the "Holdover Period", which
period shall commence no sooner than October 1, 1997 and shall terminate on the
date which is fifteen (15) days after the date of Landlord's notice of delivery
of possession of the Premises to Tenant in accordance with this Lease. The
Holdover Payment shall be paid to Tenant in the form of free rent occupancy at
the premises (i.e., Tenant shall be entitled to deduct and offset the Holdover
Payment against Rent payments due under this Lease until the Holdover Payment is
fully credited to Tenant), but in no event shall the Holdover Payment exceed
Twenty Seven Thousand Nine Hundred Forty Six and 18/100 Dollars ($27,946.18) per
month during the Holdover Period. Notwithstanding anything to the contrary
contained herein, in the event Landlord is unable to deliver possession of the
Premises to Tenant on or before October 1, 1997 for Force Majeure reasons, then
this Holdover Payment provision shall be null and void and Landlord shall have
no obligation to Tenant for the Holdover Payment.
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Coinstar Addendum Bldg "N"
Landlord [illegible]
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EXHIBIT A
RULES AND REGULATIONS
BELLEFIELD OFFICE PARK
1. Sidewalks, halls, passages, exits, entrances, elevators, escalators and
stairways shall not be obstructed by Tenants or used by them for any
purpose other than for ingress to and egress from their respective
premises. The halls, passages, exits, entrances, elevators and stairways
are not for the use of the general public and Landlord shall in all cases
retain the right to control and prevent access thereto by all persons whose
presence, in the judgment of Landlord, shall be prejudicial to the safety,
character, reputation and interests of the Building and its Tenants,
provided that nothing herein contained shall be construed to prevent such
access to persons with whom any Tenant normally deals in the ordinary
course of such Tenant's business unless such persons are engaged in illegal
activities. No tenant, and no employees or invitees of any tenant, shall
go upon the roof of the Building, except as authorized by Landlord.
2. Except as otherwise permitted in this Lease, no sign, placard, picture,
name, advertisement or notice, visible from the exterior of leased premises
shall be inscribed, painted, affixed, installed or otherwise displayed by
any Tenant either on its premises or any part of the Building without the
prior written consent of Landlord, and Landlord shall have the right to
remove any such sign, placard, picture, name, advertisement, or notice
without notice to and at the expense of the Tenant.
If the Landlord shall have given such consent to any Tenant at any time,
whether before or after the execution of the lease, such consent shall in
no way operate as a waiver or release of any of the provisions hereof or of
such lease, and shall be deemed to relate only to the particular sign,
placard, picture, name, advertisement or notice so consented to by Landlord
and shall not be construed as dispensing with the necessity of obtaining
the specific written consent of Landlord with respect to any other such
sign, placard, picture, name, advertisement or notice.
All approved signs or lettering on doors and walls shall be printed,
painted, affixed or inscribed at the expense of the Tenant by a person
approved by Landlord.
3. The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of Tenants only and
Landlord reserves the right to exclude any other names therefrom.
4. No curtains, draperies, blinds, shutters, shades, screens or other
coverings, awnings, shall be attached to, hung or placed in, or used in
connection with, any window or door on any premises without the prior
written consent of Landlord. In any event with the prior written consent
of Landlord, all such items shall be installed inboard of Landlord's
standard window covering and shall in no way be visible from the exterior
of the building.
5. Landlord reserves the right to exclude from the Building between the hours
of 6 pm and 8 am and at all hours on Saturdays, Sundays and holidays all
persons who are not Tenants or their accompanied guests in the Building.
Each Tenant shall be responsible for all persons for whom it allows to
enter the building and shall be liable to Landlord for all acts of such
persons.
Landlord shall in no case be liable for damages for error with regard to
the admission to or exclusion from the Building of any person.
During the continuance of any invasion, mob, riot, public excitement or
other circumstance rendering such action advisable in Landlord's opinion,
Landlord reserves the right to prevent access to the Building by closing
the doors, or otherwise, for the safety of Tenants and protection of the
Building and property in the Building.
6. No Tenant shall employ any person or persons other than the janitor of
Landlord for the purpose of cleaning premises unless otherwise agreed to by
Landlord in writing. Except with the written consent of Landlord no person
or persons other than those approved by Landlord shall be permitted to
enter the building for the purpose of cleaning the same. No Tenant shall
cause any unnecessary labor by reason of such Tenant's carelessness or
indifference in the preservation of good order and cleanliness of the
premises. Landlord shall in no way be responsible to any Tenant for any
loss of property on the premises, however occurring, or for any damage done
to the effects of any Tenant by the janitor or any other employee or any
other person.
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7.
8. Each Tenant shall see that all doors of its premises are closed and
securely locked and must observe strict care and caution that all water
faucets or water apparatus are entirely shut off before the Tenant or its
employees leave such premises, and that all utilities shall likewise be
carefully shut off, so as to prevent waste or damage, and for any default
or carelessness the Tenant shall make good all injuries sustained by other
Tenants or occupants of the Building or Landlord. On multiple-tenancy
floors, all Tenants shall keep the door or doors to the Building corridors
closed at all times except for ingress and egress.
9. As more specifically provided in the Tenant's Lease of the Premises, Tenant
shall not waste electricity, water or air-conditioning and agrees to
cooperate fully with Landlord to assure the most effective operation of the
Building's heating and air-conditioning, and shall refrain from attempting
to adjust any controls other than room thermostats installed for Tenant's
use.
10. No Tenant shall alter any lock or access device or install a new or
additional lock or access device or any bolt on any door of its premises
without the prior written consent of Landlord. If Landlord shall give its
consent, the Tenant shall in each case furnish Landlord with a key for any
such lock. If such work is to be performed by Landlord, Landlord will
perform the work diligently.
11. No Tenant shall make or have made additional copies of any keys or access
devices provided by Landlord. Each Tenant, upon the termination of the
Tenancy, shall deliver to Landlord all the keys or access devices for the
Building, offices, rooms and toilet rooms which shall have been furnished
the Tenant or which the Tenant shall have had made. In the event of the
loss of any keys or access devices so furnished by Landlord, Tenant shall
pay Landlord therefor.
12. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were constructed
and no foreign substance of any kind whatsoever shall be thrown therein,
and the expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose employees
or invitees, shall have caused it.
13. No Tenant shall use or keep in its premises or the Building any kerosene,
gasoline or inflammable or combustible fluid or material other than limited
quantities necessary for the operation or maintenance of office or office
equipment. No Tenant shall use any method of heating or air-conditioning
other than that supplied by Landlord.
14. No Tenant shall use, keep or permit to be used or kept in its premises any
foul or noxious gas or substance or permit or suffer such premises to be
occupied or used in a manner offensive or objectionable to Landlord or
other occupants of the Building by reason of noise, odors and/or vibrations
or interfere in any way with other Tenants or those having business
therein, nor shall any animals or birds be brought or kept in or about any
premises of the Building.
15. Any cooking done or permitted by any Tenant on its premises shall be in
accordance with all applicable federal, state and city laws, codes,
ordinances, rules and regulations. The premises shall not be used for
lodging.
16. Except with the prior written consent of Landlord, no Tenant shall sell, or
permit the sale, at retail, of newspapers, magazines, periodicals, theatre
tickets or any other goods or merchandise in or on any premises, nor shall
Tenant carry on, or permit or allow any employee or other person to carry
on, other than in connection with Tenant's business, the business of
stenography, typewriting or any similar business in or from any other
portion of the Building, nor shall the premises of any Tenant be used for
the storage of merchandise or for manufacturing of any kind, or the
business of a public barber shop, beauty parlor, nor shall the premises of
any Tenant be used for any improper, immoral or unlawful purpose, or any
business or activity other than that specifically provided for in such
Tenant's lease.
17. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instructions
in their installation.
18. Landlord will direct electricians as to where and how telephone, telegraph
and electrical wires are to be introduced or installed. Within Tenant's
Premises, telephone/data outlets and electrical outlets shall be in
mutually agreeable locations. No boring or cutting for wires will be
allowed without the prior consent of Landlord. The location of burglar
alarms, telephones, call boxes and other office equipment affixed to all
premises shall be subject to the written approval of Landlord.
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19. Except as otherwise permitted in this Lease, no Tenant shall install any
radio or television antenna, loudspeaker or any other device on the
exterior walls or the roof of the Building. Tenant shall not interfere
with radio or television broadcasting or reception from or in the Building
or elsewhere.
20. No Tenant shall lay linoleum, tile, carpet or any other floor covering so
that the same shall be affixed to the floor of its premises in any manner
except as approved in writing by Landlord. The expense of repairing any
damage resulting from a violation of this rule of the removal of any floor
covering shall be borne by the Tenant by whom, or by whose contractors,
employees or invitees, the damage shall have been caused.
21. No furniture, freight, equipment, materials, supplies, packages,
merchandise or other property will be received in the Building or carried
up or down the elevators except in the elevators designed for freight if
such improvements are made pursuant to Exhibit "C", or if no elevator is
designed for freight, in the Building's elevators at Tenant's sole risk.
Tenant shall pay to repair any damage by Tenant, its employees or invitees.
Landlord shall have the right to prescribe the weight, size and position of
all safes, furniture or other heavy equipment brought into the Building
based upon its reasonable determination of structural considerations.
Safes or other heavy objects shall, if considered necessary by Landlord,
stand on wood strips of such thickness as determined by Landlord to be
necessary to properly distribute the weight thereof. Landlord will not be
responsible for loss of or damage to any such safe, equipment or property
from any cause, and all damage done to the Building by moving or
maintaining any such safe, equipment or other property shall be repaired at
the expense of Tenant.
Business machines and mechanical equipment belonging to Tenant which cause
noise or vibration that may be transmitted to the structure of the Building
or to any space therein to such a degree as to be objectionable to Landlord
or to any tenants in the Building shall be placed and maintained by Tenant,
at Tenant's expense, on vibration eliminators or other devices sufficient
to eliminate noise or vibration. The persons employed to move such
equipment in or out of the Building must be acceptable to Landlord.
22. No Tenant shall place a load upon any floor of the premises which exceeds
the load per square foot which such floor was designed to carry (as shown
on the drawings prepared by Lance Mueller & Associates dated 11/26/96 AS
REVISED 9/5/96) and which is allowed by law. No Tenant shall mark, or
drive nails, screw or drill into, the partitions, woodwork or plaster,
except as otherwise provided in this Lease, or in any way deface such
premises or any part thereof.
23. No Tenant shall install, maintain or operate upon the Premises any vending
machine, except as otherwise provided in this Lease, without the written
consent of Landlord, which consent shall not be unreasonably withheld or
delayed.
24. There shall not be used in any space, or in the public areas of the
Building, either by any Tenant or others, any hand trucks except those
equipped with rubber tires and side guards or such other material-handling
equipment as Landlord may approve. No other vehicles of any kind shall be
brought by any Tenant into or kept in or about the premises.
25. Each Tenant shall store all its trash and garbage within the interior of
its premises. No material shall be placed in the trash boxes or
receptacles if such material is of such nature that it may not be disposed
of in the ordinary and customary manner of removing and disposing of trash
and garbage in the city without violation of any law or ordinance governing
such disposal. All trash, garbage and refuse disposal shall be made only
through entryways and elevators provided for such purposes and at such
times as Landlord shall designate.
26. Canvassing, soliciting, distribution of handbills or any other written
material, and peddling in the Building are prohibited and each Tenant shall
cooperate to prevent the same. No Tenant shall make room-to-room
solicitation of business from other tenants in the building.
27. Landlord shall have the right, exercisable with reasonable notice and
without liability to any Tenant, to change the name and address of the
Building.
28. Landlord reserves the right to exclude or expel from the Building any
person who, in Landlord's judgment, is intoxicated or under the influence
of liquor or drugs or who is in violation of any of the rules and
regulations of the Building.
29. Without the prior written consent of Landlord, Tenant shall not use the
name of the Building in connection with or in promoting or advertising the
business of Tenant except as Tenant's address.
30. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental
agency.
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31. Tenant assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
32. The requirements of Tenants will be attended to only upon application at
the office of the Building by an authorized individual. Employees of
Landlord shall not perform any work or do anything outside of their regular
duties unless under special instructions from Landlord, and no employees
will admit any person (Tenant or otherwise) to any office without specific
instructions from Landlord.
33. Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular Tenant or Tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of
any other Tenant or Tenants, nor prevent Landlord from thereafter enforcing
any such Rules and Regulations against any or all Tenants of the Building.
34. Landlord reserves the right on reasonable notice to Tenant to make such
other and reasonable rules and regulations as in its judgment may from time
to time be needed for safety and security, for care and cleanliness of the
Building and for the preservation of good order therein. Tenant agrees to
abide by all such Rules and Regulations hereinabove stated and any
additional rules and regulations which are adopted.
35. Landlord reserves the right to designate the use of the parking spaces on
the premises for handicap stalls and Landlord's use as otherwise provided
in this Lease.
36. Tenant shall endeavor to use carpet protector under all desk chairs.
37. Tenant agrees to keep balcony doors closed at all times, except during
ingress and egress.
38. Tenant or Tenant's guests shall park between designated parking lines only,
and shall not occupy two parking spaces with one car. Vehicles in
violation of the above shall be subject to tow-away, at vehicle owner's
expense.
39. Vehicles parked on premises overnight without prior written consent of the
Landlord shall be deemed abandoned and shall be subject to tow-away at
vehicle owner's expense.
40. Tenant shall be responsible for the observance of all of the foregoing
Rules and Regulations by Tenant's employees, agents, clients, customers,
invitees and guests.
41. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify, alter or amend, in whole or in part, the terms,
covenants, agreements and conditions of any Lease of Premises in the
Building. The word "Building" as used herein means the building as
identified in Paragraph 1 of the Lease of which the premises are part.
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EXHIBIT B
PREMISES
BUILDING "N", SUITE 100
Cross hatched portion outlined in red reflects the Premises as referenced
in Paragraph 1 of the Lease. Landlord and Tenant recognize that Building
"N" has not yet been constructed. The size and configuration of the
Premises as shown on this Exhibit B is subject to change based on building
design changes before and/or during the construction of the Building, as
determined by Landlord and reasonably acceptable to Tenant, as otherwise
provided in this Lease.
[FLOORPLAN]
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EXHIBIT B
PREMISES
BUILDING "N", SUITE 100
Cross hatched portion outlined in red reflects the Premises as referenced
in Paragraph 1 of the Lease. Landlord and Tenant recognize that Building
"N" has not yet been constructed. The size and configuration of the
Premises as shown on this Exhibit B is subject to change based on building
design changes before and/or during the construction of the Building, as
determined by Landlord and reasonably acceptable to Tenant, as otherwise
provided in this Lease.
[FLOORPLAN]
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EXHIBIT C
OFFICE LEASE IMPROVEMENT AGREEMENT
BLDG "N" TENANT: COINSTAR
TENANT IMPROVEMENTS
The following is hereby added to the Lease:
(a) LANDLORD'S WORK: Landlord shall cause certain improvements to be
constructed in the Premises, substantially as shown on the attached Exhibits
C-1 and C-2, "Improvement Space Plan Outline" and "Notes to Tenant
Improvements", respectively (hereinafter referred to as "Tenant
Improvements"). Landlord, at its cost, shall engage an architectural firm
for such space planning services and the completion of such architectural,
electrical and mechanical drawings; and obtain such city permits and
approvals which Landlord, in its sole discretion, determines to be necessary
to build the Tenant Improvements. Landlord will pay for architectural
services provided by a firm preferred by Tenant, provided said costs are
consistent with Landlord's budgets and the services are acceptable to
Landlord. Landlord shall deliver the Premises substantially in accordance
with the final drawings approved by Landlord and Tenant including all
approved changes thereof. Notwithstanding anything stated herein, Tenant
shall be solely responsible for the cost of changes in the scope of work
outlined on Exhibits C-1 and C-2 which are due to changes requested by
Tenant and which increase the cost of the Tenant Improvements. Said changes
shall be considered "Additional Work" to be completed at Tenant's cost and
expense to be reimbursed lump sum from Tenant to Landlord on or before the
Lease Commencement Date. At Landlord's sole option, Tenant shall contract
directly with the general contractor completing Landlord's Tenant
Improvement Work for completion of all or a portion of the Additional Work.
Tenant agrees to provide Landlord with information and approvals as may be
requested by Landlord in connection with Landlord's obligations pursuant to
this paragraph, including, but not limited to, materials, locations,
approvals, and selections requested by Landlord from Tenant, on a timely
basis and in a time frame consistent with Landlord's construction and
delivery schedule. Notwithstanding anything contained herein to the
contrary, Landlord shall not be responsible to move, furnish or install
appliances, furniture, files, moveable partitions or systems furniture or
office equipment to Tenant or the Premises. Tenant Improvements shall be
completed utilizing Building Standard materials and finishes or similar, in
mutually agreeable colors. Landlord may re-use materials and/or supplies in
its sole discretion.
(b) TENANT'S WORK: Landlord will make reasonable efforts to coordinate with
Tenant's construction project manager in scheduling installation of Tenant's
cabling and telecom equipment by Tenant's contractors and/or employees in
the Premises at Tenant's sole cost and expense (hereinafter referred to as
"Tenant's Work"). Tenant shall obtain at its sole cost and expense, permits
and other governmental approvals as may be required for the completion of
Tenant's Work. Building permits and any other governmental approvals for
Tenant's Work shall be drawn separate and apart from those drawn by Landlord
for completion of the tenant improvements. Tenant's Work shall not be
performed under building permits or other approvals related to the work
performed by Landlord. Tenant agrees not to interfere with or cause delay
in the completion of tenant improvement work by Landlord and/or its
contractors. Tenant, its employees and/or contractors shall not perform any
Tenant's Work in the Premises without prior approval of Landlord. All such
approved Tenant Work performed prior to the Lease Commencement Date shall be
subject to all of the terms and conditions of the Lease except for the
payment of Base Rent which shall not be due until the Commencement Date.
Notwithstanding anything stated herein, if Tenant's Work causes a delay or
otherwise increases the cost of Landlord's Work, Tenant shall reimburse
Landlord for said costs on or before the Lease Commencement Date.
C. ADDITIONAL WORK.
The following work shall be completed by Landlord at Tenant's cost and
expense (the "Additional Work"):
- Electrical work not specifically identified on Exhibit C-2 as
"Additional Work", if any
- Any materials or finishes which exceed Landlord's Building Standard,
if any, shall be "Additional Work" to the extent the cost of the
materials or finishes and their installation exceed Building Standard
- Any work shown on Exhibit C-1 to the extent it exceeds the scope of
work identified on Exhibit C-2.
- Provide rough-in for Tenant provided and installed card access system
at all exterior doors
- All costs associated with modifications to one (1) elevator to allow
two-sided access, but excluding the cost directly associated with
re-design of the restroom location(s) on the second floor and
re-design of other building core areas related thereto, which in any
event must be acceptable to Landlord.
- One (1) men's and one (1) women's shower room with two (2) stalls
each, lavatory counter and toilet to be installed at Tenant's sole
cost and expense and removed at Tenant's sole cost and expense at the
end of the Lease Term at Landlord's option.
Notwithstanding anything stated herein to the contrary, if Tenant
causes a delay in Landlord's Work, Tenant shall reimburse Landlord for
said costs on or before the Lease Commencement Date.
Tenant shall pay Landlord in a lump sum for the Additional Work as
Additional Rent within ten (10) business days of receipt of an invoice
therefore from Landlord provided the Additional Work has been substantially
completed.
All improvements shall be subject to, and performed substantially in
accordance with, applicable codes, laws and other governmental regulations
which may apply.
Tenant's occupancy of the Premises shall be deemed acceptance of the Tenant
Improvements herein described and Landlord shall be deemed to have fulfilled its
obligations with respect to Tenant Improvements, except with respect to punch
list items as hereinafter described. At Delivery of Possession, Landlord and
Tenant shall together prepare a punch list of Tenant Improvement work. If any
defects are noted, Landlord shall promptly repair such defects as soon as
reasonably possible thereafter.
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EXHIBIT C-1
IMPROVEMENT SPACE PLAN OUTLINE
BUILDING "N", SUITE 100
TENANT: COINSTAR
Interior room sizes are approximate. Furniture (including work stations) and
appliances are not the responsibility or obligation of the Landlord. Landlord's
Work, Tenant's Work and Additional Work are as noted on Exhibits C and C-2.
A mutually agreeable space plan for tenant improvements shall be developed to
generally include the following in a configuration that is generally designed
with open office areas along the exterior window line and the majority of hard
walled rooms in the interior of each floor:
TYPE OF SPACE SIZE NUMBER
- ------------------------------------- --------------- ------------------
Large Private Office 200 Sq. Ft. 14
Private Office 120 Sq. Ft. 19
Boardroom 450 Sq. Ft. 1
Conference Room 400 Sq. Ft. 2
Medium Conference Room 240 Sq. Ft. 2
Small Conference Room 120 Sq. Ft. 4
Technical Training Room 900 Sq. Ft. 1
Lunch Room 1,200 Sq. Ft. 1
Coffee/Kitchen Area 240 Sq. Ft. 1
Computer Room 700 Sq. Ft. 1
Computer Set-Up Room 150 Sq. Ft. 1
Computer Training Room 700 Sq. Ft. 1
Operations Lab 400 Sq. Ft. 1
Software Engineering Lab 400 Sq. Ft. 1
Vender Lab 450 Sq. Ft. 1
Mail/Copy/Supply Room 240 Sq. Ft. 2
Computer Storage 200 Sq. Ft. 1
Operations Storage 150 Sq. Ft. 1
Promotions Storage 120 Sq. Ft. 1
Parts Room 400 Sq. Ft. 1
Mail Shipping/Receiving 600 Sq. Ft. 1
Gallery (Open) 250 Sq. Ft. 1
Reception Area 600 Sq. Ft. 1
Reception Workroom 120 Sq. Ft. 1
Facilities Storage 150 Sq. Ft. 1
Facilities Workroom 300 Sq. Ft. 1
Workstations (Open Space) Approx. 6' x 8' TBD
Workstations (Open Space) Approx. 8' x 8' TBD
Open Space: Files/Fax/Printers 1,000 Sq. Ft.
Mens & Womens Showers w/Lockers 120 Sq. Ft. 2
Sick Room 120 Sq. Ft. 1
Misc. Storage Closets on Each Floor TBD TBD
Coat Closets TBD 2
Network Closet 100 Sq. Ft. 1
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EXHIBIT C-2
NOTES TO TENANT IMPROVEMENTS
BUILDING "N", SUITE 100
TENANT: COINSTAR, INC.
Landlord, at its sole option, shall determine the use of "equivalent" materials
or finishes. Tenant shall fully comply with the provisions of Exhibit C with
regard to completion of any "Tenant's Work" and/or "Additional Work", if any,
noted herein.
- - Carpet: 30 oz. cut pile or 28 oz. level loop over pad (Patcraft "New Jazz
30" or equivalent)
- - VCT: Building standard VCT flooring in lunchroom, coffee kitchen,
computer/phone room, mailroom, parts room, computer setup room,
facilities storage and facilities work room.
- - Base: 4" vinyl base with cove toe.
- - Wall Paint: New walls will be painted with one layer of primer and two
layers of paint. The paint finish will be eggshell.
- - Ceiling Tile/Grid:
Standard 15/16" width white grid with 2'x4' tegular edge lay-in
tile, (Armstrong Second Look II or equivalent). Ceiling height
shall be approximately 8'6".
- - Door Construction:
Doors will be full height (approximately 7'10"). Standard door
width will be 3'-0". Doors will be solid core with red oak
veneer. Doors and door frames will be stained to match the
building standard stain as utilized in the common lobby areas.
Landlord will provide a building standard solid core with red oak
veneer double door suite entry to Tenant's Premises at Landlord's
cost.
- - Door Hardware:
Door hardware shall be Schlage (or equivalent) with an oil-rubbed
bronze finish. Doors will have a minimum of two pair of butt
hinges per leaf. Latchsets will be standard for all doors except
suite entries. Landlord will provide locksets on President's
office, Chief Financial Officer's office, all Labs (not to exceed
three (3)), Mailroom, Computer Room and Parts Room. Any other
locksets will be provided by Landlord at Tenant's cost.
- - Relites Interior relites will be 36" in width. The frames will be of
wood construction to match the doors. The frame will start at
approximately 6" AFF and the head will match the top of the door.
Glass will be 1/4" safety glass.
Total allowance of one (1) building standard relite per private
office and one (1) per conference room in Tenant's Premises,
which Tenant may utilize in the space as it fits Tenant's
configuration. Landlord will agree to provide a total of two (2)
building standard relites at each of three (3) large conference
rooms.
- - Window Blinds:
Window blinds for the exterior windows will be 1" aluminum
(Levelor "Riviera" or equivalent). 1" blinds can be provided for
the interior relites at the Tenant's option. Please note the
finish for the interior blinds will need to match that used on
the exterior windows.
- - Electrical: In enclosed offices, the building standard will be two (2)
electrical duplex outlets, one combination telephone/data
outlet, except in the specifically identified rooms, where the
number of duplex electrical outlets or power supplied shall be as
follows:
LARGE PRIVATE OFFICES (NOT TO EXCEED FOURTEEN (14)): Three (3)
electrical duplex outlets, two (2) combination voice/data boxes.
CONFERENCE ROOM: In medium and large conference rooms the
building standard will be three (3) duplex outlets and one (1)
voice/data box.
VENDOR QUALIFICATIONS AND OPERATIONS LAB: The building standard
will be twenty-four (24) linear feet of surface mounted wiremold
power strip at belt height with outlets 2'0" on center.
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EXHIBIT C-2
NOTES TO TENANT IMPROVEMENTS
BUILDING "N", SUITE 100
TENANT: COINSTAR, INC.
- - Electrical (Continued):
COMPUTER/PHONE ROOM: The building standard will be a dedicated
panel with a minimum of thirty (30) 20 amp dedicated circuits and
one (1) 208 volt service for phone switch. Landlord will provide
3/4' plywood on designated wall surfaces.
TECHNICAL TRAINING: The building standard will be six (6)
circuits to the room with power distributed to walls for machine
connections and four (4) floor mounted monuments for power and
data connections at the center of the room in locations to be
determined by Tenant. Landlord shall provide ten (10)
incandescent lights or dimmer switches provided such lighting is
permitted within energy code.
GENERATOR HOOK-UP: Landlord shall provide rough in for Tenant
provided generator and associated equipment.
MAIL ROOM: Landlord will provide power for postage meter, FedEx
computer PC, and related equipment.
CONDUIT: Landlord shall provide one (1) six inch conduit
between Building "N" and Maplewood Building within which Landlord
shall provide four (4) conduits for Tenant's use (three at one
inch and one at two and one half inches) and two conduits at one
inch each for Landlord's use, or at Landlord's option, a larger
or smaller conduit, provided the four (4) conduits for Tenant's
use are provided within same. Notwithstanding anything to the
contrary contained herein, Tenant shall supply, install, and
maintain all wiring in said conduit at its sole cost and expense.
COMPUTER TRAINING ROOM: Landlord to provide four (4) circuits
to the room distributed to wall outlets and two (2) floor
monuments. Landlord to provide approximately six (6) combination
voice/data outlets.
LUNCH ROOM: Power to garbage disposal, four (4) vending
machines, and one (1) each of the following: refrigerator,
microwave, toaster-oven, garbage disposal, water filter and
coffee machine on timer.
COPY/SUPPLY AND OPEN OFFICE: Outlets to power reasonable power
requirements of tenant's office equipment such as copiers, color
copiers, shredders, mail sorters, printers and fax machines.
In open office areas, the building standard will be one
electrical duplex outlet, one telephone outlet, and one data
outlet for every 150 square feet, except at the Work Stations as
identified on Exhibit C-1, Improvement Space Plan Outline
(furnished and installed by Tenant), where Landlord shall provide
two circuits for every eight (8) work stations and one (1)
data/phone outlet for each work station, with a maximum of four
(4) work stations per circuit.
All telephone and data lines will be supplied and installed by
the Tenant as part of Tenant's Work.
- - Lighting: Switching and lighting shall meet the requirements of the
Washington State Energy Code. There shall be one switch per room
and a maximum of 25 lights per switch. Building standard lighting
shall be 2x4 lay-in fluorescent fixtures with three T-8 tubes and
a parabolic lens. Color of tubes shall be cool white. Furnish
and install incandescent lighting at reception area logo wall.
- - Cabinetry: Cabinetry will have plastic laminate covered faces, countertops,
and 4" backsplashes. Standard base cabinetry will be 24" deep
with one adjustable shelf and one drawer immediately below the
countertop. Standard wall cabinetry will be 12" in depth with
two adjustable shelves. The interiors of the cabinets and
drawers and the covering on the shelves will be white melamine.
Pulls will be 4" brushed chrome wire type or equivalent.
Landlord will provide building standard cabinetry and shelving as
follows:
LUNCHROOM: Approximately fifteen (15) lineal feet of upper and
lower cabinets.
COFFEE KITCHEN (2ND FLOOR): Approximately ten (10) linear feet
of upper and lower cabinets.
MAILROOM: Approximately twenty (20) lineal feet at 30" deep
lower storage cabinets with one (1) adjustable shelf and ten (10)
lineal feet of adjustable upper shelving.
Landlord [illegible]
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Tenant [illegible]
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Page 2 of 3
<PAGE>
EXHIBIT C-2
NOTES TO TENANT IMPROVEMENTS
BUILDING "N", SUITE 100
TENANT: COINSTAR, INC.
- - Cabinetry (continued):
FACILITIES WORKROOM: Approximately twelve (12) linear feet of
lower storage cabinets with one (1) adjustable shelf and twelve
(12) lineal feet of upper adjustable shelving. Counter top to be
30" deep.
MAIL/COPY ROOM (BOTH FLOORS): Approximately ten (10) lineal
feet of 30" deep lower storage cabinets with one (1) adjustable
shelf and ten (10) lineal feet of upper adjustable shelving.
RECEPTIONIST WORK ROOM: Approximately ten (10) lineal feet 30"
deep lower cabinet with one (1) adjustable shelf.
COAT CLOSETS: Provide coat rod and shelf.
- - Built-In Reception Desk:
Partial height wall; eighteen (18) lineal feet of 12" deep
plastic laminate transaction surface at 42" height with 36" wide
ADA accessible section and fourteen (14) lineal feet at 30" deep
work counter at approximate height of 30" AFF; three (3) plastic
laminate box files and two (2) pencil drawers with melamine
interiors and two (2) keyboard trays.
- - Mechanical:
The building standard HVAC system shall have the capability to
individually control zones of approximately 800 rentable square
feet, with the average building zone being 1,500 rentable square
feet, or such other average building zone size as determined by
Landlord in its sole discretion. Landlord shall determine all
zone sizes in its sole discretion, except as specifically
identified herein. Landlord shall provide a separate zone for
the Lunchroom, large Conference rooms (not to exceed three (3)),
the Technical Training room, the Computer Training Room and Labs
(not to exceed three (3)). Landlord may combine two (2) or more
of the referenced rooms into one (1) zone based upon load and
location.
Landlord shall furnish and install a dedicated twenty-four (24)
hour HVAC system for the Computer/Phone Room (Communications
Room) (estimated at 5 tons).
- - Sound Insulation:
Landlord shall provide batt insulation in walls surrounding large
Conference Room, large offices, Labs, Training Rooms,
Computer/Phone room and Coffee Kitchen. Landlord will build full
height walls with sound insulation in walls surrounding Lunch
Room.
- - Plumbing: Landlord will furnish and install plumbing lines and building
standard fixtures for stainless steel sink, dishwasher and
garbage disposal at Lunchroom. Landlord will provide building
standard stainless steel sink and garbage disposal at the Coffee
Kitchen (2nd floor).
Landlord [illegible]
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Tenant [illegible]
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Page 3 of 3
<PAGE>
EXHIBIT D
FORM OF TENANT CERTIFICATE
DATE:
--------------------------
RE: LEASE DATED
-------------------
PREMISES:
---------------------------------------
---------------------------------------
---------------------------------------
LANDLORD: ---------------------------------------
---------------------------------------
---------------------------------------
TENANT: ---------------------------------------
---------------------------------------
---------------------------------------
Gentlemen:
The undersigned as Tenant under the captioned Lease, attached as Schedule 1
hereto (the "Lease"), made and entered into between ______________________,
as Landlord, and the undersigned, as Tenant, hereby certifies that the
undersigned has entered into occupancy of the Premises described in said
Lease on ___________________ and further certifies that:
a. The Rent Commencement Date was ______________________;
b. the Lease shall expire on __________________;
c. the Lease is in full force and effect and has not been modified,
supplemented or amended in any way, except as follows:
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
d. the Premises contain __________________ square feet;
e. the monthly base rent payable by Tenant under the terms of the lease
is $___________ which amount is subject to increase as follows:
--------------------------------------------------------------------
--------------------------------------------------------------------
Tenant also pays to Landlord additional rent on a monthly basis the
sum of $__________, as its Proportionate Share of Common Area operating
expenses;
f. the improvements and space required to be furnished according to the
Lease have been duly delivered by Landlord and accepted by Tenant;
g. all conditions and agreements under said Lease to be performed by
Landlord have been satisfied or performed, and on this date there are
no existing defenses or offsets which the undersigned has against the
enforcement of said Lease by Landlord;
h. Tenant has performed all of its obligations under the Lease;
i. Tenant has no claims, counterclaims, defenses, setoffs or causes of
action, and knows of no occurrence or event which may give rise to any
claim, counterclaims, defenses, setoffs or cause of action, against
Landlord for rescission of the lease or for damages for any breach of
the Lease or in connection with the demised premises, or the Property;
and Tenant is not entitled to any concessions, rebate, allowance or
free rent for period after the date hereof, except as set forth in the
Lease;
j. Tenant has no existing dispute against Landlord regarding any amount
owing or to be paid or with respect to any other matter under the
Lease;
k. Tenant has not assigned the Lease nor subleased the Premises or any
part thereof;
l. no rental has been paid in advance, and Tenant is current in all of
its rental obligations;
Landlord [illegible]
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Tenant [illegible]
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Page 1 of 2
<PAGE>
m. the monthly rental due from Tenant for (month) 1996 has
been paid; --------------------
n. Tenant is entitled to the non-exclusive use of _______ parking spaces
and the exclusive use of ________ parking spaces.
o. there is presently a Security Deposit held by Landlord in the sum of
_____________________________________Dollars ($__________);
p. the Lease contains no Option(s) to Renew the terms, Rights of First
Refusal, Options to Expand or Options to Terminate, except as follows:
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q. Tenant represents that no Hazardous Material has been used, treated,
stored or disposed of on the Premises or, to Tenant's best knowledge,
on the Property, except in compliance with all federal, state, regional
and local laws, statutes, regulations, rules, requirements and orders
applicable to Hazardous Materials and the environment. Tenant
represents that it does not have any permits or identification numbers
issued by the United States Environmental Protection Agency or by any
state, county or municipal agencies with respect to its operations on
the Premises, except those listed below. For the purposes hereof, the
term "Hazardous Material" shall mean any substance, chemical, waste or
other material which is listed, defined or otherwise identified as
"hazardous" or "toxic" under any federal, state, local or
administrative agency ordinance or law or any regulation, order, rule
or requirement adopted thereunder, as well as any petroleum, petroleum
product or by-product, crude oil, natural gas, natural gas liquids,
liquefied natural gas, or synthetic gas usable as fuel, and "source",
"special nuclear" and "by-product" material as defined in the Atomic
Energy Act of 1985, 42 U.S.C., paragraph 3011, et seq.
List all permits and identification numbers:
------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
Tenant hereby acknowledges that certain persons are considering an investment
in the companies that constitute Landlord and investment, directly or
indirectly, in the Property itself, and that such persons may fully rely on
the certifications made herein by Tenant to Landlord.
The undersigned individual hereby certifies that he or she is duly authorized
to sign and deliver this letter on behalf of Tenant.
Very truly yours,
Tenant:
------------------------------
By: ------------------------------
------------------------------
(please print)
Its:
------------------------------
Date:
------------------------------
SCHEDULE 1
(COPY OF LEASE AND ALL AMENDMENTS)
Landlord [illegible]
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Tenant [illegible]
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Page 2 of 2
<PAGE>
EXHIBIT E
LEGAL DESCRIPTION
BELLEFIELD OFFICE PARK
BUILDING "N"
LEGAL DESCRIPTION
Lot 6 of Bellefield Office Park, as per plat recorded in Volume 119 of plats,
pages 81 through 90, inclusive, records of King County, Washington.
Landlord [illegible]
------------------
Tenant [illegible]
------------------
<PAGE>
EXHIBIT F
(INTENTIONALLY OMITTED)
Landlord [illegible]
------------------
Tenant [illegible]
------------------
<PAGE>
EXHIBIT G-1
FORM OF LETTER OF CREDIT
SAMPLE ONLY - NON-NEGOTIABLE
IRREVOCABLE STANDBY LETTER OF CREDIT NO. XXXXXX
(Date: MMDDYY)
Beneficiary: Applicant:
Spieker Properties, L.P. Coinstar, Inc., a Delaware corporation
915 - 118th Avenue SE, Suite 110 13231 SE 36th street, Suite 200
Bellevue, WA 98005 Bellevue, WA 98006
Attn: Mr. Donald Jefferson as "Tenant"
as "Landlord"
Amount: $111,595
Expiration Date/Location: MMDDYY/At our counter at the above address
Gentlemen:
We hereby establish our Irrevocable Standby Letter of Credit No. XXXXXXX in
your favor available by your drafts drawn on us at SIGHT, and accompanied by the
following required documents:
1 - Original of this letter of credit and amendments, if any.
2 - Beneficiary's signed certificate substantially in the following form:
CERTIFICATE
Spieker Properties, L.P., the Landlord under the two (2) Leases dated
January 29, 1997 between Spieker Properties, L.P., a California limited
partnership, as Landlord, and Coinstar, Inc. a Delaware corporation, as Tenant,
hereby certifies that:
a. The amount of the draft accompanying this certificate is equal to the
amount of the accompanying letter of credit, for which no prior drawing
with respect to such amount has been made under this letter of credit, if
any;
- AND -
b. (i)The Tenant or any successor(s) under said Leases is in default of its
obligation(s) under the terms of the Leases referred to, and has failed to
cure the same within the grace period therein provided, if any;
- OR -
c. (ii)The Landlord under said Leases has not received satisfactory
evidence of renewal or replacement of this letter of credit for an
additional one year term by thirty (30) days prior to the current
expiration date.
This letter of credit is transferable in whole but not in part, upon our
receipt of the attached Exhibit "A" duly executed and completed by the
beneficiary.
This letter of credit sets forth in full our undertaking, which shall not
in any way be modified, amended, amplified or limited by reference to any
document, instrument, or agreement including without limitation the Lease,
whether or not referred to herein, except only the certificates and the sight
draft and this original letter of credit for our endorsement referred to herein;
and any such reference shall not be deemed to incorporate herein by reference
any document, instrument or agreement.
Draft(s) must indicate the number and date of this letter of credit.
Each draft presented hereunder must be accompanied by this original letter
of credit for our endorsement thereon of the amount of such draft.
Documents must be forwarded to us in one parcel and must be mailed, sent by
overnight delivery service, or presented in person to: Silicon Valley Bank,
3003 Tasman Drive, Santa Clara, California 95054; Attn: International Division.
We hereby agree with the drawers, endorsers and bonafide holders that the
drafts drawn under and in accordance with the terms and conditions of this
credit shall be duly honored upon presentation to the drawee; if negotiated on
or before the expiration date of this credit.
This credit is subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce, Publication 500. As
to matters not covered by publication 500, this credit shall be governed by
Article 5 of the Uniform Commercial Code as in effect in the State of New York.
By By
-------------------------------- --------------------------------
Its Its
-------------------------------- --------------------------------
Authorized Signature Authorized Signature
Landlord [illegible]
------------------
Tenant [illegible]
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Page 1 of 2
<PAGE>
EXHIBIT G-1
FORM OF LETTER OF CREDIT
SAMPLE ONLY - NON-NEGOTIABLE
EXHIBIT "A"
To: Date:
Silicon Valley Bank RE: Letter of Credit issued by:
3003 Tasman Drive Silicon Valley Bank
Santa Clara, CA 95054 Letter of Credit No. XXXXXXX
Attn: International Division Available Amount:
Standby Letter of Credits
Gentlemen:
For value received, the undersigned Beneficiary hereby irrevocably transfer
to:
(Name of Transferee)
(Address)
All rights of the undersigned Beneficiary to draw under the above Letter of
Credit up to its Available Amount as shown above as to the date of this
transfer.
By this transfer, all rights of the undersigned Beneficiary in such Letter of
Credit are transferred to the Transferee. Transferee shall have the sole rights
as beneficiary thereof, including sole rights relating to any amendments,
whether increases or extensions or other amendments and whether now existing or
hereafter made. All amendments are to be advised direct to the Transferee
without necessity of any consent of or notice to the undersigned Beneficiary.
The original of such Letter of Credit is returned herewith, and we ask you to
endorse the transfer on the reverse thereof, and forward it direct to the
Transferee with your customary notice of transfer.
Yours very truly,
Signature Authenticated Spieker Properties, L.P.
- -------------------------------- ------------------------------
Signature of Beneficiary
- --------------------------------
Authorized Signature
Landlord [illegible]
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Tenant [illegible]
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Page 2 of 2
<PAGE>
EXHIBIT G-2
FORM OF LETTER OF CREDIT
SAMPLE ONLY - NON-NEGOTIABLE
IRREVOCABLE STANDBY LETTER OF CREDIT NO. XXXXXX
(Date: MMDDYY)
Beneficiary: Applicant:
Spieker Properties, L.P. Coinstar, Inc., a Delaware corporation
915 - 118th Avenue SE, Suite 110 13231 SE 36th street, Suite 200
Bellevue, WA 98005 Bellevue, WA 98006
Attn: Mr. Donald Jefferson as "Tenant"
as "Landlord"
Amount: $388,405
Expiration Date/Location: MMDDYY/At our counter at the above address
Gentlemen:
We hereby establish our Irrevocable Standby Letter of Credit No. XXXXXXX in
your favor available by your drafts drawn on us at SIGHT, and accompanied by the
following required documents:
1 - Original of this letter of credit and amendments, if any.
2 - Beneficiary's signed certificate substantially in the following form:
CERTIFICATE
Spieker Properties, L.P., the Landlord under the two (2) Leases dated
January 29, 1997 between Spieker Properties, L.P., a California limited
partnership, as Landlord, and Coinstar, Inc. a Delaware corporation, as Tenant,
hereby certifies that:
a. The amount of the draft accompanying this certificate is equal to the
amount of the accompanying letter of credit, for which no prior drawing
with respect to such amount has been made under this letter of credit, if
any;
- AND -
b. (i)The Tenant or any successor(s) under said Leases is in default of its
obligation(s) under the terms of the Leases referred to, and has failed to
cure the same within the grace period therein provided, if any;
- OR -
c. (ii)The Landlord under said Leases has not received satisfactory
evidence of renewal or replacement of this letter of credit for an
additional one year term by thirty (30) days prior to the current
expiration date.
This letter of credit is transferable in whole but not in part, upon our
receipt of the attached Exhibit "A" duly executed and completed by the
beneficiary.
This letter of credit sets forth in full our undertaking, which shall not
in any way be modified, amended, amplified or limited by reference to any
document, instrument, or agreement including without limitation the Lease,
whether or not referred to herein, except only the certificates and the sight
draft and this original letter of credit for our endorsement referred to herein;
and any such reference shall not be deemed to incorporate herein by reference
any document, instrument or agreement.
Draft(s) must indicate the number and date of this letter of credit.
Each draft presented hereunder must be accompanied by this original letter
of credit for our endorsement thereon of the amount of such draft.
Documents must be forwarded to us in one parcel and must be mailed, sent by
overnight delivery service, or presented in person to: Silicon Valley Bank,
3003 Tasman Drive, Santa Clara, California 95054; Attn: International Division.
We hereby agree with the drawers, endorsers and bonafide holders that the
drafts drawn under and in accordance with the terms and conditions of this
credit shall be duly honored upon presentation to the drawee; if negotiated on
or before the expiration date of this credit.
This credit is subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce, Publication 500. As
to matters not covered by publication 500, this credit shall be governed by
Article 5 of the Uniform Commercial Code as in effect in the State of New York.
By By
-------------------------------- --------------------------------
Its Its
-------------------------------- --------------------------------
Authorized Signature Authorized Signature
Landlord [illegible]
------------------
Tenant [illegible]
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Page 1 of 2
<PAGE>
BASIC LEASE INFORMATION
BELLEFIELD OFFICE PARK
OFFICE LEASE
Lease Date: January 29, 1997
Landlord: Spieker Properties, L.P.,
a California limited partnership
Address of Landlord: 915 118th Ave. S.E., Suite 110
Bellevue, WA 98004
Tenant: Coinstar, Inc.,
a Delaware corporation
Address of Tenant: 1800 114th Ave. S.E.
Bellevue, Washington 98004
PRIOR TO TENANT'S OCCUPANCY OF BLDG. N: 13231 SE 36th St., Suite 200
Bellevue, WA 98006
Contact: Chief Financial Officer
PARAGRAPH 1 Premises: Approximately 10,196 Rentable Square Feet
located in Suite 100, Maplewood Building M.
Building: "MAPLEWOOD" Building "M"; 1687 114TH AVE. S.E.,
Bellevue, WA
Project: That certain office park commonly known as
Bellefield Office Park located in Bellevue,
Washington on the Property containing 12 office
buildings, including the Building, as it may be
changed from time to time.
Property: The real property on which the Building is
located, as more fully and legally described on
Exhibit E attached.
PARAGRAPH 2 Lease Term: FIVE (5) Years, commencing on APRIL 1, 1997 and
ending on MARCH 31, 2002.
PARAGRAPH 3 Base Rent: Year 1 $17,843.00/month.
Year 2 $18,268.00/month.
Year 3 $18,693.00/month.
Year 4 $19,118.00/month.
Year 5 $19,542.00/month.
PARAGRAPH 27 "Base Year" for Operating Cost: 1997
"Fiscal Year" for Operating Costs: January 1 - December 31
PARAGRAPH 27(c) "Tenant's Share" of Operating Costs: 2.959%
PARAGRAPH 32 Security Deposit: $19,542.00 (SEE ADDENDUM)
The foregoing Basic Lease Information is hereby incorporated into and made a
part of this Lease. Each reference in this Lease to any of the Basic Lease
Information shall mean the respective information set forth above and shall be
construed to incorporate all of the terms provided under the particular Lease
paragraph pertaining to such information. If there is any conflict between any
Basic Lease Information and the Lease, the Lease shall control.
LANDLORD: TENANT:
Spieker Properties, L.P., Coinstar, Inc.,
A California limited partnership a Delaware corporation
By: Spieker Properties, Inc.,
a Maryland corporation
Its: General Partner
/s/ Donald S. Jefferson /s/ Warren M. Gordon
- --------------------------------- ----------------------------------------
By: Donald S. Jefferson By: Warren M. Gordon
Its: Senior Vice President Its: Chief Financial Officer
Date: 2/24/97 Date: February 4, 1997
---------------------------- -----------------------------------
<PAGE>
TABLE OF CONTENTS
PARAGRAPHS DESCRIPTION PAGE NUMBER
Basic Lease Information 1
Table of Contents 1(A)
1. Occupancy 2
2. Term and Possession 2
3. Rent 2
4. Restrictions on Use 3
5. Compliance with Laws 3
6. Alterations 3
7. Repair 4
8. Liens 4
9. Assignment and Subletting 4
10. Insurance and Indemnification 5
11. Waiver of Subrogation 6
12. Services and Utilities 6
13. Estoppel Certificate 7
14. Holding Over 7
15. Subordination 7
16. Rules and Regulations 8
17. Re-Entry by Landlord 8
18. Insolvency or Bankruptcy 8
19. Default 9
20. Damage by Fire, etc. 10
21. Eminent Domain 11
22. Sale by Landlord 11
23. Right of Landlord to Perform 11
24. Surrender of Premises 11
25. Waiver 12
26. Notices 12
27. Rental Adjustments 12
28. Taxes Payable by Tenant 14
29. Abandonment 15
30. Successors and Assigns 15
31. Attorney's Fees 15
32. Security Deposit 15
33. Substitution Space 15
34. Corporate Authority 16
35. Lease Not an Offer 16
36. Brokerage 16
37. Force Majeure 16
38. Certain Rights Reserved by Landlord 16
39. Personal Liability 17
40. Miscellaneous 17
41. Disclosure 18
Addendum
Notarization Page
Exhibit A Rules and Regulations
Exhibit B Outline of Premises
Exhibit C Improvement Agreement
Exhibit C-1 Improvement Space Plan
Exhibit C-2 Notes to Tenant Improvements
Exhibit D Form of Tenant Certificate
Exhibit E Legal Description
Exhibit F Prior Right of Refusal Area
Exhibit G-1 Form of Letter of Credit
Exhibit G-2 Form of Letter of Credit
Exhibit H Janitorial Specifications
page 1(A)
<PAGE>
LEASE AGREEMENT
THIS LEASE made as of this 29TH day of JANUARY, 1997,
------ --------- -----
between SPIEKER PROPERTIES, L.P., A CALIFORNIA LIMITED PARTNERSHIP (hereinafter
called "Landlord") and COINSTAR, INC., A DELAWARE CORPORATION (hereinafter
called "Tenant").
OCCUPANCY 1. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord those premises (hereinafter called "premises")
outlined in red on Exhibit "B" attached hereto and made a part
hereof, specified in the Basic Lease Information. The
premises are located in that certain building commonly known
as 1687 114TH AVE. S.E., BELLEVUE, WASHINGTON ("the Building")
and located within Bellefield Office Park ("the Office Park").
Tenant shall use and occupy the premises for general office
purposes, COMPUTER SOFTWARE AND HARDWARE RELATED RESEARCH AND
DEVELOPMENT, LIMITED SERVICING OF TENANT'S BUSINESS EQUIPMENT
AND STORAGE OF RELATED MATERIALS and for no other use or
purpose without the prior written consent of Landlord.
TERM AND 2. (a) The Term of this Lease shall be for the period specified
POSSESSION in the Basic Lease Information (or until sooner terminated as
herein provided). If Landlord, for any reason whatsoever,
cannot deliver possession of the premises to Tenant at the
commencement of the Term, this lease shall not be void or
voidable, nor shall Landlord or its agent be liable to Tenant
for any loss or damage resulting therefrom. In that event,
however, Tenant shall not be liable for any rent until
Landlord delivers possession of the premises to Tenant. If
Landlord tenders possession of the premises to Tenant prior to
the commencement of the term and Tenant chooses to accept such
possession, then the Term and Tenant's obligations hereunder
shall commence on the date that it accepts such possession.
Any failure to deliver possession at the stated commencement
of the term of this lease or delivery of possession prior to
the stated commencement date shall not in any way affect the
obligations of Tenant hereunder or the expiration date hereof.
(b) Landlord agrees to complete the building now under
construction (and shall perform the "Building Standard Work"
or "Building Nonstandard Work" in the premises as provided in
the separate Improvement Agreement attached as Exhibit "C" and
made a part hereof) with diligence, subject to events and
delays due to Force Majeure (defined in Paragraph 37).
(c) The premises shall be deemed completed and possession
delivered when Landlord has substantially completed the work
to be constructed or installed pursuant to the provisions of
the Improvement Agreement, subject only to the completion of
items on Landlord's/TENANT'S punch list (and exclusive of the
installation of all computer wiring, telephone and other
communications facilities and equipment and other finish work
or decorating work to be performed by or for Tenant). Tenant
shall accept the premises upon notice from Landlord that the
work to be constructed or installed by Landlord pursuant to
the Improvement Agreement has been substantially completed and
Tenant's obligation to pay rent hereunder shall commence on
the earlier to occur of: (I) the date on which such work has
been substantially completed, or (ii) the date on which Tenant
takes possession of any or all of the premises. Landlord
shall use its best efforts to advise Tenant of the anticipated
date of completion at least five (5) days prior to such date,
but the failure to give such notice shall not constitute a
default by Landlord. At Landlord's request, Tenant will
execute, acknowledge and deliver to Landlord a written
statement specifying the commencement date and expiration date
of the Term. SEE ADDENDUM.
RENT 3. (a) Tenant shall pay to Landlord throughout the term of this
lease Base Rent as specified in the Basic Lease Information,
payable in monthly installments in advance on the first day of
each month during every year of the term hereby demised in
lawful money of the United States, without deduction or offset
whatsoever, to Landlord at the address specified in the Basic
Lease Information, or to such other firm or to such other
place as Landlord may from time to time designate in writing.
If this lease commences on a day other than the first day of a
calendar month or ends on a day other than the last day of a
calendar month, the monthly rental for the fractional month
shall be prorated based on a thirty (30) day month. "Rent"
means Base Rent and Tenant's Share of Operating Costs.
(b) Tenant recognizes that late payment of any Rent or other
sum due hereunder from Tenant to Landlord will result in
administrative expense to Landlord, the extent of which
additional expense is extremely difficult and economically
impractical to ascertain. Tenant therefore agrees that if
Rent or any other payment due hereunder from Tenant to
Landlord remains unpaid ten (10) days after the amount is due,
the amount of unpaid Rent or other payment shall be increased
by a late charge to be paid to Landlord by Tenant as
additional rent in an amount equal to five percent (5%) of the
amount of the delinquent rent or other payment. The amount of
the late charge to be paid to Landlord by Tenant on any unpaid
Rent or other payment shall be reassessed and added to
Tenant's obligation for each successive monthly period
accruing after the date on which the late charge is initially
imposed. Tenant agrees that such amount is a reasonable
estimate of the loss and expense to be suffered by Landlord as
a result of such late payment by Tenant and may be charged by
Landlord to defray its loss and expense. The provisions of
this paragraph in no way relieve Tenant of the obligations to
pay Rent or other payments on or before the date on which they
are due, nor do the terms of this paragraph in any way affect
Landlord's remedies pursuant to Paragraph 19 of this lease if
Rent or other payment is unpaid after the date due.
page 2
<PAGE>
RESTRICTIONS 4. Tenant shall not do or permit anything to be done in or about
ON USE the premises that will in any way obstruct or interfere with
the rights of other tenants or occupants of the building or
other buildings within the Office park or injure them, nor use
or allow the premises to be used for any improper, immoral, OR
unlawful purpose, nor shall Tenant cause or maintain or
permit any nuisance in, on, or about the premises. Tenant
shall not commit or suffer the commission of any waste in, on,
or about the premises, nor permit any use of the premises
which may be dangerous to persons or property. Tenant shall
not do nor permit anything to be done on or about the premises
or bring or keep anything therein which will in any way
increase the rate of any insurance upon the Project or any of
its contents or cause a cancellation of or otherwise affect in
any manner any insurance on the Project. No retail sales
shall be permitted upon the premises without the prior written
consent of Landlord.
COMPLIANCE 5. (a) Tenant shall not use the premises or permit anything to
WITH LAWS be done in or about the premises that will in any way conflict
with any law, statute, ordinance, or governmental rule or
regulation now in force or which may hereafter be enacted or
promulgated. Tenant shall at its sole cost and expense
promptly comply with all laws, statutes, ordinances, and
governmental rules, regulations, or requirements now in force
or which may hereafter be in force, and with the requirements
of any board of fire underwriters or other similar body now or
hereafter constituted relating to or affecting the condition,
use or occupancy of the premises, excluding structural changes
not related to or affected by alterations or improvements made
by or for Tenant or Tenant's acts. The judgment of any court
of competent jurisdiction or the admission of Tenant in an
action against Tenant, whether Landlord be a party thereto or
not, that Tenant has so violated any such law, statute,
ordinance, rule, regulation, or requirement, shall be
conclusive of such violation as between Landlord and Tenant.
(b) "Accessibility Law" means any local, state or federal
law, regulation, ordinance, order or directive relating to
access, use or enjoyment of the premises by, or employment
there, of disabled persons, or to the removal of any tangible
or intangible barrier or impediment to access, use or
enjoyment of the premises by disabled persons, including but
not limited to, the Americans with Disabilities Act.
(c) Notwithstanding anything in this Lease to the contrary,
Tenant shall make no Tenant Alteration that violates any
provision of any Accessibility Law. Tenant shall not adopt
or otherwise allow to exist any policy or practice related to
its use or occupancy of the premises or the conduct of its
activities thereon that violates any Accessibility Law.
Tenant shall adopt any economically feasible policy or
practice relating to the conduct of its business at the
premises that would cure any existing or future violation of
any Accessibility Law relating to the premises. Tenant shall
bear all cost and expense of performing its duties under this
Paragraph 5. Tenant shall reimburse Landlord on demand for
any cost or expense required to alter any portion of the
Property to comply with any Disability Law as a result of any
Tenant Alteration.
(d) Notwithstanding any contrary provision of this Lease,
Landlord shall have no obligation to approve any Tenant
Alteration if Landlord, in its REASONABLE sole discretion
determines that the Tenant Alteration would obligate Landlord
to make alterations of or additions to any part of the
Property in order to comply with any Accessibility Law, unless
Tenant agrees to make such alterations or additions at its
cost in the manner provided for other Tenant Alterations and
Tenant deposits with Landlord before undertaking the design or
construction of such alterations a sum equal to Landlord's
estimate of the total costs of designing and construction of
such alterations.
(e) If any claim is asserted against Landlord under any
Accessibility Law relating directly or indirectly to any
violation by Tenant of any of the provisions of this Paragraph
5, Tenant shall defend, indemnify and hold harmless Landlord
from and against any claims, charges, liabilities,
obligations, penalties, damages, judgments, costs and expenses
(including attorneys fees) arising directly or indirectly from
such violation. Landlord has made no covenant, representation
or warranty regarding the compliance or extent of
noncompliance of any portion of the Project with any
Accessibility Law and hereby disclaims any implied warranties
with respect thereto, including any implied warranty of
habitability or fitness for a particular purpose. No approval
by Landlord of any plans or specifications for any Tenant
Alterations, or failure to disapprove any such plans,
specifications or Tenant Alterations shall constitute a
representation or warranty by Landlord, whether express or
implied, that such plans will comply with any Accessibility
Law. SEE ADDENDUM.
ALTERATIONS 6. Tenant shall not make or suffer to be made any alterations,
additions, or improvements (an "Alteration") in, on, or to the
premises or any part thereof without the prior written consent
of Landlord, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD
OR DELAYED AND LANDLORD'S PRIOR WRITTEN CONSENT SHALL NOT BE
REQUIRED FOR SHELVING, WHITEBOARDS AND BULLETIN BOARDS, AND
SIMILAR ITEMS; and any such Alteration in, on or to said
premises, except for Tenant's movable furniture and equipment,
shall immediately become Landlord's property and, at the end
of the term hereof, shall remain on the premises without
compensation to Tenant. In the event Landlord consents to the
making of any such Alteration by Tenant, the same shall be
made by Tenant, at Tenant's sole cost and expense, in
accordance with plans and specifications approved by Landlord,
and any contractor or person selected by Tenant to make the
same must first be approved in writing by Landlord. AT THE
TIME LANDLORD GIVES ITS
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CONSENT TO THE MAKING OF ANY SUCH ALTERATIONS, LANDLORD SHALL
DESIGNATE IF SAID ALTERATIONS ARE TO BE REMOVED BY TENANT UPON
THE EXPIRATION OR SOONER TERMINATION OF THE LEASE TERM. Upon
the expiration or sooner termination of the Term, Tenant shall
upon demand by Landlord, at Tenant's sole cost and expense
forthwith and with all due diligence remove any or all
Alterations made by or for the account of Tenant, designated
by Landlord to be removed, and Tenant shall forthwith and with
all due diligence, at its sole cost and expense, repair and
restore the premises to their original condition, NORMAL WEAR
AND TEAR EXCEPTED.
REPAIR 7. By taking possession of the premises, Tenant accepts the
premises as being in the condition in which Landlord is
obligated to deliver them (EXCEPTING COMPLETION OF PUNCH LIST
ITEMS PURSUANT TO EXHIBIT C AND PARAGRAPH 2 OF THIS LEASE) and
otherwise in good order, condition and repair. Tenant shall,
at all times during the Term at Tenant's sole cost and
expense, keep the premises and every part thereof in good
order, condition and repair, REASONABLE WEAR AND TEAR
EXCEPTED. Tenant shall upon the expiration or sooner
termination of the Term, surrender to Landlord the premises
and all repairs, changes, alterations, additions, and
improvements thereto, neat and clean and in the same condition
as when received except for reasonable wear and tear as
REASONABLY determined by Landlord. Tenant agrees that
Landlord has no obligation to alter, remodel, improve, repair,
decorate, or paint the premises or any part thereof except as
specified in Exhibit "C", EXHIBIT C-1, OR EXHIBIT C-2, and
that no representations respecting the condition of the
premises, the Building or the Project have been made by
Landlord to Tenant, except as specifically set forth in this
Lease.
LIENS 8. Tenant shall keep the premises free from any liens arising out
of any work performed, material furnished, or obligations
incurred by Tenant. In the event that Tenant shall not,
within ten (10) days following the imposition of any such
lien, cause the same to be released of record by payment or
posting of a proper bond, Landlord shall have, in addition to
all other remedies provided in this Lease and by law, the
right, but no obligation, to cause the same to be released by
such means as it deems proper, including payment of the claim
giving rise to such lien. All sums paid by Landlord and all
expenses incurred by it in connection therewith shall be
considered additional rent and shall be payable to it by
Tenant on demand with interest at the rate payable of TWELVE
percent (12%) per annum or four percent (4%) above the prime
rate of Seattle First National Bank, whichever is more (the
"Default Rate"). Landlord shall have the right at all times
to post and keep posted on the premises any notices permitted
or required by law, or which Landlord shall deem proper, for
the protection of Landlord, the premises, the Project, and any
other party having an interest therein, from mechanics' and
materialmen's liens. Tenant shall give Landlord at least five
(5) business days' notice before commencing any construction
on the premises.
ASSIGNMENT 9. (a) Tenant shall not sell, assign, encumber or otherwise
AND transfer by operation of law or otherwise this Lease or any
SUBLETTING interest herein, sublet the premises or any part thereof, or
suffer any person to occupy or use the premises or any portion
thereof, without the prior written consent of Landlord, WHICH
CONSENT SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED, as
provided herein, nor shall Tenant permit any lien to be placed
on the Tenant's interest by operation of law. A transfer by
the present majority shareholders of ownership and control of
the voting stock of a corporate tenant, or a transfer of a
controlling interest in a partnership or proprietorship, as
applicable, shall be deemed an assignment for the purposes of
this paragraph. Tenant shall, by written notice, advise
Landlord of its desire from and after a stated date (which
shall not be less than thirty (30) days nor more than ninety
(90) days after the date of Tenant's notice), to assign this
Lease or sublet the premises or any portion thereof for any
part of the Term. Landlord shall have the right, to be
exercised by giving written notice to Tenant ten (10) days
after receipt of Tenant's notice AND SUBJECT TO THE
LIMITATIONS IN THE ADDENDUM, to terminate this Lease as to the
portion of the premises described in Tenant's notice and such
notice shall, if given, terminate this Lease with respect to
the portion of the premises therein described as of the date
stated in Tenant's notice and sums payable by Tenant under
this Lease shall be prorated to that date. If Tenant proposes
to sublet only a portion of the Premises and Landlord
exercises its right to recapture that portion, the effective
date of recapture by Landlord shall be the effective date of
the proposed subletting, and on such date:
(i) That portion shall not be a part of the premises;
(ii) The Base Rent payable under this Lease shall be
reduced by the per rentable square foot rental rate
payable for such portion multiplied by the number of
rentable square feet in such portion;
(iii) Tenant's Share of Operating Costs and Real Estate
Taxes shall be reduced proportionately; and
(iv) Landlord shall at its sole cost and expense do all
that is necessary to separate the remainder of the
Premises from the portion recaptured by Landlord.
Said notice by Tenant shall state the name and address of the
proposed assignee or subtenant, and Tenant shall deliver to
Landlord a true and complete copy of the proposed assignment
or sublease with said notice. If Tenant's notice specifies
all of the premises and Landlord elects to terminate this
Lease, this Lease shall terminate on the date stated in
Tenant's notice. If Landlord, upon receiving Tenant's notice
with respect to any of the premises, shall not exercise its
right to terminate, Landlord will not unreasonably withhold
its consent to Tenant's subletting the premises specified in
said notice. SEE ADDENDUM.
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(b) Any assignment or subletting by Tenant shall not result
in Tenant being released or discharged from any liability
under this Lease. As a condition to Landlord's prior written
consent as provided for in this paragraph, the subtenant or
assignee shall agree in writing to comply with and be bound
by all of the terms, covenants, conditions, provisions, and
agreement of this Lease (EXCEPT RENT IN THE CASE OF A
SUBLEASE), and Tenant shall deliver to Landlord, promptly
after execution, an executed copy of each assignment and
sublease and the agreement to comply of the assignee or
sublessee.
(c) Landlord's consent to any sale, assignment, encumbrance,
subletting, occupation, lien or other transfer shall not
release Tenant from any of Tenant's obligations under this
Lease or be deemed to be a consent to any subsequent
occurrence. Any sale, assignment, encumbrance, subletting,
occupation, lien or other transfer of this Lease which does
not comply with the provisions of this Paragraph 9 shall be
void.
(d) The joint and several liability of Tenant named in this
Lease and any immediate and remote successor in interest of
Tenant (by assignment or otherwise), and the due performance
of the obligations of this Lease on Tenant's part to be
performed or observed, shall not in any way be discharged,
released or impaired by any (a) agreement which modifies any
of the rights or obligations of the parties under this Lease,
(b) stipulation that extends the time within which an
obligation under this Lease is to be performed, (c) waiver of
the performance of an obligation required under this Lease, or
(d) failure to enforce any of the obligations set forth in
this Lease.
(e) Without limiting any of the provisions of this Paragraph
9, if Tenant has entered into any sublease of any portion of
the premises, the voluntary or other surrender of this Lease
by Tenant, or a mutual cancellation by Landlord and Tenant,
shall not work a merger, and shall, at the option of Landlord,
terminate all or any existing subleases or subtenancies or, at
the option of Landlord, operate as an assignment to Landlord
of any or all such subleases or subtenancies.
INSURANCE 10. (a) Landlord shall not be liable to Tenant and Tenant hereby
AND waives all claims against Landlord for any injury or damage to
INDEMNIFICA- any person or property in or about the premises by or from any
TION cause whatsoever, other than Landlord's negligence or willful
acts or omissions, and, without limiting the generality of the
foregoing, whether caused by water leakage of any character
from the roof, walls, basement, or any other portion of the
premises, the Building, or the Office Park, or caused by gas,
fire, oil, or electricity in or about the premises, the
Building or the Project.
(b) Tenant shall indemnify, defend and hold Landlord harmless
from and against any and all claims or liability for any
injury or damage to any person or property whatsoever: (i)
occurring in, on, or about the premises or any part thereof,
(ii) occurring in, on, or about any facilities in the Office
Park (including, without prejudice to the generality of the
term "facilities", elevators, stairways, passageways, or
hallways), the use of which Tenant may have in conjunction
with other tenants of the Building or the Office Park, when
such injury or damage shall be caused in part or in whole by
the act, neglect, fault of, or omission of any duty with
respect to the same by Tenant, its agents, servants,
employees, or invitees. Tenant further agrees to indemnify
and hold harmless Landlord against and from any and all claims
by or on behalf of any person, firm or corporation, arising
from the conduct or management of any work or thing whatsoever
done by the Tenant in or about or from transactions of the
Tenant concerning the premises, and will further indemnify and
hold Landlord harmless against and from any and all claims
arising from any breach or default on the part of the Tenant
in the performance of any covenant or agreement of this Lease
on the part of the Tenant, or any of its agents, contractors,
servants, employees, or licensees and all costs, counsel fees,
expenses and liabilities incurred in connection with any such
claim or action or proceeding brought thereon. If any action
or proceeding is brought against Landlord by reason of any
claim or liability, Tenant agrees to defend such action or
proceeding at Tenant's sole expense by counsel reasonably
satisfactory to Landlord. The provisions of this Paragraph 10
shall survive the expiration or termination of this Lease with
respect to any claims or liability occurring prior to such
expiration or termination.
(c) The indemnification obligations contained in this
Paragraph 10 shall not be limited by any worker's
compensation, benefit or disability laws, and each
indemnifying party hereby waives any immunity that said
indemnifying party may have under the Industrial Insurance
Act, Title 51 RCW and similar worker's compensation, benefit
or disability laws. LANDLORD AND TENANT ACKNOWLEDGE BY THEIR
EXECUTION OF THIS LEASE THAT EACH OF THE INDEMNIFICATION
PROVISIONS OF THIS LEASE (SPECIFICALLY INCLUDING BUT NOT
LIMITED TO THOSE RELATING TO WORKER'S COMPENSATION BENEFITS
AND LAWS) WERE SPECIFICALLY NEGOTIATED AND AGREED TO BY
LANDLORD AND TENANT.
(d) Landlord shall not be liable for injury to Tenant's
business or loss of income or from damage which may be
sustained by the person, goods, wares, merchandise or
property of Tenant, its authorized representatives, or any
other person in or about the premises, caused by or resulting
from fire, steam, electricity, gas, water or rain, which may
leak or flow from or into any part of the premises, or from
the breakage, leakage, obstruction or other defects of the
pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures of the same, whether the
damage or injury resulting from conditions arising upon the
premises or upon other portions of the Building or the Project
unless such injury or
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<PAGE>
damage is caused by the negligence or intentional acts of
Landlord or its authorized representatives.
(e) Tenant agrees to purchase at its own expense and to keep
in force during the term of this lease a policy or policies of
worker's compensation and commercial general liability
insurance, including personal injury and property damage,
endorsed to state the insurance is primary over any insurance
carried by Landlord, and to include coverage for
premises/operations, independent contractors and contractual
liability in the amount of Two Million Dollars ($2,000,000)
combined single limit. The policies shall: (i) name
Landlord as an additional insured and insure Landlord's
contingent liability under this Lease, (ii) be issued by
an insurance company which is acceptable to Landlord and
licensed to do business in the State of Washington and
(iii) provide that such insurance shall not be canceled
unless thirty (30) days' prior written notice shall have
been given to Landlord. The policy or policies or
certificates thereof shall be delivered to Landlord by
Tenant upon commencement of the term of the Lease and
upon each renewal of said insurance.
WAIVER OF 11. Landlord and Tenant hereby waive any right that each may have
SUBROGATION against the other on account of any loss or damage arising in
any manner which is covered by policies of insurance for fire
and extended coverage, theft, public liability, workmen's
compensation or other insurance now or hereafter existing
during the term hereof, provided, however, the parties each
shall first have their respective insurance companies waive
any rights of subrogation that such companies may have against
Landlord or Tenant, as the case may be.
SERVICES AND 12. (a) Landlord shall maintain the public and common areas of
UTILITIES the Building and Project, including lobbies, stairs,
elevators, corridors and restrooms, the windows in the
Building, the mechanical, plumbing and electrical equipment
serving the Building, and the structure itself, INCLUDING THE
ROOF, in reasonably good order and condition except for damage
occasioned by the act of the Tenant, which damage shall be
repaired by Landlord at Tenant's expense.
(b) Subject to the rules and regulations of the Project,
Landlord agrees to furnish to the premises during ordinary
business hours (APPROXIMATELY 7:00 A.M. THROUGH 6:00 P.M.,
MONDAY THROUGH FRIDAY, HOLIDAYS EXCEPTED) of generally
recognized business days, to be determined by Landlord (but
exclusive, in any event, of Saturdays, Sundays, and legal
holidays), water and electricity suitable for the intended use
of the premises, heat and air conditioning required in
Landlord's REASONABLE judgment for the comfortable use and
occupation of the premises, janitorial services (SUBSTANTIALLY
IN ACCORDANCE WITH THE JANITORIAL SPECIFICATIONS ATTACHED
HERETO AS EXHIBIT H) during the times and in the manner that
such services are, in Landlord's REASONABLE judgment,
customarily furnished in comparable CLASS A office buildings
in the immediate market area, and automatic elevator service
AND, SUBJECT TO ALL OTHER PROVISIONS OF THIS LEASE, INCLUDING,
BUT NOT LIMITED TO INTERRUPTION OR FAILURE AS HEREIN PROVIDED,
WATER AND ELECTRICITY SUITABLE FOR THE INTENDED USE OF THE
PREMISES TWENTY-FOUR (24) HOURS PER DAY, SEVEN (7) DAYS PER
WEEK. LANDLORD SHALL MAKE HEATING AND AIR CONDITIONING
AVAILABLE TO TENANT'S PREMISES TWENTY FOUR (24) HOURS PER DAY,
SEVEN (7) DAYS PER WEEK, FOR WHICH TENANT SHALL BE REQUIRED TO
PAY LANDLORD THE ACTUAL COST, INCLUDING UTILITIES, SUPPLIES,
MAINTENANCE AND EQUIPMENT, FOR AFTER-HOURS USE AS DETERMINED
BY LANDLORD AND CURRENTLY ESTIMATED TO BE $30.00 PER HOUR.
Tenant agrees to keep and cause to be kept closed all window
coverings when necessary because of the sun's position, and
Tenant also agrees at all times to cooperate fully with
Landlord and to abide by all the regulations and requirements
which Landlord may prescribe for the proper functioning and
protection of the heating, ventilating, and air-conditioning
system. Wherever heat-generating machines, excess lighting or
equipment are used in the premises (BEYOND THE MACHINES,
LIGHTING OR EQUIPMENT INSTALLED PURSUANT TO EXHIBIT C) which
affect the temperature otherwise maintained by the
air-conditioning system, Landlord reserves the right to
install supplementary air-conditioning units in the premises,
and the cost thereof, including the cost of installation and
the cost of operation and maintenance thereof, shall be paid
by Tenant to Landlord upon demand by Landlord. Landlord shall
in no event be liable for any interruption or failure of
utility services on the premises.
(c) Tenant will not without the written consent of Landlord
use any apparatus or device in the premises, including without
limitation, electronic data processing machines and machines
using excess lighting or current that will in any way increase
the amount of electricity or water usually furnished or
supplied for use of the premises as general office space; nor
connect with electric current, except through existing
electrical outlets in the premises, or water pipes, OR
INSTALLED PURSUANT TO THE REQUIREMENTS OF EXHIBIT C, any
apparatus or device for the purposes of using electrical
current or water. TENANT'S REASONABLE ORDINARY USE OF
PERSONAL COMPUTERS, COMPUTER PRINTERS, FACSIMILE MACHINES AND
OTHER OFFICE EQUIPMENT DOES NOT CONSTITUTE AN EXCESS USE OF
ELECTRICAL CURRENT AS DEFINED HEREIN, PROVIDED USE OF SUCH
MACHINES OR EQUIPMENT IS OTHERWISE IN COMPLIANCE WITH THE
PROVISIONS OF THIS LEASE, INCLUDING THIS LEASE PARAGRAPH
12.(c). If Tenant shall require water or electric current or
any other resource in excess of that usually furnished or
supplied for use of the
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premises as general office space, Tenant shall first procure
the consent of Landlord which Landlord may refuse, to the use
thereof, and Landlord may cause a special meter to be
installed in the premises to measure the amount of water,
electric current or other resource consumed for any such other
use. The cost of any such meters and of installation,
maintenance, and repair thereof shall be paid for by Tenant,
and Tenant agrees to pay Landlord promptly upon demand by
Landlord for all such water, electric current or other
resource consumed, as shown by said meters, at the rate
charged by the local public utility, furnishing the same, plus
any additional expense incurred in keeping account of the
water, electric current or other resource so consumed.
Landlord shall not be in default hereunder or be liable for
any damages directly or indirectly resulting from, nor shall
the rental herein reserved be abated by reason of (i) the
installation, use or interruption of use of any equipment in
connection with the furnishing of any of the foregoing
utilities and services, (ii) failure to furnish or delay in
furnishing any utilities or services when the failure or delay
is caused by Force Majeure or by the making of repairs or
improvements to the premises or the Building, or (iii) the
limitation, curtailment, rationing, or restriction on use of
water or electricity, gas or any other form of energy or any
other service or utility whatsoever serving the premises or
the Building. Furthermore, Landlord shall be entitled to
cooperate voluntarily in a reasonable manner with the efforts
of national, state or local governmental agencies or utilities
suppliers in reducing energy or other resources consumption.
PROVIDED THAT TENANT OTHERWISE COMPLIES WITH THE PROVISIONS OF
THIS LEASE, INCLUDING, BUT NOT LIMITED TO, THE PROVISIONS OF
EXHIBIT C, TENANT MAY USE AND CONTRACT WITH ANY TELEPHONE
COMPANY IN ARRANGING FOR TELEPHONE AND TELECOMMUNICATION
SERVICE TO THE PREMISES, AT TENANT'S SOLE COST AND EXPENSE.
(d) Any sums payable under this Paragraph 12 shall be
considered additional rent and may be added to any installment
of rent thereafter becoming due.
ESTOPPEL 13. (a) Within ten (10) BUSINESS days following any written
CERTIFICATE request which Landlord may make from time to time, Tenant
shall execute and deliver to Landlord a certificate
substantially in the form attached as Exhibit "D" and made a
part hereof, indicating thereon any exceptions which may exist
at that time. If Tenant fails to execute and deliver such
certificate when due, Tenant shall be deemed to have accepted
the premises and acknowledged that the statements included in
Exhibit "D" are true and correct without exception. Landlord
and Tenant intend that any statement delivered pursuant to
this paragraph may be relied upon by any mortgagee,
beneficiary, purchaser or prospective purchaser of the
Property or any interest therein.
(b) Within ten (10) days following any written request from
Landlord, Tenant shall furnish current financial statements to
Landlord, PROVIDED LANDLORD SIGNS A CONFIDENTIALITY AGREEMENT
REASONABLY SATISFACTORY TO BOTH TENANT AND LANDLORD.
HOLDING 14. (a) Any holding over after the expiration of the term of this
OVER Lease with the written consent of Landlord shall be a tenancy
from month to month. The terms, covenants and conditions of
such tenancy shall be the same except that Basic Rent shall be
the then fair market value of the premises as determined by
Landlord, but in no event less than one hundred fifty percent
(150%) of the monthly Base Rent for the last period prior to
the expiration, plus Tenant's Share of increased Operating
Costs. Acceptance by Landlord of rent after such expiration
shall not result in any other tenancy or any renewal of the
term of this Lease, and the provisions of this paragraph are
in addition to and do not affect Landlord's right of re-entry
or other rights provided under this Lease or by applicable
law.
(b) If Tenant retains possession of the premises or any part
thereof without Landlord's consent following the expiration or
sooner termination of this Lease for any reason, then Tenant
shall pay to Landlord double the Basic Rent for the last
period prior to the date of such expiration or termination.
Tenant shall also indemnify and hold Landlord harmless from
any loss or liability resulting from delay by Tenant in
surrendering the premises, including, without limitation, any
claims made by any succeeding tenant founded on such delay.
Acceptance of rent by Landlord following expiration or
termination shall not constitute a renewal of this Lease, and
nothing contained in this paragraph shall waive Landlord's
right of re-entry or any other right. Tenant shall be only a
Tenant at sufferance, whether or not Landlord accepts any rent
from Tenant while Tenant is holding over without Landlord's
written consent.
SUBORDINA- 15. Without the necessity of any additional document being
TION executed by Tenant for the purpose of effecting a
subordination, this lease shall be subject and subordinate at
all times to: (a) all ground leases or underlying leases which
may now exist or hereafter be executed affecting the Building
or the land upon which the Building is situated or both, and
(b) the lien of any mortgage or deed of trust which may now
exist or hereafter be executed in any amount for which said
Building, land, ground leases or underlying leases, or
Landlord's interest or estate in any of said items, is
specified as security. Notwithstanding the foregoing, Landlord
shall have the right to subordinate or cause to be
subordinated any such ground leases or underlying leases or
any such liens to this Lease. If any ground lease or
underlying lease terminates for any reason or any mortgage or
deed of trust is foreclosed or a conveyance in lieu of
foreclosure is made for any reason, Tenant shall,
notwithstanding any subordination, attorn to and become the
Tenant of the successor in interest to Landlord at the option
of such successor in interest. Tenant covenants and agrees to
execute and deliver, upon demand by Landlord and in the form
requested by Landlord, any additional documents evidencing the
priority or subordination of this lease
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with respect to any such ground leases or underlying leases or
the lien of any mortgage or deed of trust. LANDLORD REPRESENTS
THAT, ON THE DATE OF THIS LEASE, THERE IS NO BUILDING SPECIFIC
GROUND LEASE, MORTGAGE OR DEED OF TRUST COVERING THE BUILDING
AND THE PREMISES. PROVIDED TENANT IS NOT IN DEFAULT HEREIN
AND UPON TENANT'S REQUEST AND TENANT'S AGREEMENT TO PAY ANY
REASONABLE FEES INCURRED BY LANDLORD, LANDLORD SHALL USE
REASONABLE EFFORTS TO OBTAIN A COMMERCIALLY REASONABLE
NON-DISTURBANCE AGREEMENT FROM ANY FUTURE LENDER OR GROUND
LESSOR PROVIDING THAT TENANT SHALL NOT BE DISTURBED BY ANY
FORECLOSURE OR TERMINATION OF GROUND LEASE SO LONG AS TENANT
IS NOT IN DEFAULT OF THIS LEASE.
RULES AND 16. Tenant shall faithfully observe and comply with the rules and
REGULATIONS regulations attached to this Lease as Exhibit A and all
reasonable modifications thereof and additions thereto from
time to time put into effect by Landlord. Landlord shall not
be responsible for the nonperformance by any other tenant or
occupant of the Project of the rules and regulations; HOWEVER,
LANDLORD SHALL USE REASONABLE EFFORTS TO ENFORCE SUCH RULES
AND REGULATIONS EQUITABLY AGAINST ALL TENANTS.
RE-ENTRY BY 17. Landlord reserves and shall at all times have the right to
LANDLORD re-enter the premises to inspect the same, to supply janitor
service and any other service to be provided by Landlord to
Tenant hereunder, AND UPON REASONABLE NOTICE TO TENANT, EXCEPT
IN THE CASE OF AN EMERGENCY, IN WHICH EVENT NO NOTICE SHALL BE
REQUIRED, to show the premises to prospective purchasers,
mortgagees or tenants, to post notices of nonresponsibility,
and to alter, improve or repair the premises and any portion
of the building of which the premises are a part, without
abatement of rent, and may for that purpose erect, use and
maintain scaffolding, pipes, conduit, and other necessary
structures in and through the premises where reasonably
required by the character of the work to be performed,
provided that entrance to the premises shall not be blocked
thereby, and further provided that the business of Tenant
shall not be interfered with unreasonably. Tenant waives any
claim for damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or
quiet enjoyment of the premises, and any other loss occasioned
thereby; PROVIDED, HOWEVER, THAT THE FOREGOING WAIVER SHALL
NOT APPLY TO ANY ACT OF NEGLIGENCE OR WILLFUL MISCONDUCT BY
LANDLORD, ITS AGENTS OR EMPLOYEES. For each of the aforesaid
purposes, Landlord shall at all times have and retain a key
with which to unlock all of the doors in the premises,
excluding Tenant's vaults and safes, or special security areas
(designated BY TENANT in advance), and Landlord shall have the
right to use whatever means Landlord may deem necessary or
proper to open Tenant's doors in an emergency, in order to
obtain entry to any portion of the premises, and any entry to
the premises, or portions thereof obtained by Landlord by any
means, or otherwise, shall not under any circumstances be
construed or deemed to be a forcible or unlawful entry into,
or a detainer of, the premises, or an eviction, actual or
constructive, of Tenant from the premises or any portions
thereof. Landlord shall also have the right at any time,
without the same constituting an actual or constructive
eviction and without incurring any liability to Tenant
therefor, to change the arrangement and/or location of
entrances, passageways, doors and doorways, and corridors,
elevators, stairs, toilets, or other public parts of the
Building and to change the name, number or designation by
which the Project is commonly known.
INSOLVENCY 18. TO THE EXTENT ALLOWED BY LAW: (a) If Tenant becomes a Debtor
OR under Chapter 7 of the Bankruptcy Code ("Code") or a petition
BANKRUPTCY for reorganization or adjustment of debts is filed concerning
Tenant under Chapters 11 or 13 of the Code, or a proceeding is
filed under Chapter 7 of the Code and is transferred to
Chapters 11 or 13 of the Code, the Trustee or Tenant, as
Debtor and as Debtor-In-Possession, may not elect to assume
this Lease unless, at the time of such assumption, the Trustee
or Tenant has:
(i) Cured all defaults under the Lease and paid all sums
due and owing under the Lease or provided Landlord with
"Adequate Assurance" (as defined below) that: (i) within
ten (10) days from the date of such assumption, the
Trustee or Tenant will completely pay all sums due and
owing under this Lease and compensate Landlord for any
actual pecuniary loss resulting from any existing default
or breach of this Lease, including without limitation,
Landlord's reasonable costs, expenses, accrued interest,
and attorneys' fees incurred as a result of the default
or breach; (ii) within twenty (20) days from the date of
such assumption, the Trustee or Tenant will cure all
non-monetary defaults and breaches under this Lease, or,
if the nature of such non-monetary defaults is such that
more than twenty (20) days are reasonably required for
such cure, that the Trustee or Tenant will commence to
cure such non-monetary defaults within twenty (20) days
and thereafter diligently prosecute such cure to
completion; and (iii) the assumption will be subject to
all of the provisions of this Lease.
(ii) For purposes of this Paragraph, Landlord and Tenant
acknowledge that, in the context of a bankruptcy
proceeding involving Tenant, at a minimum, "Adequate
Assurance" shall mean: (i) the Trustee or Tenant has and
will continue to have sufficient unencumbered assets
after the payment of all secured obligations and
administrative expenses to assure Landlord that the
Trustee or Tenant will have sufficient funds to fulfill
the obligations of Tenant under this Lease; (ii) the
Bankruptcy Court shall have entered an Order segregating
sufficient cash payable to Landlord and/or the Trustee or
Tenant shall have granted a valid and perfected first
lien and security interest and/or mortgage in or on
property of Trustee or Tenant acceptable as to value and
kind to Landlord, to secure to Landlord the obligation of
the Trustee or Tenant to cure the monetary and/or
non-monetary defaults and breaches under this Lease
within the time
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periods set forth above; and (iii) the Trustee or Tenant,
at the very minimum, shall deposit a sum equal to two (2)
months' Basic Rent to be held by Landlord (without any
allowance for interest thereon) to secure Tenant's future
performance under the Lease.
(b) If the Trustee or Tenant has assumed the Lease pursuant
to the provisions of this Paragraph for the purpose of
assigning Tenant's interest hereunder to any other person or
entity, such interest may be assigned only after the Trustee,
Tenant or the proposed assignee has complied with all of the
terms, covenants and conditions of this Lease, including,
without limitation, those with respect to additional rent.
Landlord and Tenant acknowledge that such terms, covenants and
conditions are commercially reasonable in the context of a
bankruptcy proceeding of Tenant. Any person or entity to
which this Lease is assigned pursuant to the provisions of the
Code shall be deemed without further act or deed to have
assumed all of the obligations arising under this Lease on and
after the date of such assignment. Any such assignee shall
upon request execute and deliver to Landlord an instrument
confirming such assignment.
(c) Upon the filing of a petition by or against Tenant under
the Code, Tenant, as Debtor and as Debtor-In-Possession, and
any Trustee who may be appointed agree to adequately protect
Landlord as follows: (i) to perform each and every obligation
of Tenant under this Lease until such time as this Lease is
either rejected or assumed by Order of the Bankruptcy Court;
(ii) to pay all monetary obligations required under this
Lease, including without limitation, the payment of Basic
Rent, Tenant's Share of the increase in Operating Costs and
any other sums payable by Tenant to Landlord under this Lease
which is considered reasonable compensation for the use and
occupancy of the Premises; (iii) provide Landlord a minimum of
thirty (30) days prior written notice, unless a shorter period
is agreed to in writing by the parties, of any proceeding
relating to any assumption of this Lease or any intent to
abandon the Premises, which abandonment shall be deemed a
rejection of this Lease; and (iv) to perform to the benefit of
Landlord as otherwise required under the Code. The failure of
Tenant to comply with the above shall result in an automatic
rejection of this Lease.
DEFAULT 19. The failure to perform or honor any covenant, condition or
representation made under this Lease shall constitute a
default hereunder by Tenant. Tenant shall have TEN (10) DAYS
grace period within which to cure any default in the payment
of rental or adjustments thereto, and Landlord shall not be
required to give any notice to Tenant of any such default MORE
THAN FIVE (5) TIMES DURING THE LEASE TERM before exercising
any remedies available to Landlord. Tenant shall have a
period of ten (10) days from the date of written notice from
Landlord within which to cure any default under this Lease
other than a default in the payment of rental or adjustments
thereto; provided, however, that with respect to any default
which cannot reasonably be cured within ten (10) days, Tenant
shall have additional time necessary to cure the default so
long as Tenant commences to cure within ten (10) days from
Landlord's notice, and continues diligently to prosecute the
cure to completion. Upon a default under this Lease by
Tenant, and failure to cure the default by Tenant within the
permissible time period, if any, Landlord shall have the
following rights and remedies in addition to, or as an
alternative to, any other rights or remedies available to
Landlord at law or in equity:
(a) The Lease may be terminated at the option of Landlord by
notice in writing to Tenant. The Lease will be deemed
terminated as of the date specified in Landlord's notice and
Tenant shall have no further rights or obligations under the
Lease except as provided in this Paragraph 19 which shall
survive termination of the Lease.
(b) Unless the Lease is terminated as provided in
subparagraph (a), the Lease will continue in full force and
effect, except Tenant's right to possession of the premises
may be terminated at any time, at the option of Landlord, by
notice in writing to Tenant. Tenant's right to possession of
the premises will be deemed terminated as of the date
specified in Landlord's notice, and Landlord, as
attorney-in-fact for Tenant, may from time to time, but shall
not be obligated to, sublet the premises or any part thereof
for such term or terms and at such rent and such other terms
as Landlord in its sole discretion deems advisable, with the
right to make alterations and repairs to the premises. Upon
each subletting, at the option of Landlord, (i) either Tenant
shall be immediately liable to pay to Landlord, in addition to
indebtedness other than rent due hereunder, the cost of such
subletting and such alterations and repairs incurred by
Landlord and the amount, if any, by which the rent hereunder
for the period of such subletting exceeds the amount to be
paid as rent for the premises for such period, or (ii)
Landlord shall apply rents received from such subletting
first, to payment of any indebtedness other than rent due
hereunder from Tenant to Landlord; second, to the payment of
any costs of subletting and of any alterations and repairs;
third, to payment of rent due and unpaid hereunder; and the
residue, if any, shall be held by Landlord and applied in
payment of future rent as the same becomes due hereunder. If,
under option (i), the rent shall not be promptly paid to
Landlord by the subtenant(s), or if, under option (ii), the
rentals received from the subletting during any month are less
than all amounts owed for that month by Tenant hereunder,
Tenant shall pay any such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly. No taking
possession of the premises by Landlord, shall be construed
as an election on its part to terminate this Lease unless a
written notice of such intention is given to Tenant as
provided in subparagraph (a). Notwithstanding any action
taken by Landlord under this subparagraph, Landlord may at any
time thereafter elect to terminate this Lease for such
previous breach.
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(c) Upon termination of the Lease as provided in subparagraph
(a), or upon termination of Tenant's right to possession of
the premises, as provided in subparagraph (b), Landlord may
reenter and take possession of the premises, and may remove
any persons or property by any lawful means and without
liability for damages. Any of Tenant's property remaining on
the premises, including, without limitation, equipment,
inventory, furnishings and trade fixtures, shall be deemed to
have been abandoned by Tenant and shall be and become the
property of Landlord; provided, however, that Landlord may, in
its sole discretion, reject the property and elect instead to
store such property in a public warehouse or elsewhere at the
cost of and for the account of Tenant, and further may, but
shall not be obligated to, sell such property and apply the
proceeds therefrom in accordance with applicable law.
(d) If the Lease is terminated as provided in subparagraph
(a), Landlord shall be entitled to recover immediately,
without waiting until the due date of any future Rent or until
the date fixed for expiration of the Lease Term, the following
amounts as damages:
(1) All past-due rent and other amounts owing by Tenant
to Landlord pursuant to the terms of this Lease as of the
date of termination of the Lease.
(2) All costs associated with Tenant's default, whether
or not suit was commenced, including, without limitation,
costs of reentry and reletting, costs of clean-up,
refurbishing, removal of Tenant's property and fixtures,
other expenses occasioned by Tenant's failure to quit the
premises upon termination and to leave them in the
required condition, any remodeling costs, attorneys' fees
and costs, court costs, broker commissions, and
advertising costs.
(3) The loss of reasonable rental value from the date of
termination of the Lease until a new tenant has been, or
with the exercise of reasonable efforts could have been,
secured.
(4) Any excess of the value of the rent and all of
Tenant's other obligations under this Lease, as if the
Lease has not been terminated, over the reasonable
expected return from the premises for the period
commencing on the earlier of the date of trial or the
date the premises are relet and continuing through the
end of the term. The present value of future amounts
will be computed using a discount rate equal to the
lowest prime interest rate publicly announced by a major
Washington bank on short-term commercial loans for its
most credit-worthy customers, in effect on the earlier of
the date of trial or the date the premises are relet.
(e) Landlord may, in its sole discretion, sue periodically to
recover damages during the period corresponding with the
remainder of the Lease term, whether or not the Lease has been
terminated, and no action for damages shall bar a later action
for damages subsequently accruing.
(f) Landlord may elect to call the entire amount of rental
for the balance of the term, or what would have been the
balance of the term if the Lease had not been terminated as
provided in subparagraph(a), immediately due and payable,
which rent shall be paid, SUBJECT TO MITIGATION IF REQUIRED BY
LAW, by Tenant to Landlord as liquidated damages.
DAMAGE BY 20. If the premises or the Building are damaged by fire or other
FIRE, casualty, Landlord shall forthwith repair the same, provided
ETC. such repairs can be made within two hundred ten (210) days
from the date of such damage under the laws and regulations of
the federal, state, and local government authorities having
jurisdiction thereof. In such event, this Lease shall remain
in full force and effect except that Tenant shall be entitled
to a proportionate reduction of rent while such repairs to be
made hereunder by Landlord are being made. The rent reduction
shall be based on the extent to which making repairs by
Landlord interferes with the business carried on by Tenant on
the premises. Within twenty (20) days from the date of such
damage, Landlord shall notify Tenant whether or not repairs
can be made within two hundred ten (210) days from the date of
damage and Landlord's determination thereof shall be binding
on Tenant. If repairs cannot be made within two hundred ten
(210) days from the date of damage, Landlord shall have the
option within thirty (30) days of the date of damage either
to: (a) notify Tenant of Landlord's intention to repair the
damage and diligently prosecute such repairs, in which event
this Lease shall continue in full force and effect and the
rent shall be reduced as provided above or (b) notify Tenant
of Landlord's intention to terminate this Lease as of a date
specified in the notice, which date shall be not less than
thirty (30) days nor more than sixty (60) days after the
notice is given. IF LANDLORD NOTIFIES TENANT THAT REPAIRS
CANNOT BE MADE WITHIN TWO HUNDRED TEN (210) DAYS FROM THE DATE
OF DAMAGE, AND THE DAMAGE OCCURS DURING THE LAST YEAR OF THE
LEASE TERM OR EXTENSION HEREOF, TENANT MAY TERMINATE THIS
LEASE BY NOTICE TO LANDLORD AS OF A DATE SPECIFIED IN THE
NOTICE WHICH DATE SHALL NOT BE LESS THAN THIRTY (30) DAYS NOR
MORE THAN SIXTY (60) DAYS AFTER THE NOTICE IS GIVEN TO
LANDLORD. In the event that notice to terminate is given,
this Lease shall terminate on the date specified in the notice
and the rent shall be reduced by a proportionate amount based
upon the extent to which the damage interfered with the
business carried on by Tenant in the premises, and the Tenant
shall pay such reduced rent up to the date of termination.
Landlord shall refund to Tenant any rent previously paid for
any period of time subsequent to the date of termination. The
repairs to be made by Landlord shall not include, and Landlord
shall not be required to repair, any damage by fire or other
cause to the property of Tenant or any repair or replacement
of any alterations,
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additions, fixtures or improvements installed on the premises
by or at the expense of Tenant, all of which shall be promptly
repaired and restored by Tenant at its expense.
EMINENT 21. If any part of the Project shall be taken or appropriated
DOMAIN under the power of eminent domain or conveyed in lieu thereof
AFFECTING THE BUILDING OR THE PREMISES OR PARKING RATIOS OR
PARKING CONFIGURATION OR ACCESS TO THE PROJECT, THE BUILDING,
THE PREMISES OR PARKING AREAS, Landlord shall have the right
to terminate this lease at its sole option. In such event
Landlord shall receive (and Tenant shall assign to Landlord
upon demand from Landlord) any and all income, rent, award or
any interest thereon which may be paid or owed in connection
with the exercise of such power of eminent domain or
conveyance in lieu thereof, and Tenant shall have no claim
against Landlord or against the agency exercising such power
or receiving such conveyance, for any part of such sum paid by
virtue of such proceedings, whether or not attributable to the
value of the unexpired term of this lease. If a part of the
Project shall be so taken or appropriated or conveyed and
Landlord shall elect not to terminate this Lease, Landlord
shall nonetheless receive (and Tenant shall assign to Landlord
upon demand from Landlord) any and all income, rent, award or
any interest thereon paid or owed in connection with such
taking, appropriation or conveyance and if the premises have
been damaged as a consequence of such partial taking or
appropriation or conveyance, Landlord shall restore the
premises continuing under this lease at Landlord's cost and
expense provided that such restoration can be made, in
Landlord's sole opinion, within 360 days of the time the
property so taken is appropriated or conveyed. If restoration
cannot be made, in Landlord's sole opinion, within three
hundred sixty (360) days from the time of taking, Landlord
shall notify Tenant within sixty (60) days of such taking and
Tenant shall have the right to cancel this lease by giving
Landlord written notice of its intention to cancel within
thirty (30) days of the date of Landlord's notice. If Tenant
elects not to cancel this lease, it shall remain in full force
and effect except that Tenant shall be entitled to an
appropriate reduction in rent while restoration is being made
by Landlord. Such proportionate reduction shall be based upon
the extent to which the restoration being made by Landlord
interferes with the business carried on by Tenant in the
demised premises. Landlord will not be required to repair or
restore any injury or damage to the property of Tenant or make
any repairs or restoration to any alterations, additions,
fixtures or improvements installed in the premises by or at
the expense of Tenant. Notwithstanding anything to the
contrary contained in this paragraph, if the temporary use or
occupancy of any part of the premises is taken or appropriated
under power of eminent domain during the term of this Lease,
this Lease shall be and remain unaffected by the taking or
appropriation and Tenant shall continue to pay in full all
rent payable hereunder by Tenant during the term of this
Lease; in the event of any temporary appropriation or taking,
Tenant shall be entitled to receive that portion of any award
which represents compensation for the use or occupancy of the
premises during the term of this Lease, and Landlord shall be
entitled to receive that portion of any award which represents
the cost of restoration of the premises and the use and
occupancy of the premises after the end of the term of this
Lease. SEE ADDENDUM.
SALE BY 22. A sale or conveyance by Landlord of the Project shall operate
LANDLORD to release Landlord from any future liability under this
Lease, and in such event Tenant agrees to look solely to the
successor in interest of Landlord in and to this Lease. This
Lease shall not be affected by any such sale, and Tenant
agrees to attorn to the purchaser or assignee.
RIGHT OF 23. All covenants and agreements to be performed by Tenant under
LANDLORD TO any of the terms of this Lease shall be performed by Tenant at
PERFORM Tenant's sole cost and expense and without any abatement of
rent. If Tenant fails to pay any sum of money, other than
Basic Rent or Tenant's Share of Operating Costs, required to
be paid by it under this Lease or fails to perform any other
act on its part to be performed under this Lease, and the
failure continues for ten (10) days after notice thereof by
Landlord, Landlord may, but shall not be obligated so to do,
and without waiving or releasing Tenant from any obligations
of Tenant, make the payment or perform the act on Tenant's
part to be made or performed. Tenant shall pay to Landlord on
demand all sums so paid by Landlord and all necessary
incidental costs together with interest thereon at the Default
Rate from the date of payment by Landlord.
SURRENDER OF 24.
PREMISES
(b) At the end of the term or other sooner termination of
this Lease, or upon termination of Tenant's right to
possession, Tenant will peaceably deliver up to Landlord
possession of the premises, together with all improvements or
additions upon or belonging to same, by whomsoever made, in
the same condition as received or first installed, NORMAL WEAR
AND TEAR, damage by fire, earthquake, or the elements alone
excepted. Tenant shall, prior to the termination of this
lease or termination of Tenant's right to possession, remove
all movable furniture and equipment belonging to Tenant
(INCLUDING THE HVAC UNIT SUPPLIED BY TENANT AND INSTALLED BY
LANDLORD, IF ANY), at Tenant's sole cost, title to which shall
be in Tenant until such termination, repairing any damage
caused by removal. Property not so removed upon the
termination of this lease or upon termination of Tenant's
right to possession shall be deemed abandoned by Tenant, and
title to the same at Landlord's election shall thereupon pass
to Landlord. Unless otherwise agreed to in writing by
Landlord, PURSUANT TO THE PROVISIONS OF PARAGRAPH 6 OF THIS
LEASE, Tenant shall remove, at Tenant's sole cost, any or all
permanent improvements or additions to the premises installed
by or at the expense of Tenant and repair any damage resulting
from such removal.
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(c) The voluntary or other surrender of this Lease by Tenant,
or a mutual cancellation thereof, shall not work a merger, and
shall, at the option of Landlord, terminate all or any
existing subleases or subtenancies, or may, at the option of
Landlord, operate as an assignment to it of any or all such
subleases or subtenancies.
WAIVER 25. If either Landlord or Tenant waives the performance of any
provision of this Lease, such waiver shall not be deemed a
waiver of any subsequent breach of the same or any other
provision of this Lease. Furthermore, the acceptance of rent
by Landlord shall not constitute a waiver of any preceding
breach by Tenant of any provision of this Lease, regardless of
Landlord's knowledge of such preceding breach at the time
Landlord accepted such rent. Failure by Landlord to enforce
any provision of this Lease for any length of time shall not
be deemed to waive or decrease the right of Landlord to insist
thereafter upon strict performance by Tenant. Waiver by
Landlord of any provision of this Lease may only be made by a
written document signed by Landlord.
NOTICES 26. All notices and demands which may be or are required to be
given by either party to the other hereunder shall be in
writing. All notices and demands by Landlord to Tenant shall
be sent by United States certified or registered mail, postage
prepaid, addressed to Tenant at the ADDRESS OF TENANT
SPECIFIED IN THE BASIC LEASE INFORMATION, or to such other
place as Tenant may from time to time designate in a notice to
Landlord. All notices and demands by Tenant to Landlord shall
be sent by United States certified or registered mail, postage
prepaid, addressed to Landlord at the address specified in the
Basic Lease Information, or to such other firm or to such
other place as Landlord may from time to time designate in a
notice to Tenant. All notices and demands shall be deemed
given on the date personally delivered to the address
designated above or THREE (3) DAYS AFTER the date mailed as
provided above.
RENTAL 27. (a) Definition. The terms used in this Paragraph 27 shall
ADJUSTMENTS have the following meanings:
(1) "Operating Costs" means all expenses and costs of
every kind and nature which Landlord shall pay or become
obligated to pay because of or in connection with the
ownership and operation of the Project and Landlord's
personal property used in connection with the Project and
supporting facilities of the Project, and such additional
facilities now and in subsequent years as may be
REASONABLY determined by Landlord to be necessary to the
Project, including, but not limited to, the following:
(i) All wages, salaries and related expenses and
benefits of all on-site and off-site employees
engaged directly in the operation, management,
maintenance, engineering and security of the
Project, and the costs and rental value of an office
in Project; provided, however, that Operating Costs
shall not include leasing commissions paid to any
real estate broker, salesperson or agent.
(ii) Supplies, materials, tools and rental of
equipment used in the operation, management and
maintenance of the Project.
(iii) Utilities, including water and power, gas,
sewer, heating, lighting, air conditioning and
ventilating and the cost of electrical surveys of
the Project.
(iv) All maintenance, janitorial and service
agreements for the Project and the equipment
therein, including without limitation, alarm
services, garbage and waste disposal, security
service, water treatment, vermin extermination,
facade maintenance, roof maintenance, landscaping,
window cleaning and elevator maintenance.
(v) A management cost recovery equal to four
percent (4%) of Gross Rent derived from the Project.
(vi) Legal expenses, accounting expenses and the
cost of audits by certified public accountants;
provided, however, that legal expenses chargeable as
Basic Operating Cost shall not include the cost of
ANY PROJECT SALE OR FINANCING TRANSACTION,
negotiating leases, collecting rents, evicting
tenants nor shall it include costs incurred in legal
proceedings with or against any tenant or to enforce
the provisions of any lease.
(vii) All insurance premiums and costs, including
but not limited to, the premiums and cost of fire,
casualty, flood and liability coverage and rental
abatement and earthquake insurance (if Landlord
elects to provide such coverage) applicable to the
Project and Landlord's personal property used in
connection therewith, and any deductible payments
incurred by reason of loss.
(viii) Repairs, replacements and general maintenance
(excluding CAPITAL IMPROVEMENTS NOT INCLUDED IN
LEASE PARAGRAPH 27.(a)(xi) AND repairs and general
maintenance paid by proceeds of insurance or by
Tenant or other third parties, and the alterations
attributable solely to tenants of the Project other
than Tenant).
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(ix) All maintenance costs relating to public and
service areas of the Project, including (but without
limitation) sidewalks, landscaping, service areas,
mechanical rooms and building exteriors.
(x) All Real Property Taxes. THE REAL PROPERTY
TAXES FOR THE BASE YEAR SHALL BE ADJUSTED TO REFLECT
A FULLY ASSESSED VALUE FOR THE BUILDING. LANDLORD
AND TENANT RECOGNIZE THAT THE MAPLEWOOD BUILDING IS
NOT SITUATED ON A SEPARATE TAX LOT, AND THAT
LANDLORD SHALL MAKE A REASONABLE ESTIMATE OF THE
INCREASED VALUATION ATTRIBUTABLE TO ITS COMPLETION
AND FULL OCCUPANCY.
(xi) Amortization (together with reasonable
financing charges) of capital improvements made to
the Project subsequent to the Term Commencement Date
which will improve the operating efficiency, AS
DEMONSTRATED BY REDUCED OPERATING COSTS OF AT LEAST
A LIKE AMOUNT, of the Project or which may be
required to comply with laws, ordinances, rules or
regulations promulgated, adopted or enforced after
completion of the initial construction of the
Project and improvement of the premises pursuant to
the Office Lease Improvement Agreement.
(xii) All costs of contesting any law applicable to
the Project or the amount of any taxes or
assessments affecting the Project.
Notwithstanding anything to the contrary herein
contained, Operating Costs shall not include (aa) the
initial construction cost of the Office Park; (bb)
depreciation on the initial construction of the Project;
(cc) the cost of providing Tenant Improvements to Tenant
or any other tenant; (dd) debt service (including, but
without limitation, interest, principal and any impound
payments) required to be made on any mortgage or deed of
trust recorded with respect to the Building, Project or
Property other than debt service and financing charges
imposed pursuant to paragraph 27(a)(1)(xi) above; and
(ee) the cost of special services, goods or materials
provided to any tenant. If the Project is not fully
occupied during any fiscal year of the Term as determined
by Landlord, an adjustment shall be made in computing the
Basic Operating Cost for such year so that Basic
Operating Cost shall be computed as though the Project
had been ninety-five percent (95%) occupied; provided,
however, that in no event shall Landlord be entitled to
collect in excess of one hundred percent (100%) of the
total Operating Costs from all of the tenants in the
Project including Tenant. All costs and expenses shall
be determined in accordance with generally accepted
accounting principles which shall be consistently applied
(with accruals appropriate to Landlord's business).
Operating Costs shall not include specific costs incurred
for the account of, separately billed to and paid by
specific tenants. SEE ADDENDUM.
(2) "Real Property Taxes" means any form of tax,
assessment, general assessment, special assessment, lien,
levy, bond obligation, license fee, license tax, tax or
excise on rent, or any other levy, charge or expense,
together with any statutory interest thereon,
(individually and collectively, the "Impositions"), now
or hereafter imposed or required by any authority having
the direct or indirect power to tax, including any
federal, state, county or city government or any school,
agricultural, lighting, drainage or other improvement or
special assessment district thereof, (individually and
collectively, the "Governmental Agencies") on any
interest of Landlord or Tenant or both (including any
legal or equitable interest of Landlord or its mortgagee,
if any) in the Building, Office Park or the Property,
including without limitation:
(i) any Impositions upon, allocable to or
measured by the area of the Premises or the Project,
or the rental payable hereunder, including without
limitation, any gross income tax or excise tax
levied by any Governmental Agencies with respect to
the receipt of such rental; or
(ii) any Impositions upon or with respect to the
possession, leasing, operation, management,
maintenance, alteration, repair or use or occupancy
by Tenant of the premises or any portion thereof; or
(iii) any Impositions upon this Lease or this
transaction or any document to which Tenant is a
party creating or transferring an interest or an
estate in the premises; or
(iv) any Impositions by Governmental Agencies
(whether or not such impositions constitute tax
receipts) in substitution, partially or totally, of
any impositions now or previously included within
the definition of real property taxes, including
those calculated to increase tax increments to
Governmental Agencies and to pay for such services
as fire protection, water drainage, street, sidewalk
and road maintenance, refuse removal or other
governmental services formerly provided without
charge to property owners or occupants; or
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(v) any and all costs, including without
limitation, the fees of attorneys, tax consultants
and experts, incurred by Landlord should Landlord
elect to negotiate or contest the amount of such
real property taxes in formal or informal
proceedings before the Governmental Agency imposing
such real property taxes;
provided, however, that Real Property Taxes shall in no
event include Landlord's general income, inheritance,
estate, gift or franchise taxes.
(3) "Estimated Operating Costs" for any Fiscal Year
shall mean Landlord's estimate of the Operating Costs for
such Fiscal Year. Landlord shall have the right from
time to time to revise its Fiscal Year and interim
accounting periods so long as the periods as so revised
are reconciled with prior periods in accordance with
generally accepted accounting principles applied in a
consistent manner.
(b) Payment of Estimated Basic Operating Cost. During the
last month of each Fiscal Year during the Term, or as soon
thereafter as practicable, Landlord shall give Tenant written
notice of the Estimated Operating Costs for the ensuing Fiscal
Year. The Fiscal Year is specified in the Basic Lease
Information. Tenant shall pay to Landlord, as additional
rent, monthly, in advance, on the first day of each month
during the Term, an amount equal to one-twelfth (1/12th) of
Tenant's Share of the increase in the Operating Costs of the
Property for each Fiscal Year during the Term over the
Operating Costs for the Base Year, which amount is exclusive
of any sales, franchise, business or occupation or other tax
based on rents and should such taxes apply during the Term.
(c) Proration. Tenant's Share of the increase in Operating
Costs shall be prorated on the basis of a 360-day year to
account for any fractional portion of a year included in the
Term at its commencement and expiration. If at any time
during the course of a Fiscal Year, Landlord determines that
Basic Operating Cost will apparently vary from the then
Estimated Operating Costs by more than five percent (5%),
Landlord may, by written notice to Tenant, revise the
Estimated Operating Costs for the balance of the Fiscal Year
and Tenant shall pay Tenant's Share of the Estimated Operating
Costs as so revised for the balance of the then current Fiscal
Year on the first day of each calendar month thereafter, as
additional rent.
(d) Computation of Operating Costs Adjustment. Within one
hundred twenty (120) days after the end of each Fiscal Year or
as soon thereafter as practicable, Landlord shall deliver to
Tenant a statement of Operating Costs for the Fiscal Year just
ended, accompanied by a computation of Tenant's share of
increased Operating Costs. If the statement shows that
Tenant's payment based upon Estimated Operating Costs is less
than Tenant's Share of Operating Costs, then Tenant shall pay
as additional rent the difference within twenty (20) days
after receipt of the statement. If the statement shows that
Tenant's payment of Estimated Operating Costs exceeded
Tenant's Share of Operating Costs, then (provided that Tenant
is not in default under this Lease) Tenant shall receive a
credit for the amount of the overpayment against Tenant's
obligation for payment of Tenant's Share of Estimated
Operating Costs next becoming due hereunder. If this Lease
has been terminated or the Term has expired before the date of
the statement, then the Basic Operating Cost Adjustment shall
be paid by the appropriate party within twenty (20) days after
the date of delivery of the statement.
(e) Tenant Audit. Tenant shall have the right, at Tenant's
expense, and upon not less than seven (7) days prior written
notice to Landlord, to review at reasonable times Landlord's
books and records for any fiscal year, a portion of which
falls within the Term, for purposes of verifying Landlord's
calculation of Basic Operating Cost and Basic Operating Cost
Adjustment. If Tenant disputes the amount set forth in any
statement provided by Landlord under Paragraph 27(c) above,
Tenant shall have the right not later than FORTY (40) days
following the receipt of such statement, and upon condition
that Tenant shall first deposit with Landlord the full amount
in dispute, to cause Landlord's books and records with respect
to such Fiscal Year to be audited by certified public
accountants selected by Tenant subject to Landlord's
reasonable right of approval. The Basic Operating Cost
Adjustment shall be appropriately adjusted on the basis of the
audit. If the audit discloses a liability for a refund or
credit by Landlord to Tenant in excess of ten percent (10%) of
Tenant's Share of Operating Costs Adjustment previously
reported, the cost of the audit shall be borne by Landlord.
Otherwise the cost of the audit shall be paid by Tenant. If
Tenant does not request an audit in accordance with the
provisions of this Paragraph 27(e) within FORTY (40) days of
receipt of Landlord's statement provided pursuant to Paragraph
27(d), Landlord's statement shall be final and binding for all
purposes.
TAXES 28. Tenant shall pay before delinquency any and all taxes levied
PAYABLE or assessed and which become payable by Landlord (or Tenant)
BY TENANT during the term of this Lease (excluding, however, FRANCHISE,
state and federal personal or corporate income taxes measured
by the income of Landlord from all sources, capital stock
taxes, and estate and inheritance taxes), whether or not now
customary or within the contemplation of the parties hereto,
which are based upon, measured by or otherwise calculated with
respect to: (a) the gross or net rent payable under this
Lease, including, without limitation, any gross receipts tax
(TO THE EXTENT THIS TAX REPLACES OR SUPPLEMENTS PROPERTY
TAXES) levied by any taxing authority, or any other gross
income tax or excise tax levied by any taxing authority with
respect to the receipt of the rental hereunder; (b) the value
of Tenant's equipment, furniture, fixtures or other personal
property located in the premises; (c) the possession, Lease,
operation, management, maintenance, alteration, repair, use of
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occupancy by Tenant of the premises or any portion thereof;
(d) the value of any leasehold improvements, alterations or
additions made in or to the premises, regardless of whether
title to such improvements, alterations or additions shall be
in Tenant or Landlord; or (e) this transaction or any document
to which Tenant is a party creating or transferring an
interest or an estate in the premises. In the event that it
shall not be lawful for Tenant to so reimburse Landlord, the
rent payable to Landlord under this Lease shall be revised to
net Landlord the same net rent after imposition of any such
tax upon Landlord as would have been payable to Landlord prior
to the imposition of any such tax. All taxes payable by
Tenant under this Paragraph 28 shall be deemed to be, and
shall be paid as, additional rent.
ABANDON-
MENT 29. Tenant shall not abandon (I.E. VACATE THE PREMISES WITH NO
INTENT TO RE-OCCUPY WITHIN A REASONABLE PERIOD OF TIME NOT TO
EXCEED 130 DAYS) the Premises at any time during the term, and
any such abandonment shall be a breach of this Lease. If
Tenant shall abandon, or surrender said Premises or be
dispossessed by process of law, or otherwise, any personal
property belonging to Tenant and left on the Premises shall,
at the option of Landlord, be deemed to be abandoned and title
thereto shall pass to Landlord, except such property as may be
mortgaged to Landlord.
SUCCESSORS 30. Subject to the provisions of Paragraph 9 hereof, the terms,
AND covenants and conditions contained herein shall be binding
ASSIGNS upon and inure to the benefit of the heirs, successors,
executors, administrators and assigns of the parties hereto.
ATTORNEYS' 31. If this Lease is referred to an attorney for enforcement of
FEES its terms or provisions or if any action must be taken to
enforce any term, covenant or condition of this Lease, THE
PREVAILING PARTY shall be entitled to payment by THE OTHER
PARTY of all reasonable costs incurred in connection with such
enforcement, whether or not litigation is commenced,
including, without limitation, reasonable attorneys' fees and
costs.
SECURITY 32. (a) By execution of this Lease, Landlord acknowledges receipt
DEPOSIT of Tenant's security deposit for the faithful performance of
all terms, covenants and conditions of this Lease. The sum of
the security deposit is specified in the Basic Lease
Information. Tenant agrees that Landlord may apply the
security deposit to remedy any failure by Tenant to repair or
maintain the premises or to perform any other provisions of
this Lease. If Tenant has kept and performed all terms,
covenants and conditions of this Lease during the Term,
Landlord will promptly return the security deposit to Tenant
or the last permitted assignee of Tenant's interest hereunder
WITHIN THIRTY (30) DAYS AFTER the expiration of the Lease
Term. Should Landlord use any portion of the security deposit
to cure any default by Tenant, Tenant shall promptly replenish
the security deposit to its original amount. Landlord shall
not be required to keep any security deposit separate from its
general funds, and Tenant shall not be entitled to interest on
any such deposit.
(b) No mortgagee, mortgagee in possession, or successor in
title to the property, shall be accountable for any security
deposit required by the Landlord under this Lease, unless the
deposit has actually been received by such mortgagee or
successor as security for the Tenant's performance of this
lease. SEE ADDENDUM.
SUBSTITUTION
SPACE
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<PAGE>
CORPORATE 34. If Tenant is a corporation, each of the persons executing this
AUTHORITY Lease on behalf of Tenant does hereby covenant and warrant
that Tenant is a duly authorized and existing corporation,
that Tenant has and is qualified to do business in Washington,
that the corporation has full right and authority to enter
into this Lease, and that each and both of the persons signing
on behalf of the corporation were authorized to do so. Upon
Landlord's request, Tenant shall provide Landlord with
evidence reasonably satisfactory to Landlord confirming the
foregoing covenants and warranties.
LEASE NOT AN 35. Submission of this instrument for examination or signature by
OFFER Tenant does not constitute a reservation of or option for
lease, and it is not effective as a lease or otherwise until
execution and delivery by both Landlord and Tenant.
BROKERAGE 36. Tenant represents and warrants that it has dealt with no
broker, agent or other person in connection with this
transaction, and/or that no broker, agent or other person
brought about this transaction other than COLLIERS MACAULAY
NICOLLS INTERNATIONAL, and Tenant agrees to indemnify and hold
Landlord harmless from and against any claims by any other
broker, agent or other person claiming a commission or other
form of compensation by virtue of having dealt with Tenant
with regard to this leasing transaction. The provisions of
this Article shall survive the termination of this Lease.
FORCE 37. EXCEPT FOR THE PAYMENT OF RENT, Whenever a period of time is
MAJEURE prescribed for action to be taken by EITHER PARTY, EITHER
PARTY shall not be liable or responsible for, and there shall
be excluded from the computation for any 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 causes of any kind whatsoever which
are beyond the control of SUCH PARTY ("Force Majeure").
CERTAIN 38. Landlord shall have the following rights, exercisable without
RIGHTS notice (EXCEPT LANDLORD SHALL USE BEST EFFORTS TO NOTIFY
RESERVED BY TENANT IN THE EVENT LANDLORD SHALL REQUIRE ACCESS TO TENANT'S
LANDLORD PREMISES AFTER NORMAL BUSINESS HOURS, EXCEPT IN THE CASE OF AN
EMERGENCY, IN WHICH CASE NO NOTICE SHALL BE REQUIRED) and
without liability to Tenant for damage or injury to property,
persons or business and without effecting an eviction,
constructive or actual, or disturbance of Tenant's use or
possession or giving rise to any claim for setoff or abatement
of rent:
(a) To decorate, expand and make repairs, alterations,
additions, changes or improvements, whether structural or
otherwise, in and about the Building and Project, or any part
thereof, and for such purposes to enter upon the leased
premises and, during the continuance of any such work, to
temporarily close doors, entryways, public space and corridors
in the Building, to interrupt or temporarily suspend Building
services and facilities and to change the arrangement and
location of entrances or passageways, doors and doorways,
corridors, elevators, stairs, toilets, or other public parts
of the Building to install, use, maintain, repair, replace and
relocate pipes, ducts, conduits, wires and appurtenant meters
and equipment to other parts of the Building above the ceiling
surfaces, below the floor surfaces or within the walls, all
without abatement of rent or affecting any of Tenant's
obligations hereunder, so long as the leased premises are
reasonably accessible.
(b) To have and retain a paramount title to the premises free
and clear of any act of Tenant purporting to burden or
encumber them.
(c) To make changes to common areas including, without
limitation, changes in the location, size, shape, and number
of driveways, entrances, parking spaces, parking areas,
loading and unloading areas, ingress, egress and direction of
traffic, landscaping and walkways, to close any common areas
temporarily so long as reasonable access to the Premises
remains available, and to use the common areas as a staging
area.
(d) To change the name by which the Building or Project is
designated.
(e) To grant to anyone the exclusive right to conduct any
business or render any service in or to the Building or
Project, provided the exclusive right does not operate to
exclude Tenant from the use expressly permitted under this
Lease.
(f) To prohibit the placing of vending or dispensing machines
of any kind in or about the premises without the prior written
permission of Landlord, EXCEPT AS CONTEMPLATED IN EXHIBIT C,
C-1, OR C-2 OF THIS LEASE.
(g) To have access for Landlord and other tenants of the
Building to any mail chutes located on the leased premises
according to the rules of the United States Postal Service.
(h) To take all reasonable measures as Landlord may deem
advisable for the security of the Building or Project and its
occupants, including without limitation, the search of all
persons entering or
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<PAGE>
leaving the Building, access to the premises for cause,
suspected cause, or for drill purposes, the temporary denial
of access to the Building or Project, and the closing of the
Building or Project after normal business hours and on
Saturdays, Sundays and holidays, subject, however, to Tenant's
right to admittance when the Building or Project is closed
after normal business hours under such reasonable regulations
as Landlord may prescribe form time to time which may include
by way of example but not of limitation, that persons entering
or leaving the Building, whether or not during normal business
hours, identify themselves to a security officer by
registration or otherwise and that such persons establish
their right to enter or leave the Building.
PERSONAL 39. Landlord may sell or otherwise transfer all or part of its
LIABILITY interest in the premises and if the proposed purchaser or
transferee shall assume Landlord's obligations under this
Lease for so long as it retains an interest in the premises,
then Landlord shall be relieved of any obligation under this
Lease accruing after the date of transfer. If any security
deposit or prepaid rent has been paid by Tenant and Landlord
shall transfer such security deposit or prepaid rent to
Landlord's successor, then Landlord shall be discharged from
any further liability with respect to such security deposit or
prepaid rent. The liability of Landlord to Tenant for any
default by Landlord under this Lease or arising in connection
with this Lease or any other matter relating to the premises,
shall be limited to the interest of Landlord in the BUILDING
and Landlord shall not be liable personally for any
deficiency. Tenant agrees to look solely to Landlord's
interest in the BUILDING for the recovery of any judgment
against Landlord, and Landlord shall not be personally liable
for any such judgment or deficiency after execution thereon.
In furtherance of the foregoing limitation: (a) no general or
limited partner of Landlord shall be sued or named as a party
in any action or suit (except as may be necessary to secure
jurisdiction of the partnership); (b) no service of process
shall be made against any general or limited partner of
Landlord (except as may be necessary to secure jurisdiction of
the partnership); (c) no general or limited partner of
Landlord shall be required to answer or otherwise plead to any
service of process; (d) no adjustment will be taken against
any general or limited partner of Landlord; (e) any judgment
taken against any general or limited partner of Landlord may
be vacated or set aside at any time NUNC PRO TUNC; (f) no writ
of execution will ever be levied against the assets of any
general or limited partner of Landlord; and (g) these
covenants are enforceable both by Landlord and also by any
partner of Landlord. In addition, Landlord shall not be
liable to Tenant or anyone claiming by or through Tenant for
lost profits or consequential damages incurred due to a breach
of this Lease by Landlord or due to Landlord's acts or
omissions.
MISCELLAN- 40. ADDITIONAL DEFINITIONS.
EOUS
(a) The term "premises" wherever it appears herein includes
and shall be deemed or taken to include (except where such
meaning would be clearly repugnant to the context) the office
space demised and improvements now or at any time hereinafter
comprising or built in the space hereby demised. The term
"Landlord" includes the Landlord, its successors, and assigns.
In any case where this Lease is signed by more than one
person, the obligations hereunder shall be joint and several.
The term "Tenant" or any pronoun used in place thereof shall
indicate and include the masculine or feminine, the singular
or plural number, individuals, firms or corporations, and
their and each of their respective successors, executors,
administrators, and permitted assigns, according to the
context hereof.
(b) Time is of the essence of this lease and all its
provisions. This Lease shall in all respects be governed by
the laws of the State of Washington. Captions are for
convenience of reference only and shall in no way define,
increase, limit or describe the scope or intent of any
provision of this Lease. This Lease, together with its
exhibits, contains all the agreements of the parties and
supersedes any previous negotiations. There have been no
representations made by the Landlord or understandings made
between the parties other than those expressly set forth in
this Lease and its exhibits. This Lease may not be modified
except by a written instrument signed by the parties.
(c) If for any reason any provision of this Lease shall be
unenforceable or ineffective, all of the other provisions
shall be and remain in full force and effect.
(d) The waiver by Landlord of any term or provision of this
Lease shall not be deemed a waiver of the same term or
provision or any subsequent breach thereof or of any other
term or provision of this Lease.
(e) If, in connection with obtaining construction, interim or
permanent financing for the Property, the lender shall request
modifications in this Lease as a condition to such financing,
Tenant will not unreasonably withhold, delay or defer its
consent thereto, provided that such modifications do not
increase the obligation of Tenant under this Lease or affect
the leasehold interest created or Tenant's rights under this
Lease.
(f) Neither Tenant nor Landlord shall record this Lease
without the written consent of the other party, SUCH CONSENT
NOT TO BE UNREASONABLY WITHHELD.
(g) No payment by Tenant or receipt by Landlord of a lesser
amount than the monthly rent or any other sum due Landlord
under this Lease shall be deemed to be other than on account
of the earliest stipulated rent, nor shall any endorsement or
statement of any check or any letter accompanying any
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<PAGE>
check or payment of rent be deemed an accord and satisfaction
or a modification of Tenant's obligations under this Lease, or
a limitation on Landlord's right to recover the balance of
such rent or pursue any other remedy provided in this Lease.
(h) If Tenant requests Landlord's consent or approval and
Landlord fails or refuses to give such consent or approval,
Tenant shall not be entitled to any damages for any
withholding or delay by Landlord of its consent or approval if
Landlord is entitled to withhold such consent or approval in
its sole discretion or if such consent or approval is not to
be unreasonably withheld or delayed by Landlord and in its
good faith judgment Landlord determines that it is required
under any document evidencing or securing financing of the
Property and the lender withholds its consent or approval. In
any instance where the consent or approval of the lender is
required, Landlord shall not be required to expend money or
make any concession to the lender to induce its consent or
approval.
(i) Landlord shall RETAIN ALL LIEN RIGHTS AVAILABLE PURSUANT
TO WASHINGTON STATE LAW AFFECTING all goods, inventory,
equipment, fixtures and other personal property, which are or
may be put on the Premises, to secure the payment of the rent
and additional rent reserved under this Lease.
DISCLOSURE 41. The officers and agents of Landlord's property manager and
other related parties are licensed real estate brokers or
salespersons. This disclosure is made pursuant to RCW
18.85.230.
SEE ADDENDUM Attached hereto and made a part hereof by this reference.
IN WITNESS WHEREOF, the parties hereto have executed this
Lease the day and year first above written.
LANDLORD: TENANT:
Spieker Properties, L.P. Coinstar, Inc.
A California limited partnership a Delaware corporation
By: Spieker Properties, Inc.,
a Maryland corporation
Its: General Partner
/s/ Donald S. Jefferson /s/ Warren M. Gordon
- --------------------------------- ----------------------------
By: Donald S. Jefferson By: Warren M. Gordon
Its: Senior Vice President Its: Chief Financial Officer
Date: 2/24/97 Date: February 4, 1997
---------------------------- ---------------------------
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<PAGE>
STATE OF WASHINGTON )
-------------------------)
) ss.
COUNTY OF KING )
-------------------------)
On this 4th day of February, 1997, personally appeared before me Warren
M. Gordon, to me known to be the Chief Financial Officer of the corporation
that executed the within and foregoing instrument, and acknowledged said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath stated that he was
authorized to execute said instrument and that the seal affixed (if any) is
the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Official
Seal the day and year first above written.
/s/ Mary Lorna Meade
----------------------------------
[SEAL] NOTARY PUBLIC IN AND FOR THE STATE
OF WASHINGTON, RESIDING AT
ISSAQUAH, WA.
MY COMMISSION EXPIRES: 3-13-2000
STATE OF WASHINGTON)
) ss.
COUNTY OF KING )
On this 24 day of February, 1997, personally appeared before me DONALD
S. JEFFERSON, to me known to be the Senior Vice President of the corporation
that executed the within and foregoing instrument, and acknowledged said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath stated that he was
authorized to execute this instrument and that the seal affixed (if any) is
the corporate seal of said corporation.
/s/ Sara Anne Lemmon
----------------------------
SARA ANNE LEMMON
NOTARY PUBLIC IN AND FOR THE
STATE OF WASHINGTON, RESIDING
AT 17731 N.E. 13TH ST.,
BELLEVUE, WASHINGTON
MY COMMISSION EXPIRES: 7-9-97
Coinstar lease dated January 29, 1997 for Maplewood Building "M", Suite 100
<PAGE>
ADDENDUM TO
LEASE AGREEMENT
DATED JANUARY 29, 1997 BETWEEN
SPIEKER PROPERTIES, L.P., A CALIFORNIA LIMITED PARTNERSHIP (LANDLORD)
AND COINSTAR, INC., A DELAWARE CORPORATION (TENANT)
FOR PREMISES LOCATED IN MAPLEWOOD BUILDING "M"
THE FOLLOWING ARE ADDITIONAL TERMS AND CONDITIONS WHICH ARE HEREBY
INCORPORATED INTO THE LEASE. ALL OTHER TERMS AND CONDITIONS OF THE LEASE
SHALL REMAIN IN FULL FORCE AND EFFECT UNLESS EXPRESSLY MODIFIED HEREIN.
ADDENDUM TO PARAGRAPH 2: TERM AND POSSESSION:
Landlord's Work pursuant to Exhibit C, "Office Lease Improvement Agreement"
shall be deemed substantially completed upon issuance of a signed final
inspection card or building permit signed as "final" or such other document
that shall be comparable to a certificate of occupancy in the applicable
jurisdiction, for the completion of the Premises as outlined in Exhibit C.
Subject to the provisions of Paragraph 37 ("Force Majeure") of this Lease, in
the event Landlord is unable to deliver possession of the Premises to Tenant
by June 1, 1997, Landlord shall so notify Tenant by March 1, 1997 and Tenant
shall have the right, but not the obligation, to terminate this Lease upon
written notice delivered to Landlord no later than March 6, 1997. Tenant's
right to terminate with respect to this Paragraph 2 of the Lease shall be
null and void on March 6, 1997. Notwithstanding anything stated herein to the
contrary, if Landlord is unable to deliver possession of the Premises by June
1, 1997, and if in Landlord's reasonable judgment delivery of possession is
delayed by the action(s) or inaction(s) of Tenant or its employees, agents,
invitees, and/or contractors, then Tenant's right to terminate with respect
to this Paragraph 2 of the Lease shall be null and void.
Provided Tenant is not, and has not been, in default of any terms and
conditions of this Lease, Landlord shall permit Tenant access to the Premises
for the sole purpose of "facility set up" approximately ten (10) calendar
days prior to the Commencement Date of this Lease. "Facility set up" for the
purpose of this Lease provision shall mean installation of Tenant's cabling
and telecom equipment only. Notwithstanding anything contained herein to the
contrary, in the event Tenant occupies, conducts business at and/or otherwise
makes beneficial use of the Premises, then the Lease shall commence and the
Lease Commencement Date shall be the date upon which Tenant commenced
occupancy or use of all or any portion of the Premises. Landlord shall
notify Tenant of the date when Tenant shall be permitted access to the
Premises (the "Prior Possession Date") and Tenant's access to the Premises
during the "Prior Possession Period" (as hereinafter defined) shall be
subject to all of the terms and conditions of the Lease except for the
payment of Base Rent which shall not be due until the Commencement Date.
Landlord shall not be required to expend additional funds in order to
substantially complete tenant improvements or provide "Prior Possession" on a
date which is sooner than identified on Landlord's construction and delivery
schedule in order to provide Tenant with access to the Premises for facility
set up. The "Prior Possession Period" shall be defined as the period which
commences on the "Prior Possession Date" and terminates on the "Lease
Commencement Date". Tenant shall cooperate and coordinate with Landlord
during the Prior Possession Period to avoid interference with completion of
tenant improvements by Landlord. Tenant shall not install furniture,
fixtures, and/or equipment prior to the Commencement Date of this Lease
without Landlord's prior written consent which Landlord may withhold in its
sole discretion if such installation will delay or interfere with completion
of tenant improvements and/or governmental approval of same and/or require
Landlord to expend additional funds.
ADDENDUM TO PARAGRAPH 5: COMPLIANCE WITH LAWS.
Landlord shall substantially comply with the provision of the Americans with
Disabilities Act (ADA) for the completion of the Premises as outlined in
Exhibit C, if applicable. Landlord further agrees to comply with the ADA as
it applies to the common areas of the building, and all work outlined in
Exhibit C and the common areas of the building shall be completed by Landlord
with the costs thereof applied in accordance with Paragraph 27. All costs
for substantial compliance with ADA within Tenant's Premises subsequent to
Tenant's occupancy shall be the responsibility of Tenant. Landlord agrees to
comply with all applicable laws and regulations pertaining to Landlord's
obligations hereunder. Landlord shall defend, indemnify and hold harmless
Tenant from and against any claims, charges, liabilities, obligations,
penalties, damages, judgments, costs and expenses (including attorneys fees)
related solely to Landlord's initial construction obligations with respect to
the condition of the Premises and the common areas of the Building on the
Lease Commencement Date (but not with respect to Tenant's use or occupancy)
and arising directly and solely from Landlord's failure to substantially
comply with the provision of the ADA for the completion of the initial
construction of the common areas of the Building and the Premises as outlined
in Exhibit C as applicable.
Please Initial
Landlord /s/
---------
Coinstar Addendum Bldg M
Tenant /s/
---------
Page 1 of 5
<PAGE>
ADDENDUM TO PARAGRAPH 9: ASSIGNMENT AND SUBLETTING.
Notwithstanding the provisions of Lease Paragraph 9 (a.), if Tenant proposes
to sublet a portion of the Premises for less than the entire term of the
Lease or to sublet to an Affiliate (as hereinafter defined) of Tenant, then
Landlord shall not have the right to recapture said portion of the Premises,
provided that Tenant otherwise complies with all other provisions of this
Lease, including, but not limited to, the requirement to obtain the prior
written consent of Landlord with respect to said proposed sublet.
Landlord's consent shall not be required in the event Tenant shall assign the
Lease or sublet the Premises to an "Affiliate" (as herein after defined)
provided Tenant otherwise abides by the provisions of this Lease, including
this Paragraph 9 (including, but not limited to the provisions regarding
notice to Landlord and Tenant's ongoing obligations and liabilities under the
Lease), and Landlord shall not have the right to terminate this Lease as to
the portion of the Premises so sublet or assigned and further provided that
(i) in the case of an assignment, the proposed assignee financial net worth
at the time of assignment is at least equal to the greater of (a) the net
worth of Tenant on the date hereof, or (b) the net worth of Tenant
immediately prior to the assignment and (ii) the proposed use of the Premises
by the assignee or subtenant shall comply with the Lease. The term
"Affiliate" means a corporation, partnership or other entity which (i) is
Tenant's parent organization; or (ii) is a wholly-owned subsidiary of Tenant
or such parent; or (iii) is a corporation of which Tenant or Tenant's parent
corporation owns in excess of fifty percent (50%) of the outstanding capital
stock; or (iv) as a result of a consolidation, merger, asset sale or other
reorganization or transaction with Tenant and/or Tenant's parent
organization, shall own all or substantially all the capital stock of Tenant
or Tenant's parent organization or all or substantially all of Tenant's
assets. Provided that Tenant otherwise abides by the provisions of the
Lease, including this Paragraph 9, Landlord consents to Tenant's transfer of
all or any portion of the ownership of stock in Tenant to the extent such
transfer is made pursuant to, or otherwise in connection with, an initial
public offering of the stock of Tenant, or traded through an exchange or over
the counter.
Landlord's consent shall not be required in the event of a transfer by the
present majority shareholders of ownership and control of the voting stock of
Tenant, provided that Tenant otherwise abides by the provisions of the Lease,
including this Paragraph 9 (including, but not limited to the provisions
regarding notice to Landlord and Tenant's ongoing obligations and liabilities
under the Lease), and further provided that the proposed transfer does not
result in a diminution of Tenant's net worth as compared to the greater of
(a) the net worth of Tenant on the date hereof, or (b) the net worth of
Tenant immediately prior to the transfer.
ADDENDUM TO PARAGRAPH 19: DEFAULT.
Any uncured material default (i.e. uncured after the giving of notice, if
notice is required, and the expiration of a cure period, if applicable),
defined for the purpose of this paragraph as abandonment, failure to pay any
and all rents when due, lease termination or non-compliance with a court
order for eviction, by Tenant under its concurrent Lease being entered into
with Landlord for the Premises located at Building "N", located at 1800 114th
Ave. S.E., Bellevue, Washington, shall constitute a default hereunder.
ADDENDUM TO PARAGRAPH 21: EMINENT DOMAIN
Tenant shall have the right to claim and recover from the condemning
authority, but not from Landlord, compensation for improvements paid for by
Tenant and then existing on the Premises, all property of Tenant so taken and
any loss to which Tenant may be put for moving expense, business interruption
or taking of property of Tenant, provided such claim does not reduce
Landlord's claim or recovery thereof. If the condemning authority shall
refuse to permit separate claims to be made, then Landlord shall prosecute
the claims of both Landlord and Tenant, provided that Tenant shall in advance
pay its pro rata share of legal fees, and the proceeds of the award (and the
fees of such counsel) shall be first applied to satisfy all Landlord's claims
(including legal fees) with any balance applied to Tenant's claims.
ADDENDUM TO PARAGRAPH 27: RENTAL ADJUSTMENTS.
Operating Costs shall not include: (ff) expenditures for which and to the
extent that Landlord is reimbursed from any insurance carrier, (gg)
advertising and promotional expenditures; (hh) penalties incurred due to
violation by Landlord of any governmental law, unless said penalties were
incurred in connection with Landlord's good faith efforts to maintain the
Office Park and/or minimize the Operating Costs therein; (ii) the costs of
correcting latent defects in the construction of the Building, except that
conditions (not occasioned by construction defects) resulting from ordinary
wear and tear will not be deemed defects for the purpose of this category.
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ADDENDUM TO PARAGRAPH 32: SECURITY DEPOSIT.
This Lease and the concurrent lease being entered into for other premises
located at Building "N", at 1800 - 114th Ave. S.E., Bellevue, Washington (the
"Concurrent Lease") shall not be effective unless and until Tenant shall have
provided to Landlord two (2) letters of credit in the total amount of Five
Hundred Thousand and No/100 Dollars ($500,000.00) issued by a United States
bank that is a member of the Federal Reserve System in the forms attached
hereto as Exhibit G-1 and Exhibit G-2, or with such variations as Landlord
may approve in advance in writing, which approval may be withheld for any or
no reason. If both letters of credit are not issued and delivered within
seven (7) days after execution of this Lease, this Lease shall be null, void
and of no force or effect. If, and only if, all of the conditions
hereinafter set forth in this Addendum to Lease Paragraph 32 (the
"Conditions") shall have been met and the Tenant is not then in breach or
default under any term of this Lease, and Landlord shall not by then have
presented a draft upon the same, Landlord shall promptly surrender the
original letter of credit in the form of Exhibit G-2 to Tenant for
cancellation. The Conditions are as follows:
A. The Tenant shall have completed its initial public offering of
equity interests pursuant to a registration statement filed with
the SEC the gross proceeds of which exceed Twenty-Five
Million and No/100 Dollars ($25,000,000.00). Tenant represents
that there is no further or different criteria regarding its
initial public offering included in its debt instrument placed by
Smith Barney.
or
B. The Tenant's achievement of not less than two (2)
consecutive quarter years of the following financial thresholds
determined at or as of the end of each such quarter and evidenced
by true, accurate and tenant-verified financial statements prepared
by the Tenant in accordance with generally accepted accounting
principles:
i. Pre-tax profitability of no less than Two Hundred Thousand and
No/100 Dollars ($200,000.00) per quarter and
ii. The Tenant's tangible net worth of Eight Million and No/100
Dollars ($8,000,000.00) or more.
iii. The structure of Tenant's balance sheet shall reflect
sufficient liquidity to meet Tenant's obligations under this
Lease and the Concurrent Lease on a timely basis. Sufficient
liquidity shall be defined as a ratio of net tangible current
assets divided by current liabilities of no less than 1.25 to
1.00.
ADDITIONAL PARAGRAPH 42: OPTION TO EXTEND.
Provided Tenant is not, and has not been, in uncured default of the Lease,
Tenant shall have the right to extend the term of this Lease for the Premises
in "as is" condition for one (1) consecutive period of seven (7) years on the
same terms and conditions as set forth in this Lease except that the base
rental for the option period shall be the then current market rate for
comparable space in the area, including, if applicable, escalations during
the term of the extension, as reasonably determined by Landlord. If
requested by Tenant, Landlord shall provide Tenant with the following
information regarding other transactions in the area considered in Landlord's
determination of "then current market rate for comparable space in the area":
location, size of space, rental rate, transaction date. Notwithstanding the
foregoing, Landlord shall not be obligated to provide to Tenant the names of
third party tenant(s) or landlord(s) in said transactions. In no event shall
the rental for the option period be less than that of the previous period.
Tenant shall give Landlord written notice to exercise its option at least one
hundred eighty (180) days prior to the expiration of the then current lease
term. Within fifteen (15) days after Tenant exercises its option to extend
the Lease, Landlord will provide Tenant with the fair market rental, as
determined by Landlord, as well as terms and conditions for the extended
term. Tenant shall have fifteen (15) days from notification by Landlord of
current rent and conditions to accept Landlord's proposal. If Tenant does
not accept Landlord's rental figure and terms and conditions within the
fifteen (15) day period, this option shall be null and void and Landlord
shall have no further obligation to Tenant and Landlord may enter into a
lease for the Premises with a third party.
Notwithstanding anything to the contrary herein contained, Tenant's right to
extend the term by exercise of the foregoing option shall be conditioned upon
the following: (i) at the time of the exercise of the option, and at the time
of the commencement of the extended term, Tenant or an Affiliate of Tenant
(as defined in Lease Paragraph 9) or a "Related Party Subtenant" (defined as
a company whose majority owner is also an officer or majority owner of Tenant
or is a joint venture partner with Tenant and who is subletting no more than
fifty percent (50%) of the Premises) shall be in possession of and occupying
the Premises for the conduct of its business therein and the same shall not
be occupied by any other assignee, subtenant or licensee, the option to
extend being applicable hereunder only with respect to so much of the
Premises as is actually occupied by Tenant or an Affiliate of Tenant or a
Related Party Subtenant; and (ii) the notice of exercise shall constitute a
representation by Tenant to Landlord, effective as of the date of the
exercise and as of the date of commencement of the extended term, that Tenant
does not intend to seek to assign the Lease in whole or in part, or sublet
all or any portion of the Premises, other than to an Affiliate of Tenant or a
Related Party Subtenant, the election to extend being for purposes of
utilizing the Premises for Tenant's purposes in the conduct of Tenant's
business therein.
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ADDITIONAL PARAGRAPH 43: PRIOR RIGHT OF FIRST REFUSAL
Provided Tenant is not, and has not been, in uncured default of any terms and
conditions of this Lease, Tenant shall have a one (1) time Prior Right of
First Refusal to lease additional space on the second or third floor of the
Maplewood Building, as outlined in green on Exhibit F (the "Prior Right of
First Refusal Space"). Upon notification by Landlord in writing of the
availability of space, Tenant shall have five (5) business days to notify
Landlord of Tenant's desire to exercise Tenant's Prior Right of Refusal on
the terms and conditions mutually agreed upon by Landlord and Tenant. In the
event Tenant fails to give Landlord notice of Tenant's election to lease the
space within the time period, Tenant shall have no further right, title, or
interest in the available space and the prior right of refusal with respect
to the space in Landlord's notice shall terminate. Should Tenant exercise
its prior right of refusal in the manner prescribed, Tenant shall immediately
deliver to Landlord payment for the first month's rent for the available
space (in the same manner as provided for in this Lease), and the lease for
the available space shall be consummated within five (5) days in accordance
with the mutually agreed upon terms and conditions.
Notwithstanding anything to the contrary herein contained, Tenant's Prior
Right of Refusal by exercise of the foregoing option shall be conditioned
upon the following: (i) at the time of the exercise of the option, and at
the time of the commencement of the term for the right of refusal premises,
Tenant or an Affiliate of Tenant (as defined in Lease Paragraph 9) or a
Related Party Subtenant (as defined in Lease Paragraph 42) shall be in
possession of and occupying the Premises for the conduct of its business
therein and the same shall not be occupied by any other assignee, subtenant
or licensee (except as noted above), and (ii) the notice of exercise shall
constitute a representation by Tenant to Landlord, effective as of the date
of the exercise and as of the date of commencement of the right of refusal
term, that Tenant does not intend to seek to assign the Lease in whole or in
part, or sublet all or any portion of the Premises, other than to an
Affiliate of Tenant or a Related Party Subtenant, the election to exercise
its prior right of refusal being for purposes of utilizing the prior right of
refusal space for Tenant's purposes in the conduct of Tenant's business
therein.
Notwithstanding anything contained in this Lease to the contrary, Tenant
hereby acknowledges that Landlord has notified Tenant that (i) portions of
the Prior Right of First Refusal Space are currently available for lease and
(ii) Tenant does not currently intend to lease any portion of the Prior Right
of First Refusal Space from Landlord and (iii) Landlord shall not be required
to notify Tenant pursuant to this Paragraph prior to leasing or renting said
Prior Right of First Refusal Space to another third party tenant or occupant,
it being the intention of Landlord and Tenant that this prior right of first
refusal shall apply only at such future time that the Prior Right of First
Refusal Space next becomes available for lease, subsequent to occupancy by
another third party tenant or occupant.
ADDITIONAL PARAGRAPH 44: SIGNAGE
Tenant's name shall be listed on the building directory, floor directory (if
applicable) and suite entry door. Building standard signage will be provided
at Landlord's expense. Tenant's name may be included on the Maplewood
Building's free-standing exterior building sign, at Tenant's sole cost and
expense, subject to Landlord's approval regarding color, size, type, method
of attachment and other design elements and subject to City of Bellevue and
other governmental requirements, as applicable, related to Tenant's signage.
ADDITIONAL PARAGRAPH 45: PARKING
Tenant shall have the right to utilize a total of up to thirty-eight (38)
covered reserved and uncovered unreserved parking stalls at the Project. If
available, Tenant shall have the right to utilize up to twelve (12) covered
reserved parking stalls specifically identified by Landlord for Tenant's use
at the Maplewood Building "M", at a charge of $40.00 per month per covered
reserved stall for the Lease Term. Uncovered, unreserved parking stalls are
available at no charge during the term of the Lease. Notwithstanding
anything contained herein to the contrary, Tenant will use best faith efforts
to ensure that its employees, guests and invitees do not utilize more than a
total of thirty-eight (38) covered and/or uncovered parking stalls.
ADDITIONAL PARAGRAPH 46. ELECTRICITY
Landlord and Tenant reserve the opportunity to structure their respective
obligations for the cost of electricity on a "net" basis such that Tenant's
usage would be separately metered and Tenant would pay the electricity cost
monthly. In the event Landlord and Tenant decide not to separately meter the
Premises, after hours HVAC shall be billed to Tenant at the actual cost of
such service.
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ADDITIONAL PARAGRAPH 47: SATELLITE DISH.
With Landlord's prior written consent, Tenant may install, operate and
maintain, at its sole cost and expense, a satellite dish or communication
antenna on the roof of the building for its exclusive use in a location and
configuration acceptable to and approved by Landlord at any time during the
term of the Lease, provided said use does not interfere with any existing
installation on or about the Building or Project, and provided said satellite
dish or communication antenna is to be utilized for Tenant's equipment
operation and not commercial purposes, at no additional rental cost.
Landlord shall have the right to approve the size and weight of the satellite
dish or communication antenna. The satellite dish or communication antenna
shall be installed at Tenant's sole cost and expense by a method reasonably
acceptable to and approved by Landlord, and in such a manner that it is not
visible to the general public, tenants or guests of the Building or Project.
Tenant shall obtain, at its sole cost and expense, all permits and zoning
approvals necessary for the installation and operation of the satellite dish
or communication antenna. If requested by Landlord, a licensed structural
engineer shall be employed at Tenant's cost to ensure the integrity of the
Building area upon which the satellite dish or communication antenna is
located. Tenant shall also pay for any and all screening necessary to
conceal the satellite dish or communication antenna. Landlord agrees to
cooperate with Tenant to obtain necessary approvals, provided that Landlord
shall not be required to incur any costs or expenses related thereto. Tenant
shall be solely responsible for all maintenance, repair, operating and other
costs related to the satellite dish. Tenant shall indemnify, defend and hold
Landlord, its employees, agents, servants and/or guests harmless from claims
for personal injury, death and/or property damage arising from any incidents
occurring on or about or in connection with the satellite dish or
communication antenna.
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EXHIBIT A
RULES AND REGULATIONS
BELLEFIELD OFFICE PARK
1. Sidewalks, halls, passages, exits, entrances, elevators, escalators and
stairways shall not be obstructed by Tenants or used by them for any
purpose other than for ingress to and egress from their respective
premises. The halls, passages, exits, entrances, elevators and
stairways are not for the use of the general public and Landlord shall
in all cases retain the right to control and prevent access thereto by
all persons whose presence, in the judgment of Landlord, shall be
prejudicial to the safety, character, reputation and interests of the
Building and its Tenants, provided that nothing herein contained shall
be construed to prevent such access to persons with whom any Tenant
normally deals in the ordinary course of such Tenant's business unless
such persons are engaged in illegal activities. No tenant, and no
employees or invitees of any tenant, shall go upon the roof of the
Building, except as authorized by Landlord.
2. EXCEPT AS OTHERWISE PERMITTED IN THIS LEASE, no sign, placard,
picture, name, advertisement or notice, visible from the exterior of
leased premises shall be inscribed, painted, affixed, installed or
otherwise displayed by any Tenant either on its premises or any part of
the Building without the prior written consent of Landlord, and Landlord
shall have the right to remove any such sign, placard, picture, name,
advertisement, or notice without notice to and at the expense of the
Tenant.
If the Landlord shall have given such consent to any Tenant at any
time, whether before or after the execution of the lease, such consent
shall in no way operate as a waiver or release of any of the provisions
hereof or of such lease, and shall be deemed to relate only to the
particular sign, placard, picture, name, advertisement or notice so
consented to by Landlord and shall not be construed as dispensing with
the necessity of obtaining the specific written consent of Landlord with
respect to any other such sign, placard, picture, name, advertisement or
notice.
All approved signs or lettering on doors and walls shall be
printed, painted, affixed or inscribed at the expense of the Tenant by a
person approved by Landlord.
3. The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of Tenants only and
Landlord reserves the right to exclude any other names therefrom.
4. No curtains, draperies, blinds, shutters, shades, screens or other
coverings, awnings, shall be attached to, hung or placed in, or used in
connection with, any window or door on any premises without the prior
written consent of Landlord. In any event with the prior written
consent of Landlord, all such items shall be installed inboard of
Landlord's standard window covering and shall in no way be visible from
the exterior of the building.
5. Landlord reserves the right to exclude from the Building between
the hours of 6 pm and 8 am and at all hours on Saturdays, Sundays and
holidays all persons who are not Tenants or their accompanied guests in
the Building. Each Tenant shall be responsible for all persons for whom
it allows to enter the building and shall be liable to Landlord for all
acts of such persons.
Landlord shall in no case be liable for damages for error with
regard to the admission to or exclusion from the Building of any person.
During the continuance of any invasion, mob, riot, public
excitement or other circumstance rendering such action advisable in
Landlord's opinion, Landlord reserves the right to prevent access to the
Building by closing the doors, or otherwise, for the safety of Tenants
and protection of the Building and property in the Building.
6. No Tenant shall employ any person or persons other than the janitor
of Landlord for the purpose of cleaning premises unless otherwise agreed
to by Landlord in writing. Except with the written consent of Landlord
no person or persons other than those approved by Landlord shall be
permitted to enter the building for the purpose of cleaning the same.
No Tenant shall cause any unnecessary labor by reason of such Tenant's
carelessness or indifference in the preservation of good order and
cleanliness of the premises. Landlord shall in no way be responsible to
any Tenant for any loss of property on the premises, however occurring,
or for any damage done to the effects of any Tenant by the janitor or
any other employee or any other person.
7.
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8. Each Tenant shall see that all doors of its premises are closed and
securely locked and must observe strict care and caution that all water
faucets or water apparatus are entirely shut off before the Tenant or
its employees leave such premises, and that all utilities shall likewise
be carefully shut off, so as to prevent waste or damage, and for any
default or carelessness the Tenant shall make good all injuries
sustained by other Tenants or occupants of the Building or Landlord. On
multiple-tenancy floors, all Tenants shall keep the door or doors to the
Building corridors closed at all times except for ingress and egress.
9. As more specifically provided in the Tenant's Lease of the
Premises, Tenant shall not waste electricity, water or air-conditioning
and agrees to cooperate fully with Landlord to assure the most effective
operation of the Building's heating and air-conditioning, and shall
refrain from attempting to adjust any controls other than room
thermostats installed for Tenant's use.
10. No Tenant shall alter any lock or access device or install a new or
additional lock or access device or any bolt on any door of its premises
without the prior written consent of Landlord. If Landlord shall give
its consent, the Tenant shall in each case furnish Landlord with a key
for any such lock. IF SUCH WORK IS TO BE PERFORMED BY LANDLORD,
LANDLORD WILL PERFORM THE WORK DILIGENTLY.
11. No Tenant shall make or have made additional copies of any keys or
access devices provided by Landlord. Each Tenant, upon the termination
of the Tenancy, shall deliver to Landlord all the keys or access devices
for the Building, offices, rooms and toilet rooms which shall have been
furnished the Tenant or which the Tenant shall have had made. In the
event of the loss of any keys or access devices so furnished by
Landlord, Tenant shall pay Landlord therefor.
12. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be
thrown therein, and the expense of any breakage, stoppage or damage
resulting from the violation of this rule shall be borne by the Tenant
who, or whose employees or invitees, shall have caused it.
13. No Tenant shall use or keep in its premises or the Building any
kerosene, gasoline or inflammable or combustible fluid or material other
than limited quantities necessary for the operation or maintenance of
office or office equipment. No Tenant shall use any method of heating
or air-conditioning other than that supplied by Landlord.
14. No Tenant shall use, keep or permit to be used or kept in its
premises any foul or noxious gas or substance or permit or suffer such
premises to be occupied or used in a manner offensive or objectionable
to Landlord or other occupants of the Building by reason of noise, odors
and/or vibrations or interfere in any way with other Tenants or those
having business therein, nor shall any animals or birds be brought or
kept in or about any premises of the Building.
15. Any cooking done or permitted by any Tenant on its premises SHALL
BE in accordance with all applicable federal, state and city laws,
codes, ordinances, rules and regulations. The premises SHALL NOT be
used for lodging.
16. Except with the prior written consent of Landlord, no Tenant shall
sell, or permit the sale, at retail, of newspapers, magazines,
periodicals, theatre tickets or any other goods or merchandise in or on
any premises, nor shall Tenant carry on, or permit or allow any employee
or other person to carry on, OTHER THAN IN CONNECTION WITH TENANT'S
BUSINESS, the business of stenography, typewriting or any similar
business in or from any other portion of the Building, nor shall the
premises of any Tenant be used for the storage of merchandise or for
manufacturing of any kind, or the business of a public barber shop,
beauty parlor, nor shall the premises of any Tenant be used for any
improper, immoral or UNLAWFUL purpose, or any business or activity other
than that specifically provided for in such Tenant's lease.
17. If Tenant requires telegraphic, telephonic, burglar alarm or
similar services, it shall first obtain, and comply with, Landlord's
instructions in their installation.
18. Landlord will direct electricians as to where and how telephone,
telegraph and electrical wires are to be introduced or installed.
WITHIN TENANT'S PREMISES, TELEPHONE/DATA OUTLETS AND ELECTRICAL OUTLETS
SHALL BE IN MUTUALLY AGREEABLE LOCATIONS. No boring or cutting for
wires will be allowed without the prior consent of Landlord. The
location of burglar alarms, telephones, call boxes and other office
equipment affixed to all premises shall be subject to the written
approval of Landlord.
19. EXCEPT AS OTHERWISE PERMITTED IN THIS LEASE, no Tenant shall
install any radio or television antenna, loudspeaker or any other device
on the exterior walls or the roof of the Building. Tenant shall not
interfere with radio or television broadcasting or reception from or in
the Building or elsewhere.
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20. No Tenant shall lay linoleum, tile, carpet or any other floor
covering so that the same shall be affixed to the floor of its premises
in any manner except as approved in writing by Landlord. The expense of
repairing any damage resulting from a violation of this rule of the
removal of any floor covering shall be borne by the Tenant by whom, or
by whose contractors, employees or invitees, the damage shall have been
caused.
21. No furniture, freight, equipment, materials, supplies, packages,
merchandise or other property will be received in the Building or
carried up or down the elevators except IN THE elevators DESIGNED FOR
FREIGHT IF SUCH IMPROVEMENTS ARE MADE PURSUANT TO EXHIBIT "C" , OR IF NO
ELEVATOR IS DESIGNED FOR FREIGHT, IN THE BUILDING'S ELEVATORS AT
TENANT'S SOLE RISK. TENANT SHALL PAY TO REPAIR ANY DAMAGE BY TENANT,
ITS EMPLOYEES OR INVITEES.
Landlord shall have the right to prescribe the weight, size and
position of all safes, furniture or other heavy equipment brought into
the Building BASED UPON ITS REASONABLE DETERMINATION OF STRUCTURAL
CONSIDERATIONS. Safes or other heavy objects shall, if considered
necessary by Landlord, stand on wood strips of such thickness as
determined by Landlord to be necessary to properly distribute the weight
thereof. Landlord will not be responsible for loss of or damage to any
such safe, equipment or property from any cause, and all damage done to
the Building by moving or maintaining any such safe, equipment or other
property shall be repaired at the expense of Tenant.
Business machines and mechanical equipment belonging to Tenant
which cause noise or vibration that may be transmitted to the structure
of the Building or to any space therein to such a degree as to be
objectionable to Landlord or to any tenants in the Building shall be
placed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or other devices sufficient to eliminate noise or vibration.
The persons employed to move such equipment in or out of the Building
must be acceptable to Landlord.
22. No Tenant shall place a load upon any floor of the premises which
exceeds the load per square foot which such floor was designed to carry
(AS SHOWN ON THE DRAWINGS PREPARED BY LANCE MUELLER & ASSOCIATES DATED
11/26/96 AS REVISED 9/5/96) and which is allowed by law. No Tenant
shall mark, or drive nails, screw or drill into, the partitions,
woodwork or plaster, EXCEPT AS OTHERWISE PROVIDED IN THIS LEASE, or in
any way deface such premises or any part thereof.
23. No Tenant shall install, maintain or operate upon the Premises any
vending machine, EXCEPT AS OTHERWISE PROVIDED IN THIS LEASE, without
the written consent of Landlord, WHICH CONSENT SHALL NOT BE UNREASONABLY
WITHHELD OR DELAYED.
24. There shall not be used in any space, or in the public areas of the
Building, either by any Tenant or others, any hand trucks except those
equipped with rubber tires and side guards or such other
material-handling equipment as Landlord may approve. No other vehicles
of any kind shall be brought by any Tenant into or kept in or about the
premises.
25. Each Tenant shall store all its trash and garbage within the
interior of its premises. No material shall be placed in the trash
boxes or receptacles if such material is of such nature that it may not
be disposed of in the ordinary and customary manner of removing and
disposing of trash and garbage in the city without violation of any law
or ordinance governing such disposal. All trash, garbage and refuse
disposal shall be made only through entryways and elevators provided for
such purposes and at such times as Landlord shall designate.
26. Canvassing, soliciting, distribution of handbills or any other
written material, and peddling in the Building are prohibited and each
Tenant shall cooperate to prevent the same. No Tenant shall make
room-to-room solicitation of business from other tenants in the building.
27. Landlord shall have the right, exercisable with REASONABLE notice
and without liability to any Tenant, to change the name and address of
the Building.
28. Landlord reserves the right to exclude or expel from the Building
any person who, in Landlord's judgment, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the rules
and regulations of the Building.
29. Without the prior written consent of Landlord, Tenant shall not use
the name of the Building in connection with or in promoting or
advertising the business of Tenant except as Tenant's address.
30. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental
agency.
31. Tenant assumes any and all responsibility for protecting its
Premises from theft, robbery and pilferage, which includes keeping doors
locked and other means of entry to the Premises closed.
32. The requirements of Tenants will be attended to only upon
application at the office of the Building by an authorized individual.
Employees of Landlord shall not perform any work or do anything outside
of their regular duties unless under special instructions from Landlord,
and no employees will admit any person (Tenant or otherwise) to any
office without specific instructions from Landlord.
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33. Landlord may waive any one or more of these Rules and Regulations
for the benefit of any particular Tenant or Tenants, but no such waiver
by Landlord shall be construed as a waiver of such Rules and Regulations
in favor of any other Tenant or Tenants, nor prevent Landlord from
thereafter enforcing any such Rules and Regulations against any or all
Tenants of the Building.
34. Landlord reserves the right ON REASONABLE NOTICE TO TENANT to make
such other and reasonable rules and regulations as in its judgment may
from time to time be needed for safety and security, for care and
cleanliness of the Building and for the preservation of good order
therein. Tenant agrees to abide by all such Rules and Regulations
hereinabove stated and any additional rules and regulations which are
adopted.
35. Landlord reserves the right to designate the use of the parking
spaces on the premises FOR HANDICAP STALLS AND LANDLORD'S USE AS
OTHERWISE PROVIDED IN THIS LEASE.
36. Tenant shall endeavor to use carpet protector under all desk chairs.
37. Tenant agrees to keep balcony doors closed at all times, except
during ingress and egress.
38. Tenant or Tenant's guests shall park between designated parking
lines only, and shall not occupy two parking spaces with one car.
Vehicles in violation of the above shall be subject to tow-away, at
vehicle owner's expense.
39. Vehicles parked on premises overnight without prior written consent
of the Landlord shall be deemed abandoned and shall be subject to
tow-away at vehicle owner's expense.
40. Tenant shall be responsible for the observance of all of the
foregoing Rules and Regulations by Tenant's employees, agents, clients,
customers, invitees and guests.
41. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify, alter or amend, in whole or in part, the
terms, covenants, agreements and conditions of any Lease of Premises in
the Building. The word "Building" as used herein means the building as
identified in Paragraph 1 of the Lease of which the premises are part.
Landlord /s/
---------
Tenant /s/
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Page 4 of 4
<PAGE>
EXHIBIT B
PREMISES
MAPLEWOOD BLDG. "M", SUITE 100
Cross hatched portion outlined in red reflects the Premises as
referenced in Paragraph 1 of the Lease.
[SPIEKER PROPERTIES]
[FLOOR PLAN]
Second Floor Plan
MAPLEWOOD BULDING "M"
BELLEFIELD OFFICE PARK
1687 114th Ave. S.E., Bellevue, Washington 98004
Landlord /s/
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Tenant /s/
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<PAGE>
EXHIBIT C
OFFICE LEASE IMPROVEMENT AGREEMENT
MAPLEWOOD BLDG
TENANT: COINSTAR
TENANT IMPROVEMENTS
The following is hereby added to the Lease:
(a) LANDLORD'S WORK: Landlord shall cause certain improvements to be
constructed in the Premises, substantially as shown on the attached
Exhibits C-1 and C-2, "Improvement Space Plan" and "Notes to Tenant
Improvements", respectively (hereinafter referred to as "Tenant
Improvements"). Landlord, at its cost, shall engage an architectural
firm for such space planning services and the completion of such
architectural, electrical and mechanical drawings; and obtain such city
permits and approvals which Landlord, in its sole discretion, determines
to be necessary to build the Tenant Improvements. Landlord shall
deliver the Premises substantially in accordance with the final drawings
approved by Landlord and Tenant including all approved changes thereof.
Notwithstanding anything stated herein, Tenant shall be solely
responsible for the cost of changes in the scope of work outlined on
Exhibits C-1 and C-2 which are due to changes requested by Tenant and
which increase the cost of the Tenant Improvements. Said changes shall
be considered "Additional Work" to be completed at Tenant's cost and
expense to be reimbursed lump sum from Tenant to Landlord on or before
the Lease Commencement Date. At Landlord's sole option, Tenant shall
contract directly with the general contractor completing Landlord's
Tenant Improvement Work for completion of all or a portion of the
Additional Work. Tenant agrees to provide Landlord with information and
approvals as may be requested by Landlord in connection with Landlord's
obligations pursuant to this paragraph, including, but not limited to,
materials, locations, approvals, and selections requested by Landlord
from Tenant, on a timely basis and in a time frame consistent with
Landlord's construction and delivery schedule. Notwithstanding anything
contained herein to the contrary, Landlord shall not be responsible to
move, furnish or install appliances, furniture, files, moveable
partitions or systems furniture or office equipment to Tenant or the
Premises. Tenant Improvements shall be completed utilizing Building
Standard materials and finishes or similar, in mutually agreeable
colors. Landlord may re-use materials and/or supplies in its sole
discretion.
(b) TENANT'S WORK: Landlord will make reasonable efforts to
coordinate with Tenant's construction project manager in scheduling
installation of Tenant's cabling and telecom equipment by Tenant's
contractors and/or employees in the Premises at Tenant's sole cost and
expense (hereinafter referred to as "Tenant's Work"). Tenant shall
obtain at its sole cost and expense, permits and other governmental
approvals as may be required for the completion of Tenant's Work.
Building permits and any other governmental approvals for Tenant's Work
shall be drawn separate and apart from those drawn by Landlord for
completion of the tenant improvements. Tenant's Work shall not be
performed under building permits or other approvals related to the work
performed by Landlord. Tenant agrees not to interfere with or cause
delay in the completion of tenant improvement work by Landlord and/or
its contractors. Tenant, its employees and/or contractors shall not
perform any Tenant's Work in the Premises without prior approval of
Landlord. All such approved Tenant Work performed prior to the Lease
Commencement Date shall be subject to all of the terms and conditions of
the Lease except for the payment of Base Rent which shall not be due
until the Commencement Date. Notwithstanding anything stated herein, if
Tenant's Work causes a delay or otherwise increases the cost of
Landlord's Work, Tenant shall reimburse Landlord for said costs on or
before the Lease Commencement Date.
C. ADDITIONAL WORK.
The following work shall be completed by Landlord at Tenant's cost and
expense (the "Additional Work"):
- Electrical work not specifically identified on Exhibit C-2 as
"Additional Work", if any
- Any materials or finishes which exceed Landlord's Building Standard,
if any, shall be "Additional Work" to the extent the cost of the
materials or finishes and their installation exceed Building Standard
- Any work shown on Exhibit C-1 to the extent it exceeds the scope of
work identified on Exhibit C-2.
- Provide rough-in for Tenant provided and installed card access system
at main suite entry, Net/Phone Room (Communications Room), Computer
Work Room and stair exit.
Notwithstanding anything stated herein to the contrary, if Tenant
causes a delay in Landlord's Work, Tenant shall reimburse Landlord for
said costs on or before the Lease Commencement Date.
Tenant shall pay Landlord in a lump sum for the Additional Work as
Additional Rent within ten (10) business days of receipt of an invoice
therefore from Landlord provided the Additional Work has been
substantially completed.
All improvements shall be subject to, and performed substantially in
accordance with, applicable codes, laws and other governmental regulations
which may apply.
Tenant's occupancy of the Premises shall be deemed acceptance of the Tenant
Improvements herein described and Landlord shall be deemed to have fulfilled
its obligations with respect to Tenant Improvements, except with respect to
punch list items as hereinafter described. At Delivery of Possession,
Landlord and Tenant shall together prepare a punch list of Tenant Improvement
work. If any defects are noted, Landlord shall promptly repair such defects
as soon as reasonably possible thereafter.
Landlord /s/
---------
Tenant /s/
---------
<PAGE>
EXHIBIT C-1
IMPROVEMENT SPACE PLAN
MAPLEWOOD BUILDING, SUITE 100
TENANT: COINSTAR
Interior room sizes are approximate. Furniture and applicances are shown for
planning purposes only and are not the responsibility or obligation of the
Landlord. Landlord's Work, Tenant's Work and Additional Work are as noted in
Exhibits C and C-2.
[FIRST FLOOR PLAN]
<PAGE>
EXHIBIT C-2
NOTES TO TENANT IMPROVEMENTS
MAPLEWOOD BUILDING, SUITE 100
TENANT: COINSTAR, INC.
Landlord, at its sole option, shall determine the use of "equivalent"
materials or finishes. Tenant shall fully comply with the provisions of
Exhibit C with regard to completion of any "Tenant's Work" and/or "Additional
Work", if any, noted herein.
- - Carpet: 30 oz. cut pile over pad (Patcraft "New Jazz 30" or equivalent)
- - Base: 4" vinyl base with cove toe.
- - Wall Paint: New walls will be painted with one layer of primer and two
layers of paint. The paint finish will be eggshell.
- - Ceiling Tile/Grid:
Standard 15/16" width white grid with 2'x4' tegular edge
lay-in tile, (Armstrong Second Look II or equivalent).
- - Door Construction:
Doors will be full height (approximately 7'10"). Standard
door width will be 3'-0". Doors will be solid core with red
oak veneer. Doors and door frames will be stained to match
the building standard stain as utilized in the common
lobby areas.
Landlord will provide a building standard solid core with red
oak veneer double door suite entry to Tenant's Premises at
Landlord's cost.
- - Door Hardware:
Door hardware shall be Schlage (or equivalent) with an
oil-rubbed bronze finish. Doors will have a minimum of
two pair of butt hinges per leaf. Latchsets will be
standard for all doors except suite entries.
- - Relites Interior relites will be 36" in width. The frames will be of
wood construction to match the doors. The frame will start at
approximately 6" AFF and the head will match the top of
the door. Glass will be 1/4" safety glass.
Total allowance of one (1) building standard relite per
private office and one (1) per conference room in Tenant's
Premises, which Tenant may utilize in the space as it fits
Tenant's configuration. Landlord will agree to provide a total
of two (2) building standard relites at each of three (3)
large conference rooms.
- - Window Blinds:
Window blinds for the exterior windows will be 1" aluminum
(Levelor "Riviera" or equivalent). 1" blinds can be provided
for the interior relites at the Tenant's option. Please note
the finish for the interior blinds will need to match that
used on the exterior windows.
- - Electrical: In enclosed offices, the building standard will be two (2)
electrical duplex outlets, one telephone outlet, and one
data outlet, except in the specifically identified rooms, where
the number of duplex electrical outlets or power supplied
shall be as follows:
SOFTWARE ENGINEERING LAB: Twenty-four (24) linear feet of
surface mounted wiremold power strip at belt height with
outlets at 2'0" O.C.
NET/PHONE ROOM (COMMUNICATION ROOM): Six (6) dedicated 20
amp circuits.
KITCHEN: Power to garbage disposal, two (2) vending
machines, and one (1) each of the following: refrigerator,
microwave, toaster-oven and coffee machine on timer.
COPY/SUPPLY AND OPEN OFFICE: Outlets to power reasonable
power requirements of tenant's office equipment such as
copiers, color copiers, shredders, mail sorters, printers and
fax machines.
Landlord /s/
---------
Tenant /s/
---------
Page 1 of 2
<PAGE>
EXHIBIT C-2
NOTES TO TENANT IMPROVEMENTS
MAPLEWOOD BUILDING, SUITE 100
TENANT: COINSTAR, INC.
- - Electrical (Continued):
In open office areas, the building standard will be one
electrical duplex outlet, one telephone outlet, and one
data outlet for every 150 square feet, except at the Work
Stations as shown on Exhibit C-1, Improvement Space Plan
(furnished and installed by Tenant), where Landlord shall
provide one (1) power supply box for every four (4) work
stations and one (1) data/phone outlet for each work station,
with a maximum of four (4) work stations per circuit. In all
medium and large conference rooms, Landlord will provide
three (3) duplex electrical outlets and one (1) data/phone
outlet.
All telephone and data lines will be supplied and installed by
the Tenant as part of Tenant's Work.
- - Lighting: Switching and lighting shall meet the requirements of the
Washington State Energy Code.
There shall be one switch per room and a maximum of 25 lights
per switch.
Building standard lighting shall be 2x4 lay-in fluorescent
fixtures with three T-8 tubes and a parabolic lens. Color of
tubes shall be cool white.
- - Cabinetry: Cabinetry will have plastic laminate covered faces,
countertops, and 4" backsplashes. Standard base cabinetry
will be 24" deep with one adjustable shelf and one drawer
immediately below the countertop. Standard wall cabinetry
will be 12" in depth with two adjustable shelves. The
interiors of the cabinets and drawers and the covering on the
shelves will be white melamine. Pulls will be 4" brushed
chrome wire type or equivalent.
Landlord will provide building standard cabinetry as follows:
- approximately ten (10) lineal feet of upper and lower
cabinets in the Kitchen;
- approximately ten (10) lineal feet of 30" deep lower
storage cabinets with one adjustable shelf and ten (10)
lineal feet of upper building standard adjustable
laminate shelving in the Copy/Supply Room
- - Built-In Reception Desk:
Partial height wall; twelve (12) lineal feet of 12" deep
plastic laminate transaction surface at 42" height with 36"
wide ADA accessible section and nine (9) lineal feet at 30"
deep work counter at approximate height of 30" AFF; two (2)
plastic laminate box files and one (1) pencil drawer with
melamine interiors and one (1) keyboard tray.
- - Mechanical:
The building standard HVAC system shall have the capability
to individually control zones of approximately 800 rentable
square feet, with the average building zone being 1,500
rentable square feet, or such other average building zone
size as determined by Landlord in its sole discretion.
Landlord shall determine all zone sizes in its sole
discretion, except as specifically identified herein.
Landlord shall provide a separate zone for the Software
Engineering Lab.
Landlord shall install Tenant provided dedicated twenty-four
(24) hour HVAC system for Net/Phone Room (Communications Room)
(estimated at 1-1/2 tons). Tenant shall be solely responsible
for the design of the system and shall provide all materials
and equipment related to the system at Tenant's sole cost
and expense. Tenant shall pay the cost of any exterior
penetrations, electrical and plumbing necessary to operate
the HVAC system.
- - Sound Insulation:
Landlord shall provide batt insulation in walls surrounding
large Conference Room, Net/Phone Room (Communications Room)
and Software Engineering Lab.
- - Plumbing: Landlord will furnish and install plumbing lines and fixtures
for stainless steel sink and garbage disposal at Kitchen.
- - Locksets: Landlord will provide building standard locksets on Net/Phone
Room (Communications Room) and Computer Workroom.
Landlord /s/
---------
Tenant /s/
---------
Page 2 of 2
<PAGE>
EXHIBIT D
FORM OF TENANT CERTIFICATE
DATE: ___________________________
RE: LEASE DATED ____________________
PREMISES: _____________________________________
_____________________________________
_____________________________________
LANDLORD: _____________________________________
_____________________________________
_____________________________________
TENANT: _____________________________________
_____________________________________
_____________________________________
Gentlemen:
The undersigned as Tenant under the captioned Lease, attached as Schedule 1
hereto (the "Lease"), made and entered into between ________________________,
as Landlord, and the undersigned, as Tenant, hereby certifies that the
undersigned has entered into occupancy of the Premises described in said
Lease on _________________________ and further certifies that:
a. The Rent Commencement Date was ____________________________;
b. the Lease shall expire on ________________________;
c. the Lease is in full force and effect and has not been modified,
supplemented or amended in any way, except as follows:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
d. the Premises contain _________ square feet;
e. the monthly base rent payable by Tenant under the terms of the lease
is $_________ which amount is subject to increase as follows:
__________________________________________________________________
__________________________________________________________________
Tenant also pays to Landlord additional rent on a monthly basis the
sum of $________, as its Proportionate Share of Common Area
operating expenses;
f. the improvements and space required to be furnished according to the
Lease have been duly delivered by Landlord and accepted by Tenant;
g. all conditions and agreements under said Lease to be performed by
Landlord have been satisfied or performed, and on this date there
are no existing defenses or offsets which the undersigned has against
the enforcement of said Lease by Landlord;
h. Tenant has performed all of its obligations under the Lease;
i. Tenant has no claims, counterclaims, defenses, setoffs or causes of
action, and knows of no occurrence or event which may give rise to
any claim, counterclaims, defenses, setoffs or cause of action,
against Landlord for rescission of the lease or for damages for any
breach of the Lease or in connection with the demised premises, or
the Property; and Tenant is not entitled to any concessions, rebate,
allowance or free rent for period after the date hereof, except as
set forth in the Lease;
j. Tenant has no existing dispute against Landlord regarding any amount
owing or to be paid or with respect to any other matter under the
Lease;
k. Tenant has not assigned the Lease nor subleased the Premises or any
part thereof;
l. no rental has been paid in advance, and Tenant is current in all of
its rental obligations;
Page 1 of 2
Landlord /s/
---------
Tenant /s/
---------
<PAGE>
m. the monthly rental due from Tenant for _________(month) 1996 has
been paid;
n. Tenant is entitled to the non-exclusive use of _______ parking
spaces and the exclusive use of ________ parking spaces;
o. there is presently a Security Deposit held by Landlord in the sum of
_______________________________________________ Dollars ($________);
p. the Lease contains no Option(s) to Renew the terms, Rights of First
Refusal, Options to Expand or Options to Terminate, except as
follows:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
q. Tenant represents that no Hazardous Material has been used, treated,
stored or disposed of on the Premises or, to Tenant's best
knowledge, on the Property, except in compliance with all federal,
state, regional and local laws, statutes, regulations, rules,
requirements and orders applicable to Hazardous Materials and the
environment. Tenant represents that it does not have any permits or
identification numbers issued by the United States Environmental
Protection Agency or by any state, county or municipal agencies with
respect to its operations on the Premises, except those listed
below. For the purposes hereof, the term "Hazardous Material" shall
mean any substance, chemical, waste or other material which is
listed, defined or otherwise identified as "hazardous" or "toxic"
under any federal, state, local or administrative agency ordinance
or law or any regulation, order, rule or requirement adopted
thereunder, as well as any petroleum, petroleum product or
by-product, crude oil, natural gas, natural gas liquids, liquefied
natural gas, or synthetic gas usable as fuel, and "source", "special
nuclear" and "by-product" material as defined in the Atomic Energy
Act of 1985, 42 U.S.C., paragraph 3011, et seq.
List all permits and identification numbers: _____________________
__________________________________________________________________
__________________________________________________________________
Tenant hereby acknowledges that certain persons are considering an investment
in the companies that constitute Landlord and investment, directly or
indirectly, in the Property itself, and that such persons may fully rely on
the certifications made herein by Tenant to Landlord.
The undersigned individual hereby certifies that he or she is duly authorized
to sign and deliver this letter on behalf of Tenant.
Very truly yours,
Tenant: ________________________________
By: ________________________________
________________________________
(please print)
Its: ________________________________
Date: ________________________________
SCHEDULE 1
(COPY OF LEASE AND ALL AMENDMENTS)
Page 2 of 2
Landlord /s/
---------
Tenant /s/
---------
<PAGE>
EXHIBIT E
LEGAL DESCRIPTION
BELLEFIELD OFFICE PARK
LEGAL DESCRIPTION
LOTS 1, 2, 3 AND 4:
TOGETHER with Tracts A, B, C, D, E, F, G, H, I and J, all in Bellefield
Office Park, according to the Binding Site Plan recorded in Volume 138 of
Plats, pages 25 through 29, inclusive, in King County, Washington.
TOGETHER with a perpetual easement as created under Recording No. 8211300188
for operation and maintenance of existing HVAC structure and sewer pump
station over those portions of Lot 8, Bellefield Office Park, according to
the plat thereof, recorded in Volume 119 of Plats, page 81 through 90, in
King County, Washington, described as follows:
COMMENCING at the Northeast corner of said Lot 8;
Thence South 85DEG.00'00" East along the North line of said Lot 8 a
distance of 55.00 feet to the true POINT OF BEGINNING;
Thence South 05DEG.00'00" W 8.00 feet; Thence South 85DEG.00'00"
East 18.00 feet;
Thence North 05DEG.00'00" E 8.00 feet to the North line of said Lot 8;
Thence N 85DEG.00'00" West along said North line 18.00 feet to the TRUE
POINT OF BEGINNING; AND
COMMENCING at the Northeast corner of said Lot 8;
Thence South 85DEG.00'00" East along the North line of said Lot 8 a
distance of 138.00 feet to the true POINT OF BEGINNING;
Thence South 05DEG.00'00" West 12.00 feet; Thence South 85DEG.00'00" East
50.00 feet;
Thence North 05DEG.00'00" East 12.00 feet to the North line of said Lot 8;
Thence North 85DEG.00'00" W along said North line 50.00 feet to the TRUE
POINT OF BEGINNING; AND
TOGETHER with an easement for ingress, egress and utilities over Tract A as
delineated on the Plat of Bellefield Office Park, according to the plat
thereof, recorded in Volume 119, pages 81 through 90, in King County,
Washington and established under Recording No. 7711030797; EXCEPT that
Portion Relinquished By instrument Recorded under Recording No. 7504160361.
Landlord /s/
---------
Tenant /s/
---------
<PAGE>
EXHIBIT F
PRIOR RIGHT OF REFUSAL AREA
MAPLEWOOD BLDG. "M"
Cross hatched portion reflects the First Right of Refusal premises as
referenced in Additional Paragraph 43 of the Addendum to Lease.
[FLOOR PLAN]
SECOND FLOOR PLAN
MAPLEWOOD BUILDING "M"
BELLEFIELD OFFICE PARK
1687 114th Ave. S.E., Bellevue, Washington 98004
[SPIEKER PROPERTIES]
[FLOOR PLAN]
THIRD FLOOR PLAN
MAPLEWOOD BUILDING "M"
BELLEFIELD OFFICE PARK
1687 114th Ave. S.E., Bellevue, Washington 98004
Landlord /s/
---------
Tenant /s/
---------
<PAGE>
EXHIBIT G-1
FORM OF LETTER OF CREDIT
SAMPLE ONLY - NON-NEGOTIABLE
IRREVOCABLE STANDBY LETTER OF CREDIT NO. XXXXXX
(Date: MMDDYY)
Beneficiary: Applicant:
Spieker Properties, L.P. Coinstar, Inc., a Delaware corporation
915 - 118th Avenue SE, Suite 110 13231 SE 36th street, Suite 200
Bellevue, WA 98005 Bellevue, WA 98006
Attn: Mr. Donald Jefferson as "Tenant"
as "Landlord"
Amount: $111,595
Expiration Date/Location: MMDDYY/At our counter at the above address
Gentlemen:
We hereby establish our Irrevocable Standby Letter of Credit No. XXXXXXX
in your favor available by your drafts drawn on us at SIGHT, and accompanied
by the following required documents:
1 - Original of this letter of credit and amendments, if any.
2 - Beneficiary's signed certificate substantially in the following form:
CERTIFICATE
Spieker Properties, L.P., the Landlord under the two (2) Leases dated
January 29, 1997 between Spieker Properties, L.P., a California limited
partnership, as Landlord, and Coinstar, Inc. a Delaware corporation, as
Tenant, hereby certifies that:
a. The amount of the draft accompanying this certificate is equal to the
amount of the accompanying letter of credit, for which no prior drawing
with respect to such amount has been made under this letter of credit,
if any;
- AND -
b. (i) The Tenant or any successor(s) under said Leases is in default of
its obligation(s) under the terms of the Leases referred to, and has
failed to cure the same within the grace period therein provided, if any;
- OR -
(ii) The Landlord under said Leases has not received satisfactory evidence
of renewal or replacement of this letter of credit for an additional one
year term by thirty (30) days prior to the current expiration date.
This letter of credit is transferable in whole but not in part, upon our
receipt of the attached Exhibit "A" duly executed and completed by the
beneficiary.
This letter of credit sets forth in full our undertaking, which shall not
in any way be modified, amended, amplified or limited by reference to any
document, instrument, or agreement including without limitation the Lease,
whether or not referred to herein, except only the certificates and the sight
draft and this original letter of credit for our endorsement referred to
herein; and any such reference shall not be deemed to incorporate herein by
reference any document, instrument or agreement.
Draft(s) must indicate the number and date of this letter of credit.
Each draft presented hereunder must be accompanied by this original letter
of credit for our endorsement thereon of the amount of such draft.
Documents must be forwarded to us in one parcel and must be mailed, sent
by overnight delivery service, or presented in person to: Silicon Valley
Bank, 3003 Tasman Drive, Santa Clara, California 95054; Attn: International
Division.
We hereby agree with the drawers, endorsers and bonafide holders that the
drafts drawn under and in accordance with the terms and conditions of this
credit shall be duly honored upon presentation to the drawee; if negotiated
on or before the expiration date of this credit.
This credit is subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce, Publication 500.
As to matters not covered by publication 500, this credit shall be governed
by Article 5 of the Uniform Commercial Code as in effect in the State of New
York.
By By
------------------------------- ---------------------------------
Its Its
------------------------------- ---------------------------------
Authorized Signature Authorized Signature
Landlord /s/
---------
Tenant /s/
---------
Page 1 of 2
<PAGE>
EXHIBIT G-1
FORM OF LETTER OF CREDIT
SAMPLE ONLY - NON-NEGOTIABLE
EXHIBIT "A"
To: Date:
Silicon Valley Bank RE: Letter of Credit issued by:
3003 Tasman Drive Silicon Valley Bank
Santa Clara, CA 95054 Letter of Credit No. XXXXXXX
Attn: International Division Available Amount:
Standby Letter of Credits
Gentlemen:
For value received, the undersigned Beneficiary hereby irrevocably
transfer to:
(Name of Transferee)
(Address)
All rights of the undersigned Beneficiary to draw under the above Letter of
Credit up to its Available Amount as shown above as to the date of this
transfer.
By this transfer, all rights of the undersigned Beneficiary in such Letter
of Credit are transferred to the Transferee. Transferee shall have the sole
rights as beneficiary thereof, including sole rights relating to any
amendments, whether increases or extensions or other amendments and whether
now existing or hereafter made. All amendments are to be advised direct to
the Transferee without necessity of any consent of or notice to the
undersigned Beneficiary.
The original of such Letter of Credit is returned herewith, and we ask you to
endorse the transfer on the reverse thereof, and forward it direct to the
Transferee with your customary notice of transfer.
Yours very truly,
Signature Authenticated Spieker Properties, L.P.
- ------------------------------ -------------------------------
Signature of Beneficiary
- ------------------------------
Authorized Signature
Landlord /s/
---------
Tenant /s/
---------
Page 2 of 2
<PAGE>
EXHIBIT G-2
FORM OF LETTER OF CREDIT
SAMPLE ONLY - NON-NEGOTIABLE
IRREVOCABLE STANDBY LETTER OF CREDIT NO. XXXXXX
(Date: MMDDYY)
Beneficiary: Applicant:
Spieker Properties, L.P. Coinstar, Inc., a Delaware corporation
915 - 118th Avenue SE, Suite 110 13231 SE 36th street, Suite 200
Bellevue, WA 98005 Bellevue, WA 98006
Attn: Mr. Donald Jefferson as "Tenant"
as "Landlord"
Amount: $388,405
Expiration Date/Location: MMDDYY/At our counter at the above address
Gentlemen:
We hereby establish our Irrevocable Standby Letter of Credit No. XXXXXXX
in your favor available by your drafts drawn on us at SIGHT, and accompanied
by the following required documents:
1 - Original of this letter of credit and amendments, if any.
2 - Beneficiary's signed certificate substantially in the following form:
CERTIFICATE
Spieker Properties, L.P., the Landlord under the two (2) Leases dated
January 29, 1997 between Spieker Properties, L.P., a California limited
partnership, as Landlord, and Coinstar, Inc. a Delaware corporation, as
Tenant, hereby certifies that:
a. The amount of the draft accompanying this certificate is equal to the
amount of the accompanying letter of credit, for which no prior drawing
with respect to such amount has been made under this letter of credit,
if any;
- AND -
b. (i) The Tenant or any successor(s) under said Leases is in default of
its obligation(s) under the terms of the Leases referred to, and has
failed to cure the same within the grace period therein provided, if any;
- OR -
(ii) The Landlord under said Leases has not received satisfactory evidence
of renewal or replacement of this letter of credit for an additional one
year term by thirty (30) days prior to the current expiration date.
This letter of credit is transferable in whole but not in part, upon our
receipt of the attached Exhibit "A" duly executed and completed by the
beneficiary.
This letter of credit sets forth in full our undertaking, which shall not
in any way be modified, amended, amplified or limited by reference to any
document, instrument, or agreement including without limitation the Lease,
whether or not referred to herein, except only the certificates and the sight
draft and this original letter of credit for our endorsement referred to
herein; and any such reference shall not be deemed to incorporate herein by
reference any document, instrument or agreement.
Draft(s) must indicate the number and date of this letter of credit.
Each draft presented hereunder must be accompanied by this original letter
of credit for our endorsement thereon of the amount of such draft.
Documents must be forwarded to us in one parcel and must be mailed, sent
by overnight delivery service, or presented in person to: Silicon Valley
Bank, 3003 Tasman Drive, Santa Clara, California 95054; Attn: International
Division.
We hereby agree with the drawers, endorsers and bonafide holders that the
drafts drawn under and in accordance with the terms and conditions of this
credit shall be duly honored upon presentation to the drawee; if negotiated
on or before the expiration date of this credit.
This credit is subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce, Publication 500.
As to matters not covered by publication 500, this credit shall be governed
by Article 5 of the Uniform Commercial Code as in effect in the State of New
York.
By By
--------------------------------- ---------------------------------
Its Its
-------------------------------- --------------------------------
Authorized Signature Authorized Signature
Landlord /s/
---------
Tenant /s/
---------
Page 1 of 2
<PAGE>
EXHIBIT G-2
FORM OF LETTER OF CREDIT
SAMPLE ONLY - NON-NEGOTIABLE
EXHIBIT "A"
To: Date:
Silicon Valley Bank RE: Letter of Credit issued by:
3003 Tasman Drive Silicon Valley Bank
Santa Clara, CA 95054 Letter of Credit No. XXXXXXX
Attn: International Division Available Amount:
Standby Letter of Credits
Gentlemen:
For value received, the undersigned Beneficiary hereby irrevocably
transfer to:
(Name of Transferee)
(Address)
All rights of the undersigned Beneficiary to draw under the above Letter of
Credit up to its Available Amount as shown above as to the date of this
transfer.
By this transfer, all rights of the undersigned Beneficiary in such Letter of
Credit are transferred to the Transferee. Transferee shall have the sole
rights as beneficiary thereof, including sole rights relating to any
amendments, whether increases or extensions or other amendments and whether
now existing or hereafter made. All amendments are to be advised direct to
the Transferee without necessity of any consent of or notice to the
undersigned Beneficiary.
The original of such Letter of Credit is returned herewith, and we ask you to
endorse the transfer on the reverse thereof, and forward it direct to the
Transferee with your customary notice of transfer.
Yours very truly,
Signature Authenticated Spieker Properties, L.P.
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Signature of Beneficiary
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Authorized Signature
Landlord /s/
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Tenant /s/
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EXHIBIT H
JANITORIAL SPECIFICATIONS
BLDG. M, SUITE 100
I. REGULAR DAILY CLEANING SERVICE
A. Empty waste baskets and other waste containers, insert liners as
required, remove and deposit trash in designated containers.
B. Vacuum carpeted areas and entrance mats.
C. Remove stains from carpeting as they occur.
D. Dust desks, chairs, window ledges, credenzas, filing cabinets,
handrails, countertops, banisters and other horizontal surfaces
throughout the facility which have been cleared of papers and
which are accessible without the use of a ladder.
E. Clean stains and hand marks from desk tops and entrance doors.
F. Restrooms will be thoroughly cleaned using disinfectant. All
urinals, partitions, toilets, toilet seats, and wash basins will
be sanitized. Wet mop all floors with neutral cleaner. Clean
mirrors, bright metal and other restroom fixtures. Empty waste
and replenish restroom supplies as required, from stock provided
by owner.
G. Dust mop all hard surface floors.
H. Arrange furniture for next day's business.
I. Sweep entrance and police for debris.
J. Empty and wipe ashtrays.
K. Maintain neat and orderly janitor supply closet.
L. Leave notice advising of any irregularities noted during
servicing. (i.e. defective plumbing fixtures, shortages of
restroom materials, etc.)
M. Turn off all lights except those required to be left on.
N. Close windows and lock all entrance doors.
O. Sweep or vacuum stairways.
P. Clean sand urns and replace sand if necessary.
Q. Clean, polish and disinfect all drinking fountains.
R. Spot mop where needed due to spills or weather trackage.
S. Spot clean relite glass.
T. Clean and sanitize sinks.
U. Polish elevator doors, control panels, floor indicator plates
and tracks.
V. Clean elevator cab surfaces as needed.
W. Shower areas will be cleaned and disinfected.
II. WEEKLY CLEANING SERVICE
A. Clean desks that have been cleared of all books, pencils, office
equipment, etc.
B. Clean and polish chrome and bright metal, entrance doors, kick
and push plates.
C. Clean and disinfect all telephones.
D. Spot clean walls and doors.
E. Spot clean around light switches.
III. MONTHLY CLEANING SERVICE
A. High dust molding, door and window casings.
B. Dust all wood panel surfaces.
C. Polish office furniture that has been cleared of all books,
pencils, office equipment, etc.
D. Vacuum upholstered furniture.
E. Clean electric switchplate covers.
F. Wash leather, plastic or Naugahyde furniture.
G. Clean metal door frames.
H. Dust venetian blinds.
I. Clean and apply new finish to tile and linoleum floors in the
common areas.
IV. QUARTERLY CLEANING SERVICE
A. Dust overhead lighting fixtures.
B. Dust ventilator ducts and vents, vacuum surrounding ceiling
areas.
C. Wash exposed surfaces of filing cabinets.
D. Wash partitions and ceramic tile wall areas in restrooms.
E. Clean and apply new finish to tile and linoleum floors.
Landlord /s/
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Tenant /s/
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MANUFACTURING AGREEMENT
THIS AGREEMENT, dated as of September 1, 1996, is made and entered into by
SEAMED CORPORATION ("Seller") and COINSTAR, INC., a Delaware corporation
("Buyer").
Seller and Buyer agree as follows:
SECTION 1. DEFINITIONS
Whenever used in this Agreement, the following terms shall have the
following specified meanings:
1.1 "BUYER'S PLANT" means Buyer's plant located in Bellevue, Washington or
such other location in the United States as Buyer may specify for delivery of
any Product.
1.2 "CUSTOMER" means any customer of Buyer, any subsequent owner, operator
or user of any Product and any other Person that has or acquires an interest in
any Product.
1.3 "ORDER" means Buyer's purchase order for Products.
1.4 "DOCUMENTATION" means Specifications and/or Inspection Procedures.
1.5 "INSPECTION PROCEDURES" means detailed inspection procedures for
Product quality assurance and to assure compliance with Specifications in the
form delivered to Seller.
1.6 "LOT" means the number of Products to be delivered for acceptance
testing at the end of each week pursuant to firm delivery dates under an Order.
1.7 "PERSON" means any individual, corporation, partnership, trust,
association or other entity.
1.8 "PURCHASED PRODUCT" means Product purchased by Buyer in accordance
with the acceptance procedures under Section 4.1.
1.9 "PRODUCT" means the Coinstar, Inc. Jefferson-1000 Self Service Coin
Machine (and any spare parts or components of the same) manufactured or to be
manufactured by Seller, as more particularly described in the Specifications.
1.10 "SELLER'S PLANT" means Seller's plant where it manufactures or will
manufacture Products, currently located at 15450 N.E. 95th Street, Redmond,
Washington 98052.
1.11 "SPECIFICATIONS" means the specifications for each Product in the form
delivered to Seller, as may be changed from time to time pursuant to paragraph
2.1.
1.12 "TERM" means the period commencing with the date of this Agreement and
ending on the anniversary of the date of this Agreement. Thereafter, the
Agreement shall continue automatically for subsequent one (1) year terms. Either
party can terminate this
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Agreement by giving written notice to the other more than thirty (30) days prior
to the end of any one (1) year term.
1.13 "TOOLING" means Buyer purchased tooling set forth in Exhibit A, as the
same may be amended from item to time.
1.14 "WARRANTY PERIOD" means, with respect to each Purchased Product, the
period ending upon the expiration of twelve (12) months after the date of
shipment of such Product from Seller's Plant, but no more than fifteen (15)
months from date of invoice for such Product.
SECTION 2. PRODUCT CHANGES, TOOLING
2.1 CHANGES TO DOCUMENTATION. Seller shall revise the Documentation only
in accordance with the change control procedures set forth in Exhibit B. Buyer
shall be the owner of all Documentation and all associated patent, copyright,
trade secret and other proprietary rights.
2.2 TOOLING. Seller shall hold the Tooling for use in the manufacture,
assembly and testing of the Products. Buyer shall bear the cost of
manufacturing, preventative maintenance and normal wear repairing of all
Tooling. Buyer shall be the owner of all Tooling (and Seller shall place a
permanent marking on all Tooling showing Buyer's ownership and shall execute and
deliver any and all documents as Buyer may reasonably request to vest, evidence
or give public notice of Buyer's ownership). Seller shall deliver any and all
Tooling to Buyer promptly on request and in any event at the end of the Term in
good operating condition and state of repair, ordinary wear and tear excepted,
together with any and all related specifications, drawings, manuals,
documentation and records (e.g., pertaining to the operation, maintenance and
repair of the Tooling).
2.3 BUYER, SUPPLIED COMPONENTS. Buyer will supply the coin counting
mechanism and sheet feeder to Seller for assembly into the Product. Any parts
inventory of such Buyer supplied components shall remain the sole and exclusive
property of Buyer.
SECTION 3. PURCHASE AND SALE OF PRODUCTS
3.1 PRODUCTION PRODUCTS. Seller shall manufacture, sell and deliver to
Buyer such Products as Buyer may order from Seller during the Term.
3.2 ORDERS; DELIVERY SCHEDULE. Each of Buyer's Orders for Products shall
be submitted to Seller substantially in the form of the purchase order attached
as Exhibit C or such other form as may be utilized by Buyer for ordering
Products under this Agreement. Each Order shall contain a description of the
Products ordered, specify the shipping destination (if any at that time),
specify the quantity of Products ordered and specify the dates on which each
ordered Product is to be made available to Buyer for acceptance testing with
respect to the first three month period covered by the Order schedule, along
with a forecast of when additional Product will be acceptance tested for the
remaining quarters covered by the Order. No less than ninety (90) days prior to
any such forecasted quarter, Buyer will supply Seller with a definitive schedule
for Product acceptance testing timing and quantities for such quarter. The
definitive quantity may
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vary from the forecasted quantity by plus or minus thirty percent (30%). Time is
of the essence in this Agreement. If one or more Lots is not made available for
delivery and acceptance testing in accordance with the definitive schedule
provided by Buyer ("Short Lot(s)"), and the reason(s) for such delay are within
the reasonable control of Seller, and Seller fails to ensure that, within eight
(8) weeks from the date of the first Short Lot, the cumulative number of
Products in Lots actually made available for acceptance testing and delivery is
again equal to the number required through that date under the definitive
schedule, Seller shall be in material breach of this Agreement and Buyer may
terminate this Agreement and all or part of any outstanding Orders at any time
thereafter. Upon such termination, Buyer shall pay Seller an amount equal to
Seller's Burdened Costs (as defined in Section 3.5.2 below) for raw materials
which are purchased by Seller (or for which Seller has then placed noncancelable
purchase orders) specifically for the manufacture of such Products and which are
returned to Seller's suppliers, sold or otherwise disposed of as directed by
Buyer.
3.3 PURCHASE PRICE. As full compensation for the Products and the
performance of Seller's obligations under this Agreement, Buyer shall pay Seller
the price for each Product as established in each Order. Buyer requested changes
to (a) the Documentation or (b) to ordering components for subassemblies
resulting in a quantity less than the total purchase quantity for such Products
under such Order, may cause an increase or decrease in underlying materials
costs, and therefore in the price of Products. All increases or decreases in
material cost due to such changes will be passed on to Buyer at direct material
cost increase or savings (as the case may be) plus ten percent (10%). Seller
will provide Buyer detailed baseline cost and actual costs for any such changes
to support any price adjustments made hereunder. The parties will work together
to ensure that the mechanics and documentation of implementing price changes
occur in an efficient manner for both Buyer and Seller.
3.4 PAYMENT. Seller shall issue its invoice for the price of a Product
upon Buyer's approval of the Product pursuant to paragraph 4.1. Buyer shall pay
Seller the amount due under each of Seller's invoices within thirty (30) days
after Buyer's receipt of the invoice. Seller shall promptly furnish Buyer with
such documentation and information as Buyer may reasonably request to verify the
amount due under any of Seller's invoices. Payments otherwise due or payable
under this Agreement may be withheld by Buyer on account of any Product that
does not comply with the warranty set forth in paragraph 7.1 or the failure of
Seller to comply with any of its other obligations under this Agreement.
3.5 CANCELLATION OF ORDERS.
3.5.1 Buyer may not cancel any Order as it applies to Products
scheduled for delivery within ninety (90) days after Buyer gives Seller notice
of the cancellation.
3.5.2 Buyer may cancel any Order as it applies to Products
scheduled for delivery more than ninety (90) days after Buyer gives Seller
notice of the cancellation; provided that, with respect to canceled Products
scheduled for delivery more than ninety (90) but less than three hundred sixty
five (365) days after Buyer gives Seller notice of the cancellation, Buyer shall
agree to pay Seller an amount equal to Seller's Burdened Costs (as defined
below) for raw materials which are purchased by Seller (or for which Seller has
then placed noncancelable purchase orders) specifically for the manufacture of
such Products and which are returned to
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Seller's suppliers, sold or otherwise disposed of as directed by Buyer. Seller's
"Burdened Costs" shall equal the difference between the amount paid by Seller
for such materials plus a handling charge of ten percent (10%) plus any bill
back by Seller's suppliers for taking less than amounts ordered with respect to
Product Orders and the amount of any refund, credit, allowance or compensation
received by or on behalf of Seller for such return, sale or other disposition.
Seller shall furnish Buyer such receipts, documents and other information as
Buyer may reasonably request to verify Seller's net Burdened Costs under this
Agreement.
3.5.3 No cancellation shall relieve Buyer or Seller of any of
their respective obligations under this Agreement as to any Products not
canceled. If Buyer purports to cancel all or any part of any Order for Seller's
breach or default and it is determined that Seller was not in breach or default
that would permit such cancellation, then such cancellation shall be deemed to
have been a cancellation pursuant to this paragraph and the rights and
obligations of the parties shall be determined accordingly.
3.6 SPARE PARTS. Seller will produce and sell and provide Buyer with
spare parts for the Products, which are configured and tested to the current
Product Specifications pursuant to Orders for such spare parts. Seller shall
invoice Buyer for Seller's actual spare part direct material and assembly labor
cost plus ten percent (10%) when spare parts are ordered with annual Product
Orders. For spare parts orders not made in connection with annual Product
Orders, Seller shall invoice Buyer for Seller's actual spare part direct
material and assembly labor cost plus seventeen percent (17%). On Orders for
spares that provide for future delivery to Buyer, Seller will reasonably
accommodate Buyer's requests, as necessary, to delay delivery or utilize some
portion of such spares in future Product manufacturing.
SECTION 4. ACCEPTANCE, DELIVERY AND SHIPMENT
4.1 ACCEPTANCE. Delivery of Products to Buyer shall be deemed to have
occurred upon acceptance of each lot of Products under any Order in accordance
with the following acceptance procedure. Seller shall notify Buyer when a
particular Product Lot is ready for acceptance testing. Buyer will promptly
inspect all or a portion of such Product Lot at Seller's Plant. Buyer may
conduct a statistical sampling of each such Lot of Products. If five percent
(5%) or more of the lot fails to comply with the warranties set forth in
paragraph 7.1, then Seller shall repair the nonconforming Products at Seller's
Plant using Seller's labor, tools and materials, all at Seller's expense.
However, if Seller will not be able to make, or does not make, such required
repairs within a reasonable time, Buyer may, at its option, repair the
noncomplying Products and charge Seller the reasonable cost of the repair. Even
if a Product Lot is accepted, Seller shall remain responsible to correct
nonconformities in any Product in such Lot under paragraph 7.2.
4.2 STORAGE OF COMPLETED PRODUCTS. Accepted Product lots shall be stored
in a clean and safe condition by Seller at Seller's Plant or any other mutually
acceptable location until Buyer requests shipment of individual Products to
Buyer's Plant. Seller shall retain all risk of loss with respect to such stored
Products until shipment. Once accepted pursuant to Section 4.1, Buyer shall
retain all right, title and interest in and to such Products. Seller shall
execute any and all documents reasonably required in order to protect Buyer's
ownership interest in all accepted and delivered Products. Seller shall maintain
general liability and any other insurance reasonably
4.
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required to insure against loss or damage of any nature to the Products and
Tooling in amounts equal to the full insurable value thereof. At Buyer's
request, Seller shall provide a certificate evidencing the above required
insurance coverage.
4.3 SHIPMENT. Upon Buyer's request, Seller shall properly mark and
otherwise identify each accepted Product for shipment to Buyer's Plant. Buyer
shall arrange and pay for all transportation, handling, transit insurance,
duties, governmental inspections and other requirements for delivery of the
Products in accordance with this Agreement. Shipments shall be F.O.B. Seller's
Plant.
4.4 PACKAGING. Seller shall properly package the Purchased Products
according to Buyer's instructions for protection against damage or deterioration
that may result from shipment, handling, storage or other cause.
4.5 SCHEDULE. Seller shall make the Products available for Buyer's
acceptance testing in accordance with the schedule set forth in the applicable
Order, as revised and updated as described in Section 3.2. However, Seller shall
not be liable for delays in delivery due to causes which are not reasonably
foreseeable, which are beyond Seller's control and which cannot be overcome by
the exercise of reasonable diligence; provided that Seller gives Buyer prompt
written notice of the circumstances giving rise to the delay, the anticipated
duration of the delay and the action being taken by Seller to overcome or
mitigate the delay. The specified delivery date shall be extended by the period
of any such delay.
SECTION 5. INSPECTION
5.1 SELLER'S PLANT. Seller's Plant and all Tooling shall be subject to
inspection by Buyer at any time during normal business hours upon twenty-four
(24) hours prior notice. Seller shall provide Buyer with safe and sufficient
access for such inspection.
5.2 BY SELLER. Seller shall perform such detailed inspections and tests
of each Purchased Product as are necessary to ensure that such Product complies
with the requirements of this Agreement. Without limiting the generality of the
foregoing, Seller shall:
(a) comply with the Inspection Procedures applicable to each
Purchased Product;
(b) inspect and test all materials and components to be
incorporated in any Purchased Product on receipt in order to assure material and
component quality; and
(c) keep and maintain complete and adequate records of all
inspections and tests performed on Purchased Products, and make such records
available to Buyer for examination, copying and audit.
5.3 BY BUYER. All Products shall at all times be subject to inspection
and testing by Buyer upon 24 hours prior notice to Seller. Seller shall provide
Buyer with safe and sufficient access, equipment and facilities for any such
inspection or tests prior to delivery. No acceptance of any Products shall be
construed to result from any inspection, test or delay or failure to inspect
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or test by Buyer prior to final inspection and test of such Products by Buyer.
Buyer shall be afforded a reasonable opportunity to inspect each Product for
damage at its specified destination. No inspection, test, delay or failure to
inspect or test, or failure to discover any defect or noncompliance by Buyer
shall relieve Seller of any of its obligations under this Agreement or impair
Buyer's right to reject defective or noncomplying Products or any other right or
remedy afforded to Buyer.
SECTION 6. COMPLIANCE WITH LAWS AND STANDARDS
6.1 GENERAL. Seller shall comply (and shall ensure that all Products and
Seller's subcontractors and suppliers of every tier comply) with all applicable
laws, ordinances, rules, regulations, orders, licenses, permits and other
requirements, now or hereafter in effect, of any governmental authority. Seller
shall furnish such documents as may be required to effect or evidence such
compliance. All laws, ordinances, rules, regulations and orders required to be
incorporated in agreements of this character are incorporated in this Agreement
by this reference.
6.2 INDUSTRY STANDARDS. Seller shall produce all Products in accordance
with, and shall ensure that each Product complies with, the following
requirements as now or hereafter in effect:
(a) Federal Communications Commission ("FCC") Class "A" Standard
agency approvals; and
(b) Underwriters Laboratory ("UL") Standard 751 agency
approvals. Seller shall provide Buyer with such specifications, testimony and
other assistance as Buyer may reasonably request in connection with the listing,
approval, registration or satisfaction of similar requirements of any trade
association or other organization, as the same may apply to the Product.
SECTION 7. WARRANTY
7.1 WARRANTY. Seller warrants to Buyer that
(a) each Product shall be free from all defects in materials and
workmanship;
(b) each Product shall be free from all defects in design,
except to the extent manufactured to a detailed design furnished by Buyer;
(c) all materials, parts, components and other items
incorporated in any Product shall be new and suitable for its intended purposes;
(d) all Products shall strictly comply with the Documentation;
and
(e) each Product shall comply with the requirements of this
Agreement and the Order pursuant to which it is purchased by Buyer.
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7.2 CORRECTION OF NONCOMPLIANCE. If at any time during the Warranty
Period Buyer notifies Seller of any failure to comply with the warranty set
forth in paragraph 7.1, Seller shall promptly correct such noncompliance (e.g.,
by repair or replacement of the noncomplying Product) and remedy any damage to
the Product resulting from such failure. Buyer will pay the costs of
transportation to Seller's Plant for warranty service. Seller will pay all other
transportation and other costs incidental to such correction and remedying. If
Buyer rejects any Products that do not comply with the warranty set forth in
paragraph 7.1, Seller shall have a reasonable time to correct the noncompliance.
If Seller fails to correct the noncompliance within a reasonable time, Buyer may
cancel the Order as it applies to the noncomplying Products only without any
cost, obligation or liability to Buyer with respect to such noncomplying
Products and without prejudice to any other rights or remedies of Buyer with
respect to such noncompliance (e.g., as to damages or cover).
7.3 SELLER'S FAILURE TO CORRECT NONCOMPLIANCE. If during the Warranty
Period Buyer requests Seller to correct any Product that does not comply with
the warranty set forth in paragraph 7.1 and Seller thereafter fails to correct
the noncompliance or otherwise comply with the requirements of paragraph 7.2, or
indicates its inability or unwillingness to comply, then Buyer may perform (or
cause performance of) the correction or otherwise achieve compliance by the most
expeditious means available to it (by contract or otherwise) and charge to or
otherwise recover (for example, by offset against the compensation otherwise
payable to Seller under this Agreement) from Seller all reasonable costs thereof
that are associated with the direct repair of the Product. Buyer's rights to
perform corrections, achieve compliance and recover the costs thereof from
Seller shall not be interpreted or construed as obligating Buyer to make any
correction or otherwise achieve compliance. Further, Seller's obligations
(including warranty) shall not be limited or reduced in any way because of any
corrections performed or caused to be performed by Buyer or Buyer's rights to
perform the same. However, Seller will have no obligation for damage to a
Product where such damage is caused by the efforts of Buyer or Buyer's
representative in correcting the noncompliance.
7.4 RESPONSE TIME. Seller shall use its best efforts to perform such
warranty service by a qualified service technician within ten (10) business days
from the time that Seller receives the defective Product part, assuming material
availability. If the claim is not within Seller's warranty obligations under
this paragraph 7, Seller shall immediately notify Buyer and, at Buyer's option,
shall either return such Product part to Buyer or shall perform the required
service under paragraph 7.5 as directed by Buyer.
7.5 SERVICE NOT COVERED BY WARRANTY. In the event that any Product
requires repair or other service that is not covered by Seller's warranty
obligations under this paragraph 7 (e.g., after expiration of the Warranty
Period), Seller shall provide such service at a rate as may be agreed upon by
the parties. Seller shall use its best efforts to complete such repairs within
four (4) business days in the case of a priority repair and within ten (10)
business days in the case of a normal repair.
7.6 ONGOING ENGINEERING SERVICES. Seller shall provide such technical
support services to Buyer as the parties may agree upon during the Term and
thereafter until the expiration of the Warranty Period for all Products
delivered under this Agreement. Such services
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may include, without limitation, engineering consulting services to modify,
correct or enhance any Product to perform according to its specifications or to
its intended function. Seller's engineering hourly rates for the Term are set
forth on Exhibit D.
SECTION 8. ADDITIONAL OBLIGATIONS OF SELLER
8.1 PROPRIETARY NATURE OF PRODUCTS. Documentation, Tooling and Products
involve valuable patent, copyright, trade secret and other proprietary rights of
Buyer. Accordingly, Seller shall not, without Buyer's prior written consent:
(a) sell any Product to any Person other than Buyer;
(b) manufacture any Product except for sale to Buyer under this
Agreement;
(c) deliver or disclose any Documentation, Tooling, or any
confidential or proprietary information of or relating to Buyer (e.g., whether
of a technical, financial, business, trade secret or other nature) to any Person
other than Buyer; or
(d) use any Documentation or Tooling for any purpose other than
the manufacture of Products for sale to Buyer under this Agreement.
8.2 COMPONENT SPECIFICATIONS. Seller shall provide upon request from
Buyer a complete list of all pans and components used in the Product and the
manufacturers of such parts and components, specifically noting which parts or
components are available only from the manufacturer listed. Seller shall ensure
that all Products and pertinent parts and components of all Products are
serialized and otherwise identified in accordance with any reasonable
requirements specified by Buyer.
8.3 PRODUCT DEFECT NOTIFICATION. Seller shall immediately notify Buyer by
fax or telephone of any material or recurring defect, deficiency or
nonconformity discovered with respect to any Product or any similar product
manufactured by Seller.
8.4 MODIFICATION. Seller shall not modify or authorize any modification
affecting fit, form or function of any Product, or which would be significant
with respect to requirements of any governmental authority, without the prior
written consent of Buyer. Seller shall promptly disclose in writing to Buyer all
potential modifications (including, but not necessarily limited to, alterations,
improvements and enhancements), methods, applications, inventions, ideas and
know-how relating to the Product, or any similar product manufactured by Seller,
obtained, developed or made by Seller during the Term.
SECTION 9. MISCELLANEOUS
9.1 NOTICES. Any notice, request, authorization, direction or other
communication under this Agreement shall be given in writing and be delivered in
person or by first-class U.S. mail, properly addressed and stamped with the
required postage, to the intended recipient as follows:
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If to Seller: SeaMED Corporation
14500 N.E. 87th Street
Redmond, WA 98052
Attention: President
If to Buyer: Coinstar, Inc.
13231 SE 36th St., Suite 200
Bellevue, Washington 98006
Attention: President
Either party may change its address specified above by giving the other party
notice of such change in accordance with this paragraph.
9.2 INDEPENDENT CONTRACTOR. Seller is an independent contractor, not an
agent or representative of Buyer. Seller shall not have any right, power or
authority to enter into any agreement for or on behalf of, or incur any
obligation or liability of or to otherwise bind Buyer. This Agreement shall not
be interpreted or construed to create an association, joint venture or
partnership between the parties or to impose any partnership obligation or
liability upon either party.
9.3 NONWAIVER. The failure of either party to insist upon or enforce
strict performance by the other party of any provision of this Agreement or to
exercise any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such party's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same shall be
and remain in full force and effect.
9.4 SURVIVAL. Paragraphs 6, 7 and 8.1 (and all provisions of this
Agreement which may reasonably be interpreted or construed as surviving the
completion, expiration, termination or cancellation of this Agreement) shall
survive the completion, expiration, termination or cancellation of this
Agreement.
9.5 ENTIRE AGREEMENT. This Agreement and all outstanding purchase orders
from Buyer to Seller for Product set forth the entire agreement, and supersede
any and all prior agreements, of the parties with respect to the Products. Buyer
shall not be bound by, and specifically objects to, any term, condition or other
provision which is different from or in addition to the provisions of this
Agreement (whether or not it would materially alter this Agreement) and which is
proffered by Seller in any quotation, invoice, shipping document, acceptance,
confirmation, correspondence or otherwise, unless Buyer specifically agrees to
such provision in a written instrument signed by Buyer. The rights, remedies
and warranties afforded to Buyer pursuant to any provision of this Agreement are
in addition to and do not in any way limit any other rights, remedies or
warranties afforded to Buyer by any other provisions of this Agreement, by any
of Seller's subcontractors or suppliers of any tier or by law.
9.6 AMENDMENT. No change, amendment or modification of any provision of
this Agreement shall be valid unless set forth in a written instrument signed by
the party to be bound thereby.
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9.7 SUCCESSORS AND ASSIGNS. Neither party shall assign (voluntarily, by
operation of law or otherwise) this Agreement or any right, interest or benefit
under this Agreement without the prior written consent of the other party;
provided, however, that either party may assign this Agreement or any of its
rights, interests or benefits in this Agreement without such consent to any
entity which is wholly owned or controlled by, which owns or controls or which
is under common control with the assigning party. No assignment with or without
such consent shall relieve or release either party of any of its obligations
under this Agreement. Subject to the foregoing restriction on assignments, this
Agreement shall be fully binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors, assigns and legal
representatives.
9.8 APPLICABLE LAW. This Agreement shall be interpreted, construed and
enforced in accordance with the laws of the State of Washington, except to the
extent such laws may be preempted by the laws of the United States of America.
Seller shall not commence or prosecute any suit, proceeding or claim to enforce
the provisions of this Agreement, to recover damages for breach of or default
under this Agreement, or otherwise arising under or by reason of this Agreement,
other than in the courts of the State of Washington or the District Court of the
United States, Western Division, State of Washington. Seller irrevocably
consents to the jurisdiction of the courts of the State of Washington with venue
laid in King County and of the District Court of the United States, Western
Division, State of Washington.
9.9 FORCE MAJEURE. Neither party shall be liable for any failure to
perform or delay in performing any of its obligations hereunder when such
failure or delay is due to one or more of the following circumstances: any
natural catastrophe, fire, war, riot or civil unrest, or any act, regulation,
restriction, order or intervention of any governmental authority. Upon the
occurrence of such circumstance(s), the affected party shall immediately notify
the other party, keep the other party informed of any further developments and
use all commercially reasonable efforts to overcome the force majeure event.
Immediately after such condition is removed the affected party shall perform
such obligation with all due speed.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the
day and year first above written.
SELLER:
SEAMED CORPORATION
By:
--------------------------
Title:
------------------
COINSTAR, INC.
By:
--------------------------
Title:
------------------
10.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED UNDER 17
C.F.R. SECTIONS 200.80(b)(4), 200.83 AND
230.406 *** INDICATES OMITTED MATERIAL
THAT IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST THAT IS FILED
SEPARATELY WITH THE COMMISSION
MARKETING/DISTRIBUTION CONTRACT
SCAN COIN AB AND COINSTAR, INC.
LETTER OF INTENT, DATED MARCH 5, 1997
This letter of intent is designed to be effective starting March 5, 1997
through December 31, 2000, as agreed to below:
I. DEFINITION OF THE MARKET.
a) GEOGRAPHICAL - U.S.
II. DEFINITION OF SELF-SERVICE COIN REDEMPTION SYSTEMS.
a) The contract's definition of self-service coin redemption systems will
include all electrical or mechanical devices that are designed or
manufactured or branded products by Scan Coin AB of Malmo, Sweden or
Scan Coin's affiliates to be placed in publicly accessible United
States locations and operated unattended for the purpose of
counting/redeeming U.S. coins and issuing notes, receipts/scripts,
making direct deposits, or interfacing with ATM or "Smart" cards.
b) As a result of a mutual agreement with Coinstar, future or yet to be
developed system, and any other systems which have as their intent to
serve as coin redemption/deposit self-service system in the U.S.,
will be covered under the exclusivity agreement of this contract.
III. PRICING.
a) [***] UNITS. The pricing for the [***] units is as follows:
-[***]
-[***]
-[***]
-[***]
b) The above pricing structure is intended to apply to orders that
specify the delivery dates during one calendar year.
c) Self-service coin redemption systems. Scan Coin will sell Coinstar
their CDS or other self-service line of self-service coin redemption
systems at a price equal to the current distributor price.
d) Both participants agree that during the life of this contract, prices
may be adjusted annually based upon the increase/decrease in the
consumer price index in Sweden for the preceding calendar year.
1. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
IV. PAYMENT TERMS.
Net 30 days
V. REQUIRED MINIMAL ANNUAL QUANTITIES.
Banks Bank/Financial Contract Contract
Minimum* Market Expectation Expectation Total Minimum*
-------- ------------------ ----------- --------------
1997 [***] [***] [***] [***]
1998 [***] [***] [***] [***]
1999 [***] [***] [***] [***]
2000 [***] [***] [***] [***]
*Purchases of this quantity of [***] by Coinstar, during the calendar
years listed above, will be required to maintain exclusivity.
Scan Coin has the right to verification of the number of machines
placed in banks, during the exclusive period. Coinstar will upon
request provide an independent auditor information permitting the
number of units placed to be verified.
VI. EXCLUSIVITY.
a) Scan Coin agrees that Coinstar will have exclusive rights to market
Scan Coin's self-service coin redemption systems (see definition,
Section 2) only in the U.S. for the life of this four year agreement
which is an annually renewable, (providing the contract minimums are
met) to all markets. Coinstar will have the right to establish the
distribution channel(s) to most effectively accomplish the goal of
full penetration of the market. Coinstar will grant Scan Coin A.B.,
the non-exclusive right to solicit and accept orders directly from
the following organizations/markets;
- Federal Government and Military
- Casinos/Gaming
- All other organizations that would purchase/
lease the self-service products for internal
use by their own employees when conduction
internal transactions.
b) It is understood that Scan may sell/lease/place these above
non-exclusive markets directly or utilize agents or manufacturers reps
to penetrate these markets.
VII. SCAN COIN WILL GRANT COINSTAR THE;
a) Exclusive right to market the equipment as defined in this contract in
the U.S. for a period of four (4) consecutive years if the contract
minimums are met.
b) Right to market all accessories, parts, and supplies for the above
mentioned equipment.
c) Right to use Scan Coin's name and display the Scan Coin mark
prominently on all equipment, advertising and promotional pieces, and
in trade publications.
2. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
d) Right to continue to purchase self service systems on a non-exclusive
basis for twelve consecutive months, following the termination of the
agreement, if Coinstar has purchased [***] of the contract minimum for
the previous period and pursue any other source of supply, while Scan
Coin agrees to supply spares and systems non-exclusively.
e) Right to renew this contract, on an annual basis, if the performance
minimums are met.
VIII. IN EXCHANGE FOR THE ABOVE CONSIDERATIONS, COINSTAR AGREES THAT IT
WILL, ON A BEST EFFORTS BASIS;
a) Continue to aggressively market the current Coinstar system to the
retail grocery stores and supermarkets in the U.S.
b) Comply with the performance standards as stated in Section 5.
c) Initiate activities to penetrate the twenty (20) largest retail
financial institutions in the U.S.
d) Establish a system and mechanism by which the systems are maintained
on a regular basis and the coins are collected in a manner consistent
with the local requirements.
e) Promote only the use of Scan Coin equipment in the United States
during the exclusive period. Coinstar is not prevented from
developing, building or seeking alternative suppliers or sources at
anytime.
f) Display prominently on all machines "Scan Coins" name whenever the
market permits.
IX. ADJUDICATION OF THE CONTRACT.
In the case of a dispute this contract will be adjudicated under the laws
of the court system of Sweden.
X. EQUIPMENT MODIFICATIONS/IMPROVEMENTS.
Modifications/improvements may be made to any self service equipment
defined Section II, for example the [***] or any other self-service coin
redemption systems.
a) If at the request of Coinstar, then all development and engineering
and production costs, resulting in price increases/decreases will need
to be negotiated and agreed upon in a mutually beneficial manner prior
to the initiation of such a project.
b) If at the instigation of Scan Coin, then the resulting new/improved
systems will be offered to Coinstar at the price consistent with their
value in the marketplace.
XI. CONFIDENTIALITY/SECRECY.
Both parties agree to hold confidential all information of a technical,
scientific, and financial nature obtained from the other during the course
of their relationship. This information is to be held confidential for a
period of twelve (12) consecutive months following the termination of this
contract.
3. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
XII. RENEW OR NON-RENEW/NOTICE CLAUSE:
a) Scan Coin AB and Coinstar recognize that due to unforeseen
circumstances it may become necessary for one or both parties to
terminate this contract.
b) Without cause, it is agreed that neither party may terminate this
contract prior to September 30, 1998, thereafter only with six (6)
months notice.
XIII. QUALITY STANDARDS AND TESTING PROCEDURES.
Scan Coin AB and Coinstar agree that the Appendix of this contract will
contain the following two mutually agreeable documents.
a) The first document will specify the functional and physical
performance standards which the [***] units received from Scan Coin to
Coinstar must conform to.
b) The second portion will detail the testing methods and protocols that
both parties agree to use in evaluating the [***] system against these
quality standards.
XIV. DESIGN/ENGINEERING CHANGES.
a) Both parties recognize that due to the possibility of more advanced
technology and/or market forces that the unit referred to in this
contract as the [***] may require certain unspecified modifications
and changes which would substantially affect its cost and function.
Both parties agree that;
- They are amenable to discussing any suggestions/requests by either
party on an as needed basis.
- Both parties need to agree and commit in writing the objective of such
a project, the time line of said project, the checking or "exit"
points, who will bear the cost of the project, and how the benefits of
such project will be shared.
b) It is the intent of this clause to ensure that both parties feel free
to conduct an open and candid dialog regarding mutually beneficial
changes and/or modifications to the design or function of the [***]
system.
XV. APPENDIX. THE APPENDIX WILL INCLUDE;
a) The technical and marketing specifications of the [***] and or other
self service product lines.
b) Shipping options.
c) The quality control testing procedures and methodologies.
This letter is an expression of intent only, and does not set forth all of the
matters upon which agreement must be reached in order for the proposed agreement
to be executed. The respective rights and obligations of the parties remain to
be defined in the proposed agreement, and the parties do not intend to be
legally bound unless and until a proposed agreement is executed and delivered.
Accordingly, this document does not constitute a legally binding document and
does not create any legal obligations on the part of, or any rights in favor of,
either party.
4. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Signed: Signed:
/s/ Jens Molbak /s/ Rickert Ovin
- ------------------------------------- ------------------------------------
Jens Molbak Rickert Ovin
on behalf of Coinstar, Inc. on behalf of Scan Coin, Inc.
/s/ Jack Karlsson
------------------------------------
Jack Karlsson
5. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
UNDER 17 C.F.R. SECTIONS 200.80(b)(4),
200.83 AND 230.406 *** INDICATES OMITTED
MATERIAL THAT IS THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST THAT IS
FILED SEPARATELY WITH THE COMMISSION
A G R E E M E N T
made and entered into as of April 30, 1993 by and between The Skydeck
Corporation, 495 Old Spanish Trail, Suite B, Portola Valley, California 94028,
USA (hereafter called "Skydeck")
and
Scan Coin AB, Reg No 556193-2673, Jagershillgatan 26, 213 75 Malmo, Sweden
(hereafter called "Scan Coin").
1. BACKGROUND
WHEREAS Skydeck is in the process of developing a coin deposit machine with
dispensing discount coupons to customers in or in connection with retail
establishments, which machine Skydeck intends to own and operate in such
places, and
WHEREAS Scan Coin has developed a coin validation and counting unit which can
be applied as part of Skydeck's aforementioned machine, and which unit
Skydeck wishes to buy from Scan Coin.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties agree as follows.
2. DEFINITIONS
For the purpose of this Agreement
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
2.1 "Product" shall mean a coin validation and counting unit currently in
the form set out in ATTACHMENT 1, and parts thereof, as well as all
improvements and developments thereof.
2.2 "Machine" shall mean the coin deposit machine (self service) with
dispensing discount coupons to customers in or in connection with
retail establishments. The Machine is developed by Skydeck.
2.3 "Territory" shall mean the United States of America, Canada and Mexico.
3. GRANT, EXCLUSIVITY ETC.
3.1 Skydeck hereby engages Scan Coin on an exclusive basis and Scan Coin
agrees to manufacture and supply the Product to Skydeck for use in the
Machine in the Territory.
3.2 Skydeck undertakes during the term of this Agreement not to manufacture
or from any other party than Scan Coin buy or use products similar to
the Product for use in the Machine. Skydeck is only allowed to use the
Product in the Machine and undertakes neither directly nor indirectly
through another party to utilize the Product for other purposes.
3.3 Scan Coin undertakes, not to sell the Products to customers of whom
Scan Coin knows that they intend to use the Product within the
Territory in coin deposit machines (self service) with dispensing
discount coupons to customers in or in connection with retail
establishments, developed, owned or handled by other than Skydeck. This
obligation does not restrict Scan Coin to sell the Product as a part
2. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
of Scan Coin's validation, counting and sorting machines included in
Scan Coin's normal product range. However, Scan Coin undertakes in the
Territory not to sell without Skydeck's approval, any Scan Coin
sorting self service product together with the improvements and
developments according to Clause 6.1, excluding the [***] which
compete with the Machine. Such approval shall not be unreasonably
withheld.
3.4 Skydeck has estimated to order and take deliveries of the following
minimum quantities of units of the Product during the term of the
Agreement.
Year Units of the Product
---- --------------------
1993 [***]
1994 [***]
1995 [***]
1996 [***]
1997 [***]
1998 [***]
-----
Total [***]
Should actual orders and deliveries of units of the Product for one
year exceed estimated minimum quantities such excess units of the
Product shall be credited Skydeck against the following year's minimum
quantity. Any delayed delivery from Scan Coin shall adjust the timing
of the said minimum quantities accordingly.
Should Skydeck not order and take deliveries according to above
mentioned estimated minimum quantities of units of the Product,
Skydeck's exclusivity granted in Clauses 3.1 and 3.3 is terminated
without notice and Scan Coin is free to sell the Product to
3. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
any other third party irrespectively of the customers' use of the
Product.
Skydeck is entitled to retain its exclusivity according to Clauses 3.1
and 3.3 by compensating Scan Coin for the loss of its net contribution
as defined in Attachment 3, calculated on the difference in said
estimated quantities and actual delivered quantity of the Product for
the calendar year Such compensation to Scan Coin shall be paid by
Skydeck on March 1 at the latest, following the year under which the
minimum quantity has not been met.
4. PRICE ETC
4.1 Scan Coin's price for deliveries of the Product during the full
calendar year of 1993 is set out in ATTACHMENT 2.
4.2 For each subsequent calendar year after 1993 the parties shall meet in
October, before the new calendar year, to agree on a new price
effective from the following January 1st. The new price shall be based
on Scan Coin's price model set out in ATTACHMENT 3, which price model
Scan Coin has utilized in its calculation of the price set out in
Attachment 2.
4.3 Notwithstanding the above, Scan Coin's price shall be subject to
increase or decrease at any time during the course of a calendar year
with immediate effect on orders not yet confirmed by Scan Coin, in the
event it is established the costs related to any of the items included
in the price model pursuant to Attachment 3, have changed, more than
five (5) percent compared with the level of such costs in the price
model at the time the prevailing price was established. Said minimum 5
percent change of costs shall also be reflected and included in the new
price.
4. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
From the first delivered [***] units of the Product [***] shall be
deducted from the calculated price for each unit as compensation for
Skydeck's payment of improvement- and development work (cf Clause 6.2)
5. DELIVERY AND PAYMENT
5.1 Unless otherwise agreed, deliveries of the Product shall be Ex works,
Incoterms 1990, Scan Coin's premises in Malmo, pursuant to the delivery
terms set out in ATTACHMENT 4.
5.2 Payment shall, if not otherwise agreed, be against Letter of
Credit payable at sight.
6. SPECIFICATION, IMPROVEMENT- AND DEVELOPMENT WORK ETC.
6.1 The technical specification of the Product and the improvement- and
development work and the functional responsibility for soft- and
hardware related to the Product are set out in ATTACHMENT 5.
6.2 The costs for the improvement- and development work, which shall be
paid by Skydeck as expenses, are set forth in ATTACHMENT 6. The costs
for the work according to Phase II and III (Design, prototype and
testing phases) shall be paid by Skydeck with [***] at the signing of
this Agreement and the remaining [***] by Skydeck simultaneously on
delivery of the prototypes. The costs for the work according to Phase
IV (Manufacturing phase) shall be paid by Skydeck with [***]
immediately after the termination of Phase III and the remaining part
by Skydeck simultaneously on delivery of the [***] units of the Product
(0-serie).
The improvement- and development costs for the serial production shall
be paid by Skydeck and is estimated to a maximum of [***]. As soon as
a
5. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
more accurate estimation of the costs has been carried out the parties
shall agree on Skydeck's terms of payment of the costs.
Skydeck's expenses for the improvements- and development costs will be
reimbursed Skydeck by deduction from the calculated price for units of
the Product according to Clause 4.3 last paragraph.
7. TIME SCHEDULE, 0-SERIE ETC
7.1 During the calendar year 1993 the Product will be developed and tested
and [***] units of the Product (0-serie) will be ordered and delivered
to Skydeck. The parties have estimated the work and time schedule
according to ATTACHMENT 7. The parties shall with due diligence make
their best efforts to keep this time schedule.
8. FORECAST, PLACEMENT OF PURCHASE ORDERS ETC
8.1 Forecast, placement of purchase orders and delivery times for the
serial production of the Products after deliveries of the first [***]
units of the Product are set forth in ATTACHMENT 8.
Initial start up phase for the serial production (included first order
of such production) shall be subject for a separate agreement between
the parties.
After the initial phase and up to the delivery of the first [***] units
of the Product (included the first order for serial production in the
initial start up phase), the [***] forecast in Attachment 8 is replaced
by a running [***] forecast submitted by Skydeck to Scan Coin [***]
before each [***] of the [***], showing a forecast for that [***]. This
forecast will be considered as a firm order [***].
6. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Except as stated in this paragraph Attachment 8 applies on said
deliveries of the first [***] units of the Product.
8.2 Scan Coin shall use its best efforts to provide Skydeck with any
additional quantities of the Product in excess of Skydeck's estimated
minimum quantities of units of the Product according to Clause 3.4.
8.3 Should Scan Coin encounter substantial difficulties in fulfilling
confirmed orders to Skydeck, Scan Coin is willing to discuss the
setting up of a joint production of the Product in the United States of
America.
9. INTELLECTUAL PROPERTY
9.1 Skydeck acknowledges that Scan Coin is the owner of all intellectual
property related to the Product, including but not limited to all
rights to patents, patent applications, know-how, designs, trade
secrets etc.
9.2 Any patent or patent application resulting from the work with a new
product (for example components that are compatible with the Product,
which does not fall under the definition in Clause 2.1) developed and
built by Scan Coin on request of Skydeck belongs to Skydeck under
condition that the work has been finally paid for by Skydeck. Scan Coin,
has the first option to negotiate a license under such patent or patent
application. Skydeck is not entitled to grant a license to any third
party on more favourable conditions than those offered to Scan Coin
under the condition that Scan Coin within thirty (30) days after the
offering of the license declares its interest to acquire the license.
Skydeck has the corresponding right to, under the same conditions,
negotiate a license for the
7. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Territory under any new patent- or patent application that belongs to
Scan Coin and relates to the Machine.
Intellectual property related to a new product that is not owned by
Skydeck according to the forthgoing paragraph belongs to Scan Coin.
10. TOOLS ETC
10.1 Production equipment such as tools, special testing equipment etc
required exclusively for the improvement and development of the Product
according to Clause 6.2 shall be paid by the parties in equal shares and
shall remain the property of Scan Coin. The costs for the production
equipment is estimated to approximately [***]. All replacement tooling
will be paid for by Scan Coin.
11 DOCUMENTATION
11.1 Scan Coin's technical documentation regarding the Product which is
necessary for the operation and support of the Product and the market,
shall be furnished by Scan Coin to Skydeck. The documentation includes
a technical function description, maintenance description, physical
interfacing description, software interface description, circuit
diagram, mechanical/electrical assembly drawings and spare parts lists.
Skydeck shall be free to furnish above mentioned documentation to its
customers and service organization (cf Clause 16.1).
12 WARRANTY
12.1 Scan Coin represents and warrants that the Product is manufactured in
accordance with the specification and requirements set forth in
Attachment 1 or agreed upon between the parties separately in writing.
Scan
8. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Coin's liability in respect of any defective parts of the Product shall
be limited to the sending of an equivalent part without delay to
Skydeck. Skydeck is not entitled to a price reduction for any defective
part and Scan Coin is not responsible for any damages incurred directly
or indirectly in connection with the sale or use of the Product.
Skydeck shall return all defective parts to Scan Coin for approval
whether the defect is included under Scan Coin's warranty. The freight
cost for the return of the defective part to Scan Coin and the sending
of an equivalent part shall be carried by Scan Coin. Scan Coin shall
make available any spare parts of all versions of the Product for ten
(10) years from delivery of each unit of the Product at a price
established pursuant to the price model in Attachment 3. Scan Coin will
maintain a level of spare parts to be agreed upon between the parties
annually.
Any claim under the warranty against defects in material and
workmanship shall be allowed only when it is submitted to Scan Coin in
writing within thirty (30) days after the discovery of the defect and
in any event within twelve (12) months after the delivery of the
Product to Skydeck.
13. PRODUCT LIABILITY
13.1 Scan Coin shall be liable for personal injury only if it is proved that
such injury was caused by negligence on the part of Scan Coin or others
for whom Scan Coin is responsible.
Scan Coin shall not be liable for damage to property occurring whilst
the Product is in the possession of Skydeck. Nor shall Scan Coin be
liable for damage to products manufactured by Skydeck, or to other pro-
9. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
ducts of which Skydeck's products form a part. Apart from these
limitations Scan Coin shall be liable for damage to property on the
same conditions as for personal injury.
Scan Coin shall in no circumstances be liable for loss of production,
loss of profit or any other consequential damage and indirect loss.
To the extent Scan Coin might incur product liability towards any third
party as a result of a Product purchased by Skydeck, Skydeck shall
indemnify Scan Coin as far as Scan Coin's liability has been limited by
the three preceding subparagraphs.
If a claim for damage as described in this Clause is lodged by a
third party against one of the parties, the latter party shall
forthwith inform the other party thereof.
The above limitations in Scan Coin's liability shall not apply where
Scan Coin is shown to have been guilty of gross misconduct.
14. FORCE MAJEURE
14.1 The following circumstances shall be considered as cases of force
majeure if they intervene after the formation of this Agreement and
impedes its performance: Government laws or regulations, industrial
disputes, war, riot, fire or any other causes beyond the control of
such party.
The party wishing to claim force majeure shall notify the other party
in writing without delay of the occurrence and cessation thereof.
10. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
15. PROJECT GROUP, ETC
15.1 For the continuous supervision of the parties' performance under this
Agreement, and with reference to the future improvement and development
of the Product, Scan Coin and Skydeck shall form a joint permanent
project group, (hereafter called the "Project Group"), consisting of
one representative from each party. The Project Group shall meet on a
regular basis. Each party shall carry the cost for its own
representation in the Project Group. Minutes from the meetings in the
Project Group shall be kept and approved by both parties'
representatives.
Within the framework of the Project Group the parties shall discuss
Skydeck's possible need for further improvement and development of the
Product beyond what is agreed in Clause 6.1. If prepared to implement
Skydeck's improvement and development proposals, Scan Coin shall
indicate its impact on already agreed requirements, price pursuant to
the price model in Attachment 3, delivery terms, warranties and other
material conditions. Any improvement or development of the Product,
beyond what is agreed in Clause 6.1, discussed in the Project Group
shall only be implemented to the extent that the parties have agreed in
writing on the terms of such development.
16. SECRECY
16.1 All information exchanges under this Agreement shall be regarded as
confidential and is for the use of the receiving party solely for the
purpose of this Agreement. The parties may not use or disclose any such
information to a third party without the prior written consent of the
furnishing party and shall
11. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
take all reasonable measures to prevent unauthorized use or disclosure
of confidential information by their own employees and/or consultants.
This secrecy undertaking shall be effective during the term of this
Agreement and for a period of five (5) years following its termination.
Any confidential documentation furnished by one party to the other
shall be treated by the other party in relation to customers and
service organization in the same way as the other party would treat its
own confidential information.
17. ASSIGNMENT
17.1 Neither party shall have the right to assign his rights or obligations
pursuant to this Agreement without the prior written consent of the
other party, which consent shall not be unreasonably withheld. Such
consent shall not be required in connection with an assignment to a
successor entity resulting from a corporate reorganization of either
party (including without limitation a reincorporation) under the
condition that the transferor in writing guarantees the succeeding
entity's obligations according to this Agreement.
18. DURATION OF THE AGREEMENT
18.1 This Agreement becomes effective on the date first set forth on page 1
above and remains effective until either party terminates this
Agreement with six (6) months written notice, provided that such
termination shall never become effective before December 31, 1998.
12. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
19. PREMATURE TERMINATION
19.1 If either party should commit a material breach of the provisions of
this Agreement, the other shall - in case of a breach capable of remedy
- give written notice requiring such breach to be remedied, and in the
event of such breach not being remedied within one (1) month of the
date of service of such notice, or in the case of a breach not capable
of remedy, have the right to terminate this Agreement forthwith,
unless the breach relates to any of the circumstances referred to in
Clause 14 (Force Majeure) above. If the grounds of force majeure
according to Clause 14 subsist for more than three (3) months the other
party shall be entitled to terminate this Agreement forthwith.
This Agreement may otherwise be terminated immediately upon written
notice by
(1) any party in the event the notified party becomes insolvent,
(2) Scan Coin if Skydeck, during any year, orders and takes
deliveries of less than 30 percent of the estimated minimum
quantities of units of the Product stipulated under Clause 3.4,
(3) Scan Coin if Skydeck discontinues its business relating to the
Product.
(4) Skydeck if Scan Coin at two (2) consecutive occasions has failed
to fulfill confirmed orders to Skydeck within thirty (30) days
calculated from committed delivery date,
(5) Skydeck if Scan Coin's price for the Product, calculated according
to the price model in
13. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Attachment 3, any calendar year has increased in SEK with more
than 15% or in USD with more than 25%.
Skydeck is only entitled to terminate the Agreement according to point
5 above after the parties in good faith have concluded negotiations
regarding measures to reduce the costs for the Product, a joint
production of the Product or part thereof in the United States of
America etc.
20. ARBITRATION AND GOVERNING LAW
20.1 This Agreement presupposes a close and confidential collaboration and
the parties intend to try to solve as they arise, such problems as are
not envisaged in this Agreement, or may otherwise give rise to a
difference of opinion between the parties.
20.2 Any dispute, controversy or claim arising out of or in connection with
this Agreement, or the breach, termination or invalidity thereof, shall
be settled by arbitration in accordance with the Rules of the
Arbritration Institute of the Stockholm Chamber of Commerce.
The arbitral tribunal shall be composed of three (3) arbitrators.
The place of arbitration shall be Malmo, Sweden.
The language to be used in the arbitral proceedings shall be English.
20.3 This Agreement shall be governed by the law of Sweden.
14. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
21. NOTICES
21.1 All notices, reports, payments and communications required by this
Agreement by one party to the other shall be addressed to the parties
at their respective official addresses as set forth above or to such
other addresses notified by either party in writing. All such notices,
reports, payments and communications shall be made by personal
delivery, or telex, or telecopier, or registered mail, and shall be
considered as served the date received, provided however, in the case
of registered mail, that it shall be deemed to have been served at the
expiration of ten (10) days from the time of being posted and proof
that the letter was properly addessed and posted shall be sufficient
proof of service.
22. SEVERABILITY
22.1 If any provision of this Agreement should be or become fully or partly
invalid or unenforceable for any reason whatsoever or should violate
any applicable law, this Agreement is to be considered divisible as to
such provision and such provision is to be deemed deleted from this
Agreement, and the remainder of this Agreement shall be valid and
binding as if such provision was not included herein. There shall be
substituted for any such provision, a suitable provision which, as far
as legally possible, comes nearest to what the parties desired or would
have desired according to the sense and purpose of this Agreement, had
they considered the point when concluding the Agreement.
____________________________
15. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
The parties hereto have caused this Agreement to be executed by their
duly authorized representatives as of the date first above written.
SCAN COIN AB THE SKYDECK CORPORATION
/S/ JACK KARLSSON /s/ Jens H. Molbak
- ------------------------------- --------------------------------
Jack Karlsson Jens H. Molbak
2234L/EE
16. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
ATTACHMENT 1
93-04-28
DEFINITION OF THE "PRODUCT"
The "Product" in paragraph 2.1 is defined as:
For PROTOTYPES AND O-SERIES:
- [***]
- [***]
For SERIAL PRODUCTION:
- [***]
- [***]
1. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
ATTACHMENT 2
93-04-28
PRODUCT COST AND PRODUCT PRICE
Indicative Product Cost (PC) and Product Price (PP) in SEK, ex works Malmo
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
O-SERIES ([***] UNITS) [***] UNITS/YEAR
PARTS DESCRIPTION PRODUCT COST PRODUCT PRICE PRODUCT COST PRODUCT PRICE
SEK (SEK) SEK (SEK)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
- --------------------------------------------------------------------------------------------------
</TABLE>
The Product Prices in the column for [***] units/year is based on the price
model in Attachment 3.
The parts are defined in Attachment 5.
For each part the packing is included in the Product Price.
1. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Attachment 3
1993-03-05
1. PRODUCT COST CALCULATION
Product cost is defined as follows:
[***]
[***]
Product cost (PC) = X + Y
[***].
[***].
2. PRODUCT PRICE ([***] UNITS/YEAR)
Product price (PP) = [***] x PC
3. SPARE PART PRICES
Prices according to Scan Coin's standard export price list for
subsidiaries.
4. "Net contribution" according to Section 3.4 is to be defined as [***] of
Product Price (PP).
1. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
ATTACHMENT 4
CONDITIONS OF DELIVERY
1. GENERAL
These terms shall apply on every delivery of products from Scan Coin to the
purchaser, unless otherwise specifically agreed upon in writing between
Scan Coin and the purchaser.
2. ORDER AND CONFIRMATION OF ORDER
Scan Coin will confirm an order from the purchaser by written confirmation.
Objections against Scan Coin's confirmation of order must be made without
delay.
3. TRADING TERMS
All trading terms used in orders and/or confirmations of order will be
construed in accordance with Incoterms 1990 as amended. If no trade term
is specifically agreed upon the delivery shall be Ex Works.
4. PRODUCT INFORMATION
Information given by Scan Coin in brochures and otherwise is binding on
Scan Coin only when specific reference to such information is made in the
confirmation of an order.
5. DRAWINGS AND TECHNICAL DOCUMENTATION
Any drawings and technical documents submitted by Scan Coin to the
purchaser prior or subsequent to the formation of the contract remain the
exclusive property of Scan Coin. They may not, without Scan Coin's prior
written approval, be utilized by the purchaser or copied, reproduced,
transmitted or otherwise communicated to a third party.
1. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
6. PACKING
The sales price includes packing, sufficient to protect the products under
normal conditions.
7. PART DELIVERY
Any portion of a confirmed order of the products may be shipped as soon as
completed at the plant, and payment for any portion so shipped, shall
become due in accordance with the Terms of Payment, provided that the
purchaser agrees to receive the part delivery. Scan Coin will pay for any
additional shipping and handling charges incurred due to the part delivery.
8. PENALTY
If not other agreement has been made, penalty for late delivery (part
delivery) shall be paid by Scan Coin at a rate of two (2)% per thirty (30)
days delay.
The penalty shall be calculated on the basis of the price of the products
delayed.
The total sum of penalties for late deliveries shall not exceed five (5)%
of the price of the products delayed.
Should the purchaser according to point 7 chose not to take part delivery
no penalty shall be paid by Scan Coin related to the offered part delivery.
In addition to the above, the purchaser is not entitled to any compensation
for damage in case of late delivery.
2306L/EE
2. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
ATTACHMENT 5
93-04-28
TECHNICAL SPECIFICATION OF THE "PRODUCT" AND DEFINITION OF THE RESPONSIBILITY
FOR THE FUNCTION OF SOFTWARE/HARDWARE
A. TECHNICAL SPECIFICATION
[***]
The CAM unit to be used in the "Machine" is a [***] with the following
modifications:
- - [***]
- - [***]
- - [***]
- - [***]
- - [***]
- - [***]
- - [***]
[***]
Same as [***] but with the [***] replaced by [***].
OUTLET MECHANISM
The [***] shall feed coins from the CAM unit (either [***]) into [***] according
to the following arrangement:
- -----------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------
[***]
1. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
ATTACHMENT 5
93-04-28
B. FUNCTIONAL RESPONSIBILITY FOR HARDWARE/SOFTWARE
SCAN COIN have functional responsibility for the following functions:
To be agreed upon separately
SKYDECK have functional responsibility for the following functions:
To be agreed upon separately
2. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
ATTACHMENT 6
93-04-28
SPECIFICATION OF R&D COSTS
Referring to the definition of project phases in Attachment 7, the following
specification of R&D costs is made:
- PROTOTYPE AND O-SERIES
PHASE I: Prestudy phase: [***]
PHASE II & III: Design, prototype and testing phases [***]
PHASE IV: Manufacturing phase [***]
TOTAL for Phase I - IV [***]
- SERIAL PRODUCTION, TOTAL [***]
- TOTAL PROJECT COST [***]
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SKYDECK COIN EXCHANGE UNIT
PROJECT TIME SCHEDULE FOR SCAN COIN DELIVERIES
Attachment 7
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
April May June July August September
- ----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Project start
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Phase II: Design phase
- ----------------------------------------------------------------------------------------------------------------------
A. [***]
- ----------------------------------------------------------------------------------------------------------------------
[***]
- ----------------------------------------------------------------------------------------------------------------------
[***]
- ----------------------------------------------------------------------------------------------------------------------
[***]
- ----------------------------------------------------------------------------------------------------------------------
[***]
- ----------------------------------------------------------------------------------------------------------------------
B. [***]
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Phase III: Prototype and test phase
- ----------------------------------------------------------------------------------------------------------------------
Parts ordering
- ----------------------------------------------------------------------------------------------------------------------
Parts delivery, inspection and modification
- ----------------------------------------------------------------------------------------------------------------------
Assembly of three prototypes
- ----------------------------------------------------------------------------------------------------------------------
Scan Coin laboratory tests and modifications
- ----------------------------------------------------------------------------------------------------------------------
Shipping of two prototypes
- ----------------------------------------------------------------------------------------------------------------------
Revision of drawings
- ----------------------------------------------------------------------------------------------------------------------
Skydeck assembly
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
October November December January February
- ---------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Project start
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Phase II: Design phase
- ---------------------------------------------------------------------------------------------------------
A. [***]
- ---------------------------------------------------------------------------------------------------------
[***]
- ---------------------------------------------------------------------------------------------------------
[***]
- ---------------------------------------------------------------------------------------------------------
[***]
- ---------------------------------------------------------------------------------------------------------
[***]
- ---------------------------------------------------------------------------------------------------------
B. [***]
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Phase III: Prototype and test phase
- ---------------------------------------------------------------------------------------------------------
Parts ordering
- ---------------------------------------------------------------------------------------------------------
Parts delivery, inspection and modification
- ---------------------------------------------------------------------------------------------------------
Assembly of three prototypes
- ---------------------------------------------------------------------------------------------------------
Scan Coin laboratory tests and modifications
- ---------------------------------------------------------------------------------------------------------
Shipping of two prototypes
- ---------------------------------------------------------------------------------------------------------
Revision of drawings
- ---------------------------------------------------------------------------------------------------------
Skydeck assembly
- ---------------------------------------------------------------------------------------------------------
</TABLE>
1. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
April May June July August September
- ----------------------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Skydeck field test
- ----------------------------------------------------------------------------------------------------------------------
Skydeck decision
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Phase IV: Manufacturing phase ([***])
- ----------------------------------------------------------------------------------------------------------------------
Design changes
- ----------------------------------------------------------------------------------------------------------------------
Parts ordering
- ----------------------------------------------------------------------------------------------------------------------
Parts delivery and inspection
- ----------------------------------------------------------------------------------------------------------------------
Assembly
- ----------------------------------------------------------------------------------------------------------------------
Shipping of batch 1, [***]
- ----------------------------------------------------------------------------------------------------------------------
Shipping of batch 2, [***]
- ----------------------------------------------------------------------------------------------------------------------
Shipping of batch 3, [***]
- ----------------------------------------------------------------------------------------------------------------------
Shipping of batch 4, [***]
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
October November December January February
- ---------------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Skydeck field test
- ---------------------------------------------------------------------------------------------------------
Skydeck decision
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Phase IV: Manufacturing phase ([***])
- ---------------------------------------------------------------------------------------------------------
Design changes
- ---------------------------------------------------------------------------------------------------------
Parts ordering
- ---------------------------------------------------------------------------------------------------------
Parts delivery and inspection
- ---------------------------------------------------------------------------------------------------------
Assembly
- ---------------------------------------------------------------------------------------------------------
Shipping of batch 1, [***]
- ---------------------------------------------------------------------------------------------------------
Shipping of batch 2, [***]
- ---------------------------------------------------------------------------------------------------------
Shipping of batch 3, [***]
- ---------------------------------------------------------------------------------------------------------
Shipping of batch 4, [***]
- ---------------------------------------------------------------------------------------------------------
</TABLE>
2. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
FORECAST, PLACEMENT OF PURCHASE ORDERS ATTACHMENT 8
93-04-09
[***]
1. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
AMENDMENT TO AGREEMENT
entered April 30, 1993, with amendments to agreement entered September 1, 1994,
by and between Scan Coin AB and Coinstar Inc. ("the Agreement").
____________________________
Scan Coin AB ("Scan Coin") and the Coinstar, Inc. ("Coinstar") have now agreed
that the Clauses 2.2, 2.3 and 3.3. in the Agreement shall have the following
wording.
2.2 "Machine" shall mean the coin deposit machine (self service) with or
without dispensing discount coupons to customers in or in connection with
retail establishments. The machine is developed by Coinstar.
2.3 "Territory" shall mean
(i) United States of America, Canada and Mexico in relation with the
Machine with dispensing discount coupons.
(ii) United States of America in relation with the machine without
dispensing discount coupons
3.3 Scan Coin undertakes, not to sell the Products to customers of whom Scan
Coin knows that they intend to use the Products
- within the USA in coin deposit machines (self service), owned or
handled by other than Coinstar and where the customer's main target group
is retail establishments
- within Canada and Mexico in coin deposit machines (self services) with
dispensing discount coupons to customers in or in connection with retail
establishment developed owned or handled by other than Coinstar. This
obligation does not restrict Scan Coin to sell the Products as part of
Scan Coin's normal product range. However, Scan Coin undertakes in the
Territory not to sell without Coinstar's approval, any Scan Coin self
service product together with the improvements and developments
according to Clause 6.1,
1. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
excluding the [***], which compete with the machine. Such approval
shall not be unreasonably withheld.
____________________________
Clause 20.2 in the Agreement regarding Arbitration is applicable on this
amendment to the Agreement. Except for the Clauses 2.2, 2.3 and 3.3 all other
contractual obligations in the Agreement are unchanged.
____________________________
In witness whereof, the parities have executed this amendment to the Agreement
in duplicate, each party taking one copy, the last day and year written below.
Date 15 February 1995 Date 15 February 1995
SCAN COIN AB COINSTAR, INC.
/s/ Jack Karlsson /s/ Jens H. Molbak
- ---------------------------- -----------------------------------
Jack Karlsson Jens H. Molbak
2. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
AMENDMENT TO AGREEMENT
entered April 30, 1993, by and between San Coin AB and the Skydeck Corporation
("the Agreement").
____________________________
The Skydeck Corporation has after the entering of the Agreement changed its
business name and is now carrying out its business under the name Coinstar, Inc.
at the address 13231 S.E. 36th Street, Suite 200, Bellevue, WA 98006.
Scan Coin AB ("Scan Coin") and the Coinstar, Inc. ("Coinstar") have now agreed
that the minimum delivery quantities and the duration of the Agreement shall be
modified and that the Clauses 3.4 and 18.1 in the Agreement therefore shall have
the following wording.
3.4 Coinstar has estimated to order and take deliveries of the following
minimum quantities of units of the Product during the term of the
Agreement.
Year Units of the Product
---- --------------------
1993 [***] (already completed)
1994 [***] (already ordered)
1995 [***]
1996 [***]
1997 [***]
1998 [***]
1999-01-01--1999-06-30 [***]
-----
TOTAL [***]
Should actual orders and deliveries of units of the Product for one
year exceed estimated minimum quantities such excess units of the
Product shall be credited Coinstar against the following year's minimum
quantity. Any delayed delivery from Scan Coin shall adjust the timing
of the said minimum quantities accordingly.
1. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Should Coinstar not order and take deliveries according to above
mentioned estimated minimum quantities of units of the Product,
Coinstar's exclusivity granted in Clauses 3.1 and 3.3 is
terminated without notice and Scan Coin is free to sell the Product to
any other third party irrespectively of the customer's use of the
Product.
Coinstar is entitled to retain its exclusivity according to Clauses 3.1
and 3.3 by compensating Scan Coin for the loss of its net contribution
as defined in Attachment 3, calculated on the difference in said
estimated quantities and actual delivered quantity of the Product for
the calendar year (and for 1999 its first 6 months). Such compensation
to Scan Coin shall be paid by Coinstar on March 1 at the latest,
following the year under which the minimum quantity has not been met.
18. DURATION OF THE AGREEMENT
18.1 This Agreement becomes effective on the date first set forth on page 1
above and remains effective until either party terminates this Agreement
with six (6) months written notice, provided that such termination shall
never become effective before June 30, 1999.
____________________________
Clause 20.2 in the Agreement regarding Arbitration is applicable on this
amendment to the Agreement. Except for the Clauses 3.4 and 18.1 all other
contractual obligations in the Agreement are unchanged.
____________________________
In witness whereof, the parties have executed this amendment to the Agreement in
duplicate, each party taking one copy, the last day and year written below.
Date 10 August 1994 Date 1 September 1994
SCAN COIN AB COINSTAR, INC.
/s/ Jack Karlsson /s/ Jens H. Molbak
- --------------------------- ---------------------------------
Jack Karlsson Jens H. Molbak
2. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Execution Copy
95,000 Units
consisting in the aggregate of
$95,000,000 Aggregate Principal Amount at Maturity of
13% Senior Subordinated Discount Notes due 2006
and
95,000 Warrants to Purchase 665,000 Shares of Common Stock
of
COINSTAR, INC.
PURCHASE AGREEMENT
October 22, 1996
SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Coinstar, Inc., a Delaware corporation (the "COMPANY"),
proposes, upon the terms and conditions set forth in this agreement (this
"AGREEMENT"), to issue and sell to Smith Barney Inc. (the "INITIAL
PURCHASER") units (the "UNITS") consisting in the aggregate of (i)
$95,000,000 aggregate principal amount at maturity of the Company's 13%
Senior Subordinated Discount Notes due October 1, 2006 (the "NOTES"), and
(ii) 95,000 Warrants (the "INITIAL WARRANTS"), each representing the right to
purchase initially seven shares of Common Stock, $.001 par value of the
Company (the "COMMON STOCK"). In addition, the Company will be obligated to
issue additional warrants to holders of the Notes upon the occurrence of the
Contingent Event (as defined in that certain Warrant Agreement dated as of
the date hereof between the Company and The Bank of New York as warrant
agent, the "WARRANT AGREEMENT") (the "CONTINGENT WARRANTS," and together with
the Initial Warrants, the "WARRANTS") entitling the holder thereof to
purchase initially three (3) shares of Common Stock at an exercise price of
$.01 per share. Each Unit will consist of $1,000 aggregate principal amount
at maturity of Notes, one Initial Warrant entitling the holder thereof to
purchase initially seven (7) shares of Common Stock at an exercise price of
$.01 per share. The Notes will be issued under an indenture (the
"INDENTURE"), to be dated as of October 1, 1996, between the Company and The
Bank of New
<PAGE>
York, as trustee (the "TRUSTEE"). The Warrants will be issued under a warrant
agreement (the "WARRANT AGREEMENT"), to be dated as of October 22, 1996, between
the Company and The Bank of New York, as warrant agent (the "WARRANT AGENT").
The Notes and the Initial Warrants are collectively referred to herein as the
"SECURITIES." This Agreement, the Indenture, the Securities, the Warrant
Agreement and the Registration Rights Agreements (as defined herein) are herein
collectively referred to as the "TRANSACTION DOCUMENTS."
The Company wishes to confirm as follows its agreement with the
Initial Purchaser in connection with the purchase and resale of the Securities.
1. PRELIMINARY OFFERING MEMORANDUM AND OFFERING MEMORANDUM.
The Securities will be offered and sold to the Initial Purchaser without
registration under the Securities Act of 1933, as amended (the "ACT"), in
reliance on an exemption therefrom. The Company has prepared a preliminary
offering memorandum, dated September 5, 1996 (the "PRELIMINARY OFFERING
MEMORANDUM"), and an offering memorandum, dated October 22, 1996 (the
"OFFERING MEMORANDUM"), setting forth information regarding the Company and
the Securities. Unless stated herein to the contrary, all references herein
to the Offering Memorandum are to the Offering Memorandum at the date hereof
(including the exhibits thereto) and do not include any supplement or
amendment subsequent thereto. The Company hereby confirms that it has
authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the Securities by
the Initial Purchaser in accordance with the terms hereof.
The Company understands that the Initial Purchaser proposes to
make offers and sales (the "EXEMPT RESALES") of the Securities purchased by
the Initial Purchaser hereunder only on the terms and in the manner set forth
in the Offering Memorandum and Section 2 hereof, as soon as the Initial
Purchaser deems advisable after this Agreement has been executed and
delivered, (i) to persons in the United States whom the Initial Purchaser
reasonably believes to be qualified institutional buyers ("QUALIFIED
INSTITUTIONAL BUYERS") as defined in Rule 144A under the Act, as such rule
may be amended from time to time ("RULE 144A"), in transactions under Rule
144A and (ii) to a limited number of other institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) and (7) under Regulation D
of the Act) ("ACCREDITED INVESTORS") in private sales exempt from
registration under the Act (such persons specified in clauses (i) and (ii)
being referred to herein as the "ELIGIBLE PURCHASERS").
It is also understood and acknowledged (i) that holders
(including subsequent transferees) of the Notes will have the registration
rights set forth in the registration rights agreement (the "NOTES
REGISTRATION RIGHTS AGREEMENT") substantially in the form attached hereto as
EXHIBIT A-1, to be dated as of October 22, 1996, by and between the Company
and the Initial Purchaser, and (ii) that holders (including subsequent
transferees) of the Warrants and the Shares (of Common Stock issuable upon
exercise of the Warrants (the "WARRANT SHARES") will have the registration
rights set forth in the registration rights agreement)(the "WARRANT
REGISTRATION RIGHTS AGREEMENT" substantially in the form attached hereto as
EXHIBIT A-2, and together with the Notes Registration Rights Agreement, the
"REGISTRATION RIGHTS AGREEMENTS"), to be dated as of October 22, 1996, by and
between the Company and the Initial Purchaser.
The Initial Purchaser covenants and agrees with the Company
that it will deliver an Offering Memorandum in connection with each Exempt
Resale (to the extent made available by the
2
<PAGE>
Company) if the Company has not already done so and will not after the date of
this Agreement deliver any other offering materials other than the Offering
Memorandum or any amendment or supplement thereto in connection with any Exempt
Resale without the prior consent of the Company. In addition, the Initial
Purchaser shall advise the Company (which advice may be by telephone and if
required by the Company, confirmed in writing) when its initial distribution
(the "INITIAL DISTRIBUTION") of the Securities has been completed.
2. AGREEMENTS TO SELL, PURCHASE AND RESELL.
(a) The Company hereby agrees, subject to all of the
terms and conditions set forth herein, and upon the basis of the
representations, warranties and agreements of the Initial Purchaser, to issue
and sell to the Initial Purchaser and, upon the basis of the representations,
warranties and agreements of the Company herein contained and subject to all
of the terms and conditions set forth herein, the Initial Purchaser agrees to
purchase from the Company the amount of Securities set forth on Schedule I
attached hereto at a purchase price equal to $690.39 per Unit; provided,
however that the Initial Purchaser shall not have any obligation to take or
pay for any Units, Notes or Initial Warrants to the extent that any person to
whom it intends to effect an Exempt Resale fails or refuses to purchase on
the Closing Date (as defined below) the Securities which such person was to
purchase pursuant to the terms of such agreed upon Exempt Resale.
(b) The Initial Purchaser has advised the Company that
it will offer the Securities for sale upon the terms and conditions set forth
in this Agreement and in the Offering Memorandum. The Initial Purchaser
hereby represents and warrants to, and agrees with, the Company that it (i)
will not solicit offers for, or offer to sell, the Securities by means of any
form of general solicitation or general advertising or in any manner
involving a public offering within the meaning of Section 4(2) of the Act,
and (ii) will solicit offers for the Securities only from, and will offer,
sell or deliver the Securities as part of its initial offering only to, (A)
persons in the United States whom the Initial Purchaser reasonably believes
to be Qualified Institutional Buyers and the Initial Purchaser is unaware of
any facts indicating that any such representation or warranty is false or
inaccurate, or if any such person is buying for one or more institutional
accounts for which such person is acting as fiduciary or agent, only when
such person has represented to the Initial Purchaser that each such account
is a Qualified Institutional Buyer, to whom notice has been given that such
sale or delivery is being made in reliance on Rule 144A, in each case, in
transactions under Rule 144A and (B) to a limited number of Accredited
Investors that make the representations to and agreements with the Initial
Purchaser specified in Annex A to the Offering Memorandum in private sales
exempt from registration under the Act.
The Initial Purchaser has advised the Company that it will
offer the Units to Eligible Purchasers at a price initially equal to $690.39
per Unit, plus accrued original issue discount, if any, on the Notes from the
date of issuance of the Units. Such price may be changed by the Initial
Purchaser at any time thereafter without notice.
The Initial Purchaser understands that the Company and, for the
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 7(c) and 7(d) hereof, counsel to the Company will rely upon the accuracy
and truth of the foregoing representations and agreements and the Initial
Purchaser hereby consents to such reliance.
3
<PAGE>
DELIVERY OF THE SECURITIES AND PAYMENT THEREFOR. Delivery to
the Initial Purchaser of and payment for the Units shall be made at the
offices of Wilson Sonsini Goodrich & Rosati, P.C., at 10:00 a.m., New York
time, on October 22, 1996 (the "CLOSING DATE"). The place of closing for the
Securities and the Closing Date may be varied by agreement between the
Initial Purchaser and the Company.
The Securities shall be delivered to the Initial Purchaser
against payment of the purchase price therefor by wire transfer payable to
the order of the Company in New York Clearing House (next day) funds in
accordance with written instructions from the Company. The Notes will be
represented by a global security (the "GLOBAL NOTE") and the Initial Warrants
will be represented by a global security (the "GLOBAL WARRANT" and, together
with the Global Note, the "GLOBAL SECURITIES") and will be registered in the
name of Cede & Co. as nominee of The Depository Trust Company ("DTC"). The
Securities to be delivered to the Initial Purchaser have already been or
shall be made available to the Initial Purchaser in New York City for
inspection and packaging not later than 12:00 noon, New York City time, on
the business day immediately preceding the Closing Date.
4. AGREEMENTS OF THE COMPANY. The Company agrees with the
Initial Purchaser as follows:
(a) During the period of time specified in clause (e)
below of this Section 4, the Company shall advise the Initial Purchaser
promptly and, if requested by it, shall promptly confirm such advice in
writing, of any material adverse change, or of any event or condition known
to the Company which is reasonably likely to result in a material change, in
the condition (financial or other), business, prospects, liabilities
(contingent or otherwise), properties, net worth, solvency or results of
operations of the Company (whether or not arising in the ordinary course of
business), or of the happening of any event, any information becoming known
or the existence of any condition that would require any amendment or
supplement to the Offering Memorandum (as then amended or supplemented) so
that the Offering Memorandum (as so amended or supplemented) would not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The Company will furnish to the Initial Purchaser,
without charge, such number of copies of the Offering Memorandum and any
amendments or supplements thereto, as it may reasonably request.
(c) The Company will not make any amendment or
supplement to the Preliminary Offering Memorandum or to the Offering
Memorandum of which the Initial Purchaser shall not previously have been
furnished a copy a reasonable time prior to the making thereof or, at any
time prior to the payment for the Securities on the Closing Date, to which it
may reasonably object after being so advised.
(d) The Company consents to the use of the Offering
Memorandum (and of any amendment or supplement thereto prepared in accordance
with Section 4(c) hereof) in accordance with the securities or Blue Sky laws
of the jurisdictions in which the Securities are offered by the Initial
Purchaser and by all dealers to whom Securities may be sold, in connection
with the offering and sale of the Securities.
4
<PAGE>
(e) If, at any time prior to completion of the Initial
Distribution of the Securities by the Initial Purchaser to Eligible Purchasers,
any event shall occur, any information shall become known or any condition shall
exist that in the reasonable business judgment of the Company or in the opinion
of counsel for the Initial Purchaser would require any amendment or supplement
to the Offering Memorandum (as then amended or supplemented) so that the
Offering Memorandum (as so amended or supplemented) would not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, the Company will, in
each such case subject to Section 4(c) hereof, forthwith prepare, at the sole
expense of the Company, an appropriate supplement or amendment thereto, and will
expeditiously furnish to the Initial Purchaser that number of copies thereof as
it shall request.
(f) The Company will cooperate with the Initial
Purchaser and with its counsel in connection with the qualification of the
Securities for offering and sale by the Initial Purchaser and by dealers
under the securities or Blue Sky laws of such jurisdictions as the Initial
Purchaser may designate and will file such consents to service of process or
other documents necessary or appropriate in order to effect such
qualification.
(g) For a period of five (5) years after the Closing
Date, the Company will furnish to the Initial Purchaser (i) as soon as
available, a copy of each quarterly or annual report of the Company mailed to
stockholders or filed with the Securities and Exchange Commission (the
"COMMISSION"), and (ii) from time to time such other information concerning
the Company as the Initial Purchaser may reasonably request.
(h) The Company will apply the net proceeds from the
sale of the Securities in accordance with the description set forth under
"Use of Proceeds" in the Offering Memorandum.
(i) Except as stated in this Agreement and in the Offering
Memorandum, the Company has not taken, nor will it take, directly or indirectly,
any action designed to or that could reasonably be expected to cause or result
in stabilization or manipulation of the price of the Securities to facilitate
the sale or resale of the Securities. Except as permitted by the Act, the
Company will not distribute any offering material in connection with the Exempt
Resales. The Company will not, and will not permit any Affiliate (as defined in
the Indenture) or any person acting on its behalf to, solicit any offers to buy
and will not offer to sell the Securities by means of any form of general
solicitation or general advertising or by means of any directed selling efforts
(as defined under Regulation S and the Commission's releases related thereto).
(j) The Company will use its best efforts to cause the
Securities and the Contingent Warrants to be eligible for trading on PORTAL.
(k) From and after the Closing Date, so long as any of the
Securities or the Contingent Warrants are outstanding and are "restricted
securities" within the meaning of Rule 144(a)(3) under the Act or, if earlier,
until three years after the Closing Date, and during any period in which the
Company is not subject to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), the Company will furnish to holders and
beneficial owners of the Securities and the Contingent Warrants and prospective
purchasers of Securities or the Contingent
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Warrants designated by such holders, upon request of such holders or
beneficial owners or such prospective purchasers, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Act to permit compliance
with Rule 144A in connection with resales of the Securities.
(l) The Company represents that it has not, and agrees
that it will not and will cause its affiliates not to, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in the Act) that would be integrated with the sale of the
Securities in a manner that would require the registration under the Act of
the sale by the Company to the Initial Purchaser or by the Initial Purchaser
to the Eligible Purchasers of the Securities.
(m) The Company agrees to comply in all material
respects with the terms and conditions of the Registration Rights Agreements,
the Warrant Agreement and all agreements set forth in the representation
letters of the Company to DTC relating to the approval of the Securities and
the Contingent Warrants by DTC for "book entry" transfer.
(n) The Company agrees that prior to any registration of
the Notes pursuant to the Notes Registration Rights Agreement, or at such
earlier time as may be so required, the Indenture shall, if so required, be
qualified under the Trust Indenture Act of 1939 (the "1939 ACT") and will
enter into any necessary supplemental indentures in connection therewith.
(o) Prior to the Closing Date, the Company will furnish
to the Initial Purchaser, if and as soon as prepared by the Company, a copy
of any unaudited interim consolidated quarterly financial statements of the
Company for any period subsequent to the period covered by the most recent
consolidated financial statements of the Company appearing in the Offering
Memorandum.
(p) The Company shall not, until 90 days following the
Closing Date, without the prior written consent of the Initial Purchaser,
offer, sell or contract to sell, or otherwise dispose of, directly or
indirectly, or announce the offering of, any securities issued by the Company
(other than the Securities, any debt securities of the Company issued
pursuant to the Notes Registration Rights Agreement in exchange for the
Notes, any Common Stock and/or options, warrants or other Common Stock
purchase rights, and the Common Stock issued pursuant to such options,
warrants or other rights, to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors of the Company and indebtedness permitted under the
Indenture).
(q) The Company will not claim voluntarily, and will,
subject to the fiduciary duties of the Board of Directors of the Company and
applicable law, resist actively any attempts to claim, the benefit of any
usury laws against the holders of any Notes.
(r) Not to, and to cause its affiliates not to, sell any
Securities or Contingent Warrants that have been acquired by any of them.
(s) The Company will amend promptly its Amended and
Restated Certificate of Incorporation to clarify that the definition of
"Additional Shares" includes the Contingent Warrants and shares of Common
Stock issuable upon exercise thereof.
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(t) The Company will do and perform in all material
respects all things required to be done and performed under this Agreement
and the other Transaction Documents by it on, prior to, and after the Closing
Date.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Initial Purchaser on the date hereof
and as of the Closing Date that:
(a) No order or decree preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum or any amendment
or supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements
of the Act has been issued, and no proceeding for that purpose has commenced
or is pending or, to the knowledge of the Company, is contemplated.
(b) The Preliminary Offering Memorandum and the Offering
Memorandum as of their respective dates and the Offering Memorandum as of the
Closing Date and any amendment or supplement thereto as of its date and as of
the Closing Date, did not and will not (as of the Closing Date) contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except
that this representation and warranty does not apply to (i) statements in or
omissions from the Preliminary Offering Memorandum and Offering Memorandum
made in reliance upon and in conformity with information relating to the
Initial Purchaser furnished to the Company in writing by or on behalf of the
Initial Purchaser expressly for use therein or (ii) statements in or
omissions from the Preliminary Offering Memorandum that are supplemented,
corrected or modified in, or, as the case may be, added to, the Offering
Memorandum. Notwithstanding the preceding sentence, with respect to the
projections and the underlying assumptions upon which they are based
contained in the Offering Memorandum, the Company represents only that such
projections were prepared in good faith with a reasonable belief in the
underlying assumptions upon which the projections were based.
(c) The Indenture has been duly and validly authorized
by the Company and, upon execution, delivery and performance thereof by the
Company and assuming due authorization, execution, delivery and performance
thereof by the Trustee, will be a valid and legally binding agreement of the
Company, enforceable in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity; the Indenture conforms in all
material aspects to the summary description thereof in the Offering
Memorandum; and no qualification of the Indenture under the 1939 Act is
required in connection with the offer and sale of the Securities contemplated
hereby (except for sales of Notes pursuant to the Exchange Offer, as defined
in the Indenture) or in connection with the Exempt Resales.
(d) The Company has all the requisite power and
authority to execute and deliver each of the Transaction Documents and the
Contingent Warrants and perform its obligations thereunder; the execution and
delivery of, and the performance by the Company of each of its obligations
under, each of the Transaction Documents and the Contingent Warrants have
been duly and validly authorized by the Company, and each of the Transaction
Documents has been duly executed and delivered by the Company and constitutes
the valid and legally binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as such enforcement
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may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and subject to the applicability
of general principles of equity, and except as rights to indemnity and
contribution under such Transaction Document may be limited by Federal or
state securities laws.
(e) The execution and delivery of, and the performance
by the Company of each of its obligations under, each of the Second Amended
and Restated Investors' Rights Agreement dated August 27, 1996, as amended on
October 22, 1996 (the "Investors' Rights Agreement") among Jens H. Molbak and
the investors listed in Exhibit A thereto, and the Amended and Restated
Co-Sale Agreement dated December 15, 1995, as amended on October 22, 1996
(the "Co-Sale Agreement") among the Company, Jens H. Molbak and the holders
of the Company's Series C Preferred Stock and/or Series D Preferred Stock,
have been duly and validly authorized by the Company, and each of the
Investors' Rights Agreement and the Co-Sale Agreement has been duly executed
and delivered by the Company and constitutes the valid and legally binding
agreement of the Company, enforceable against the Company in accordance with
its terms, except as such enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors'
rights generally and subject to the applicability of general principles of
equity, and except as rights to indemnity and contribution under such
Investors' Rights Agreement and Co-Sale Agreement may be limited by Federal
or state securities laws. The amendments to each of the Investors' Rights
Agreement and the Co-Sale Agreement have been duly approved by the parties to
such Investors' Rights Agreement and Co-Sale Agreement, other than the
Company, in accordance with their respective terms and are in full force and
effect.
(f) The Securities have been duly authorized by the
Company, and, when executed by the Company and, in the case of the Notes,
authenticated by the Trustee in accordance with the Indenture or, in the case
of the Warrants, countersigned by the Warrant Agent in accordance with the
provisions of the Warrant Agreement, and, in the case of the Notes and the
Initial Warrants, delivered to the Initial Purchaser against payment therefor
in accordance with the terms hereof, and, in the case of the Contingent
Warrants, delivered to the holders of the Notes upon the occurrence of a
Contingent Event, will have been validly issued and delivered, and will
constitute valid and legally binding obligations of the Company, in the case
of the Notes, entitled to the benefits of the Indenture and, in the case of
the Warrants, entitled to the benefits of the Warrant Agreement and
enforceable in accordance with their respective terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity, and the Securities conform in
all material respects to the summary descriptions thereof in the Offering
Memorandum. The Contingent Warrants have been duly authorized by the
Company, and when executed by the Company and authenticated by the Warrant
Agent in accordance with the provisions of the Warrant Agreement, will have
been validly issued and delivered and will constitute valid and legally
binding obligations of the Company, entitled to the benefits of the Warrant
Agreement, and enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and subject to
the applicability of general principles of equity, and the Contingent
Warrants conform in all material respects to the summary descriptions thereof
in the Offering Memorandum.
(g) When issued in accordance with the terms and
conditions contained in the Warrant Agreement upon exercise of the Warrants,
the Warrant Shares will be duly authorized,
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validly issued, fully paid and non-assessable and will not be subject to any
preemptive or similar rights, other than the right of first refusal set forth in
the Investors' Rights Agreement which right has been properly waived. The
Warrant Shares have been duly reserved for issuance in accordance with the terms
of the Warrants and the Warrant Agreement.
(h) The Initial Warrants and the Contingent Warrants, when
issued, will represent the right to acquire upon exercise initially not less
than approximately 5.2% and 2.2% respectively, of the outstanding common equity
of the Company on a fully diluted basis as of the Closing Date (after giving
effect to the maximum number of shares of common equity of the Company
deliverable upon exercise, conversion or exchange of all vested stock options
and restricted stock, preferred stock and in the money warrants outstanding as
of the Closing Date including, without limitation, the Warrants (but not
including the Contingent Warrants) and excluding unvested outstanding stock
options and restricted stock repurchaseable at cost by the Company).
(i) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable and are free of any preemptive or similar rights, other than the
right of first refusal set forth in the Investors' Rights Agreement, and were
issued and sold in compliance in all material respects with all applicable
Federal and state securities laws. The Company has the authorized
capitalization as set forth in the Offering Memorandum.
(j) The Company is a corporation duly organized and validly
existing under the laws of the State of Delaware with full corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum, and is duly registered or qualified to
conduct its business and is in good standing in each jurisdiction wherein the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify and maintain good standing could not, singly or in the aggregate with
all other such failures, reasonably be expected to have a material adverse
effect on the condition (financial or other), business, prospects, liabilities
(contingent or otherwise) properties, net worth, solvency or results of
operations of the Company (any such event, a "MATERIAL ADVERSE EFFECT").
(k) The Amended and Restated Certificate of
Incorporation of the Company has been properly amended to provide that no
redemption rights exercisable by the holders of any of the Company's
preferred stock shall become exercisable before April 30, 2007.
(l) The Company has, on the date of this Agreement, no
subsidiaries.
(m) There are no legal or governmental proceedings
pending or, to the knowledge of the Company, threatened, against the Company
or to which the Company or any of its properties or assets is subject, or
which question the validity of any of the Transaction Documents or the
Contingent Warrants or the right of the Company to enter into any of the
Transaction Documents or the Contingent Warrants or to consummate the
transactions contemplated hereby, that are not disclosed in the Offering
Memorandum. The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency
or instrumentality. The Company is not involved in any strike, job action or
labor dispute with any group of employees, and, to the knowledge of the
Company, no such action or dispute is threatened. The Company has no
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<PAGE>
collective bargaining agreements with any of its employees. Except as set forth
in the Offering Memorandum, no employee has any agreement or contract, written
or verbal, regarding employment and each employee is employed on an "at will"
basis and has no right to any compensation following termination of employment
with the Company, except to the extent that any such agreement or contract or
any such compensation could not reasonably be expected to have a Material
Adverse Effect.
(n) No statute, rule, regulation or order that has been
enacted, adopted or issued by any governmental agency and no injunction,
restraining order or order of any nature by a Federal or state court of
competent jurisdiction to which the Company is subject has been issued or to
the best knowledge of the Company is pending that (i) would interfere with or
adversely affect the issuance of the Securities or the Contingent Warrants or
(ii) would in any manner draw into question the validity of this Agreement,
any Transaction Document or the Contingent Warrants.
(o) The Company has not violated any Federal, state or
local law relating to discrimination in hiring, promotion or pay of
employees, except to the extent that any such violation could not reasonably
be expected to have a Material Adverse Effect.
(p) The Company is not (i) in violation of its articles of
incorporation or bylaws or other organizational documents, or (ii) in violation
of any statute, ordinance, law, administrative or governmental rule or
regulation or filing or judgment, injunction, order or decree of any court or
governmental agency or body, foreign or domestic, applicable to the Company or
its properties or assets (collectively, "LAW AND LEGAL REQUIREMENTS"), except
where any such violation could not, singly or in the aggregate with all other
such violations, reasonably be expected to have a Material Adverse Effect or
(iii) in breach of or in default in the performance of (including any event
which, with notice or lapse of time or both, would constitute a breach of or a
default in the performance of) any obligation, agreement or condition contained
in any bond, debenture, note or any other evidence of indebtedness, agreement,
indenture, lease or other instrument to which the Company is a party or by which
the Company or any of its properties may be bound (collectively, "AGREEMENTS AND
INSTRUMENTS"), except (A) as may be disclosed in the Offering Memorandum or (B)
where any such breach or default could not, singly or in the aggregate with all
other such breaches and defaults, reasonably be expected to have a Material
Adverse Effect.
(q) The issuance, offer, sale and delivery of the
Securities, the issuance and delivery of the Contingent Warrants (assuming
the Contingent Warrants were issued concurrently with the Securities), the
execution, delivery and performance of the Transaction Documents and the
Contingent Warrants by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not: (i) require
any consent, approval, authorization or other order of, or registration or
filing with, any court, regulatory body, administrative agency or other
governmental body, agency or official (collectively, "CONSENTS AND FILINGS"),
except (A) such as may be required under the Act in connection with the
performance of the Company's obligations under the Registration Rights
Agreements and the qualification of the Indenture under the 1939 Act in
connection with the consummation of the transactions contemplated by the
Notes Registration Rights Agreement and (B) compliance with the state
securities or Blue Sky laws of applicable jurisdictions; (ii) conflict with
or constitute a breach of or a default under (including any event which, with
notice or lapse of time or both, would constitute a breach of or a default
under), the articles of incorporation or bylaws or other organizational
documents of the Company; (iii) conflict with or
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constitute a breach of or a default under (including any event which, with
notice or lapse of time or both, would constitute a breach of or a default
under) any Agreement or Instrument, except any such conflict, breach or default
that could not, singly or in the aggregate with all other such conflicts,
breaches and defaults, reasonably be expected to have a Material Adverse Effect;
(iv) violate any Law or Legal Requirement, except any such violation that could
not, singly or in the aggregate with all other such violations, reasonably be
expected to have a Material Adverse Effect; or (v) result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to the terms of any Agreement or Instrument.
(r) No consents or waivers from any other person are
required for the execution, delivery and performance of this Agreement and
the other Transaction Documents and the Contingent Warrants by the Company
and the consummation of the transactions contemplated hereby and thereby,
other than such consents and waivers as have been obtained and are in full
force and effect.
(s) The financial statements of the Company included in
the Offering Memorandum, present fairly in all material respects the
financial position, results of operations and cash flows of the Company, at
the dates and for the periods to which they relate, and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis ("GAAP") and, in the case of such financial statements for
annual periods, have been audited by Deloitte & Touche LLP which has issued
an unqualified report thereon. The pro forma financial information included
in the Offering Memorandum (the "PRO FORMA INFORMATION") is in all respects
computationally accurate and has been prepared on a basis consistent with the
audited historical financial statements of the Company included in the
Offering Memorandum, except for the pro forma adjustments specified therein,
and give effect to assumptions made on a reasonable basis to give effect to
historical and proposed transactions and events described in the Offering
Memorandum. The statistical data included in the Offering Memorandum are
true and correct in all material respects. The Company has no material
liabilities (whether matured or unmatured, fixed or contingent) not disclosed
in the financial statements of the Company included in the Offering
Memorandum that are required to be so disclosed under GAAP, and is not aware
of any material contingent or unmatured liabilities not required to be so
disclosed, except expenses incurred in connection with this offering and
current liabilities incurred in the ordinary course of business subsequent to
the date of such financial statements. There are no loss contingencies (as
such term is used in Statement of Financial Accounting Standards No. 5 issued
by the Financial Accounting Standards Board in March 1975) which are not
adequately provided for in such financial statements.
(t) The projections contained in the Offering Memorandum
have been prepared by the Company and are based on reasonable and good faith
estimates and assumptions of the Company and the Company has no reason to
believe that such estimates and assumptions are not fair and reasonable.
Notwithstanding the preceding sentence, with respect to the projections and
the underlying assumptions upon which they are based contained in the
Offering Memorandum, the Company represents only that such projections were
prepared in good faith with a reasonable belief in the underlying assumptions
upon which the projections were based.
(u) Except as disclosed in the Offering Memorandum,
subsequent to the date as of which such information is given in the Offering
Memorandum, the Company has not incurred any liability or obligation, direct
or contingent, or entered into or agreed to enter into any
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transaction, whether or not in the ordinary course of business, that is material
to the Company, and there has not been any material change in the capital stock,
or material increase in the short-term or long-term debt, of the Company or any
material adverse change, or any development involving or which could reasonably
be expected to involve a prospective material adverse change, in or affecting
the condition (financial or other), business, prospects, liabilities (contingent
or otherwise), properties, net worth, solvency or results of operations of the
Company (whether or not arising in the ordinary course of business), and there
have not been dividends or distributions of any kind declared, paid or made by
the Company on any class of its capital stock.
(v) The Company has good and, if applicable, marketable
title to all property (real and personal) described in the Offering
Memorandum as being owned by it (or so reflected in the financial statements
included in the Offering Memorandum), free and clear of all liens, claims,
security interests or other encumbrances, except such as are described in the
Offering Memorandum and except for any such lien, claim, security interest or
other encumbrance which could not, singly or in the aggregate with all other
liens, claims, security interests or encumbrances, reasonably be expected to
have a Material Adverse Effect, and all the property described in the
Offering Memorandum as being held under lease by the Company is, to the
Company's knowledge, held by it under valid, subsisting and enforceable
leases, with only such exceptions as in the aggregate are not materially
burdensome and do not interfere in any material respect with the conduct of
the business of the Company, and no default by the Company has occurred and
is continuing thereunder, except such as are described in the Offering
Memorandum or as could not, singly or in the aggregate with all such other
defaults, reasonably be expected to have a Material Adverse Effect, and to
the knowledge of the Company no material defaults by the landlord are
existing under any such lease. The Company possesses or has rights to use
all of the property that is necessary for the conduct of the business of the
Company as set forth in the Offering Memorandum. The number of Coinstar
units installed and operating is not less than that set forth in the Offering
Memorandum.
(w) Except as permitted by the Act or otherwise agreed
to by the Initial Purchaser, the Company has not distributed and, prior to
the later to occur of the Closing Date and completion of the Initial
Distribution of the Securities (which includes the sale by the Initial
Purchaser), will not distribute any offering material in connection with the
offering and sale of the Securities other than the Preliminary Offering
Memorandum and Offering Memorandum (and any amendment or supplement thereto
in accordance with Section 4(c) hereof).
(x) Except as set forth in the Offering Memorandum, the
Company has all such permits, licenses, franchises, certificates of need and
other approvals or authorizations of governmental or regulatory authorities
("PERMITS") as are necessary under applicable law to own its properties and
to conduct its businesses in the manner conducted as of the Closing Date as
described in the Offering Memorandum, except to the extent that the failure
to have any such Permit could not, singly or in the aggregate with all other
such failures, reasonably be expected to have a Material Adverse Effect; the
Company has fulfilled and performed, in all material respects, all its
material obligations with respect to the Permits; and, except as described in
the Offering Memorandum, none of the Permits contains any restriction that is
materially burdensome to the Company.
(y) Neither the Company nor, to the knowledge of the
Company, any employee or agent of the Company has made any payment of funds
of the Company or received or
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retained any funds in violation of any law, rule or regulation, which violation
could, singly or in the aggregate with all other such violations, reasonably be
expected to have a Material Adverse Effect.
(z) Except as disclosed in the Offering Memorandum, the
Company has filed all tax returns required to be filed, and such returns are
true and correct in all material respects, and the Company is not delinquent
in the payment of any taxes which were payable pursuant to said returns or
any assessments with respect thereto, except where the failure to file any
such return or make any such payment could not, singly or in the aggregate
with all other such failures, reasonably be expected to have a Material
Adverse Effect. The Company does not know of any material proposed additional
tax assessments against it.
(aa) Except as described in the Offering Memorandum, no
holder of any security of the Company (other than holders of the Securities)
has any right to request or demand registration of any security of the
Company because of the consummation of the transactions contemplated by the
Transaction Documents and the Contingent Warrants. Except as described in
the Offering Memorandum, other than the Warrants to be issued and sold
pursuant to the Warrant Agreement, there are no outstanding options, warrants
or other rights calling for the issuance of, and there are no commitments or
arrangements to issue, any shares of capital stock of the Company or any
security convertible into or exchangeable or exercisable for capital stock of
the Company, and there are no rights or obligations of the Company to redeem
or repurchase, or rights of any holder of any shares of capital stock of the
Company or any security convertible into or exchangeable or exercisable for
capital stock of the Company to cause the Company, to redeem or repurchase,
any shares of capital stock of the Company or any security convertible into
or exchangeable or exercisable for capital stock of the Company.
(bb) Except as set forth in the Offering Memorandum, the
Company owns or possesses or has the right to use all patents, trademarks,
trademark registrations, service marks, service mark registrations, trade
names, copyrights, licenses, inventions, trade secrets and rights described
in the Offering Memorandum as being owned, possessed or used by it or
necessary for the conduct of its business (collectively, the "INTELLECTUAL
PROPERTY"), except to the extent that the failure to own or possess such
Intellectual Property could not, singly or in the aggregate with all such
other failures, reasonably be expected to result in any Material Adverse
Effect, and the Company is not aware of any claim, or basis for a claim, to
the contrary or any challenge, or basis for a challenge, by any other person
to the rights of the Company with respect to the foregoing. The use of such
Intellectual Property in connection with the business and operations of the
Company does not infringe on the rights of any person or entity, except to
the extent that any such infringement could not, singly or in the aggregate
with all such other infringements, reasonably be expected to result in any
Material Adverse Effect. No royalties or fees are payable by the Company to
other persons or entities by reason of the ownership or use of any
Intellectual Property. To the knowledge of the Company, no employee of the
Company is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any Court or administrative agency, that would interfere
with such employee's duties to the Company or that would conflict with the
Company's business except as set forth in the Offering Memorandum. Neither
the execution nor delivery of the Transaction Documents or the consummation
of the transactions contemplated hereby will, to the Company's knowledge,
conflict with or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any contract, covenant or instrument under
which any employee is obligated.
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(cc) The Company is not and, upon sale of the Securities
to be issued and sold hereby in accordance herewith and the application of
the net proceeds to the Company of such sale as described in the Offering
Memorandum under the caption "Use of Proceeds," will not be an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(dd) When the Securities are issued and delivered
pursuant to this Agreement and the applicable Transaction Documents, such
Securities will not be of the same class (within the meaning of Rule
144A(d)(3) under the Act) as any security issued by the Company that is
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that is quoted in a United States automated interdealer
quotation system.
(ee) Neither the Company nor any of its affiliates, has
directly, or through any agent (provided that no representation is made as to
the Initial Purchaser or any person acting on its behalf): (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Act) that is or will be integrated with the
offering and sale of the Securities in a manner that would require the
registration of the Securities under the Act; (ii) engaged in any form of
general solicitation or general advertising (within the meaning of Regulation
D under the Act) in connection with the offering of the Securities including,
but not limited to, articles, notices or other communications published in
any newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising; or (iii) engaged in any directed
selling efforts within the meaning of Rule 903 under the Act and the
Commission's Release No. 33-6883. No securities of the same class as the
Notes or Warrants have been issued and sold by the Company within the
six-month period immediately prior to the date hereof, except for the sale of
100,000 shares of Series E-1 Preferred Stock, warrants to purchase 350,000
shares of Series E-2 Preferred Stock and warrants to purchase 550,000 shares
of Series E-3 Preferred Stock.
(ff) Assuming (i) that the representations and warranties
in Section 2 hereof are true and correct, (ii) that the Initial Purchaser
complies with the covenants set forth in Section 2 hereof and (iii) that each
person to whom the Initial Purchaser offers, sells or delivers the Securities
is an Eligible Purchaser, the purchase and sale of the Securities pursuant
hereto (including the Initial Purchaser's proposed offering of the Securities
on the terms and in the manner set forth in the Offering Memorandum and
Section 2 hereof) is exempt from the registration requirements of the Act.
(gg) The Company is in compliance with, and not subject
to any liability under, the common law and all applicable federal, state and
local laws, regulations, rules, codes, ordinances, directives, and orders
relating to pollution or to protection of public or employee health or safety
or to the environment, including, without limitation, those that relate to
any Hazardous Material (as defined herein) ("ENVIRONMENTAL LAWS"), except, in
each case, where noncompliance or liability, singly or in the aggregate with
all other such noncompliance and liabilities, could not reasonably be
expected to have a Material Adverse Effect. The term "HAZARDOUS MATERIAL"
means any pollutant, contaminant or waste, or any hazardous, dangerous, or
toxic chemical, material, waste, substance or constituent subject to
regulation under any Environmental Law.
(hh) The Company is not, nor will it be, after giving
effect to the issuance of the Securities and the execution, delivery and
performance of this Agreement and the
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consummation of the transactions contemplated hereby, (i) insolvent, (ii) left
with unreasonably small capital with which to engage in its existing businesses
or other businesses in which the Company presently proposes to engage or (iii)
incurring debts beyond its ability to pay such debts as they mature.
(ii) The Offering Memorandum, as of its date, and each
amendment or supplement thereto, as of its date, contains all the information
specified in, and meets the requirements of, Rule 144A(d)(4) under the Act.
(jj) Deloitte & Touche LLP are independent public
accountants with respect to the Company as required by the Act.
(kk) The Company maintains insurance of the types and in
the amounts that are reasonable for its business as set forth in the Offering
Memorandum, except where the failure to maintain such insurance could not
reasonably be expected to have a Material Adverse Effect.
(ll) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed and access to assets is permitted in accordance
with management's general and specific authorizations; and (ii) transactions
are recorded as necessary to permit the preparation of financial statements
in conformity with GAAP and to maintain accountability for assets.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless the
Initial Purchaser and each person, if any, who controls the Initial Purchaser
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or Offering Memorandum (including the Exhibits
thereto) or in any amendment or supplement thereto, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except, with
respect to the Initial Purchaser, insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with the information
relating to the Initial Purchaser furnished in writing to the Company by or on
behalf of the Initial Purchaser expressly for use therein. The foregoing
indemnity agreement shall be in addition to any liability which the Company may
otherwise have; PROVIDED, HOWEVER, that the indemnification contained in this
paragraph (a) with respect to the Preliminary Offering Memorandum shall not
inure to the benefit of the Initial Purchaser (or to the benefit of any person
controlling the Initial Purchaser) on account of any such loss, claim, damage,
liability or expense arising from the sale of the Securities by the Initial
Purchaser to any person if such untrue statement or alleged untrue statement
contained in, or omission or alleged omission of a material fact from, the
Preliminary Offering Memorandum upon which such loss, claim, damage, liability
or expense is based was completely corrected in the Offering Memorandum and that
the Initial Purchaser sold Securities to that person without sending or giving
at or prior to the written confirmation of such sale, a copy of the Offering
Memorandum (as
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then amended or supplemented), of which the Company had previously furnished
sufficient copies to the Initial Purchaser as required hereby.
(b) The Initial Purchaser agrees to indemnify and hold
harmless the Company, and its directors and officers, and any person who
controls the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act to the same extent as the indemnity from the Company
to the Initial Purchaser set forth in paragraph (a) hereof, but only with
respect to information relating to the Initial Purchaser furnished in writing
by or on behalf of the Initial Purchaser expressly for use in the Preliminary
Offering Memorandum or Offering Memorandum or any amendment or supplement
thereto. If any action, suit or proceeding shall be brought against the
Company, any of its directors or officers, or any such controlling person
based on the Preliminary Offering Memorandum or Offering Memorandum, or any
amendment or supplement thereto, and in respect of which indemnity may be
sought against the Initial Purchaser pursuant to this paragraph (b), the
Initial Purchaser shall have the rights and duties given to the Company by
paragraph (c) (except that if the Company shall have assumed the defense
thereof the Initial Purchaser shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the Initial Purchaser's expense),
and the Company, its directors and officers, and any such controlling person
shall have the rights and duties given to the Initial Purchaser by paragraph
(c). The foregoing indemnity agreement shall be in addition to any liability
which the Initial Purchaser may otherwise have.
(c) If any action, suit or proceeding shall be brought
against the parties or any person entitled to indemnification under this
Section 6 (the "INDEMNIFIED PARTIES") in respect of which indemnity may be
sought, the indemnified parties shall promptly notify the parties against
whom indemnification is being sought (the "INDEMNIFYING PARTIES"), and such
indemnifying parties shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the indemnified parties and
payment of all reasonable fees and expenses. The indemnified parties shall
have the right to employ separate counsel in any such action, suit or
proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the indemnified parties
unless (i) the indemnifying parties have agreed to pay such fees and
expenses, (ii) the indemnifying parties have failed to assume the defense and
employ counsel reasonably satisfactory to the indemnified parties on a timely
basis, or (iii) the named parties to any such action, suit or proceeding
(including any impleaded parties) include both (a) the indemnified parties
and (b) any of the indemnifying parties, and the indemnified parties shall
have been advised by its counsel that representation of such indemnified
party and the indemnifying party by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the indemnifying
party shall not have the right to assume the defense of such action, suit or
proceeding on behalf of the indemnified parties). It is understood, however,
that the indemnifying parties shall, in connection with any one such action,
suit or proceeding or separate but substantially similar or related actions,
suits or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
the indemnified parties, which firm shall be designated in writing by the
indemnified party and be reasonably acceptable to the indemnifying party, and
that all such fees and expenses shall be reimbursed on a monthly basis. The
indemnifying parties shall not be liable for any settlement of any such
action, suit or proceeding effected without their written consent (which
shall not be unreasonably withheld or delayed), but if settled with such
written
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consent, or if there be a final judgment for the plaintiff in any such
action, suit or proceeding, the indemnifying parties agree to indemnify and
hold harmless each of the indemnified parties, to the extent provided in
paragraph (a) or (b), as applicable, against any loss, claim, damage,
liability or expense by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section
6 is unavailable for any reason to an indemnified party under paragraphs (a)
or (b) hereof or is insufficient to hold any such indemnified party
completely harmless in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Initial Purchaser on the other hand from the offering of the Securities, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company on the one hand and the Initial Purchaser on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the Initial Purchaser on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total discounts and
commissions received by the Initial Purchaser, in each case as set forth in
the table on the cover page of the Offering Memorandum. The relative fault
of the Company on the one hand and the Initial Purchaser on the other hand
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company on the one hand or by the Initial Purchaser on the other hand and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(e) The Company and the Initial Purchaser agree that it
would not be just and equitable if contribution pursuant to this Section 6
were determined by a pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to
in paragraph (d) above shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating any claim or depending on
any such action, suit or proceeding. Notwithstanding the provisions of this
Section 6, the Initial Purchaser shall not be required to contribute any
amount in excess of the purchase discount or commission applicable to the
Notes purchased by the Initial Purchaser hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses
for which an indemnified party is entitled to indemnification or contribution
under this Section 6 shall be paid by the indemnifying party to the
indemnified party as such losses, claims, damages, liabilities or expenses
are incurred. Each successor to the Initial Purchaser or any person who
controls the Initial Purchaser, and each successor to the Company, or any
person controlling the Company and their respective
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directors or officers, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 6.
(g) No indemnifying party shall, without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld), effect any settlement or compromise of any pending or
threatened proceeding in respect of which any indemnified party is or could
have been a party, or indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional written
release of such indemnified party, in form and substance reasonably
satisfactory to such indemnified party, from all liability on claims that are
the subject matter of such proceeding.
7. CONDITIONS OF THE INITIAL PURCHASER'S OBLIGATIONS. The
obligation of the Initial Purchaser to purchase the Securities hereunder is
subject to the fulfillment, in the Initial Purchaser's sole discretion, of
the following conditions:
(a) At the time of execution of this Agreement and on
the Closing Date, no order or decree preventing the use of the Offering
Memorandum or any amendment or supplement thereto, or any order asserting
that the transactions contemplated by this Agreement are subject to the
registration requirements of the Act shall have been issued, and no
proceedings for that purpose shall have been commenced or shall be pending
or, to the knowledge of the Company, be contemplated. No order suspending
the sale of the Securities in any jurisdiction shall have been issued, and no
proceedings for that purpose shall have been commenced or shall be pending
or, to the knowledge of the Company, shall be contemplated.
(b) Subsequent to the date hereof and prior to the
Closing Date, the conduct of the business and operations of the Company has
not been interfered with by strike, fire, flood, hurricane, accident or other
calamity (whether or not insured) and, except as otherwise stated in the
Offering Memorandum, the properties of the Company have not sustained any
loss or damage (whether or not insured) as a result of any such occurrence,
except any such interference, loss or damage which could not, singly or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(c) The Initial Purchaser shall have received on the
Closing Date an opinion of Cooley Godward LLP counsel for the Company, dated
the Closing Date and addressed to the Initial Purchaser, in form and
substance satisfactory to Latham & Watkins, counsel for the Initial
Purchaser, to the effect that:
(i) The Company is a corporation duly incorporated
and validly existing in good standing under the laws of the State of Delaware
with full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering
Memorandum and, to the best of such counsel's knowledge, is duly registered
and qualified to conduct its business and is in good standing as a foreign
corporation in each jurisdiction where the nature of its properties or the
conduct of its business requires such registration or qualification, except
(a) in Massachusetts and New York, where the Company is not in good standing,
and (b) where the failure so to register or qualify or to be in good standing
could not, singly or in the aggregate with all other such failures,
reasonably be expected to have a Material Adverse Effect;
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(ii) The authorized capital stock of the Company,
and to such counsel's knowledge, the number of outstanding shares of the
Company's Capital Stock as of the date of the Offering Memorandum is as set
forth in the second paragraph under the caption "Description of Capital
Stock" in the Offering Memorandum, and to such counsel's knowledge, the
number of the Company's outstanding warrants is as set forth under the
caption "Warrants" in the Offering Memorandum.
(iii) The Company has corporate power and authority
to enter into this Agreement and the other Transaction Documents and to
issue, sell and deliver the Notes, the Initial Warrants and the Contingent
Warrants to be sold by it to the Initial Purchaser as provided herein;
(iv) The Notes, the Initial Warrants and the
Contingent Warrants have been duly and validly authorized by the Company;
(v) The Warrant Shares have been duly reserved by
the Company for issuance upon exercise of the Initial Warrants in sufficient
number to cover the exercise of all of the Initial Warrants at the initial
number of Warrant Shares deliverable upon exercise of the Initial Warrants,
and the issuance of the Warrant Shares upon exercise of the Warrants has been
duly and validly authorized, and the Warrant Shares, when paid for and
delivered in accordance with the terms of the Warrants and the Warrant
Agreement, will be validly issued, fully paid and nonassessable. The shares
of Common Stock issuable upon exercise of the Contingent Warrants have been
duly reserved by the Company for issuance upon exercise of the Contingent
Warrants in sufficient number to cover the exercise of all the Contingent
Warrants at the initial number of shares deliverable upon exercise of the
Contingent Warrants, and the issuance of the initial number of shares
issuable upon exercise of the Warrants has been duly and validly authorized,
and such shares, when paid for and delivered in accordance with the terms of
the Contingent Warrants and the Initial Warrant Agreement, will be validly
issued, fully paid and nonassessable. To such counsel's best knowledge, no
holder of capital stock of the Company has preemptive or similar rights
applicable to the Initial Warrants, or the Warrant Shares or the Contingent
Warrants other than the right of first refusal set forth in the Investors'
Rights Agreement which has been waived;
(vi) (w) the issuance and delivery of the
Contingent Warrants (assuming the Contingent Warrants were issued
concurrently with the Securities), (x) the offer, sale or delivery of the
Securities and (y) the execution, delivery or performance by the Company of
this Agreement and the other Transaction Documents, compliance by the Company
with the provisions hereof or thereof and consummation by the Company of the
transactions contemplated hereby or thereby do not conflict with and do not
constitute a breach of, or a default under (including any event which, with
notice or lapse of time or both, would become a breach of or a default
under), (a) the Amended and Restated Certificate of Incorporation, as
amended, or bylaws of the Company or (b) any Agreement or Instrument which is
known to such counsel, except, with respect to this clause (b) any such
conflict, breach or default that could not, singly or in the aggregate, with
all such other conflicts, breaches and defaults, reasonably be expected to
have a Material Adverse Effect;
(vii) To the best knowledge of such counsel, there
are no legal or governmental proceedings pending or threatened against the
Company or to which the Company or any of its property or assets is subject,
which (A) are not disclosed in the Offering
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Memorandum and which, if adversely decided, could, singly or in the aggregate
with all other such proceedings, reasonably be expected to have a Material
Adverse Effect or (B) seek to restrain or prohibit the consummation of the
transactions contemplated by the Transaction Documents;
(viii) To the best knowledge of such counsel, except
as provided under the Investors' Rights Agreement, no holder of any
securities of the Company (except for the holders of the Notes and the
Initial Warrants) or any other person has the right to have any securities of
the Company included in any registration statement contemplated by the
Registration Rights Agreements. To the best knowledge of such counsel,
except as described in the Offering Memorandum, other than the Warrants,
there are no (a) outstanding options, warrants or other rights calling for
the issuance of any shares of capital stock of the Company or any security
convertible into or exchangeable or exercisable for capital stock of the
Company, (b) commitments or arrangements to issue any shares of capital
stock of the Company or any security convertible into or exchangeable or
exercisable for capital stock of the Company, or (c) obligations of the
Company to redeem or repurchase any shares of capital stock of the Company or
any security convertible into or exchangeable or exercisable for capital
stock of the Company;
(ix) No registration of any of the Securities under
the Act is required for the sale of the Securities to the Initial Purchaser
as contemplated in this Agreement or for the Exempt Resales (relying on (A)
the accuracy of the representations made by each person who buys the
Securities in the Exempt Resales that such person is an Eligible Purchaser,
(B) the accuracy of the Initial Purchaser's representations and those of the
Company in this Agreement regarding the absence of general solicitation and
general advertising in connection with the Exempt Resales and (C) the
accuracy of the representations made by each Accredited Investor who
purchases Securities pursuant to an Exempt Resale as set forth in the letter
of representation executed by such Accredited Investor in the form of Annex A
to the Offering Memorandum);
(x) The statements in the Offering Memorandum,
entitled "Offering Memorandum Summary - The Company," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operation," "Business," "Certain Transactions" and "Description of Capital
Stock," insofar as they are descriptions of contracts, agreements or other
legal documents (other than the Indenture or the Notes, as to which such
counsel expresses no opinion), or refer to statements of law or legal
conclusions (except insofar as they pertain to the Indenture or the Notes, as
to which such counsel expresses no opinion) are true and accurate in all
material respects;
(xi) Any preemptive rights or rights of first
refusal known to such counsel that might permit any existing holder of any
shares of capital stock of the Company or any security convertible into or
exchangeable or exercisable for capital stock of the Company to purchase the
Notes, the Initial Warrants, the Contingent Warrants the Warrant Shares or
any portion thereof, including without limitation those set forth in the
Investors' Rights Agreement, have been properly waived;
(xii) All consents and approvals known to such
counsel to be required under the Company's Amended and Restated Certificate
of Incorporation and under any Agreement or Instrument for the issuance,
offer, sale and delivery of the Securities, the execution, delivery and
performance of the Transaction Documents and the consummation of the
transactions
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contemplated hereby, including without limitation requisite consents under the
Investors' Rights Agreement with respect to the granting of registration rights
under the Registration Rights Agreements, have been obtained;
(xiii) The Amended and Restated Certificate of
Incorporation of the Company has been amended by all necessary corporate action
to provide that no redemption rights exercisable by the holders of any of the
Company's Preferred Stock shall become exercisable before April 30, 2007; and
(xiv) Such counsel will not be required to make any
investigation or examination of the accuracy or completeness of, or otherwise
verified, the information furnished with respect to the Offering Memorandum.
Such counsel will have considered, reviewed and discussed with certain officers
and employees of the Company, and with you, the information furnished. On the
basis of such consideration, review and discussion, but without any independent
investigation, examination or verification, no facts will have come to such
counsel's attention that will have caused such counsel to believe that the
Offering Memorandum as of its date and as of the Closing contained or contains
an untrue statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, it being understood that such
counsel need express no belief with respect to (A) the financial statements and
related schedules and financial and statistical data included in the Offering
Memorandum, (B) the financial projections and related schedules and financial
and statistical data included therein, (C) the underlying assumptions to the
financial projections, (D) any summary or description of the Indenture or the
Notes, (E) the Blue Sky legends on pages two through four of the Offering
Memorandum, (F) the sections of the Offering Memorandum entitled "Certain
Federal Income Tax Considerations," "Plan of Distribution," "Transfer
Restrictions" and "Book Entry; Delivery and Form," and (G) any Annex or Exhibit
to the Offering Memorandum (as to which such counsel expresses no view).
In giving such opinion, such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Company and
certificates of public officials; PROVIDED, HOWEVER, that such certificates
have been delivered to the Initial Purchaser prior to the Closing Date. The
opinions rendered by such counsel will be subject to (i) applicable
limitations of bankruptcy, insolvency, receivership, moratorium,
reorganization, fraudulent conveyance and other similar laws providing relief
to debtors and (ii) general principals of equity, whether considered in a
proceeding in equity or at law. In addition, with respect to any opinion
interpreting the laws of the State of New York, such counsel may state that,
although they have made such investigation of the laws of the State of New
York as they have deemed necessary to render the opinions contemplated
hereby, they are not generally familiar with other New York statutes,
regulations, rules, guidelines, common law, rules of construction or other
legal authorities which might influence the construction or interpretation of
such law in ways which such counsel naturally could not anticipate.
(d) The Initial Purchaser shall have received on the
Closing Date an opinion of Wilson Sonsini Goodrich & Rosati, P.C., counsel
for the Company, dated the Closing Date and addressed to the Initial
Purchaser, in form and substance satisfactory to Latham & Watkins, counsel
for the Initial Purchaser, to the effect that:
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(i) This Agreement and each of the other Transaction
Documents (other than the Securities) have been duly authorized, executed and
delivered by the Company and each of the Transaction Documents are valid, legal
and binding agreements of the Company, enforceable against the Company in
accordance with their respective terms;
(ii) When the Securities have been executed by the
Company and, in the case of the Notes, authenticated by the Trustee in
accordance with the Indenture or, in the case of the Warrants, authenticated
by the Warrant Agent in accordance with the terms of the Warrant Agreement,
and, in each case, delivered to the Initial Purchaser against payment
therefor in accordance with the terms hereof, will have been validly issued
and delivered, and will constitute valid and binding obligations of the
Company, entitled to the benefits of, with respect to the Notes, the
Indenture and, with respect to the Warrants, the Warrant Agreement. The
Contingent Warrants, when executed by the Company and authenticated by the
Warrant Agent in accordance with the provisions of the Warrant Agreement,
will have been validly issued and delivered and will constitute valid and
binding obligations of the Company, entitled to the benefits of the Warrant
Agreement;
(iii) (x) The offer, sale or delivery of the
Securities and (y) the execution, delivery or performance by the Company of
this Agreement and the other Transaction Documents, compliance by the Company
with the provisions hereof and thereof and consummation by the Company of the
transactions contemplated hereby and thereby do not and will not result in
any violation of any Law or Legal Requirement which in such counsel's
experience are customarily applicable to commercial transactions of the type
contemplated by the Transaction Documents (assuming compliance with all
applicable state securities and Blue Sky laws and, in the case of the
Registration Rights Agreements, the Act, the Exchange Act and the 1939 Act);
(iv) No Consent or Filing based on Law or Legal
Requirements is required on the part of the Company for the valid issuance and
sale of the Securities to the Initial Purchaser as contemplated by this
Agreement or the execution, delivery or performance by the Company of each of
the Transaction Documents, except (A) as have been obtained and are in full
force and effect and (B) as may be required under state securities or Blue Sky
laws governing the purchase and distribution of the Securities or such as may be
required under the Act, the Exchange Act or the 1939 Act in connection with the
performance by the Company of its obligations under the Registration Rights
Agreements, as to which such counsel expresses no opinion;
(v) No qualification of the Indenture under the
1939 Act is required in connection with the offer and sale of the Securities
contemplated hereby (except for sales of Notes pursuant to the Exchange
Offer, as defined in the Notes Registration Rights Agreement) or in
connection with the Exempt Resales;
(vi) Assuming that the proceeds of issuance of the
Securities are used as set forth in the Offering Memorandum, neither the
consummation of the transactions contemplated hereby nor the sale, issuance,
execution or delivery of the Securities, nor the application of the proceeds
therefrom (if applied as described in the Offering Memorandum under the caption
"Use of Proceeds"), will violate Regulation G (12 C.F.R. Part 207), T (12 C.F.R.
Part 220), U (12 C.F.R. Part 221) or X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System; and
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(vii) The statements in the Offering Memorandum,
insofar as they are (a) set forth under the headings "Certain Federal Income
Tax Considerations," "Transfer Restrictions" or "Book Entry; Delivery and
Form," or (b) wheresoever set forth, constitute descriptions of the Indenture
or the Notes, or (c) refer to statements of law or legal conclusions
pertaining to any of the foregoing, are true and accurate in all material
respects and summarize fairly the information required to be shown.
In giving such opinion, such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of the officers of the Company and
certificates of public officials; PROVIDED, HOWEVER, that such certificates
have been delivered to the Initial Purchaser prior to or on the Closing Date.
The opinions rendered by such counsel will be subject to (i) applicable
limitations of bankruptcy, insolvency, receivership, moratorium,
reorganization, fraudulent conveyance and other similar laws providing relief
to debtors and (ii) general principals of equity, whether considered in a
proceeding in equity or at law. In addition, with respect to any opinion
interpreting the laws of the State of New York, such counsel may state that,
although they have made such investigation of the laws of the State of New
York as they have deemed necessary to render the opinions contemplated
hereby, they are not generally familiar with other New York statutes,
regulations, rules, guidelines, common law, rules of construction or other
legal authorities which might influence the construction or interpretation of
such law in ways which such counsel naturally could not anticipate.
(e) (i) There shall not have been any change in the
capital stock of the Company nor any material increase in the short-term or
long-term debt of the Company (other than in the ordinary course of business)
from that set forth or contemplated in the Offering Memorandum; (ii) there
shall not have been, since the respective dates as of which information is
given in the Offering Memorandum, except as may otherwise be expressly stated
in the Offering Memorandum, any material adverse change in the condition
(financial or other), business, prospects, liabilities (contingent or
otherwise), properties, net worth, solvency or results of operations of the
Company; (iii) the Company shall not have any liabilities or obligations,
direct or contingent (whether or not in the ordinary course of business),
that are material to the Company, other than those reflected in the Offering
Memorandum; (iv) each of the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects on and as of the date hereof and on and as of the Closing Date as if
made on and as of the Closing Date; (v) the Company shall have executed and
delivered each Transaction Document; and (vi) the Initial Purchaser shall
have received a certificate, dated the Closing Date and signed on behalf of
the Company by the President and the Chief Financial Officer of the Company
(or such other officers as are acceptable to the Initial Purchaser), to the
effect set forth in this Section 7(e) and in Section 7(f) hereof, to the
effect that the Company is not, nor will it be, after giving effect to the
issuance of the Securities and the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby,
(x) insolvent, (y) left with unreasonably small capital with which to engage
in its existing businesses or other businesses in which the Company presently
proposes to engage or (z) incurring debts beyond its ability to pay such
debts as they mature and to the effect that, to the knowledge of such
individuals, the Offering Memorandum, and any amendment or supplement
thereto, does not contain any untrue statement of material fact or omit to
state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
23
<PAGE>
(f) The Company shall not have failed at or prior to the
Closing Date to have performed or complied in any material respect with any
of its agreements herein contained and required to be performed or complied
with by it hereunder at or prior to the Closing Date.
(g) The Securities and the Contingent Warrants shall
have been approved for trading on PORTAL.
(h) The Initial Purchaser shall be satisfied in its sole
discretion with the terms and provisions of the Transaction Documents and the
Contingent Warrants.
(i) The Company shall have furnished or caused to be
furnished to the Initial Purchaser such further certificates, documents and
opinions as the Initial Purchaser shall have reasonably requested.
(j) There shall not have been made any amendment or
supplement to the Offering Memorandum to which the Initial Purchaser has
reasonably objected.
(k) At the time of the execution of this Agreement, the
Initial Purchaser shall have received from Deloitte & Touche LLP a letter
dated as of the Closing Date in form and substance reasonably satisfactory to
the Initial Purchaser in the form contemplated for "comfort letters addressed
to underwriters" by Statement of Auditing Standards No. 72 ("SAS 72"), and in
form and substance previously provided to for review and agreed to as
satisfactory to the Initial Purchaser and to counsel for the Initial
Purchaser.
(l) [Intentionally Omitted].
(m) Any preemptive rights or rights of first refusal
that might permit any existing holder of any shares of capital stock of the
Company or any security convertible into or exchangeable or exercisable for
capital stock of the Company to purchase the Securities, the Warrant Shares
or any portion thereof, including without limitation those set forth in the
Investors' Rights Agreement, have been properly waived, in form and substance
satisfactory to the Initial Purchaser in its sole discretion.
(n) All consents or approvals required under the
Company's Amended and Restated Certificate of Incorporation and under any
Agreement or Instrument for the issuance, offer, sale and delivery of the
Securities, the issuance and delivery of the Contingent Warrants, the
execution, delivery and performance of the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby, including
without limitation requisite consents under the Investors' Rights Agreement
with respect to the granting of registration rights under the Registration
Rights Agreements, shall have been obtained, in form and substance
satisfactory to the Initial Purchaser in its sole discretion.
(o) The Amended and Restated Certificate of
Incorporation of the Company shall have been amended, in form and substance
satisfactory to the Initial Purchaser in its sole discretion, to provide that
no redemption rights exercisable by the holders of any of the Company's
preferred stock shall become exercisable before April 30, 2007.
24
<PAGE>
(p) The Initial Purchaser shall have received on the
Closing Date an opinion of Latham & Watkins, counsel for the Initial
Purchaser, dated the Closing Date and addressed to the Initial Purchaser,
regarding the enforceability of the Notes, the Registration Rights
Agreements, the Warrant Agreement and the Indenture.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are
satisfactory in form and substance to the Initial Purchaser and Latham &
Watkins, counsel for the Initial Purchaser.
Any certificate or document signed by any officer of the
Company and delivered to the Initial Purchaser, or to counsel for the Initial
Purchaser, at the Closing, shall be deemed a representation and warranty by
the Company to the Initial Purchaser as to the statements made therein.
Acceptance of the proceeds of the issuance and sale of the
Securities shall be a representation and warranty by the Company to the
Initial Purchaser that each of the conditions set forth in clauses (a), (b),
(d), (e), (f), (g), (h), (k) and (l) of this Section 7 has been satisfied or,
to the knowledge of the Company, waived.
8. EXPENSES.
(a) Whether or not the purchase and sale of the
Securities hereunder is consummated or this Agreement is terminated pursuant
to Section 9 hereof, the Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it
of its obligations hereunder: (i) the preparation, word processing, printing,
delivery and reproduction of the Preliminary Offering Memorandum and the
Offering Memorandum (including the exhibits thereto), and each amendment or
supplement to any of them, this Agreement and each of the other Transaction
Documents (including the reasonable disbursements of the Initial Purchaser's
counsel in connection therewith); (ii) the delivery (including postage, air
freight charges and charges for counting and packaging) of such copies of the
Offering Memorandum, the Preliminary Offering Memorandum and all amendments
or supplements as may be reasonably requested for use in connection with the
offering and sale of the Securities as part of the Initial Distribution
thereof pursuant to Exempt Resales; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the Securities and
the Contingent Warrants, including any stamp taxes in connection with the
original issuance and sale of the Securities and the Contingent Warrants;
(iv) the printing (or reproduction) and delivery of the preliminary and
supplemental Blue Sky Memoranda and all other agreements and documents
printed (or reproduced) and delivered in connection with the offering of the
Securities; (v) the application for quotation of the Securities and the
Contingent Warrants on PORTAL; (vi) the qualification of the Securities for
offer and sale under the securities or Blue Sky laws of the several states as
provided in Section 4(f) hereof (including the fees, expenses and
disbursements of counsel for the Initial Purchaser relating to the
preparation, printing or reproduction, and delivery of the preliminary and
supplemental Blue Sky Memoranda and such qualification); (vii) the
performance by the Company of its obligations under the Warrant Agreement and
the Registration Rights Agreements (including fees and expenses of the
Trustee, the Warrant Agent and the transfer agent and registrar of the
Warrant Shares, including fees and expenses of their respective counsel);
(viii) the fees and expenses of the Company's accountants and the fees and
25
<PAGE>
expenses of counsel (including local and special counsel) for the Company; and
(ix) the reasonable fees and expenses of Latham & Watkins, counsel for the
Initial Purchaser. The Company hereby agrees that it will pay in full on the
Closing Date (or in the event that this Agreement is terminated or there shall
be a failure to consummate the transaction hereunder, upon request by such
counsel) the fees and expenses referred to in clauses (vi) and (ix) of this
Section 8 by delivering to counsel for the Initial Purchaser on such date a
check payable to such counsel in the requisite amount.
(b) If the purchase and sale of the Securities hereunder
is not consummated because any condition to the obligations of the Initial
Purchaser set forth in Section 7 hereof is not satisfied, because this
Agreement is terminated pursuant to Section 9 hereof or because of any
failure, refusal or inability on the part of the Company to perform all
obligations and satisfy all conditions on its part to be performed or
satisfied hereunder other than by reason of a default by the Initial
Purchaser in payment for the Securities on the Closing Date after all
conditions set forth herein have been satisfied, the Company shall reimburse
the Initial Purchaser promptly upon demand for all out-of-pocket expenses
(including reasonable fees and expenses of counsel) that shall have been
incurred by the Initial Purchaser in connection with the proposed purchase
and sale of the Securities and the other transactions contemplated hereby.
9. TERMINATION OF AGREEMENT. This Agreement shall be
subject to termination in the absolute discretion of the Initial Purchaser,
without liability on the part of the Initial Purchaser to the Company, by
notice to the Company, if at or prior to the delivery and payment for
Securities, (i) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the Nasdaq National Market shall have
been suspended or materially limited, (ii) a general moratorium on commercial
banking activities in New York shall have been declared by either Federal or
state authorities, or (iii) there shall have occurred any outbreak or
escalation of hostilities or other international or domestic calamity, crisis
or change in political, financial or economic conditions, the effect of which
on the financial markets of the United States or the market for the
Securities is such as to make it, in the sole judgment of the Initial
Purchaser, impracticable or inadvisable to commence or continue the offering
of the Securities on the terms set forth in the Offering Memorandum or to
enforce contracts for the resale of the Securities by the Initial Purchaser.
Notice of such termination may be given to the Company by telecopy or
telephone and shall be subsequently confirmed by letter.
10. INFORMATION FURNISHED BY THE INITIAL PURCHASER. The
statements set forth in the last paragraph on the cover page and in the
fourth and seventh paragraphs under the caption "Plan of Distribution" in the
Offering Memorandum, constitute the only information furnished by or on
behalf of the Initial Purchaser as such information is referred to in
Sections 5(b) and 6 hereof.
11. MISCELLANEOUS. Except as otherwise provided in Sections
4 and 9 hereof, notice given pursuant to any provision of this Agreement
shall be in writing and shall be delivered (i) if to the Company, at the
office of the Company at 13231 SE 36th Street, Suite 200, Bellevue, WA 98006,
Attention: Jens H. Molbak, or (ii) if to the Initial Purchaser, to Smith
Barney Inc., 338 Greenwich Street, New York, New York 10013, Attention:
Manager, Investment Banking Division.
This Agreement may be signed in various counterparts which
together constitute one and the same instrument. If signed in counterparts,
this Agreement shall not become effective unless at least one counterpart
hereof shall have been executed and delivered on behalf of each party hereto.
26
<PAGE>
This Agreement has been and is made solely for the benefit of
the Initial Purchaser and the Company, and their respective directors,
officers and the controlling persons referred to in Section 6 hereof and
their respective successors and assigns, to the extent provided herein, and
no other person shall acquire or have any right under or by virtue of this
Agreement. Neither the term "successor" nor the terms "successors and
assigns" as used in this Agreement shall include a purchaser from the Initial
Purchaser of any of the Securities in such purchaser's status as such
purchaser.
12. SURVIVAL. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company set
forth in this Agreement or made by or on behalf of the Company (including,
pursuant to any officer's certificate) pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by
or on behalf of the Initial Purchaser, any director, officer, employee or
agent of the Initial Purchaser or any controlling person referred to in
Section 6 hereof, and (ii) delivery of and payment for the Securities. The
respective agreements, covenants, indemnities and other statements set forth
in Sections 6, 8 and 13 hereof shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement.
13. APPLICABLE LAW; COUNTERPARTS; CONSENT TO JURISDICTION.
This Agreement shall be governed by and construed in accordance with the law
of the State of New York applicable to contracts made and to be performed
within the State of New York. Each of the parties hereto hereby irrevocably
and unconditionally: (i) submits itself and its property in any legal action
or proceeding relating to this Purchase Agreement or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive
jurisdiction of the courts of the State of New York and the courts of the
United States of America for the Southern District of New York, and appellate
courts thereof, and consents and agrees to such action or proceeding being
brought in such courts; and (ii) waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any such
court or that such action or proceeding was brought in any inconvenient court
and agrees not to plead or claim the same.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
27
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Initial Purchaser.
Very truly yours,
COINSTAR, INC.
By: /s/ Jens H. Molbak
-----------------------------
Name: Jens H. Molbak
-----------------------------
Title: CEO and President
-----------------------------
Confirmed as of the date first
above mentioned.
SMITH BARNEY INC.
By: /s/ Edward P. Massaro
-----------------------------
Name: Edward P. Massaro
-----------------------------
Title: Vice President
-----------------------------
<PAGE>
EXHIBIT 11.1
COINSTAR, INC.
COMPUTATION OF EARNINGS PER SHARE
Calculations of pro forma net loss per share are based on the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1996 1997 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding............... 984,012 984,012 984,012 984,012
Effect of convertible preferred shares................... 8,988,964 8,988,964 8,988,964 8,988,964
Effect of stock warrants outstanding..................... 397,162 397,162 397,162 397,162
Effect of stock options outstanding...................... 89,745 89,745 89,745 89,745
------------ ------------ ------------ ------------
Pro forma weighted average common and equivalent shares
outstanding............................................ 10,459,883 10,459,883 10,459,883 10,459,883
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Coinstar, Inc. on
Form S-4 of our report dated February 14, 1997 (May 28, 1997, as to Notes 1,
2 and 9 and June 27, 1997 as to Notes 2 and 11), appearing in the Prospectus,
which is part of this Registration Statement. We also consent to the
reference to our Firm under the headings "Selected Financial Data" and
"Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Seattle, Washington
August 8, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997 JAN-01-1996 JAN-01-1997
<PERIOD-END> JUN-30-1996 JUN-30-1997 JUN-30-1996 JUN-30-1997
<CASH> 7,283,086 16,271,057 7,283,086 16,271,057
<SECURITIES> 0 23,080,853 0 23,080,853
<RECEIVABLES> 0 0 0 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 7,644,554 41,188,942 7,644,554 41,188,942
<PP&E> 16,523,597 43,486,857 16,523,597 43,486,857
<DEPRECIATION> (2,874,393) (8,918,193) (2,874,393) (8,918,193)
<TOTAL-ASSETS> 21,363,134 79,102,985 21,363,134 79,102,985
<CURRENT-LIABILITIES> 6,200,930 18,522,153 6,200,930 18,522,153
<BONDS> 0 0 0 0
23,675,912 24,972,084 23,675,912 24,972,084
4,231,809 4,231,809 4,231,809 4,231,809
<COMMON> 14,346 93,727 14,346 93,727
<OTHER-SE> (17,000,477) (41,799,362) (17,000,477) (41,799,362)
<TOTAL-LIABILITY-AND-EQUITY> 21,363,134 79,102,985 21,363,134 79,102,985
<SALES> 2,133,643 9,288,582 1,387,982 5,293,558
<TOTAL-REVENUES> 2,133,643 9,288,582 1,387,982 5,293,558
<CGS> 0 0 0 0
<TOTAL-COSTS> 7,480,104 21,097,599 4,352,734 11,364,914
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 254,936 4,758,676 167,573 2,414,608
<INCOME-PRETAX> (5,346,844) (15,547,986) (3,037,733) (8,046,295)
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> (5,346,844) (15,547,986) (3,037,733) (8,046,295)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (5,346,844) (15,547,986) (3,037,733) (8,046,295)
<EPS-PRIMARY> (0.51) (1.49) (0.29) (0.77)
<EPS-DILUTED> (0.51) (1.49) (0.29) (0.77)
</TABLE>
