<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 17, 1998
REGISTRATION NO. 333-57437
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CITYSEARCH, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 7375 95-4546874
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
----------------
CITYSEARCH, INC.
790 E. COLORADO BOULEVARD, SUITE 200
PASADENA, CA 91101
(626) 405-0050
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
CHARLES CONN
CHIEF EXECUTIVE OFFICER
CITYSEARCH, INC.
790 E. COLORADO BOULEVARD, SUITE 200
PASADENA, CA 91101
(626) 405-0050
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
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<S> <C>
LARRY W. SONSINI CRAIG E. SHERMAN
JOHN T. SHERIDAN GLEN R. VAN LIGTEN
NAN H. KIM ADAM J. ROSENBERG
WILSON SONSINI GOODRICH & ROSATI VENTURE LAW GROUP
PROFESSIONAL CORPORATION A PROFESSIONAL CORPORATION
650 PAGE MILL ROAD 2800 SAND HILL ROAD
PALO ALTO, CA 94304 MENLO PARK, CA 94025
(650) 493-9300 (650) 854-4488
</TABLE>
----------------
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 on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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=====================================================================================
PROPOSED MAXIMUM
TITLE OF EACH PROPOSED MAXIMUM AGGREGATE AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1)(2) FEE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value................. 4,600,000 $13.00 $59,800,000 $17,641(3)
=====================================================================================
</TABLE>
(1) Includes shares that the Underwriters have the option to purchase to cover
over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) promulgated under the Securities
Act of 1933, as amended.
(3) Previously paid $14,750 in connection with the Registration Statement
filed on June 22, 1998.
----------------
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, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
===============================================================================
<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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED JULY 17, 1998
4,000,000 SHARES
[LOGO OF CITYSEARCH.COM]
COMMON STOCK
All of the shares of Common Stock offered hereby are being offered by
CitySearch, Inc. ("CitySearch" or the "Company"). Prior to this offering, there
has been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $11.00 and
$13.00 per share. See "Underwriting" for a discussion of factors to be
considered in determining the initial public offering price. USA Networks,
Inc., an existing stockholder of the Company that owned 12.9% of the Company's
Common Stock on an as-converted basis as of June 30, 1998, has committed to
purchase 1,332,093 shares in this offering, subject to certain limitations. See
"Certain Transactions" and "Principal Stockholders." Application has been made
to have the Common Stock approved for listing on the Nasdaq National Market
under the symbol "CTYS."
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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================================================================================
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share..................................... $ $ $
Total(3)...................................... $ $ $
================================================================================
</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting offering expenses payable by the Company estimated at
$800,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 600,000 shares of Common Stock solely to cover over-
allotments, if any. If the Underwriters exercise this option in full, the
Price to Public will total $ , the Underwriting Discount will total $
and the Proceeds to Company will total $ . See "Underwriting." USA
Networks has committed to purchase 89,400 shares if the over-allotment
option is exercised in full, subject to certain limitations.
The shares of Common Stock are offered by the Underwriters named herein,
subject to receipt and acceptance by them, and subject to their right to reject
any order in whole or in part. It is expected that delivery of the certificates
representing the shares will be made against payment therefor at the office of
NationsBanc Montgomery Securities LLC on or about , 1998.
-----------
NationsBanc Montgomery Securities LLC
BancAmerica Robertson Stephens
Donaldson, Lufkin & Jenrette
, 1998
<PAGE>
[ARTWORK]
The inside cover will contain four images consisting of screen shots from the
Company's city guide web sites. An image of the Company's home page
(www.citysearch.com) primarily containing a map of the U.S. will appear in the
upper left corner. An arrow will point from the area of the map indicating the
location of Toronto, Ontario to an image in the upper right area of the page
containing a screen shot from the home page of the Toronto city guide web site
(www.starcitysearch.com). Another arrow will lead from the area of the U.S.
map indicating the location of Raleigh/Durham/Chapel Hill to an image in the
lower right area of the page containing a screen shot from the home page of
the Raleigh/Durham/Chapel Hill city guide web site (www.citysearch11.com). A
third arrow will lead from the area of the U.S. map indicating the location of
San Francisco to an image in the lower left area of the page containing a
screen shot from the home page of the San Francisco city guide web site
(www.citysearch7.com).
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING THE PURCHASE OF THE
COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
The CitySearch logo is a registered United States trademark of the Company.
"CitySearch" is a registered United States trademark of a third party, and the
Company is the exclusive third party licensee of this trademark in its field
of use. See "Risk Factors--Uncertain Protection of Intellectual Property;
Risks of Third Party Licenses." This Prospectus also contains trademarks and
tradenames of other companies.
2
<PAGE>
The page will be divided by a vertical line roughly two-thirds of the distance
across the page. The left area of the page will contain four screen shots from
the Company's web site. The first screen shot depicts a home page from one of
the Company's city guides. The second screen shot depicts an "arts and
entertainment" topic page indicating a search for "jazz" events in the search
box. The third screen shot depicts an event description created by the Company
describing a jazz event. The fourth screen shot depicts the Web site of a
business customer that hosts jazz events. The right column of the page will
describe the content available on each of the four pages, e.g., "The home page
indicates the content areas within the site, and contains the branding of
CitySearch and its local market media partners."
<PAGE>
The page will contain three boxes. The first box will contain the names and/or
logos of the Company's licensees, including washingtonpost.com, Los Angeles
Times, the Toronto Star, The Melbourne Age, Big Colour Pages, The Sydney
Morning Herald, The Dallas Morning News, Schibsted ASA, Scandinavia Online and
The Baltimore Sun. The second box will contain names and/or logos of the
Company's marketing partners, including American Express, Earthlink, Internet
Travel Network, Guess?, WebTV Networks, Inc. etc. The third box will contain
names and/or logos of the Company's local market media partners organized by
the city in which the service is available, including KGO-TV, WTVD, other
television stations and radio stations owned by CBS, Citadel Communications
Corp., Clear Channel, and others who consent to use of their trademarks.
<PAGE>
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information, including "Risk Factors" and
the Consolidated Financial Statements and Notes thereto, appearing elsewhere in
this Prospectus. The discussion in this Prospectus includes forward-looking
statements. The outcome of the events described in such forward-looking
statements is subject to risks and uncertainties. The Company's actual results
may differ materially from those discussed in such forward-looking statements.
Factors that may cause or contribute to such differences include those
discussed in sections entitled "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. Except as otherwise
specified, all information in this Prospectus reflects (i) a two-for-three
reverse stock split of the Company's outstanding Common Stock which will occur
prior to the completion of the offering (the "Reverse Stock Split"), (ii) the
conversion of each outstanding share of Preferred Stock into Common Stock upon
completion of this offering and (iii) no exercise of the Underwriters' over-
allotment option.
THE COMPANY
CitySearch produces and delivers comprehensive local city guides on the World
Wide Web (the "Web"), providing up-to-date information regarding arts and
entertainment events, community activities, recreation, businesses, shopping,
professional services and news/sports/weather to consumers in metropolitan
areas. Each local city guide consists primarily of original content developed
and designed specifically for the Web by the Company and its partners. The
Company designs and produces custom-built Web sites and related services for
local and regional businesses, aggregates them in a local city guide
environment and provides these businesses the ability to regularly update and
expand their sites. The CitySearch sites offer local and regional businesses
the opportunity to reach and interact with targeted consumers. The Company
builds its city sites with the involvement of local government, community and
volunteer associations, business and professional groups, educational
institutions and local media companies. In addition, content generated by
consumers through e-mail and bulletin boards, available in most sites, enhances
the sense of community in CitySearch sites.
CitySearch and its partners create comprehensive locally focused content that
can be accessed using targeted, sophisticated searches across all content
residing on a CitySearch site. In contrast, many search engines and
navigational guides access pre-existing content from third-party Web sites that
may be incomplete or out of date. In its owned and operated markets, CitySearch
offers a broad array of updated, local content that is relevant to consumers.
In certain other markets, CitySearch provides local media companies with the
necessary technology and business expertise to design, launch and operate a co-
branded CitySearch site. The Company's city guides have received numerous
awards and recognition for design, functionality and content, including PC
Magazine's Editor's Choice, USA Today/Intelliquest's survey leader and
recognition by the New York Times as best overall online guide to New York
City.
CitySearch launched its initial site in the Raleigh-Durham-Chapel Hill
metropolitan area in May 1996. The Company and its partners have since launched
additional local city guides in Austin, Dallas, Los Angeles, Nashville, New
York City, Portland, Salt Lake City/Utah, the San Francisco Bay Area and
Washington, D.C. in the U.S., and in Melbourne, Sydney and Toronto
internationally. The Company plans to expand its service to additional national
and international markets both by leveraging the standardized roll-out model it
has developed through previous city launches and by partnering with major media
companies in certain cities. The Company has, for instance, partnered with The
Baltimore Sun, The Dallas Morning News, the Los Angeles Times, The San Diego
Union-Tribune, The Washington Post, The Melbourne Age, Schibsted
ASA/Scandinavia Online (Copenhagen, Oslo and Stockholm), The Sydney Morning
Herald and the Toronto Star. These major media partners bring capital, brand
recognition, promotional strength and local knowledge to their CitySearch sites
and allow the Company to build out its national and international network of
sites faster than it could solely through owned and operated sites. The Company
has also reached an agreement with Classified Ventures, L.L.C. ("Classified
Ventures"), a leading provider of online classified advertising products and
services to the newspaper industry that was formed by seven leading newspaper
companies. The Company will license elements of its technology and business
systems and provide services to Classified Ventures. The Company has also
reached an agreement with American Express Travel Related Services Company,
Inc. ("American Express") that provides for marketing of the Company's services
to American Express merchant customers and various other electronic commerce
and marketing initiatives. The Company's equity investors include
Washingtonpost.Newsweek Interactive Company, The Times Mirror Company, CPQ
Holdings, Inc. (entity affiliated with Compaq Computer Corporation), Global
Retail Partners, L.P. and its affiliates, American Express, Intel Corporation,
AT&T Ventures, T. Rowe Price Threshold Fund III, L.P. and Schibsted ASA.
The Company was organized under the laws of Delaware in September 1995. The
Company's principal executive offices are located at 790 E. Colorado Boulevard,
Suite 200, Pasadena, California 91101, and its telephone number at that address
is (626) 405-0050.
3
<PAGE>
THE OFFERING
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Common Stock offered............... 4,000,000 shares
Common Stock to be outstanding
after this offering............... 20,788,507 shares(1)
Use of proceeds.................... The Company intends to use the net proceeds
of this offering for general corporate
purposes, including working capital and
capital expenditures relating to the
CitySearch site such as enhancements to the
Company's server and networking
infrastructure. See "Use of Proceeds."
Proposed Nasdaq symbol............. CTYS
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
SEPTEMBER 20, YEAR ENDED ENDED
1995 (DATE OF DECEMBER 31, JUNE 30,
FORMATION) TO ------------------ ------------------
DECEMBER 31, 1995 1996 1997 1997 1998
----------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues:
Subscription and
services............. $ -- $ 203 $ 4,913 $ 1,508 $ 5,577
Licensing and royalty. -- -- 1,271 -- 1,221
------- -------- -------- -------- --------
Total revenues...... -- 203 6,184 1,508 6,798
Loss from operations... (313) (14,112) (36,741) (18,122) (16,742)
Net loss............... (308) (13,897) (36,526) (18,018) (16,482)
Historical basic and
diluted net loss per
share(2).............. $ (0.06) $ (2.37) $ (5.80) $ (2.87) $ (2.50)
Pro forma basic and
diluted net loss per
share(2).............. $ (0.05) $ (1.65) $ (2.94) $ (1.56) $ (1.02)
Shares used to compute
historical basic and
diluted net loss per
share(2).............. 5,263 5,857 6,301 6,282 6,582
Shares used to compute
pro forma basic and
diluted net loss per
share(2).............. 5,640 8,431 12,430 11,515 16,139
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1998
------------------------
ACTUAL AS ADJUSTED (3)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $15,512 $59,352
Working capital....................................... 10,731 54,571
Total assets.......................................... 22,490 66,330
Long-term obligations, less current portion........... 2,319 2,319
Redeemable Convertible Preferred Stock................ 77,840 --
Stockholders' equity (deficit)........................ (63,741) 57,939
</TABLE>
- --------
(1) Based on shares outstanding as of June 30, 1998. Does not include (i)
2,608,514 shares of Common Stock issuable upon exercise of options
outstanding at June 30, 1998 at a weighted average price of $5.20 per share
under the Company's 1996 Stock Option Plan, (ii) 624,234 shares of Common
Stock available for future grant or issuance under the Company's 1996 Stock
Option Plan, 1998 Director Option Plan and 1998 Employee Stock Purchase
Plan and (iii) 62,077 shares of Common Stock issuable upon exercise of an
outstanding warrant at an exercise price of $13.29 per share held by
NationsBanc Montgomery Securities LLC. See "Capitalization," "Management--
Employee Benefit Plans," "Underwriting" and Note 7 of Notes to Consolidated
Financial Statements.
(2) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of the number of shares used to compute historical and
pro forma basic and diluted net loss per share.
(3) Adjusted to reflect (i) the sale and issuance of the 4,000,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$12.00 per share and after deducting the underwriting discount and
estimated offering expenses and (ii) the conversion of all outstanding
shares of Preferred Stock into Common Stock upon the closing of this
offering. See "Capitalization."
4
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. In addition to the other
information set forth in this Prospectus, the following risk factors should be
considered carefully in evaluating the Company and its business before
purchasing any of the shares of Common Stock of the Company. This Prospectus
contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all forward-looking statements wherever
they appear in this Prospectus. The Company's actual results could differ
materially from the results discussed in this Prospectus. Factors that could
cause or contribute to such differences include those discussed below, as well
as those discussed elsewhere in this Prospectus.
LIMITED OPERATING HISTORY
The Company was incorporated in September 1995 and launched its initial
local city guide service in the Raleigh-Durham-Chapel Hill metropolitan area
in May 1996. Accordingly, the Company has an extremely limited operating
history upon which an evaluation of the Company and its prospects can be
based. The Company's prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stages of development, particularly companies in new and rapidly evolving
markets such as the Company's. Such risks include, but are not limited to, an
evolving and unpredictable business model, management of growth, the Company's
ability to anticipate and adapt to a developing market, acceptance by Internet
users and business customers of the Company's local city guide concept and the
ability of the Company to enter into relationships with additional media
partners. To address these risks, the Company must, among other things,
attract and retain an audience of frequent users of its service in its target
markets, maintain its customer base and attract a significant number of new
business customers in its target markets, respond to competitive developments,
continue to form and maintain relationships with media partners, continue to
attract, retain and motivate qualified persons, provide superior customer
service, and continue to develop and upgrade its technologies and
commercialize its services incorporating such technologies. There can be no
assurance that the Company will be successful in addressing such risks, and a
failure to do so could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
ANTICIPATED CONTINUED OPERATING LOSSES
The Company incurred net losses of $308,000, $13.9 million and $36.5 million
for the period from September 20, 1995 (date of formation) to December 31,
1995, and the years ended December 31, 1996 and 1997, respectively, and $16.5
million for the six months ended June 30, 1998. At June 30, 1998, the Company
had an accumulated deficit of $67.2 million. The Company believes that its
future profitability and success will depend in large part on, among other
things, its ability to generate sufficient revenues from sales of business Web
sites to businesses and the licensing of its technology and business systems
to partners setting up CitySearch services in partner-led markets, its ability
to effectively maintain existing relationships with its media partners and its
ability to successfully enter into new strategic relationships for
distribution and increased usage of its offerings. Accordingly, the Company
intends to expend significant financial and management resources on the roll-
out of its service in new owned and operated and partner-led markets, site and
content development, strategic relationships, technology and operating
infrastructure. As a result, the Company expects to incur significant
additional losses and continued negative cash flow from operations for the
foreseeable future. There can be no assurance that the Company's revenues will
increase or even continue at their current levels or that the Company will
achieve or maintain profitability or generate cash from operations in future
periods. In view of the rapidly evolving nature of the Company's business and
its limited operating history, the Company believes that period-to-period
comparisons of its operating results are not meaningful and should not be
relied upon as an indication of future performance. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
5
<PAGE>
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The Company requires substantial working capital to fund its business and
expects to use a significant portion of the net proceeds of this offering to
fund its operating losses. Since inception, the Company has experienced
negative cash flow from operations and expects to continue to experience
significant negative cash flow from operations for the foreseeable future. The
Company currently believes that its existing capital resources, combined with
the net proceeds of this offering, will be sufficient to meet its presently
anticipated cash requirements through at least the next 12 months. Thereafter,
the Company may be required to raise additional funds. No assurance can be
given that the Company will not be required to raise additional financing
prior to such time. If additional funds are raised through the issuance of
equity securities, stockholders of the Company may experience significant
dilution. Furthermore, there can be no assurance that additional financing
will be available when needed or that if available, such financing will
include terms favorable to the Company or its stockholders. If such financing
is not available when required or is not available on acceptable terms, the
Company may be unable to develop or enhance its services, take advantage of
business opportunities or respond to competitive pressures, any of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
UNPREDICTABILITY OF FUTURE REVENUES; FLUCTUATIONS IN OPERATING RESULTS
As a result of the Company's limited operating history and the emerging
nature of the local city guide market in which the Company competes, the
Company is unable to accurately forecast its revenues. The Company's current
and future expense levels are based predominantly on its operating plans and
estimates of future revenues and are to a large extent fixed. The Company's
business model, particularly in its owned and operated markets, requires
significant staffing to develop content and to create and maintain
relationships with small and medium size businesses. The Company may be unable
to adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in revenues would likely
have an immediate material adverse effect on the Company's business, financial
condition and results of operations. Further, the Company currently intends to
increase its operating expenses to roll out its service in new markets, to
fund increased sales and marketing and customer service operations and to
further develop its technology infrastructure. To the extent such expenses
precede or are not subsequently followed by increased revenues, the Company's
operating results will fluctuate and net anticipated losses in a given quarter
may be greater than expected.
The Company expects to experience significant fluctuations in its future
operating results due to a variety of factors, many of which are outside of
the Company's control. Factors that may adversely affect the Company's
operating results include, but are not limited to, the ability of its partners
to meet roll-out schedules for the Company's city guide service, the timing
and amount of license and royalty payments from the Company's partners, the
Company's ability to retain existing business customers, attract new business
customers at a steady rate and maintain customer satisfaction, the timing and
volume of new business Web site orders and the Company's capacity to meet such
orders, the Company's ability to maintain or increase current rates of sales
productivity, the announcement or introduction of new or enhanced sites and
services by the Company or its competitors, the amount of traffic on the
Company's online sites, the amount of expenditures for online advertising by
businesses, the level of use of online services and consumer acceptance of the
Internet for services such as those offered by the Company, the Company's
ability to upgrade and develop its systems and attract personnel in a timely
and effective manner, the amount and timing of operating costs and capital
expenditures relating to expansion of the Company's business and
infrastructure, technical difficulties, system downtime or Internet brownouts,
political or economic events affecting the cities in which the Company
operates and general economic conditions. Unfavorable changes in any of the
above factors could adversely affect the Company's revenues, gross margins and
results of operations in future periods. Accordingly, the Company believes
that period-to-period comparisons of its results of operations should not be
relied upon as an indication of future performance. In addition, the results
of any quarterly period are not indicative of results to be expected for a
full fiscal year. Finally, as a result of the foregoing factors, the Company's
annual or quarterly results of
6
<PAGE>
operations may be below the expectations of public market analysts or
investors, in which case the market price of the Common Stock could be
materially and adversely affected. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
NEW AND UNCERTAIN MARKET; UNPROVEN MARKET ACCEPTANCE; RISK OF SIGNIFICANT
BUSINESS CUSTOMER TURNOVER
The markets for the Company's service have only recently begun to develop,
are rapidly evolving and are characterized by a number of entrants that have
introduced or plan to introduce online city guides. As is typical in the case
of a new and rapidly evolving industry, demand and market acceptance for
recently introduced services are subject to a high level of uncertainty and
risk. Because the markets for the Company's services are new and evolving, it
is difficult to predict the size and future growth rate, if any, of these
markets. There can be no assurance that the markets for the Company's services
will develop or that demand for the Company's services will emerge or become
economically sustainable. In particular, the success of the Company's city
guide service will depend on the willingness of local businesses to pay for
custom business Web sites developed by the Company and to retain the service,
which in turn may depend on the popularity of the guides to consumers and on
the actual or perceived revenues attributable to the Company's services. If
such businesses are unwilling to pay for the Company's service or retain the
service, if the markets for the Company's service otherwise fail to develop or
develop more slowly than anticipated, or if business customer turnover rates
are higher than projected by the Company, the Company's business, financial
condition and results of operations will be materially and adversely affected.
In addition, the turnover rate of business customers using the Company's
service has been higher than the Company had anticipated and there can be no
assurance that such turnover rates would be at levels which would not in the
future materially and adversely affect the Company's business, financial
condition and results of operations.
RELIANCE ON STRATEGIC RELATIONSHIPS
An important element of the Company's current business strategy is to enter
into agreements with local media companies to establish and support city
guides. The Company has entered into, and intends to enter into, agreements
with media companies to address opportunities. In these "partner-led markets"
markets, the Company develops and designs a city guide for local media
companies and licenses certain intellectual property to such companies in
exchange for certain up-front and continuing license payments and royalty
payments. These royalty payments are based on the amount of revenues generated
by such companies through the partner-led city guides. The Company currently
anticipates that royalty payments from such agreements will constitute a
significant portion of its revenues in future periods. Accordingly, the
Company's success will depend in large part upon the ability of its partners
to timely launch city guides in the Company's partner-led markets and the
extent to which these partners are able to generate revenue through their city
guides. Under the terms of the Company's agreements with its media company
partners, the Company has very limited control over the amount of time and
financial resources that a partner devotes to the launch of a city guide or
over the day-to-day operations and management of the city guide, including the
marketing and sale of business Web sites to potential business customers. For
example, one of the Company's partners did not launch its city guide in
accordance with the Company's initial expectations, thereby delaying revenues
subject to royalty payments payable to the Company. Furthermore, some of the
Company's agreements grant exclusivity in certain territories. There can be no
assurance that the Company's partners that are in the process of developing
new city guides or the Company's future partners will launch their sites in a
timely manner, or at all, or that if launched, such sites will generate
revenues consistent with the Company's expectations or that the exclusivity
provisions in some of the Company's agreements will not prevent the Company
from licensing its intellectual property to other partners. There also can be
no assurance that the Company will successfully enter into partnerships with
media companies in additional cities. Furthermore, due to the Company's
limited experience with partner-led city guides, the Company is unable to
accurately forecast its revenues to be derived from these agreements with such
partners. In addition, certain of the Company's agreements with its media
company partners may be terminated for non-performance or material breach. Any
failure by one of the Company's proposed partner-led city guides to launch in
a timely manner or by one of the Company's existing partner-led city guides to
generate sufficient revenues, or a failure by the Company to enter into or to
renew agreements with media company partners on terms
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favorable to the Company or early termination of certain existing agreements
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company has recently entered into a license and services agreement with
Classified Ventures, pursuant to which CitySearch will license elements of its
technology and business systems to Classified Ventures and provide services in
automotive and real estate classified advertising categories. The Company
expects to receive significant revenues from licensing and service fees under
this agreement. Under this agreement, the Company is restricted from entering
certain classified advertising markets and from licensing its technology and
business systems to competitors of Classified Ventures. In addition, this
agreement may be terminated effective 2001 by Classified Ventures and there
can be no assurance that it will be renewed on terms favorable to the Company.
The failure of the Company to meet certain milestones under this agreement,
early termination of this agreement or the inability of the Company to compete
with Classified Ventures or to license technology to competitors of Classified
Ventures may have a material adverse effect on the Company's business,
financial condition and results of operations.
In its owned and operated markets, the Company has entered into co-promotion
or distribution agreements with a number of television, radio, print media and
online companies. Some of these agreements are of a short duration and there
can be no assurance that the Company's co-promotion or distribution partners
will not terminate their agreements with the Company or that the Company will
secure additional co-promotion or distribution partners in the future. See
"Business--Strategic Alliances."
DEPENDENCE ON SALES PERSONNEL
The Company currently derives and, for the foreseeable future, intends to
derive a substantial portion of its revenues from sales of business Web sites
to local businesses in markets in which the Company owns and operates city
guides. The Company depends on its direct sales force to sell business Web
sites in these markets. The creation of new revenue from the Company's city
guide service and its roll-out in additional cities requires the services of a
highly trained sales force working directly for the Company. Accordingly, a
shortage in the number of trained salespeople could limit the Company's
ability to sell business Web sites as it rolls out its service in new cities
or to maintain or increase its number of business customers in cities in which
the Company already operates. The Company has in the past and expects in the
future to experience a high rate of turnover in its direct sales force. There
can be no assurance that such turnover will not increase in the future or have
a material adverse effect on the Company's sales, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
UNCERTAIN ACCEPTANCE AND MAINTENANCE OF CITYSEARCH BRAND
The Company believes that establishing and maintaining the CitySearch brand
is critical to its efforts to attract consumers and business customers to its
sites and that the importance of brand recognition will increase due to the
growing number of Internet sites and relatively low barriers to entry to
providing Internet content. Promotion of the CitySearch brand will depend
largely on the success of the Company and its media company partners in
providing high quality Internet content. Under the terms of its agreements
with its media company partners, the Company has very limited control over the
content provided on the partners' sites. If consumers and business customers
do not perceive the content of the Company's or its partners' existing sites
to be of high quality, the Company will be unsuccessful in promoting and
maintaining its brand. Furthermore, not all of the Company's partners promote
the CitySearch brand on their services with a high level of prominence. Other
than links to the Company's city sites, the Company has not entered into a
significant distribution relationship with any major online search or
navigation company. In order to attract and retain consumers and business
customers, and to promote the CitySearch brand in response to competitive
pressures, the Company may find it necessary to increase its budget for
content or otherwise to increase substantially its financial commitment to
creating and maintaining a distinct brand loyalty among consumers and business
customers. If either the Company or its media company partners are unable to
provide high quality content or otherwise fail to promote and maintain the
CitySearch brand, or if the Company incurs excessive expenses in an attempt to
improve its content or promote and maintain its brand, the Company's business,
financial condition and results of operations will be materially and adversely
affected.
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RISKS ASSOCIATED WITH ROLL-OUT OF CITYSEARCH SERVICE
The Company's future success will depend to a significant extent on the
Company's ability, on its own and with partners, to rapidly roll out its local
city guide service in additional cities in the United States and
internationally. As of July 15, 1998, the Company had launched its local city
guide service in 13 metropolitan areas and intends to expand its service in
additional cities in the U.S. and internationally. There can be no assurance
that the Company will be able to launch its service in additional markets in a
cost-effective or timely manner or in accordance with its planned schedule, or
that any newly launched service will achieve market acceptance. Any new service
that is not favorably received by local businesses or consumers could damage
the Company's reputation or the CitySearch brand. Launching the CitySearch
service will also require significant additional expenses and will strain the
Company's management, financial and operational resources. In particular, the
launch of the CitySearch service in additional cities will require the Company
to expand and upgrade its technology infrastructure and business systems,
including its enterprise management system (i.e., an integrated set of software
tools and business processes for sales force management, Web site production,
customer service and billing) and its business Web site production system. The
Company is in the process of launching a new version of the software underlying
its CitySearch service. There can be no assurance that this new version will
function as intended, and any failure of the Company's software could have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, the strain placed on the Company's resources
by simultaneous launches in multiple cities may adversely affect the roll-out
schedule or quality of the service in a particular city. The Company's failure
to launch its service in new markets in a timely and cost effective manner in
accordance with its planned schedule or the lack of market acceptance of new
services would have a material adverse effect on the Company's business,
financial condition and results of operations.
COMPETITION
The markets for local interactive content and services are highly
competitive. Currently, the Company's primary competitors include Digital City,
Inc., a company wholly owned by America Online, Inc. and Tribune Company,
Microsoft Corporation (Sidewalk) and Zip2 Corporation. The Company also
competes against search engine and other site aggregation companies such as
Excite, Inc. (City.Net), Lycos, Inc. (Lycos City Guide) and Yahoo! Inc. (Yahoo!
Local) which primarily serve to aggregate links to sites providing local
content. In addition, the Company competes against offerings from media
companies, including Cox Interactive Media and Knight-Ridder, Inc., as well as
offerings from several telecommunications and cable companies and Internet
service providers that provide local interactive programming such as SBC
Communications Inc. (At Hand) and U.S. West, Inc. (Dive-In). Many of these
companies have greater financial and marketing resources than the Company and
may have significant competitive advantages through other lines of business and
existing business relationships. There are also numerous niche competitors
which focus on a specific category or geography and compete with specific
content offerings provided by CitySearch. The Company may also compete with
online services and other Web site operators, as well as traditional media such
as television, radio and print, for a share of advertisers' total advertising
budgets. Furthermore, additional major media and other companies with financial
and other resources greater than those of the Company may introduce new
Internet products and services addressing these markets in the future. There
can be no assurance that the Company's competitors will not develop services
that are superior to those of the Company or that achieve greater market
acceptance than the Company's offerings.
The Company believes that the principal competitive factors in its markets
include depth, quality and comprehensiveness of content, ease of use,
distribution, search capability and brand recognition. There can be no
assurance that the Company will be able to successfully compete against its
current or future competitors or that competition will not have a material
adverse effect on the Company's business, financial condition and results of
operations. Furthermore, as a strategic response to changes in the competitive
environment, the Company may make certain pricing, service or marketing
decisions or enter into acquisitions or new ventures that could have a material
adverse effect on the Company's business, financial condition and results of
operations.
RISKS ASSOCIATED WITH OFFERING NEW SERVICES
The Company plans to introduce new and expanded services in order to generate
additional revenues, attract more consumers and respond to competition. For
example, the Company recently introduced business Web sites
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containing new and enhanced functionality for its business customers. The
Company also may in the future offer services facilitating the purchase of
goods by consumers from the Company's business customers. There can be no
assurance that the Company will be able to offer any new services in a cost-
effective or timely manner or that any such efforts would be successful.
Furthermore, any new service launched by the Company that is not favorably
received by consumers could damage the Company's reputation or its brand name.
Expansion of the Company's services in this manner would also require
significant additional expenses and development and may strain the Company's
management, financial and operational resources. The Company's inability to
generate revenues from such expanded services sufficient to offset their cost
could have a material adverse effect on the Company's business, financial
condition and results of operations.
MANAGEMENT GROWTH; RISKS ASSOCIATED WITH EXPANSION
The Company's business has grown rapidly in recent periods. The growth of
the Company's business and expansion of its business customer base have placed
a significant strain on the Company's management and operations. The Company's
expansion has resulted, and is expected in the future to result, in growth in
the number of its employees, in the establishment of offices in disparate
regions of the country and in increased responsibility for both existing and
new management personnel. In addition, this growth has and will put additional
pressure on the Company's existing operational, financial and management
information systems. The Company's success depends to a significant extent on
the ability of its executive officers and other members of senior management,
none of whom has any prior executive management experience in public
companies, to operate effectively, both independently and as a group. To
manage its growth, the Company must continue to implement and improve its
operational, financial and management information systems and hire and train
additional qualified personnel, including sales and marketing staff. There can
be no assurance that the Company will be able to manage its recent or any
future expansions successfully, and any failure of the Company to do so could
have a material adverse effect on the Company's business, financial condition
and results of operations. There also can be no assurance that the Company
will be able to sustain the rate of expansion that it has experienced in the
past. See "Management--Executive Officers and Directors."
DEPENDENCE UPON KEY PERSONNEL; NEED TO HIRE ADDITIONAL QUALIFIED PERSONNEL
The Company's success depends to a significant degree upon the continued
contributions of its executive management team, including Charles Conn, the
Company's co-founder and Chief Executive Officer, and Thomas Layton, the
Company's President and Chief Operating Officer. The loss of the services of
Mr. Conn or Mr. Layton or other members of the Company's management team could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's success will also depend upon the
continued service of the other members of its senior management team and its
technical, marketing and sales personnel. The Company's employees, including
its senior officers, may voluntarily terminate their employment with the
Company at any time, and competition for qualified employees is intense. The
Company's success also depends upon its ability to attract and retain
additional highly qualified management, technical and sales and marketing
personnel. The process of locating and hiring such personnel with the
combination of skills and attributes required to carry out the Company's
strategy is often lengthy. The loss of the services of key personnel or the
inability to attract additional qualified personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations.
DEPENDENCE UPON CONTINUED CONTENT DEVELOPMENT
The Company's success depends in part upon its ability to deliver compelling
interactive content such as recreation, business, shopping, professional
services and news/sports/weather in order to attract consumers with
demographic characteristics valuable to the Company's business customers. The
markets for the Company's services are characterized by rapidly changing
technology, emerging industry standards and consumer requirements that are
subject to rapid change and frequent new service introductions. These
characteristics are exacerbated by the emerging nature of the local
interactive content and service market and the expectation that many companies
may introduce new Internet products and services addressing this market in the
near future.
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There can be no assurance that the Company will be successful in developing
new content and services or enhancing its existing local city guide service on
a timely basis, or that such content and services will effectively address
consumer requirements and achieve market acceptance. If the Company, for
technological or other reasons, is unable to develop and enhance its local
interactive content and service in a manner compatible with emerging industry
standards and that allows it to attract, retain and expand a consumer base
possessing demographic characteristics attractive to business customers, the
Company's business, financial condition and results of operations would be
materially and adversely affected.
DEPENDENCE ON INCREASED USAGE AND STABILITY OF THE INTERNET AND THE WEB
The usage of the Web for services such as those offered by the Company will
depend in significant part on continued rapid growth in the number of
households and commercial, educational and government institutions with access
to the Web, in the level of usage by individuals and in the number and quality
of products and services designed for use on the Web. Because usage of the Web
as a source for information, products and services is a relatively recent
phenomenon, it is difficult to predict whether the number of users drawn to
the Web will continue to increase and whether any significant market for usage
of the Web for such purposes will continue to develop and expand. There can be
no assurance that Internet usage patterns will not decline as the novelty of
the medium recedes or that the quality of products and services offered online
will improve sufficiently to continue to support user interest. Failure of the
Web to stimulate user interest and be accessible to a broad audience at
moderate costs would jeopardize the markets for the Company's local city guide
service.
Moreover, issues regarding the stability of the Internet's infrastructure
remain unresolved. The rapid rise in the number of Internet users and
increased transmission of audio, video, graphical and other multimedia content
over the Web has placed increasing strains on the Internet's communications
and transmission infrastructures. Continuation of such trends could lead to
significant deterioration in transmission speeds and reliability of the Web
and could reduce the usage of the Web by businesses and individuals. In
addition, to the extent that the Web continues to experience significant
growth in the number of users and level of use without corresponding increases
and improvements in the Internet infrastructure, there can be no assurance
that the Internet will be able to support the demands placed upon it by such
continued growth. Any failure of the Internet to support such increasing
number of users due to inadequate infrastructure or otherwise would seriously
limit the development of the Web as a viable source of local interactive
content and services, which could materially and adversely affect the
acceptance of the Company's services, which would, in turn, materially and
adversely affect the Company's business, financial condition and results of
operations.
SUSCEPTIBILITY TO GENERAL ECONOMIC CONDITIONS
The Company's revenues and results of operations will be subject to
fluctuations based upon the general economic conditions of the United States
and other countries in which its local city guide service is offered. If there
were to be a general economic downturn or a recession in the United States or
any other country in which the Company's service is provided, the Company
expects that business enterprises, including its customers and potential
customers, will substantially and immediately reduce their advertising and
marketing budgets. In the event of such an economic downturn, the Company's
business, financial condition and results of operations could be materially
and adversely affected.
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
A key component of the Company's strategy is to continue to expand its local
city guide service into international markets. The Company anticipates that it
will expend significant financial and management resources to operate overseas
and create localized user interfaces through the launch of additional partner-
led markets. If the revenues generated by these international operations are
insufficient to offset the expense of establishing and maintaining such
operations, the Company's business, financial condition and results of
operations will be materially and adversely affected. To date, the Company has
limited experience in developing localized versions of its online sites and
marketing and distributing its products and services internationally.
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There can be no assurance that the Company or its partners will be able to
successfully market or sell its services in these international markets. In
addition to the uncertainty as to the Company's ability to expand its
international presence, there are certain risks inherent in conducting
business on an international level, such as unexpected changes in regulatory
requirements, tariffs and other trade barriers, difficulties in staffing and
managing foreign operations, political instability, currency rate fluctuations
and potentially adverse tax consequences. There can be no assurance that one
or more of the foregoing factors will not have a material adverse effect on
the Company's current and future international operations and, consequently,
on its business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
CAPACITY CONSTRAINTS AND SYSTEM DISRUPTIONS
The satisfactory performance, reliability and availability of the Company's
city guides and its network infrastructure are critical to attracting Web
users and maintaining relationships with business customers and consumers.
System interruptions that result in the unavailability of the Company's sites
or slower response times for consumers would reduce the number of business Web
sites and advertisements purchased and reduce the attractiveness of the
Company's local city guides to business customers and consumers. The Company
has experienced system interruptions in the past and believes that such
interruptions will continue to occur from time to time in the future.
Additionally, any substantial increase in traffic on the Company's local city
services will require the Company to expand and adapt its network
infrastructure. The Company's inability to add additional software and
hardware to accommodate increased traffic on its local city guides may cause
unanticipated system disruptions and result in slower response times. In
addition, the Company currently depends on a limited number of suppliers for
certain key technologies used to roll out and manage the CitySearch service.
There can be no assurance that the Company will be able to expand its network
infrastructure on a timely basis to meet increased demand or that key
technology suppliers will continue to provide the Company with products and
services that meet the Company's requirements. Any increase in system
interruptions or slower response times resulting from the foregoing factors
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company's operations are vulnerable to interruption by fire, earthquake,
power loss, telecommunications failure and other events beyond the Company's
control. Substantially all of the Company's server equipment is currently
located in California in areas that are susceptible to earthquakes. The
Company's business interruption insurance may not be sufficient to compensate
the Company for losses that may occur, and any losses or damages incurred by
the Company could have a material adverse effect on its business, financial
condition and results of operations. See "Business--Technology" and "--
Facilities."
LIABILITY FOR ONLINE CONTENT
The Company may face potential liability for defamation, negligence,
copyright, patent or trademark infringement and other claims based on the
nature and content of the materials that appear on the Company's or its
partners' online sites. Such claims have been brought, and sometimes
successfully pressed, against online services. Although the Company carries
general liability insurance, the Company's insurance may not cover claims of
these types or may not be adequate to indemnify the Company for any liability
that may be imposed. Any imposition of liability, particularly liability that
is not covered by insurance or is in excess of insurance coverage, could have
a material adverse effect on the Company's reputation and its business,
financial condition and results of operations.
UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY; RISKS OF THIRD PARTY LICENSES
The Company regards its copyrights, service marks, trademarks, trade dress,
trade secrets and similar intellectual property as critical to its success,
and relies on trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with the Company's employees,
customers, partners and others to protect its proprietary rights. The Company
pursues the registration of certain of its key trademarks and service
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marks in the United States and internationally. Effective trademark, service
mark, copyright and trade secret protection may not be available in every
country in which the Company's products and services are made available
online. The Company has licensed in the past, and expects that it may license
in the future, certain of its proprietary rights, such as trademarks or
copyrighted material, to third parties. In addition, the Company has licensed
in the past, and expects that it may license in the future, certain content,
including trademarks and copyrighted material, from third parties. While the
Company attempts to ensure that the quality of its brand is maintained by such
licensees, there can be no assurance that such licensees will not take actions
that might materially adversely affect the value of the Company's proprietary
rights or reputation, which could have a material adverse effect on the
Company's business, financial condition and results of operations. There can
be no assurance that the steps taken by the Company to protect its proprietary
rights will be adequate or that third parties will not infringe or
misappropriate the Company's copyrights, trademarks, trade dress and similar
proprietary rights. In addition, there can be no assurance that other parties
will not assert infringement claims against the Company. The Company licenses
the trademark "CitySearch" from a third party, and there can be no assurance
that the Company will be able to continue to license the trademark on terms
acceptable to the Company. The Company may be subject to legal proceedings and
claims from time to time in the ordinary course of its business, including
claims of alleged infringement of the trademarks and other intellectual
property rights of third parties by the Company and its licensees. Such
claims, even if not meritorious, could result in the expenditure of
significant financial and managerial resources which could result in a
material adverse effect on the Company's business, financial condition and
results of operations.
RISK ASSOCIATED WITH REGULATORY MATTERS
The Company is subject to regulations applicable to businesses generally and
laws or regulations directly applicable to access to online commerce. Although
there are currently few laws and regulations directly applicable to the
Internet and commercial online services, it is possible that a number of laws
and regulations may be adopted with respect to the Internet or commercial
online services covering issues such as user privacy, pricing, content,
copyrights, distribution, antitrust and characteristics and quality of
products and services. Furthermore, the growth and development of the market
for online commerce may prompt calls for more stringent consumer protection
laws that may impose additional burdens on those companies conducting business
online. The adoption of any additional laws or regulations may decrease the
growth of the Internet or commercial online services, which could, in turn,
decrease the demand for the Company's products and services and increase the
Company's cost of doing business, or otherwise have a material adverse effect
on the Company's business, financial condition and results of operations.
Moreover, the applicability to the Internet and commercial online services
of existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve. For example, tax authorities in a number of states
are currently reviewing the appropriate tax treatment of companies engaged in
online commerce, and new state tax regulations may subject the Company to
additional state sales and income taxes. Any such new legislation or
regulation, the application of laws and regulations from jurisdictions whose
laws do not currently apply to the Company's business, or the application of
existing laws and regulations to the Internet and commercial online services
could have a material adverse effect on the Company's business, financial
condition and results of operations.
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS
As part of its business strategy, the Company may make acquisitions of, or
significant investments in, complementary companies, products or technologies,
although the Company has no present understandings, commitments or agreements
with respect to any acquisition or investment. Any such future acquisitions
would be accompanied by the risks commonly encountered in acquisitions of
companies. Such risks include, among other things, the difficulty of
assimilating the operations and personnel of the acquired companies, the
potential disruption of the Company's ongoing business, the diversion of
resources from the Company's existing businesses, sites and technologies, the
inability of management to maximize the financial and strategic position of
the Company through the successful incorporation of the acquired technology
into the Company's products
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and services, additional expense associated with amortization of acquired
intangible assets, the maintenance of uniform standards, controls, procedures
and policies and the impairment of relationships with employees and customers
as a result of any integration of new management personnel. There can be no
assurance that the Company would be successful in overcoming these risks or
any other problems encountered with such acquisitions, and the Company's
inability to overcome such risks could have a material adverse effect on its
business, financial condition and results of operations.
SECURITY RISKS
Although the Company has not in the past experienced attempts by programmers
or "hackers" to penetrate the Company's network security, there can be no
assurance that such actions will not occur in the future. If successful, such
actions could have a material adverse effect on the Company's business,
financial condition and results of operations. A party who is able to
penetrate the Company's network security could misappropriate proprietary
information or cause interruptions in the Company's Web site. The Company may
be required to expend significant capital and resources to protect against the
threat of such security breaches or to alleviate problems caused by such
breaches. Concerns over the security of Internet transactions and the privacy
of users may also inhibit the growth of the Internet generally, particularly
as a means of conducting commercial transactions. Security breaches or the
inadvertent transmission of computer viruses could expose the Company to a
risk of loss or litigation and possible liability. There can be no assurance
that contractual provisions attempting to limit the Company's liability in
such areas will be successful or enforceable, or that other parties will
accept such contractual provisions as part of the Company's agreements, any of
which could have a material adverse effect on the Company's business, results
of operations and financial condition.
RISKS ASSOCIATED WITH DOMAIN NAMES
The Company currently holds various Web domain names relating to its brand,
including the "citysearch.com" domain name. The acquisition and maintenance of
domain names generally is regulated by governmental agencies and their
designees. For example, in the United States, the National Science Foundation
has appointed Network Solutions, Inc. as the exclusive registrar for the
".com," ".net" and ".org" generic top-level domains. The regulation of domain
names in the United States and in foreign countries is subject to change.
Governing bodies may establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding
domain names. As a result, there can be no assurance that the Company will be
able to acquire or maintain relevant domain names in all countries in which it
conducts business. Furthermore, the relationship between regulations governing
domain names and laws protecting trademarks and similar proprietary rights is
unclear. The Company, therefore, may be unable to prevent third parties from
acquiring domain names that are similar to, infringe upon or otherwise
decrease the value of its trademarks and other proprietary rights. Any such
inability could have a material adverse effect on the Company's business,
financial condition and results of operations.
YEAR 2000 RISK
Many older computer systems and software products currently in use are coded
to accept only two digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century
dates from 20th century dates. As a result, in less than two years, computer
systems and/or software used by many companies may need to be upgraded to
comply with such "Year 2000" requirements. Significant uncertainty exists in
the software industry concerning the potential effects associated with such
compliance. Although the Company licenses to its partners software products
that are designed to be Year 2000 compliant, there can be no assurance that
the Company's software products contain all necessary date changes. In
addition, although the Company licenses software from third parties that it
believes are Year 2000 compliant, there can be no assurance that such software
will be compliant. Any Year 2000 compliance problems could result in a
material adverse affect on the Company's business, financial condition and
results of operations.
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CONTROL BY DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT STOCKHOLDERS
As of June 30, 1998, the directors, executive officers and stockholders
owning 5% of the Company's Common Stock and their respective affiliates in the
aggregate beneficially own approximately 61.8% of the outstanding Common Stock
(on an as-converted basis and including shares issuable upon exercise of stock
options to purchase shares of Common Stock which are exercisable within 60
days of June 30, 1998). In addition, USA Networks, Inc., formerly HSN, Inc.
("USA Networks"), which beneficially owns approximately 12.9% of the
outstanding Common Stock as of June 30, 1998 (on an as-converted basis), has
committed to purchase 1,332,093 shares in this offering (plus an additional
89,400 shares if the Underwriters' over-allotment option is exercised in
full), subject to certain limitations. Furthermore, USA Networks has the right
to elect a member of the Board of Directors until November 12, 2007, subject
to certain limitations. Pursuant to a voting agreement, certain holders of the
Company's Preferred Stock and Common Stock are required to vote all of the
Company's voting securities owned by them to elect to the Board of Directors a
designee of the holders of a majority of the shares of Series C Preferred
Stock outstanding immediately prior to the closing of this offering. As of
June 30, 1998, entities affiliated with Goldman, Sachs & Co. own approximately
79.6% of the outstanding Series C Preferred Stock. As a result, these
directors, executive officers and stockholders owning 5% of the Company's
Common Stock and their respective affiliates will possess significant
influence over the Company, giving them the ability, among other things, to
elect a majority of the Company's Board of Directors and approve significant
corporate transactions. Such share ownership and control may also have the
effect of delaying or preventing a change in control of the Company, impeding
a merger, consolidation, takeover or other business combination involving the
Company or discourage a potential acquiror from making a tender offer or
otherwise attempting to obtain control of the Company which could have a
material adverse effect on the market price of the Company's Common Stock. See
"Management--Board Composition" and "Certain Transactions."
LACK OF PRIOR PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained. The initial public offering price for the Common
Stock to be sold by the Company has been established by negotiations among the
Company and the Representatives of the Underwriters and may bear no
relationship to the price at which the Common Stock will trade after
completion of the offering. See "Underwriting" for factors to be considered in
determining such offering price. The market price of the Common Stock could be
subject to significant fluctuations in response to quarter-to-quarter
variations in the Company's operating results, announcements of technological
innovations or new products by the Company or its competitors, and other
events or factors. For example, a shortfall in revenues or net income, or an
increase in losses from levels expected by securities analysts, could have an
immediate and significant adverse effect on the market price of the Company's
Common Stock. In addition, the stock market in recent years has experienced
extreme price and volume fluctuations that have often dramatically affected
the market prices of many high technology companies, particularly those
companies doing business on the Internet. These fluctuations have often been
unrelated or disproportionate to the operating performance of the companies.
Such fluctuations, as well as general economic and market conditions, may
adversely affect the market price for the Common Stock.
ANTITAKEOVER EFFECT OF CERTAIN CHARTER AND CONTRACTUAL PROVISIONS
Certain provisions of the Company's Restated Certificate of Incorporation
and Bylaws, which will become effective upon the closing of this offering, may
have the effect of delaying, deferring or preventing a change of control of
the Company. These provisions will provide, among other things, that the Board
of Directors is divided into three classes to serve staggered three-year
terms, that stockholders may not take actions by written consent, that certain
provisions of the Company's Restated Certificate of Incorporation and Bylaws
may be amended only by the affirmative vote of 66 2/3% of the Common Stock and
that the stockholders may not call special meetings. After completion of this
offering, the Company will also be authorized to issue up to 2,000,000 shares
of Preferred Stock. The Board of Directors is authorized, subject to
limitations prescribed by Delaware law, to provide for the issuance of
additional shares of Preferred Stock in one or more series, to establish from
time to
15
<PAGE>
time the number of shares to be included in each such series, to fix the
powers, designations, preferences and rights of the shares of each wholly
unissued series and designate any qualifications, limitations or restrictions
thereon and to increase or decrease the number of shares of any such series
(but not below the number of shares of such series then outstanding) without
any further vote or action by the stockholders. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any Preferred Stock that may be issued in the future. The
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change of control of the Company and may adversely affect the
voting and other rights of the holders of Common Stock, which could have an
adverse impact on the market price of the Common Stock. In addition, the
Company will be subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law ("DGCL"), which will prohibit the Company
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved
in a prescribed manner. Such provisions may have the effect of preventing
changes in the management or control of the Company. The Sixth Amended and
Restated Stockholders' Agreement by and among the Company and certain
stockholders of the Company dated May 26, 1998 (the "Stockholders' Agreement")
provides that the Company may not (i) adopt a rights agreement (or other
similar device) with an ownership threshold that would limit USA Networks'
ability to own or purchase securities of the Company or (ii) amend its bylaws,
certificate of incorporation or fail to take an action under Section 203 of
the DGCL, in each case which would limit USA Networks' ability to own or
purchase securities of the Company. See "Certain Transactions," "Description
of Capital--Antitakeover Effects of Provisions of Certificate of Incorporation
and Bylaws" and "--Effect of Delaware Antitakeover Statute."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market after this
offering or the anticipation of such sales could have a material adverse
effect on then-prevailing market prices. Upon completion of the offering, the
Company will have 20,788,507 shares of Common Stock outstanding, assuming no
exercise of currently outstanding options or warrants. Of these shares, the
4,000,000 shares sold in this offering (plus any additional shares sold upon
exercise of the Underwriters' over-allotment option) will be freely
transferable without restriction under the Securities Act of 1933, as amended
(the "Securities Act"), unless they are held by "affiliates" of the Company as
that term is used under the Securities Act and the regulations promulgated
thereunder ("Affiliates"). The remaining 16,788,507 shares of Common Stock
held by existing stockholders are "restricted securities" as that term is
defined in Rule 144 of the Securities Act (the "Restricted Shares").
Restricted Shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rule 144 or Rule 701
under the Securities Act. As a result of contractual restrictions and the
provisions of Rules 144 and 701, additional shares will be available for sale
in the public market as follows: (i) approximately 498,574 Restricted Shares
will be eligible for immediate sale on the effective date of this offering;
(ii) approximately 4,334 Restricted Shares will be eligible for sale 90 days
after the date of this offering; (iii) approximately 4,949,461 Restricted
Shares will be eligible for sale without restriction and 10,601,970 Restricted
Shares will be eligible for sale subject to volume limitations, in each case
180 days after the effective date of this offering and (iv) the remainder of
the Restricted Shares will be eligible for sale from time to time thereafter
upon expiration of their respective holding periods under Rule 144. In
addition, 1,224,944 shares will be issuable upon exercise of vested stock
options and eligible for sale 180 days after the date of this offering upon
the expiration pre-existing contractual lock-up agreements. NationsBanc
Montgomery Securities LLC, on behalf of the Underwriters, may, in its sole
discretion and at any time without notice, release all or any portion of
securities subject to the lock-up agreement with the Underwriters.
Upon the effective date of this offering, the holders of 8,740,795 shares of
Common Stock have the right in certain circumstances to require the Company to
register their shares under the Securities Act for resale to the public. If
such holders, by exercising their demand registration rights, cause a large
number of shares to be registered and sold in the public market, such sales
could have a material adverse effect on the market price for the Company's
Common Stock. If the Company were required to include in a Company-initiated
registration shares held by such holders and holders of an additional
5,820,956 shares of Common Stock pursuant to the
16
<PAGE>
exercise of their piggyback registration rights, such sales may have a
material adverse affect on the Company's ability to raise new capital. In
addition, the Company expects to file a registration statement on Form S-8
registering a total of approximately 3,232,748 shares of Common Stock subject
to outstanding stock options or reserved for issuance under the Company's 1996
Stock Plan, 1998 Directors Option Plan and 1998 Employee Stock Purchase Plan.
The Form S-8 registration statement is expected to be filed and to become
effective immediately following the effective date of this offering. Shares
registered under such registration statement will be available for sale in the
open market, subject to Rule 144 volume limitations applicable to Affiliates,
unless such shares are subject to vesting restrictions with the Company or the
lock-up agreements described above. See "Description of Capital Stock--
Registration Rights" and "Shares Eligible for Future Sale."
NO SPECIFIC USE OF PROCEEDS
The Company has not designated any specific use for the net proceeds from
the sale by the Company of the Common Stock offered hereby. The Company
intends to use the net proceeds of this offering for general corporate
purposes, including working capital and capital expenditures relating to the
CitySearch site such as enhancements to the Company's server and networking
infrastructure. A portion of the proceeds also may be used to acquire or
invest in complementary businesses, technologies or service offerings.
Accordingly, management will have significant flexibility in applying the net
proceeds of this offering. The failure of management to apply such funds
effectively could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Use of Proceeds."
DILUTION
The initial public offering price is substantially higher than the book
value per share of the outstanding Common Stock. At an assumed initial public
offering price of $12.00 per share, investors purchasing shares of Common
Stock in the offering will incur immediate, substantial dilution in the amount
of $9.21 per share. In addition, investors purchasing shares of Common Stock
in this offering will incur additional dilution to the extent outstanding
options and warrants are exercised. See "Dilution."
17
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of 4,000,000 shares of Common
Stock offered hereby are estimated to be $43.8 million ($50.5 million if the
over-allotment option is exercised in full) at an assumed initial public
offering price of $12.00 per share and after deducting the underwriting
discount and estimated offering expenses. The Company intends to use the net
proceeds of this offering for general corporate purposes, including working
capital and capital expenditures relating to the CitySearch site such as
enhancements to the Company's server and networking infrastructure. A portion
of the proceeds also may be used to acquire or invest in complementary
businesses, technologies or service offerings. In the ordinary course of
business, the Company evaluates potential acquisitions of such businesses,
technologies or service offerings. However, the Company has no present
understandings, commitments or agreements with respect to any such
acquisition, and the Company is not currently engaged in any negotiations with
respect to any such transaction. Pending use of the net proceeds for the above
purposes, the Company intends to invest such funds 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 anticipates that it will retain any future
earnings for use in its business and does not anticipate paying any cash
dividends for the foreseeable future.
18
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1998 (i) on an actual basis, and (ii) on an as-adjusted basis to reflect
the conversion of all outstanding shares of Preferred Stock into Common Stock
upon the closing of this offering and the receipt of the net proceeds from the
sale of the 4,000,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $12.00 per share and after deducting the
underwriting discount and estimated offering expenses.
<TABLE>
<CAPTION>
JUNE 30, 1998
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term obligations, less current portion(1)........... $ 2,319 $ 2,319
Redeemable Convertible Preferred Stock(2)................ 77,840 --
Stockholders' equity(3):
Preferred Stock, $0.01 par value: 2,241,173 shares
authorized, actual; 2,000,000 shares authorized, as
adjusted; 2,080,165 shares issued and outstanding,
actual; no shares issued and outstanding, as adjusted.. 3,056 --
Common Stock, $0.01 par value; 75,000,000 shares
authorized, actual; 6,660,886 shares issued and
outstanding, actual; 20,788,507 shares issued and
outstanding, as adjusted............................... 1,635 126,371
Deferred stock compensation.............................. (1,219) (1,219)
Accumulated deficit...................................... (67,213) (67,213)
-------- --------
Total stockholders' equity (deficit)..................... (63,741) 57,939
-------- --------
Total capitalization.................................... $ 16,418 $ 60,258
======== ========
</TABLE>
- --------
(1) See Notes 2 and 5 of Notes to Consolidated Financial Statements.
(2) See Note 6 of Notes to Consolidated Financial Statements.
(3) Based on shares outstanding as of June 30, 1998. Does not include (i)
2,608,514 shares of Common Stock issuable upon exercise of options
outstanding at June 30, 1998 at a weighted average price of $5.20 per
share under the Company's 1996 Stock Option Plan, (ii) 624,234 shares of
Common Stock available for future grant or issuance under the Company's
1996 Stock Option Plan, 1998 Director Option Plan and 1998 Employee Stock
Purchase Plan and (iii) 62,077 shares of Common Stock issuable upon
exercise of an outstanding warrant at an exercise price of $13.29 per
share held by NationsBanc Montgomery Securities LLC. See "Management--
Employee Benefit Plans," "Underwriting" and Note 7 of Notes to
Consolidated Financial Statements.
19
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1998 was
$14.1 million, or $0.84 per share of Common Stock, assuming the conversion of
all outstanding shares of Preferred Stock into shares of Common Stock. "Pro
forma net tangible book value per share" is determined by dividing the number
of outstanding shares of Common Stock into the net tangible book value of the
Company (total tangible assets less total liabilities). After giving effect to
the application of the estimated net proceeds from the sale by the Company of
the 4,000,000 shares of Common Stock offered hereby (based upon an assumed
initial public offering price of $12.00 per share and after deducting the
underwriting discount and estimated offering expenses), the pro forma net
tangible book value of the Company as of June 30, 1998 would have been $57.9
million, or $2.79 per share. This represents an immediate increase in pro
forma net tangible book value of $1.95 per share to existing stockholders and
an immediate dilution of $9.21 per share to new investors purchasing shares at
the initial public offering price. The following table illustrates the per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price............................ $ 12.00
Pro forma net tangible book value as of June 30, 1998.......... $0.84
Increase in pro forma net tangible book value attributable to
new investors................................................. 1.95
-----
Pro forma net tangible book value after offering................. 2.79
-------
Dilution to new investors........................................ $ 9.21
=======
</TABLE>
The following table summarizes on a pro forma basis as of June 30, 1998, the
number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by the
existing stockholders and by the investors purchasing shares of Common Stock
in this offering, based upon an assumed initial public offering price of
$12.00 per share (before deducting the underwriting discount and estimated
offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)...... 16,788,507 80.8% $ 83,590,107 63.5% $ 4.98
New Investors(1).............. 4,000,000 19.2 48,000,000 36.5 12.00
---------- ----- ------------ -----
Total....................... 20,788,507 100.0% $131,590,107 100.0%
========== ===== ============ =====
</TABLE>
- --------
(1) If the Underwriters' over-allotment is exercised in full, the number of
shares held by new investors will be increased to 4,600,000, or 21.5% of
the total shares of Common Stock to be outstanding after this offering.
The foregoing computations assume no exercise of any outstanding stock
options or warrants. As of June 30, 1998, there were options outstanding to
purchase a total of 2,608,514 shares of Common Stock at a weighted average
exercise price of $5.20 per share and warrants outstanding to purchase a total
of 62,077 shares of Common Stock at an exercise price of $13.29 per share. In
addition, as of June 30, 1998, 624,234 shares of Common Stock were reserved
for future issuance under the Company's 1996 Stock Option Plan, 1998 Director
Option Plan and 1998 Employee Stock Purchase Plan. To the extent that any
shares available for issuance upon exercise of outstanding stock options or
warrants or reserved for future issuance under the Company's 1996 Stock Option
Plan, 1998 Directors Option Plan or 1998 Employee Stock Purchase Plan are
issued, there will be future dilution to new investors. See "Management--
Employee Benefit Plans," "Underwriting" and Note 7 of Notes to Consolidated
Financial Statements.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for the period from
September 20, 1995 (date of formation) through December 31, 1995 and for, and
as of the end of, each of the years in the two-year period ended December 31,
1997, are derived from the consolidated financial statements of the Company,
which consolidated financial statements have been audited by Ernst & Young
LLP, independent certified public accountants, and are included elsewhere in
this Prospectus. The consolidated balance sheet data as of December 31, 1995
is derived from audited consolidated financial statements of the Company that
are not included herein. The consolidated statements of operations data for
the six-month periods ended June 30, 1997 and 1998 and the consolidated
balance sheet data at June 30, 1998 are derived from unaudited consolidated
financial statements included elsewhere in this Prospectus. In the opinion of
management, the unaudited consolidated financial statements have been prepared
on the same basis as the audited consolidated financial statements and contain
all adjustments, consisting only of normal recurring adjustments, necessary
for a fair presentation of the Company's results of operations for such
periods and financial condition at such dates. The results of operations for
the six months ended June 30, 1998 are not necessarily indicative of the
results to be expected for the full year or future periods. The selected
consolidated financial data set forth is qualified in its entirety by, and
should be read in conjunction with, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 20,
1995 (DATE OF YEAR ENDED SIX MONTHS
FORMATION) TO DECEMBER 31, ENDED JUNE 30,
DECEMBER 31, ------------------ ------------------
1995 1996 1997 1997 1998
------------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Subscription and
services............... $ -- $ 203 $ 4,913 $ 1,508 $ 5,577
Licensing and royalty... -- -- 1,271 -- 1,221
------ -------- -------- -------- --------
Total revenues........ -- 203 6,184 1,508 6,798
Costs and expenses:
Cost of revenues........ -- 2,908 10,846 4,457 7,446
Sales and marketing..... 57 6,369 19,014 9,210 9,065
Research and
development............ 152 2,563 7,182 3,220 3,395
General and
administrative......... 104 2,475 5,883 2,743 3,634
------ -------- -------- -------- --------
Total costs and ex-
penses............... 313 14,315 42,925 19,630 23,540
------ -------- -------- -------- --------
Loss from operations..... (313) (14,112) (36,741) (18,122) (16,742)
Interest income, net..... 5 217 223 104 260
------ -------- -------- -------- --------
Loss before provision for
income taxes............ (308) (13,895) (36,518) (18,018) (16,482)
Provision for income
taxes................... -- (2) (8) -- --
------ -------- -------- -------- --------
Net loss................. $ (308) $(13,897) $(36,526) $(18,018) $(16,482)
====== ======== ======== ======== ========
Historical basic and
diluted net loss per
share................... $(0.06) $ (2.37) $ (5.80) $ (2.87) $ (2.50)
====== ======== ======== ======== ========
Pro forma basic and
diluted net loss per
share................... $(0.05) $ (1.65) $ (2.94) $ (1.56) $ (1.02)
====== ======== ======== ======== ========
Shares used to compute
historical basic and
diluted net loss per
share................... 5,263 5,857 6,301 6,282 6,582
====== ======== ======== ======== ========
Shares used to compute
pro forma basic and
diluted net loss per
share................... 5,640 8,431 12,430 11,515 16,139
====== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 1998
----------------------- --------
1995 1996 1997
------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.................... $1,413 $ 7,527 $25,227 $15,512
Working capital.............................. 1,323 4,257 19,375 10,731
Total assets................................. 1,490 13,370 31,655 22,490
Long-term obligations, less current portion.. -- 1,451 2,420 2,319
Redeemable Convertible Preferred Stock....... -- 20,309 70,882 77,840
Stockholders' equity (deficit)............... 8,366 (11,943) (47,911) (63,741)
</TABLE>
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and the related Notes thereto included elsewhere in this
Prospectus. This discussion contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including, but not limited to, those set forth under "Risk
Factors" and elsewhere in this Prospectus.
OVERVIEW
CitySearch produces and delivers comprehensive local city guides on the
World Wide Web (the "Web"), providing up-to-date information regarding arts
and entertainment events, community activities, recreation, businesses,
shopping, professional services and news/sports/weather to consumers in
metropolitan areas. Each local city guide consists primarily of original
content developed and designed specifically for the Web by the Company and its
partners. The Company designs and produces custom-built Web sites and related
services for local and regional businesses, aggregates them in a local city
guide environment and provides these businesses the ability to regularly
update and expand their sites. From the Company's founding and incorporation
in September 1995 through May 1996, the Company's operating activities
consisted primarily of recruiting employees, developing new services and
technology, raising capital, engaging in marketing activities, and negotiating
strategic partnerships. The Company launched its first city guide in Chapel
Hill, North Carolina in May 1996. The Company first commenced selling business
Web sites to local businesses in February 1996 and recognized its initial
revenues in June 1996.
CitySearch has two primary means of providing its local city guides. In its
"owned and operated" markets, the Company systematically produces the majority
of its own content, hires and rapidly deploys a direct sales force to sell
custom-built Web sites as well as related services to local and regional
businesses and launches a presence in approximately six months. In other
markets, the Company partners with a local media company that contracts with
CitySearch to assist in developing, designing and launching a city guide.
These partners license CitySearch's systems and provide royalty payments to
the Company for revenues derived from operations. While the Company's initial
site launches were all on an "owned and operated" basis, the Company is
increasingly launching city guides in conjunction with local newspaper
companies in its partner-led markets. These major media partners bring
capital, brand recognition, promotional strength and local knowledge to their
CitySearch sites and allow the Company to build out its national and
international network of sites faster than it could solely through owned and
operated sites. The Company's current owned and operated sites are Austin,
Nashville, New York City, Portland, Raleigh-Durham-Chapel Hill, Salt Lake
City/Utah and the San Francisco Bay Area, and current partner-led markets
include Dallas, Los Angeles, Washington D.C., Melbourne, Sydney and Toronto.
Additional partner-led markets where roll-out teams have been deployed include
Baltimore, Copenhagen, San Diego and Stockholm.
In its owned and operated markets, the Company derives its revenues
primarily from subscription fees resulting from the creation, hosting and
maintenance of local business Web sites. Business customers typically enter
into 12 month agreements that automatically convert to month to month
contracts upon expiration. The Company recognizes revenue from sales of local
business Web sites on a monthly basis over the term of each contract as
services are rendered. The Company's business customers in its owned and
operated markets increased from approximately 1,300 as of December 31, 1996 to
approximately 8,900 as of June 30, 1998. As of June 30, 1998, the Company
believes that there were approximately 6,800 business customers in its
partner-led markets. The average monthly revenue from new business customers
signed up in its owned and operated markets in December 1996 was approximately
$50 and in June 1998 was approximately $160. To a lesser extent, the Company
derives revenue from banner advertising purchased by national and regional
advertisers and from barter agreements with television, radio and media
alliances. Banner revenue is recognized as earned. With barter agreements, the
Company receives television and radio broadcast advertising in exchange for
Web site design,
22
<PAGE>
hosting and maintenance. Barter revenue and expense are recognized monthly
over the term of each contract. For each barter agreement, revenue and expense
are equal and are recognized at a rate based on the estimated cost of the
specific services provided by the Company.
In partner-led markets, the Company derives revenues from the licensing of
its business and technology systems, from royalties on Web site subscriptions,
banners, sponsorships and other ancillary offerings, from consulting and
technology customization services, and from hosting and back office services,
including Web site production, customer service and billing. Royalty,
consulting and technology customization revenues have not been significant to
date, but are expected to increase as a percentage of revenues as partner-led
markets mature and as more partner-led market sites are launched. Licensing
revenue under license agreements entered into prior to December 31, 1997 is
recognized upon the completion and installation of the Company's business and
technology systems and training of partner personnel in each partner-led
market. Pursuant to SOP 97-2, the Company is recognizing revenues from the
sale of licenses for use of the Company's business and technology systems over
the term of the license agreement or the period over which the relevant
services are delivered beginning with contracts signed in 1998. See Note 1 of
Notes to Consolidated Financial Statements. Royalty revenue is recognized as
earned and is typically a percentage of partner-led market Web site
subscriptions, banners, sponsorships and other ancillary offerings. In the
second quarter of 1998, the Company began to derive revenue from providing
back office services, including business Web site design, hosting, customer
service and billing, to certain of its partners.
The Company has recorded deferred stock compensation of $255,000 for the
year ended December 31, 1997 and $1.1 million for the six months ended June
30, 1998 as a result of stock options granted during 1997 and the first six
months of 1998. Amortization of deferred stock compensation of $10,000 was
recognized in 1997, and $84,000 was recognized in the six months ended June
30, 1998. Amortization of deferred stock compensation is allocated to costs of
revenues or to operating expenses depending on the responsibilities of the
relevant employee. Deferred stock compensation is amortized over the vesting
period of the options, generally four years. As a result, amortization of
deferred stock compensation will adversely impact the Company's operating
results for the next four years.
The Company incurred net losses of $308,000, $13.9 million and $36.5 million
for the period from September 20, 1995 (date of formation) to December 31,
1995, and the years ended December 31, 1996 and 1997, respectively, and $16.5
million for the six months ended June 30, 1998. At June 30, 1998, the Company
had an accumulated deficit of $67.2 million. The net losses and accumulated
deficit resulted from the Company's lack of substantial revenues and the
significant operation, infrastructure and other costs incurred in the
development and initial roll-outs of the Company's services. Given its limited
operating history, the Company believes that an analysis of its cost and
expense categories as a percentage of revenues is not meaningful. As a result
of its aggressive expansion plans, the Company expects to incur significant
additional losses from operations for the foreseeable future. Although the
Company has experienced revenue growth in recent periods, there can be no
assurance that such growth rates are sustainable and, therefore, they should
not be considered indicative of future operating results. There can be no
assurance that the Company will ever achieve significant revenues or
profitability or, if significant revenues and profitability are achieved, that
they could be sustained.
RESULTS OF OPERATIONS
Revenues. The Company's revenues increased from $1.5 million for the six
months ended June 30, 1997 to $6.8 million for the six months ended June 30,
1998, and increased from $203,000 for the year ended December 31, 1996 to $6.2
million for the year ended December 31, 1997. The Company did not recognize
any revenue from September 20, 1995 (date of formation) to December 31, 1995
(the "Inception Period"). The Company has two revenue sources: (i)
subscription and services revenue and (ii) licensing and royalty revenue.
Subscription and services revenue was $1.5 million and $5.6 million for the
six months ended June 30, 1997 and 1998, respectively, and was $203,000 and
$4.9 million for the years ended December 31, 1996 and 1997 respectively.
Subscription and services revenue increased in each period primarily as the
result of increases in business Web site subscription revenue due to increases
in the number of city guides launched, an increased number of business Web
sites in each city guide market, and an increase in the average sales price
for business
23
<PAGE>
Web sites. The increases in subscription and services revenue also resulted
from increases in consulting revenue, barter revenue, and banner revenue.
Licensing and royalty revenue was $0 and $1.2 million for the six months ended
June 30, 1997 and 1998, respectively, and was $0 and $1.3 million for the
years ended December 31, 1996 and 1997, respectively.
Cost of Revenues. Cost of revenues consists primarily of the expenses
associated with the design, layout, photography, customer service and
editorial resources used in the production and maintenance of business Web
sites and editorial content, network infrastructure maintenance and the costs
of consulting services in partner-led markets. Cost of revenues is expensed as
incurred. The Company had no cost of revenues for the Inception Period. Cost
of revenues were $4.5 million and $7.4 million for the six months ended June
30, 1997 and 1998, respectively, and were $2.9 million and $10.8 million for
the years ended years December 31, 1996 and 1997, respectively. The increases
were due primarily to increased personnel and freelance labor required to
produce and maintain the increased number of business Web sites and amount of
editorial content.
Sales and Marketing Expenses. Sales and marketing expenses consist primarily
of the costs related to compensation of sales and marketing personnel,
advertising, public relations, travel, sales force training and marketing
literature. Sales and marketing expenses were $9.2 million and $9.1 million
for the six months ended June 30, 1997 and 1998, respectively, and were
$57,000, $6.4 million and $19.0 million for the Inception Period and for the
years ended December 31, 1996 and 1997, respectively. These increases were due
primarily to increased headcount and, to a lesser extent, increases in
marketing and advertising programs. The Company expects that sales and
marketing expenses will continue to increase in absolute dollars as the
Company expands its direct sales force, hires additional marketing personnel
and increases expenditures for marketing and promotional activities.
Research and Development Expenses. Research and development expenses include
the costs to develop, test and upgrade the CitySearch online service and the
enterprise management systems. These costs consist primarily of salaries for
product development personnel, contract labor expense, consulting fees,
software licenses, hardware costs and recruiting fees. Research and
development expenses were $3.2 million and $3.4 million for the six months
ended June 30, 1997 and 1998, respectively, and were $152,000, $2.6 million
and $7.2 million for the Inception Period and for the years ended December 31,
1996 and 1997, respectively. The increases in research and development
expenses were primarily attributable to increased staffing levels required to
design, test, deploy and support expanded city guide functionality and back-
office systems. The Company believes that timely deployment of new and
enhanced products and technology are critical to attaining its strategic
objectives and to remain competitive. Accordingly, the Company intends to
continue recruiting and hiring experienced research and development personnel
and make other investments in research and development. As such, the Company
expects that research and development expenditures will increase in absolute
dollars in future periods. The Company has expensed research and development
costs as incurred.
General and Administrative Expenses. General and administrative expenses
consist primarily of administrative and executive personnel costs, fees for
professional services and the costs of in-house infrastructure to support the
operations of the Company. General and administrative expenses were $2.7
million and $3.6 million for the six months ended June 30, 1997 and 1998,
respectively, and were $104,000, $2.5 million and $5.9 million for the
Inception Period and for the years ended December 31, 1996 and 1997,
respectively. These increases were due primarily to increased staffing levels
to manage and support the Company's expanding operations. The Company
anticipates hiring additional personnel and incurring additional costs related
to being a publicly held entity, including directors' and officers' liability
insurance, investor relations programs and professional service fees.
Accordingly, the Company anticipates that general and administrative expenses
will continue to increase in absolute dollars.
Interest Income, Net. Net interest income consists primarily of interest
earned on the Company's cash, cash equivalents and short term investments,
less interest expense on capital lease obligations. The Company had net
interest income of $104,000 and $260,000 for the six months ended June 30,
1997 and 1998, respectively, and $5,000, $217,000 and $223,000 for the
Inception Period and for the years ended December 31, 1996 and 1997,
respectively. The Company invests its cash balances in short-term investment
grade, interest-bearing securities.
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INCOME TAXES
The provision for income, franchise and capital taxes of $800, $1,600 and
$8,330 for the Inception Period and for the years ended December 31, 1996 and
December 31, 1997, respectively, is based solely on minimum state tax
requirements. The Company's effective tax rate differs from the statutory
federal income tax rate, primarily as a result of operating losses not
benefited. Due to the uncertainty surrounding the timing or realizing the
benefits of its favorable tax attributes in future tax returns, the Company
has placed a valuation allowance against its otherwise recognizable deferred
tax assets. At December 31, 1997, the Company had net operating loss
carryforwards for federal and state income tax purposes of approximately $47.5
million. The federal carryforwards expire principally in the period from 2010
to 2012, and the state carryforwards expire principally in 2003. See Note 4 of
Notes to Consolidated Financial Statements. The Tax Reform Act of 1986 imposes
substantial restrictions on the utilization of net operating losses and tax
credits in the event of an "ownership change" of a corporation. The Company's
ability to utilize net operating loss carryforwards may be limited as a result
of an "ownership change" as defined in the Internal Revenue Code. This
offering, together with prior issuances of Preferred Stock, may constitute an
"ownership change" that could result in limitations on the use of net
operating loss carryforwards in future periods.
SELECTED QUARTERLY OPERATING RESULTS
The following table sets forth certain consolidated statement of operations
data for the Company's six most recent quarters. This information has been
derived from the Company's unaudited consolidated financial statements. In
management's opinion, this unaudited information has been prepared on the same
basis as the annual consolidated financial statements and includes all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation for the quarters presented. This information should be read
in conjunction with the Consolidated Financial Statements and Notes thereto
included elsewhere in this Prospectus. The operating results for any quarter
are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1997 1997 1997 1997 1998 1998
--------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Subscription and
services.............. $ 470 $ 1,038 $ 1,478 $ 1,927 $ 2,563 $ 3,014
Licensing and royalty.. -- -- 677 594 528 693
------- ------- ------- ------- ------- -------
Total revenues....... 470 1,038 2,155 2,521 3,091 3,707
Costs and expenses:
Cost of revenues....... 2,040 2,417 3,155 3,234 3,634 3,812
Sales and marketing.... 4,519 4,691 4,506 5,298 4,383 4,682
Research and
development........... 1,713 1,507 1,729 2,233 1,655 1,740
General and
administrative........ 1,363 1,380 1,520 1,620 1,568 2,066
------- ------- ------- ------- ------- -------
Total costs and
expenses............ 9,635 9,995 10,910 12,385 11,240 12,300
------- ------- ------- ------- ------- -------
Loss from operations.... (9,165) (8,957) (8,755) (9,864) (8,149) (8,593)
Interest income, net.... 84 20 -- 119 173 87
------- ------- ------- ------- ------- -------
Provision for income
tax.................... -- -- -- (8) -- --
------- ------- ------- ------- ------- -------
Net loss................ $(9,081) $(8,937) $(8,755) $(9,753) $(7,976) $(8,506)
======= ======= ======= ======= ======= =======
</TABLE>
Subscription and services revenue increased each period primarily as the
result of business Web site subscription revenue growth due to an increased
number of city guides launched, a greater number of business Web sites in each
city guide and an increase in the average sales price for business Web sites.
Licensing and royalty revenue has fluctuated with the timing of license
agreements in partner-led markets.
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Cost of revenues has increased each period as the Company continues to sell
new business Web sites, add editorial content, host and maintain an increasing
number of business Web sites and, to a lesser extent, provide increasing
services in partner-led markets. Sales and marketing expenses fluctuate
primarily due to the timing of advertising and promotional campaigns. During
the three months ended December 31, 1997, the increase in sales and marketing
expense was primarily due to increased advertising expenditures. Research and
development expenses fluctuate primarily due to the periodic use of technology
consultants. During the three months ended December 31, 1997, consultants were
retained to assist with the development of version CS 2.5 of the Company's
online city guide application. General and administrative expenses have
increased due primarily to increased staffing levels to manage and support the
Company's expanding operations. During the three months ended June 30, 1998,
general and administrative expenses increased primarily due to higher
professional fees incurred during the quarter.
The Company's operating results have varied on a quarterly basis during its
short operating history and may fluctuate significantly in the future as a
result of a variety of factors, many of which are outside the Company's
control. Factors that may affect the Company's quarterly operating results
include, but are not limited to, the ability of its partners to meet roll-out
schedules for the Company's city guide service, the timing and amount of
license and royalty payments from the Company's partners, the Company's
ability to retain existing business customers, attract new business customers
at a steady rate and maintain customer satisfaction, the timing and volume of
new business Web site orders and the Company's capacity to meet such orders,
the Company's ability to maintain or increase current rates of sales
productivity, the announcement or introduction of new or enhanced sites and
services by the Company or its competitors, the amount of traffic on the
Company's online sites, the amount of expenditures for online advertising by
businesses, the level of use of online services and consumer acceptance of the
Internet for services such as those offered by the Company, the Company's
ability to upgrade and develop its systems and attract personnel in a timely
and effective manner, the amount and timing of operating costs and capital
expenditures relating to expansion of the Company's business and
infrastructure, technical difficulties, system downtime or Internet brownouts,
political or economic events affecting the cities in which the Company
operates and general economic conditions. Unfavorable changes in any of the
above factors could adversely affect the Company's revenues, gross margins and
results of operations in future periods. Accordingly, the Company believes
that period-to-period comparisons of its results of operations should not be
relied upon as an indication of future performance. In addition, the results
of any quarterly period are not indicative of results to be expected for a
full fiscal year. Finally, as a result of the foregoing factors, the Company's
annual or quarterly results of operations may be below the expectations of
public market analysts or investors, in which case the market price of the
Common Stock could be materially and adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through the private placement of equity securities, raising $81.0 million, and
capital equipment leases. At June 30, 1998, the Company had $15.5 million in
cash and cash equivalents. The Company has had significant negative cash flows
from operating activities in each fiscal and quarterly period to date. Net
cash used in operating activities was $15.8 million and $16.1 million for the
six months ended June 30, 1997 and 1998, respectively, and $213,000, $10.5
million and $30.1 million for the Inception Period and for the years ended
December 31, 1996 and 1997, respectively. Cash used in operating activities
from Inception through June 30, 1998 consisted primarily of net operating
losses and increases in accounts receivable, which were partially offset by
increases in deferred revenues, accrued expenses and accounts payable.
Net cash used in investing activities was $1.1 million and $54,000 for the
six months ended June 30, 1997 and 1998, respectively, and was $82,000, $3.5
million and $2.0 million for the Inception Period and for the years ended
December 31, 1996 and 1997, respectively. Net cash used in investing
activities in these periods consisted primarily of capital expenditures for
computer equipment, purchased software, office equipment, and leasehold
improvements. As of December 31, 1997, the Company also had commitments under
non-cancelable operating leases of $5.3 million. Net cash provided by
financing activities was $15.7 million and $6.5 million for the six
26
<PAGE>
months ended June 30, 1997 and 1998, respectively, and was $1.7 million, $20.2
million and $49.7 million for the Inception Period and the years ended
December 31, 1996 and 1997, respectively, attributable to the private sale of
Preferred Stock.
The Company believes that net proceeds from this offering, together with
existing cash, cash equivalents and short-term investments, will be sufficient
to meet its working capital and capital expenditures requirements for at least
the next 12 months. Thereafter, the Company may be required to raise
additional funds. No assurance can be given that the Company will not be
required to raise additional financing prior to such time. If additional funds
are raised through the issuance of equity securities, stockholders of the
Company may experience significant dilution. Furthermore, there can be no
assurance that additional financing will be available when needed or that if
available, such financing will include terms favorable to the Company or its
stockholders. If such financing is not available when required or is not
available on acceptable terms, the Company may be unable to develop or enhance
its products and services, take advantage of business opportunities or respond
to competitive pressures, any of which could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Risk Factors--Future Capital Needs; Uncertainty of Additional Financing."
RECENT ACCOUNTING PRONOUNCEMENT
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") No. 97-2, Software Revenue Recognition,
which supersedes SOP No. 91-1. The Company adopted SOP No. 97-2 prospectively
for software transactions entered into beginning January 1, 1998. SOP No. 97-2
generally requires revenue earned on software arrangements involving multiple
elements to be allocated to each element based on the relative fair values of
the elements. The fair value of an element must be based on evidence that is
specific to the vendor. If a vendor does not have evidence of the fair value
for all elements in a multiple-element arrangement, all revenue from the
arrangement is deferred until such evidence exists or until all elements are
delivered. Beginning with contracts signed in 1998 pursuant to SOP 97-2, the
Company is recognizing revenues from the sale of licenses for use of the
Company's business and technology systems over the term of the license
agreement or the period over which the relevant services are delivered. See
Note 1 of Notes to Consolidated Financial Statements.
27
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BUSINESS
The discussion in this Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
significantly 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" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
OVERVIEW
CitySearch produces and delivers comprehensive local city guides on the
World Wide Web (the "Web"), providing up-to-date information regarding arts
and entertainment events, community activities, recreation, businesses,
shopping, professional services and news/sports/weather to consumers in
metropolitan areas. Each local city guide consists primarily of original
content developed and designed specifically for the Web by the Company and its
partners. The Company designs and produces custom-built Web sites and related
services for local and regional businesses, aggregates the sites in a local
city guide environment and provides these businesses the ability to regularly
update and expand their sites. This service offers local and regional
businesses the opportunity to reach and interact with targeted consumers. The
Company builds its city sites with the involvement of local government,
community and volunteer associations, business and professional groups,
educational institutions and local media companies. In addition, content
generated by consumers through e-mail and bulletin boards, available in most
sites, enhances the sense of community in CitySearch sites.
CitySearch and its partners create comprehensive locally focused content
that can be accessed using targeted, sophisticated searches across all content
residing on a CitySearch site. In contrast, many search engines and
navigational guides access pre-existing content from third-party Web sites
that may be incomplete or out of date. In its owned and operated markets,
CitySearch offers a broad array of updated, local content that is relevant to
consumers. In certain other markets, CitySearch provides local media companies
with the necessary technology and business expertise to design, launch and
operate a co-branded CitySearch site. The Company's city guides have received
numerous awards and recognition for design, functionality and content,
including PC Magazine's Editor's Choice, USA Today/Intelliquest's survey
leader, the 1998 Webby award for best travel site, recognition by The New York
Times as the best overall online guide to New York City, How Magazine's Design
Award and Net Guide's Platinum "Best of the Web" Award.
CitySearch launched its initial site in the Raleigh-Durham-Chapel Hill
metropolitan area in May 1996. The Company and its partners have since
launched additional local city guides in Austin, Dallas, Los Angeles,
Nashville, New York City, Portland, Salt Lake City/Utah, the San Francisco Bay
Area and Washington, D.C. in the U.S., and in Melbourne, Sydney and Toronto
internationally. The Company plans to expand its service to additional
national and international markets both by leveraging the standardized roll-
out model it has developed through previous city launches and by partnering
with major media companies in certain cities. The Company has, for instance,
partnered with The Baltimore Sun, The Dallas Morning News, the Los Angeles
Times, The San Diego Union-Tribune, The Washington Post, The Melbourne Age,
Schibsted ASA/Scandinavia Online (Copenhagen, Oslo and Stockholm), The Sydney
Morning Herald and the Toronto Star. These major media partners bring capital,
brand recognition, promotional strength and local knowledge to their
CitySearch sites and allow the Company to build out its national and
international network of sites faster than it could solely through owned and
operated sites. The Company has also reached an agreement with Classified
Ventures, a leading provider of online classified advertising products and
services to the newspaper industry that was formed by seven leading newspaper
companies. The Company will license elements of its technology and business
systems and provide services to Classified Ventures. The Company has also
reached an agreement with American Express that provides for marketing of the
Company's services to American Express merchant customers and various other
electronic commerce and marketing initiatives. The Company's equity investors
include Washingtonpost.Newsweek Interactive Company, The Times Mirror Company,
CPQ Holdings, Inc. (entity affiliated with Compaq Computer Corporation),
Global Retail Partners, L.P. and its affiliates, American Express, Intel
Corporation, AT&T Ventures, T. Rowe Price Threshold Fund III, L.P. and
Schibsted ASA.
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INDUSTRY BACKGROUND
The Internet and the World Wide Web
The Internet is an increasingly significant global interactive medium for
communications, content and commerce. International Data Corporation ("IDC")
estimates that the number of Web users worldwide will increase from 69 million
at the end of 1997 to 320 million by the year 2002. According to The Media
Audit, in certain of the markets where CitySearch has offerings, including
Austin, Portland, Raleigh-Durham-Chapel Hill, Salt Lake City, San Francisco
and Washington, D.C., more than four in ten adults are online. Growth in
Internet usage has been fueled by a number of factors, including the large and
growing installed base of personal computers in the workplace and home,
advances in the performance and speed of personal computers and modems,
improvements in network infrastructure, easier and cheaper access to the
Internet and increased awareness of the Internet among businesses and
consumers. As Internet accessibility, usage and functionality continue to
grow, the Internet is increasingly being used as a medium for direct
communication among users (e.g., via e-mail and bulletin boards) as well as a
rapidly growing sales and marketing channel.
The Demand for Local, Community-Oriented Information over the Internet
The Company believes that as users spend more time on the Web, they are
increasingly seeking local information relevant to their daily lives. The
Company believes that consumers spend a large majority of their time and money
in their local communities and that, as a result, Web users are increasingly
seeking targeted, relevant information concerning local events, places of
interest, shopping and other information that is pertinent to their local
activities. According to a survey conducted by Find/SVP, over half of U.S.
Internet users accessed some type of online local news and information during
the first three months of 1997. Additionally, businesses are seeking cost-
effective means to target advertising and direct marketing efforts based on
demographic characteristics, specific interests and geographic location.
McCann-Erickson estimates that businesses spent approximately $77 billion in
1997 on traditional, indirect advertising efforts in local markets. With the
Internet, businesses can directly interact with consumers, receive immediate
feedback on their marketing efforts and refine advertising campaigns on a
real-time basis. The Company believes that the Web is becoming a more
effective and efficient means for businesses to reach consumers.
Consumers have limited Web resources available to provide focused and
relevant local information. Similarly, many local businesses lack Web
resources enabling them to effectively advertise to targeted local consumers.
As the Internet has evolved, Web users have used sites devoted to local areas
within navigational guides, such as search engines and directories, and Web
sites provided by newspapers and other traditional media sources. Local
content within large navigational guides is often comprised of hypertext links
to multiple, disparate Web sites that may provide the user with inconsistent
and confusing user interfaces, outdated information and no common database to
enable useful information searches. While Web sites for traditional media,
including newspapers and television stations, effectively provide Web users
with updated news coverage, they often lack the internal resources to
structure easy-to-use, interactive guides for Web users, resulting in Web
sites with limited functionality. In addition, the Company believes these
sites frequently do not provide businesses with useful geographic and topical
context for a business' Web presence. Finally, many traditional media
organizations, while possessing strong brand names in their local markets, do
not have experience in fielding, training and managing a sales and production
force skilled at selling Web sites to local businesses, producing high quality
Web-based advertising or providing necessary customer support.
The Company believes there is a growing demand for online city guides that
provide frequently updated local information organized in an intuitive manner
and targeted at metropolitan consumers. The Company believes that consumers
are seeking a guide that provides extensive information on local events,
business listings and community activities, offers a user-friendly interface
to facilitate rapid information access and allows users to search within a
city-specific site. The Company also believes that as Internet users are
increasingly seeking such information, traditional media sources are also
seeking to partner with companies that are able to provide the appropriate
technology and business processes to develop an online presence. Similarly,
businesses are
29
<PAGE>
seeking content and technology solutions that not only offer Web users a rich
and focused local guide so as to provide a highly effective context for the
marketing of their goods and services, but also provide small and medium sized
businesses a low cost, high quality Web presence. Indicative of this
opportunity, Jupiter Communications estimates that the amount of local
business advertising online will grow from 9% of total online advertising
revenues in 1996 to 37% in 1998 and 54% of the $7.7 billion in online
advertising in 2002. For local businesses seeking a means of establishing a
Web presence, the current alternatives include either building their own Web
site or placing an advertisement with an electronic yellow pages site. Most
custom Web sites are expensive to develop and maintain, and may not attract
high levels of Web site traffic without significant promotion. Placing an
advertisement with an electronic yellow pages typically does not provide an
appropriate context for a local business' site and no assistance on how to
effectively reach consumers. As a result, the Company believes a significant
opportunity exists for a local city guide that meets consumers' demands for
local information and businesses' objectives for targeting, interacting and
selling to these local consumers.
THE CITYSEARCH SOLUTION
CitySearch produces and delivers comprehensive local city guides on the Web,
providing up-to-date information regarding arts and entertainment events,
community activities, recreation, businesses, shopping, professional services
and news/sports/weather to consumers in metropolitan areas. Each local city
guide primarily consists of original content developed and designed
specifically for the Web by the Company and its partners. The Company designs
and produces custom-built Web sites and related services for local and
regional businesses, aggregates them in a local city guide environment and
provides business customers the ability to regularly update and expand their
sites. The CitySearch sites offer local and regional businesses the
opportunity to reach and interact with targeted consumers.
CitySearch typically targets medium to large sized cities with a combination
of high personal computer penetration, high Internet use, strong population
growth, significant high technology employment, a large university population
and a government presence. CitySearch has two primary means of providing its
local city guides. In its "owned and operated" markets, the Company
systematically produces the majority of its own content, hires and rapidly
deploys a direct sales force to sell custom-built Web sites as well as related
services to local businesses and launches a presence in approximately six
months. In other markets, the Company partners with a local media company that
contracts with CitySearch to assist in developing, designing and launching a
city guide. These partners license CitySearch's systems and provide royalty
payments to the Company for revenues derived from operations. As of July 15,
1998, the Company provided local guides in 13 cities, seven of which are owned
and operated and six of which are operated by its local newspaper partners
("partner-led markets"). The Company and its partners are in the process of
rolling out their services in four additional partner-led markets in
Baltimore, Copenhagen, San Diego and Stockholm. Key elements of the Company's
solution include the following:
Leading and Experienced Local Online Service. The Company is a leader in
providing online local guides. CitySearch has launched or initiated a roll-out
of Web-based local city guides with an easy-to-use interface in major national
and international markets, including Austin, Baltimore, Dallas, Los Angeles,
Nashville, New York City, Portland, Raleigh-Durham-Chapel Hill, Salt Lake
City/Utah, San Diego, the San Francisco Bay Area, Washington, D.C.,
Copenhagen, Melbourne, Stockholm, Sydney and Toronto. The Company believes the
success of its approach is evidenced by the over 8,900 local and regional
business Web sites that were online as of June 30, 1998 in its owned and
operated markets, the over 6,800 business Web sites that the Company believes
were online as of June 30, 1998 in its partner-led markets and by its consumer
base penetration and consumer usage. According to Relevant Knowledge,
CitySearch had approximately 810,000 unique adult users in its owned and
operated markets, and the Company believes that approximately 7.4% of the
local market online consumers used the CitySearch service in these markets in
June 1998.
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Differentiated Service Offering. The Company believes its local city guides
differ substantially from competitive offerings. CitySearch develops and
regularly updates its own content, both internally and in conjunction with
local media partners, and offers consumers the opportunity to perform
sophisticated searches since all Web content resides in the CitySearch site
database. Unlike navigational guides that typically access content from third-
party Web sites that may be incomplete or out of date, CitySearch sites
encompass a broad array of updated, community-specific content that is easily
accessed through CitySearch's common interface. The Company's city guides have
received numerous awards and recognition for design, functionality and content
including PC Magazine's Editor's Choice, USA Today/Intelliquest's survey
leader, the 1998 Webby award for best travel site, recognition by the New York
Times as best overall online guide to New York City, How Magazine's Design
Award and Net Guide's Platinum "Best of the Web" award.
Strategic Partnerships. The Company is engaged in a number of strategic
partnerships with media, content and other companies in order to build the
CitySearch brand name and network of city guides. The Company has established
or signed agreements to develop city guides in partnership with The Baltimore
Sun, The Dallas Morning News, Washingtonpost.Newsweek Interactive Company, the
Los Angeles Times, The San Diego Union-Tribune, The Melbourne Age, Schibsted
ASA/Scandinavia Online (Copenhagen, Oslo and Stockholm), The Sydney Morning
Herald and the Toronto Star. Several of the Company's strategic relationships
involve equity investments from the Company's partners, including
Washingtonpost.Newsweek Interactive Company, The Times Mirror Company, owner
of the Los Angeles Times and The Baltimore Sun, Schibsted ASA and Toronto Star
Newspapers Limited. These major media partners also bring capital, brand
recognition, promotional strength and local knowledge to their CitySearch
sites and allow the Company to build out its national and international
network of sites faster than it could solely through owned and operated sites.
In July 1998, the Company reached an agreement with Classified Ventures, a
leading provider of online advertising products and services to the newspaper
industry. According to information provided by Classified Ventures, Classified
Ventures is funded by Central Newspapers Inc., Gannett Co., Inc., Knight
Ridder, The McClatchy Company, The Times Mirror Company, Tribune Company and
The Washington Post Company, and has a network of over 130 affiliated
newspapers in 42 states, including 35 of the nation's top 50 markets.
CitySearch will license elements of its technology and business systems to
Classified Ventures and provide services in automotive and real estate
classified advertising categories. Certain CitySearch owned and operated
services may also participate as Classified Ventures affiliates in their
respective markets.
In CitySearch owned and operated markets, the Company partners with local
media companies to assist it in developing content and expanding its
promotional activities. For example, CitySearch has partnered in Salt Lake
City/Utah with the CBS television station (KUTV) and six radio stations owned
by Citadel Communications Corporation, in San Francisco with the ABC
television station (KGO) and two CBS-owned radio stations and in Raleigh-
Durham-Chapel Hill with the national public radio station (WUNC) and with four
radio stations owned by Capstar Broadcasting Corporation. In addition, the
Company has entered into an agreement with American Express Travel Related
Services Company, Inc. ("American Express") that provides for an equity
investment by American Express in the Company, the distribution of co-branded
marketing materials for the sale of business Web sites to American Express
merchant customers on CitySearch guides, American Express sponsorship and
banner advertising, introduction of electronic commerce products and services
and sponsorship of other promotions. To further supplement the information and
services it provides its consumers, the Company also entered into a
relationship with Ticketmaster Group, Inc. ("Ticketmaster") to develop a
system to enable consumers to purchase tickets to events listed on the
CitySearch service. CitySearch has also reached agreements or arrangements
with Earthlink Network, Inc., The Walt Disney Company's Family.com, Cnet
Snap!, Planet Direct, At Home Network and Internet Travel Network to expand
its distribution efforts.
Differentiated Presence on the Web For Local and Regional Businesses. The
Company creates Web sites for local and regional businesses, aggregates the
Web sites in a local city guide environment and provides businesses the
ability to regularly update and expand their sites. The Company believes its
service offers local and regional businesses the opportunity to reach and
interact with targeted audiences in a cost-effective manner.
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The Company provides business customers with integrated solutions to establish
customized, multi-page Web sites including design, layout, photography,
posting of updated information, hosting and maintenance. Businesses are able
to provide a targeted audience with updated information about their products
and services, including photographs, prices, store location, schedules of live
entertainment, specials or sales and other relevant information. The Company
typically creates a customized, multi-page Web site for its customers with a
minimal up-front fee and monthly fees ranging from $60 to $750 per month. The
Company believes its broad offering of services and prices compares favorably
to other Web advertising options available to businesses. Such options range
from low cost, low quality scanned-in information to free-standing custom-
designed sites that may cost in excess of $10,000 in up-front fees to produce
and that rely on significant promotion to attract traffic. By providing a high
quality Web presence at an affordable price, the Company believes that its
services address the demand of the large number of businesses whose online
needs fall between these market extremes.
Community-Based Approach. CitySearch differentiates itself from most
national developers of local city guides by building many of its owned and
operated sites with involvement from city governments, chambers of commerce,
community associations, schools and others, and by focusing its hiring efforts
within the local community. The Company builds free Web sites for selected
community organizations, provides tools for e-mail to constituents and
community forums and maintains guides to community services and volunteer
organizations, thereby enhancing the sense of community each CitySearch site
provides. The Company believes that its community-based approach builds
consumer interest in the site both directly, since the content it provides is
of interest to many individuals and is not generally covered by competing city
sites, and indirectly, because it builds broad support and "ownership" in the
community. The Company has secured strong community support for its service in
each of its markets, and the launch of many of its owned and operated markets
have been presided over by the mayor or governor.
THE CITYSEARCH STRATEGY
The Company's objective is to be the category leader for comprehensive local
city guides that will attract a new and larger group of consumers to the
Internet and provide an easy-to-use resource for local information that is
relevant to people's daily lives. The Company's strategy is focused on rapidly
rolling out its service in the most attractive, Web-penetrated markets
worldwide, establishing a dominant presence in these markets and using the
CitySearch service as a platform for multiple revenue streams. The following
are key elements of this strategy:
Leverage Systematic City Launch Process. The Company believes it derives a
competitive advantage from its ability to launch its service rapidly.
CitySearch has developed and refined its detailed roll-out process in its 13
city guide launches to date. The Company's roll-out teams are led by
experienced managers who prepare for launch by setting up operations, hiring
and training local management teams, building the initial community
relationships, negotiating promotional arrangements with local media, training
a direct sales force of Internet Business Advisors ("IBAs") and selling
initial sites. The Company's documented roll-out processes typically enable it
to launch its service in approximately six months in owned and operated
markets. In partner-led markets, the Company provides its roll-out expertise,
professional personnel and technical infrastructure to assist its partners in
creating effective sites and initiating rapid and successful launches.
Rapidly Build National and International Network and Brand Awareness. The
Company intends to establish its service as the category leader for local
information on the Web by linking its local city guides together in a national
and international network. As of July 15, 1998, the Company's service operated
in 13 metropolitan areas worldwide, and CitySearch had initiated roll-out for
launches in four additional metropolitan areas. The Company will continue to
aggressively enter targeted markets through either an owned and operated
market presence or by entering into partnerships and strategic alliances with
major newspapers. The Company believes that as the number of its sites and
usage of its service increases, it is creating a readily recognizable brand
name for local content on the Internet. The Company believes that its branded
worldwide network of local guides in Web-penetrated markets will increasingly
attract local, regional and national advertisers that seek to efficiently
target local markets and consumers seeking information about cities where they
live or that they intend to visit.
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Continue Penetration of Established Markets. The Company emphasizes an
aggressive, on-going process of increasing penetration of businesses in its
metropolitan markets and continued community involvement. The Company strives
to retain its business customers through continuing direct contact by Internet
Marketing Advisers ("IMAs") employed by the Company in most cities and by
providing customers with a high level of customer support. IMAs also educate
existing customers about the benefits of upgrading and expanding their Web
presence. The Company continues to emphasize local community involvement in
each city by maintaining Web sites for and communication with selected city
governments, chambers of commerce, community associations, schools, local
charities and others. Through direct and ongoing contact with businesses and
continuing emphasis on the community, the Company believes it creates a local
presence that is difficult for subsequent competitive entrants to displace or
replicate.
Continue to Enter into Strategic Alliances. The Company intends to continue
to differentiate its service by entering into agreements with local radio,
television and other media companies in its future owned and operated markets
and with major newspapers and other media companies in its partner-led
markets. The Company believes major newspapers, in particular, are trusted
sources for local information and possess strong brand names in their
communities. The Company intends to increase its number of local newspaper
partnerships as a primary growth vehicle. The Company believes its
partnerships with local newspapers provide a significant barrier to entry to
competing local city guides that will be difficult to replicate. In addition,
the Company intends to enter into additional strategic relationships, such as
its current relationships with local television and radio stations, Classified
Ventures, American Express and distribution partners.
Develop Platform with Multiple Revenue Streams. The Company believes that
its local city guides provide a platform for multiple revenue streams. In
owned and operated markets, the Company derives recurring revenue fees from
the sale of Web sites to local businesses in the communities CitySearch
serves, as well as banner and sponsorship advertising. Part of the Company's
strategy is to increase average monthly revenue from new customers, in part
through the introduction of new services. Between June 1997 and June 1998,
average monthly revenue from new customers more than doubled. In partner-led
markets, the Company derives licensing and royalty revenues from the licensing
of the Company's technology and business systems, consulting services provided
by CitySearch personnel to develop and establish local sites, and from the
providing back office and hosting services. The Company also offers or intends
to offer electronic commerce functionality and other innovative features
allowing businesses to better serve consumers, including ticketing,
reservations, sales events notifications, electronic coupons, newsletters and
other transactions. The Company believes these types of services offer the
Company the opportunity to further attract both consumers and businesses to
its sites and to derive revenues through increased fees from businesses for
additional services and potentially from online product sales.
THE CITYSEARCH SERVICE FOR CONSUMERS
CitySearch produces and delivers comprehensive local city guides on the Web,
providing up-to-date information regarding arts and entertainment events,
community activities, recreation, businesses, shopping, professional services
and news/sports/weather to consumers in metropolitan areas. Each local city
guide consists primarily of original content developed and designed
specifically for the Web by the Company and its partners. The CitySearch
service is topically organized by categories, such as arts and entertainment,
restaurants and bars, community, shops and services, sports and outdoors,
hotels and tourism, local news and professional services. By using the
CitySearch service, consumers can search shopping areas, obtain maps, contact
community organizations and vendors by e-mail, and engage in bulletin board
discussions with individuals such as local public officials and celebrities.
Some consumers can also access video streams, including recent news and other
information, from local television station partners. CitySearch offers local
and regional businesses the opportunity to reach and interact with targeted
consumers. In addition, content generated by consumers through e-mail and
bulletin boards enhances the sense of community in CitySearch sites.
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The CitySearch service has been launched in markets across the United States
and in selected international markets. The Company plans to continue to expand
its service both in owned and operated markets and by partnering with major
media companies in other markets. These major media partners bring capital,
brand recognition, promotional strength and local knowledge to their city
guides and allow the Company to build out its national and international
network of sites faster than it could solely through owned and operated sites.
The following table lists the Company's owned and operated and partner-led
markets:
<TABLE>
<CAPTION>
MARKETS DATE OF LAUNCH PARTNERS
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
OWNED AND OPERATED:
Raleigh-Durham-Chapel May 1996 WUNC (public radio station)
Hill Capstar Broadcasting Corporation (4 radio
stations) WCHL AM
The Independent (weekly arts and entertainment
publication)
San Francisco Bay October 1996 KGO (ABC)
Area CBS Radio (2 radio stations)
Austin February 1997 KTBC (Fox)
Clear Channel Communications, Inc. (4 radio
stations)
Salt Lake City/Utah March 1997 KUTV (CBS)
Citadel Communications Corporation (6 radio
stations)
Nashville May 1997 WZTV (Fox)
Dick Broadcasting (2 radio stations)
Portland June 1997 KATU (ABC)
KKCW FM
New York September 1997(/1/) Time Out New York (weekly arts and entertainment
publication)
PARTNER-LED:
Melbourne July 1997 The Melbourne Age
Big Colour Pages
Sydney September 1997 The Sydney Morning Herald
Big Colour Pages
Toronto September 1997 Toronto Star
Washington, D.C. December 1997 Washingtonpost.Newsweek Interactive Company
Los Angeles(/2/) April 1998 Los Angeles Times
Dallas July 1998 The Dallas Morning News
Baltimore 1998* The Baltimore Sun
Copenhagen 1998* Schibsted ASA/Scandinavia Online
Stockholm 1998* Schibsted ASA/Scandinavia Online
Oslo 1999* Schibsted ASA/Scandinavia Online
San Diego 1999* The San Diego Union-Tribune
</TABLE>
* Estimated launch dates
(1) CitySearch acquired MetroBeat, Inc. in June 1996 and relaunched the
MetroBeat site as a CitySearch site in September 1997.
(2) Includes Pasadena, California, which was launched as a beta test site in
January 1996.
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THE CITYSEARCH SERVICE FOR BUSINESS CUSTOMERS
The Company creates and hosts Web sites for local and regional businesses
and organizations for a monthly fee. CitySearch offers local businesses a wide
range of options in creating Web presences, from a basic Web presence costing
as little as $60 per month to a multi-page site with additional features and
functionality costing up to $750 per month. Most business customers have
entered into a 12 month agreement that automatically converts into a month-to-
month contract. By aggregating a customer's Web site with those of numerous
other businesses in a comprehensive local city guide, CitySearch provides
categorical and geographic context to a customer's Web presence to generate
usage by consumers, as well as significant Internet traffic. Based on internal
studies, the Company believes that CitySearch users are more evenly split
between men and women, better educated, slightly older and have higher annual
incomes than the typical Internet user. The Company believes that these
demographics are attractive to its business customers.
The Company provides an integrated solution for businesses to establish a
Web presence, including design, photography, lay out, posting of updated
information, hosting and maintenance. Businesses are able to provide a
targeted audience with current information about their stores and services
including photographs, prices, store location, schedules of live
entertainment, sales and other relevant information. Unlike traditional media
such as yellow-pages advertising, the Company offers business customers a
certain number of free updates each month. CitySearch's business customers
also receive usage reports, e-mails from interested consumers and access to an
expanded base of potential buyers including tourists and out-of-town users.
The Company has recently introduced a strategy of bundling enhanced features
and functionality, including panoramic images and audio clips. These services,
when bundled with the Company's basic services, are typically priced from $200
to $750 per month, and have accounted for significant increases in the average
selling prices of the Company's offerings. The Company believes its broad
offering of services and prices compares favorably to other Web advertising
options available to businesses. Such options range from low cost, low quality
scanned-in information to free-standing custom-designed sites that may cost in
excess of $10,000 in up-front fees to produce and that rely on significant
promotion to attract traffic. By providing a high quality Web presence at an
affordable price, the Company believes that its services address the demand of
the large number of businesses whose online needs fall between these market
extremes.
The Company's proprietary site design tools and production economies enable
it to build customized multi-page Web sites for customers for a minimal up-
front fee. The production of business Web sites for CitySearch owned and
operated markets and certain partner-led markets is managed centrally in the
Company's headquarters to better control quality and cost and provide rapid
production. Business Web site creation follows a standardized process. First,
IBAs in the field work with customers to design their sites and gather images
and text. Once content is collected, IBAs forward this information to
CitySearch's central production site in Pasadena, where data entry personnel
input the text. Graphic designers then use the Company's proprietary software
to combine the text and scanned images to create custom sites designed to
reflect the nature and style of each business customer. Once the Web site
designers have completed their work, the business Web site is checked for
accuracy and published online after a 14 day customer proofing period. The
entire process, from the receipt of content by the Company to putting a site
online, takes approximately one month to complete. Each step of the sales and
production process is monitored by an enterprise management system to ensure
that the process is consistent and complete. The Company believes the systems
and processes it has developed to produce business Web sites allow it to
create higher quality, more informative sites in a more cost-effective and
timely manner than that of its competitors.
The Company offers or intends to offer electronic commerce functionality and
other innovative features allowing businesses to better serve consumers,
including ticketing, reservations, sales events notifications, electronic
coupons, newsletters and other transactions. These types of services offer the
Company the opportunity to further attract both consumers and businesses to
its sites and to derive revenues through increased fees from businesses for
additional services and potentially from online product sales.
STRATEGIC ALLIANCES
The Company has entered into partnerships and strategic alliances with third
parties in order to (i) rapidly build its national and international network,
(ii) generate licensing revenue in its partner-led markets,
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<PAGE>
(iii) facilitate branding, (iv) gain access to additional content and (v)
drive traffic on the CitySearch network of sites. Management intends to
continue to negotiate further partnerships and alliances.
Newspaper Partnerships. CitySearch has entered into strategic partnerships
with major newspapers and media companies such as The Baltimore Sun, The
Dallas Morning News, the Los Angeles Times, The San Diego Union-Tribune, The
Washington Post, Schibsted ASA/Scandinavia Online (Copenhagen, Oslo and
Stockholm), The Melbourne Age, The Sydney Morning Herald and the Toronto Star.
In these partner-led markets, the partner provides the capital and management,
while CitySearch contributes technology, a business model, consulting
services, and business systems and processes. CitySearch typically receives
up-front license fees, ongoing license fees for delivery of upgrades and
support, and royalties based on revenues that the newspaper partner generates
through the city guide service. In addition, the Company generally receives
additional fees for consulting services in connection with the launch of the
partner's city guides, custom engineering requested by particular partners,
and compensation for business Web site production, customer service, billing
and hosting services. The terms of the partner agreements are typically five
to eight years in length, and contain customary termination rights in the
event of material breach or non-performance. The Company believes these
arrangements allow it to expand its national and international network of
cities in a more rapid and cost-effective manner than a solely owned and
operated network would allow.
In July 1998, the Company reached an agreement with Classified Ventures, a
leading provider of online advertising products and services to the newspaper
industry. According to information provided by Classified Ventures, Classified
Ventures is funded by Central Newspapers, Inc., Gannett Co., Inc., Knight
Ridder, The McClatchy Company, The Times Mirror Company, Tribune Company and
The Washington Post Company, and has a network of over 130 affiliated
newspapers in 42 states, including 35 of the nation's top 50 markets.
CitySearch will license elements of its technology and business systems to
Classified Ventures and provide services in automotive and real estate
classified advertising categories. Certain CitySearch owned and operated
services may also participate as Classified Ventures affiliates in their
respective markets.
Television and Radio Media Alliances. CitySearch has entered into co-
promotion agreements with local television and radio stations in most of its
owned and operated markets. These relationships typically offer content
sharing and co-promotion to both parties. CitySearch works with each partner
to develop a multimedia Web site within the CitySearch site, while the partner
offers promotion and a recognized brand within the market. CitySearch
typically receives significant on-air promotion from these television and
radio stations that increases brand awareness and drives traffic to the
CitySearch site. For example, CitySearch has partnered in Salt Lake City/Utah
with the CBS television station (KUTV) as well as radio stations owned by
Citadel Communications Corporation and, in Raleigh-Durham-Chapel Hill, with
the national public radio station (WUNC) and radio stations owned by Capstar
Broadcasting Corporation. In San Francisco, the Company has agreements with
the ABC television station (KGO) and radio stations owned by CBS.
Marketing Agreements. The Company has entered into both local and national
marketing agreements. For example, the Company recently reached a wide-ranging
agreement with American Express, including an equity investment in the
Company. The agreement provides for distribution of co-branded marketing
materials to American Express merchant customers in the Company's local
markets that will offer merchant customers online presences through the
Company's local city guides. The parties intend to create areas within the
Company's sites to aggregate promotions and discounts offered to consumers by
American Express merchant customers as well as develop additional electronic
commerce products. In addition, American Express will purchase sponsorships
and banner advertising on the Company's sites. The Company has also entered
into an agreement with Ticketmaster to develop a system to enable consumers to
purchase tickets to Ticketmaster events featured on the CitySearch service
along with local market online promotion of various Ticketmaster events. In
addition, the Company enters into a wide variety of national and local
marketing agreements. For example, the Company has reached an agreement with
GUESS? Inc. that involves banner and in-store promotions in all of the
Company's owned and operated markets, and an agreement with Levi Strauss
Associates Inc.'s Dockers Khakis to provide sponsorship, editorial features
and contests relating to two 1998 San Francisco film festivals. The Company
intends to continue to aggressively pursue such marketing agreements in order
to attract additional business customers and increase usage of the service by
consumers.
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Distribution and Vertical Content Alliances. The Company has entered into
agreements with a number of companies to expand its distribution efforts and
user base. For example, the Company has entered into agreements or
arrangements with Earthlink Network, Inc., The Walt Disney Company's
Family.com, Cnet Snap!, Planet Direct, At Home Network and Internet Travel
Network to distribute content across relevant sites.
MARKETING AND SALES
The Company emphasizes marketing activities in its owned and operated
markets aimed at increasing awareness of its local city guides for both
consumers and business customers. The Company seeks to build each site as a
community project. From the outset, the Company approaches city councils,
chambers of commerce, volunteer groups, community associations and clubs,
visitors bureaus, schools and other local groups. The Company begins by
creating an online presence for selected organizations free of charge. This
approach builds consumer interest in the site, both directly, since this
content is of interest to the community and not typically covered by
commercial city sites, and indirectly because it builds goodwill with a broad
group. The Company's roll-out teams are led by experienced professionals who
prepare for launch by negotiating promotional arrangements with local media,
training a direct sales force and selling initial sites. The roll-out team
initiates advertising and public relations campaigns through low-cost
"guerilla" marketing efforts and CitySearch's local media partners in radio,
television and print advertising to both drive business customer sales and
consumer usage. The Company also purchases targeted advertising on Web sites
such as Infoseek, Preview Travel and Yahoo! as well as through traditional
media such as radio, print and outdoor.
Market roll-out is supported by integrated business system software that
guides operations, production, billing and customer service. The roll-out
strategy and software is designed to enable CitySearch to rapidly penetrate
key targeted vendor categories and neighborhoods. These integrated,
enterprise-wide tools facilitate lead management, sales cycle management,
problem tracking resolution, mass mailing fulfillment, and in-bound and out-
bound call handling.
In partner-led markets, the Company's marketing efforts rely substantially
on the partner's existing franchise and resources in the community. Partners
typically market their city guide services through print promotion and
integration into a pre-existing news Web site. The partner's brand is also
used in conjunction with the CitySearch brand to build credibility with local
consumers. The Company provides its partners both with a roll-out team to
launch the service and ongoing support, including assistance with recruiting,
sales strategy and back office operations.
Once a city site has been launched, the Company and its partners rely upon a
direct sales force to accelerate the momentum established by the roll-out
team. As of June 30, 1998, the Company employed approximately 140 IBAs in
seven owned and operated markets selling directly to local businesses and
approximately 15 IMAs in these markets to maintain regular contact with
business customers and facilitate up-selling of Web site functionality. Each
IBA and IMA completes a one week intensive training program at the Company's
headquarters with follow up field training. The Company's proprietary
enterprise management system tracks sales leads and prospect status and allows
sales managers to track performance. IBAs and IMAs participate in ongoing
training sessions in sales techniques and new products.
OPERATIONS
The Company has created a systematic approach to market roll-out that is
designed to enable it to launch its service in owned and operated markets in
approximately six months and to support a local service once launched. In
addition, the Company licenses its roll-out capabilities to media companies in
its partner-led markets. The Company has analyzed and documented the best
practices associated with its early city launches to refine and standardize
its field and home office production processes. CitySearch's software systems
monitor much of the sales and customer care functions. Additionally, the
Company has built custom systems that streamline the site creation and
maintenance process.
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The Company's customer service operation is located in the Company's
Pasadena headquarters. The Company's enterprise management systems enable
customer service staff to view the customer's full profile, billing and
interactive history as they take the call, and to use the software tools to
make changes to the business customer's site in real time.
TECHNOLOGY
The Company has developed and implemented a number of technologies to
support its local service and business operations, including (i) an online
city guide application, (ii) a set of content creation and management tools
and (iii) a suite of integrated enterprise management systems.
CitySearch Online Application
The CitySearch online application provides a user interface intended to
support novice online users while providing easily accessible advanced
features for experienced Web users. The core end-user functionality of the
CitySearch application includes (i) concurrently performed keyword, spatial
and temporal searches; (ii) personalization that permits consumers, for
example, to receive newsletters in areas of interest, and register for special
offers from CitySearch business customers that have chosen to implement a one-
to-one marketing approach; (iii) dynamic map rendering and "nearby"
functionality; (iv) real-time chat; and (v) message boards.
CitySearch has to date employed an object-relational database to support Web
publishing and searching. With version CS 2.5 of its service, which the
Company intends to deploy in all of its markets in 1998, CitySearch will
employ a multi-tiered architecture, separating a standard relational database
from business rules and presentation logic. CS 2.5 is designed to permit city
guide publishers to create and change the appearance and, generally, the
function of the product using any commercially available Web page design tool
or text editor. As a result, the Company believes that CitySearch and its
partners will be able to respond more quickly to changes in the marketplace
and evolving user preferences. In addition, the object-oriented architecture
is designed to provide for rapid development cycles and code reuse. The
Company has made a substantial investment in its product development
infrastructure and intends to continue to release product enhancements that
address changing demands of business customers and consumers.
Content Creation and Management Tools
The Company has created the following applications to support editorial and
advertising content production: (i) SiteWorks, for design of business Web
sites and editorial features; (ii) EditWorks, for editorial content entry;
(iii) User Interface Tree editor, for defining and managing the site
hierarchy; and (iv) MediaWorks, to enable remote content partners, typically
television and radio stations, to submit content directly to the site. These
tools are designed to minimize the technical knowledge that editorial and
advertising content producers need to possess.
Enterprise Management Systems
CitySearch has developed and implemented a suite of integrated enterprise
management systems designed to handle an increasing volume of business
customers. The enterprise management system consists of third party and
internally developed applications covering sales force automation and
telemarketing, production management and tracking systems, customer service,
accounting, billing and commissions systems.
CitySearch has also designed a sophisticated tool to manage the planning,
scheduling, forecasting and tracking of business Web sites, banners and other
services through the various stages of design and production. This tool
enables the Company to manage the large number of business Web sites and
banners developed simultaneously and originating from numerous cities. The
Company believes the systems and processes it has developed to produce
business Web sites allow it to create high quality sites in a more cost-
effective and timely manner.
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COMPETITION
The markets for local interactive content and services are highly
competitive. Currently, the Company's primary competitors include Digital
City, Inc., a company wholly owned by America Online Inc. and Tribune Company,
Microsoft Corporation (Sidewalk) and Zip2 Corporation. The Company also
competes against search engine and other site aggregation companies such as
Excite, Inc. (City.Net), Lycos, Inc. (Lycos City Guide) and Yahoo! Inc.
(Yahoo! Local) which primarily serve to aggregate links to sites providing
local content. In addition, the Company competes against offerings from media
companies, including Cox Interactive Media and Knight-Ridder, Inc., as well as
offerings from several telecommunications and cable companies and Internet
service providers that provide local interactive programming such as SBC
Communications Inc. (At Hand) and U.S. West, Inc. (Dive-In). Many of these
companies have greater financial and marketing resources than the Company and
may have significant competitive advantages through other lines of business
and existing business relationships. There are also numerous niche competitors
which focus on a specific category or geography and compete with specific
content offerings provided by CitySearch. The Company may also compete with
online services and other Web site operators, as well as traditional media
such as television, radio and print, for a share of advertisers' total
advertising budgets. Furthermore, additional major media and other companies
with financial and other resources greater than those of the Company may
introduce new Internet products and services addressing these markets in the
future. There can be no assurance that the Company's competitors will not
develop services that are superior to those of the Company or that achieve
greater market acceptance than the Company's offerings.
The Company believes that the principal competitive factors in its markets
include depth, quality and comprehensiveness of content, ease of use,
distribution, search capability and brand recognition. There can be no
assurance that the Company will be able to successfully compete against its
current or future competitors or that competition will not have a material
adverse effect on the Company's business, financial condition and results of
operations. Furthermore, as a strategic response to changes in the competitive
environment, the Company may make certain pricing, service or marketing
decisions or enter into acquisitions or new ventures that could have a
material adverse effect on the Company's business, financial condition and
results of operations.
PROPRIETARY RIGHTS
The Company regards its copyrights, service marks, trademarks, trade dress,
trade secrets and similar intellectual property as critical to its success,
and relies on trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with the Company's employees,
customers, partners and others to protect its proprietary rights. The Company
pursues the registration of certain of its key trademarks and service marks in
the United States and internationally. Effective trademark, service mark,
copyright and trade secret protection may not be available in every country in
which the Company's products and services are made available online. The
Company has licensed in the past, and expects that it may license in the
future, certain of its proprietary rights, such as trademarks or copyrighted
material, to third parties. In addition, the Company has licensed in the past,
and expects that it may license in the future, certain content, including
trademarks and copyrighted material, from third parties. While the Company
attempts to ensure that the quality of its brand is maintained by such
licensees, there can be no assurance that such licensees will not take actions
that might materially and adversely affect the value of the Company's
proprietary rights or reputation, which could have a material adverse effect
on the Company's business, financial condition and results of operations.
There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate or that third parties will not infringe or
misappropriate the Company's copyrights, trademarks, trade dress and similar
proprietary rights. In addition, there can be no assurance that other parties
will not assert infringement claims against the Company. The Company licenses
the trademark "CitySearch" from a third party, and there can be no assurance
that the Company will be able to continue to license the trademark on terms
acceptable to the Company. The Company may be subject to legal proceedings and
claims from time to time in the ordinary course of its business, including
claims of alleged infringement of the trademarks and other intellectual
property rights of third parties by the Company and its licensees. Such
claims, even if not meritorious, could result in the
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expenditure of significant financial and managerial resources which could
result in a material adverse effect on the Company's business, financial
condition and results of operations.
EMPLOYEES
As of June 30, 1998, CitySearch employed 555 persons, including 207 persons
in functions related to cost of revenue, 245 persons in sales and marketing,
54 persons in research and development and 49 persons in general and
administrative areas. None of the Company's employees is represented by a
labor union, and CitySearch considers its employee relations to be good.
FACILITIES
The Company's headquarters are located in Pasadena, California, where the
Company currently leases approximately 28,000 square feet under a lease
expiring in 2002. The Company also leases approximately 4,500 square feet in
Austin, 3,900 square feet in Morrisville, North Carolina, 7,900 square feet in
Research Triangle Park, North Carolina, 4,600 square feet in Nashville, 10,000
square feet in New York, 4,700 square feet in Portland, 4,600 square feet in
Salt Lake City and 5,800 square feet in San Francisco under leases which
expire in 2002, 2001, 2003, 2000, 2004, 2002, 2001 and 1999, respectively. The
Company believes that its facilities are adequate in those cities in which the
Company currently does business.
LEGAL PROCEEDINGS
The Company is not currently subject to any material legal proceedings. The
Company may from time to time become a party to various legal proceedings
arising in the ordinary course of business.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company as of June 30, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Charles Conn............ 36 Chief Executive Officer and Director
Thomas Layton........... 35 President, Chief Operating Officer, Treasurer
and Director
Douglas McPherson....... 36 Chief Legal Officer and Vice President,
Business Development
Bradley Ramberg......... 34 Chief Financial Officer, Vice President,
Finance and Administration and Secretary
Robert Kavner(1)........ 54 Chairman of the Board
Gerald Breslauer(2)..... 69 Director
Barry Diller............ 56 Director
Joseph Gleberman(2)..... 40 Director
William Gross(1)........ 39 Director
Yves Sisteron(2)........ 43 Director
Alan Spoon.............. 47 Director
Thomas Unterman(1)...... 53 Director
</TABLE>
- --------
(1)Member of the Compensation Committee
(2)Member of the Audit Committee
Mr. Conn has served as Chief Executive Officer and a director since he co-
founded the Company in September 1995 and served as President of the Company
from September 1995 to October 1996. From September 1990 to September 1995, he
was a consultant at McKinsey & Company, where he was elected Partner. From
September 1986 to September 1988, Mr. Conn worked with the Boston Consulting
Group in Boston and Tokyo and in 1989 with Canon, Inc. in Japan. Mr. Conn
holds a B.A. from Boston University, a B.A. and M.A. from Oxford University,
where he was a Rhodes Scholar and a M.B.A. from Harvard Business School, where
he was a Baker Scholar.
Mr. Layton has served as President since October 1996, Chief Operating
Officer since November 1995, a director since May 1996 and Treasurer of the
Company since September 1995. He also served as Vice President, Sales and
Marketing from November 1995 to October 1996. From May 1994 to November 1995,
he was with Score Learning Corporation, a leading educational learning center,
where he was promoted from Chief Financial Officer to President and Chief
Operating Officer. From January 1989 to October 1992, Mr. Layton was Vice
President and General Manager of the Western Region for Leasecomm, Inc., a
national equipment leasing company, and was previously with the Boston
Consulting Group. Mr. Layton holds a B.S. from the University of North
Carolina at Chapel Hill and a M.B.A. from Stanford University.
Mr. McPherson has served as Chief Legal Officer and Vice President, Business
Development since he joined the Company in July 1996. From November 1992 to
July 1996, Mr. McPherson was with the law firm of Heller Ehrman White &
McAuliffe, where he specialized in intellectual property law and general
commercial litigation. From September 1991 to September 1992, he served as a
law clerk for a federal district judge. From
41
<PAGE>
June 1986 to June 1988, he served as Assistant to the Vice President at The
Rockefeller Foundation in New York City. He holds a B.A. from the University
of North Carolina at Chapel Hill, a M.A. from the University of California,
Berkeley and a J.D. from Stanford Law School.
Mr. Ramberg has served as the Chief Financial Officer and Vice President,
Finance and Administration since he joined the Company in April 1996 and as
Secretary since February 1998. From January 1994 to April 1996, he was Vice
President of Finance and Operations at the Fresh Gourmet Company, a joint
venture between CPC International Inc. and Prepco. From December 1992 to
January 1994, he was vice president, operations and finance at Pro-Towel, a
start-up consumer products venture. He holds an A.B. from Brown University and
a M.B.A. from Harvard Business School.
Mr. Kavner has served as a director of the Company since December 1995 and
Chairman of the Board of Directors since March 1996. Mr. Kavner has served as
the Chief Executive Officer, President and a director of On Command
Corporation, a provider of hotel in-room entertainment and movies, since
September 1996 and was a consultant in the area of Internet services and
content, interactive entertainment and telecommunications from September 1995
to August 1996. From June 1994 to September 1995, Mr. Kavner was the head of
Creative Artists Agency's business advisory group. From 1984 to 1994, Mr.
Kavner held a number of senior executive positions in AT&T, Inc. Mr. Kavner
has a B.A. from Adelphi University. He also serves as a director of Fleet
Financial Group and Earthlink Networks, Inc.
Mr. Breslauer has served as a director of the Company since December 1995.
Since June 1952, he has been a Partner of Breslauer & Rutman, a financial
management company. Mr. Breslauer holds a B.A. from the University of
California, Los Angeles.
Mr. Diller has served as a director of the Company since December 1997. He
has been a director and Chairman of the Board and Chief Executive Officer of
USA Networks since August 1995. He was Chairman of the Board and Chief
Executive Officer of QVC, Inc. from December 1992 through December 1994. From
1984 to 1992, Mr. Diller served as the Chairmen of the Board and Chief
Executive Officer of Fox, Inc. Prior to joining Fox, Inc., Mr. Diller served
for ten years as Chairman of the Board and Chief Executive Officer of
Paramount Pictures Corporation. Mr. Diller is also a director of The Seagram
Company, Ltd., Ticketmaster Group, Inc. and Golden Books Family Entertainment,
Inc.
Mr. Gleberman has served as a director of the Company since May 1996. He is
a Managing Director in the Principal Investment Area of Goldman, Sachs & Co.
He joined Goldman, Sachs & Co. in 1982. He holds a B.A. and M.A. from Yale
University and a M.B.A. from Stanford University. Mr. Gleberman serves as a
director of Applied Analytical Industries, Inc., Biofield Corp., and Dade
International, Inc.
Mr. Gross has served as a director of CitySearch since he co-founded it in
September 1995. Since March 1996, Mr. Gross has been Chairman of the Board,
Chief Executive Officer and President of bill gross' idealab!, a corporation
which generates ideas for and creates new companies. In 1991, he founded
Knowledge Adventure Inc., a corporation which developed educational software
for children. He served as the Chairman of Knowledge Adventure, Inc. from June
1991 to January 1997. He was a developer at Lotus Development Corporation from
1986 to 1991. Prior to joining Lotus Development Corporation, Mr. Gross
founded, in 1980, GNP Loudspeaker, Inc. to manufacture and sell his patented
designs. In 1995, Mr. Gross was elected to the Board of Trustees of California
Institute of Technology as the first Young Alumni Trustee. Mr. Gross holds a
B.S. from the California Institute of Technology.
Mr. Sisteron has served as a director of the Company since December 1997.
Mr. Sisteron has been a Principal of Global Retail Partners, L.P. since
January 1996 and Manager, U.S. Investments of Carrefour S.A. since 1993. Mr.
Sisteron has a J.D. and an L.L.M. from the Lyon Law School and an L.L.M. in
Comparative Law from New York University School of Law. Mr. Sisteron also
serves as a director of InterWorld Technology Ventures, Inc. and P.F. Chang's
China Bistro, Inc.
42
<PAGE>
Mr. Spoon has served as a director of the Company since December 1997. Mr.
Spoon has been President of The Washington Post Company since September 1993
and Chief Operating Officer and a director since May 1991. Prior to that, Mr.
Spoon held a wide variety of positions at The Washington Post Company,
including President of Newsweek from September 1989 to May 1991. Mr. Spoon has
a B.S. from the Massachusetts Institute of Technology, a M.S. from the M.I.T.
Sloan School of Management and a J.D. from Harvard Law School. He is also a
director of American Management Systems, Inc. and Human Genome Sciences, Inc.
Mr. Unterman has served as a director of the Company since June 1997. Since
March 1998, he has served as an Executive Vice President and Chief Financial
Officer and from August 1995 to March 1998, he served as a Senior Vice
President and Chief Financial Officer of The Times Mirror Company. From
February 1995 to August 1995, Mr. Unterman was a Senior Vice President and
General Counsel, and from September 1992 to February 1995 was a Vice President
and General Counsel, of The Times Mirror Company. He has an A.B. from
Princeton University and a J.D. from the University of Chicago.
BOARD COMPOSITION
The Board of Directors is currently comprised of 10 directors, including
eight non-employee directors. Messrs. Diller and Sisteron were elected
pursuant to rights granted to USA Networks and Global Retail Partners, L.P.
(together with its affiliates, "GRP"), respectively, under the Company's
Restated Certificate of Incorporation. Pursuant to the Company's Restated
Certificate of Incorporation, USA Networks has a right to elect one member of
the Board of Directors until the earlier of (i) November 12, 2007 or (ii) the
date USA Networks owns less than 50% of the capital stock of the Company that
it owned on November 12, 1997. In the event that the Company grants any other
stockholder or stockholders, voting as a separate class, a right to elect more
than one director, USA Networks will be entitled to elect the same number of
directors. The Company's Restated Certificate of Incorporation also provides
that GRP has a right to elect one member of the Board of Directors until the
later of (i) November 20, 1999, (ii) the one-year anniversary of the closing
of this offering or (iii) the date GRP owns less than 100% of the capital
stock of the Company that it owned on November 20, 1997.
Mr. Gleberman was elected to the Board of Directors pursuant to the
Company's Restated Certificate of Incorporation, which provides that the
holders of Series C Preferred Stock, voting together as a separate class, have
a right to elect one member of the Board of Directors. This right terminates
upon the closing of this offering. Certain holders of the Company's Preferred
Stock and Common Stock have entered into a voting agreement (the "Voting
Agreement") pursuant to which such stockholders are required to vote, from and
after the closing of the offering, all of the shares of the Company's voting
securities owned by them to elect to the Board of Directors the designee or
designees (the "Series C Directors") of the holders of a majority of the
shares of Series C Preferred Stock outstanding immediately prior to the
closing of this offering (the "Series C Holders"). The Series C Holders are
entitled to designate one candidate for election to the Board of Directors,
except that if any other stockholder or stockholders, voting as a separate
class, are entitled, by virtue of a right granted by the Company, to elect
more than one director, the number shall be increased to the number of
directors that such other stockholder or stockholders are entitled to elect.
The Company has agreed to use its best efforts to cause the nomination and
election of the Series C Directors in accordance with the Voting Agreement.
The Voting Agreement terminates upon the date the Series C Holders hold less
than 7.5% of the then outstanding Common Stock (on a fully diluted basis). As
of June 30, 1998, the holders of the Series C Preferred hold 10.9% of the
outstanding Common Stock of the Company (on a fully diluted, as-converted
basis). As of June 30, 1998, entities affiliated with Goldman, Sachs & Co.
owned 79.6% of the outstanding Series C Preferred Stock.
The Company's Restated Certificate of Incorporation to be effective upon the
completion of this offering provides that the Board of Directors will be
divided into three classes to serve staggered three-year terms.
The Board of Directors has a Compensation Committee, currently comprised of
Mr. Kavner, Mr. Gross and Mr. Unterman, that makes recommendations to the
Board of Directors concerning salaries and incentive
43
<PAGE>
compensation for officers and employees of the Company. The Board of Directors
also has an Audit Committee, currently comprised of Mr. Breslauer, Mr.
Gleberman and Mr. Sisteron, that reviews the results and scope of the annual
audit and other accounting related matters.
DIRECTOR COMPENSATION
The members of the Board of Directors are not compensated for their services
to the Company other than for reimbursement of their expenses incurred in
connection with such services and their eligibility for stock option grants
under the Company's 1996 Stock Option Plan. In March and April 1996, Mr.
Kavner received options to purchase 33,334, 6,667 and 54,454 shares of Common
Stock under the 1996 Stock Option Plan at an exercise price of $0.15, $0.15
and $0.38 per share, respectively. In March 1996, Mr. Breslauer received an
option to purchase 6,667 shares of Common Stock under the 1996 Stock Option
Plan at an exercise price of $0.15 per share. Upon completion of this
offering, directors who are employees of the Company will be eligible to
receive stock options pursuant to the 1996 Stock Option Plan, while non-
employee directors will receive stock options pursuant to the automatic option
grant provisions of the 1998 Director Option Plan. See "--Employee Benefit
Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee is an officer or employee
of the Company. 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 company, nor has such an interlocking
relationship existed in the past.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation awarded to, earned by or paid for services rendered to the
Company in all capacities during the year ended December 31, 1997 by the
Company's Chief Executive Officer and the one executive officer who earned in
excess of $100,000 in compensation during the year ended December 31, 1997
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITY
------------------- OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITIONS SALARY BONUS COMPENSATION OPTIONS (#)
- ---------------------------- ------------------- ------------ ------------
<S> <C> <C> <C> <C>
Charles Conn..................... $ 93,333 $ 40,000 -- 83,334
Chief Executive Officer and Di-
rector
Thomas Layton.................... 86,667 25,000 -- 50,000
President, Chief Operating
Officer, Treasurer and Director
</TABLE>
44
<PAGE>
OPTION GRANTS IN 1997
The following table sets forth certain information regarding option grants
to each of the Named Executive Officers during the year ended December 31,
1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
PERCENT OF TOTAL OF STOCK PRICE
NUMBER OF OPTIONS APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OPTION TERMS(4)
UNDERLYING EMPLOYEES IN PRICE ---------------------
NAME OPTIONS GRANTED (1) 1997(2) PER SHARE(3) EXPIRATION DATE 5% 10%
- ---- ------------------- ---------------- ------------ --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Charles Conn............ 83,334 12.1% $3.00 10/01/07 $ 157,225 $ 398,439
Thomas Layton........... 50,000 7.3 3.00 10/01/07 94,334 239,061
</TABLE>
- --------
(1) All options were granted under the Company's 1996 Stock Option Plan and
vest one forty-eighth per month at the end of each month commencing
September 1, 1997; provided, however that upon a substantial merger or an
acquisition of the Company, the unvested portion of such options will vest
immediately.
(2) Based on options to purchase 689,010 shares granted to employees,
including the Named Executive Officers, during the year ended December 31,
1997 (excluding options to purchase 56,643 shares of Common Stock which
were granted to employees and subsequently canceled during the fiscal year
ended December 31, 1997).
(3) The exercise price per share of each option was equal to the fair market
value of the underlying Common Stock on the date of grant as determined by
the Board of Directors.
(4) Potential gains are calculated net of the exercise price but before taxes
associated with the exercise. The 5% and 10% assumed annual rates of
compounded stock appreciation are mandated by the rules of the Securities
and Exchange Commission ("Commission") and do not represent the Company's
estimate or projection of the future Common Stock price. Actual gains, if
any, on stock option exercises are dependent on the future financial
performance of the Company, overall market conditions and the option
holder's continued employment through the vesting period.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth the number of shares acquired upon the
exercise of stock options during the year ended December 31, 1997 and the
number of shares covered by both exercisable and unexercisable stock options
held by each of the Named Executive Officers at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END(1) AT YEAR-END(2)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles Conn............ -- $ -- 6,944 76,390 $ 62,496 $687,510
Thomas Layton........... -- -- 170,834 45,833 2,012,507 412,497
</TABLE>
- --------
(1) Options shown were granted under the 1996 Stock Option Plan. See "Employee
Benefit Plans" for a description of the material terms of these options.
(2) Based on the assumed initial public offering price of $12.00 per share,
less the exercise price.
EMPLOYMENT AGREEMENTS
On May 9, 1996 and July 2, 1997, respectively, the Company entered into at-
will employment agreements with each of Charles Conn and Thomas Layton, the
Company's Chief Executive Officer and President, respectively. Pursuant to
such employment agreements, in the event that Mr. Conn's or Mr. Layton's, as
the case may be, employment is terminated, he will be entitled to receive
severance payments until the earlier of (i) such time as he is employed by a
recognized company or (ii) six months after termination. Such severance
payments will equal his full salary for the first three months after
termination and half of his salary for the second three months after
termination.
45
<PAGE>
EMPLOYEE BENEFIT PLANS
1996 Stock Option Plan. The Board of Directors adopted and the stockholders
approved the Company's 1996 Stock Option Plan (the "Stock Plan") and the
reservation of 1,666,667 shares of Common Stock thereunder on March 1, 1996.
On September 18, 1996, the Board of Directors and the stockholders approved an
increase of 333,333 reserved for issuance under the Stock Plan. The Board of
Directors and the stockholders approved a further increase of 666,667 shares
on November 18, 1996 and November 20, 1996, respectively. Subject to approval
by the stockholders, the Company plans to increase the number of shares
reserved for issuance by 1,000,000 shares to an aggregate of 3,666,667 shares
of the Common Stock reserved under the Stock Plan. The Stock Plan, as proposed
to be amended, provides that the aggregate number of shares reserved
thereunder will automatically be increased each year on the first day of the
Company's fiscal year beginning in 1999 by a number of shares equal to the
lesser of (i) 666,667 shares of Common Stock, (ii) 3% of the then outstanding
shares of Common Stock on such date or (iii) a lesser amount determined by the
Board of Directors.
The Stock Plan provides for the granting to employees (including officers
and employee directors) of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, and for the
granting to employees (including officers and employee directors) and
consultants (including non-employee directors) of nonstatutory stock options.
Unless terminated sooner, the Stock Plan will terminate automatically in March
2006. The Board of Directors has the authority to amend, suspend or terminate
the Stock Plan, provided that no such action may affect any share of Common
Stock previously issued and sold or any option previously granted under the
Stock Plan.
The Stock Plan may be administered by the Board of Directors or a committee
consisting of members of the Board of Directors. The administrator has the
power to determine the terms of each option granted, including the exercise
price, the number of shares subject to the option and the exercisability
thereof, and the form of consideration payable upon exercise. No employee or
consultant may be granted, in any fiscal year of the Company, options to
purchase more than 500,000 shares (plus 1,000,000 shares in the case of a new
employee's or consultant's initial employment with the Company). Unless
determined otherwise by the administrator, an option granted under the Stock
Plan is not transferable by the optionee other than by will or by the laws of
descent or distribution, and is exercisable during the lifetime of the
optionee only by such optionee. An option granted under the Stock Plan must be
exercised within three months after termination of the optionee's status as an
employee or consultant of the Company (or within 12 months after termination
of such status by death or disability), but in no event later than the
expiration of the option in accordance with its terms. The exercise price of
nonstatutory stock options is determined by the administrator, but with
respect to nonstatutory stock options intended to a qualify as "performance-
based compensation" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended, the exercise price must at least be equal to
the fair market value of the Common Stock on the date of grant. With respect
to any participant who owns stock possessing more than 10% of the voting power
of all classes of the Company's outstanding capital stock, the exercise price
of any incentive stock option must equal at least 110% of the fair market
value on the grant date and the term of the option must not exceed five years.
The term of all other options granted under the Stock Plan may not exceed ten
years.
The shares subject to options granted under the Stock Plan may be fully and
immediately exercisable or may be exercisable cumulatively over time or upon
satisfaction of specified performance criteria, as determined by the
administrator. In most cases, 25% of the shares subject to options granted
under the Stock Plan are exercisable at the end of one year with one forty-
eighth of the shares subject to the option becoming exercisable each month
thereafter.
The Stock Plan provides that in the event of a merger of the Company with or
into another corporation, outstanding stock options will either be assumed by
the acquiring corporation or terminated as of the date of the closing of the
merger, and immediately prior to the consummation of any dissolution or
liquidation of the Company, outstanding stock options will be terminated.
46
<PAGE>
1998 Director Option Plan. Subject to approval by the stockholders, the
Company intends to adopt the 1998 Director Option Plan (the "Director Plan").
The Director Plan provides for the automatic grant of nonstatutory stock
options to non-employee directors. The Director Plan has a term of ten years,
unless terminated sooner by the Board of Directors. A total of 200,000 shares
of Common Stock have initially been reserved for issuance under the Director
Plan. In addition, the Director Plan provides for annual increases on the
first day of the Company's fiscal year beginning in 1999 by a number equal to
the lesser of (i) the number of shares needed to restore the maximum aggregate
number of shares available for sale under the Director Plan to 200,000 shares
or (ii) a lesser number of shares determined by the Board of Directors.
The Director Plan provides that on the date of the closing of this offering
(the "Closing Date"), any Current Outside Director (as defined below) who is
the Chairman of the Board of Directors as of the Closing Date shall
automatically be granted an option to purchase 33,334 shares of Common Stock
and each other Current Outside Director shall automatically be granted an
option to purchase 16,667 shares of Common Stock. Each New Outside Director
(as defined below) shall automatically be granted an option to purchase 13,334
shares of Common Stock on the date which such person first becomes a non-
employee director. In addition, each New Outside Director shall automatically
be granted an option to purchase 3,334 shares on the date of each of the
Company's annual meeting of stockholders, if on such date he or she shall have
served on the Board of Directors for at least six months. Each option granted
under the Director Plan shall have a term of ten years. Twenty-five percent of
the shares subject to the options will vest one year from the date of grant
and one forty-eighth of the optioned stock shall vest each month thereafter,
provided that the individual continues to serve as a director on such dates.
The exercise price of each option shall be 100% of the fair market value per
share of the Common Stock on the date of grant. The term "Current Outside
Director" shall mean any person who is a non-employee director of the Company
on the Closing Date, and the term "New Outside Director" shall mean any person
who joins the Board of Directors after the Closing Date.
In the event of a substantial merger or an acquisition of the Company, each
outstanding option granted to a Current Outside Director shall become fully
vested and exercisable. Each outstanding option may be assumed or an
equivalent option substituted for by the successor corporation. If an option
is assumed or substituted for by the successor corporation, it shall continue
to vest as provided in the Director Plan so long as the optionee continues to
serve as a director of the Company or the successor corporation, as
applicable. If the successor corporation does not assume an outstanding option
or substitute for it an equivalent option, the option will terminate as of the
closing of the merger or asset sale. Options granted under the Director Plan
must be exercised within three months of the end of the optionee's tenure as a
director of the Company, or within 12 months after such director's termination
by death or disability, but in no event later than the expiration of the
option's ten-year term. Options granted under the Director Plan are generally
not transferable by the optionee other than by will or the laws of descent and
distribution, and each option is exercisable, during the lifetime of the
optionee, only by such optionee.
1998 Employee Stock Purchase Plan. Subject to approval by stockholders, the
Company plans to adopt the 1998 Employee Stock Purchase Plan (the "Purchase
Plan") and reserve an aggregate of 200,000 shares of Common Stock thereunder.
The number of shares reserved will be increased automatically each year on the
first day of the Company's fiscal year beginning in 1999 by an amount equal to
the lesser of (i) 266,667 shares of Common Stock, (ii) 1.0% of the outstanding
shares of Common Stock on such date or (iii) a lesser amount determined by the
Board of Directors. The Purchase Plan is intended to qualify as an employee
stock purchase plan within the meaning of Section 423 of the Code. Under the
Purchase Plan, the Board of Directors may authorize participation by eligible
employees, including officers, in periodic offerings following the
commencement of the Purchase Plan. Each offering period will run for 12 months
and will be divided into consecutive purchase periods of approximately six
months. The initial offering under the Purchase Plan will commence on the date
of this Prospectus and terminate on October 31, 1999. Thereafter, new 12 month
offering periods will commence every six months on each May 1 and November 1.
Unless otherwise determined by the Board of Directors, employees are
eligible to participate in the Purchase Plan only if they are customarily
employed by the Company or a subsidiary of the Company designated by the
47
<PAGE>
Board of Directors for at least 20 hours per week and for at least five months
per calendar year. Amounts deducted and accumulated by the participant are
used to purchase shares of Common Stock at the end of each purchase period.
Employees who participate in an offering may have up to 15% of their
compensation withheld pursuant to the Purchase Plan. The price of Common Stock
purchased under the Purchase Plan will be equal to 85% of the fair market
value of the Common Stock at the commencement date of each offering period or
the relevant purchase date, whichever is lower. In the event the fair market
value at the end of a purchase period is less than the fair market value at
the beginning of the offering period, the participants will be withdrawn from
the current offering period following exercise and automatically re-enrolled
in a new offering period. The new offering period will use the lower fair
market value as of the first date of the new offering period to determine the
purchase price for future purchase periods. Employees may end their
participation in any offering period at any time during any offering period,
and participation ends automatically on termination of employment with the
Company. The maximum number of shares that a participant may purchase during
each purchase period is 3,334 shares during any purchase period. In addition,
no person may purchase shares under the Purchase Plan to the extent such
person would own 5% or more of the total combined value or voting power of all
classes of the capital stock of the Company or any of its subsidiaries, or to
the extent that such person's rights to purchase stock under all employee
stock purchase plans would exceed $25,000 for any calendar year. The Purchase
Plan will terminate ten years from the date of adoption of the Purchase Plan,
unless terminated earlier in accordance with the provisions of the Purchase
Plan.
In the event of a proposed sale of all or substantially all the assets of
the Company, or the merger of the Company with or into another corporation,
each outstanding option will be assumed or an equivalent option substituted by
the successor corporation. In the event the successor corporation does not
assume or substitute for the option, any offering periods then in progress
shall be shortened to a new date prior to the proposed sale or merger. The
Board of Directors has the authority to amend or terminate the Purchase Plan,
provided, that no such action may adversely affect any outstanding rights to
purchase Common Stock.
401(k) Plan. The Company participates in a tax-qualified employee savings
and retirement plan (the "401(k) Plan") which covers all of the Company's
full-time employees who are at least 21 years of age and who have been
employed with the Company for at least three months. Pursuant to the 401(k)
Plan, eligible employees may defer up to 20% of their pre-tax earnings,
subject to the Internal Revenue Service's annual contribution limit. The
401(k) Plan permits additional discretionary matching contributions by the
Company on behalf of all participants in the 401(k) Plan in such a percentage
amount as may be determined annually by the Board of Directors. To date, the
Company has made no such matching contributions. The 401(k) Plan is intended
to qualify under Section 401 of the Internal Revenue of 1986, as amended, so
that contributions by employees or by the Company to the 401(k) Plan, and
income earned on plan contributions, are not taxable to employees until
withdrawn from the 401(k) Plan, and so that contributions by the Company, if
any, will be deductible by the Company when made. The trustee under the 401(k)
Plan, at the direction of each participant, invests the assets of the 401(k)
Plan in any of a number of investment options.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
The Company's Restated Certificate of Incorporation, which will become
effective upon the closing of this offering, limits the liability of directors
for breach of fiduciary duty as a director to the maximum extent permitted by
the DGCL. The DGCL provides that a corporation's certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director for monetary damages for breach of their fiduciary duties as
directors, except for liability (i) for any breach of their 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) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided for in Section 174 of the DGCL or (iv) for any
transaction from which the director derived an improper personal benefit. The
Company's Restated Certificate of Incorporation also provides that the Company
is required to indemnify to the fullest extent permitted by law any director,
officer or employee of the Company.
The Company's Bylaws, which will also become effective upon the closing of
this offering, provide that (i) the Company is required to indemnify its
directors and officers to the maximum extent permitted by the
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<PAGE>
DGCL, subject to certain very limited exceptions, (ii) the Company may
indemnify its other employees and agents to the maximum extent permitted by
the DGCL, (iii) the Company is required to advance expenses, as incurred, to
its directors and officers in connection with a legal proceeding, subject to
certain very limited exceptions and (iv) the rights conferred in the Bylaws
are not exclusive.
The Company will enter into indemnification agreements with its officers and
executive directors containing provisions that may require the Company, among
other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors
or officers (other than liabilities arising from willful misconduct of a
culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance if available on reasonable terms.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding that might result in a claim for such
indemnification.
49
<PAGE>
CERTAIN TRANSACTIONS
PRIVATE PLACEMENTS OF SECURITIES
On September 22, 1995, the Company issued an aggregate of 4,415,291 shares
of its Common Stock to William Gross, a co-founder and director of the
Company, for services provided to the Company and aggregate proceeds of
$5,000. On December 9, 1995, the Company repurchased 1,333,334 shares of
Common Stock from Mr. Gross for an aggregate price of $1,510. On October 11,
1995 the Company sold an aggregate of 2,822,344 shares of its Common Stock to
Charles Conn, Thomas Layton, Jeffrey Brewer and certain other key employees
(together with shares of Common Stock issued to William Gross, the "Founders'
Stock") for aggregate proceeds of $84,670. Pursuant to the terms of the
applicable subscription agreement, Founders' Stock may not be transferred
without the written consent of the Board of Directors. To date, 1,245,784
shares of Founders' Stock have been transferred by Mr. Gross and certain key
employees with the approval of the Board of Directors. However, Mr. Gross
retains voting power over 1,118,875 of shares transferred by him until the
closing of this offering.
Between May 15, 1996 and July 31, 1996, the Company issued and sold an
aggregate of 3,261,024 shares of Series C Preferred Stock (or 2,113,458 shares
of Common Stock on an as-converted basis and as adjusted for the Reverse Stock
Split) at a per share price of $3.4665. Entities affiliated with Goldman,
Sachs & Co., which entities together hold more than 5% of the capital stock of
the Company, purchased 2,596,278 of these shares (or 1,682,646 shares of
Common Stock on an as-converted basis and as adjusted for the Reverse Stock
Split) for an aggregate purchase price of approximately $9.0 million. Mr.
Gleberman, a director of the Company, is a Managing Director in the Principal
Investment Area of Goldman, Sachs & Co.
Between December 13, 1996 and October 22, 1997, the Company issued and sold
an aggregate of 4,430,313 shares of Series D Preferred Stock (or 2,865,063
shares of Common Stock on an as-converted basis and as adjusted for the
Reverse Stock Split) at a per share price of $6.5251. These sales included the
following: 766,272 shares (or 495,548 shares of Common Stock on an as-
converted basis and as adjusted for the Reverse Stock Split) to were sold to
The Times Mirror Company for an aggregate purchase price of approximately $5.0
million; 475,085 shares (or 307,232 shares of Common Stock on an as-converted
basis and as adjusted for the Reverse Stock Split) were sold to entities
affiliated with Goldman, Sachs & Co. for an aggregate purchase price of
approximately $3.1 million; 459,763 shares (or 297,328 shares of Common Stock
on an as-converted basis and as adjusted for the Reverse Stock Split) were
sold to Washingtonpost.Newsweek Interactive Company, for an aggregate purchase
price of approximately $3.0 million; and 12,674 shares (or 8,196 shares of
Common Stock on an as-converted basis and as adjusted for the Reverse Stock
Split) were sold to Byters for an aggregate purchase price of approximately
$83,000. Mr. Unterman, a director of the Company, is an Executive Vice
President and Chief Financial Officer of The Times Mirror Company. Mr. Spoon,
a director of the Company, is President of The Washington Post Company. Mr.
Breslauer, a director of the Company, is a general partner of Byters.
Between November 11, 1997 and November 26, 1997, the Company issued and sold
an aggregate of 4,714,286 shares of Series E Preferred Stock (or 3,103,875
shares of Common Stock on an as-converted basis and as adjusted for the
Reverse Stock Split) at a per share price of $7.00. USA Networks purchased
2,857,143 of these shares (or 1,881,142 shares of Common Stock on an as-
converted basis and as adjusted for the Reverse Stock Split) for an aggregate
purchase price of approximately $20.0 million. Mr. Diller, a director of the
Company, is Chairman and Chief Executive Officer of USA Networks. In addition,
714,286 shares (or 470,283 shares of Common Stock on an as-converted basis and
as adjusted for the Reverse Stock Split) were sold to Global Retail Partners,
L.P. and its affiliates for an aggregate purchase price of approximately $5.0
million and 306,509 shares (or 201,805 shares of Common Stock on an as-
converted basis and as adjusted for the Reverse Stock Split) were sold to
Washingtonpost.Newsweek Interactive Company for an aggregate purchase price of
approximately $2.1 million. Mr. Sisteron, a director of the Company, is a
Principal of Global Retail Partners, L.P.
On May 26, 1998, the Company issued and sold an aggregate of 1,000,000
shares of Series E Preferred Stock (or 658,399 shares of Common Stock on an
as-converted basis and as adjusted for the Reverse Stock Split)
50
<PAGE>
at a per share price of $7.00. USA Networks purchased 428,571 of these shares
(or 282,171 shares of Common Stock on an as-converted basis and as adjusted
for the Reverse Stock Split) for an aggregate purchase price of approximately
$3.0 million.
Until the closing of this offering, the holders of the Series C Preferred
Stock have a right to elect directors pursuant to the Company's Restated
Certificate of Incorporation and from and after the closing of this offering
pursuant to the Voting Agreement. USA Networks and GRP have a right to elect
directors pursuant to the Company's Restated Certificate of Incorporation. See
"Management--Board Composition."
Pursuant to the Stockholders' Agreement, USA Networks has a right to
purchase that number of shares of this offering (the "IPO Shares") which will
enable USA Networks to own up to 14.9% of the Company (on a fully diluted, as-
converted basis); provided that USA Networks may not purchase more than 50% of
the IPO Shares. As of June 30, 1998, USA Networks owns 11.1% of the Company
(on a fully diluted, as-converted basis). USA Networks has committed to
purchase 1,332,093 shares of Common Stock in this offering (plus an additional
89,400 shares if the Underwriters' over-allotment option is exercised in full)
pursuant to the Stockholders' Agreement. If the actual price of the IPO Shares
is above the range specified in this offering, USA Networks will no longer be
obligated to purchase any IPO Shares. In addition, the Stockholders' Agreement
provides that the Company may not (i) adopt a rights agreement (or other
similar device) with an ownership threshold that would limit USA Networks'
ability to own or purchase securities of the Company or (ii) amend its bylaws,
certificate of incorporation or fail to take an action under Section 203 of
the DGCL which would limit USA Networks' ability to own or purchase securities
of the Company.
In May 1997, the Company entered into a cross-promotional agreement with
Ticketmaster Group, Inc., an affiliate of USA Networks ("Ticketmaster").
Pursuant to the agreement, Ticketmaster agreed to provide banner advertising
promoting the Company's owned and operated city sites on the Ticketmaster Web
site, to provide access to Ticketmaster ticket and information Web pages and
to provide "music-on-hold" and/or direct mail opportunities. CitySearch agreed
to provide promotion of the Ticketmaster name and logo in selected advertising
and marketing materials, to co-produce with Ticketmaster broadcast
advertising, to provide banner advertising promoting Ticketmaster on the
CitySearch Web sites and to promote Ticketmaster events and publications.
In June 1997, the Company entered into a license and services agreement with
the Los Angeles Times, a division of The Times Mirror Company. The agreement
provides for the license of the Company's intellectual property and consulting
services in exchange for an up-front license fee, ongoing royalties based on
the revenues generated by the city guide developed by the parties and fees for
consulting services. The agreement contains customary termination provisions
for material breach or non-performance.
In November 1997, the Company entered into a license and services agreement
with Washingtonpost. Newsweek Interactive Company. The agreement provides for
the license of the Company's intellectual property and consulting services in
exchange for an up-front license fee, ongoing royalties based on the revenues
generated by the city guide developed by the parties and fees for consulting
services. The agreement contains customary termination provisions for material
breach or non-performance.
The Company believes that the terms of each of the transactions described
above, taken as a whole, were no less favorable than the Company could have
obtained from unaffiliated third parties. All future transactions between the
Company and its officers, directors and principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including
a majority of the independent and disinterested outside directors.
The Company has entered into employment agreements with each of Charles Conn
and Thomas Layton, the Company's Chief Executive Officer and President,
respectively. See "Management--Employment Agreement."
51
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock on an as-converted basis and as
adjusted to reflect the sale of the 4,000,000 shares of Common Stock offered
hereby by (i) each person or entity who is known by the Company to own
beneficially 5% or more of the Company's outstanding Common Stock; (ii) each
director of the Company; (iii) each of the Named Executive Officers; and (iv)
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(2)
NAME AND ADDRESS OF NUMBER OF SHARES ------------------------------
BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) BEFORE OFFERING AFTER OFFERING
- ------------------- --------------------- --------------- --------------
<S> <C> <C> <C>
William Gross(3).......... 2,356,882 14.0 11.3
USA Networks, Inc. ....... 2,163,313 12.9 16.8(4)
152 West 57th Street,
38th Floor
New York, NY 10019
Barry Diller(5)........... 2,163,313 12.9 16.8(4)
Entities affiliated with 11.9 9.6
The Goldman Sachs Group,
L.P.(6).................. 1,989,878
85 Broad Street
New York, NY 10004
Joseph Gleberman(7)....... 1,989,878 11.9 9.6
Charles Conn(8)........... 1,084,645 6.5 5.2
Thomas Layton(9).......... 639,006 3.8 3.1
Thomas Unterman(10)....... 500,250 3.0 2.4
Alan Spoon(11)............ 499,133 3.0 2.4
Yves Sisteron(12)......... 470,283 2.8 2.3
Robert Kavner(13)......... 149,549 * *
Gerald Breslauer(14)...... 61,067 * *
Executive officers and
directors as a group
(12 persons)(15)......... 10,454,442 61.8 50.0
</TABLE>
- --------
* Less than 1% of the Company's outstanding Common Stock.
(1) Unless otherwise indicated, the address of each of the named individuals
is: c/o CitySearch, Inc., 790 E. Colorado Boulevard, Suite 200, Pasadena,
CA 91101.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Except as indicated by footnote, and subject to community
property laws where applicable and the terms of the Voting Agreement
relating to the election of the Series C Director, the persons 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 16,788,507 shares of Common Stock
outstanding as of June 30, 1998, and 4,000,000 shares of Common Stock
after completion of this offering. Amounts shown in the above table and
the following notes include shares issuable upon stock options to
purchase shares of Common Stock which are exercisable within 60 days of
June 30, 1998.
(3) Excludes 1,118,875 shares which Mr. Gross transferred previously but as
to which he retains voting power until the closing of this offering.
Includes 393,800 shares held by bill gross' idealab!, as to which Mr.
Gross disclaims beneficial ownership.
(4) Percentage calculation includes the 1,332,093 shares of Common Stock to
be purchased by USA Networks in this offering. See "Certain
Transactions."
(5) Includes 2,163,313 shares held by USA Networks, as to which Mr. Diller
disclaims beneficial ownership.
(6) Represents 1,989,878 shares owned by certain investment partnerships, of
which affiliates of The Goldman Sachs Group, L.P. ("GS Group") are the
general partner, managing general partner or investment manager. Includes
1,248,511 shares held of record by GS Capital Partners II, L.P., 496,332
shares held of record by GS Capital Partners II Offshore, L.P., 46,050
shares held of record by Goldman, Sachs & Co.
52
<PAGE>
Verwaltungs GmbH, 118,573 shares held of record by Stone Street Fund
1996, L.P. and 80,412 shares held of record by Bridge Street Fund 1996.
L.P. GS Group disclaims beneficial ownership of the shares owned by such
investment partnerships to the extent attributable to partnership
interests therein held by persons other than GS Group and its affiliates.
Each of such investment partnerships shares voting and investment power
with certain of its respective affiliates.
(7) Includes 1,989,878 shares held by entities affiliated with the GS Group.
Mr. Gleberman, a director of the Company, is a managing director of
Goldman, Sachs & Co., the general partner of which is GS Group. Mr.
Gleberman disclaims beneficial ownership of the shares owned by the GS
Group, except to the extent of his pecuniary interest therein. See
footnote (6).
(8) Includes 27,430 shares issuable upon exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
June 30, 1998.
(9) Includes 19,791 shares issuable upon exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
June 30, 1998.
(10) Includes 495,548 shares held by The Times Mirror Company, as to which Mr.
Unterman disclaims beneficial ownership, and 4,702 shares held by The
Thomas and Janet Unterman Living Trust dated 12/30/94.
(11) Includes 499,133 shares held by Washingtonpost.Newsweek Interactive
Company, as to which Mr. Spoon disclaims beneficial ownership.
(12) Includes 470,283 shares held by Global Retail Partners, L.P. and its
affiliates, as to which Mr. Sisteron disclaims beneficial ownership.
(13) Includes 72,693 shares issuable upon exercise of stock options to
purchase shares of Common Stock which are exercisable by Mr. Kavner
within 60 days of June 30, 1998.
(14) Includes 54,400 shares held by Byters and 6,667 shares issuable upon
exercise of stock options to purchase shares of Common Stock which are
exercisable within 60 days of June 30, 1998.
(15) See footnotes (2) through (14). Includes 141,227 shares issuable upon
exercise of stock options to purchase shares of Common Stock which are
exercisable within 60 days of June 30, 1998.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of June 30, 1998, assuming the conversion of all outstanding Preferred
Stock into Common Stock, there were 16,788,507 shares of Common Stock held of
record by 265 stockholders and options to purchase 2,608,514 shares of Common
Stock outstanding.
COMMON STOCK
Upon the closing of this offering, the Company will be authorized to issue
75,000,000 shares of Common Stock. Subject to preferences that may apply to
shares of Preferred Stock outstanding from time to time, the holders of
outstanding shares of Common Stock are entitled to receive dividends out of
assets legally available therefor at such times and in such amounts as the
Board of Directors may from time to time determine. Each stockholder is
entitled to one vote for each share of Common Stock held on all matters
submitted to a vote of stockholders. Cumulative voting for the election of
directors is not provided for in the Company's Restated Certificate of
Incorporation; therefore, the holders of a majority of the shares voted can
elect all of the directors then standing for election. The Common Stock is not
entitled to preemptive rights and is not subject to conversion or redemption.
Upon a liquidation, dissolution or winding-up of the Company, the assets
legally available for distribution to stockholders are distributable ratably
among the holders of the Common Stock and any participating Preferred Stock
outstanding at that time after payment of liquidation preferences, if any, on
any outstanding Preferred Stock and payment of other claims of creditors. Each
outstanding share of Common Stock is, and all shares of Common Stock to be
outstanding upon completion of this offering will be, fully paid and
nonassessable.
PREFERRED STOCK
Upon the closing of this offering, the Company will be authorized to issue
2,000,000 shares of Preferred Stock. The Board of Directors is authorized,
subject to limitations prescribed by Delaware law, to provide for the issuance
of shares of Preferred Stock in one or more series, to establish from time to
time the number of shares to be included in each such series, to fix the
powers, designations, preferences and rights of the shares of each wholly
unissued series and designate any qualifications, limitations or restrictions
thereon and to increase or decrease the number of shares of any such series
(but not below the number of shares of such series then outstanding) without
any further vote or action by the stockholders. The issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of the Company and may adversely affect the voting and other rights of
the holders of Common Stock, which could have an adverse impact on the market
price of the Common Stock. The Company has no current plan to issue any shares
of Preferred Stock.
ANTITAKEOVER EFFECTS OF PROVISIONS OF CERTIFICATE OF INCORPORATION AND BYLAWS
The Company's Restated Certificate of Incorporation provides that, effective
upon the closing of this offering, all stockholder actions must be effected at
a duly called meeting and not by consent in writing. Provisions of the
Restated Certificate of Incorporation and Bylaws provide that the stockholders
may amend certain provisions of the Restated Certificate of Incorporation and
the Bylaws only with the affirmative vote of holders of 66 2/3% of the
Company's capital stock. Further, the Bylaws (i) provide that only the Board
of Directors, the Chairman of the Board of Directors or the President may call
special meetings of the stockholders and (ii) establish an advance notice
procedure for stockholder proposals to be brought before an annual meeting of
stockholders of the Company, including proposed nominations of persons for
election to the Board of Directors. In addition, the Restated Certificate of
Incorporation provides that the Board of Directors will be divided into three
classes to serve staggered three-year terms. These provisions of the Restated
Certificate of Incorporation and Bylaws may have the effect of delaying,
deferring or preventing a change of control of the Company. These provisions
are intended to enhance the likelihood of continuity and stability in the
composition of the Board of Directors and in the policies formulated by the
Board of Directors and to discourage certain types of transactions that may
involve an actual or threatened change of control of the Company. These
provisions are designed to reduce the vulnerability of the Company to an
unsolicited acquisition proposal. The
54
<PAGE>
provisions also are intended to discourage certain tactics that may be used in
proxy fights. However, such provisions could have the effect of discouraging
others from making tender offers for the Company's shares and, as a
consequence, they also may inhibit fluctuations in the market price of the
Company's shares that could result from actual or rumored takeover attempts.
Such provisions also may have the effect of preventing changes in the
management of the Company. The Stockholders' Agreement provides that the
Company may not (i) adopt a rights agreement (or other similar device) with an
ownership threshold that would limit USA Networks' ability to own or purchase
securities of the Company or (ii) amend its bylaws, certificate of
incorporation or fail to take an action under Section 203 of the DGCL, in each
case in a manner which would limit USA Networks' ability to own or purchase
securities of the Company. See "Risk Factors--Anti-takeover Effects of Certain
Charter and Contractual Provisions."
EFFECT OF DELAWARE ANTITAKEOVER STATUTE
The Company is subject to Section 203 of the DGCL (the "Antitakeover Law"),
which regulates corporate acquisitions. The Antitakeover Law prevents certain
Delaware corporations, including those whose securities are listed for trading
on the Nasdaq National Market, from engaging under certain circumstances in a
"business combination" with any "interested stockholder" for three years
following the date that such stockholder became an interested stockholder. For
purposes of the Antitakeover Law, a "business combination" includes, among
other things, a merger or consolidation involving the Company and the
interested stockholder and the sale of more than ten percent of the Company's
assets. In general, the Antitakeover Law defines an "interested stockholder"
as any entity or person beneficially owning 15% or more of the outstanding
voting stock of the Company and any entity or person affiliated with or
controlling or controlled by such entity or person. A Delaware corporation may
"opt out" of the Antitakeover Law with an express provision in its original
certificate of incorporation or an express provision in its certificate of
incorporation or bylaws resulting from amendments approved by the holders of
at least a majority of the Company's outstanding voting shares. The Company
has not "opted out" of the provisions of the Antitakeover Law.
REGISTRATION RIGHTS
After this offering, the holders of 14,561,751 shares of Common Stock will
be entitled to certain rights with respect to the registration of such shares
under the Securities Act. Under the terms of the agreement between the Company
and the holders of such registrable securities, if the Company proposes to
register any of its securities under the Securities Act, either for its own
account or for the account of other security holders exercising registration
rights, such holders are entitled to notice of such registration and are
entitled to include shares of such Common Stock therein. Additionally, of such
holders, holders of 8,740,795 shares of Common Stock are also entitled to
certain demand registration rights pursuant to which they may require the
Company to file a registration statement under the Securities Act at its
expense with respect to their shares of Common Stock, and the Company is
required to use its best efforts to effect such registration. All of these
registration rights are subject to certain conditions and limitations, among
them the right of the underwriters of an offering to limit the number of
shares included in such registration and the right of the Company not to
effect a requested registration within six months following an offering of the
Company's securities, including the offering made hereby.
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
55
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market could materially adversely affect prevailing market prices.
Furthermore, since only a limited number of shares will be available for sale
shortly after the offering because of certain contractual and legal
restrictions on resale described below, sales of substantial amounts of Common
Stock of the Company in the public market after restrictions lapse could
materially adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.
Upon completion of the offering, the Company will have 20,788,507 shares of
Common Stock outstanding, assuming no exercise of currently outstanding
options. Of these shares, the 4,000,000 shares sold in this offering (plus any
additional shares sold upon exercise of the Underwriters' over-allotment
option) will be freely transferable without restriction under the Securities
Act, unless they are held by "affiliates" of the Company as that term is used
under the Securities Act and the regulations promulgated thereunder
("Affiliates"). The remaining 16,788,507 shares of Common Stock held by
existing stockholders are "restricted securities" as that term is defined in
Rule 144 of the Securities Act (the "Restricted Shares"). Restricted Shares
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144 or Rule 701 under the Securities
Act. As a result of contractual restrictions and the provisions of Rules 144
and 701, additional shares will be available for sale in the public market as
follows: (i) approximately 498,574 Restricted Shares will be eligible for
immediate sale on the effective date of this offering; (ii) approximately
4,334 Restricted Shares will be eligible for sale 90 days after the effective
date of this offering; (iii) approximately 4,949,461 Restricted Shares will be
eligible for sale without restriction and 10,601,970 Restricted Shares will be
eligible for sale subject to volume limitations, in each case 180 days after
the effective date of this offering and (iv) the remainder of the Restricted
Shares will be eligible for sale from time to time thereafter upon expiration
of their respective holding periods under Rule 144. In addition, 1,224,944
shares will be issuable upon exercise of vested stock options 180 days after
the effective date of this offering upon the expiration of contractual pre-
existing lock-up agreements. NationsBanc Montgomery Securities LLC, on behalf
of the Underwriters, may, in its sole discretion and at any time without
notice, release all or any portion of securities subject to the lock-up
agreement with the Underwriters.
Upon the effective date of this offering, the holders of 8,740,795 shares of
Common Stock have the right in certain circumstances to require the Company to
register their shares under the Securities Act for resale to the public. If
such holders, by exercising their demand registration rights, cause a large
number of shares to be registered and sold in the public market, such sales
could have a material adverse effect on the market price for the Company's
Common Stock. If the Company were required to include in a Company-initiated
registration shares held by such holders and holders of an additional
5,820,956 shares of Common Stock pursuant to the exercise of their piggyback
registration rights, such sales may have a material adverse affect on the
Company's ability to raise new capital. See "Description of Capital Stock--
Registration Rights."
In addition, the Company expects to file a registration statement on Form S-
8 registering a total of approximately 3,232,748 shares of Common Stock
subject to outstanding stock options or reserved for issuance under the
Company's 1996 Stock Option Plan, 1998 Director Option Plan and 1998 Employee
Stock Purchase Plan. The Form S-8 registration statement is expected to be
filed and to become effective immediately following the date of this offering.
Shares registered under such registration statement will be available for sale
in the open market, subject to Rule 144 value limitations applicable to
Affiliates, unless such shares are subject to vesting restrictions with the
Company or the lock-up agreements described above.
In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of the offering, an Affiliate of the Company or person (or
persons whose shares are aggregated) who has beneficially owned restricted
shares (as defined under Rule 144) for at least one year is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of (i) one percent of the then outstanding shares of the Company's
Common Stock or (ii) the average weekly trading volume of the Company's Common
Stock in the Nasdaq National Market during the four calendar weeks immediately
preceding the date on which the notice of
56
<PAGE>
the sale is filed with the Commission. Sales pursuant to Rule 144 are subject
to certain requirements relating to the manner of sale, notice, and
availability of current public information about the Company. A person (or
persons whose shares are aggregated) who is not an Affiliate of the Company at
any time during the 90 days immediately preceding the sale, and who has
beneficially owned restricted shares for at least two years is entitled to
sell such shares under Rule 144(k) without regard to the limitations described
above.
An employee, officer or director of the Company or a consultant to the
Company who purchased or was awarded shares or options to purchase shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701 of the Securities Act, which permits Affiliates
and non-Affiliates to sell their Rule 701 shares without having to comply with
Rule 144's holding period restrictions, in each case commencing 90 days after
the date of this offering. In addition, non-Affiliates may sell Rule 701
shares without complying with the public information, volume and notice
provisions of Rule 144.
57
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), represented by
NationsBanc Montgomery Securities LLC, BancAmerica Robertson Stephens and
Donaldson, Lufkin & Jenrette Securities Corporation (the "Representatives"),
have severally agreed, subject to the terms and conditions set forth in the
Underwriting Agreement, to purchase from the Company the number of shares of
Common Stock indicated below opposite their respective names at the initial
public offering price less the underwriting discount set forth on the cover
page of this Prospectus. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent
and that the Underwriters are committed to purchase all of the shares if they
purchase any.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
NationsBanc Montgomery Securities LLC..............................
BancAmerica Robertson Stephens.....................................
Donaldson, Lufkin & Jenrette Securities Corporation................
---------
Total............................................................ 4,000,000
=========
</TABLE>
The Representatives have advised the Company that the Underwriters initially
propose to offer the shares of Common Stock to the public on the terms set
forth on the cover page of this Prospectus. The Underwriters may allow to
selected dealers a concession of not more than $ per share, and the
Underwriters may allow, and such dealers may reallow, a concession of not more
than $ per share to certain other dealers. After the offering, the offering
price and concessions and other selling terms may be changed by the
Representatives. No change in such terms shall change the amount of proceeds
to be received by the Company as set forth on the cover page of this
Prospectus. The Common Stock is offered subject to receipt and acceptance by
the Underwriters and to certain other conditions, including the right to
reject orders in whole or in part.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a
maximum of additional shares of Common Stock to cover over-allotments, if any,
at the same price per share as the initial shares to be purchased by the
Underwriters. To the extent the Underwriters exercise this option, each of the
Underwriters will be committed to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments made in
connection with this offering.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.
All of the Company's officers and directors and certain stockholders have
agreed that, subject to certain exceptions, for a period of 180 days after the
date of this Prospectus, they will not, without the prior written consent of
NationsBanc Montgomery Securities LLC, directly or indirectly, sell, offer to
sell or otherwise dispose of any such shares of Common Stock or any right to
acquire such shares. In addition, the Company has agreed that, for a period of
180 days after the date of this Prospectus, it will not, without the prior
written consent of NationsBanc Montgomery Securities LLC, issue, offer, sell,
grant options to purchase or otherwise dispose of any of the Company's equity
securities or any other securities convertible into or exchangeable for the
Common Stock or other equity security, other than the grant of options to
purchase Common Stock, or the issuance of
58
<PAGE>
shares of Common Stock under the Company's stock option and stock purchase
plans, the issuance of shares of Common Stock in connection with certain
acquisitions and the issuance of shares of Common Stock pursuant to the
exercise of outstanding options.
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined by
negotiations between the Company and the Representatives. Among the factors to
be considered in such negotiations will be the history of, and the prospects
for, the Company and the industry in which it competes, an assessment of the
Company's management, the prospects for future earnings of the Company, the
present state of the Company's development, the general condition of the
securities markets at the time of the offering, the market prices of and
demand for publicly traded common stock of comparable companies in recent
periods and other factors deemed relevant.
The Representatives, on behalf of the Underwriters, may engage in over-
allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities and Exchange
Act of 1934. Over-allotment involves syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions
permit bids to purchase the underlying security so long as the stabilizing
bids do not exceed a specified maximum. Syndicate covering transactions
involve purchases of shares of Common Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Representatives to reclaim a selling concession from a
syndicate member when the shares of Common Stock originally sold by such
syndicate member are purchased in a syndicate covering transaction to cover
syndicate short positions. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the Common Stock to be
higher than it would otherwise be in the absence of such transactions. These
transactions may be effected on the Nasdaq National Market or otherwise and,
if commenced, may be discontinued at any time.
The Representatives have informed the Company that the Underwriters do not
expect to make sales in excess of five percent of the number of shares of
Common Stock offered hereby to accounts over which they exercise discretionary
authority.
In consideration of the services rendered by NationsBanc Montgomery
Securities LLC as placement agent for the Company's Series E Preferred Stock
financing, the Company paid to NationsBanc Montgomery Securities LLC a fee
equal to $1,546,182 in November 1997. As additional consideration for such
services, the Company granted to NationsBanc Montgomery Securities LLC a
warrant to purchase 94,286 shares of Series E Preferred Stock (or 62,077
shares of Common Stock on an as-converted basis and as adjusted to reflect the
Reverse Stock Split). The warrant is exercisable at any time at an exercise
price of $8.75 per share of Series E Preferred Stock (or $13.29 per share of
Common Stock on an as-converted basis and as adjusted to reflect the Reverse
Stock Split). Any unexercised portion of the warrant is automatically
convertible into Common Stock immediately prior to the closing of this
offering for that number of shares of Series E Preferred Stock equal to (x)
the value of the unexercised portion as of the date of the closing of this
offering, which value shall equal the difference between the aggregate
exercise price and the aggregate value of the shares of Series E Preferred
Stock issuable upon exercise of the unexercised portion of the warrant, at a
per share price equal to the initial offering price divided by (y) the initial
offering price.
Bayview Investors, Ltd., an entity affiliated with BancAmerica Robertson
Stephens, holds 25,941 shares of Series D Preferred Stock (or 16,776 shares of
Common Stock on an as-converted basis and as adjusted to reflect the Reverse
Stock Split).
Global Retail Partners, L.P. and its affiliates, each an affiliate of
Donaldson, Lufkin & Jenrette Securities Corporation, holds 714,286 shares of
Series E Preferred Stock (or 470,283 shares of Common Stock on an as-converted
basis and as adjusted to reflect the Reverse Stock Split). Under the Company's
Restated Certificate of Incorporation, GRP is entitled to elect one member of
the Board of Directors until the later of (i) November 20, 1999, (ii) the one-
year anniversary of the closing of this offering or (iii) the date GRP owns
less than 100% of the capital stock of the Company that it owned on November
20, 1997. Mr. Sisteron, a director of the Company, is a Principal of Global
Retail Partners, L.P.
59
<PAGE>
CITYSEARCH, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets at December 31, 1996 and 1997 and at June 30,
1998 (unaudited)......................................................... F-3
Consolidated Statements of Operations for the period from September 20,
1995 (date of formation) to December 31, 1995, the years ended December
31, 1996 and 1997 and the six months ended June 30, 1997 and 1998
(unaudited) ............................................................. F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the period
from September 20, 1995 (date of formation) to December 31, 1995, the
years ended December 31, 1996 and 1997 and the six months ended June 30,
1998 (unaudited)......................................................... F-5
Consolidated Statements of Cash Flows for the period from September 20,
1995 (date of formation) to December 31, 1995, the years ended December
31, 1996 and 1997 and the six months ended June 30, 1997 and 1998
(unaudited).............................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND STOCKHOLDERS
CITYSEARCH, INC.
We have audited the accompanying consolidated balance sheets of CitySearch,
Inc. as of December 31, 1996 and 1997 and the related statements of
operations, stockholders' equity, and cash flows for the period from September
20, 1995 (date of formation) to December 31, 1995 and for each of the two
years in the period ended December 31, 1997. 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CitySearch,
Inc. at December 31, 1996 and 1997, and the consolidated results of its
operations and its cash flows for the period from September 20, 1995 (date of
formation) to December 31, 1995 and for each of the two years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Los Angeles, California
March 11, 1998, except for Note 10,
as to which the date is July 14, 1998
The foregoing report is in the form that will be signed upon the completion
of the restatement of capital accounts described in Note 10 to the financial
statements.
/s/ Ernst&Young LLP
Los Angeles, California
July 14, 1998
F-2
<PAGE>
CITYSEARCH, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------ JUNE 30, JUNE 30,
1996 1997 1998 1998
-------- -------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $ 7,527 $ 25,227 $ 15,512
Accounts receivable, net of
allowance for doubtful accounts
of $25 in 1997 and $61 in 1998... 34 100 407
Due from licensees................ -- 193 735
Prepaid expenses and other current
assets........................... 249 119 149
-------- -------- --------
Total current assets............. 7,810 25,639 16,803
Computers, software, equipment and
leasehold improvements:
Computers and software............ 2,074 7,716 8,879
Furniture and equipment........... 391 194 194
Leasehold improvements............ 194 275 275
Enterprise system development in
process.......................... 1,315 -- --
-------- -------- --------
3,974 8,185 9,348
Accumulated depreciation.......... (329) (2,169) (3,661)
-------- -------- --------
3,645 6,016 5,687
Intangible asset, net of
accumulated amortization of $422
in 1996........................... 1,915 -- --
-------- -------- --------
Total assets..................... $ 13,370 $ 31,655 $ 22,490
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................. $ 1,975 $ 2,197 $ 2,480
Accrued payroll and related
liabilities...................... 174 664 1,186
Other accrued liabilities......... 991 760 453
Deferred subscription and license
revenue.......................... 327 1,836 980
Current portion of obligations
under capital leases............. 86 807 973
-------- -------- --------
Total current liabilities........ 3,553 6,264 6,072
Deferred rent...................... 33 189 202
Deferred purchase price of
subsidiary........................ 1,336 891 446
Obligations under capital leases,
net of current portion............ 82 1,340 1,671
Commitments
Redeemable Convertible Preferred
Stock (Series C, D, and E):
Authorized shares -- 12,500 at
December 31, 1997 and June 30,
1998 (pro forma: none)
Issued and outstanding -- 4,706 at
December 31, 1996 and 12,406 at
December 31, 1997 and 13,406 at
June 30, 1998 (pro forma: none)
Liquidation preference -- $20,731
at December 31, 1996 and $73,212
at December 31, 1997 and $80,212
at June 30, 1998 (pro forma:
none)............................ 20,309 70,882 77,840 $ --
Stockholders' equity (deficit):
Convertible Preferred Stock $0.01
par value, (Series A and B):
Authorized shares -- 2,241 at
December 31, 1997 and June 30,
1998
Issued and outstanding -- 1,948
at December 31, 1996 and 2,016
at December 31, 1997 and 2,080
at June 30, 1998 (pro forma:
none)
Liquidation preference -- $2,165
at December 31, 1996 and $2,610
at December 31, 1997 and $3,056
at June 30, 1998 (pro forma:
none)........................... 2,165 2,610 3,056 --
Common Stock $0.01 par value:
Authorized shares -- 75,000 at
December 31, 1997 and June 30,
1998
Issued and outstanding shares --
5,876 at December 31, 1996 and
6,360 at December 31, 1997 and
6,660 at June 30, 1998 (pro
forma: 16,789).................. 97 455 1,635 82,531
Deferred compensation............. -- (245) (1,219) (1,219)
Accumulated deficit............... (14,205) (50,731) (67,213) (67,213)
-------- -------- -------- -------
Total stockholders' equity
(deficit)....................... (11,943) (47,911) (63,741) $14,099
-------- -------- -------- =======
Total liabilities and
stockholders' equity
(deficit).................... $ 13,370 $ 31,655 $ 22,490
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CITYSEARCH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 20, SIX MONTHS
1995 (DATE OF YEAR ENDED ENDED
FORMATION) TO DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------ ------------------
1995 1996 1997 1997 1998
------------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Subscription and
services .............. $ -- $ 203 $ 4,913 $ 1,508 $ 5,577
Licensing and royalty .. -- -- 1,271 -- 1,221
------ -------- -------- -------- --------
-- 203 6,184 1,508 6,798
Cost and expenses:
Cost of revenues........ -- 2,908 10,846 4,457 7,446
Sales and marketing .... 57 6,369 19,014 9,210 9,065
Research and development
....................... 152 2,563 7,182 3,220 3,395
General and
administrative ........ 104 2,475 5,883 2,743 3,634
------ -------- -------- -------- --------
313 14,315 42,925 19,630 23,540
------ -------- -------- -------- --------
Loss from operations..... (313) (14,112) (36,741) (18,122) (16,742)
Interest income.......... 5 229 494 161 371
Interest expense......... -- (12) (271) (57) (111)
------ -------- -------- -------- --------
5 217 223 104 260
------ -------- -------- -------- --------
Loss before provision for
income taxes............ (308) (13,895) (36,518) (18,018) (16,482)
Provision for income
taxes................... -- (2) (8) -- --
------ -------- -------- -------- --------
Net loss................. $ (308) $(13,897) $(36,526) $(18,018) $(16,482)
====== ======== ======== ======== ========
Historical basic and
diluted net loss per
share................... $(0.06) $ (2.37) $ (5.80) $ (2.87) $ (2.50)
====== ======== ======== ======== ========
Pro forma basic and
diluted net loss per
share................... $(0.05) $ (1.65) $ (2.94) $ (1.56) $ (1.02)
====== ======== ======== ======== ========
Shares used to compute
historical basic and
diluted net loss per
share................... 5,263 5,857 6,301 6,282 6,582
====== ======== ======== ======== ========
Shares used to compute
pro forma basic and
diluted net loss per
share................... 5,640 8,431 12,430 11,515 16,139
====== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CITYSEARCH, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK
(SERIES A AND B) COMMON STOCK
----------------- -------------- DEFERRED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT COMPENSATION DEFICIT TOTAL
-------- -------- ------ ------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial issuance of
Common Stock, September
20, 1995............... -- $ -- 4,415 $ 5 $ -- $ -- $ 5
Repurchase of Common
Stock.................. -- -- (1,333) (2) -- -- (2)
Issuance of Common
Stock.................. -- -- 2,822 85 -- -- 85
Issuance of Convertible
Preferred Stock........ 1,791 1,620 -- -- -- -- 1,620
Net loss................ -- -- -- -- -- (308) (308)
------- -------- ------ ------ ------- -------- --------
Balance at December
31, 1995............. 1,791 1,620 5,904 88 -- (308) 1,400
Repurchase of Common
Stock.................. -- -- (77) (2) -- -- (2)
Exercise of stock
options................ -- -- 49 11 -- -- 11
Issuance of Series B
Convertible Preferred
Stock.................. 157 545 -- -- -- -- 545
Net loss................ -- -- -- -- -- (13,897) (13,897)
------- -------- ------ ------ ------- -------- --------
Balance at December
31, 1996............. 1,948 2,165 5,876 97 -- (14,205) (11,943)
Exercise of stock
options................ -- -- 484 103 -- -- 103
Issuance of Series B
Convertible Preferred
Stock.................. 68 445 -- -- -- -- 445
Deferred compensation... -- -- -- 255 (255) -- --
Amortization of deferred
compensation........... -- -- -- -- 10 -- 10
Net loss................ -- -- -- -- -- (36,526) (36,526)
------- -------- ------ ------ ------- -------- --------
Balance at December
31, 1997............. 2,016 2,610 6,360 455 (245) (50,731) (47,911)
Exercise of stock
options (unaudited).... -- -- 300 122 -- -- 122
Issuance of Series B
Convertible Preferred
Stock (unaudited)...... 64 446 -- -- -- -- 446
Deferred compensation
(unaudited)............ -- -- -- 1,058 (1,058) -- --
Amortization of deferred
compensation
(unaudited)............ -- -- -- -- 84 -- 84
Net loss (unaudited).... -- -- -- -- -- (16,482) (16,482)
------- -------- ------ ------ ------- -------- --------
Balance at June 30,
1998 (unaudited)..... 2,080 $ 3,056 6,660 $1,635 $(1,219) $(67,213) $(63,741)
======= ======== ====== ====== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
CITYSEARCH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 20, SIX MONTHS
1995 (DATE OF YEAR ENDED ENDED
FORMATION) TO DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------ ------------------
1995 1996 1997 1997 1998
------------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................. $ (308) $(13,897) $(36,526) $(18,018) $(16,482)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Equity interest in loss
from partnership....... -- -- 259 20 --
Write-down of investment
in partnership......... -- -- 321 321 --
Depreciation............ 5 325 1,841 654 1,492
Amortization............ -- 422 1,915 957 --
Change in operating
assets and liabilities,
net of assets acquired
and liabilities
assumed:
Accounts receivable..... -- (34) (67) (49) (306)
Due from licensees...... -- -- (193) (466) (542)
Prepaid expenses and
other current assets... -- (249) 129 71 (31)
Accounts payable........ 90 2,537 317 (643) 284
Accrued payroll and
related liabilities.... -- -- 489 575 523
Other accrued
liabilities............ -- -- (221) (325) (305)
Deferred subscription
and license revenue.... -- 327 1,510 1,069 (856)
Deferred rent........... -- 33 157 48 12
Deferred compensation... -- 84
------ -------- -------- -------- --------
Net cash used in
operating activities.. (213) (10,536) (30,069) (15,786) (16,127)
INVESTING ACTIVITIES
Purchases of software,
equipment and leasehold
improvements............ (82) (3,547) (1,391) (774) (54)
Investment in
partnership............. -- -- (580) (324) --
------ -------- -------- -------- --------
Net cash used in
investing activities.... (82) (3,547) (1,971) (1,098) (54)
FINANCING ACTIVITIES
Payments on capital
leases.................. -- (121) (840) (247) (613)
Exercise of stock
options................. -- 11 103 60 121
Issuance of Common Stock. 90 -- -- -- --
Repurchases of Common
Stock................... (2) (2) -- -- --
Issuance of Preferred
Stock, net.............. 1,620 20,309 50,477 15,881 6,958
------ -------- -------- -------- --------
Net cash provided by
financing activities.... 1,708 20,197 49,740 15,694 6,466
------ -------- -------- -------- --------
Net increase (decrease)
in cash and cash
equivalents............. 1,413 6,114 17,700 (1,190) (9,715)
Cash and cash equivalents
at beginning of year.... -- 1,413 7,527 7,527 25,227
------ -------- -------- -------- --------
Cash and cash equivalents
at end of year.......... $1,413 $ 7,527 $ 25,227 $ 6,337 $ 15,512
====== ======== ======== ======== ========
Supplemental disclosure
of cash flow
information:
Cash paid for:
Interest................ $ -- $ 12 $ 271 $ 57 $ 111
Income taxes............ $ 1 $ 2 $ 8 $ -- $ --
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES
During 1996 and 1997, the Company purchased computers and office equipment
under financing leases totaling $288,000 and $2,820,000, respectively.
On June 19, 1996, the Company acquired its Metrobeat, Inc. in exchange for
an initial payment of Series B Convertible Preferred Stock valued at $544,497.
During the year ended December 31, 1997 and the six months ended June 30,
1998, the Company made its second and third annual installment of Series B
Convertible Preferred Stock valued at $445,495 and $445,494, respectively,
pursuant to the acquisition. The remaining purchase price of $446,000 is
payable in two annual installments, principally of Series B Convertible
Preferred Stock.
During 1997, the Company issued 14,670 shares of Series D Preferred Stock
valued at $95,725 as payment for accrued advertising and recruiting fees.
During the six months ended June 30, 1997 and 1998, the Company purchased
computers and office equipment under financing leases totaling $1,835,000 and
$1,109,000, respectively.
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
CITYSEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AT JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY AND BASIS OF PRESENTATION
CitySearch, Inc. (the "Company"), a Delaware corporation, was organized on
September 20, 1995. The Company and its wholly owned subsidiaries Metrobeat,
Inc. ("Metrobeat") and CitySearch Ontario, Inc. ("CitySearch Ontario"),
produce and deliver comprehensive local city guides on the World Wide Web (the
"Web"), providing up-to-date information regarding arts and entertainment
events, community activities, recreation, business, shopping, professional
services and news/sports/weather to consumers in metropolitan areas. Each
local city guide consists primarily of original content developed and designed
specifically for the Web by the Company and its media partners. The Company
designs and produces custom-built Web sites and related services for local
businesses, aggregates them in a local city guide environment and provides
business customers the ability to regularly update and expand their sites.
Customers include restaurants, taverns, movie theaters, museums and retail
stores. The Company currently owns and operates sites in Austin, TX,
Nashville, TN, New York, NY, Portland, OR, Raleigh-Durham-Chapel Hill, NC,
Salt Lake City, UT, Los Angeles, CA, and San Francisco, CA. Through
partnership and licensing agreements, the Company has an internet presence in
Washington D.C., Melbourne and Sydney, Australia, and Toronto, Canada.
The Company has experienced operating losses and negative cash flows from
operations since its formation on September 20, 1995. Since its formation, the
Company has raised significant capital through the sale of Preferred Stock to
outside investors and expects to continue to raise capital in 1998. The
Company has also successfully licensed its product domestically and
internationally generating additional revenue streams. Management anticipates
that its investment in new markets and technology will result in operating
losses in the near term but believes that anticipated revenues, existing cash,
cash equivalents, working capital and new capital contributions will be
sufficient to fund operations over the next year.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, Metrobeat and CitySearch
Ontario. All significant intercompany amounts have been eliminated.
INTERIM FINANCIAL INFORMATION
The accompanying balance sheet as of June 30, 1998 and the statements of
operations and cash flows for the six months ended June 30, 1997, and 1998 and
the statement of changes in shareholders equity (deficit) for the six months
ended June 30, 1998 are unaudited. In the opinion of management, the
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, consisting of normal recurring
adjustments, necessary for the fair statement of interim periods. The data
disclosed in these notes to the financial statements for these periods is also
unaudited. The results of operations and cash flows for the interim period are
not necessarily indicative of the results to be expected for any other interim
future period.
ESTIMATES USED IN THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the
F-7
<PAGE>
CITYSEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
consolidated financial statements and the accompanying notes. Actual results
could differ from those estimates, although management does not believe that
any differences would materially affect the Company's consolidated financial
position or results of operations.
REVENUE RECOGNITION
The Company generates revenue from the sale of subscriptions for business
Web sites and advertising on its owned and operated city guides on the
internet, the sale of licenses for use of the Company's business and
technology systems to its licensees establishing the CitySearch service in
certain markets, the receipt of royalties under its license agreements in
exchange for customer support and certain upgrade rights, and the performance
of consultation and design services.
The Company recognizes subscription revenues over the period the services
are provided. Licensing revenue, under agreements entered into prior to
December 31, 1997, for partner-led markets is recognized upon the completion
of the delivery and installation of the business and technology systems and
training of partner personnel in each partner-led-market. Royalty revenues are
recognized when earned. Revenue from consultation and design services is
recognized as the services are provided. Advertising revenues, which have not
been significant, are recognized as earned and are included in subscription
and service revenues.
Effective January 1, 1998, the Company adopted Statement of Position 97-2
(SOP 97-2), "Software Revenue Recognition," which impacts the manner companies
recognize revenue on sales and licensing of software. The Company, during
1997, accounted for licensing of its software under the provisions of SOP 91-
1. Under the provision of SOP 97-2 revenues from the sale of licenses for use
of the Company's business and technology systems to its partner-led markets
generally will be recognized over the term of the license agreement or the
period over which the relevant services are delivered. The Company's license
agreements have terms ranging from five to nine years. Licensing and royalty
revenues, on a pro forma basis, for the year ended December 31, 1997, and the
six months ended June 30, 1997 and 1998 would have been $253,000, $73,000 and
$304,000, respectively, had SOP 97-2 been effective January 1, 1997. SOP 97-2
is not expected to have a material effect on revenues from royalties,
services, and subscriptions.
Deferred revenues arise upon the prepayment of subscription services and
license agreements.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable and cash
deposits at financial institutions. Concentration of credit risk with respect
to trade receivables is limited due to the large number of customers and their
geographic dispersion. The Company requires no collateral from its customers.
The Company places its cash deposits with high-credit quality financial
institutions. At times, balances in the Company's cash accounts may exceed the
Federal Deposit Insurance Corporation (FDIC) limit.
COMPUTERS, SOFTWARE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Computers, software, equipment and leasehold improvements are stated at cost
and depreciated using the straight-line method over the estimated useful lives
of the assets, which range from three to seven years. Assets
F-8
<PAGE>
CITYSEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
acquired under capitalizable lease arrangements are recorded at the present
value of the minimum lease payments. Amortization of assets capitalized under
capital leases and leasehold improvements are computed using the straight-line
method over the life of the asset or term of the lease, whichever is shorter,
and is included in depreciation expense.
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as incurred.
Based on the Company's product development process, technological feasibility
is established upon completion of a working model. Costs incurred by the
Company between completion of the working model and the point at which the
product is ready for general release have been insignificant.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising costs for the years
ended December 31, 1996 and 1997, amounted to $1,305,859 and $2,464,641,
respectively. There was no advertising expense for the period from September
20, 1995 (date of formation) to December 31, 1995.
During 1996 and 1997 the Company entered into several barter arrangements
whereby the Company has assisted in the design of a Web site in exchange for
broadcast advertising. The Company valued these barter transactions at $60,000
and $1,158,000 for the years ended December 31, 1996 and 1997, respectively,
based on the estimated cost of the specific services provided by the Company.
Such amounts are included in subscription and services revenue as well as
recognized in sales and marketing expense in the accompanying consolidated
statements of operations. Reciprocal noncash advertising on the Internet is
not valued in the consolidated financial statements and no barter revenue is
recorded for any such agreements.
PRO FORMA AND HISTORICAL NET LOSS PER SHARE
Pro forma net loss per share is computed using the weighted average number
of shares of Common Stock outstanding. Common equivalent shares from
convertible Preferred Stock (using the if converted method) have been included
in the computation when dilutive, except that the Convertible Preferred Stock
which will convert into Common Stock in connection with the Company's initial
public offering is included as if converted at the original date of issuance,
for both basic and diluted net loss per share, even though inclusion is
antidilutive, based on the conversion price disclosed in Note 6.
Historical net loss per share is computed as described above except that it
excludes the Convertible Preferred Stock because it is antidilutive for
periods which incurred a net loss.
INTANGIBLE ASSET
The intangible asset is stated at cost and consists of goodwill resulting
from the purchase of Metrobeat in June 1996 (see Note 2).
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (SFAS 123), requires that stock awards granted subsequent
to January 1, 1995, be recognized as compensation
F-9
<PAGE>
CITYSEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
expense based on their fair value at the date of grant. Alternatively, a
company may use Accounting Principles Board Opinion No. 25 (APB 25),
"Accounting for Stock Issued to Employees," and disclose pro forma results of
operations which would have resulted from recognizing such awards at their
fair value. The Company will continue to account for stock-based compensation
under APB 25 and make the required pro forma disclosures for compensation (see
Note 8). Under APB 25 compensation expense is calculated based on the
difference between the exercise price and the fair market value of the
underlying stock on the date of grant. The amount of compensation expense
calculated under APB 25 is recognized over the vesting period of the options.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' balances to
conform to the current year presentation.
YEAR 2000 -- UNAUDITED
The Company could be adversely affected if its computer systems and those of
its service providers do not properly process and calculate date-related
information and data from and after January 1, 2000. The Company is taking
steps that it believes are reasonably designed to address these issues and to
obtain reasonable assurances that comparable steps are being taken by each of
the Company's service providers. Management believes such efforts and any
remedies will be completed by 1999 and all expenses incurred in assessing and
remedying this issue will be expensed as incurred and are not expected to be
material to the consolidated financial statements.
2. ACQUISITION OF METROBEAT
On June 19, 1996, the Company purchased Metrobeat for approximately
$2,337,300. The Company assumed net liabilities of $456,303 and issued 157,074
shares of Series B Convertible Preferred Stock valued at $544,497. During the
year ended December 31, 1997 and the six months ended June 30, 1998, the
Company made its second and third annual installment of Series B Convertible
Preferred Stock valued at $445,495 and $445,494, respectively. The remaining
purchase price of $445,506 is payable in one annual installment, principally
of Series B Convertible Preferred Stock. The remaining installment has been
recorded as a deferred purchase price liability in the accompanying
consolidated balance sheets. The transaction was accounted for using the
purchase method of accounting. The excess of the purchase price over the net
assets acquired has been allocated to goodwill and was initially to be
amortized over three years. Effective January 1, 1997, the Company reassessed
the future life of the goodwill recorded in connection with the Metrobeat
acquisition and concluded the remaining life was one year. Accordingly, the
unamortized goodwill as of December 31, 1996 was fully amortized to expense in
1997.
3. INVESTMENT IN PARTNERSHIP
On February 17, 1997, CitySearch Ontario entered into a partnership, Toronto
Star CitySearch, with others to launch CitySearch sites in Canada. CitySearch
Ontario contributed the Company's technology through a licensing agreement
valued by the other partners at $390,500 and cash of $319,171 in exchange for
a 20% interest in the partnership. The other partners collectively contributed
cash of $2,811,600 in exchange for the remaining 80% interest. Profits are
shared in accordance with the respective partnership interests. Losses are
allocated to one of the other partners up to a cumulative loss limit, and
thereafter losses of the partnership shall be allocated to CitySearch Ontario
and the other partners at a ratio of 10% and 90%, respectively. CitySearch
Ontario is committed to funding up to 10% of any losses of the partnership.
F-10
<PAGE>
CITYSEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
Summarized unaudited financial information of Toronto Star CitySearch as of
and for the year ended December 31, 1997 is as follows (in thousands):
<TABLE>
<S> <C>
As of December 31, 1997:
Current assets.................................................... $ 1,520
Total liabilities................................................. 2,006
Partners' capital................................................. 758
For the period ended December 31, 1997:
Revenues.......................................................... $ 123
Loss from operations.............................................. (2,658)
Net loss.......................................................... (2,806)
</TABLE>
CitySearch Ontario carries its investment in Toronto Star CitySearch at
zero. CitySearch Ontario's share of partnership losses ($258,937) is included
in costs of revenues and sales and marketing expenses.
4. INCOME TAXES
Deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Deferred tax expense is determined by the
change in the net asset or liability for deferred taxes.
The provision for income, franchise and capital taxes of $800, $1,600 and
$8,330 is based solely on minimum state tax requirements. The Company's
effective tax rate differs from the statutory federal income tax rate,
primarily as a result of operating losses not benefited.
The tax effect of temporary differences resulted in net deferred income tax
assets and liabilities at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1997
------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss and tax credits...................... $ 5,485 $ 21,239
Various accruals........................................ 58 636
Deferred rent........................................... 14 77
------- --------
5,557 21,952
Less valuation allowance................................ (5,103) (19,650)
------- --------
Net deferred tax assets................................... 454 2,302
Deferred tax liabilities:
Federal benefit for state income taxes.................. (427) (1,499)
Excess of tax depreciation and amortization............. (27) (803)
------- --------
Deferred tax liabilities.................................. (454) (2,302)
------- --------
$ -- $ --
======= ========
</TABLE>
F-11
<PAGE>
CITYSEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
Due to the uncertainty surrounding the timing of the realization of the
benefits from its favorable tax attributes in future tax returns, the Company
has placed a valuation allowance against its otherwise recognizable deferred
tax assets. The Company had federal and state operating loss carryforwards of
$47,450,000 at December 31, 1997. The federal carryforwards expire principally
in the period from 2010 to 2012, and the state carryforwards expire
principally in 2003. The Company has generated tax credit carryforwards for
federal and state purposes in the amounts of $329,723 and $107,353,
respectively, at December 31, 1997. Utilization of the above carryforwards is
subject to utilization limitations which may inhibit the Company's ability to
use carryforwards in the future.
The following table reconciles the provision for taxes based on income
before taxes to the statutory federal income tax rate of 35%:
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 20,
1995 (DATE OF
FORMATION) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, -----------------------
1995 1996 1997
-------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax benefit at statutory rate..... $(108) $ (4,864) $ (12,781)
Increase related to:
State taxes, net of federal bene-
fit.............................. 1 1 5
Meals and entertainment......... 1 17 30
Amortization of goodwill........ -- 143 670
Foreign operations.............. -- -- 203
Valuation reserve on deferred
taxes.......................... 106 4,705 11,881
----- ----------- ------------
$ -- $ 2 $ 8
===== =========== ============
</TABLE>
F-12
<PAGE>
CITYSEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
5. COMMITMENTS
LEASES
The Company entered into noncancelable capital lease obligations for
computers and equipment during the year ended December 31, 1997. In addition,
the Company leases its facilities and other office equipment under
noncancelable operating lease agreements expiring through 2004. Certain of the
Company's leases provide for free rent and escalations. The Company is
responsible for other costs such as property taxes, insurance, maintenance and
utilities.
The following is a schedule of future minimum lease payments:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
(IN THOUSANDS)
<S> <C> <C>
December 31:
1998.................................................... $1,321 $1,115
1999.................................................... 1,191 1,028
2000.................................................... 1,167 517
2001.................................................... 1,043 4
2002.................................................... 265 --
Thereafter.............................................. 332 --
------ ------
$5,319 2,664
======
Less amount representing interest......................... 517
------
Net present value of net minimum lease payments (including
approximately $807,000 payable currently)................ $2,147
======
</TABLE>
Computers, software and equipment under capital leases had an original cost
basis of $288,419 and $2,819,842 at December 31, 1996 and 1997, respectively.
The net book value of the related computers, software and equipment was
$231,267 and $2,157,717 at December 31, 1996 and 1997, respectively.
Rent expense related to operating leases was $7,800, $291,000 and $1,372,000
for the period from September 20, 1995 (date of formation) to December 31,
1995 and for the years ended December 31, 1996 and 1997, respectively.
F-13
<PAGE>
CITYSEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
6. CONVERTIBLE PREFERRED STOCK
At December 31, 1997 and June 30, 1998, the Company was authorized to issue
14,741,082 and 15,741,082 shares, respectively of Convertible Preferred Stock
with a par value of $0.01 per share. The Company has designated 1,791,173
shares as Series A Convertible Preferred Stock, 450,000 shares as Series B
Convertible Preferred Stock, 3,261,024 shares as Series C Redeemable
Convertible Preferred Stock, 4,430,313 shares as Series D Redeemable
Convertible Preferred Stock, and 5,808,572 shares as Series E Redeemable
Convertible Preferred Stock.
Convertible Preferred Stock issued and outstanding as of December 31, 1997
and June 30, 1998 are as follows:
<TABLE>
<CAPTION>
ORIGINAL
AMOUNT PER SHARE
SHARES (NET OF ISSUANCE
OUTSTANDING ISSUANCE COST) PRICE DATE FIRST ISSUED
----------- -------------- --------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Series A............. 1,791 $ 1,620 $0.904 October 31, 1995
Series B............. 157 545 3.467 June 19, 1996
Series B............. 68 445 6.525 June 19, 1997
Series B............. 64 445 7.000 June 21, 1998
Series C............. 3,261 11,261 3.467 May 15, 1996
Series D............. 4,431 28,265 6.525 December 13, 1996
Series E............. 4,714 31,356 7.000 November 10, 1997
Series E............. 1,000 6,959 7.000 May 26, 1998
------ -------
15,486 $80,896
====== =======
</TABLE>
Preferred Stock contains a liquidation preference of an amount per share
equal to the price for which such share of Preferred Stock was originally
issued, adjusted for any stock dividends, combinations or splits with respect
to such shares, plus any declared and unpaid dividends on the Preferred Stock.
The Series C Preferred Stock contains a May 2006 mandatory redemption
provision. The Series D and E Preferred Stock contain mandatory redemption
provisions with a minimum of an 80% favorable vote, by the holders, beginning
December 2004.
Each share of Preferred Stock shall be, at the option of the holder,
convertible at any time into the number of shares of Common Stock as
determined by dividing the original issue price by the conversion price, as
defined. At the date of issuance, the conversion price for each series of
Preferred Stock was equal to the original per share issuance price. The
conversion price is subject to adjustment for stock splits and stock
combinations of the Company's outstanding Common Stock. The conversion price
for Series C, D and E Preferred Stock is also adjusted for the forfeiture of
Common Stock options outstanding from the date of issuance to the date of
conversion. The Preferred Stock has an automatic conversion feature which
provides for each share of Preferred Stock to be automatically converted into
shares of Common Stock based on the then effective conversion price
immediately upon the closing of an underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of shares of the Corporation's Common Stock priced
above $7.70 per share, with aggregate net proceeds to the Company of not less
than $20,000,000. At June 30, 1998, on an unaudited pro forma basis, giving
effect to Common Stock option forfeitures through June 30, 1998, each share of
Series A, B, C, D and E Preferred Stock was convertible into approximately
.667, .667, .648, .647 and .658 shares of Common Stock, respectively.
F-14
<PAGE>
CITYSEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
7. STOCK OPTIONS
The Company has adopted the 1996 Stock Option Plan (the "Plan") which
authorizes members of management to grant non-statutory stock options or
incentive stock options to employees and consultants of the Company and its
subsidiaries. As of December 31, 1997 and June 30, 1998 the maximum number of
shares of Common Stock to be issued under the plan was 2,666,667 and 3,666,667
shares, respectively. All options granted under the Plan have been made at
prices not less than fair market value of the stock at the date of grant.
Options granted under the Plan are exercisable at various dates over their
ten-year life. Options granted under the Plan vest principally 25% after the
first year and ratably over the remaining vesting period.
The following table summarizes certain information related to options for
Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
SHARES PRICE PER SHARE
-------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at January 1, 1996.................. --
Granted during 1996....................... 2,147 $ 0.15 to $ 1.13
Forfeited................................. 209 0.15 to 1.13
Exercised................................. 49 0.15 to 1.13
----- ----------------
Outstanding at December 31, 1996............ 1,889 0.15 to 1.13
Granted during 1997....................... 740 1.13 to 4.50
Forfeited................................. 323 0.15 to 3.00
Exercised................................. 484 0.15 to 3.00
----- ----------------
Outstanding at December 31, 1997............ 1,822 0.15 to 4.50
Granted................................... 1,246 4.50 to 12.00
Forfeited................................. 159 0.15 to 8.25
Exercised................................. 300 0.15 to 4.50
----- ----------------
Outstanding at June 30, 1998................ 2,609 0.15 to 12.00
===== ================
</TABLE>
Options granted during the year ended December 31, 1997 and the six months
ended June 30, 1998 resulted in a total compensation amount of $255,000 and
$1,058,000, respectively, and was recorded as deferred compensation in
stockholders equity. The deferred compensation amount will be recognized as
compensation expense over the vesting period. During the year ended December
31, 1997 and the six months ended June 30, 1998, such compensation expense
amounted to $10,000 and $84,000, respectively.
Information with respect to stock options outstanding is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
--------- -------
(NUMBER OF SHARES
IN THOUSANDS)
<S> <C> <C>
Weighted average price per share........................... $0.39 $1.29
Exercisable options........................................ 740 661
Options available for future grants........................ 729 313
Weighted average remaining contractual life................ 9.5 years 9 years
</TABLE>
F-15
<PAGE>
CITYSEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
In connection with the Series E Redeemable Convertible Preferred Stock
issuance, the Company granted warrants to a private placement selling agent to
purchase 94,286 shares of Series E Redeemable Convertible Preferred Stock at
an exercise price of $8.75 per share in exchange for services. The warrants
expire upon a closing of an initial public offering or five years from the
grant date, whichever is earlier.
Pro forma information regarding the effect on operations is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The fair
value for these options was estimated at the date of grant using the minimum-
value method, which utilizes a near-zero volatility factor.
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Expected life (years)...................................... 6 years 5 years
Risk-free interest rate.................................... 6.30% 6.30%
Dividend yield............................................. -- --
</TABLE>
This option valuation model requires input of highly subjective assumptions.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing model does not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The
Company's pro forma information follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1997
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Net loss, as reported............................. $ (13,897) $ (36,526)
Pro forma net loss................................ (13,953) (36,608)
Pro forma basic and diluted historical loss per
share............................................ $ (2.38) $ (5.81)
Pro forma basic and diluted loss per share........ (1.66) (2.95)
</TABLE>
The effects of applying Statement 123 in this pro forma disclosure may not
be indicative of future amounts. Additional awards in future years are
anticipated.
8. DEFINED CONTRIBUTION PLAN
In July 1997, the Company established a defined contribution plan for
certain qualified employees as defined in the plan. Participants may
contribute from 1% to 20% of pretax compensation subject to certain
liabilities. The plan does provide for certain discretionary contributions by
the Company as defined in the plan. No Company contributions were made for the
year ended December 31, 1997.
9. RELATED PARTY TRANSACTIONS
Included in revenues for the year ended December 31, 1997 and the six months
ended June 30, 1998 is approximately $1,049,000 and $1,417,000 of revenues,
respectively, generated under the Company's license agreements with
stockholders or other related parties. Included in due from licensees at
December 31, 1997 and June 30, 1998 is $136,000 and $234,000, respectively,
due from stockholders and other related parties.
F-16
<PAGE>
CITYSEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
(INFORMATION AT JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
10. PROPOSED INITIAL PUBLIC OFFERING AND OTHER SUBSEQUENT EVENTS
The Company is contemplating filing an amended registration statement with
the Securities and Exchange Commission, relating to an initial public offering
of shares of its unissued Common Stock. If the initial public offering is
consummated under the terms presently anticipated, all of the Preferred Stock
outstanding will automatically convert into Common Stock. At June 30, 1998, on
an unaudited pro forma basis, using a conversion price calculated based on
Common Stock option forfeitures through June 30, 1998, 10,127,621 shares of
Common Stock would be issued upon automatic conversion of Preferred Stock. The
pro forma effect on stockholders' equity, as adjusted for the assumed
conversion of the Preferred Stock, is set forth on the accompanying balance
sheet.
In connection with the Company's initial public offering, the Board of
Directors authorized a two-for-three reverse stock split prior to the
completion of the Company's initial public offering. Accordingly, all common
stock share and per share information has been retroactively restated to give
effect to the two-for-three reverse stock split.
F-17
<PAGE>
The back inside cover will contain a selection of five to fifteen overlapping
screen shots of home pages of the Company's business customers. The screen
shots will represent business customers in a variety of service categories
(e.g., restaurants, professional services, entertainment venues, etc.).
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person has been authorized to give any infor-
mation or to make any representations other than those contained in this Pro-
spectus in connection with this offering and, if given or made, such informa-
tion or representation must not be relied upon as having been authorized by the
Company or any Underwriter. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made hereun-
der shall, under any circumstances, create any implication that the information
herein is correct as of any time subsequent to the date hereof or that there
has been no change in the affairs of the Company since such date.
--------------------------
TABLE OF CONTENTS
--------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 18
Dividend Policy........................................................... 18
Capitalization............................................................ 19
Dilution.................................................................. 20
Selected Consolidated Financial Data...................................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 22
Business.................................................................. 28
Management................................................................ 41
Certain Transactions...................................................... 50
Principal Stockholders.................................................... 52
Description of Capital Stock.............................................. 54
Shares Eligible for Future Sale........................................... 56
Underwriting.............................................................. 58
Legal Matters............................................................. 60
Experts................................................................... 60
Additional Information.................................................... 60
Index to Consolidated Financial
Statements............................................................... F-1
</TABLE>
---------------
Until , 1998 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Common Stock, whether or not participating in
this distribution, may be required to deliver a Prospectus. This is in addition
to the obligation of dealers to deliver a Prospectus when acting as Underwrit-
ers and with respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,000,000 SHARES
[LOGO OF CITYSEARCH.COM]
COMMON STOCK
---------------
PROSPECTUS
---------------
NationsBanc Montgomery Securities LLC
BancAmerica Robertson Stephens
Donaldson, Lufkin & Jenrette
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts, commissions and certain accountable expenses, payable
by the Company in connection with the sale of Common Stock being registered.
All amounts are estimates except the SEC registration fee and the NASD filing
fee.
<TABLE>
<S> <C>
SEC Registration Fee............................................... $ 17,691
NASD Filing Fee.................................................... 6,480
Nasdaq Listing Fee................................................. 93,000
Printing Fees and Expenses......................................... 150,000
Legal Fees and Expenses............................................ 250,000
Accounting Fees and Expenses....................................... 175,000
Blue Sky Fees and Expenses......................................... 10,000
Transfer Agent and Registrar Fees.................................. 10,000
Miscellaneous...................................................... 87,829
--------
Total............................................................ $800,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
The Registrant's Restated Certificate of Incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware
law.
The Registrant's Bylaws provide for the indemnification of officers,
directors and third parties acting on behalf of the Registrant if such person
acted in good faith and in a manner reasonably believed to be in and not
opposed to the best interest of the Registrant, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for
in the Registrant's Bylaws, and intends to enter into indemnification
agreements with any new directors and executive officers in the future.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since inception of Registrant (September 20, 1995), the Registrant has
issued and sold the following unregistered securities (as adjusted to reflect
the two-for-three reverse stock split anticipated to be consummated
immediately prior to the closing contemplated hereby):
(1) From September 20, 1995 to June 30, 1998, Registrant granted options
to purchase 6,206,040 shares of Common Stock pursuant to its 1996 Stock
Option Plan at exercise prices ranging from $0.15 to $12.00.
(2) From September 20, 1995 to June 30, 1998, Registrant issued and sold
an aggregate of 833,919 shares of Common Stock to its employees, directors
and consultants upon exercise of stock options granted pursuant to its 1996
Stock Option Plan at exercise prices ranging from $0.15 to $4.50 for an
aggregate consideration of $220,990.70.
(3) In September 1995; at Registrant formation, Registrant issued and
sold 4,415,291 shares of Common Stock to William Gross for an aggregate
cash consideration of $5,000 and for services provided to the Company.
II-1
<PAGE>
(4) In October 1995, Registrant issued and sold an aggregate of 2,822,344
shares of its Common Stock for an aggregate cash consideration of $84,670.
These shares were issued to the following key founding employees: Charles
Conn, III; Thomas Layton; Jeffrey Brewer; Kristen Ding; Caskey Dickson;
David Holtz; Tamar Halpern; Brad Haugaard; Taylor Wescoatt; Linda Gross;
Karen DeDea; Lee Husiuk and Michael Radford.
(5) From November 1995 to December 1995, Registrant issued and sold an
aggregate 1,791,173 shares of Series A Preferred Stock for an aggregate
cash consideration of approximately $1.6 million. Shares of Series A
Preferred Stock were issued to the following: David M. Balkin; Robert
McLean; Morris Ventures; Robert W. Shaw, Jr.; Philip E. Berney; WS
Investment Company 95B; William N. Melton; Stuart Cohen; Robert Kavner;
Edwin C. Cohen; Peter R. Bleyleben; Steven Spielberg; Gerald Breslauer;
Barry S. Volpert; Pando Associates, Ltd.; John Wylie; Jeffrey Glynn and
Victoria Jo Edwards, Co-Trustees of the Edwards Family Trust of 1995;
Charles R. Conn, II; Taylor Wescoatt; North American Trust Co., TTEE FBO
L&W Dickson #410280.
(6) In June 1996, Registrant issued an aggregate 157,074 shares of Series
B Preferred Stock at $3.4665 per share as part consideration for the
acquisition of MetroBeat, Inc. Such shares were issued to the following
shareholders of MetroBeat, Inc.: Mark Davies and Joshua White.
(7) From May 1996 to July 1996, Registrant issued and sold an aggregate
3,261,024 shares of Series C Preferred Stock for an aggregate cash
consideration of approximately $11.3 million. Shares of Series C Preferred
Stock were issued to the following: GS Capital Partners II, L.P; GS Capital
Partners II Offshore, L.P.; Goldman, Sachs & Co. Verwaltungs GmbH; The
Goldman Sachs Group, L.P.; AT&T Venture Fund I, L.P.; AT&T Venture Fund II,
L.P.; Steven Spielberg; Edwin C. Cohen; Pamela C. Alexander; Barry S.
Volpert; Alexander Communications, Inc.; Jeffrey G. Edwards; IRA MSTC
Custodian; Morris Ventures; Byters; David White; Robert W. Shaw, Jr.;
Charles R. Conn, II; The Pacific Bank, N.A., Trustee E. Keith Thomson IRA;
Michael Barton; Eric Higgs; Mark Lewyn; Emily Martin; Douglas M. McPherson;
Ted Meisel.
(8) From December 1996 to October 1997, Registrant issued and sold an
aggregate 4,430,313 shares of Series D Preferred Stock for an aggregate
cash consideration of approximately $28.0 million and for services provided
to the Company. Such shares of Series D Preferred Stock were issued to the
following: GS Capital Partners II, L.P.; GS Capital Partners II Offshore,
L.P.; Goldman, Sachs & Co. Verwaltungs GmbH; Stone Street Fund 1996, L.P.;
Bridge Street Fund 1996, L.P.; Edwin C. Cohen; EnCompass Group, Inc.;
Michael Barton; Mark Lewyn; Brian A. Goler; Emily Bloomfield; Bradley
Ramberg; Lamar Rutherford; Kristen Brown; James R. McGovern; AnneMarie
Weibel; Debra J. Wilkens; Francesca Colloredo-Mansfeld; Kathryn Takach;
Byters; Comcast CitySearch, Inc.; Far West Capital Partners, L.P.; Robert
McLean; Morris Ventures; Steven Spielberg; David White; CPQ Holdings, Inc.;
Intel Corporation; Bayview Investors, Ltd.; Toronto Star Newspapers
Limited; AT&T Venture Fund I, L.P.; AT&T Venture Fund II, L.P.; Bill Gross'
idealab!; Alexander Communications, Inc.; The Times Mirror Company; Paul S.
Larsen; ServiceMaster Venture Fund L.L.C.; Digital Ink Company and
Korn/Ferry International.
(9) In June 1997, Registrant issued an aggregate 68,274 shares of Series
B Preferred Stock at $6.5251 per share as additional consideration for the
acquisition of Metro Beat, Inc. Such shares were issued to the following
shareholders of MetroBeat, Inc.: Mark Davies and Joshua White.
(10) In November 1997, Registrant issued and sold an aggregate 4,714,286
shares of Series E Preferred Stock for an aggregate cash consideration of
approximately $33.0 million. Such shares of Series E Preferred Stock were
issued to the following: USA Networks, Inc.; Comcast CitySearch, Inc.; Far
West Capital Partners, LP; Intel Corporation; Endurance Fund; Gary Lauder;
The Thomas and Janet Unterman Living Trust dated 12/30/94; East Peak
Partners; Margaret L. Taylor; David A. Duffield Trust dated 7/14/88; Orchid
& Co.; Digital Ink Company; Global Retail Partners, L.P.; DLJ Diversified
Partners, L.P.; GRP Partners, L.P.; Global Retail Partners Funding, Inc.;
DLJ First ESC L.P. and Schibsted ASA.
II-2
<PAGE>
NationsBanc Montgomery Securities LLC ("NationsBanc") acted as placement
agent. As consideration for such services, Registrant paid NationsBanc
$1,546,182 in cash and issued a warrant to purchase 94,286 shares of Series
E Preferred Stock, which terms and conditions are described in item (11)
below.
(11) In November 1997, as part consideration for services provided as
placement agent, Registrant issued to NationsBanc a warrant to purchase
94,286 shares of Series E Preferred Stock. The warrant is exercisable at
any time at an exercise price equal to $8.75 per share and any unexercised
portion of the warrant is automatically convertible immediately prior to
the closing of this offering.
(12) In May 1998, Registrant issued an sold an aggregate 1,000,000 shares
of Series E Preferred Stock for an aggregate cash consideration of
approximately $7.0 million. Such shares of Series E Preferred Stock were
issued to the following: USA Networks, Inc. and American Express Travel
Related Services, Inc.
(13) In June 1998, Registrant issued an aggregate 63,644 shares of Series
B Preferred Stock at $7.00 per share as additional consideration for the
acquisition of MetroBeat, Inc. Such shares were issued to the following
shareholders of MetroBeat, Inc.: Mark Davies and Joshua White.
The sales of the securities described in Items 15(1) and 15(2) were deemed
to be exempt from registration under the Securities Act in reliance on Rule
701 promulgated under Section 3(b) of the Securities Act as transactions
pursuant to compensatory benefit plans and contracts relating to compensation
as provided under such Rule 701. The sale of the securities described in Items
15(3) through 15(13) were deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, as transactions by an issuer not
involving a public offering. The recipients of securities in each such
transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions. All recipients
either received adequate information about the Registrant or had access,
through employment or other relationships, to such information.
II-3
<PAGE>
ITEM 16. EXHIBITS
(a) Exhibits
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
2.1* +Agreement and Plan of Reorganization, among Registrant, MS Acquisition
Corporation, MetroBeat, Inc., Mark Davies and Joshua White, dated May
31, 1996.
3.1* Restated Certificate of Incorporation, as currently in effect.
3.2 Restated Certificate of Incorporation, to be filed prior to the
consummation of the offering.
3.3 Restated Certificate of Incorporation, to be filed immediately
following the consummation of the offering.
3.4* Bylaws, as currently in effect.
3.5* Restated Bylaws, to be effective upon the closing of the offering.
4.1 Specimen Common Stock Certificate.
4.2* Sixth Amended and Restated Stockholders' Agreement by and among
Registrant and certain stockholders of the Registrant, dated May 26,
1998.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
as to the legality of the securities being registered.
10.1* Form of Indemnification Agreement for directors and officers.
10.2 1996 Stock Plan and form of agreement thereunder.
10.3 1998 Employee Stock Purchase Plan.
10.4 1998 Director Option Plan.
10.5* +License Agreement between Registrant and Perly, Inc., dated March 9,
1996.
10.6* +Marketing Agreement between Registrant and American Express Travel
Related Services Company, Inc., dated May 26, 1998.
10.7* Employment Agreement between Registrant and Charles Conn, dated May 9,
1996.
10.8* +Partnership Agreement between Metroland Printing, Publishing &
Distributing Ltd. 1217554 Ontario Inc., Registrant and Torstar
Corporation, dated February 17, 1997.
10.9* +License and Services Agreement between Registrant and 1217554 Ontario
Inc., dated February 17, 1997.
10.10* +Noncompetition Agreement between Registrant, 1217554 Ontario Inc.,
Torstar Corporation and Metroland Printing, Publishing & Distributing
Ltd., dated February 17, 1997.
10.11* +Assignment Agreement between Registrant, 1217554 Ontario Inc., and
Toronto Star CitySearch, dated February 17, 1997.
10.12 Lease Agreement by and between Registrant and West End Land Development
Co., L.P., dated November 7, 1996.
10.13 Standard Form of Lease, Aeriel Center Executive Park, between
Pizzagalli Investment Company and Registrant, dated May 8, 1996.
10.14 Standard Office Lease between Registrant and Sage Realty Corporation,
dated May 6, 1997.
10.15 Standard Office Lease between Registrant and H. Naito Corporation,
dated March 6, 1997.
10.16 Standard Office Lease between Registrant and Brazos Austin Centre,
Ltd., dated August 15, 1996.
10.17 Standard Office Lease between Registrant and Judge Building Group,
dated September 10, 1996.
10.18 Standard Office Lease between Registrant and Sobel Building
Development, dated May 31, 1996.
10.19 Standard Office Lease between Registrant and BPG Pasadena, L.L.C.
(later assigned to Spieker Properties), dated September 30, 1996.
10.20* Lease Agreement between Registrant and Secured Properties Investors II,
L.P., dated May 13, 1998.
10.21* Amended and Restated Voting Agreement by and among Registrant and
certain stockholders of Registrant, dated November 12, 1997.
10.22* Employment Agreement between Registrant and Thomas Layton, dated July
2, 1997.
10.23* +License and Services Agreement between Registrant and Classified
Ventures.
21.1* Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1** Power of Attorney.
27.1 Financial Data Schedule (available in EDGAR format only).
</TABLE>
(b) Schedules
Schedule II--Valuation and Qualifying Accounts
- --------
* Previously filed.
**Partly filed herewith and partly previously filed.
+ Confidential treatment requested.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the provisions described in Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the 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 of 1933, and will be governed by the
final adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act of 1933, the information omitted from
the form of prospectus as filed as part of the registration statement in
reliance upon Rule 430A and contained in the form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as of the time
it was declared effective, and (2) for the purpose of determining any
liability under the Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT ON
FORM S-1 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF PASADENA, STATE OF CALIFORNIA, ON THE 17TH DAY OF
JULY, 1998.
CITYSEARCH, INC.
/s/ Charles Conn
By___________________________________
CHARLES CONN
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Charles Conn Chief Executive
- ------------------------------------- Officer and July 17, 1998
CHARLES CONN Director (Principal
Executive Officer)
/s/ Bradley Ramberg Chief Financial
- ------------------------------------- Officer and Vice July 17, 1998
BRADLEY RAMBERG President, Finance
and Administration
and Secretary
(Principal Financial
Officer and Principal
Accounting Officer)
* President, Chief
- ------------------------------------- Operating Officer, July 17, 1998
THOMAS LAYTON Treasurer and
Director
* Director
- ------------------------------------- July 17, 1998
GERALD BRESLAUER
* Director
- ------------------------------------- July 17, 1998
JOSEPH GLEBERMAN
* Director
- ------------------------------------- July 17, 1998
WILLIAM GROSS
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
--------- ----- ----
* Director July 17, 1998
- -------------------------------------
ROBERT KAVNER
* Director July 17, 1998
- -------------------------------------
YVES SISTERON
* Director July 17, 1998
- -------------------------------------
THOMAS UNTERMAN
/s/ Charles Conn
*By: ___________________________
CHARLES CONN
ATTORNEY-IN-FACT
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Charles Conn and Bradley Ramberg and
each one of them, acting individually and without the other, as his or her
attorney-in-fact, each with full power of substitution, for him and her in any
and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, and all post-effective amendments thereto, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming
all that each of said attorneys-in-fact, or his substitute or substitutes may
do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Barry Diller
- ------------------------------------- Director July 17, 1998
BARRY DILLER
- ------------------------------------- Director July , 1998
ALAN SPOON
</TABLE>
II-7
<PAGE>
CITYSEARCH, INC.
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- --------------------- ---------- ----------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER THE END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Period from September 20
(date of formation)
through December 31,
1995................... $ -- $ -- $-- $ -- $ --
Year ended December 31,
1996................... -- -- -- -- --
Year ended December 31,
1997................... -- 114,000 -- 89,000(a) 25,000
</TABLE>
- --------
(a) Represents amounts written-off against the allowance for doubtful accounts,
net of recoveries and reversals.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1* +Agreement and Plan of Reorganization, among Registrant, MS
Acquisition Corporation, MetroBeat, Inc., Mark Davies and Joshua
White, dated May 31, 1996.
3.1* Restated Certificate of Incorporation, as currently in effect.
3.2 Restated Certificate of Incorporation, to be filed prior to the
consummation of the offering.
3.3 Restated Certificate of Incorporation, to be filed immediately
following the consummation of the offering.
3.4* Bylaws, as currently in effect.
3.5* Restated Bylaws, to be effective upon the closing of the offering.
4.1 Specimen Common Stock Certificate.
4.2* Sixth Amended and Restated Stockholders' Agreement by and among
Registrant and certain stockholders of the Registrant, dated May
26, 1998.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, as to the legality of the securities being
registered.
10.1* Form of Indemnification Agreement for directors and officers.
10.2 1996 Stock Plan and form of agreement thereunder.
10.3 1998 Employee Stock Purchase Plan.
10.4 1998 Director Option Plan.
10.5* +License Agreement between Registrant and Perly, Inc., dated March
9, 1996.
10.6* +Marketing Agreement between Registrant and American Express
Travel Related Services Company, Inc., dated May 26, 1998.
10.7* Employment Agreement between Registrant and Charles Conn, dated
May 9, 1996.
10.8* +Partnership Agreement between Metroland Printing, Publishing &
Distributing Ltd. 1217554 Ontario Inc., Registrant and Torstar
Corporation, dated February 17, 1997.
10.9* +License and Services Agreement between Registrant and 1217554
Ontario Inc., dated February 17, 1997.
10.10* +Noncompetition Agreement between Registrant, 1217554 Ontario
Inc., Torstar Corporation and Metroland Printing, Publishing &
Distributing Ltd., dated February 17, 1997.
10.11* +Assignment Agreement between Registrant, 1217554 Ontario Inc.,
and Toronto Star CitySearch, dated February 17, 1997.
10.12 Lease Agreement by and between Registrant and West End Land
Development Co., L.P., dated November 7, 1996.
10.13 Standard Form of Lease, Aeriel Center Executive Park, between
Pizzagalli Investment Company and Registrant, dated May 8, 1996.
10.14 Standard Office Lease between Registrant and Sage Realty
Corporation, dated May 6, 1997.
10.15 Standard Office Lease between Registrant and H. Naito Corporation,
dated March 6, 1997.
10.16 Standard Office Lease between Registrant and Brazos Austin Centre,
Ltd., dated August 15, 1996.
10.17 Standard Office Lease between Registrant and Judge Building Group,
dated September 10, 1996.
10.18 Standard Office Lease between Registrant and Sobel Building
Development, dated May 31, 1996.
10.19 Standard Office Lease between Registrant and BPG Pasadena, L.L.C.
(later assigned to Spieker Properties), dated September 30, 1996.
10.20* Lease Agreement between Registrant and Secured Properties
Investors II, L.P., dated May 13, 1998.
10.21* Amended and Restated Voting Agreement by and among Registrant and
certain stockholders of Registrant, dated November 12, 1997.
10.22* Employment Agreement between Registrant and Thomas Layton, dated
July 2, 1997.
10.23* +License and Services Agreement between Registrant and Classified
Ventures.
21.1* Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1** Power of Attorney.
27.1 Financial Data Schedule (available in EDGAR format only).
</TABLE>
- --------
*Previously filed.
**Partly filed herewith and partly previously filed.
+Confidential treatment requested.
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CITYSEARCH, INC.
A DELAWARE CORPORATION
CitySearch, Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of Delaware (the "Corporation"), does hereby
certify as follows:
FIRST: The original Certificate of Incorporation of the Corporation was
filed under the name of "PerfectMarket, Inc." with the Secretary of State of the
State of Delaware (the "Secretary") on September 20, 1995, amended by the
Certificate of Amendment of Certificate of Incorporation filed with the
Secretary on November 27, 1995, by the Restated Certificate of Incorporation
filed with the Secretary on May 15, 1996, by the Certificate of Amendment of the
Certificate of Incorporation filed with the Secretary on June 25, 1996, by the
Certificate of Amendment of the Certificate of Incorporation filed with the
Secretary on July 25, 1996, by the Restated Certificate of Incorporation filed
with the Secretary on December 12, 1996, by the Restated Certificate of
Incorporation filed with the Secretary on December 23, 1996, by the Restated
Certificate of Incorporation filed with the Secretary on November 12, 1997 and
by the Restated Certificate of Incorporation filed with the Secretary on May 22,
1998.
SECOND: This Amended and Restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Sections 242 and 245 of the
General Corporation Law of the State of Delaware by the Board of Directors of
the Corporation.
THIRD: This Amended and Restated Certificate of Incorporation was approved
by written consent of the stockholders pursuant to Section 228 of the General
Corporation Law of the State of Delaware.
FOURTH: The Restated Certificate of Incorporation of this Corporation is
amended and restated in its entirety to read as follows:
I.
The name of the Corporation is CitySearch, Inc.
II.
<PAGE>
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
III.
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
IV.
The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock" all of which
shall have a par value of $0.01 per share. The total number of shares which the
Corporation is authorized to issue is ninety-two million seven hundred and
forty-one thousand and eighty-two (92,741,082) shares. Seventy-five million
(75,000,000) shares shall be Common Stock and fifteen million seven hundred and
forty-one thousand and eighty-two (17,741,082) shares shall be Preferred Stock.
1,791,173 shares of Preferred Stock shall be designated "Series A Preferred
Stock" (hereinafter "Series A Preferred"), 450,000 shares of Preferred Stock
shall be designated "Series B Preferred Stock" (hereinafter "Series B
Preferred"), 3,261,024 shares of Preferred Stock shall be designated "Series C
Preferred Stock" (hereinafter "Series C Preferred"), 4,430,313 shares of
Preferred Stock shall be designated "Series D Preferred Stock" (hereinafter
"Series D Preferred"), 5,808,572 shares of Preferred Stock shall be designated
"Series E Preferred Stock" (hereinafter "Series E Preferred" and, together with
the Series A Preferred, Series B Preferred, Series C Preferred, and Series D
Preferred, the "Preferred Stock") and 2,000,000 shares shall be undesignated
Preferred Stock, which undesignated Preferred Stock shall not be issuable until
the closing of a Qualified IPO (as defined herein).
Effective immediately upon the filing of this Amended and Restated
Certificate of Incorporation, there shall be a two for three reverse stock split
(the "Reverse Split") pursuant to which each three outstanding shares of Common
Stock shall be consolidated and converted, automatically and without further
action, into two shares of Common Stock. Such combination shall be effected on
a certificate-by-certificate basis. No fractional share of Common Stock shall
be issued in connection with such conversion, and the number of shares of Common
Stock to be issued shall be rounded up to the nearest whole share.
The 2,000,000 shares of undesignated Preferred Stock may be issued from
time to time in one or more series pursuant to a resolution or resolutions
providing for such issue duly adopted by the Board of Directors (authority to do
so being hereby expressly vested in the Board). The Board of Directors is
further authorized to determine or alter the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock and to fix the number of shares of any series of Preferred Stock and the
designation of any such series of Preferred Stock. The Board of Directors,
within the limits and restrictions stated in any resolution or resolutions of
the Board of Directors originally fixing the number of shares constituting any
series, may increase or decrease (but not below
-2-
<PAGE>
the number of shares in any such series then outstanding) the number of shares
of any series subsequent to the issue of shares of that series.
The authority of the Board of Directors with respect to each such class or
series shall include, without limitation of the foregoing, the right to
determine and fix:
(a) the distinctive designation of such class or series and the number of
shares to constitute such class or series;
(b) the rate at which dividends on the shares of such class or series
shall be declared and paid, or set aside for payment, whether dividends at the
rate so determined shall be cumulative or accruing, and whether the shares of
such class or series shall be entitled to any participating or other dividends
in addition to dividends at the rate so determined, and if so, on what terms;
(c) the right or obligation, if any, of the Corporation to redeem shares of
the particular class or series of Preferred Stock and, if redeemable, the price,
terms and manner of such redemption;
(d) the special and relative rights and preference, if any, and the amount
or amounts per share, which the shares of such class or series of Preferred
Stock shall be entitled to receive upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(e) the terms and conditions, if any, upon which shares of such class or
series shall be convertible into, or exchangeable for, shares of capital stock
of any other class or series, including the price or prices or the rate or rates
of conversion or exchange and the terms of adjustment, if any;
(f) the obligation, if any, of the Corporation to retire, redeem or
purchase shares of such class or series pursuant to a sinking fund or fund of
similar nature or otherwise, and the terms and conditions of such obligation;
(g) voting rights, if any, on the issuance of additional shares of such
class or series or any shares of any other class or series of Preferred Stock;
(h) limitations, if any, on the issuance of additional shares of such class
or series or any shares of any other class or series of Preferred Stock; and
(i) such other preferences, powers, qualifications, special or relative
rights and privileges thereof as the Board of Directors of the Corporation,
acting in accordance with this Restated Certificate of Incorporation, may deem
advisable and are not inconsistent with law and the provisions of this Restated
Certificate of Incorporation.
The rights, preferences, restrictions and other matters relating to the
Preferred Stock are as follows:
-3-
<PAGE>
1. LIQUIDATION PREFERENCE.
----------------------
(a) The Preferred Stock shall, with respect to rights upon
liquidation, dissolution or winding up, rank prior to the shares of Common Stock
and of any other class of stock of the Corporation ranking junior to the
Preferred Stock and in the event of any Transaction (as defined below), whether
voluntary or involuntary, the holders of the Preferred Stock shall be entitled
to receive out of the assets of the Corporation available for distribution to
its stockholders, whether from capital, surplus or earnings, the distributions
described herein before any distribution is made to holders of shares of Common
Stock or any other junior stock.
(b) At any time, in the event of any of the following occurrences
(each, a "Transaction"):
(i) Any dissolution of the Corporation, liquidation or winding
up of the Corporation;
(ii) Any liquidation or winding up of the Corporation as a result
of a bankruptcy, reorganization or similar proceeding;
(iii) Any foreclosure by creditors of the Corporation on all or
substantially all of the assets or equity interests in the Corporation; or
(iv) An acquisition, merger or consolidation of the Corporation
occurs in which more than 50% of the outstanding capital stock of the
Corporation is being acquired for cash and the price per share of Common Stock
(on a fully diluted basis) is below the Series E Conversion Price (as defined in
Section 2 below) then in effect;
the Corporation shall take appropriate steps in connection with such Transaction
to ensure that the assets of the Corporation available for distribution shall be
distributed at the closing of the Transaction in the order and priority as
follows:
(x) the holders of the Preferred Stock shall be entitled to
receive the amount of $.90446 (the "Series A Preference Amount") for each share
of Series A Preferred then held by them, the amount of $3.4665 (the "Series B
Preference Amount") for each share of Series B Preferred then held by them, the
amount of $3.4665 (the "Series C Preference Amount") for each share of Series C
Preferred then held by them, the amount of $6.5251 (the "Series D Preference
Amount") for each share of Series D Preferred then held by them and the amount
of $7.00 (the "Series E Preference Amount", together with the Series A
Preference Amount, the Series B Preference Amount, the Series C Preference
Amount and the Series D Preference Amount, collectively, the "Preference
Amounts" and, individually, a "Preference Amount") for each share of Series E
Preferred then held by them. Each of the Preference Amounts shall be adjusted
for any stock dividends, combinations or splits with respect to such shares,
plus any declared and unpaid dividends on the Preferred Stock; and
-4-
<PAGE>
(y) all remaining assets available for distribution shall be
distributed pro rata among the holders of the Common Stock based on the number
of shares held by each.
If upon the occurrence of a Transaction, the assets and funds available for
distribution (the "Distribution Assets") are less than the sum of the Preference
Amounts of all shares of Preferred Stock (the "Aggregate Preference Amount"),
the distribution on account of each share of Preferred Stock pursuant to
paragraph (x) above shall be an amount equal to (a) (i) the respective
Preference Amount of such share of Preferred Stock multiplied by (ii) the
Distribution Assets divided by (b) the Aggregate Preference Amount.
(c) With respect to any Transaction, if the consideration received by
the Corporation is other than cash, its value will be deemed its fair market
value. Any securities shall be valued as follows:
(i) Securities not subject to investment letter or other similar
restrictions on free marketability:
(A) If traded on a securities exchange or through
Nasdaq, the value shall be deemed to be the average of
the closing prices of the securities on such exchange
over the thirty (30) trading day period ending three
(3) days prior to the closing;
(B) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or
sale prices (whichever is applicable) over the thirty
(30) trading day period ending three (3) days prior to
the closing; and
(C) If there is no active public market, the value
shall be the fair market value thereof, as mutually
determined by the Corporation and the holders of at
least a majority of the voting power of all then
outstanding shares of Preferred Stock with respect to
any Transaction.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other
than restrictions arising solely by virtue of a stockholder's status
as an affiliate or former affiliate) shall be to make an appropriate
discount from the market value determined as above in (i)(A), (B) or
(C) to reflect the approximate fair market value thereof, as mutually
determined by the Corporation and the holders of at least a majority
of the voting power of all then outstanding shares of such Preferred
Stock.
(d) In the event the requirements of this Section 1 are not complied
with, this Corporation shall forthwith either:
(i) cause such closing to be postponed until such time as the
requirements of this Section 1 have been complied with; or
-5-
<PAGE>
(ii) cancel such Transaction to the extent permitted by law, in
which event the rights, preferences and privileges of the holders of the
Preferred Stock shall revert to and be the same as such rights, preferences and
privileges existing immediately prior to the date of the first notice referred
to in Section 1(e) hereof.
(e) The Corporation shall give each holder of record of Preferred
Stock written notice of such impending Transaction not later than twenty (20)
days prior to the stockholder's meeting called to approve such Transaction, or
twenty (20) days prior to the closing of such Transaction, whichever is earlier,
and shall also notify such holders in writing of the final approval of such
Transaction. The first of such notices shall describe the material terms and
conditions of the impending Transaction and the provisions of this Section 1,
and the Corporation shall thereafter give such holders prompt notice of any
material changes. The Transaction shall in no event take place sooner than
twenty (20) days after the Corporation has given the first notice provided for
herein or sooner than ten (10) days after the Corporation has given notice of
any material changes provided for herein; provided, however, that such periods
may be shortened upon the written consent of the holders of Preferred Stock that
are entitled to such notice rights or similar notice rights and that represent
at least a majority of the voting power of all then outstanding shares of such
Preferred Stock.
2. CONVERSION. The holders of the Preferred Stock have conversion rights
----------
as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
----------------
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable shares
of Common Stock as is determined: in the case of the Series A Preferred, by
dividing $0.90446 by the Series A Conversion Price, determined as hereinafter
provided, in effect at the time of the conversion; in the case of the Series B
Preferred, by dividing $3.4665 by the Series B Conversion Price, determined as
hereinafter provided, in effect at the time of the conversion; in the case of
Series C Preferred, by dividing $3.4665 by the Series C Conversion Price,
determined as hereinafter provided, in effect at the time of the conversion; in
the case of the Series D Preferred, by dividing $6.5251 by the Series D
Conversion Price, determined as hereinafter provided, in effect at the time of
the conversion; and in the case of the Series E Preferred, by dividing $7.00 by
the Series E Conversion Price, determined as hereinafter provided, in effect at
the time of the conversion. The price at which shares of Common Stock shall be
deliverable upon conversion of the Series A Preferred (the "Series A Conversion
Price") shall initially be $0.90446 per share of Common Stock. The price at
which shares of Common Stock shall be deliverable upon conversion of the Series
B Preferred (the "Series B Conversion Price") shall initially be $3.4665 per
share of Common Stock. The price at which shares of Common Stock shall be
deliverable upon conversion of the Series C Preferred (the "Series C Conversion
Price") shall initially be $3.4665 per share of Common Stock. The price at
which shares of Common Stock shall be deliverable upon conversion of the Series
D Preferred (the "Series D Conversion Price") shall initially be $6.5251 per
share of Common Stock. The price at which shares of Common Stock shall be
deliverable upon conversion of the Series E Preferred (the "Series E Conversion
Price") shall initially be $7.00 per share of Common Stock. The term
"Conversion Price," as used herein shall refer to the respective Conversion
Price of each series of Preferred Stock. Each such Conversion Price shall be
subject to adjustment as hereinafter
-6-
<PAGE>
provided. Upon conversion, all declared and unpaid dividends on the Preferred
Stock shall be paid, to the extent funds are legally available therefor, either
in cash or in shares of Common Stock of the Corporation, at the election of the
Corporation, wherein the shares of Common Stock shall be valued at the fair
market value at the time of such conversion, as determined in good faith by the
Board.
(b) Automatic Conversion. Each share of Preferred Stock shall
--------------------
automatically be converted into shares of Common Stock at the then effective
Conversion Price upon: (i) the closing of a firm underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of shares of the Corporation's
Common Stock with an aggregate net proceeds (after deduction of underwriter's
discounts and commissions and offering expenses) to the Company of not less than
$20,000,000, the price per share to the public of which was not less than $7.70
per share (a "Qualified IPO"); or (ii) the written election of holders of not
less than a majority of the then outstanding Preferred Stock and a majority of
each of the then outstanding Series C Preferred and Series E Preferred. In the
event of the automatic conversion of the Preferred Stock upon a public offering
as aforesaid, the person(s) entitled to receive the Common Stock issuable upon
such conversion of Preferred Stock shall not be deemed to have converted such
Preferred Stock until immediately prior to the closing of such sale of
securities.
(c) Mechanics of Conversion. No fractional shares of Common Stock
-----------------------
shall be issued upon conversion of Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled (after aggregating all
shares of Preferred Stock held by such holder such that the maximum number of
whole shares of Common Stock is issued to such holder upon conversion), the
Corporation shall pay cash equal to such fraction multiplied by the then fair
market value of a share of Common Stock. Before any holder of Preferred Stock
shall be entitled to convert the same into full shares of Common Stock and to
receive certificates therefor, such holder shall surrender the certificate or
certificates evidencing such Preferred Stock, duly endorsed, at the office of
the Corporation or of any transfer agent for the Preferred Stock, and shall give
written notice to the Corporation at such office that such holder elects to
convert the same; provided, however, that in the event of an automatic
conversion pursuant to paragraph (b) hereof, the outstanding shares of Preferred
Stock shall be converted automatically without any further action by the holders
of such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent, and provided further that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such automatic conversion unless the
certificates evidencing such shares of Preferred Stock are either delivered to
the Corporation or its transfer agent as provided above, or the holder notifies
the Corporation or its transfer agent that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such
certificates.
The Corporation shall, as soon as practicable after such delivery, or after
such agreement and indemnification, issue and deliver at such office to such
holder of Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which the holder shall be entitled as aforesaid and a
check payable to the holder in the amount of any cash amounts payable as the
result of a conversion into fractional shares of Common Stock. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Preferred Stock
-7-
<PAGE>
to be converted, or, in the case of automatic conversion, on the date of closing
of the offering or the date of written election to convert, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
(d) Adjustments of the Conversion Price.
-----------------------------------
(i) If the number of shares of Common Stock outstanding at any
time after the date upon which any shares of Series E Preferred were first
issued (the "Series E Original Issue Date") is increased by split or subdivision
of the outstanding shares of Common Stock or the receipt by holders of Common
Stock of a dividend or other distribution payable in additional shares of Common
Stock or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no record date
is fixed), the number of shares of Common Stock issuable on conversion of each
share of Preferred Stock shall be increased in proportion to such increase in
outstanding shares by means of an adjustment to the applicable Conversion Price.
(ii) If the number of shares of Common Stock outstanding at any
time after the Series E Original Issue Date is decreased by a combination of the
outstanding shares of Common Stock (including the Reverse Split), then,
following the record date of such combination, the number of shares of Common
Stock issuable on conversion of each share of Preferred Stock shall be decreased
in proportion to such decrease in outstanding shares by means of an adjustment
to the applicable Conversion Price.
(iii) If at any time or from time to time the Corporation
distributes to all holders of the Corporation evidences of indebtedness or
assets of the Corporation (other than cash dividends), the holders of the
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Preferred Stock the amount of such evidences of indebtedness or assets of the
Corporation as such holders of Preferred Stock would have been entitled to
receive had they converted their shares of Preferred Stock into shares of Common
Stock immediately prior to such distribution.
(e) Adjustments for Certain Corporate Transactions. If the Common
----------------------------------------------
Stock issuable upon conversion of the Preferred Stock shall be changed into the
same or a different number of shares of any other class or classes of stock of
the Corporation or another corporation, whether by merger, consolidation, sale
of all or substantially all of the assets of the Corporation, liquidation,
capital reorganization, reclassification or otherwise (other than a dividend,
subdivision, combination or consolidation of shares provided for above) (a
"Reorganization"), the Conversion Price then in effect shall, concurrently with
the effectiveness of such Reorganization, be proportionately adjusted such that
the Preferred Stock shall be convertible into, in lieu of the number of shares
of Common Stock which the holders would otherwise have been entitled to receive,
a number of shares of such other class or classes of stock of the Corporation or
other corporation, as the case may be, equivalent to the number of shares
-8-
<PAGE>
of Common Stock that would have been subject to receipt by the holders upon
conversion of such shares of Preferred Stock immediately before such
Reorganization. Furthermore, in the event of an acquisition, merger or
consolidation of the Corporation whereby the Corporation's stockholders of
record immediately prior to such acquisition, merger or consolidation hold less
than 50% of the voting power of the surviving entity immediately after such
acquisition, merger or consolidation and (i) such acquisition, merger or
consolidation shall be effected in such a way that the holders of the
Corporation's Common Stock shall be entitled to receive stock, securities or
assets other than cash and (ii) the surviving entity is not subject to the
periodic reporting requirements of Sections 12(g) or 15(d) of the Securities Act
of 1934, as amended, immediately after such acquisition, merger or
consolidation, appropriate provisions shall be made with respect to the rights
and interests of holders of the Series A Preferred, the Series B Preferred, the
Series C Preferred, the Series D Preferred and the Series E Preferred to the end
that the rights, preferences and privileges of the Series A Preferred, the
Series B Preferred, the Series C Preferred, the Series D Preferred and the
Series E Preferred as set forth in this Restated Certificate, as applicable
(including without limitation provisions for adjustments of the Conversion
Price), shall thereafter be incorporated into any shares of stock or securities
thereafter deliverable upon the exercise of such conversion rights.
(f) Adjustment of Series C Conversion Price. Upon any conversion of
---------------------------------------
any shares of Series C Preferred to Common Stock in accordance with this Section
2, the Series C Conversion Price shall be adjusted to the extent necessary to an
amount equal to the following:
Series C Conversion Price = $45 million
------------------------------------------
Series C Measurement Shares plus Series C
Option Shares
For purposes of this Section 2(f), (i) the term "Series C Measurement Shares"
shall equal 10,690,196 shares of Common Stock (as adjusted for stock splits,
stock dividends or similar recapitalizations after the Series E Original Issue
Date) and (ii) the term "Series C Option Shares" shall equal the 2,291,181
shares of Common Stock issuable upon exercise of stock options ("Original Issue
Date Options") outstanding as of the date upon which any shares of Series C
Preferred were first issued (the "Series C Original Issue Date") less such
number of Option Shares that were subject to Original Issue Date Options that
were canceled as a result of the termination of employment or consulting
services on or prior to (i) June 30, 1998 in the event that the Company
completes a Qualified IPO on or prior to December 31, 1998 or (ii) the date of
conversion of the Series C Preferred in the event that the Company does not
complete a Qualified IPO on or prior to December 31, 1998 (as adjusted for stock
splits, stock dividends or similar recapitalizations after the Series E Original
Issue Date).
(g) Adjustment of Series D Conversion Price. Upon any conversion of
---------------------------------------
any shares of Series D Preferred to Common Stock in accordance with this Section
2, the Series D Conversion Price shall be adjusted to the extent necessary to an
amount equal to the following:
Series D Conversion Price = $110 million
-----------------------------------------
Series D Measurement Shares plus Series D
Option Shares
For purposes of this Section 2(g), (i) the term "Series D Measurement Shares"
shall equal 14,011,324 shares of Common Stock (as adjusted for stock splits,
stock dividends or similar recapitalizations after
-9-
<PAGE>
the Series E Original Issue Date) and (ii) the term "Series D Option Shares"
shall equal 2,846,776 shares of Common Stock issuable upon exercise of stock
options ("Series D Original Issue Date Options") outstanding as of the date upon
which any shares of Series D Preferred were first issued (the "Series D Original
Issue Date") less such number of Series D Option Shares that were subject to
Series D Original Issue Date Options that were canceled as a result of the
termination of employment or consulting services on or prior to (i) June 30,
1998 in the event that the Company completes a Qualified IPO on or prior to
December 31, 1998 or (ii) the date of conversion of the Series D Preferred in
the event that the Company does not complete a Qualified IPO on or prior to
December 31, 1998 (as adjusted for stock splits, stock dividends or similar
recapitalizations after the Series E Original Issue Date).
(h) Adjustment of Series E Conversion Price. Upon any conversion of
---------------------------------------
any shares of Series E Preferred to Common Stock in accordance with this Section
2, the Series E Conversion Price shall be adjusted to the extent necessary to an
amount equal to the following:
Series E Conversion Price = $ 152,662,601
-----------------------------------------
Series E Measurement Shares plus Series E
Option Shares
For purposes of this Section 2(h), (i) the term "Series E Measurement Shares"
shall equal 19,173,153 shares of Common Stock (as adjusted for stock splits,
stock dividends or similar recapitalizations after the Series E Original Issue
Date) and (ii) the term "Series E Option Shares" shall equal 2,635,790 shares of
Common Stock issuable upon exercise of stock options ("Series E Original Issue
Date Options") outstanding as of the Series E Original Issue Date less such
number of Series E Option Shares that were subject to Series E Original Issue
Date Options that were canceled as a result of the termination of employment or
consulting services on or prior to (i) June 30, 1998 in the event that the
Company completes a Qualified IPO on or prior to December 31, 1998 or (ii) the
date of conversion of the Series E Preferred in the event that the Company does
not complete a Qualified IPO on or prior to December 31, 1998 (as adjusted for
stock splits, stock dividends or similar recapitalizations after the Series E
Original Issue Date).
(i) No Fractional Shares as to Adjustments. No fractional shares
--------------------------------------
shall be issued upon the conversion of any share or shares of the Preferred
Stock, and the number of shares of Common Stock to be issued shall be rounded
down to the nearest whole share.
(j) No Impairment. The Corporation will not, by amendment of this
-------------
Amended and Restated Certificate of Incorporation or through any Reorganization,
issuance or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 2 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of the Preferred Stock against impairment.
(k) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment of the Conversion Price pursuant to this Section 2, the Corporation
at its expense shall promptly compute such adjustment in accordance with the
terms hereof and furnish to each holder of Preferred Stock a certificate
-10-
<PAGE>
setting forth such adjustment and showing in detail the facts upon which such
adjustment is based. The Corporation shall, upon the written request at any time
of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Price at the time in effect, and (iii) the number of shares
of Common Stock and the amount, if any, of other property which at the time
would be received upon the conversion of such holder's shares of Preferred
Stock.
3. MANDATORY REDEMPTION.
--------------------
(a) The Corporation shall redeem, from any source of funds legally
available therefor, all then outstanding shares of Series C Preferred on the
ten-year anniversary date (the "Series C Redemption Date") of the Series C
Original Issue Date. The Corporation shall effect such redemption on the Series
C Redemption Date by paying in exchange for the outstanding shares of Series C
Preferred Stock cash in the amount equal to the liquidation value of such shares
pursuant to Section 1 above (the "Series C Redemption Price").
(b) The Corporation shall redeem, from any source of funds legally
available therefor, all then outstanding shares of Series D Preferred at any
time on or after the seven-year anniversary date of the Series D Original Issue
Date upon the written election of holders of not less than eighty percent (80%)
of the then outstanding Series D Preferred. "Series D Redemption Date" shall
mean forty-five (45) days from the date of the receipt by the Corporation of
such written election. The Corporation shall effect such redemption on the
Series D Redemption Date by paying in exchange for the outstanding shares of
Series D Preferred, cash in the amount equal to the liquidation value of such
shares pursuant to Section 1 above (the "Series D Redemption Price").
(c) The Corporation shall redeem, from any source of funds legally
available therefor, all then outstanding shares of Series E Preferred at any
time on or after the seven-year anniversary date of the Series D Original Issue
Date upon the written election of holders of not less than eighty percent (80%)
of the then outstanding Series E Preferred. "Series E Redemption Date" shall
mean forty-five (45) days from the date of the receipt by the Corporation of
such written election and the term "Redemption Date" shall mean a Series C
Redemption Date, a Series D Redemption Date or a Series E Redemption Date. The
Corporation shall effect such redemption on the Series E Redemption Date by
paying in exchange for the outstanding shares of Series E Preferred, cash in the
amount equal to the liquidation value of such shares pursuant to Section 1 above
(the "Series E Redemption Price" and together with the Series C Redemption Price
and Series D Redemption Price, a "Redemption Price").
(d) At least fifteen (15) but no more than thirty (30) days prior to
any Redemption Date, written notice shall be mailed, first class postage
prepaid, to each holder of record (at the close of business on the business day
next preceding the day on which notice is given) of the Series C Preferred,
Series D Preferred or Series E Preferred, as the case may be, at the address
last shown on the records of the Corporation for such holder, notifying such
holder of the redemption to be effected, specifying the applicable Redemption
Date, the applicable Redemption Price, the place at which payment may be
obtained and calling upon such holder to surrender to the Corporation, in the
manner and at the place designated, his or her certificate or certificates
representing the Series C Preferred, the Series D Preferred
-11-
<PAGE>
or the Series E Preferred, as the case may be, (the "Redemption Notice"). Except
as provided in Section 3(e) below, on or after such Redemption Date, each holder
of Series C Preferred, the Series D Preferred or the Series E Preferred, as the
case may be, shall surrender to the Corporation the certificate or certificates
representing such shares, in the manner and at the place designated in the
Redemption Notice, and thereupon the applicable Redemption Price of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled.
(e) From and after any Redemption Date, unless there shall have been a
default in the payment of the applicable Redemption Price, all rights of the
holders of shares of Series C Preferred, Series D Preferred or Series E
Preferred, as the case may be, (except the right to receive the applicable
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the Corporation legally
available for redemption of shares of Series C Preferred, Series D Preferred or
Series E Preferred, as the case may be, on any Redemption Date are insufficient
to redeem the total number of shares of Series C Preferred, Series D Preferred
or Series E Preferred, as the case may be, those funds which are legally
available will be used to redeem the maximum possible number of such shares
ratably among the holders of Series C Preferred, Series D Preferred or Series E
Preferred, as the case may be, based on their holdings of Series C Preferred,
Series D Preferred or Series E Preferred, as the case may be. The shares of
Series C Preferred, Series D Preferred or Series E Preferred, as the case may
be, not redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein. At any time thereafter when additional funds of
the Corporation are legally available for the redemption of shares of Series C
Preferred, Series D Preferred or Series E Preferred, as the case may be, such
funds will immediately be used to redeem the balance of the shares to the extent
of such additional funds until all shares of Series C Preferred, Series D
Preferred or Series E Preferred, as the case may be, are redeemed.
(f) At least ten days prior to any Redemption Date, the Corporation
shall deposit the applicable Redemption Price of all shares of Series C
Preferred, Series D Preferred or Series E Preferred, as the case may be, with a
bank or trust corporation having aggregate capital and surplus in excess of
$100,000,000 as a trust fund for the benefit of the respective holders of the
Series C Preferred, Series D Preferred or Series E Preferred, as the case may
be, with irrevocable instructions and authority to the bank or trust corporation
to pay the applicable Redemption Price for such shares to their respective
holders on or after such Redemption Date upon receipt of notification from the
Corporation that such holder has surrendered his or her share certificate to the
Corporation pursuant to Section 3(d) above. As of such Redemption Date, the
deposit shall constitute full payment of the shares to their holders, and from
and after such Redemption Date the shares of Series C Preferred, Series D
Preferred or Series E Preferred, as the case may be, shall be redeemed and shall
be deemed to be no longer outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares and shall have no rights with respect
thereto except the rights to receive from the bank or trust corporation payment
of the applicable Redemption Price of the shares, without interest, upon
surrender of their certificates therefor. Such instructions shall also provide
that any moneys deposited by the Corporation pursuant to this Section 3(f) for
the redemption of shares thereafter converted into shares of the Corporation's
Common Stock pursuant to Section 2 hereof prior to such Redemption Date shall be
returned to the Corporation
-12-
<PAGE>
forthwith upon such conversion. The balance of any moneys deposited by the
Corporation pursuant to this Section 3(f) remaining unclaimed at the expiration
of two years following such Redemption Date shall thereafter be returned to the
Corporation upon its request expressed in a resolution of its Board of
Directors.
(g) Notwithstanding anything to the contrary in this Section 3, in the
event the Corporation is precluded by applicable law from redeeming any of
Series C Preferred, Series D Preferred or Series E Preferred, as the case may
be, hereunder, the Corporation shall redeem such Series C Preferred, Series D
Preferred or Series E Preferred, as the case may be, at the earliest date
permitted under applicable law.
(h) The provisions of this Section 3 shall terminate upon the closing
of a Qualified IPO.
4. VOTING RIGHTS.
-------------
(a) General. Except as otherwise provided herein or required by law,
-------
the holder of each share of Common Stock issued and outstanding shall have one
vote and the holder of each share of Preferred Stock shall be entitled to the
number of votes equal to the number of shares of Common Stock into which such
share of Preferred Stock could be converted at the record date for determination
of the stockholders entitled to vote on such matters, or, if no such record date
is established, at the date such vote is taken or any written consent of
stockholders is solicited, such votes to be counted together with all other
shares of stock of the Corporation having a general voting power and not
separately as a class. Holders of Common Stock and Preferred Stock shall be
entitled to notice of any stockholders' meeting in accordance with the Bylaws of
the Corporation. Fractional votes by the holders of Preferred Stock shall not,
however, be permitted and any fractional voting rights shall (after aggregating
all shares into which shares of Preferred Stock held by each holder could be
converted) be rounded to the nearest whole number.
(b) Holders of stock of any class or series of this corporation shall
not be entitled to cumulate their votes for the election of directors or any
other matter submitted to a vote of the stockholders, unless such cumulative
voting is required pursuant to Sections 2115 and/or 301.5 of the California
Corporations Code, in which event each such holder shall be entitled to as many
votes as shall equal the number of votes which (except for this provision as to
cumulative voting) such holder would be entitled to cast for the election of
directors with respect to his shares of stock multiplied by the number of
directors to be elected by him, and the holder may cast all of such votes for a
single director or may distribute them among the number of directors to be voted
for, or for any two or more of them as such holder may see fit, so long as the
name of the candidate for director shall have been placed in nomination prior to
the voting and the stockholder, or any other holder of the same class or series
of stock, has given notice at the meeting prior to the voting of the intention
to cumulate votes.
(c) Protective Provisions.
---------------------
-13-
<PAGE>
(i) So long as any shares of Series C Preferred remain
outstanding, the Corporation shall not, without the vote or written consent of
not less than a majority of such outstanding shares of Series C Preferred voting
together as a single class:
(A) Increase or decrease the total number of authorized
shares of Series C Preferred;
(B) Alter or change by amendment to this Restated
Certificate of Incorporation or otherwise the terms and provisions of the Series
C Preferred or any other terms so as to affect adversely the rights, preferences
or privileges of the Series C Preferred; or
(C) Create or issue any new shares or any other securities
convertible into equity securities of the Corporation or reclassify any existing
shares into equity securities or any other securities convertible into equity
securities of the Corporation having a preference senior to the Series C
Preferred with respect to voting, dividends, redemption or upon liquidation.
(ii) So long as any shares of Series D Preferred remain
outstanding, the Corporation shall not, without the vote or written consent of
not less than a majority of such outstanding shares of Series D Preferred voting
together as a single class:
(A) Increase or decrease the total number of authorized
shares of Series D Preferred;
(B) Alter or change by amendment to this Restated
Certificate of Incorporation or otherwise the terms and provisions of the Series
D Preferred or any other terms so as to affect adversely the rights, preferences
or privileges of the Series D Preferred; or
(C) Create or issue any new shares or any other securities
convertible into equity securities of the Corporation or reclassify any existing
shares into equity securities or any other securities convertible into equity
securities of the Corporation having a preference senior to the Series D
Preferred with respect to voting, dividends, redemption or upon liquidation.
(iii) So long as any shares of Series E Preferred remain
outstanding, the Corporation shall not, without the vote or written consent of
not less than a majority of such outstanding shares of Series E Preferred voting
together as a single class:
(A) Increase or decrease the total number of authorized
shares of Series E Preferred;
(B) Alter or change by amendment to this Restated
Certificate of Incorporation or otherwise the terms and provisions of the Series
E Preferred or any other terms so as to affect adversely the rights, preferences
or privileges of the Series E Preferred; or
-14-
<PAGE>
(C) Create or issue any new shares or any other securities
convertible into equity securities of the Corporation or reclassify any existing
shares into equity securities or any other securities convertible into equity
securities of the Corporation having a preference senior to the Series E
Preferred with respect to voting, dividends, redemption or upon liquidation.
5. STATUS OF CONVERTED OR REDEEMED STOCK. In the case any shares of
-------------------------------------
Preferred Stock shall be redeemed or converted pursuant to the terms hereof, the
shares so converted or redeemed shall be canceled and shall not be issuable by
the Corporation. From time to time, this Restated Certificate of Incorporation
shall be appropriately revised to reflect the corresponding reduction in the
Corporation's authorized capital stock.
V.
1. NUMBER OF DIRECTORS. From and after the closing of a Qualified IPO,
-------------------
the number of directors which constitutes the whole Board of Directors of the
corporation shall be designated in the Bylaws of the corporation. Unless
precluded by Section 301.5 of the California Corporation Code or otherwise
precluded by law, the directors shall be divided into three classes with the
term of office of the first class (Class I) to expire at the annual meeting of
stockholders held in 1999; the term of office of the second class (Class II) to
expire at the annual meeting of stockholders held in 2000; the term of office of
the third class (Class III) to expire at the annual meeting of stockholders held
in 2001; and thereafter for each such term to expire at each third succeeding
annual meeting of stockholders after such election.
2. ELECTION OF DIRECTORS.
---------------------
(a) The holders of Series C Preferred voting together as a separate
class shall have the right to elect one (1) member of the Board of Directors
until the earlier of (i) a Qualified IPO or (ii) at such time as the outstanding
Series C Preferred (including shares of Common Stock issuable upon conversion of
the Series C Preferred) shall be less than five percent (5%) of the then
outstanding Common Stock of the Company (including shares of Common Stock
issuable upon conversion, exchange or exercise of securities convertible into or
exercisable for or exchangeable for Common Stock). At such time as any other
stockholder or stockholders, voting as a separate class, are entitled, by virtue
of a right granted by the Company and not solely as a result of the number of
shares held by such stockholder or stockholders, to elect two (2) or more
directors, for purposes of the preceding sentence, the holders of the Series C
Preferred voting together as a separate class shall have the right to elect a
number of directors equal to the number of directors such stockholder or
stockholders are entitled to elect.
(b) USA Networks, Inc. ("USA Networks") shall have the right to elect
one (1) member of the Board of Directors (the "USA Networks Director") (i) at
each annual meeting prior to a Qualified IPO and (ii) at each annual meeting at
which the stockholders elect the successors of the class of directors set forth
in Article (V)(1) above to which the USA Networks Director is a member from and
after a Qualified IPO until the earlier of (x) November 11, 2007 or (y) the date
USA Networks owns less than 50% of the capital stock of the Company (on an as
converted to Common
-15-
<PAGE>
Stock basis and as adjusted for stock dividends, stock splits, stock
combinations, recapitalizations and the like) that it owned as of November 11,
1997. At such time as any other stockholder or stockholders, voting as a
separate class, are entitled, by virtue of a right granted by the Company and
not solely as a result of the number of shares held by such stockholder or
stockholders, to elect two (2) or more directors, for purposes of the preceding
sentence, USA Networks shall have the right to elect a number of directors equal
to the number of directors such stockholder or stockholders are entitled to
elect.
(c) Global Retail Partners, L.P. (together with its affiliates "GRP")
shall have the right to elect one (1) member of the Board of Directors (the "GRP
Director") (i) at each meeting prior to a Qualified IPO and (ii) at each annual
meeting at which the stockholders elect the successors of the class of directors
set forth in Article (V)(1) above to which the GRP Director is a member from and
after a Qualified IPO until the later of (x) November 20, 1999 or (y) the one-
year anniversary of the closing of a Qualified IPO; provided GRP owns 100% of
the capital stock of the Company (on an as converted to Common stock basis and
as adjusted for stock dividends, stock splits, stock combinations,
recapitalizations and the like) that it owned as of November 20, 1999.
(d) Elections of directors need not be by written ballot unless the
Bylaws of the corporation shall so provide.
VI.
Subject to Article VII hereof, the Board is expressly authorized to make,
alter or repeal Bylaws of the Corporation, but the stockholders may make
additional Bylaws and may alter or repeal any Bylaw whether adopted by them or
otherwise.
VII.
Effective upon the closing of a Qualified IPO, no action shall be taken by
the stockholders of the corporation except at an annual or special meeting of
the stockholders called in accordance with the Bylaws and no action shall be
taken by the stockholders by written consent. Effective upon the closing of a
Qualified IPO, the affirmative vote of sixty-six and two-thirds percent (66
2/3%) of the then outstanding voting securities of the corporation, voting
together as a single class, shall be required for the amendment, repeal or
modification of the provisions of Article IV(4)(b), Article V(1) or Article VII
of this Restated Certificate of Incorporation or Sections 2.3, 2.4, 2.6, 2.10,
2.11 or Article IX of the Corporation's Bylaws to be effective upon the closing
of the Qualified IPO.
VIII.
1. To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
-16-
<PAGE>
2. The Corporation shall indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the Corporation or any predecessor of the Corporation or serves or served at any
other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor to the Corporation.
3. Neither any amendment nor repeal of this Article VIII, nor the
adoption of any provision of the Corporation's Restated Certificate of
Incorporation inconsistent with this Article VII, shall eliminate or reduce the
effect of this Article VIII in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article VIII, would accrue
or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
FIFTH: That written notice of this Amended and Restated Certificate of
Incorporation was duly given to the stockholders of this corporation who did
not consent in writing to the foregoing resolutions.
IN WITNESS WHEREOF, CitySearch, Inc. has caused this Restated Certificate
of Incorporation to be signed by its Chief Executive Officer and attested to by
its Secretary this _____ day of July 1998.
_______________________________________
Charles Conn, III
Chief Executive Officer
ATTEST:
_____________________________
Bradley O. Ramberg
Secretary
-17-
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CITYSEARCH, INC.
CitySearch, Inc., a corporation organized and existing under and by virtue
of the General Corporation Law (the "Corporation"), does hereby certifies as
follows:
FIRST: The original Certificate of Incorporation of the Corporation was
filed under the name of "PerfectMarket, Inc." with the Secretary of State of the
State of Delaware (the "Secretary") on September 20, 1995, amended by the
Certificate of Amendment of Certificate of Incorporation filed with the
Secretary on November 27, 1995, by the Restated Certificate of Incorporation
filed with the Secretary on May 15, 1996, by the Certificate of Amendment of the
Certificate of Incorporation filed with the Secretary on June 25, 1996, by the
Certificate of Amendment of the Certificate of Incorporation filed with the
Secretary on July 25, 1996, by the Restated Certificate of Incorporation filed
with the Secretary on December 12, 1996, by the Restated Certificate of
Incorporation filed with the Secretary on December 23, 1996, by the Restated
Certificate of Incorporation filed with the Secretary on November 12, 1997, by
the Restated Certificate of Incorporation filed with the Secretary on May 22,
1998 and by the Restated Certificate of Incorporation filed with the Secretary
on July __, 1998.
SECOND: This Amended and Restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Sections 242 and 245 of the
General Corporation Law of the State of Delaware by the Board of Directors of
the Corporation.
THIRD: This Amended and Restated Certificate of Incorporation was approved
by written consent of the stockholders pursuant to Section 228 of the General
Corporation Law of the State of Delaware.
FOURTH: The Restated Certificate of Incorporation of this Corporation is
amended and restated in its entirety to read as follows:
I.
The name of the Corporation is CitySearch, Inc.
II.
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801.
The name of its registered agent at such address is The Corporation Trust
Company.
III.
<PAGE>
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
IV.
The Corporation is authorized to issue two classes of shares of stock to be
designated, respectively, "Common Stock" and "Preferred Stock", all of which
have a par value of $0.01. The total number of shares that the Corporation is
authorized to issue is seventy-seven million (77,000,000) shares. Seventy-five
million (75,000,000) shall be Common Stock and two million (2,000,000) shall be
Preferred Stock.
1. PREFERRED STOCK. The Preferred Stock may be issued from time to time
---------------
in one or more series pursuant to a resolution or resolutions providing for such
issue duly adopted by the Board of Directors (authority to do so being hereby
expressly vested in the board). The Board of Directors is further authorized to
determine or alter the rights, preferences, privileges and restrictions granted
to or imposed upon any wholly unissued series of Preferred Stock and to fix the
number of shares of any series of Preferred Stock and the designation of any
such series of Preferred Stock. The Board of Directors, within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series, may increase or
decrease (but not below the number of shares in any such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of that series.
The authority of the Board of Directors with respect to each such class or
series shall include, without limitation of the foregoing, the right to
determine and fix:
(a) the distinctive designation of such class or series and the number of
shares to constitute such class or series;
(b) the rate at which dividends on the shares of such class or series
shall be declared and paid, or set aside for payment, whether dividends at the
rate so determined shall be cumulative or accruing, and whether the shares of
such class or series shall be entitled to any participating or other dividends
in addition to dividends at the rate so determined, and if so, on what terms;
(c) the right or obligation, if any, of the corporation to redeem shares
of the particular class or series of Preferred Stock and, if redeemable, the
price, terms and manner of such redemption;
(d) the special and relative rights and preferences, if any, and the
amount or amounts per share, which the shares of such class or series of
Preferred Stock shall be entitled to receive upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
<PAGE>
(e) the terms and conditions, if any, upon which shares of such class or
series shall be convertible into, or exchangeable for, shares of capital stock
of any other class or series, including the price or prices or the rate or rates
of conversion or exchange and the terms of adjustment, if any;
(f) the obligation, if any, of the corporation to retire, redeem or
purchase shares of such class or series pursuant to a sinking fund or fund of a
similar nature or otherwise, and the terms and conditions of such obligation;
(g) voting rights, if any, on the issuance of additional shares of such
class or series or any shares of any other class or series of Preferred Stock;
(h) limitations, if any, on the issuance of additional shares of such
class or series or any shares of any other class or series of Preferred Stock;
and
(i) such other preferences, powers, qualifications, special or relative
rights and privileges thereof as the Board of Directors of the corporation,
acting in accordance with this Restated Certificate of Incorporation, may deem
advisable and are not inconsistent with law and the provisions of this Restated
Certificate of Incorporation.
2. VOTING RIGHTS. Holders of stock of any class or series of this
-------------
Corporation shall not be entitled to cumulate their votes for the election of
directors or any other matter submitted to a vote of the stockholders, unless
such cumulative voting is required pursuant to Sections 2115 and/or 301.5 of the
California Corporations Code, in which event each such holder shall be entitled
to as many votes as shall equal the number of votes which (except for this
provision as to cumulative voting) such holder would be entitled to cast for the
election of directors with respect to his shares of stock multiplied by the
number of directors to be elected by him, and the holder may cast all of such
votes for a single director or may distribute them among the number of directors
to be voted for, or for any two or more of them as such holder may see fit, so
long as the name of the candidate for director shall have been placed in
nomination prior to the voting and the stockholder, or any other holder of the
same class or series of stock, has given notice at the meeting prior to the
voting of the intention to cumulate votes.
3. STATUS OF CONVERTED OR REDEEMED STOCK. In the case any shares of
-------------------------------------
Preferred Stock shall be redeemed or converted pursuant to the terms hereof, the
shares so converted or redeemed shall be canceled and shall not be issuable by
the Corporation. From time to time, this Restated Certificate of Incorporation
shall be appropriately revised to reflect the corresponding reduction in the
Corporation's authorized capital stock.
<PAGE>
V.
1. NUMBER OF DIRECTORS. The number of directors which constitutes the
-------------------
whole Board of Directors of the corporation shall be designated in the Bylaws of
the corporation. The directors shall be divided into three classes with the
term of office of the first class (Class I) to expire at the annual meeting of
stockholders held in 1999; the term of office of the second class (Class II) to
expire at the annual meeting of stockholders held in 2000; the term of office of
the third class (Class III) to expire at the annual meeting of stockholders held
in 2001; and thereafter for each such term to expire at each third succeeding
annual meeting of stockholders after such election.
2. ELECTION OF DIRECTORS.
---------------------
(a) USA Networks, Inc. ("USA Networks") shall have the right to elect
one (1) member of the Board of Directors (the "USA Networks Director") at each
annual meeting at which the stockholders elect the successors of the class of
directors set forth in Article (V) (1) above to which the USA Networks Director
is a member until the earlier of (i) November 1, 2007 or (ii) the date USA
Networks owns less than 50% of the capital stock of the Corporation (on an as
converted to Common Stock basis and as adjusted for stock dividends, stock
splits, stock combinations, recapitalizations and the like) that it owned as of
November 11, 1997. At such time as any other stockholder or stockholders, voting
as a separate class, are entitled, by virtue of a right granted by the
Corporation and not solely as a result of the number of shares held by such
stockholder or stockholders, to elect two (2) or more directors, for purposes of
the preceding sentence, USA Networks shall have the right to elect a number of
directors equal to the number of directors such stockholder or stockholders are
entitled to elect.
(b) Global Retail Partners, L.P. ("together with its affiliates "GRP")
shall have the right to elect one (1) member of the Board of Directors (the "GRP
Director") at each annual meeting at which the stockholders elect the successors
of the class of directors set forth in Article (V) (1) above to which the GRP
Director is a member until the later of (i) November 20, 1999 or (ii) the one-
year anniversary of the date hereof [date of closing of Qualified IPO], provided
GRP owns 100% of the capital stock of the Corporation (on an as converted to
Common Stock basis and as adjusted for stock dividends, stock splits, stock
combinations, recapitalizations and the like) that it owned as of November 20,
1997.
(c) Elections of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
VI.
Subject to Article VII hereof, the Board of Directors is expressly
authorized to make, alter or repeal the Bylaws of the Corporation, but the
stockholders may make additional Bylaws and may alter or repeal any Bylaw
whether adopted by them or otherwise.
<PAGE>
VII.
No action shall be taken by the stockholders of the corporation except at
an annual or special meeting of the stockholders called in accordance with the
Bylaws and no action shall be taken by the stockholders by written consent. The
affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the then
outstanding voting securities of the corporation, voting together as a single
class, shall be required for the amendment, repeal or modification of the
provisions of Article IV(2), Article V(1) or Article VII of this Restated
Certificate of Incorporation or Sections 2.3, 2.4, 2.6, 2.10, 2.11 or Article
IX of the Corporation's Bylaws.
VIII.
1. To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or as may hereafter be amended, a director
of the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
2. The Corporation shall indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that such person or his or her testator or intestate is or was a director,
officer or employee of the Corporation, or any predecessor of the Corporation,
or serves or served at any other enterprise as a director, officer or employee
at the request of the Corporation or any predecessor to the Corporation.
3. Neither any amendment nor repeal of this Article VIII, nor the
adoption of any provision of the Corporation's Restated Certificate of
Incorporation inconsistent with this Article VIII, shall eliminate or reduce the
effect of this Article VIII, in respect of any matter occurring, or any action
or proceeding accruing or arising or that, but for this Article VIII, would
accrue or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
IN WITNESS WHEREOF, CitySearch, Inc. has caused this Restated Certificate
of Incorporation to be signed by its Chief Executive Officer and attested to by
its Secretary this _____ day of _____ , 1998.
________________________________________
Charles Conn
Chief Executive Officer
<PAGE>
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
NUMBER SHARES
CTYS
[LOGO OF CITYSEARCH APPEARS HERE]
THIS CERTIFICATE IS TRANSFERABLE IN SEE REVERSE FOR CERTAIN
NEW YORK, NY OR RIDGEFIELD PARK, NJ DEFINITIONS AND A
STATEMENT AS TO THE
RIGHTS, PREFERENCES,
PRIVILEGES AND
RESTRICTIONS ON SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 17878A 10 0
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $0.01 PAR VALUE PER
SHARE, OF
CITYSEARCH, INC.
transferable on the books of the Corporation by the holder 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:
/s/ BRADLEY O. RAMBERG /s/ CHARLES CONN
SECRETARY CHIEF EXECUTIVE OFFICER
[CITYSEARCH CORPORATE SEAL APPEARS HERE]
CITYSEARCH, INC.
CORPORATE
SEAL
1995
DELAWARE
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
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:
TEN COM - as tenants in common UNIF GIFT MIN ACT-.........Custodian.........
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to
JP TEN - as joint tenants with Minors Act..................
right of survivorship (State)
and not as tenants in UNIF TRF MIN ACT- .....Custodian (until age..)
common (Cust)
......under Uniform Transfer
(Minor)
to Minors Act...............
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _____________________________ hereby sell(s), assign(s)
and transfer(s) 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 capital 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 ____________________________
X __________________________________
X __________________________________
NOTICE: THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed
By_________________________________
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
SIGNATURE MEDALLION GUARANTEE PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
Exhibit 5.1
July 17, 1998
CitySearch, Inc.
790 E. Colorado Blvd.
Suite 200
Pasadena, CA 91101
RE: REGISTRATION STATEMENT NO. 333-57437 ON FORM S-1
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 filed by you with
the Securities and Exchange Commission on June 22, 1998 (Registration No. 333-
57437), Amendment No. 1 thereto filed June 26, 1998 and Amendment No. 2 thereto
filed July 17, 1998 (the "Registration Statement") in connection with the
registration under the Securities Act of 1933, as amended, of 4,600,000 shares
of your Common Stock (the "Shares"). The Shares include an over-allotment
option for 600,000 shares granted to the underwriters. The Shares are to be
sold to the underwriters for resale to the public as described in the
Registration Statement and pursuant to the Underwriting Agreement filed as an
exhibit thereto. As your counsel, we have examined the proceedings proposed to
be taken in connection with the sale and issuance of the Shares.
It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states, where required, the Shares when issued and sold in the
manner referred to in the Registration Statement will be legally and validly
issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
<PAGE>
EXHIBIT 10.2
CITYSEARCH, INC.
1996 STOCK OPTION PLAN
(As Amended Effective [Date of IPO])
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees
-------------
appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a Committee appointed by the Board of Directors
---------
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means CitySearch, Inc., a Delaware corporation.
-------
(h) "Consultant" means any person who is engaged by the Company or
----------
any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(i) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other
<PAGE>
personal leave approved by an authorized representative of the Company. For
purposes of Incentive Stock Options, no such leave may exceed 90 days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract,
including Company policies. If reemployment upon expiration of a leave of
absence approved by the Company is not so guaranteed, on the 181st day of such
leave any Incentive Stock Option held by the Optionee shall cease to be treated
as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option.
(j) "Employee" means any person, including Officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code.
(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) "Optioned Stock" means the Common Stock subject to an Option.
--------------
-2-
<PAGE>
(r) "Optionee" means an Employee or Consultant who receives an
--------
Option.
(s) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(t) "Plan" means this 1996 Stock Option Plan.
----
(u) "Section 16(b)" means Section 16(b) of the Securities Exchange
-------------
Act of 1934, as amended.
(v) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 below.
(w) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 3,666,667 Shares, plus an annual increase to be added on the
first day of the Company's fiscal year beginning in 1999 equal to the lesser of
(i) 666,667 shares, (ii) 3% of the outstanding shares on such date or (iii) a
lesser amount determined by the Board. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an option exchange program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
--------
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. The Plan may be
------------------------------
administered by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To the extent that the Administrator
--------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the
-3-
<PAGE>
meaning of Section 162(m) of the Code, the Plan shall be administered by a
Committee of two or more "outside directors" within the meaning of Section
162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
----------
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
--------------------
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2 of the Plan;
(ii) to select the Employees and Consultants to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award granted
hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Common Stock;
(viii) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option that number of Shares having a Fair Market Value equal to
the amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by an Optionee to have Shares withheld for
this purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable;
-4-
<PAGE>
(ix) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted; and
(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
6. Limitations.
-----------
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option shall confer upon an Optionee any
right with respect to continuing the Optionee's relationship as a Service
Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Employee or Consultant shall be granted, in any fiscal
year of the Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial service, an Employee
or Consultant may be granted Options to purchase up to an additional 1,000,000
Shares which shall not count against the limit set forth in subsection (i)
above.
-5-
<PAGE>
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 12.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 12), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company, as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
8. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code,
-6-
<PAGE>
the per Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan. With respect to Options granted after February 2, 1998 unless the
Administrator provides otherwise, the vesting of such Options shall be tolled
during any unpaid leave of absence.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 9(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
-7-
<PAGE>
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company (but not in the event of an Optionee's change of
status from Employee to Consultant (in which case an Employee's Incentive Stock
Option shall automatically convert to a Nonstatutory Stock Option on the date
three (3) months and one day from the date of such change of status) or from
Consultant to Employee), such Optionee may, but only within such period of time
as is determined by the Administrator, with such determination in the case of an
Incentive Stock Option not exceeding three (3) months after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his or her Option to the
extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's consulting relationship or Continuous Status as an Employee as a
result of his or her disability, Optionee may, but only within twelve (12)
months from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination; provided, however, that if such disability is
not a "disability" as such term is defined in Section 22(e)(3) of the Code, in
the case of an Incentive Stock Option such Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the day three months and
one day following such termination. To the extent that Optionee is not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. 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 immediately revert to the Plan. If, after death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
-8-
<PAGE>
11. Non-Transferability of Options. Unless determined otherwise by the
------------------------------
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.
12. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option (which if such option was outstanding on July __, 1998,
was adjusted for a two for three reverse split effected on July __, 1998), and
the number of shares of Common Stock which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per share of Common Stock covered by each such outstanding Option
(which if such option was outstanding on July __, 1998, was adjusted for a two
for three reverse split effected on July __, 1998), shallbe proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company after [the IPO Date]; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the extent
it has not been previously exercised, the Option will terminate immediately
prior to the consummation of such proposed action.
(c) Merger. In the event of a merger of the Company with or into
------
another corporation, the Option may be assumed or an equivalent option may be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. If, in such event, the Option is not assumed or
substituted, the Option shall terminate as of the date of the closing of the
merger. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger, the option confers the right to purchase, for
each Share of Optioned Stock subject to the Option immediately prior to the
merger, the consideration (whether stock, cash, or other securities or property)
received in the merger by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option for
each Share of
-9-
<PAGE>
Optioned Stock subject to the Option to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger.
13. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful
-10-
<PAGE>
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
18. Stockholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
-11-
<PAGE>
CITYSEARCH, INC.
1996 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Stock Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
----------------
Subject to your Continuous Status as an Employee or Consultant, this
Option may be exercised, in whole or in part, in accordance with the following
schedule:
25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48 of the Shares subject to the Option
shall vest each month thereafter.
<PAGE>
Termination Period:
------------------
You may exercise this Option for three months after your employment or
consulting relationship with the Company terminates, or for such longer period
upon your death or disability as provided in the Plan. If your status changes
from Employee to Consultant or Consultant to Employee, this Option Agreement
shall remain in effect. In no case may you exercise this Option after the
Term/Expiration Date as provided above.
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby
---------------
grants to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 14(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term
-----------------
in accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of
------------------
an exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
-2-
<PAGE>
3. Method of Payment. Payment of the aggregate Exercise Price shall
-----------------
be by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
(b) check;
(c) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
4. Non-Transferability of Option. This Option may not be transferred
-----------------------------
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by the Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term
--------------
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Termination of Relationship. In the event an Optionee's
---------------------------
Continuous Status as an Employee or Consultant terminates, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set out in the Notice
of Grant. To the extent that Optionee was not entitled to exercise this Option
at the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate. An Optionee's
Continuous Status as a Consultant shall terminate at the completion of any three
month period in which the Optionee works less than one hour on behalf of the
Company in each of the three months.
7. Disability of Optionee. Notwithstanding the provisions of
----------------------
Section 6 above, in the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee as a result of his or her
disability, Optionee may, but only within twelve (12) months from the date of
such termination (and in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination;
provided, however, that if such disability is not a "disability" as such term is
defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock
Option such Incentive Stock Option shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option on the day three months and one day following such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
-3-
<PAGE>
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
8. Death of Optionee. In the event of termination of Optionee's
-----------------
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option at
the date of death.
9. Tax Consequences. Some of the federal tax consequences relating
----------------
to this Option, as of the date of this Option, are set forth below. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS
OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Option.
---------------------
(i) Nonstatutory Stock Option. The Optionee may incur
-------------------------
regular federal income tax liability upon exercise of a NSO. The Optionee will
be treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price. If
the Optionee is an Employee or a former Employee, the Company will be required
to withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies as an
----------------------
ISO, the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
(b) Disposition of Shares.
---------------------
(i) NSO. If the Optionee holds NSO Shares for at least one
---
year, any gain realized on disposition of the Shares will be treated as long-
term capital gain for federal income tax purposes.
-4-
<PAGE>
(ii) ISO. If the Optionee holds ISO Shares for at least one
---
year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
10. Entire Agreement; Governing Law. The Plan is incorporated herein
-------------------------------
by reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.
11. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND
---------------------------------
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND
NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator
-5-
<PAGE>
upon any questions relating to the Plan and Option Agreement. Optionee further
agrees to notify the Company upon any change in the residence address indicated
below.
OPTIONEE: CITYSEARCH, INC.
__________________________________ ________________________________________
Signature By
__________________________________ ________________________________________
Print Name Title
__________________________________
Residence Address
__________________________________
-6-
<PAGE>
EXHIBIT A
---------
1996 STOCK OPTION PLAN
EXERCISE NOTICE
CitySearch, Inc.
790 E. Colorado Blvd., Suite 200
Pasadena, CA 91101
Attention: Secretary
1. Exercise of Option. Effective as of today, ________________,
------------------
199__, the undersigned ("Purchaser") hereby elects to purchase ______________
shares (the "Shares") of the Common Stock of CitySearch, Inc. (the "Company")
under and pursuant to the 1996 Stock Option Plan (the "Plan") and the Stock
Option Agreement dated _____________, 19___ (the "Option Agreement"). The
purchase price for the Shares shall be $_____________, as required by the Option
Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company
-------------------
the full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that
----------------------------
Purchaser has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 12 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement
-------------------------------
are incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all
-1-
<PAGE>
prior undertakings and agreements of the Company and Purchaser with respect to
the subject matter hereof, and may not be modified adversely to the Purchaser's
interest except by means of a writing signed by the Company and Purchaser. This
agreement is governed by the internal substantive laws, but not the choice of
law rules, of California.
Submitted by: Accepted by:
PURCHASER: CITYSEARCH, INC.
________________________________ _______________________________________
Signature By
________________________________ _______________________________________
Print Name Its
Address: Address:
- ------- -------
_________________________________ 790 E. Colorado Blvd., Suite 200
_________________________________ Pasadena, CA 91101
________________________________
Date Received
-2-
<PAGE>
EXHIBIT 10.3
CITYSEARCH, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1998 Employee Stock Purchase
Plan of CitySearch, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the common stock of the Company.
------------
(d) "Company" shall mean CitySearch, Inc. and any Designated
-------
Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
------------
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary which has been
---------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
--------
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
---------------
Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each Purchase
-------------
Period.
<PAGE>
(j) "Fair Market Value" shall mean, as of any date, the value of
-----------------
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(4) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately twelve
----------------
(12) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after May 1 and November 1
of each year and terminating on the last Trading Day in the periods ending
twelve (12) months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the last Trading Day on or before October 31,
1999. The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.
(l) "Plan" shall mean this 1998 Employee Stock Purchase Plan.
----
(m) "Purchase Period" shall mean the approximately six month period
---------------
commencing after one Exercise Date and ending with the next Exercise Date,
provided, that the first Purchase Period of any Offering Period shall commence
on the Enrollment Date and end with the next Exercise Date; provided further,
that the first Purchase Period under the Plan shall commence with the first
Trading Day on or after the date on which the Securities and Exchange Commission
declares the Company's Registration Statement effective and shall end on the
last Trading Day on or before April 30, 1999.
-2-
<PAGE>
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
--------------
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock
--------
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
-----------
and the Nasdaq System are open for trading.
3. Eligibility.
-----------
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 of each year, or on such other date
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
October 31, 1999. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without stockholder approval if such change is announced prior
to the scheduled beginning of the first Offering Period to be affected
thereafter.
-3-
<PAGE>
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
------------------
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
-4-
<PAGE>
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
---------------
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than 3,334
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of the Company's Common Stock an Employee may purchase during
each Purchase Period of such Offering Period. Exercise of the option shall
occur as provided in Section 8 hereof, unless the participant has withdrawn
pursuant to Section 10 hereof. The option shall expire on the last day of the
Offering Period.
8. Exercise of Option.
------------------
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or
-5-
<PAGE>
Exercise Date, as applicable, in as uniform a manner as shall be practicable and
as it shall determine in its sole discretion to be equitable among all
participants exercising options to purchase Common Stock on such Exercise Date,
and terminate any or all Offering Periods then in effect pursuant to Section 20
hereof. The Company may make pro rata allocation of the shares available on the
Enrollment Date of any applicable Offering Period pursuant to the preceding
sentence, notwithstanding any authorization of additional shares for issuance
under the Plan by the Company's stockholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on
--------
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
----------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment.
-------------------------
Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
-6-
<PAGE>
12. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
13. Stock.
-----
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 200,000 shares, plus an annual increase to be added on the first day of
the Company's fiscal year beginning in 1999 equal to the lesser of (i) 266,667
shares, (ii) 1.0% of the outstanding shares on such date or (iii) a lesser
amount determined by the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
--------------
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. 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 an Exercise
Date on which the option is exercised but prior to delivery to such 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 prior to
exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(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 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.
-7-
<PAGE>
16. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
-------
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
---------------------------------------------------------------------
Merger or Asset Sale.
--------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New
-8-
<PAGE>
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
------------------------
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its stockholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain stockholder approval in such a manner
and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the
-9-
<PAGE>
extent necessary or desirable, modify or amend the Plan to reduce or eliminate
such accounting consequence including, but not limited to:
(1) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(2) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(3) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the closing date
------------
of the Company's initial public offering of its equity securities registered on
Form S-1 with the Securities and Exchange Commission. It shall continue in
effect for a term of ten (10) years unless sooner terminated under Section 20
hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their
-10-
<PAGE>
option on such Exercise Date and automatically re-enrolled in the immediately
following Offering Period as of the first day thereof.
-11-
<PAGE>
EXHIBIT A
---------
CITYSEARCH, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _______________________________ hereby elects to participate in the
CitySearch, Inc. 1998 Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") and subscribes to purchase shares of the Company's Common
Stock in accordance with this Subscription Agreement and the Employee Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (not to exceed 15%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my ability
to exercise the option under this Subscription Agreement is subject to
stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):_________
_________________________________________________.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
shares were purchased by me over the price which I paid for the shares. I
-
hereby agree to notify the Company in writing
---------------------------------------------
<PAGE>
within 30 days after the date of any disposition of my shares and I will
------------------------------------------------------------------------
make adequate provision for Federal, state or other tax withholding
-------------------------------------------------------------------
obligations, if any, which arise upon the disposition of the Common Stock.
-------------------------------------------------------------------------
The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any time
after the expiration of the 2-year and 1-year holding periods, I understand
that I will be treated for federal income tax purposes as having received
income only at the time of such disposition, and that such income will be
taxed as ordinary income only to the extent of an amount equal to the
lesser of (1) the excess of the fair market value of the shares at the time
of such disposition over the purchase price which I paid for the shares, or
(2) 15% of the fair market value of the shares on the first day of the
Offering Period. The remainder of the gain, if any, recognized on such
disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)______________________________________________
(First) (Middle) (Last)
________________________________ _____________________________________________
Relationship
_____________________________________________
(Address)
-2-
<PAGE>
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ _____________________________________
Signature of Employee
_____________________________________
Spouse's Signature (If beneficiary
other than spouse)
-3-
<PAGE>
EXHIBIT B
---------
CITYSEARCH, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the CitySearch, Inc.
1998 Employee Stock Purchase Plan which began on ____________, 19____ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned under stands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
_____________________________________
_____________________________________
_____________________________________
Signature:
_____________________________________
Date:________________________________
<PAGE>
EXHIBIT 10.4
CITYSEARCH, INC.
1998 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1998 Director Option Plan
--------------------
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" means the Board of Directors of the Company.
(b) "Closing Date" means the closing date of the Company's initial
public offering of its equity securities registered on Form S-1 with the
Securities and Exchange Commission.
(c) "Common Stock" means the common stock of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Company" means CitySearch, Inc., a Delaware corporation.
(f) "Current Outside Director" means a Director who is an Outside
Director as of the Closing Date.
(g) "Director" means a member of the Board.
(h) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(i) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself 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 Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall
<PAGE>
be the mean between the high bid and low asked prices for the Common Stock for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(l) "Inside Director" means a Director who is an Employee.
(m) "New Outside Director" means an Outside Director who joins the
Board after the Closing Date.
(n) "Option" means a stock option granted pursuant to the Plan.
(o) "Optioned Stock" means the Common Stock subject to an Option.
(p) "Optionee" means a Director who holds an Option.
(q) "Outside Director" means a Director who is not an Employee.
(r) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(s) "Plan" means this 1998 Director Option Plan.
(t) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(u) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 200,000 Shares, plus an annual increase to be added on the
first day of the Company's fiscal year (beginning in 1999) equal to the lesser
of (i) the number of Shares needed to restore the maximum aggregate number of
Shares available for sale under the Plan to 200,000 Shares, or (ii) a lesser
amount determined by the Board (the "Pool"). The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
-2-
<PAGE>
4. Administration and Grants of Options under the Plan. All grants of
---------------------------------------------------
Options to Outside Directors under this Plan shall be automatic and
nondiscretionary and shall be made strictly in accordance with the following
provisions:
(a) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options.
(b) Each Current Outside Director who is a Chairman of the Board as
of the Closing Date shall be automatically granted an Option to purchase 33,334
Shares (the "Chairman Option") and each Current Outside Director shall be
automatically granted an option to purchase 16,667 Shares (a "Current First
Option") on the date effective date of this Plan as determined in accordance
with Section 6 hereof.
(c) Each New Outside Director shall be automatically granted an
Option to purchase 13,334 Shares ( a "New First Option", together with a
Chairman Option and a Current First Option, a "First Option") on the date which
such person first becomes an Outside Director, whether through election by the
stockholders of the Company or appointment by the Board to fill a vacancy;
provided, that an Inside Director who ceases to be an Inside Director but who
remains a Director shall not receive a New First Option.
(d) Each New Outside Director shall be automatically granted an
Option to purchase 3,334 Shares (a "Subsequent Option") on the date of the
annual meeting of the stockholders of each year provided he or she is then an
Outside Director and if as of such date, he or she shall have served on the
Board for at least the preceding six (6) months.
(e) Notwithstanding the provisions of subsections (b) and (c) hereof,
any exercise of an Option granted before the Company has obtained stockholder
approval of the Plan in accordance with Section 16 hereof shall be conditioned
upon obtaining such stockholder approval of the Plan in accordance with Section
16 hereof.
(f) The terms of a First Option and Subsequent Option granted
hereunder shall be as follows:
(i) the term of the Option shall be ten (10) years.
(ii) the Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in Sections 8
and 10 hereof.
(iii) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Option.
(iv) subject to Section 10 hereof, the Option shall become
exercisable as to twenty-five percent (25%) of the Shares subject to the Option
on the first anniversary of its date of grant, and 1/48 of the Shares subject to
the Option at the end of each full month thereafter, provided that the Optionee
continues to serve as a Director on such dates.
(g) In the event that any Option granted under the Plan would cause
the number of Shares subject to outstanding Options plus the number of Shares
previously purchased under Options to exceed the Pool, then the remaining Shares
available for Option grant shall be granted under
-3-
<PAGE>
Options to the Outside Directors on a pro rata basis. No further grants shall be
made until such time, if any, as additional Shares become available for grant
under the Plan through action of the Board or the stockholders to increase the
number of Shares which may be issued under the Plan or through cancellation or
expiration of Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
6. Term of Plan. The Plan shall become effective on the Closing Date.
------------
It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares to
---------------------
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.
8. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until
stockholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a
-4-
<PAGE>
stockholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment shall be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
----------------------------------------------
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a
----------------------
Director terminates as a result of Disability, the Optionee may exercise his or
her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
-----------------
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. Unless provided otherwise by the
------------------------------
Administrator, the Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.
-5-
<PAGE>
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
------------------------------------------------------------------
Asset Sale.
----------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a substantial merger
--------------------
or an acquisition of the Company, the Chairman Options and the Current First
Options shall have their vesting fully accelerated, prior to the consummation of
such merger or acquisition. All outstanding Options may be assumed or equivalent
options may be substituted by the successor corporation or a Parent or
Subsidiary thereof (the "Successor Corporation"). If an Option is assumed or
substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee serves
as a Director or a director of the Successor Corporation. If the Successor
Corporation does not assume an outstanding Option or substitute for it an
equivalent option, the Option shall terminate as of the date of the closing of
the merger or asset sale.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or acquisition, the Option confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or acquisition, the consideration (whether
stock, cash, or other securities or property) received in the merger or
acquisition by holders of Common Stock for each Share held on the effective date
of the transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Shares). If such consideration received in the merger or acquisition is not
solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock subject to the Option, to be solely common stock of
-6-
<PAGE>
the successor corporation or its Parent equal in fair market value to the per
share consideration received by holders of Common Stock in the merger or
acquisition.
11. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
-7-
<PAGE>
15. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
16. Stockholder Approval. The Plan shall be subject to approval by the
--------------------
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.
-8-
<PAGE>
CITYSEARCH, INC.
1998 DIRECTOR OPTION PLAN
DIRECTOR OPTION AGREEMENT
1. Grant of Option. Effective as of today, _______________, 19__,
---------------
CitySearch, Inc., a Delaware corporation (the "Company"), hereby grants to
_______________________ (the "Optionee"), a nonstatutory stock option to
purchase a total of ___________ (_____) shares of the Company's Common Stock
("Common Stock"), at the price determined as provided herein, and in all
respects subject to the terms, definitions and provisions of the Company's 1998
Director Option Plan (the "Plan") adopted by the Company which is incorporated
herein by reference. The terms defined in the Plan shall have the same defined
meanings herein.
2. Exercise Price. The exercise price is $_______ for each share of
--------------
Common Stock.
3. Exercise of Option. This Option shall be exercisable during its term
------------------
in accordance with the provisions of Section 8 of the Plan as follows:
(a) Right to Exercise.
-----------------
(i) This Option shall become exercisable in installments
cumulatively with respect to twenty-five percent (25%) of the shares subject to
the Option on the first anniversary of the date of grant, and as to an
additional 1/48 of the shares subject to the Option at the end of each full
month thereafter, subject to Optionee continuing to provide services as a
Director, so that one hundred percent (100%) of the Optioned Stock shall be
exercisable four years after the date of grant; provided, however, that in no
event shall any Option be exercisable prior to the date the stockholders of the
Company approve the Plan.
(ii) This Option may not be exercised for a fraction of a
share.
(iii) In the event of Optionee's death, Disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
(b) Method of Exercise. This Option shall be exercisable by written
------------------
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
4. Method of Payment. Payment of the exercise price shall be by any of
-----------------
the following, or a combination thereof, at the election of the Optionee:
(a) cash;
<PAGE>
(b) check; or
(c) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or
(d) delivery of a properly executed exercise notice together with
such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
------------------------
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. Term of Option. This Option may not be exercised more than ten (10)
--------------
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon
--------------------------------
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.
-2-
<PAGE>
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
OPTIONEE: CITYSEARCH, INC.
______________________________ ___________________________________
Signature By
______________________________ ___________________________________
Print Name Title
______________________________
Residence Address
______________________________
-3-
<PAGE>
EXHIBIT A
---------
1998 DIRECTOR OPTION PLAN
DIRECTOR OPTION EXERCISE NOTICE
CitySearch, Inc.
[Address]
Attention: Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
------------------
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of CitySearch, Inc. (the "Company") under and pursuant to the
Company's 1998 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Agreement.
3. Tax Consequences. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
4. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
5. Entire Agreement. The Agreement is incorporated herein by reference.
----------------
This Exercise Notice, the Plan and the Agreement constitute the entire agreement
of the parties and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof. This Exercise Notice, the Plan and the Agreement are governed by
California law except for that body of law pertaining to conflict of laws.
<PAGE>
Submitted by: Accepted by:
PURCHASER: CITYSEARCH, INC.
______________________________ ___________________________________
Signature By
______________________________ ___________________________________
Print Name Its
Address: Address:
- ------- -------
______________________________ ___________________________________
______________________________ ___________________________________
______________________________
Date Received
-2-
<PAGE>
EXHIBIT 10.12
LEASE AGREEMENT
by and between
WEST END LAND DEVELOPMENT CO., L.P.
("Landlord")
and
CITYSEARCH, INC.
("Tenant")
dated
November 7th, 1996
for
Fourth Floor
containing
4,556 square feet of net rentable area
at One Church Street
101 Church Street
Nashville, Tennessee
Term: 5 Years
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Article I SUMMARY OF LEASE PROVISIONS AND EXHIBITS..................... 1
SECTION 1.1 - Fundamental Lease Provisions........................ 1
Article II PREMISES AND TERM............................................ 3
SECTION 2.1 - Demised Premises.................................... 3
SECTION 2.2 - Term and Right of Termination....................... 3
SECTION 2.3 - Completion and Occupancy............................ 5
Article III CONSTRUCTION................................................. 6
SECTION 3.1 - Landlord's Work..................................... 6
SECTION 3.2 - Early Commencement Date............................. 6
SECTION 3.3 - Ownership of Improvements........................... 6
Article IV RENT......................................................... 7
SECTION 4.1 - Payment............................................. 7
SECTION 4.2 - Fixed Minimum Rent.................................. 7
SECTION 4.3 - Adjustment of Fixed Minimum Rent.................... 7
SECTION 4.4 - Operating Expenses.................................. 7
SECTION 4.5 - Late Payment Penalty................................ 9
SECTION 4.6 - Additional Rent..................................... 9
SECTION 4.7 - Rent for a Partial Month............................ 9
SECTION 4.8 - Payment by Automatic Transfer....................... 9
SECTION 4.9 - Services Provided to Landlord....................... 10
Article V UTILITY SERVICES............................................. 10
SECTION 5.1 - Utilities........................................... 10
Article VI LANDLORD'S ADDITIONAL COVENANTS.............................. 11
SECTION 6.1 - Repairs by Landlord................................. 11
SECTION 6.2 - Quiet Enjoyment..................................... 12
SECTION 6.3 - Landlord's Liability................................ 12
SECTION 6.4 - Services............................................ 12
SECTION 6.5 - Common Areas........................................ 13
SECTION 6.6 - Signage............................................. 13
SECTION 6.7 - Indemnity........................................... 13
Article VII TENANT'S ADDITIONAL COVENANTS................................ 13
SECTION 7.1 - Affirmative Covenants............................... 13
SECTION 7.2 - Negative Covenants.................................. 17
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Article VIII DESTRUCTION AND CONDEMNATION.................................... 18
SECTION 8.1 - Fire or other Casualty............................... 18
SECTION 8.2 - Eminent Domain....................................... 19
Article IX DEFAULTS AND REMEDIES........................................... 20
SECTION 9.1 - Default.............................................. 20
SECTION 9.2 - Bankruptcy........................................... 20
SECTION 9.3 - Remedies of Landlord................................. 21
SECTION 9:4 - Waiver of Jury Trial; Tenant Not to Counterclaim..... 22
SECTION 9.5 - Holdover by Tenant................................... 22
SECTION 9.6 - Landlord's Right to Cure Defaults.................... 22
SECTION 9:7 - Effect of Waivers of Default......................... 23
SECTION 9.8 - Security Deposit..................................... 23
SECTION 9.9 - Landlord's Default................................... 23
Article X MISCELLANEOUS PROVISIONS........................................ 23
SECTION 10.1 - Notices.............................................. 23
SECTION 10.2 - Estoppel Certificates................................ 23
SECTION 10.3 - Applicable Law and Construction...................... 24
SECTION 10.4 - Cancellation......................................... 24
SECTION 10.5 - Binding Effect of Lease.............................. 24
SECTION 10.6 - Effect of Unavoidable Delays......................... 24
SECTION 10.7 - Subordination........................................ 25
SECTION 10.8 - No Waiver............................................ 26
SECTION 10.9 - No Oral Changes...................................... 26
SECTION 10.10 - No Representations by Landlord....................... 26
SECTION 10.11 - Changes in Entrances and Other Public Areas.......... 26
SECTION 10.12 - Risk of Loss or Damage to Personal Property, Etc..... 27
SECTION 10.13 - Rules and Regulations................................ 27
SECTION 10.14 - Real Estate Commissions.............................. 27
SECTION 10.15 - Attorney's Fees...................................... 27
</TABLE>
ii
<PAGE>
ARTICLE I
---------
SUMMARY OF LEASE PROVISIONS AND EXHIBITS
SECTION 1.1 - Fundamental Lease Provisions:
- ------------------------------------------
DATE: November 7/th/, 1996
COMMENCEMENT DATE: December 1, 1996 subject to adjustment pursuant to Section
2.2
TERMINATION DATE: November 30, 2000
LANDLORD: West End Land Development Co., L.P.
ADDRESS OF LANDLORD: West End Land Development Co., L.P.
c/o Grace Development, Inc.
3309 Fairmont Drive
Nashville, Tennessee 37203
TENANT: CitySearch Inc.
ADDRESS OF TENANT: CitySearch, Inc.
Attn: Chief Financial Officer
790 Colorado Boulevard
Pasadena, California 91101
BUILDING ADDRESS: One Church Street
101 Church Street
Nashville, Tennessee 37219
FIXED MINIMUM RENT: Year 1 $47,844 - $3,987 per month ($10.50 psf)
Year 2 $47,844 - $3,987 per month ($10.50 psf)
Year 3 $47,844 - $3,987 per month ($10.50 psf)
Year 4 $47,844 - $3,987 per month ($10.50 psf)
Year 5 $47,844 - $3,987 per month ($10.50 psf)
1
<PAGE>
NET RENTABLE AREA: 4,556 square feet
TENANT'S PRO-RATA
PERCENTAGE AND
OPERATING EXPENSES: 15.07% 1997 Base Year Operating Expense Stop
LEASE TERM AND RIGHT OF
EARLY TERMINATION: Five (5) years. Right of termination following year
three (3) of Lease as set forth in Section 2.2.
RENEWAL OPTIONS: One (1) Renewal Option of Five (5) years.
PERMITTED USE: Office
SECURITY DEPOSIT: N/A
SECTION 1.2 - Effect of Summary and Reference to Fundamental Lease Provisions:
- -----------------------------------------------------------------------------
Each reference in this Lease to any of the Fundamental Lease Provisions
contained in Section 1.1 shall be construed to incorporate all of the terms
provided under such Fundamental Lease Provision.
SECTION 1.3 - EXHIBITS:
- ----------------------
The exhibits listed in this Section and attached to this Lease are hereby
incorporated in and made a part of this Lease:
Exhibit "A" - Site Plan and Legal Description
Exhibit "B" - Space Plan
Exhibit "C" - Description of Landlord's Work
2
<PAGE>
ARTICLE II
PREMISES AND TERM
SECTION 2.1 - Demised Premises:
- ------------------------------
Landlord hereby leases to Tenant and Tenant hires and takes from Landlord
the premises (the "Premises" or "Demised Premises") consisting of 4,556 net
rentable square feet located on the Fourth Floor of the building known as One
Church Street, 101 Church Street, Nashville, Tennessee (the "Building") on the
parcel of land (the "Parcel") shown and described on Exhibit "A" hereof and
-----------
located at Nashville, Tennessee, the Premises being that certain space and being
delineated on the Space Plan, attached hereto as Exhibit "B", subject to and
-----------
with the benefits of the terms of this Lease, together with the appurtenances
specifically granted in this Lease, but reserving and excepting to Landlord (i)
the use of (a) the exterior faces of the walls and (b) the roof, and (ii) the
right to install, maintain, use, repair and replace pipes, ducts, conduits and
wires through the Demised Premises serving the other parts of the Building
provided that Landlord's reserved and excepted uses and rights shall not
unreasonably interfere with Tenant's use of the Premises.
SECTION 2.2 - Term and Right of Termination:
- -------------------------------------------
The term of this Lease shall be for a period of five (5) years commencing
on the Commencement Date (as hereinafter defined), which is anticipated to be on
or about December 1, 1996, plus the period from the Commencement Date to the
first day of the calendar month next following said Commencement Date if the
Commencement Date occurs on a day other than the first day of the calendar month
(the "Term"). The Term shall end five (5) years thereafter (the "Expiration
Date"), subject to the right of Tenant to terminate this Lease as provided for
in this Section 2.2. Landlord and Tenant agree to execute an addendum or letter
agreement following the execution of the Lease specifying the Commencement Date
if it is other than December 1, 1996.
The Commencement Date shall be the earlier of: (i) the date the Demised
Premises are ready for Tenant's occupancy, or (ii) the date Tenant occupies the
Demised Premises with the consent of the Landlord, and shall end at noon at the
end of the Lease Term, unless sooner terminated as hereinafter provided;
subject, however, to the provisions of Section 2.3.
Prior to the Commencement Date, and during the time of Landlord's carrying
out of the completion of the Landlord's Work as set forth in Section 3.1 herein,
Tenant shall have the right following the date of the execution of a letter of
intent by Landlord and Tenant to occupy temporary space in the Building,
consisting of approximately 2,000 square feet located on the Third Floor of the
Building (the "Temporary Premises"). Tenant shall pay rent to Landlord for
Tenant's occupancy of the Temporary Premises in the amount of $1,500.00 per
month calculated on a pro-rata basis for the number of days of occupancy until
the Commencement Date. Tenant shall observe and perform all of its obligations
under this Lease, except for the payment of the
3
<PAGE>
Fixed Minimum Rent as provided for herein, from and after the date upon which
the Temporary Premises are made available to Tenant until the Commencement Date
of the Term of this Lease in the same manner as though the Commencement Date of
the Term of this Lease began when the Temporary Premises were so made available
to Tenant.
Tenant shall have the option, upon the terms and conditions set forth
herein, to extend the Term for the Premises for one (1) period of five (5) years
(the "Renewal Term"), by notifying Landlord in writing of its exercise of said
option at least one hundred twenty (120) days prior to the expiration date of
the Term. Rent payable for the Renewal Term period shall be at a fair market
rental rate. Following notice by Tenant to Landlord of Tenant's exercise of the
option to renew as provided for herein, Landlord and Tenant shall negotiate this
rate and, if a fair market rental rate cannot be determined and mutually agreed
to by Landlord and Tenant within thirty (30) days of the date of Tenant's notice
of the exercise of the option, the option to extend the Term shall expire and be
of no further force or effect.
Tenant's right to exercise the foregoing option to extend the Term for
lease of the Premises is subject to this Lease being in full force and effect
and Tenant not being in default under any provisions of this Lease at the time
notice of the exercise of such option to renew is given, or on the last day of
the Term immediately preceding the commencement of the ensuing Renewal Term.
Failure by Tenant to notify Landlord of Tenant's exercise of any option herein
granted in the manner and within the time period set forth herein shall
constitute a waiver of said option to renew.
Tenant shall have the right of first refusal to lease the Fourth Floor
adjacent space to the Premises in the Building, as set forth herein. If such
Fourth Floor space shall become vacant or available for lease to the general
public, and prior to Landlord agreeing to lease any of such space to a
prospective tenant, Landlord shall offer such space for lease to Tenant upon
terms and conditions similar to the terms offered to any prospective tenant of
such space. Said offer to Tenant shall be conveyed in writing or verbal, at
Landlord's sole discretion. Tenant shall have twenty (20) days to exercise said
right of first refusal following the date of Landlord's notice to Tenant of such
right to lease. If Tenant exercises said right, Tenant shall enter into a lease
agreement substantially similar to the form of this Lease, except for such terms
as the rental, term, and other provisions which were contained in the offer to
the prospective tenant for said adjacent space. Failure by Tenant to notify
Landlord of Tenant's exercise of such right of first refusal shall constitute a
waiver of said right.
Notwithstanding the foregoing, but only so long as Tenant has not breached
any of the terms, provisions, and covenants of this Lease, Tenant shall have the
right following the first three (3) years of the Term of this Lease, and upon
not less than one hundred eighty (180) days advance written notice from Tenant
to Landlord computed following the expiration of said three (3) years, and
following payment by Tenant to Landlord in advance of all unamortized
construction costs of Landlord which constitute Landlord's Work (as hereinafter
defined) and any unamortized real estate commissions payable hereunder (the
"Termination Fee"), to terminate this Lease. The Termination Fee is payable to
Landlord as of the time of the notice of Tenant's
4
<PAGE>
exercise of said right, but Tenant nevertheless shall be liable for the Fixed
Minimum Rent and any other amounts due hereunder for said one hundred eighty
(180) day period, as well as any other provisions of this Lease during such
period.
SECTION 2.3 - Completion and Occupancy:
- --------------------------------------
2.3.1 Subject to delay by causes beyond the reasonable control of
Landlord, or by the action or inaction of Tenant, Landlord shall endeavor to
have the Premises ready for Tenant's occupancy on or before a reasonable period
of time following execution of this Lease but not to exceed sixty (60) days. If
the Demised Premises are not ready for the Tenant's occupancy on such date, then
this Lease shall not be affected thereby but, in such case, such date shall be
postponed until the date when the Demised Premises are ready for Tenant's
occupancy. and Tenant shall not have any claim against Landlord, and Landlord
shall have no liability to Tenant, by reason of any such postponement of such
specific date. Notwithstanding the foregoing, if the Demised Premises are not
ready for the Tenant's occupancy within ninety (90) days of the date of Landlord
and Tenant's execution of this Lease, Tenant shall have the right to terminate
this Lease.
2.3.2 The Demised Premises shall be conclusively deemed ready for Tenant's
occupancy as soon as (i) a certificate (temporary or final) permitting occupancy
of the Demised Premises has been issued by the governmental authority having
jurisdiction, and (ii) the initial installations and work to be done by Landlord
(referred to on Exhibit "C" annexed hereto and made a part hereof) in the
-----------
Demised Premises have been substantially completed by Landlord in accordance
with the obligations assumed by Landlord hereunder. Tenant shall cooperate with
Landlord in obtaining a certificate of occupancy for the Premises. The Fixed
Minimum Rent and all additional rent to be paid under this Lease shall commence
on the Commencement Date. Notwithstanding the aforesaid, Tenant shall pay the
first monthly installment of Fixed Minimum Rent on the execution of this Lease.
The Demised Premises shall not be deemed to be unready for Tenant's occupancy or
incomplete, nor shall the Commencement Date be delayed. if only minor or
insubstantial details of construction, decoration or mechanical adjustments
remain to be done in the Premises, or if the delay in the availability of the
Premises for occupancy shall be due to special work, changes, alterations or
additions required or made by Tenant in the layout or finish of the Premises or
any part thereof or shall be caused in whole or in part by Tenant through the
delay of Tenant in submitting any plans and/or drawings (including, but not
limited to, the final plans and drawings referred to on Exhibit "C" hereof),
-----------
supplying information, approving estimates or giving authorizations or shall be
caused in whole or in part by delay and/or default on the part of Tenant.
Notwithstanding the foregoing, Landlord and Tenant shall approve the final
punch-list for the construction of the Demised Premises prior to the time that
the Demised Premises shall be deemed to be ready for Tenant's occupancy.
2.3.3 Landlord and Tenant acknowledge the final plans and drawings for
completion of the Landlord's Work (as shown on the drawings attached hereto as
Exhibit "C") If Tenant delays in submitting to Landlord any additional
- -----------
information required for the Landlord's carrying out of the Landlord's Work,
such as approving estimates, or in giving authorizations or otherwise or
5
<PAGE>
if Tenant makes any changes, alterations or additions to said plans, any
additional cost to Landlord in connection with the completion of the Premises in
accordance with the terms of this Lease and said Exhibit "C" shall be promptly
-----------
paid by Tenant to Landlord as additional rent.
ARTICLE III
-----------
CONSTRUCTION
SECTION 3.1 - Landlord's Work:
- -----------------------------
Landlord shall perform the work ("Landlord's Work") with respect to the
Demised Premises on behalf of Tenant as set forth in the description of the
Landlord's Work attached -hereto as Exhibit "C". As an accommodation to Tenant,
-----------
Landlord shall give Tenant thirty (30) days advance notice of the estimated date
for completion of the Landlord's Work. The giving of such notice of the
estimated date of completion of the Landlord's Work, or the failure to give such
notice, shall not affect the respective obligations of the parties under this
Lease.
SECTION 3.2 - Early Commencement Date:
- -------------------------------------
If Landlord has substantially completed the Landlord's Work prior to the
specific date mentioned in Section 2.2 hereof, Tenant may, with the prior
written consent of Landlord, enter into possession of the Demised Premises.
Under such circumstances, the Lease Term shall commence on the date ("Early
Commencement Date") Landlord delivers possession of the Demised Premises to
Tenant, and all rent, Additional Rent and other charges payable by Tenant
hereunder, shall accrue on and after the Early Commencement Date.
SECTION 3.3 - Ownership of Improvements:
- ---------------------------------------
All structural installations, alterations, additions or improvements (the
"Improvements") upon the Premises made by either party, shall, at the option of
the Landlord, become the property of the Landlord and shall remain upon and be
surrendered with the Premises as a part thereof at the expiration or sooner
termination of the Lease Term. Notwithstanding the foregoing, Landlord may, at
its option, specify which Improvements that have been made by the Tenant shall
be removed from the Demised Premises at the expiration or sooner termination of
the Lease Term. Tenant, at its own expense, shall remove such specified
Improvements, and Tenant shall, at its expense, promptly repair any damage
caused by such removal. Movable office furniture and trade fixtures which are
installed by Tenant at its expense shall remain the property of Tenant and may
be removed at any time prior to the expiration of the Lease Term, provided
Tenant promptly repairs any damage caused by such removal.
6
<PAGE>
ARTICLE IV
----------
RENT
SECTION 4.1 - Payment:
- ---------------------
All Fixed Minimum Rent and other charges payable to Landlord under any
provision of this Lease shall be paid to Landlord, or as Landlord may otherwise
designate, in lawful money of the United States which shall be legal tender in
payment of all debts and dues, public and private, at the time of payment at the
Address of Landlord or at such other place as Landlord in writing may designate,
without any set-off or deduction whatsoever and without any prior demand
therefor. Ln addition to the payment of Fixed Minimum Rent and other charges.
Tenant shall also pay to Landlord, at the time of payment of such Fixed Minimum
Rent and other charges, all sales, use or occupancy taxes payable by virtue of
any such payments.
SECTION 4.2 - Fixed Minimum Rent:
- --------------------------------
Tenant shall pay the annual Fixed Minimum Rent in equal monthly
installments in advance on the first day of each calendar month included in the
Lease Term. The first monthly installment of Fixed Minimum Rent shall be paid on
the signing of this Lease as provided in Section 2.3.2 hereof.
SECTION 4.3 - Adjustment of Fixed Minimum Rent: N/A.
- ----------------------------------------------
SECTION 4.4 - Operating Expenses:
- --------------------------------
4.4.1 In addition to the Fixed Minimum Rent, Tenant shall pay to Landlord
its pro-rata share of the increase in Operating Expenses (as such term is
hereinafter defined) over the first Lease year which shall be defined as 1997.
Such pro-rata share shall be determined by multiplying the Operating Expenses by
the Tenant's Percentage referred to in Section 1.1 hereof. The Operating
Expenses for each prospective calendar year shall be determined and estimated by
Landlord. Tenant agrees to pay its share of Operating Expenses, as additional
rent, in monthly payments in advance during the term of this Lease as may be
estimated by Landlord. At the end of each calendar year, Landlord shall advise
Tenant of Tenant's share of the Operating Expenses payable for such year as
computed on the accrual basis based upon the costs thereof to Landlord. Tenant
upon written request to Landlord shall be provided with an itemized cost
analysis in reasonable detail and shall have the right to review the records in
support of Landlord's calculation of Tenant's share of the Operating Expenses.
If Tenant's review of Landlord's records in support of Tenant's share of the
Operating Expenses results in a finding that Landlord overcharged Tenant, Tenant
shall have the right to require Landlord to bill Tenant for Tenant's share of
Operating Expenses annually as opposed to being paid in monthly payments as
provided for in this Section 4.4.1. If there shall have been an underpayment
by Tenant, Tenant shall forthwith pay the difference, and if there shall be an
overpayment by Tenant, Tenant shall be given a credit towards the next due
payment(s) of its share of Operating Expenses. The
7
<PAGE>
Operating Expenses payable by Tenant as provided for herein shall not increase
from the immediately preceding annual period by more than four percent (4%);
and, provided that any and all non-controllable items which comprise the
Operating Expenses (such as real estate taxes, premiums paid for insurance on
the Building and similar items) shall be payable by Tenant and not subject to
such limitation.
4.4.2 For the purposes of this Section 4.4, the term "Operating Expenses"
shall include all reasonable and customary costs and expenses relating to the
operation and maintenance of the Building as an office building, including, but
not limited to, costs of replacement for tools and equipment, reasonable amounts
paid to managing agents of the Building, amounts paid for legal or other
professional services related to the Premises, costs of clerical and accounting
staff and costs of telephone, telegraph, postage, stationery supplies and other
materials required by such staff, amounts paid to contractors for services,
materials and supplies (including without limitation, the servicing and
maintenance of the elevator, plumbing, heating, air conditioning, ventilating,
lighting, electrical, security and fire alarms and other systems and equipment),
reasonable premiums paid for insurance, cost of equipment rental, including
applicable taxes, costs of electricity, water and other utilities, Real Estate
Taxes (hereinafter defined), and costs of painting the Premises or Common Areas.
The term "Operating Expenses" shall also include all costs and expenses relating
to the operation and maintenance of the Parcel and all improvements thereon,
including without limitation all costs of landscape maintenance and the
materials and supplies incident thereto, all costs and expenses relating to the
maintenance and operation of all entrances, exits, parking areas, driveways,
curbs, walks, and exterior lighting, reasonable premiums for public liability
and other insurance. For the purposes of this Section 4.4, the term "Real Estate
Taxes" shall include all real estate taxes, assessments (general and special)
and other governmental impositions and charges of every kind and nature
whatsoever, extraordinary as well as ordinary, foreseen or unforeseen, and each
and every installment thereof, which shall or may during the Lease Term be
levied, assessed, imposed, become due and payable, or liens upon, or arise in
connection with the use, occupancy or possession of, or grow due or payable out
of, or for, the Building or any part thereof, the Parcel and all improvements
thereon. Operating Expenses and Real Estate Taxes do not include, nor shall
Tenant be obligated to contribute towards, any expenses associated in any way
with Landlord's compliance with the Americans with Disabilities Act, toxic or
hazardous materials regulations (whether federal, state or local) or asbestos
abatement or containment other than materials introduced into the Premises by
Tenant.
SECTION 4.5 - Late Payment Penalty:
- ----------------------------------
A penalty of three and one-half percent (3-1/2%) per month of the Fixed
Minimum Rent and any additional rent provided for in this Lease shall be
assessed, due and payable immediately upon tender of the payment for the Fixed
Minimum Rent and additional rent if said payment is not received by the tenth
(lOth) day next following the due date of such rental payment. If payment is
received after the twentieth (2Oth) day of the month, the penalty shall be
increased to eight percent (8%) per month if such payment is not made.
8
<PAGE>
SECTION 4.6 - Additional Rent: N/A
- -----------------------------
SECTION 4.7 - Rent for a Partial Month:
- --------------------------------------
For any portion of a calendar month at the beginning or end of the Lease
Term, Tenant shall pay 1/3Oth of the monthly installment of Fixed Minimum Rent
and additional rent for each day of such portion of a month payable in advance
at the beginning of such period.
SECTION 4.8 - Payment by Automatic Transfer:
- -------------------------------------------
Instead of requiring Tenant to pay Fixed Minimum Rent, Operating Expenses,
or other charges in a manner pursuant to Section 4.1, Landlord may, if Tenant
shall agree to the same upon not less than thirty (30) days' prior notice to
Tenant, request Tenant to execute promptly and deliver to Landlord any
documents, instruments, authorizations, or certificates required by Landlord to
give effect to an automated debiting system, whereby any or all payments by
Tenant (as designated from time to time by Landlord) of whatsoever nature
required or contemplated by this Lease shall be debited monthly or from time to
time, as determined by Landlord, from Tenant's account in a bank or financial
institution designated by Tenant and credited to Landlord's bank account as
Landlord shall designate from time to time.
Tenant shall promptly pay all reasonable service fees and other reasonable
charges connected therewith including, without limitation, any charges resulting
from insufficient funds in Tenant's bank account or any charges imposed on the
Landlord.
In the event that Tenant elects to designate a different bank or financial
institution from which any Fixed Minimum Rent. Operating Expenses, or other
charges under this Lease are automatically debited, notification of such change
and the required documents, instruments, authorizations, and certificates as
specified in this Section 4.8 must be received by Landlord no later than thirty
(30) days prior to the date such change is to become effective.
Tenant agrees that it shall remain responsible to Landlord for all payments
of Fixed Minimum Rent, Operating Expenses. and other charges pursuant to this
Lease, even if Tenant's bank account is incorrectly debited in any given month.
Such Fixed Minimum Rent, Operating Expenses, and other charges shall be
immediately payable to Landlord upon written demand.
SECTION 4.9 - Services Provided to Landlord:
- -------------------------------------------
Tenant acknowledges that Landlord has undertaken to pay the entire cost of
the Landlord's Work as provided for in Section 3.1 herein, which cost is in
excess of the cost of Landlord's original estimates to construct suitable space
for Tenant in the Building. In consideration of the foregoing, Tenant shall
provide to Landlord, or any of its affiliates, for a period of three (3) years
from the date of publication (i.e., the date of publication of an information
site on the World Wide Web) an information site consisting of up to 14 pages
within the CitySearch Nashville service at a rate of fifty percent (50%) of the
standard commercial rate charged for such
9
<PAGE>
information site. Such services shall include design, photography and lay-out,
updates and any similar services provided by Tenant. Prior to providing such
services, Landlord shall execute Tenant's standard Information Site Agreement.
In exchange for the above, Landlord agrees to use its reasonable best efforts to
promote the CitySearch service to its other tenants and other vendors and
business associates of Landlord. For example, Landlord agrees to promote Tenant
in Landlord's newsletter, presentations and contacts with other vendors and
business associates.
ARTICLE V
---------
UTILITY SERVICES
SECTION 5.1 - Utilities:
- -----------------------
Provided that Tenant is not in default hereunder, Landlord agrees to
furnish to the Premises electricity for normal desk top office equipment and
normal copying equipment, and heating, ventilation and air conditioning ("HVAC")
as required in Landlord's judgment for the comfortable use and occupancy of the
premises, 365 days per year, 24 hours per day at no additional cost to Tenant.
Landlord shall also maintain and keep lighted the common stairs, common entries
and restrooms in the Building. Landlord shall not be in default hereunder or be
liable for any damages directly or indirectly resulting from, nor shall the Rent
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 services if
beyond the reasonable control of Landlord, (ii) failure to furnish or delay in
furnishing any such services where such failure or delay is caused by accident
or any condition or event beyond the reasonable control of Landlord, or by the
making of necessary repairs or improvements to the Premises, Building or
Project, or (iii) the limitation, curtailment or rationing of, or restrictions
on, use of water, electricity, gas or any other form of energy serving the
Premises. Building or Project if beyond the reasonable control of Landlord.
Landlord shall not be liable under any circumstances for a loss of or injury to
property or business, however occurring, through or in connection with or
incidental to failure by third parties to furnish any such services. If Tenant
uses heat generating machines or equipment in the Premises which affect the
temperature otherwise maintained by the HVAC system, Landlord reserves the right
to install supplementary air conditioning units in the Premises and the cost
thereof, including the cost of installation, operation and maintenance thereof,
shall be paid by Tenant to Landlord upon demand by Landlord. Landlord shall use
reasonable efforts to correct all services provided for hereunder.
Tenant shall not, without the written consent of Landlord, use any
apparatus or devise in the Premises, including without limitation, electronic
data processing machines, punch card machines or machines using in excess of 120
volts, which consumes more electricity than is usually furnished or supplied for
the use of premises as general office space, as determined by Landlord. Tenant
shall not connect any apparatus with electric current except through existing
electrical outlets in the Premises. Tenant shall not consume water or electric
current in excess of that usually furnished or supplied for the use of Premises
as general office space (as
<PAGE>
determined by Landlord), without first procuring the written consent of
Landlord, which Landlord may refuse, and in the event of consent. Landlord may
have installed a water meter or electrical current meter in the Premises to
measure the amount of water or electric current consumed. The cost of any such
meter and of its installation, maintenance and repair shall be paid for by the
Tenant and Tenant agrees to pay to Landlord promptly upon demand for all such
water and electric current consumed as shown by said meters, at the rates
charged for such services by the local public utility plus any additional
expense incurred in keeping account of the water and electric current so
consumed. If a separate meter is not installed, the excess cost for such water
and electric current shall be established by an estimate made by a utility
company or electrical engineer hired by Landlord at Tenant's expense.
ARTICLE VI
----------
LANDLORD'S ADDITIONAL COVENANTS
SECTION 6.1 - Repairs by Landlord:
- ---------------------------------
Landlord covenants to keep, in good order, repair and condition the
foundations and roof of the Building and the structural soundness of the floors
and walls thereof and the pipes, ducts, conduits and wires running through the
Demised Premises and installed therein as part of the Landlord's Work (but not
including Tenant's service connections thereto) except as affected by any work
by or for Tenant or the negligence, act or omission of Tenant, its employees,
agents and invitees. Landlord shall not be required to commence any repair until
after notice from the Tenant that the same is necessary, which notice, except in
the case of an emergency, shall be in writing and shall allow Landlord seven
(7) days in which to commence such repair. The provisions of this Section shall
not apply in the case of damage by fire or casualty or by eminent domain, in
which events the obligations of the Landlord shall be controlled by the
applicable provisions of this Lease. Except as provided in this Section,
Landlord shall not be obligated to make repairs, replacements or improvements of
any kind upon the Demised Premises or upon any equipment or facilities or
fixtures contained herein, all of which shall be the responsibility of Tenant.
Landlord acknowledges that Tenant shall have no responsibility for completion of
the Landlord's Work and for the Premises following such work to be in compliance
with applicable building, health and environmental ordinances or regulations of
any federal, state and local entities.
SECTION 6.2 - Quiet Enjoyment:
- -----------------------------
Landlord covenants that Tenant, on paying the Fixed Minimum Rent and
additional rent and performing Tenant's obligations under this Lease shall
peacefully and quietly have, hold and enjoy the Demised Premises throughout the
Lease Term, subject to the other terms and provisions of this Lease and to all
mortgages and underlying leases to which this Lease may be or become subject and
subordinate. Landlord covenants that any construction or renovation in the
Building
11
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following the date of the execution of this Lease shall not unreasonably or
adversely affect Tenant's ability to conduct its business within the Premises.
SECTION 6.3 - Landlord's Liability:
- ----------------------------------
In the event of a sale or assignment by Landlord of its interest in the
Building, then, and in that event, Landlord shall thereupon be entirely relieved
of all terms, covenants, and obligations thereafter to be performed by Landlord
under this Lease and it shall be deemed and construed, without further
agreement, that the transferee or lessee, as the case may be, has assumed and
agreed to carry out any and all covenants and obligations of Landlord hereunder.
SECTION 6.4 - Services:
- ----------------------
Landlord will furnish the following services to Tenant:
(a) Automatically operated elevator service at all times and on all
days throughout the year subject to such security arrangements (by key operation
or otherwise) during non-business hours as Landlord shall deem prudent and
necessary.
(b) Heat and air conditioning, as necessary, to the public portions of
the Building.
(c) Landlord shall furnish such cleaning of the Demised Premises as in
the judgment of Landlord is normal and usual in office buildings similar to the
Building provided that (i) the Premises are kept in order by Tenant; (ii)
Landlord shall not be required to clean storage rooms data processing, computers
or similar equipment; and (iii) any shampooing or cleaning of carpets more than
one (1) time per year and other than normal vacuuming shall be at Tenant's own
expense.
Such services shall be provided so long as the Tenant is not in default
under any of the terms, provisions, covenants and conditions of this Lease,
subject to interruptions caused by repairs, renewals, improvements, changes of
service, alterations, strikes, lockouts, labor controversies, inability to
obtain fuel or power, accidents, breakdowns, catastrophes, national or local
emergencies, acts of God, and conditions and causes beyond the reasonable
control of Landlord; and upon such happening, no claim for damages or abatement
of rent for failure to furnish any such services shall be made by the Tenant or
allowed by the Landlord.
SECTION 6.5 - Common Areas:
- --------------------------
Tenant and Tenant's agents, employees and invitees shall have the right to
use, in common with Landlord and Landlord's tenants and the agents, employees,
and invitees of each, the public sidewalks, entrances, lobbies, vestibules,
stairways, corridors, elevators, public toilets, and other public areas of the
Building subject, however, to applicable rules, regulations, and security
measures; and Tenant and Tenant's agents, employees, and invitees shall not
obstruct or litter,
12
<PAGE>
or use for storage, temporary or otherwise, or for any purpose other than the
intended or normal purpose, any of the public sidewalks, entrances, lobbies,
vestibules, stairways, corridors, elevators, public toilets, and other public
areas of the Building.
SECTION 6.6 - Signage:
- ---------------------
Tenant may have installed a sign identifying Tenant at Tenant's entrance to
its suite subject to Landlord's reasonable approval. Tenant shall also be
identified in the lobby directory. Both such signs shall be paid for by
Landlord.
SECTION 6.7 - Indemnity:
- -----------------------
To defend and save Tenant harmless and indemnified from all loss, claims or
damage (including attorney's fees and disbursements) to any person or property
arising from, related to or in connection with any work performed by or for
Landlord in the Building, other than losses, claims or damage resulting from or
caused by Tenant's negligence or any of its agents or employees.
ARTICLE VII
-----------
TENANT'S ADDITIONAL COVENANTS
SECTION 7.1 - Affirmative Covenants:
- -----------------------------------
Tenant covenants, at its own expense, at all times during the Lease Term:
7.1.1 To perform promptly all of the obligations of Tenant set forth in
this Lease and in the exhibits attached hereto and to pay, when due, the Fixed
Minimum Rent and other charges and additional rents which by the terms of this
Lease are to be paid by Tenant.
7.1.2 To use the Demised Premises only for the Permitted Use and to abide
by and conform to any and all use restrictions set forth in the certificate of
occupancy issued for the Demised Premises, all applicable occupation permits,
the recorded plat, all agreements filed of record and all other laws, orders,
rules and regulations of any governmental authority having or claiming
jurisdiction over the Demised Premises.
7.1.3 Except for repairs required to be performed by Landlord pursuant to
the provisions of this Lease, to keep the Demised Premises, including the
equipment, facilities and fixtures therein, at Tenant's sole costs and expense,
in good order, repair, condition and free of vermin.
7.1.4 Other than the Landlord's Work as set forth in Section 3.1, and
except for the work described in Section 4.4.2, to pay promptly, when due, the
entire costs of any work to the Demised Premises, including equipment,
facilities and fixtures therein, undertaken by Tenant when permitted or required
to do so under the provisions of this Lease so that the Demised
13
<PAGE>
Premises shall at all times be free of liens for labor and materials; to procure
all necessary permits before undertaking such work; to do all such work in a
good and workmanlike manner acceptable to Landlord, employing materials of good
quality; to perform such work in such manner as to insure proper maintenance of
labor relationships; to comply with all governmental requirements relating
thereto and to save Landlord harmless and indemnified from all injury, loss,
claims or damage to any person or property occasioned by or growing out of such
work.
7.1.5 To defend and save Landlord harmless and indemnified from all injury,
loss, claims or damage (including attorney's fees and disbursements) to any
person or property arising from, related to or in connection with any work
performed by or for Tenant in the Demised Premises, other than losses, claims or
damage resulting from or caused by Landlord's negligence or any of its agents or
employees.
7.1.6 To maintain in responsible companies approved by Landlord (i)
liability insurance, with contractual liability endorsement covering the matters
set forth in this Lease, against all claims, demands or actions for injury to or
death of any one person in an amount of not less than $1,000,000 and for injury
to or death of more than one person in any one accident or occurrence to the
limit of not less than $2,000,000 and for damage to property in an amount not
less than $1,000,000 made by or on behalf of any person or persons, firms or
corporations arising from, relating to or connected with the conduct and
operation of Tenant's business at the Demised Premises or caused by actions or
omissions to act, where there is a duty to act, of Tenant, its agents, servants
and contractors; and (ii) fire insurance, with such extended coverage
endorsements as Landlord may reasonably from time to time require, covering all
of Tenant's fixtures, furniture, furnishing, floor coverings and equipment at
the Demised Premises in an amount not less than one hundred percent (100%) of
their full replacement cost. All of said insurance shall be in form satisfactory
to Landlord and shall provide that it shall not be subject to cancellation,
termination or change except after at least thirty (30) days prior written
notice to Landlord. All insurance provided by Tenant as required under this
Section shall be carried in favor of Landlord and Tenant, as their respective
interests may appear. All liability policies shall provide that although the
Landlord is named insured, it shall nevertheless be entitled to recover under
said policies for any loss or damage to Landlord resulting from Tenant's
negligence. The policies, or duly executed certificates for the same, including
any renewals, together with satisfactory evidence of the payment of the premium
thereof, shall be deposited with Landlord within twenty (20) days of the written
request of Landlord. If Tenant fails to comply with such requirement, Landlord
may, but shall not be obligated to, obtain such insurance and keep the same in
effect and Tenant shall pay Landlord the premium costs thereof upon demand
7.1.7 To pay on demand any increase in premiums that may be charged on
insurance carried by Landlord or for which Landlord may be obligated to make
reimbursement to other tenants or occupants of the Building under the terms of
their respective leases or occupancy agreements resulting from Tenant's use or
occupancy of the Demised Premises, or from any vacancy of the Demised Premises,
provided, however, Tenant shall not be required to pay any amounts that exceed
ten percent (10%) from the immediately preceding policy term, whether or
14
<PAGE>
not Landlord has consented to same. In determining whether increased premiums
are the result of Tenant's use or occupancy or vacancy of the Demised Premises,
a schedule or "make-up" rate of the organization issuing the coverage, or any
and all risk insurance rates for said premises, or any rule books issued by the
rating organization or similar bodies or by rating procedures or rules of
Landlord's insurance company shall be conclusive evidence of the items and
charges which make up the insurance rates and premiums on the Demised Premises
and the Building.
7.1.8 To waive all claims for loss or damage to Tenant's business or damage
to personal property sustained by Tenant or any person claiming through Tenant
resulting from any accident or occurrence in or upon the Demised Premises or the
Building, unless caused by or resulting from the negligence of Landlord, its
agents, servants or employees.
7.1.9 To permit Landlord or Landlord's agents to enter upon the Demised
Premises at all reasonable times to examine same and to make such repairs,
alterations, improvements or additions in the Demised Premises or in the
Building as may be necessary and to allow Landlord to take all materials into
and upon said premises that may be required therefor without the same
constituting an eviction of Tenant, in whole or in part, and all rents shall in
no wise abate while such repairs, alterations, improvements, or additions are
being made by reason of loss or interruption of business of Tenant because of
the performance of any such work. Landlord or Landlord's agents shall also have
the right to enter upon the Demised Premises at reasonable times to show them to
prospective mortgage or or purchasers of the Building. During the 90 days prior
to the expiration of the Term of this Lease, Landlord may show the Demised
Premises to prospective tenants and Landlord may also place upon the Demised
Premises the usual notices "To Let" or "For Rent", which notices Tenant shall
permit to remain thereon without molestation. If, during the last month of the
Term. Tenant shall have removed all or substantially all of Tenant's property
therefrom, Landlord may immediately enter and alter, renovate and redecorate the
Demised Premises without elimination or abatement of rent or additional rent or
other compensation and such action shall have no effect upon this Lease.
7.1.10 To pay Landlord's expenses, including reasonable attorney's,
architect's and engineer's fees, incurred in enforcing any obligation of Tenant
under this Lease or incurring any default by Tenant under this Lease, assuming
Landlord is the prevailing party in such enforcement action.
7.1.11 Forthwith to cause to be discharged of record (by payment, bond,
order of a court of competent jurisdiction or otherwise) any mechanic's lien at
any time filed against the Demised Premises or the Building for any work, labor,
services or materials claimed to have been performed at, or furnished to Tenant,
excluding the Landlord's Work. If Tenant shall fail to cause such lien to be
discharged upon demand, then, in addition to any other right or remedy of
Landlord, Landlord may, but shall not be obligated to, discharge the same by
paying the amount claimed to be due or by bonding or other proceeding deemed
appropriate by Landlord and the amount so paid by Landlord and/or all costs and
expense, including reasonable attorney's fees, incurred by Landlord in procuring
the discharge of such lien shall be deemed to be additional rent. Nothing in
this Lease contained shall be construed as a consent on the part of the Landlord
15
<PAGE>
to subject Landlord's estate in the Demised Premises or the Building to any lien
or liability under any laws, orders, rules and regulations of any governmental
authority having or claiming jurisdiction over the Demised Premises. The Tenant
shall not have any authority to create any liens for labor or material on the
Landlord's interest in the Demised Premises or the realty of which the Demised
Premises form a part and all persons contracting with the Tenant for the
destruction or removal of any facilities or other improvements or for the
erection, installation, alteration, or repair of any facilities or other
improvements on or about the Demised Premises, and all materialmen, contractors,
mechanics, and laborers, are hereby charged with notice that they must look only
to the Tenant and to the Tenant's interests in the Demised Premises to secure
the payment of any bill for work done or material furnished at the request or
instruction of Tenant.
7.1.12 Upon the expiration or other termination of the Lease Term, to quit
and surrender to Landlord the Demised Premises, broom clean, in good order and
condition, ordinary wear and tear excepted, and at Tenant's expense, to remove
all property of Tenant, to repair all damages to the Demised Premises caused by
such removal and restore the Demised Premises to the condition in which they
were prior to the installation of the articles so removed. Any property not so
removed shall be deemed to have been abandoned by Tenant and may be retained or
disposed of by Landlord, as Landlord shall desire, and if Landlord shall decide
to dispose of same, such disposal shall be at the cost and expense of Tenant.
7.1.13 To remove all rubbish, dirt and debris from the Demised Premises,
at its own cost and expense, utilizing a company approved by Landlord, subject
to the obligation of Landlord to furnish normal and usual cleaning services as
provided in Section 6.4 hereof.
7.1.14 To remain fully obligated under this Lease, notwithstanding any
assignment or sublease or any indulgence granted by Landlord to Tenant or to any
assignee or sublessee.
SECTION 7.2 - Negative Covenants:
- --------------------------------
Tenant covenants at all times during the Lease Term and such further time
as Tenant occupies the Demised Premises, or any part thereof:
7.2.1 Not to injure, overload, deface or otherwise harm the Demised
Premises or any equipment or installation therein; nor commit any waste or
nuisance; nor permit the emission of any objectionable noise or odor; nor burn
any trash or refuse in or about the Demised Premises; nor make any use of the
Demised Premises, or any part thereof or equipment therein, which is improper,
offensive or contrary to any law or ordinance or to reasonable rules or
regulations of Landlord as such may be promulgated from time to time; nor park
or permit its employees, agents, visitors or invitees to park automobiles or
other vehicles so as to interfere with the use of driveways, entrances, exits,
walks, roadways, highways, streets, or parking areas. Without limiting the
foregoing provisions pertaining to overloading and noise, Tenant further
covenants that (a) Tenant shall not place a load upon any floor of the Demised
Premises which exceeds the load per square foot which such floor was designed to
carry or which is allowed by law and (b)
16
<PAGE>
business machines and mechanical equipment belonging to Tenant which cause
noise, vibration or any other nuisance that may be transmitted to the structure
or other portions of the Building or to the Demised Premises to such a degree as
to be objectionable to Landlord, or which interfere with the use or enjoyment by
other tenants of their premises or the public portions of the Building, shall be
placed and maintained by Tenant, at Tenant's cost and expense, in settings
sufficient to eliminate noise or vibration. Landlord reserves the right to
approve the weight and position of all safes which Tenant desires to bring into
the Demised Premises.
7.2.2 Except for placement and display of art work, erasable boards, other
display materials, and routine cables (reparable with minor patching) and
telephone lines, not to make any alterations or additions to the Demised
Premises or the Building, nor permit the making of any holes in the walls,
ceilings, or floors thereof installed as part of Landlord's Work, without on
each occasion obtaining prior written consent of the Landlord, in which event
the provisions of Paragraph 7.1.5 shall control.
7.2.3 Not to assign, sell, mortgage, encumber, pledge or in any manner
transfer this Lease or any interest therein or sublet the Demised Premises or
any part or parts thereof. or grant any concession or license or otherwise
permit occupancy of all or any part thereof by anyone with, through, or under
it, without the prior written consent of the Landlord, which consent may not be
unreasonably withheld.
7.2.4 Not to place, install or maintain any sign, advertisement, notice or
any other lettering upon the Parcel or any part thereof, the entrance door or
doors to the Demised Premises, or upon or within the interior of the Building or
any part thereof, except for such sign and/or lettering placed or installed by
Landlord at its expense pursuant to Section 6.5 hereof.
7.2.5 Not to place or install any blinds, shades or other window coverings
or treatments in the windows of the Demised Premises other than those furnished
by Landlord without the prior written approval of Landlord; not to place or
display any signs, advertising or other things of whatsoever kind, nature or
description in the windows of the Demised Premises or within the Demised
Premises so that the same are visible from outside of the Demised Premises; and
not to wash or permit or suffer any contractor, employee or agent of Tenant to
wash the exterior of any windows in the Demised Premises.
ARTICLE VIII
------------
DESTRUCTION AND CONDEMNATION
SECTION 8.1 - Fire or other Casualty:
- ------------------------------------
8.1.1 Tenant shall give prompt notice to Landlord in case of fire or other
damage to the Demised Premises or the Building.
17
<PAGE>
8.1.2 If (i) the Demised Premises shall be damaged to the extent of more
than twenty-five percent (25%) of the cost of replacement thereof; or (ii) the
proceeds of Landlord's insurance recovered or recoverable as a result of the
damage shall be insufficient to pay fully for the cost of replacement of so much
of the Demised Premises and/or the Building in which they are located as was
included in the Landlord's Work referred to in Section 3.1 hereof; or (iii) the
Demised Premises or the Building shall be damaged as a result of a risk which is
not covered by Landlord's insurance; or (iv) the Demised Premises shall be
damaged in whole or in part during the last six (6) months of the Lease Term; or
(v) the Building of which the Demised Premises are a part shall be damaged to
the extent of fifty percent (50%) or more of the cost of replacement thereof,
whether or not the Demised Premises shall be damaged, then, and in any of such
events, Landlord may terminate this Lease by notice given within sixty (60) days
after such event in which case this Lease shall terminate effective upon the
date the damage occurred and Tenant shall vacate and surrender the Demised
Premises to Landlord. If the casualty, repairing or rebuilding shall render the
Demised Premises untenantable in whole or in part, an equitable abatement of the
Fixed Minimum Rent shall be allowed from the date when the damage occurred until
completion of the repairs or rebuilding or, in the event Landlord elects to
terminate this Lease, until said date of termination, taking into account, among
other things, the amount and location of the floor space of the Demised Premises
rendered untenantable.
8.1.3 If this Lease shall not be terminated as provided above, Landlord
shall, at its expense, proceed with the repair or restoration of the Demised
Premises and the Building. All repairs and restoration of the Demised Premises
not included in Landlord's Work shall be performed by Tenant at its expense. All
work of restoration by Landlord shall be done in conformity with Exhibit "C".
-----------
All salvage from repair or restoration work done at any time pursuant to this
Section shall belong to Landlord, who shall not be accountable therefor to
Tenant.
8.1.4 If the Demised Premises shall be damaged or destroyed due to the
fault and/or negligence of Tenant, its agents, employees or invitees, the cost
of repairing or restoring the Demised Premises shall be paid by Tenant and the
Fixed Minimum Rent and all other additional rents and charges herein shall not
abate.
SECTION 8.2 - Eminent Domain:
- ----------------------------
8.2.1 If the whole of the Demised Premises shall be taken by any public or
quasi-public authority under the power of condemnation, eminent domain or
expropriation, or in the event of a conveyance in lieu thereof, the Lease Term
shall cease as of the date possession shall be taken by such authority.
8.2.2 If twenty-five percent (25%) or less of the Floor Space of the
Demised Premises shall be so taken or conveyed, the Lease Term shall cease only
with respect to the part so taken or conveyed, as of the date possession shall
be taken by such authority.
18
<PAGE>
8.2.3 If more than twenty-five percent (25%) of the Floor Space of the
Demised Premises shall be so taken or conveyed, the Lease Term shall cease only
with respect to the part so taken or conveyed, as of the date possession shall
be taken by such authority, and either party shall have the right to terminate
this Lease upon notice in writing within thirty (30) days after such taking of
possession.
8.2.4 In the event of any such taking or conveyance of the Demised
Premises, or any portion thereof, Tenant shall pay Fixed Minimum Rent and
additional rent to the day when possession thereof shall be taken by such
authority, with an appropriate refund by Landlord of such rent as may have been
paid in advance for a period subsequent to such date. If this Lease shall
continue in effect as to any portion of the Demised Premises not so taken or
conveyed, the Fixed Minimum Rent shall be equitably reduced and the other
charges shall thereafter be recomputed on the basis of the remaining Floor
Space. If this Lease shall so continue, Landlord shall, at its expense, but only
to the extent of an equitable proportion of the award or other compensation for
the portion taken or conveyed of the Building in which the Demised Premises are
located, make all necessary repairs or alterations so as to constitute the
remaining Demised Premises a complete architectural and tenantable unit.
8.2.5 All compensation awarded for any such taking or conveyance, whether
for the whole or a part of the Demised Premises or otherwise, shall be the
property of Landlord, and Tenant hereby assigns to the Landlord all of Tenant's
right, title and interest in and to any and all such compensation.
ARTICLE IX
----------
DEFAULTS AND REMEDIES
SECTION 9. 1 - Default:
- ----------------------
9.1.1 If Tenant defaults in fulfilling any of the covenants of this Lease,
including, without limitation, the payment of Fixed Minimum Rent when due, or
for the making of any other payment herein provided for, or for the performance
of any other covenant on Tenant's part to be performed hereunder, and, in the
case of Tenant's failure to pay Fixed Minimum Rent or other required charges and
such failure continues for ten (10) days after such payment is due and following
written notice from Landlord that the same is due, or in the case where Tenant
fails to promptly and fully perform any other covenant, condition or agreement
contained herein and such failure continues for thirty (30) days after written
notice thereof from Landlord to Tenant, provided that if such failure cannot be
cured within thirty (30) days, if Tenant does not use reasonably diligent
efforts to commence to cure such failure within said thirty (30) day period,
then, in any one or more of such events, Landlord may serve upon Tenant a
written notice ("Notice of Termination") that this Lease will terminate on a
date to be specified therein, which shall not be less than fifteen (15) days
after the giving of such notice, and upon the date so
19
<PAGE>
specified, Tenant shall then quit and surrender the Demised Premises to
Landlord, but Tenant shall remain liable as hereinafter set forth.
9.1.2 If the Notice of Termination provided for in the above paragraph
shall have been given and this Lease shall be terminated, then, and in such
event, Landlord may seek such remedies for recovery of possession of the Demised
Premises, and for damages incurred, as provided for under the laws of the State
of Tennessee.
SECTION 9.2 - Bankruptcy:
- ------------------------
9.2.1 If there shall be filed against Tenant in any court, pursuant to any
statute either of the United States or of any state, a petition in bankruptcy or
insolvency or reorganization or the appointment of a receiver or trustee of all
or a portion of Tenant's property and is not dismissed within sixty (60) days,
or if Tenant shall voluntarily file any such petition, then, and in the event,
the Lease shall be deemed canceled and terminated, subject to the right of the
trustee, with the court's approval, to timely assume the unexpired Lease. If
Tenant shall make an assignment for the benefit of creditors or enter into an
arrangement, this Lease shall be deemed canceled and terminated, in which event
neither Tenant nor any person claiming through or under Tenant shall be entitled
to acquire or remain in possession of the Demised Premises and Landlord shall
have no further liability hereunder to Tenant and any such person, if in
possession, shall forthwith quit and surrender the Demised Premises. If this
Lease shall be so canceled and terminated, Landlord, in addition to the other
rights or remedies of Landlord contained herein, or by virtue of any statute or
rule of law, may retain as liquidated damages the Security Deposit or any monies
received by Landlord from Tenant or others on behalf of Tenant. In addition,
Landlord shall be entitled to recover from Tenant, as liquidated damages, an
amount equal to the difference between (i) the sum of (a) the annual Fixed
Minimum Rent, and (b) all additional rents due for the remaining term of the
Lease; and (ii) the present rental value of the Demised Premises at the time of
termination for such unexpired term. If the Demised Premises, or any part
thereof, be relet by Landlord for the unexpired term of said Lease, or any part
thereof, before presentation of proof of such liquidated damages to any court,
the amount of rent received upon such reletting shall be deemed prima facie to
be the fair and reasonable rental value for the part of the whole of the
premises so relet during the term of the reletting.
SECTION 9.3 - Remedies of Landlord:
- ----------------------------------
9.3.1 In case of any such default, and Landlord elects not to terminate
this Lease, (i) the Fixed Minimum Rent and additional rent shall become due
thereupon and be paid up to the time of such default; (ii) Landlord may relet
the Demised Premises, or any part or parts thereof, for a term which may at
Landlord's option be less than or exceed the period which would have otherwise
constituted the balance of the term of this Lease and may grant concessions or
free rent; and (iii) Tenant or the legal representative of Tenant shall also pay
Landlord, as liquidated damages for the failure of Tenant to observe and perform
Tenant's covenants herein contained, for each month of the period constituting
the balance of the Lease Term, any deficiency between (a) the sum of (1) one
monthly installment of the Fixed Minimum Rent, and (2) the monthly
20
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charge for Operating Expenses and other charges and (b) the net amount, if any,
of the rents collected on account of the lease or leases of the Demised Premises
for each month of the period which would otherwise have constituted the balance
of the Lease Term. In computing such liquidated damages, there shall be added to
the said deficiency such expenses as Landlord may incur in connection with the
reletting, such as court costs, attorney's fees and disbursements, brokerage,
and for putting and keeping the Demised Premises in good order or for preparing
same for reletting, together with interest on the expenses so incurred at the
then maximum lawful rate from the date of such expenditure to the date of
repayment thereof to Landlord. Any such liquidated damages shall be paid in
monthly installments by Tenant on the rent date specified in this Lease and any
suit brought to collect the amount of deficiency for any month shall not
prejudice in any way the rights of Landlord to collect the deficiency for any
subsequent month by a similar proceeding. Landlord at Landlord's option, may
make such alterations, repairs, replacements and/or decorations of the Demised
Premises as Landlord, in Landlord's sole judgment, considers advisable and
necessary for the purpose of reletting the Demised Premises and the making of
such alterations and/or declaration shall not operate or be construed to release
Tenant from liability hereunder.
9.3.2 In the case of such default and the Lease is terminated, Landlord
may recover from Tenant, or the legal representative of Tenant, as liquidated
damages (i) the worth at the time of termination of any unpaid Fixed Minimum
Rent, additional rent, and other charges earned at the time of such termination;
plus (ii) the worth at the time of the termination of the amount of the unpaid
Fixed Minimum Rent, additional rent and other charges which Tenant would have
paid for the remaining term of the Lease plus (iii) such expenses on other
amounts to compensate Landlord for all the detriment proximately caused by
Tenant's failure to fulfill any of the covenants of this Lease or which in the
ordinary course of things would be likely to result therefrom, including without
limitation, any costs or expenses incurred by Landlord in (1) maintaining or
preserving the Premises after such default, (2) recovering possession of the
Premises, including attorneys fees therefor, (3) expenses of reletting the
Premises including necessary renovations or alterations of the Premises
including necessary renovations or alterations of the Premises, attorneys fees
and leasing commissions incurred, plus (4) such other amounts in addition to or
in lieu of the foregoing as may be permitted by law.
As used in Paragraph (i) above, the "worth at the time of termination" is
computed by allowing interest on unpaid amounts at the maximum rate allowed by
law. As used in Paragraph (ii) above the "worth at the time of termination" is
computed by discounting such amount at the discount rate of the nearest Federal
Reserve Bank in effect at the time of the award plus one percent (1%).
9.3.3 In the event of a breach by Tenant of any of the covenants or
provisions hereof, Landlord shall have the right of injunction and the right to
invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
Lease of any particular remedy shall not preclude Landlord from any other remedy
in law or in equity.
21
<PAGE>
SECTION 9.4 - Waiver of Jury Trial; Tenant Not to Counterclaim: N/A
- --------------------------------------------------------------
SECTION 9.5 - Holdover by Tenant:
- --------------------------------
In the event Tenant remains in possession of the Demised Premises after the
expiration of the tenancy created hereunder, and without the execution of a new
lease, Tenant, at the option of Landlord, shall be deemed to be occupying said
Demised Premises as a tenant from month to month, at a monthly rental equal to
one hundred fifty percent (150%) of the sum of (i) the monthly installment of
Fixed Minimum Rent during the last month of the Lease Term; (ii) the monthly
Operating Expenses payable for such month; and (iii) all other charges payable
hereunder, subject to all of the other conditions, provisions and obligations of
this Lease insofar as the same are applicable to a month-to-month tenancy.
SECTION 9.6 - Landlord's Right to Cure Defaults:
- -----------------------------------------------
Landlord may, but shall not be obligated to, cure, at any time, upon
fifteen (15) days prior written notice to Tenant (except that notice shall not
be required in the event of emergencies), any default by Tenant under this Lease
and whenever Landlord so elects, all costs and expenses incurred by Landlord in
curing such default, including, without limitation, reasonable attorneys' fees,
together with interest on the amount of costs and expenses so incurred at the
then maximum lawful rate, shall be paid by Tenant to Landlord on demand and
shall be recoverable as additional rent.
SECTION 9.7 - Effect of Waivers of Default:
- ------------------------------------------
No consent or waiver, express or implied, by landlord to or of any breach
of any covenant, condition or duty of Tenant shall be construed as a consent or
waiver to or of any other breach of the same or any other covenant, condition or
duty unless in writing signed by the Landlord.
SECTION 9.8 - Security Deposit: N/A
- ------------------------------
SECTION 9.9 - Landlord's Default:
- --------------------------------
If Landlord fails to perform any covenant, condition, or agreement
contained in this Lease within thirty (30) days after receipt of written notice
from Tenant specifying such failure (or if such failure cannot reasonably be
cured within thirty (30) days, if Landlord does not commence to cure the failure
within that thirty (30) day period), then such failure shall constitute a
default hereunder and Landlord shall be liable to Tenant for any damages
sustained by Tenant as a result of Landlord's default.
22
<PAGE>
ARTICLE X
---------
MISCELLANEOUS PROVISIONS
SECTION 10.1 - Notices:
- ----------------------
Any notice or demand from Landlord to Tenant or from Tenant to Landlord
shall be in writing and shall be deemed duly delivered if mailed by registered
or certified mail, return receipt requested, addressed, if to Tenant, at the
address of Tenant or such other address as Tenant shall have last designated by
notice in writing to Landlord, and, if to Landlord, at the address of Landlord
or such other address as Landlord shall have last designated by written notice
to Tenant. Provided, however, notices to Tenant shall be deemed duly served or
given if delivered or mailed to Tenant at the Premises.
SECTION 10.2 - Estoppel Certificates:
- ------------------------------------
Tenant agrees that it will, at reasonable intervals, within ten (10) days
following written notice by Landlord, execute, acknowledge and deliver to
Landlord a statement in writing certifying that this Lease is unmodified and in
full force and effect (or if there have been any modifications, that the same is
in full force and effect as modified, stating the modifications) and the dates
to which Fixed Minimum Rent and other payments due hereunder from Tenant have
been paid in advance, if any, and stating whether or not to the best knowledge
of the Tenant the Landlord is in default in the performance of any covenant,
agreement or condition contained in this Lease and, if so, specifying each such
default.
SECTION 10.3 - Applicable Law and Construction:
- ----------------------------------------------
The laws of the State of Tennessee shall govern the validity, performance
and enforcement of this Lease. The invaliditv or unenforceability of any
provision of this Lease shall not affect or impair any other provision. All
negotiations, considerations, representations and understandings between the
parties are incorporated in this Lease. The headings of the several articles and
sections contained herein are for convenience only and do not define, limit or
construe the contents of such articles or sections.
SECTION 10.4 - Cancellation:
- ---------------------------
If Landlord shall be unable to deliver the Demised Premises ready for
Tenant's occupancy within ninety (90) days of the date of the complete execution
of the Lease (except that such date shall be extended as a result of (a)
Unavoidable Delays of the type referred to in Section 10.6 hereof and (b) any
delay caused by Tenant), this Lease shall, at the option of either Landlord or
Tenant (exercisable by the giving of written notice of cancellation to the other
party within ten (10) days after the specific date hereinbefore mentioned in
this Subsection 10.4 as the same may be extended as herein provided), cease and
be deemed canceled. Upon any such cancellation, this Lease shall be of no
further force or effect and neither party shall have any right or claim
23
<PAGE>
hereunder against the other except that upon such cancellation, Landlord shall
be required to return to Tenant, without interest, the monthly installment of
Fixed Minimum Rent and any other amounts paid upon the execution of this Lease.
SECTION 10.5 - Binding Effect of Lease:
- --------------------------------------
The covenants, agreements and obligations herein contained, except as
herein otherwise specifically provided, shall extend to, bind and inure to the
benefit of the parties hereto and their respective personal representatives,
successors and permitted assigns. Each covenant, agreement, obligation or other
provision herein contained shall be deemed and construed as a separate and
independent covenant of the party bound by, undertaking or making the same, not
dependent on any other provision of this Lease unless otherwise expressly
provided. If any term, covenant, agreement or provision of this Lease shall be
held by any court of competent jurisdiction to be against public policy and/or
null and void, such term, covenant, agreement or provision shall be deemed not
to have been included in this Lease and shall not affect the validity of the
remaining terms, covenants, agreements or provisions of this Lease.
SECTION 10.6 - Effect of Unavoidable Delays:
- -------------------------------------------
The provisions of this Section shall be applicable if there shall occur,
during the Lease Term, or prior to the commencement thereof, any (i) strike,
lockout or labor dispute; (ii) inability to obtain labor or materials or
reasonable substitutes therefor; or (iii) acts of God, governmental
restrictions, regulations or controls, enemy or hostile governmental action,
civil commotion, fire or other casualty or other conditions similar or
dissimilar to those enumerated in this item (iii) any other circumstances beyond
the reasonable control of the party obligated to perform. If Landlord or Tenant
shall, as a result of any of the above described events, fail punctually to
perform any obligation on its part to be performed under this Lease, then such
failure shall be excused and not be a breach of this Lease by the party in
question, but only to the extent occasioned by such event. If any right or
option of any party to take any action under or with respect to this Lease is
conditioned upon the same being exercised within any prescribed period of time
or at or before a named date, then such prescribed period of time and such named
date shall be deemed to be extended or delayed, as the case may be, for a period
equal to the period of the delay occasioned by any above described event.
Notwithstanding anything herein contained, however, the provisions of this
Section shall not be applicable to Tenant's obligation to pay the Fixed Minimum
Rent or additional rent under the provisions of Article IV or its obligation to
pay any other sums, monies, costs, charges or expenses required to be paid by
Tenant hereunder, unless the Premises are untenantable.
SECTION 10.7 - Subordination:
- ----------------------------
10.7.1 Subject to Landlord and Tenant executing a reasonably satisfactory
non-disturbance agreement, this Lease is subject and subordinate to all ground
leases and/or underlying leases now or hereafter covering the real property of
which the Demised Premises form a part and to all mortgages which may now or
hereafter be placed on or affect such leases and/or such real
24
<PAGE>
property, or any part or parts thereof, and/or Landlord's interest therein and
to all renewals, modifications, amendments, consolidations, replacements or
extensions thereof. This clause shall be self-operative and no further
instrument of subordination shall be required by any mortgagee. In confirmation
of such subordination, Tenant shall execute promptly any certificate that
Landlord may request. Tenant hereby constitutes and appoints Landlord as the
Tenant's attorney-in-fact to execute any such certificate or certificates for
and on behalf of Tenant.
10.7.2 At the option of the Landlord or any successor Landlord or the
holder of any mortgage affecting the Demised Premises, Tenant agrees that
neither the foreclosure of a mortgage affecting the Demised Premises nor the
institution of any suit, action, summary or other proceeding against the
Landlord herein or any successor Landlord or any foreclosure proceeding brought
by the holder of any such mortgage to recover possession of such property shall,
by operation of law or otherwise, result in a cancellation or termination of
this Lease or the obligations of Tenant hereunder, and upon the request of any
such Landlord, successor Landlord or the holder of such mortgage, Tenant
covenants and agrees to execute an instrument in writing satisfactory to such
Landlord, successor Landlord or to the holder of such mortgage or to the
purchaser of the mortgaged premises in foreclosure whereby Tenant attorns to
such successor in interest.
10.7.3 If, in connection with obtaining financing for the Building and/or
the Parcel, a banking, insurance or other recognized institutional lender shall
request reasonable 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 that increase the obligations of Tenant
hereunder or materially adversely affect the leasehold interest hereby created
or Tenant's use and enjoyment of the Demised Premises shall be accompanied by a
reasonable rent reduction to be negotiated in good faith by Landlord and Tenant.
SECTION 10.8 - No Waiver:
- ------------------------
The failure of Landlord to seek redress for violation of, or to insist upon
the strict performance of, any covenant or condition of this Lease or any of the
Rules and Regulations now or hereafter adopted or promulgated by Landlord shall
not prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original violation. The
receipt by Landlord of Fixed Minimum Rent or additional rent or any other
charges payable under this Lease with knowledge of the breach of any covenant of
this Lease by Tenant shall not be deemed a waiver of such breach. No provision
of this Lease shall be deemed to have been waived by Landlord unless such waiver
be in writing and signed by Landlord. No payment by Tenant or receipt by
Landlord of a lesser amount than the monthly payments required to be made
hereunder shall be deemed to be other than on account of the earliest stipulated
Fixed Minimum Rent or additional rent or other charges payable hereunder nor
shall any endorsement or statement on any check or any letter accompanying any
check or payment be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such rent or pursue any other remedy in this Lease provided.
25
<PAGE>
SECTION 10.9 - No Oral Changes:
- ------------------------------
This Lease may not be changed or terminated orally but only by an agreement
in writing signed by the parties hereto.
SECTION 10.10 - No Representations by Landlord:
- ----------------------------------------------
Landlord or Landlord's agents have made no representations, warranties or
promises with respect to the Demised Premises or the Building except as herein
expressly set forth.
SECTION 10.11 - Changes in Entrances and Other Public Areas:
- -----------------------------------------------------------
Landlord shall have the right at any time and from time to time, whether
before or after the completion of the Building, without thereby creating an
actual or constructive eviction of incurring any liability to Tenant therefor,
to change the arrangement or location of such of the following as are not
contained within the Demised Premises or any part thereof: entrances,
passageways, doors and doorways, corridors, stairs, toilets and other public
service portions of the Building provided that such changes do not unreasonably
interfere with Tenant's use of the Premises. Landlord shall also have the right
at any time and from time to time to change the entrances, exits, parking areas,
driveways, walks, exterior lighting, landscaping and other common areas of the
Parcel without creating an actual or constructive eviction or incurring any
liability to Tenant therefor provided that such changes do not unreasonably
interfere with Tenant's use-of the Premises.
SECTION 10.12 - Risk of Loss or Damage to Personal Property, Etc.:
- -----------------------------------------------------------------
Supplementing the provisions of Section 7.1.9 hereof and without limiting
the generality of said Section 7.1.9, it is agreed that all personal property at
any time placed or kept within the Demised Premises shall be placed or kept
therein at the risk of the Tenant or other owner thereof; that Landlord shall
not be liable for any theft or loss of any personal property placed or kept
within the Demised Premises unless such theft or loss is due to the fault and/or
negligence of Landlord, its agents, representatives or invitees; and that
Landlord shall not be liable to Tenant or to any other person whomsoever for any
damage to any personal property at any time placed or kept within the Demised
Premises arising from the bursting or leaking of water pipes unless such
bursting or leaking is due to the fault and/or negligence of Landlord, its
agents, representatives or invitees, or from any negligence of any tenant or
occupant of space within the Building.
SECTION 10.13 - RULES AND REGULATIONS:
- -------------------------------------
Tenant, its employees, agents, visitors and invitees shall comply with all
reasonable rules and regulations Landlord may adopt from time to time for
operation of the Building and the Parcel and the protection and welfare of the
Building, its tenants, visitors and occupants. Any rules and regulations shall
become a part of this Lease and Tenant hereby agrees to comply with
26
<PAGE>
the same upon delivery of a copy thereof to Tenant, providing the same do not
unreasonably interfere with or deprive Tenant of its rights established under
this Lease or its lawful use of the Premises.
SECTION 10.14 - Real Estate Commissions:
- ---------------------------------------
Landlord and Tenant each warrant and represent to the other that no real
estate brokers were involved on its behalf in negotiating or consummating this
Lease, other than Landlord's broker, Frank L. Smith Co., and Tenant's broker.
Cherry and Associates, and each agrees to indemnify and hold the other party
harmless from and against any and all claims for any other brokerage commissions
arising out of any communications or negotiations had by such party with any
other brokers regarding the Premises and/or the consummation of this Lease.
Landlord shall pay within thirty (30) days of the Commencement Date of the
Lease a cash-out commission equal to four percent (4%) to Cherry and Associates
and a cash-out commission equal to two percent (2%) to Frank L. Smith Co., of
the gross rentals to be received by Landlord during the Term of the Lease.
Tenant acknowledges that it shall be responsible for the unamortized portion of
said commissions payable by Landlord hereunder in the event Tenant exercises its
right of termination as set forth in Section 2.2 herein.
SECTION 10.15 - Attorney's Fees:
- -------------------------------
In the event either Landlord or Tenant is required to retain an attorney to
bring any action to enforce or construe any of the terms, provisions or
covenants of this Lease, such party shall be entitled to the recovery of
reasonable attorney's fees and expenses from the other so long as such party is
the prevailing party in such action.
IN WITNESS WHEREOF, Landlord and Tenant have hereunto executed this Lease
as of this 7th day of November, 1996.
LANDLORD:
Date: 11/07/96 500 CHURCH STREET, L.P.
----------------
By: GRACE DEVELOPMENT, INC.,
Its: General Partner
By: /s/ John R. Grace, V.P.
------------------------------------------
John R. Grace, Vice President
TENANT:
Date: 11/07/96 CITYSEARCH, INC.
----------------
By: [SIGNATURE ILLEGIBLE]
------------------------------------------
Its: [SIGNATURE ILLEGIBLE]
-----------------------------------------
27
<PAGE>
RULES AND REGULATIONS
---------------------
1. No sign, advertisement, display, notice, or other lettering or picture
shall be exhibited, inscribed, painted or affixed on any part of the
outside of the Office Building or inside, if visible from the outside,
without Landlord's written consent.
2. No awning or other projection shall be attached to the outside walls of the
Premises or the Office Building without, in each instance, the prior
written consent of Landlord.
3. All loading and unloading of goods shall be done only at such times, in the
areas and through the entrances designated for such purposes by Landlord.
4. No loudspeakers, television sets, phonographs, radios or other devices
shall be used in a manner so as to be heard or seen outside of the Premises
without the prior written consent of the landlord.
5. No auction, fire, bankruptcy, second-hand or going-out-of-business sales or
other promotions or sales (except for periodic sales in the normal course
of business) shall be conducted on or about the Premises without the prior
written consent of the landlord.
6. Tenant shall keep the Premises at a temperature sufficiently high to
prevent freezing of water in pipes and fixtures.
7. The corridors immediately adjoining the Premises shall not be obstructed by
the Tenant, and Tenant shall not place or permit any obstructions in such
areas or in the stairwells.
8. Tenant shall not operate any coin or token operated vending machine or
similar device for the sale of any goods, wares, merchandise, food,
beverages, or services, including but not limited to, pay telephones, pay
lockers, scales, amusement devices and machines for the sale of beverages,
foods, chewing gum, candy, cigarettes or other commodities without the
prior written consent of the Landlord.
9. Tenant shall not suffer, allow or permit any vibration, noise, light, odor
or other effect to emanate from the Premises, or from any machine or other
installation therein, or otherwise suffer, allow or permit the same to
constitute a nuisance or otherwise interfere with the safety, comfort or
convenience of Landlord or any of the other occupants of the Office
Building or their customers, clients, agents or invitees or any others
lawfully in the Office Building. Tenant shall not store gasoline, kerosene,
or any inflammable or combustible or hazardous substance on the Premises
without the prior written consent of Landlord. Upon notice by Landlord to
Tenant that any of the aforesaid is occurring, Tenant agrees to forthwith
remove or control the same.
10. Tenant shall not go onto the roof without the express written consent of
Landlord obtained first in each instance.
28
<PAGE>
11. Tenant's entry doors shall at all times, except when in actual use, be kept
closed.
12. No furniture, freight or equipment of any kind shall be brought into or
removed from the Premises without the consent of Landlord, except that
Tenant shall have the right to move furniture and equipment into the leased
portion of the Office Building without the express consent of Landlord; and
all moving of same into or out of Premises, by Tenant, shall be done at
such time and in such manner as Landlord shall designate. Landlord shall
have the right to prescribe the weight, size and position of all safes and
other heavy property brought into the Premises, and also the times and
manner of moving the same in and out of the premises. Landlord shall not be
responsible for loss or damage to any such safe or property from any cause;
but all damage done to the Premises by moving or maintaining any such safe
or property shall be repaired at the expense of Tenant by contractors or
mechanics named by Landlord.
13. Tenant shall not alter any lock or install any new additional locks or
bolts on any door of the premises, without the express written consent of
Landlord.
14. Tenant agrees not to have duplicate keys made without the consent of
Landlord. Upon termination of the Lease, Tenant shall surrender all keys,
provided, however, that the surrender of such keys shall not in itself be
considered as a termination of the Lease or a surrender of the Premises.
15. Landlord or Landlord's representative shall not be liable for excluding any
person from the Office Building who is intoxicated or under the influence
of liquor or drugs or who shall in any manner do any act in violation of
any of the rules and regulations of the Office Building.
16. Doors of the Premises are to be closed and securely locked when Tenant
closes, and Tenant must observe strict care and caution that all water
faucets and other apparatus (other than computers and facsimile machines)
are regulated and monitored to prevent waste and damage before Tenant's
employees leave the Premises, and that all electricity, gas or air shall
likewise be carefully monitored to prevent waste or damage.
17. Tenant shall not disturb, solicit or canvas any occupancy of the Office
Building and shall cooperate to prevent the same.
29
<PAGE>
EXHIBIT "A"
(PROPERTY DESCRIPTION)
BEING A PARCEL OF LAND IN THE FIRST CIVIL DISTRICT OF DAVIDSON COUNTY,
TENNESSEE, LOCATED ON CHURCH STREET BETWEEN FIRST AVENUE NORTH AND SECOND
AVENUE NORTH, BEING PART OF LOT NO.12 IN THE ORIGINAL TOWN OF NASHVILLE, NOT OF
RECORD, AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT THE POINT OF INTERSECTION OF THE WESTERLY MARGIN OF FIRST
AVENUE NORTH AND THE SOUTHERLY MARGIN OF CHURCH STREET, THENCE WITH SAID MARGIN
OF FIRST AVENUE NORTH S 27 degrees 02' OO" E 78.30 FEET TO THE OUTSIDE EDGE
(CORNER) OF BUILDING; THENCE LEAVING SAID MARGIN S 62 degrees 38' 00" W 208.76
FEET, TO THE EASTERLY MARGIN OF SECOND AVENUE NORTH; THENCE WITH SAID MARGIN N
27 degrees 01' 00" W 18.85 FEET TO A POINT, SAID POINT BEING 59.1 FEET SOUTH OF
THE SOUTHERLY MARGIN OF CHURCH STREET; THENCE LEAVING SAID SECOND AVENUE NORTH,
N 62 degrees 32' 00" E 103.00 FEET TO A POINT; THENCE N 27 degrees 01' 00" W
59.07 FEET TO THE SOUTHERLY MARGIN OF CHURCH STREET; THENCE WITH SAID MARGIN N
62 degrees 32' 00" E 105.74 FEET TO THE POINT OF BEGINNING, CONTAINING 10,221
SQUARE FEET OR 0.23 ACRES MORE OR LESS, DESCRIBED ACCORDING TO THE SURVEY DATED
OCTOBER 25, 1994 PREPARED BY HOWARD W ANDERSON, TENNESSEE NO.527, A & A
ENGINEERS, INC., P.O. BOX 40048, NASHVILLE, TENNESSEE 37204, JOB NO. 5321-94.
<PAGE>
EXHIBIT "B"
SPACE PLAN
----------
[TO BE ATTACHED]
31
<PAGE>
EXHIBIT "C"
DESCRIPTION OF LANDLORD'S WORK
------------------------------
Landlord represents and warrants that the Landlord's Work on the Demised
Premises as described herein will be completed pursuant to applicable building
codes administered in Nashville, Davidson County, Tennessee as of the date of
the issuance of the use and occupancy permit for the Demised Premises.
<PAGE>
EXHIBIT 10.13
STANDARD FORM OF LEASE
AERIAL CENTER EXECUTIVE PARK
LEASE SUMMARY
LESSOR: Pizzagalli Investment Company
-----------------------------------------------------------------------
LESSOR'S ADDRESS: 50 Joy Drive, P. O. Box 2009
---------------------------------------------------------------
South Burlington Vermont 05403
----------------------------------------------------------------
LESSEE: PerfectMarket, Inc.
-------------------------------------------------------------------------
LESSEE'S ADDRESS (FOR NOTICE AND BILLING):______________________________________
4502 Dyer Street, Suite 201 La Crescenta. California 91216
- --------------------------------------------------------------------------------
LESSEE'S REPRESENTATIVE: Thomas Layton
-------------------------------------------------------
BUILDING: 3000 Aerial Center, Suite 140
-----------------------------------------------------------------------
RENTABLE SQUARE FEET OF LESSEE'S SPACE: 3,900
-----------------------------------------
RENTABLE SQUARE FEET OF BUILDING: 50,900
-----------------------------------------------
TERM COMMENCEMENT DATE: June 1, 1996
---------------------------------------------------------
TERM EXPIRATION DATE: May 31, 2001 APPROXIMATE TERM: 60 Months
--------------- ---------------------------
<TABLE>
<CAPTION>
BASE RENT SCHEDULE:
BASE RATE RENT/ BASE MONTHLY
YEAR SQ.FT. RENT
---- ----- ----
<S> <C> <C>
1 $13.50 $4,387.50
2 $13.91 $4,519.13
3 $14.32 $4,654.70
4 $14.75 $4,794.34
5 $15.19 $4,938.17
</TABLE>
ESCALATIONS: N.A.
--------------------------------------------------------------------
SECURITY DEPOSIT: $4,387.50
---------------------------------------------------------------
PERMITTED USES: General Office Use
-----------------------------------------------------------------
EXHIBITS:
Exhibit A Floor Plan of the Premises
Exhibit B Master Plan
Exhibit C Work Letter
Exhibit D Rules and Regulations
Exhibit E Janitorial Schedule
Exhibit F Renewal Option
Exhibit G Additional Provisions
i
<PAGE>
TABLE OF CONTENTS
AERIAL CENTER EXECUTIVE PARK
<TABLE>
<CAPTION>
PAGE
<S> <C>
Article 1. Premises 1
Article 2. Term 1
Article 3. Rent 1
Article 4. Permitted Uses 2
Article 5. Acceptance of Premises; Repairs; Alterations 2
Article 6. Maintenance 2
Article 7. Assignment 2
Article 8. Termination not to affect liability for rent 3
Article 9. Signs 3
Article 10. Removal of Fixtures 3
Article 11. Attorney's Fees 3
Article 12. Loss of personal property 3
Article 13. Comply with laws 3
Article 14. Duty to keep Premises is good order 3
Article 15. Entire agreement herein 4
Article 16. Remedies cumulative; Nonwaiver 4
Article 17. Rental Adjustment for Services and Taxes 4
Article 18. Services by Lessor 4
Article 19. Lessee's Obligations 5
Article 20. Exculpation of personal liability 6
Article 21. Self-help by Lessor 7
Article 22. Lessor's rights 7
Article 23. Subordination; Mortgagee's Rights 7
Article 24. Damage to property; eminent domain 8
Article 25. Default and remedies 8
Article 26. Captions 9
Article 27. Lessor's right to sell 9
Article 28. Joint and several liability 9
Article 29. Liability insurance 9
Article 30. Fire Insurance 9
Article 31. Lease not to be recorded 9
Article 32. Severability 9
Article 33. Notice 9
Article 34. Mortgagee approval 10
Article 35. Indemnification 10
Article 36. Relocation 10
Article 37. Riders and Exhibits 10
</TABLE>
ii
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF WAKE
STANDARD FORM OF LEASE
AERIAL CENTER EXECUTIVE PARK
----------------------------
THIS AGREEMENT dated this 8 day of May, 1996, by and between Pizzagalli
Investment Company, a Vermont general partnership having an office at 50 Joy
Drive, Post Office Box 2009, South Burlington, Vermont 05407-2009 (hereinafter
called "Lessor") and PerfectMarket, Inc., a California corporation with its
principal office at 4502 Dyer St., # 201 La Crescenta, CA, 91214 (hereinafter
called "Lessee")
W I T N E S S E T H
ARTICLE 1. PREMISES: (a) The Lessor does hereby rent and lease to
---------
the Lessee and the Lessee does hereby rent and lease from the Lessor certain
space described on the attached Exhibit A (hereinafter called "Premises")
located in a building known as 3000 Aerial Center, Suite 140, Morrisville, North
Carolina 27560 (hereinafter called the "Building"), together with the right (i)
of ingress and egress to the Premises through designated areas and under
conditions approved by the Lessor and (ii) to use the designated parking lot in
common with others. No easement for light or air is granted hereunder.
(b) For all purposes of this lease, the Premises shall be deemed to
Contain 3,900 square feet of rentable floor area and said Building shall be
deemed to contain a total of 50,900 square feet of rentable floor area.
ARTICLE 2. TERM: To have and to hold said Premises for a term
-----
commencing on June 1, 1996, and, unless sooner terminated as herein provided,
extending through May 31, 2001.
ARTICLE 3. RENT: (a) Lessee hereby agrees and covenants to pay to
-----
the Lessor as rental for the Premises in advance on the first day of each month
during the term hereof the "base rent schedule" as follows:
<TABLE>
<CAPTION>
BASE RENT/ BASE MONTHLY
YEAR SQ.FT. RENT
---- ------ ----
<S> <C> <C>
1 $ 13.50 $ 4,387.50
2 $ 13.91 $ 4,519.13
3 $ 14.32 $ 4,654.70
4 $ 14.75 $ 4,794.34
5 $ 15.19 $ 4,938.17
</TABLE>
said base rent to be prorated for portions of the calendar month at the
beginning and end of said term and to be paid to Lessor at the address first set
forth above, or at such other place as Lessor shall designate in writing to the
Lessee in the manner provided herein. Said rental shall be paid promptly
without notice or demand and without setoff or deduction of any kind.
(b) Lessee has deposited with Lessor the sum of "Four Thousand Three
Hundred Eighty Seven and Seventeen Cents ($4,387.50)", as security for the full
and faithful performance of every provision of this Lease to be performed by
Lessee. If Lessee defaults with respect to any provisions of this Lease,
including but not limited to the provisions relating to the payment of rent,
Lessor may use, apply or retain all or any part of this security deposit for the
payment of any rent or any other sum in default or for the payment of any other
amount which Lessor may spend or become obligated to spend by reason of Lessee's
default, or to compensate Lessor for any other loss, cost or damage which Lessor
may suffer by reason of Lessee's default. If any portion of said deposit is so
used or applied, Lessee shall, within five (5) days after written demand
therefore, deposit cash with Lessor in an amount sufficient to restore the
security deposit to its original amount and Lessee's failure to do so shall be a
breach of this
<PAGE>
Lease. Lessor shall not, unless otherwise required by law, be required to keep
this security deposit separate from its general fund, nor pay interest to its
Lessee. If Lessor is required to maintain said deposit in an interest bearing
account, Lessor will retain the maximum amount permitted under applicable law as
a bookkeeping and administrative charge. If Lessee 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 Lessee (or, at Lessor's
option, to the last transferee of Lessee's interest hereunder) at the expiration
of the Lease term and upon Lessee's vacation of the Premises. In the event the
Building is sold, the security deposit will be transferred to the new owner, and
the Lessor named herein shall have no further liability in connection therewith.
(c) Any payment of rent or other sum due hereunder not received by
Lessor by the first (1st) day of the month shall be subject to a late payment
charge of eighteen (18%) percent per annum from the due date to the date of
payment or $15.00, whichever is greater.
ARTICLE 4. PERMITTED USES: (a) Lessee shall use and occupy the
---------------
Premises for the following described purposes and for none other:
GENERAL OFFICE USE.
(b) The Premises shall not be used for any illegal purpose, nor in
violation of any valid regulation of any governmental body, nor in any manner to
create any nuisance or trespass, nor in any manner to vitiate the insurance or
increase the rate of insurance on the Premises or on the Building.
(c) In the event that Lessee fails to comply with this provision, then
(i) Lessee shall reimburse Lessor, as additional rent hereunder, for that
portion of all insurance premiums previously or thereafter paid by Lessor which
shall have been charged because of such failure by Lessee to so comply, such
payment to be made within thirty days after payment of charges by Lessor, and
(ii) Lessor may exercise any other remedy provided for herein with respect to
default by Lessee.
ARTICLE 5. ACCEPTANCE OF PREMISES; REPAIRS; ALTERATIONS: The
---------------------------------------------
Lessee, by taking possession of the Premises, shall accept and shall be held to
have accepted same as suitable for the use intended by the Lessee. The Lessor
shall not be required, after possession of the Premises has been delivered to
the Lessee, to make any repairs or improvements to the Premises, except repairs
necessary for safety and tenantability and customary office or building
maintenance. The Lessee shall make no alterations in, or additions to, the
Premises, without first obtaining in writing the Lessor's written consent for
such alterations or additions, which such alterations or additions shall be at
the sole cost and expense of the Lessee. In connection therewith, Lessee shall
comply with all applicable rules, regulations, laws, or orders of any
governmental authority, or any rules or conditions established by Lessor or
Lessors insurance carrier.
ARTICLE 6. MAINTENANCE: Lessee shall, at its own expense, keep and
------------
maintain the said Premises and appurtenances and every part thereof in good
order and repair except portions of the Premises to be repaired by the Lessor
under the terms of Article 5 above. Lessee shall at once report in writing to
Lessor any defective condition known to him which the Lessor is required to
repair, and the failure to so report shall make the Lessee responsible for
damages resulting from such defective condition.
ARTICLE 7. ASSIGNMENT: Lessee shall not, without the prior written
-----------
consent of Lessor, assign this Lease, or any interest thereunder, or sublet the
Premises or any part thereof, or permit the use of the Premises by any party
other than the Lessee. Consent to one assignment or sublease shall not destroy
or waive this provision, and all later assignments and subleases shall
<PAGE>
likewise be made only on the prior written consent of the Lessor. Subtenants or
assignees shall be liable to the Lessor for all obligations of the Lessee
hereunder. Provided however, that notwithstanding such consent at any time
given, the Lessee shall remain as fully liable hereunder as if no subletting had
taken place. Provided further, that Lessor, prior to such subletting, shall have
the right to require that all (or any portion) of the Premises which Lessee
proposes to sublease or as to which Lessee proposes to assign this Lease (if the
subtenant or assignee is not an entity controlled by the same interest which
controls Lessee) be surrendered to Lessor for the term of the proposed sublease
or assignment in consideration of the appropriate prorata adjustment of, or
cancellation of, the Lessee's obligations hereunder.
ARTICLE 8. TERMINATION NOT TO AFFECT LIABILITY FOR RENT: No
---------------------------------------------
termination of this lease prior to the normal ending thereof, by lapse of time
or otherwise, shall affect Lessor's right to collect rent for the period prior
to the termination thereof.
ARTICLE 9. SIGNS: Lessee shall not paint or place any signs,
------
displays, advertising devices, or other things upon the windows of the Premises
or at any other location in, upon or about the Premises or the Building which
are visible from outside of the Premises or the Building. Lessee may, however,
erect a suitable sign at the door to its Premises, the design, construction, and
erection procedure of which shall first be approved in writing by the Lessor,
which approval shall not be unreasonably withheld. Lessee acknowledges that
Lessor may from time to time erect and maintain signs to identify the Building
or signs displaying the name or logotype of another lessee of the Building;
provided, however, that no such signs shall obstruct any window of the Premises.
Lessee shall also have the right, at Lessor's expense, to include its name in a
common directory in the lobby of the Building.
ARTICLE 10. REMOVAL OF FIXTURES: Lessee may (if not in default
--------------------
hereunder) prior to the expiration of this Lease, or any extension thereof,
remove all fixtures and equipment which it has placed in the Premises provided
that Lessee repairs all damages to the Premises caused by such removal.
ARTICLE 11. ATTORNEY'S FEES: If Lessee defaults and any rent owing
----------------
under this Lease is collected by or through an Attorney at Law, Lessee agrees to
pay all reasonable attorneys' fees and related costs of collection.
ARTICLE 12. LOSS OF PERSONAL PROPERTY: Lessee agrees that all
--------------------------
personal property brought into the Premises shall be at the risk of the Lessee
only and the Lessor shall not be liable for theft thereof or any damage thereto
occasioned from any acts of cotenants or other occupants of said Building or any
other person.
ARTICLE 13. COMPLY WITH LAWS: Lessee agrees that it will promptly
-----------------
comply at its own expense with all requirements of any governmental authority
having competent jurisdiction, which requirements are made necessary by reason
of Lessee's occupancy of said Premises.
ARTICLE 14. DUTY TO KEEP PREMISES IN GOOD ORDER: Lessee hereby
------------------------------------
covenants and agrees to keep the Premises in as good order, repair and condition
as the same are in as of the commencement of the term hereof, or may be put in
thereafter, damage by fire or unavoidable casualty and reasonable wear and tear
excepted; and at the termination hereof, to peaceably yield up said Premises and
all additions, alterations, and improvements thereto in such good order, repair
and condition leaving the Premises clean, neat and tenantable. If Lessor in
writing permits Lessee to leave any such goods and chattels in the Premises, and
the Lessee does so, Lessee shall have no further claims and rights in such goods
and chattels as against the Lessor or those claiming by, through or under the
lessor.
<PAGE>
ARTICLE 15. ENTIRE AGREEMENT HEREIN: This Lease contains the entire
------------------------
agreement of the parties and no representations, inducements, promises or
agreements between the parties not embodied herein shall be of any force or
effect.
ARTICLE 16. REMEDIES CUMULATIVE; NONWAIVER: No remedy herein or
-------------------------------
otherwise conferred upon or reserved to Lessor or Lessee shall be considered
exclusive of any other remedy, but the same shall be distinct, separate and
cumulative and shall be in addition to every other remedy given hereunder, or
now or hereafter existing at law or in equity; and every power and remedy given
by this Lease may be exercised from time to time as often as occasion may arise
or as may be deemed expedient. No delay or omission of Lessor to exercise any
right or power arising from any default on the part of Lessee shall impair any
such right or power, or shall be construed to be a waiver of any such default,
or an acquiescence therein. The acceptance of rent by Lessor with knowledge of a
default by Lessee hereunder shall not constitute a waiver of such default.
****
ARTICLE 18. SERVICES BY LESSOR: (a) Lessor covenants and agrees to
-------------------
furnish services to the Premises as follows:
(2) Water for ordinary drinking, cleaning, lavatory and toilet
facilities.
(3) Cleaning and janitor service.
<PAGE>
(4) Maintenance and repair of the Building in a safe and tenantable
condition, except maintenance and repair which is the obligation of the Lessee
hereunder or with respect to which the Lessor is specifically excused from
responsibility; provided, however, that any such maintenance or repairs made
necessary by fault or neglect of the Lessee or the employees and visitors of the
Lessee shall be at the expense of the Lessee and Lessee shall pay all costs
thereof.
(5) Window washing.
(b) Lessor shall not be liable to anyone for interruption in or
cessation of any service rendered to the Premises or Building or agreed to by
the terms of this Lease, due to any accident, the making of repairs, alteration
or improvements, labor difficulties, trouble in obtaining fuel, electricity
service or supplies from the sources from which they are usually obtained for
said Building, or any cause beyond the lessor's control, except to the extent
that the liability of the Lessor is insured by virtue of a general comprehensive
Lessor's public liability insurance policy, which the Lessor agrees to maintain
on the Building.
(c) In the event Lessee wishes to provide outside services for the
Premises over and above those services to be provided by Lessor as set forth
herein, Lessee shall first obtain the prior written approval of Lessor for the
installation and/or utilization of such services, which approval shall not be
unreasonably withheld. "Outside services" shall include but shall not be limited
to cleaning and moving services, television and so-called "canned music"
services, security services, catering services and the like. In the event Lessor
approves the installation and/or utilization of such services, such installation
and utilization shall be at Lessee's sole cost, risk and expense.
****
ARTICLE 19. LESSEE'S OBLIGATIONS: Lessee covenants and agrees as
---------------------
follows:
(1) to pay, when due, all rents and other charges set forth herein;
all charges for electricity, gas, telephone and other communications systems
used at, supplied to, or furnished to the Premises; Lessor to provide initial
(1) lamps, ballasts and bulbs.
(2) not to place a load upon any floor of the Premises in excess of 80
pounds live load per square foot or in violation of what is allowed by law.
(3) that, without limitation of any other provision herein, the Lessor
and its employees shall not be liable for any injuries to any person or damages
to property due to the Building, or any part thereof, or any appurtenance
thereof, becoming out of repair or due to the happening of any accident in or
about the Building or the Premises or due to any act or neglect of any lessee of
the Building or of any employee or visitor of any lessee. Without limitation,
this provision shall apply to injuries and damage caused by nature, rain, snow,
ice, wind, water, steam, gas, or odors in any form or by the bursting or leaking
of windows, doors, walls, ceilings, floors, pipes, gutters, or other fixtures;
and to damage caused to fixtures, furniture, equipment and the like
<PAGE>
situated in the Premises, whether owned by the Lessee or others. Provided
however, that Lessor shall be liable for its negligence and the negligence of
its employees to the extent that liability of the Lessor is insured by virtue of
a Lessor's general comprehensive public liability insurance policy, which the
Lessor agrees to maintain on the Building.
(4) to permit Lessor or its agents to examine the Premises at
reasonable times and, if Lessor shall so elect, to make any repairs or additions
Lessor may deem necessary and, at Lessee's expense, to remove any alterations,
signs, drapes, curtains, shades, awnings, aerials, flagpoles, or the like, not
consented to in writing.
(5) to permit Lessor to show the Premises to prospective purchasers,
mortgagees and to prospective lessees of the Building.
(6) to permit Lessor at any time or times to decorate and to make, at
its own expense, repairs, alterations, additions, improvements, structural or
otherwise, in or to the Building or any part thereof, and during such operations
to take into and through the Premises or any part of the Building all materials
required and to close or temporarily suspend operation of entrances, doors,
corridors, elevators or other facilities, Lessor agreeing, however, that it will
carry out such work in a manner which will cause minimum inconvenience and
interference to the business of the Lessee.
(7) not to install any vending machines or food services equipment in
or upon the Premises without first obtaining Lessor's written consent, which
consent shall not be unreasonably withheld.
(8) not to permit any employee of the Lessee to violate any covenant
or obligation of Lessee hereunder.
(9) not to suffer or permit any lien of any nature or description to
be placed against the Building, the Premises, or any portion thereof, and, in
the case of any such lien attaching by reason of the conduct of Lessee, to
immediately pay and remove the same. This provision shall not be interpreted as
meaning that the Lessee has any authority or power to permit any lien of any
nature or description to attach to or be placed upon the Lessor's title or
interest in the Building, the Premises, or any portion thereof.
(10) to keep the Premises equipped with all safety appliances required
by law or public authority because of the use made by the Lessee of the
Premises.
(11) to use electric current in such manner as not to overload the
Building's wiring installation and not to use any electrical equipment which in
Lessor's opinion, reasonably exercised, will overload such installations or
interfere with the use thereof by other lessees in the Building.
ARTICLE 20. EXCULPATION OF PERSONAL LIABILITY: It is agreed that none
----------------------------------
of the partners who constitute the Lessor here-under, nor any person having a
beneficial interest in the Premises or the Building, shall be personally liable
under this Agreement in any way whatsoever to the Lessee, and the Lessee shall
be entitled to make claim, for any liability it is alleged to have suffered,
only against the Lessor's property. Furthermore, if Lessor, or any successor in
interest of Lessor, shall be a mortgagee in possession, or an individual, joint
venture, trust, tenancy in common, corporation or partnership, general or
limited, it is specifically understood and agreed that there shall be absolutely
no personal liability on the part of such mortgagee in possession, or such
individual or on the part of the stockholders of such corporation or the members
of such partnership or joint venture or the beneficiaries of such trust with
respect to any of the terms, covenants and conditions of this lease, and Lessee
shall look solely to the equity of Lessor, or such successor in interest, in the
estate of Lessor in the Premises for the satisfaction of each and every remedy
of Lessee in the event of any breach by Lessor, or by such successor in
interest, of any of the terms, covenants and condi-
<PAGE>
tions of this Lease to be performed by Lessor, such exculpation of personal
liability to be absolute and without any exception whatsoever.
ARTICLE 21. SELF-HELP BY LESSOR: If the Lessee shall at any time
--------------------
breach or default in the performance of any of the obligations of Lessee under
this Lease, Lessor shall have the right to enter upon the Premises and to
perform such obligation of the Lessee including the payment of money and the
performance of any other act. All sums paid by the Lessor and all necessary
incidental costs and expenses in connection therewith shall be deemed to be
additional rent under this Lease and shall be payable to Lessor immediately upon
demand.
ARTICLE 22. LESSOR'S RIGHTS: Lessor may, without limitation of
----------------
anything elsewhere herein contained:
(1) designate and change the name and street address of the Building;
provided however that the Lessor shall first give reasonable notice thereof to
the Lessee.
(2) designate, restrict and control all sources from which Lessee may
obtain maintenance services for the Premises and any service in or to the
Building and its tenants.
(3) retain and use in appropriate instances keys to all doors within
and into the Premises. No locks shall be changed by Lessee without the prior
written consent of the Lessor.
****
(5) enter upon the Premises and exercise any and all of Lessor's
rights without being deemed guilty of any eviction or disturbance of Lessee's
use or possession and without being liable in any manner to Lessee.
(6) establish such reasonable rules and regulations, as described on
the attached Exhibit D for the conduct and operation of the Premises and the
Building as are not inconsistent with the express terms of this Lease.
(7) change the arrangement and/or location of public entrances,
doorways, doors, passageways, corridors, elevators, toilets, stairs, or other
public parts of the Building.
ARTICLE 23. SUBORDINATION; MORTGAGEE'S RIGHTS: (A) Lessee agrees, at
----------------------------------
the request of Lessor, to subordinate this Lease to any mortgage or mortgages
placed upon the Premises by Lessor and to any ground or underlying leases and,
if required by the mortgagee or mortgagees, or such ground or underlying lessor,
to agree not to prepay rent more than ten (10) days in advance, provided such
mortgagee or lessor shall agree that, in the event such holder takes possession
of the Premises or forecloses such mortgage or takes a deed in lieu of
foreclosure, or terminates its ground or underlying lease, Lessee shall continue
its occupancy of the Premises in accordance with the terms and provisions of
this Lease so long as Lessee shall then recognize such holder as Lessor
hereunder and continue to pay the rent when due and otherwise punctually perform
all Lessee's obligations hereunder.
(b) Lessee agrees that it will not cancel or terminate this Lease by
reason of any act, omission, breach or default by Lessor, or for any other cause
except the normal expiration hereof, without first giving written notice of such
act, omission, breach or default to any mortgagee of the Building or ground or
underlying
<PAGE>
lessor and affording such party the opportunity to remedy such act, omission,
breach or default within ten (lO) days from receipt of such written notice or
within such longer time as may be reasonably necessary under the circumstances.
ARTICLE 24. DAMAGE TO PROPERTY; EMINENT DOMAIN: If the Premises or
-----------------------------------
Building, or any substantial part thereof, shall be taken by any exercise of the
right of eminent domain or shall be destroyed or damaged by fire or unavoidable
casualty or by action of any public or other authority, or shall suffer any
direct consequential damage for which Lessee and Lessor, or either of them,
shall be entitled to compensation by reason of anything done in pursuance of any
public or other authority during this Lease or any extension thereof, then this
Lease shall terminate at the election of Lessor which election may be made
whether or not Lessor's entire interest has been divested; and if Lessor shall
not so elect, then in case of such taking, destruction or damage rendering the
Premises unfit for use and occupation, a just proportion of said rent according
to the nature and extent of the injury shall be abated until the Premises, or in
the case of a partial taking, what may remain thereof, shall have been put in
proper condition for use and occupation. Lessor reserves and accepts all rights
to damages to said Premises and Building and the leasehold hereby created,
accrued or substantially accruing by reason of anything lawfully done in
pursuance of any public, or other authority; and by way of confirmation, Lessee
grants to Lessor all Lessee's rights to such damages and covenants to execute
and deliver such further instruments of assignment thereof as Lessor may from
time to time request. Lessor shall give Lessee notice of its decision to
terminate this Lease or restore said Premises within two (2) days after any
occurrence giving rise to Lessor's right to so terminate or restore.
ARTICLE 25. DEFAULT AND REMEDIES: (a) If Lessee shall continue in
---------------------
default in the payment of any rental or other sum of money becoming due
hereunder for a period of 10 days after written notice of such default has been
given to Lessee, or if Lessee shall default in the performance of any other of
the terms, conditions, or covenants contained in this Lease to be observed or
performed by it and does not remedy such default within 30 days after written
notice thereof or does not within such 30 days commence such act or acts
promptly, or if Lessee shall become bankrupt or insolvent, or file any debtor
proceedings, or file in any court pursuant to any statute, either of the United
States or of any State a petition in bankruptcy or insolvency or for
reorganization, or file or have filed against it a petition for the appointment
of a receiver or trustee for all or substantially all of the assets of Lessee
and such appointment shall not be vacated or set aside within 15 days from the
date of such appointment, or if Lessee makes an assignment for the benefit of
creditors, or petitions for or enters into an arrangement, or if Lessee shall
abandon the Premises or suffer the Lease to be taken under any writ of execution
and such writ is not vacated or set aside within 15 days, then in any such event
the Lessor shall have the immediate right of reentry without resort to legal
proceedings and the right to terminate and cancel this Lease. If Lessor should
elect to reenter as herein provided, or should it take possession pursuant to
legal proceedings, it may either terminate this Lease or it may from time to
time without terminating this Lease, relet the Premises for such term and at
such rentals and upon such other terms and conditions as the Lessor may deem
advisable. If such reletting shall yield rentals insufficient for any month to
pay the rental due by Lessee hereunder for that month, Lessee shall be liable to
Lessor for the deficiency and same shall be paid monthly. No such reentry or
taking possession of the Premises by Lessor shall be construed as an election to
terminate this Lease unless a written notice of such intention be given by
Lessor to Lessee at the time of such reentry; but, notwithstanding any such
reentry and reletting without termination, Lessor may at any time thereafter
elect to terminate this Lease for such previous breach. If as a result of
Lessee's default hereunder, Lessor shall institute legal proceedings for the
enforcement of Lessee's obligations, Lessee shall pay all costs incurred by
Lessor, including
<PAGE>
reasonable attorney's fees.
(b) Lessee shall also pay to Lessor such expenses as Lessor may incur
in connection with reletting including, but not by way of limitation, reasonable
attorney's fees, brokerage and advertising costs, and expenses for keeping the
Premises in good order or for preparing same for reletting.
ARTICLE 26. CAPTIONS: The captions are inserted only as a matter of
---------
convenience and for reference and in no way define, limit or describe the scope
of this Lease nor the intent of any provision hereof.
ARTICLE 27. LESSOR'S RIGHT TO SELL: Lessor shall have the right to
-------------------------
sell, assign, transfer or otherwise alienate its interest in the Building. Upon
such sale, assignment, transfer or alienation, the new owner shall succeed to
all of Lessor's obligations hereunder, and Lessee shall be bound to the new
owner to the same extent as it was bound to Lessor. At such time, Lessor
hereunder shall be entirely freed and relieved of any further obligation or
responsibility under this Lease.
ARTICLE 28. JOINT AND SEVERAL LIABILITY: If Lessee is more than one
----------------------------
person or party, Lessee's obligations shall be joint and several. Unless
repugnant to the context, "Lessor" and "Lessee" mean the person or persons,
natural or corporate, named above as Lessor and Lessee respectively, and their
respective heirs, executors, administrators, successors and assigns.
ARTICLE 29. LIABILITY INSURANCE: Lessee shall procure and maintain
-------------------
during the term of this Lease comprehensive general liability insurance written
by good and solvent insurance companies licensed to do, and doing, business in
North Carolina and reasonably acceptable to Lessor, naming Lessor as an
additional insured, with limits of not less than $1,000,000 for injury or death
to any one person and not less than $1,000,000 for injuries or deaths arising
out of any one occurrence. Copies of such policies or certificates thereof,
together with evidence of payment of premiums, shall be furnished to the Lessor.
Such insurance policies shall provide that the insurance company agrees not to
cancel or modify the coverage without first giving thirty (30) days advance
written notice to Lessor. If the term of this Lease (including any renewal
options) exceeds five (5) years, the aforesaid limits shall be doubled after the
fifth lease year.
ARTICLE 30. FIRE INSURANCE: It is acknowledged and understood by the
--------------
parties hereto that such insurance for fire and extended coverage as Lessor
elects to purchase shall be for the sole benefit of the Lessor, and that such
insurance shall not cover Lessee's personal property, trade fixtures, leasehold
improvements, and other appurtenances, and that in the event of damage to or
loss of any such items, Lessor shall have no obligation to repair or replace
same. Lessor and Lessee hereby release and waive all right of recovery against
each other or any one claiming through or under each of them by way of
subrogation or otherwise and arising out of any loss by fire or other similar
casualty.
ARTICLE 31. LEASE NOT TO BE RECORDED: Lessor and Lessee agree that
-------------------------
this Lease shall not be recorded. Lessor and Lessee shall enter into a
Memorandum of Lease in recordable form.
ARTICLE 32. SEVERABILITY: If any provision of this Lease or its
------------
application to any person or circumstances shall to any extent be invalid or
unenforceable, the remainder of this Lease or the application of such provision
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby and each provision of this Lease
shall be valid and enforceable to the fullest extent permitted by law.
ARTICLE 33. NOTICE: Any notice required to be given by the terms
-------
hereof shall be deemed duly served if sent by certified mail, return receipt
requested, through the United States
<PAGE>
Postal Service, if to Lessee at said premises after the term of this Lease has
commenced and prior thereto at:
PERFECTMARKET, INC.
4502 Dyer St., #201
La Crescenta, CA 91214
or to the Lessor at the place from time to time established for the payment of
rent in accordance with Article 3 hereof, or to either party at such place as
may, from time to time, be established in the manner aforesaid.
ARTICLE 34. MORTGAGES APPROVAL: This Lease is subject to the approval
------------------
of Lessor's mortgagee, and the parties agree hereby to execute an amendment to
the Lease, in such form as said mortgagee might reasonably require, in the event
that any technical changes are required. It is understood that any such changes
will not affect such substantive items as the rent or term provided for herein.
ARTICLE 35. INDEMNIFICATION: Lessee agrees to indemnify and save
----------------
harmless Lessor against all claims for damages to persons or property by reason
of the use or occupancy of the Premises, the Building or Lessor's adjoining land
and all expenses incurred by Lessor on account thereof, including reasonable
attorney's fees and court costs. Lessee further shall be liable for and shall
hold Lessor harmless in connection with damage or injury to Lessor, the
Premises, the Building and the land and property or persons of Lessor's other
tenants, or anyone else, if due to act or neglect of Lessee, or anyone in its
control or employ .
ARTICLE 36. RELOCATION: (a) Lessor shall have the right during the
-----------
term of this Lease to relocate Lessee to other comparable office space within
Aerial Executive Park. Lessor shall give written notice to Lessee of its intent
to relocate Lessee at least three (3) days in advance of the proposed relocation
date. All costs necessitated by the relocation of Lessee shall be borne by
Lessor. All other terms and conditions contained herein shall apply to the
premises to which the Lessee is relocated. Upon such relocation, the parties
shall enter into a new lease in substantially the same form as this Lease.
(b) Lessee may terminate this Lease by giving written notice of intent
to terminate within four (4) days of receipt of notice from lessor to relocate.
If notice is not given as aforesaid, Lessee's right to terminate will be void
and of no further effect .
ARTICLE 37. RIDERS AND EXHIBITS: The following riders and exhibits are
-------------------
hereby incorporated herein by reference and to the extent that any of such
riders or exhibits conflict with any of the foregoing provisions, the provisions
of such riders or exhibits shall prevail:
Exhibit A Floor Plan of the Premises
Exhibit B Master Plan
Exhibit C Work Letter
Exhibit D Rules and Regulations
Exhibit E Janitorial Schedule
Exhibit F Renewal Option
Exhibit G Additional Provisions
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Lease as of the
day and date first written above.
In the presence of: PIZZAGALLI INVESTMENT COMPANY
/s/ [SIGNATURE ILLEGIBLE]
- -------------------------------
/s/ [SIGNATURE ILLEGIBLE] BY /s/ Ronald I. Bouchard
- ------------------------------- -----------------------------
In the presence of: PERFECTMARKET, INC.
/s/ [SIGNATURE ILLEGIBLE]
- ----------------------------- BY /s/ Thomas Layton
_____________________________ -------------------------------
State of Vermont )
(SS
Chitlenden County )
At South Borlington in said County on the 9th day of May, 1996 Ronald I.
Bouchard, Partner of Pizzagalli Investment Company personally appeared and he
executed the above instrument and acknowledged the same to be his free act and
deed and the free act and deed of said Company.
Before me,
/s/ [SIGNATURE ILLEGIBLE]
-----------------------------------
Notary Public
My Commission Expires 2/10/99
State of North Carolina )
(SS
Franklin County )
At Morrisville in said County on the 8th day of May, 1996 Thomas Layton,
of Perfectmarket Inc. personally appeared and he executed the above instrument
and acknowledged the same to be his free act and deed and the free act and deed
of said Company.
Before me,
/s/ [SIGNATURE ILLEGIBLE]
-----------------------------------
Notary Public
My Commission Expires 2/16/99
<PAGE>
EXHIBIT "A"
-----------
[FLOOR PLAN OF THE PREMISES APPEARS HERE]
PERFECTMARKET, INC.
3000 AERIAL CENTER, SUITE 140
3,900 RENTABLE SQUARE FEET
<PAGE>
EXHIBIT "B"
-----------
[MASTER PLAN APPEARS HERE]
PERFECTMARKET, INC.
3000 AERIAL CENTER, SUITE 140
3,900 RENTABLE SQUARE FEET
<PAGE>
EXHIBIT "C"
-----------
WORK LETTER
PERFECTMARKET, INC.
3000 AERIAL CENTER, SUITE 140
3,900 RENTABLE SQUARE FEET
The following above standard work shall be provided by Lessor at its cost and
expense:
OFFICE AREA
- -----------
1) Place new building standard carpet in the entire office area to include
vinyl wall boards. (Lessee will choose carpet type and color)
2) Paint the entire office area. (Lessee will choose paint color)
3) Perform a one time general clean-up of the entire office to include
lighting lenses, windows and the replacing of burned out bulbs.
4) Install 8' X 10' +/- window in space where overhead door was located
installation to be performed no later than June 10, 1996.
5) Electrical outlets and conduit will be installed at 12' intervals on
walls in Open Area #1, Open Area #2 and along the 54" Wall #1, #2 and
#3.
6) Space will be modified per the attached floor plan (Exhibit "A").
SIGNAGE
- -------
1) Building directory sign will be provided at Lessor's expense.
2) Door sign will be provided at Lessee's expense and conform with Aerial
Center's Building Standard.
3) Signage will be made available on the building exterior per the Aerial
Center's Building Standard and will be at Lessee's expense.
<PAGE>
EXHIBIT "D"
-----------
RULES AND REGULATIONS
PERFECTMARKET, INC.
3000 AERIAL CENTER, SUITE 140
3,900 RENTABLE SQUARE FEET
1. The sidewalks, halls, passages, exits, entrances, elevators and stairways
shall not be obstructed by Lessee or used for any purpose other than
ingress and egress to the premises. The halls, passages, exits, entrances,
stairways, balconies and roof are not for use by the general public, and
Lessor shall in all cases retain the right to control and prevent access
thereto by all persons whose presence in the judgement of Lessor may be
prejudicial to the safety, character, reputation or best interests of the
Building and its tenants. Nothing herein contained shall be construed to
prevent such access to persons with whom Lessee conducts business, unless
such persons are engaged in illegal activities. No Lessee and no employees
or invitees of any Lessee shall go upon the roof of the Building.
2. Lessee shall not alter any lock or install any new or additional locks or
bolts on any door of the Premises.
3. No restroom fixture shall be used for any purpose other than that for which
it was constructed; no foreign substance of any kind whatsoever shall be
thrown therein. The expense of any breakage, stoppage or damage resulting
from the violation of the above rule shall be borne by Lessee or employees
or invitees of Lessee.
4. ****
5. Except with the written consent of Lessor, no person or persons other than
those approved by Lessor shall be permitted to enter the Premises or
Building for the purpose of cleaning same. Lessee shall not cause any
unnecessary labor by reason of Lessee's carelessness or indifference in
the preservation of good order and cleanliness. Janitorial services shall
include ordinary dusting and cleaning by the janitor assigned to such work
and shall not include cleaning of carpets or rugs, except normal vacuuming,
or moving of furniture or other special services.
6. Lessee shall not use, keep or permit any foul or noxious gas or substance
in the Premises, or permit or allow the Premises to be occupied or used in
a manner which interferes with business or is offensive or objectionable to
Lessor or other occupants of the Building by reason of noise, odors and/or
vibrations. No animals or birds shall be brought in or about the Premises
or the Building.
7. The following shall not be permitted by Lessee on the Premises: cooking,
storing of merchandise, washing clothes, lodging, or for any improper,
objectionable or immoral purposes.
<PAGE>
8. Lessee shall not use, keep, or permit in the Premises or the Building any
kerosene, gasoline, inflammable or combustible fluid or material, or use
any method of heating or air conditioning other than that supplied by
Lessor.
9. Lessor will direct electricians as to where and how telephone and telegraph
wires are to be introduced. No boring or cutting for wires is permitted
without the prior consent of Lessor.
10. Upon termination of its tenancy, Lessee shall deliver to Lessor all
Building keys which shall have been furnished Lessee or which Lessee shall
have had made. In the event of loss of any keys so furnished, Lessee
shall pay Lessor for the replacement of keys and/or any necessary locks.
11. Lessee shall not install linoleum, tile, carpet or other similar floor
covering so that the same shall be affixed to the floor of the Premises in
any manner except as approved by Lessor. The expense of repairing any
damage resulting from violation of this rule or from removal of any floor
covering shall be borne by the Lessee by whom, or by whose contractors,
employees or invitees, the damage shall have been caused.
12. Lessee shall see that the doors of the Premises are closed and securely
locked before leaving the Building. All water faucets or water apparatus
and all electricity shall be shut off before Lessee or Lessee's employees
leave the Building, so as to prevent waste or damage, and for any default
or carelessness Lessee shall make good all injuries sustained by Lessor
and/or other tenants or occupants of the Building.
13. Lessor reserves the right to exclude or expel from the Building any person
who, in the judgement of Lessor is intoxicated or under the influence of
liquor or drugs, or who shall in any manner violate the Building rules and
regulations.
14. Lessee shall not disturb, solicit, or canvas any occupant of the Building
and shall cooperate to prevent the same.
15. Without the written consent of Lessor, Lessee shall not conduct any auction
upon the Premises or use the name of the Building in promoting or
advertising the business of Lessee except as Lessee's address.
<PAGE>
EXHIBIT "E"
-----------
JANITORIAL SCHEDULE
PERFECTMARKET, INC.
3000 AERIAL CENTER, SUITE 140
3,900 RENTABLE SQUARE FEET
I. GENERAL CLEANING
a. Empty all waste baskets and trash containers. (D)
b. Replace soiled trash liners as needed. (or W)
c. Empty and damp wipe all ash trays. (D)
d. Dust all horizontal surfaces below 6' high. (W)
e. Dust all vertical surfaces below 6' high. (W)
f. Dust all high ledges, shelves, picture frames, etc. (M)
g. Dust all baseboards and preform all low dusting not done daily.
(W)
h. Clean and sanitize all drinking fountains. (D)
i. Dust all venetian blinds. (2 TIMES PER Y)
j. Sweep or vacuum upholstered furniture. (M)
k. Polish brass main lobby doors (D)
l. Break room maintained per restroom guidelines.
II. FLOOR/WORK - HARD RESILIENT
a. Dust mop or sweep. (D)
b. Spot mop and remove spillage. (D)
c. Damp mop or wet mop. (2 TIMES W)
d. Buff or spray buff. (W)
e. Machine clean. (M)
f. Add water one time per week to restroom floor drains (W)
III. CARPET CARE
a. Vacuum all traffic lanes. D
b. Remove all spots and stains when possible. (D)
c. Completely vacuum all carpets including edges. (3 TIMES W)
IV. RESTROOMS
a. Polish mirrors and all metal surfaces. (D)
b. Clean and disinfect all toilets and urinals. (D)
c. Clean and polish wash basins. (D)
d Mop floors using disinfectant. (D)
e Fill soap dispensers, towel and tissue holders. (D)
f. Clean partitions and ledges. (D)
g. Scrub bathroom floors and ceramic tile. (M)
V. WALLS, WOODWORK AND OVERHEAD
a. Remove hand prints from door frames and around light switches.
(D)
b. Clean air vents and diffusers. (1 TIME Y)
c. Dust or vacuum bottom surface of light fixtures. (1 TIME Y)
VI. OTHER REQUESTED OPERATIONS
a. Spot clean entrance door glass. (D)
b. Spot clean partition glass. (D)
c. Clean windows inside and outside. (2 TIMES Y)
d Clean exterior surfaces of vending machines. (M)
e Polish all brass thresholds and doors. (W)
f. Police 20' on each side of main doors.
g. Empty any outside ash cans or trash cans. (D)
(D) - Daily cleaning (5 times per week)
(W) - Weekly cleaning
(M) - Monthly cleaning
<PAGE>
EXHIBIT "F"
----------
RENEWAL OPTION
PERFECTMARKET, INC.
3000 AERIAL CENTER, SUITE 140
3,900 RENTABLE SQUARE FEET
a) Lessor hereby grants unto Lessee the right and option to renew and extend
this Lease, if Lessee is not then in default under any of the terms or
conditions of the lease at the time notice is given, nor at any time prior
to the commencement of the extended term, for all of such space as then
comprises the Premises for one (1) renewal term of two (2) years. Said
renewal term to begin immediately upon expiration of the initial term of
this Lease as the case may be. Said option for renewal shall be exercised
by Lessee giving notice to Lessor, as provided herein with respect to
notices, of Lessee's election to renew, at least six (6) months prior to the
expiration of the initial term and if notice as aforesaid is not given,
said option shall lapse and be of no further force and effect. Time is
agreed to be of the essence with respect to this notice requirement.
b) Said renewal term shall be upon the same conditions as herein agreed upon
for the initial term, except that the base rent during the first year (year
six) of the renewal term shall be $5,000.00 per month, the next year (year
seven) of the renewal term the base rent shall be $5,150.00, then Lessor and
Lessee prior to the first day of the renewal term shall enter into an
amendment to this Lease for the purpose of confirming said rental.
C) Whenever in this Lease words are used such as "during the term hereof" or
words of similar effect, it is agreed that upon the valid exercise by Lessee
of this renewal option, such words shall also mean "during any renewal term
hereof", and all of the provisions of the initial term shall apply to the
renewal term, except as provided herein with respect to the base rent.
<PAGE>
EXHIBIT "G"
----------
ADDITIONAL PROVISIONS
PERFECTMARKET, INC.
3000 AERIAL CENTER, SUITE 140
3,900 RENTABLE SQUARE FEET
The following additional provisions are incorporated as part of the Lease and
are numerically referenced in the body of the Lease:
1. Add: "and replacement"
2. Insert: "sixty (60)"
3. Insert: "ninety (90)"
4. Insert: "twenty (20)"
<PAGE>
EXHIBIT 10.14
[LETTERHEAD OF SAGE REALTY CORPORATION APPEARS HERE]
May 6, 1997
CitySearch, Inc.
790 East Colorado Blvd.
Suite 200
Pasadena, CA 91101
Re: Lease, dated May 6, 1997 (the "Lease"),
between Sage Realty Corporation, as Agent
("Landlord"), and CitySearch Inc. ("Tenant"),
for a portion of the third (3rd) floor (the
"Demised Premises") in the building known as
320 West 13th Street, New York, New York
---------------------------------------------
Gentlemen:
This letter shall serve to confirm our understanding with respect to the
referenced Lease. All capitalized terms used herein shall have the meaning
ascribed to them in the Lease unless otherwise indicated.
Landlord, as agent for the owner of the building located 747 Third
Avenue, New York, New York (the "Building"), and Tenant hereby agree that Tenant
shall occupy that portion of the 34th floor of the Building as shown on Exhibit
A annexed hereto and made a part hereof (the "Temporary Space") during the
period (the "Temporary Space Term") commencing on the date hereof and ending on
the earlier to occur of (i) the Commencement Date or (ii) October 1, 1997.
During the Temporary Space Term, Tenant shall occupy the Temporary Space
in accordance with all of the terms and conditions of the Lease which would be
applicable to the
<PAGE>
-2-
Temporary Space if the Temporary Space were the Demised Premises, except that
Tenant shall have no obligation to pay Fixed Rent or additional rent due under
Article 3 of the Lease and in lieu thereof, Tenant shall pay to Landlord the sum
of $2,647.88 per month for each month (pro-rated for any partial month)
occurring during the Temporary Space Term. It is understood and agreed that
Tenant shall not be obligated to pay to Landlord Fixed Rent or other charges for
usual services in connection with its occupancy of the Temporary Space but if
Tenant specifically requests and receives any overtime or additional services
from Landlord, Tenant shall pay Landlord's customary charges therefor.
In the event that Tenant shall fail to vacate and surrender the
Temporary Space on or prior to October 1, 1997, all of the provisions of Article
28 of the Lease shall be applicable to Tenant with respect to the Temporary
Space as if the Temporary Space were the Demised Premises under the Lease, and
Landlord shall have all of the rights of Landlord set forth in the Lease with
respect to the Temporary Space as if the Temporary Space were the Demised
Premises. For the purposes of Section 28.03, the average rent and additional
rent referred to therein shall with respect to the Temporary Space be deemed to
be $8,726.48 per month.
<PAGE>
-3-
Please execute a copy of this Letter Agreement where indicated to
acknowledge your agreement with the foregoing.
SAGE REALTY CORPORATION, AGENT
By: [SIGNATURE ILLEGIBLE]
-----------------------------
Accepted and Agreed to this
1st day of May, 1997.
CITYSEARCH, INC.
By: [SIGNATURE ILLEGIBLE]
------------------------
<PAGE>
[LETTERHEAD OF SAGE REALTY CORPORATION APPEARS HERE]
May 6, 1997
CitySearch, Inc.
790 East Colorado Boulevard
Suite 200
Pasadena, CA 91101
Re: Proposed lease (the "Lease") between Sage Realty
Corporation, as Agent ("Landlord"), and
CitySearch, Inc. ("Tenant") for space located in
320 West 13th Street, New York, NY (the
"Building")
--------------------------------------------------
Gentlemen:
Notwithstanding the requirement contained in Section 3.01 of the Lease
to the effect that Tenant's checks must be drawn on a member of the New York
Clearinghouse Association, provided checks are received by Landlord on or before
the fifth (5th) Business Day of each calendar month, Tenant may utilize checks
which are drawn on a Californai bank which is not a member of the New York
Clearinghouse Association. In the event that any check is received after the
fifth (5th) Business Day of any calendar month, Tenant acknowledges that
Landlord may strictly enforce the terms and conditions of Section 3.01 and
require checks to be drawn on a bank which is a member of the New York
Clearinghouse Association.
Please sign a copy of this letter where indicated to acknowledge your
consent to the foregoing.
SAGE REALTY CORPORATION,
AS AGENT
By: /s/ Robert Kaufman
----------------------------------------
Robert Kaufman, Executive
Vice President
Accepted and Agreed to
this 1st day of May, 1997
CITYSEARCH, INC.
By: [SIGNATURE ILLEGIBLE]
------------------------
<PAGE>
SAGE REALTY CORPORATION, AGENT
LANDLORD
and
CITYSEARCH, INC.
TENANT
INDENTURE OF LEASE
PREMISES: Part of the Third Floor
320 West 13th Street
New York, New York 10014
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. DEFINITIONS, TERM................................................. 1
2. COMMENCEMENT OF TERM.............................................. 2
3. FIXED RENT, ADDITIONAL RENTS AND RENT ADJUSTMENTS................. 3
REAL ESTATE TAX ADJUSTMENT........................................ 5
4. ELECTRICITY....................................................... 7
5. USE............................................................... 13
6. REPAIRS, ALTERATIONS AND LIENS.................................... 13
7. FLOOR LOAD, NOISE, WINDOW CLEANING................................ 20
8. LAWS, ORDINANCES, REQUIREMENTS OF PUBLIC AUTHORITIES ............. 21
9. INSURANCE, PROPERTY LOSS, REIMBURSEMENT........................... 22
10. DAMAGE OR DESTRUCTION BY FIRE OR OTHER CAUSE...................... 25
11. ASSIGNMENT, SUBLETTING, MORTGAGING................................ 27
12. NO LIABILITY ON LANDLORD.......................................... 33
13. MOVING OF HEAVY EQUIPMENT......................................... 34
14. CONDEMNATION...................................................... 34
15. ENTRY, RIGHT TO CHANGE PUBLIC PORTIONS OF THE BUILDING............ 35
16. BANKRUPTCY........................................................ 37
17. DEFAULTS AND REMEDIES AND WAIVER OF REDEMPTION.................... 38
18. LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS ................. 41
19. COVENANT OF QUIET ENJOYMENT....................................... 42
20. EXCAVATION........................................................ 42
21. SERVICES AND EQUIPMENT............................................ 42
22. DEFINITION OF LANDLORD............................................ 46
23. INVALIDITY OF ANY PROVISION....................................... 47
24. BROKER............................................................ 47
25. SUBORDINATION..................................................... 47
26. ESTOPPEL CERTIFICATE.............................................. 49
</TABLE>
<PAGE>
<TABLE>
<S> <C>
27. LEGAL PROCEEDINGS, WAIVER OF JURY TRIAL........................... 50
28. SURRENDER OF PREMISES/HOLDOVER.................................... 52
29. RULES AND REGULATIONS............................................. 53
30. NOTICES........................................................... 53
31. NO WAIVER; ENTIRE AGREEMENT....................................... 54
32. CAPTIONS.......................................................... 55
33. INABILITY TO PERFORM.............................................. 55
34. REPRESENTATION BY LANDLORD........................................ 56
35. NAME OF BUILDING.................................................. 56
36. SUCCESSORS AND ASSIGNS............................................ 56
37. DEFERRED COLLECTIONS.............................................. 56
38. FEES/INTEREST/LATE CHARGES........................................ 57
39. ABATEMENT OF RENT................................................. 57
40. SECURITY DEPOSIT.................................................. 58
41. TENANT'S EXPANSION OPTION......................................... 59
42. TENANT'S EXTENSION OPTION. ....................................... 62
</TABLE>
Schedule A Floor Plan
Schedule B Work Letter
Schedule C Rule and Regulations
Schedule D Form of Letter of Credit
Schedule E Schedule of Building Holidays
Schedule F Electric Survey
ii
<PAGE>
INDENTURE OF LEASE made as of this 6th day of May, 1997, between SAGE
REALTY CORPORATION, a New York corporation having its principal office at 777
Third Avenue, New York, New York 10017, Agent for the owner of the Building
hereinafter mentioned (herein "Landlord"), and CITYSEARCH, INC., a Delaware
corporation having its office at 790 East Colorado Boulevard, Suite 200,
Pasadena, California 91101 (herein "Tenant").
W I T N E S S E T H:
ARTICLE 1.
DEFINITIONS, TERM
-----------------
Section 1.01. The terms defined in this Article shall, for all purposes of
this Lease and all agreements supplemental thereto, have the meanings herein
specified unless the context otherwise requires.
(a) "Building" shall mean the office building known as 320 West 13th
Street, in the Borough of Manhattan, City and State of New York. The plot of
land on which the Building is erected is hereinafter called the "Land."
(b) "Business Days" shall mean all days excluding Saturdays, Sundays
and days observed by the State of New York or Federal Government as legal
holidays, and further excluding holidays established by any union contract
applicable to employees at the Building. A schedule of holidays for calendar
year 1997 is attached hereto as Schedule E.
(c) "Commencement Date" shall have the meaning set forth in Section
2.02.
(d) "Demised Premises" shall mean a portion of the third (3rd) floor
of the Building, as shown on the Floor Plan annexed hereto as Schedule A and
made a part of this Lease, including all fixtures and equipment which at the
Commencement Date or during the Term of this Lease are attached thereto and
which become a part thereof.
(e) "Expiration Date" shall mean the last day of the month in which
the day prior to the seventh (7th) anniversary of the Commencement Date occurs,
or any sooner date of termination pursuant to the provisions hereof.
(f) "Fixed Rent" shall mean the annual rental payable by Tenant for
the Demised Premises in equal monthly installments as provided for in Article 3
of this Lease.
(g) "Interest Rate" shall mean the lesser of (i) 2% above the prime
commercial lending rate of Marine Midland Bank, N.A. in effect from time to time
or (ii) the maximum applicable legal rate, if any.
<PAGE>
-2-
(h) "Landlord's Work" shall mean the work agreed to be done by
Landlord in the Demised Premises as provided for in Schedule B hereof.
(i) "Lease" shall mean this Indenture of Lease and any and all
Schedules annexed hereto.
(j) "Term of this Lease" and "Term" shall mean the term of years
commencing on the Commencement Date and expiring on the Expiration Date, subject
to the terms and conditions hereinafter set forth.
Section 1.02. Landlord hereby leases to Tenant, and Tenant hereby rents
from Landlord, the Demised Premises, subject to the provisions hereinafter set
forth, together with appurtenances, including the right to use in common with
others the lobbies, elevators and other public portions of the Building.
TO HAVE AND TO HOLD unto Tenant, its successors and permitted assigns, for
the Term of this Lease or until the Term of this Lease sooner terminates as
hereinafter provided.
ARTICLE 2.
COMMENCEMENT OF TERM
--------------------
Section 2.01. Except as provided in Section 2.02 hereof, Tenant
acknowledges that it has examined the Demised Premises and is taking same "as
is" as of the Commencement Date. Tenant acknowledges that Landlord is not
required to do any work with respect thereto, except as set forth in Schedule B.
Section 2.02. The Term of this Lease and the payment of rent shall commence
on the date that the Demised Premises shall be Substantially Completed, as
defined in Schedule B (herein the "Commencement Date"). Promptly after the
Commencement Date, Landlord and Tenant agree to execute an agreement
("Commencement Date Agreement") in form and substance satisfactory to Landlord
setting forth, among other things, the Commencement Date and the Expiration Date
of this Lease.
The taking of possession by Tenant of the Demised Premises shall be deemed
an acceptance of same by Tenant and shall be conclusively deemed Substantial
Completion (as defined in Schedule B) of Landlord's Work. Such taking of
possession shall also be conclusive evidence, as against Tenant, that the
Demised Premises and the Building of which the same form a part were in good and
satisfactory condition at the time of such occupancy (except for so-called
"punchlist" items and latent defects, if any) and that the Demised Premises were
substantially as shown on Schedule A. Landlord shall, however, thereafter
complete any "punchlist" items required for completion of Landlord's Work.
<PAGE>
-3-
Section 2.03. If Landlord shall be unable to give possession of the Demised
Premises on the date anticipated for the commencement of the Term hereof for any
reason whatsoever, Landlord shall not be subject to any liability, nor shall the
validity of this Lease nor the obligations of Tenant hereunder be thereby
affected. Landlord shall use diligent efforts to substantially complete the work
necessary to deliver possession of the Demised Premises promptly, subject to any
delays beyond the reasonable control of Landlord. In the event that Landlord
shall be unable to give possession of the Demised Premises on or prior to August
1, 1997 (the" Outside Completion Date") (subject to extension by reason of force
majeure [set forth immediately below]), Tenant shall be entitled to a credit
against the first installments of Fixed Rent due hereunder (after taking into
account any abatement of Fixed Rent as provided in Article 39 hereof), in the
amount of $395.52 per day for each day beyond the Outside Completion Date that
Landlord shall remain unable to deliver possession of the Demised Premises. Any
delay in Landlord's substantial completion of Landlord's Work caused by labor
trouble, governmental controls, act of God, or any other cause beyond Landlord's
reasonable control shall extend such time period for Landlord to substantially
complete Landlord's Work and give possession of the Demised Premises to Tenant.
Without limiting the foregoing, the parties hereto expressly negate the
provisions of Section 223-a of the Real Property Law and agree that such Section
shall be inapplicable hereto. Tenant agrees that the provisions of this Article
are intended to constitute "an express provision to the contrary" within the
meaning of Section 223-a. If by reason of such delay, the Term of this Lease
shall commence subsequent to such anticipated date, the Term of this Lease shall
be deemed extended for the same period.
ARTICLE 3.
FIXED RENT, ADDITIONAL RENTS AND RENT ADJUSTMENTS
-------------------------------------------------
Section 3.01. During the Term of this Lease, Tenant shall pay, at
Landlord's address as herein set forth, or at such other address that Landlord
may from time to time designate, a Fixed Rent payable in lawful money of the
United States of America (by check of Tenant drawn on a bank that is a member of
the New York Clearinghouse Association) in equal monthly installments in advance
on the first day of each calendar month, without notice or demand, and without
setoff or deduction whatsoever at annual rates as follow:
(i) $164,785.44 per annum for the period beginning on the
Commencement Date and continuing through the day prior to
the first (1st) anniversary of the Commencement Date;
(ii) $173,605.44 per annum for the period beginning on the
first (1st) anniversary of the Commencement Date
<PAGE>
-4-
and continuing through the day prior to the second (2nd)
anniversary of the Commencement Date;
(iii) $178,060.44 per annum for the period beginning on the
second (2nd) anniversary of the Commencement Date and
continuing through the day prior to the third (3rd)
anniversary of the Commencement Date;
(iv) $191,515.44 per annum for the period beginning on the third
(3rd) anniversary of the Commencement Date and continuing
through the day prior to the fourth (4th) anniversary of
the Commencement Date;
(v) $205,240.44 per annum for the period beginning on the
fourth (4th) anniversary of the Commencement Date and
continuing through the day prior to the fifth (5th)
anniversary of the Commencement Date; and
(vi) $214,735.44 per annum for the period beginning on the fifth
(5th) anniversary of the Commencement Date and continuing
through the day prior to the sixth (6th) anniversary of the
Commencement Date; and
(vii) $224,365.44 per annum for the period beginning on the sixth
(6th) anniversary of the Commencement Date and continuing
through the Expiration Date.
If Tenant's obligation to pay Fixed Rent shall commence on a date
other than the first day of a calendar month, the first installment of Fixed
Rent shall be in an amount equal to that required to cover the period up to and
including the last day of the month wherein the obligation to pay Fixed Rent
occurs, computed on a per diem basis.
Section 3.02. The Fixed Rent does not take into account increases
of real estate taxes and/or expenses during the Term of this Lease or other
adjustments in rent, or other payments to be made by Tenant, during the Term of
this Lease. Provision therefor is hereinafter made.
Section 3.03. All costs, expenses, adjustments and payments which
Tenant is obligated to pay to Landlord pursuant to this Lease and/or its
Schedules shall be deemed additional rent whether or not denominated as such
and, in the event of nonpayment thereof, Landlord shall have all rights and
remedies with respect thereto as herein provided for in case of nonpayment of
Fixed Rent.
Tenant covenants and agrees to pay the Fixed Rent and additional
rent as in this Lease provided, when due.
<PAGE>
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Section 3.04. For the purposes of this Section 3.04, the following
definitions shall apply:
(a) The term "Base Tax Year" as hereinafter set forth for the
determination of real estate tax escalation shall mean the period commencing on
July 1, 1997 and ending on June 30, 1998.
(b) The term "the Percentage" shall mean 2.38%.
(c) The term "Real Estate Taxes" shall mean all real estate taxes,
assessments, water and sewer rents, governmental levies, county taxes or any
other governmental charges, general or special, ordinary or extraordinary,
unforeseen as well as foreseen, of any kind or nature whatsoever, which are or
may be assessed or imposed upon the Land, the Building and the sidewalks, plazas
or streets in front of or adjacent thereto, including any tax, excise or fee
measured by or payable with respect to any rent, and levied against Landlord
and/or the Land and/or Building, under the laws of the United States, the State
of New York, or any political subdivision thereof, or by the City of New York,
or any political subdivision thereof. If, due to a future change in the method
of taxation or in the taxing authority, a franchise, income, transit, profit or
other tax or governmental imposition, however designated, shall be levied
against Landlord, and/or the Land and/or the Building, in substitution in whole
or in part for said Real Estate Taxes, or in lieu of additional real estate
taxes, then such franchise, income, transit, profit or other tax or governmental
imposition shall be deemed to be included within the definition of "Real Estate
Taxes" for the purposes hereof. In the event that the Real Estate Taxes for the
Base Tax Year shall include any charge with respect to any so called "Business
Improvement District" or similar charge (a "Bid Charge"), and if any such Bid
Charge is subsequently discontinued or eliminated, then, as of the date of such
discontinuance or elimination, the Real Estate Taxes for the Base Tax Year shall
be recalculated as if the Bid Charge had not originally been included therein.
(d) The term "Tax Year" shall mean every twelve-month consecutive
period commencing each July 1st during the Term of this Lease.
Real Estate Tax Adjustment
In the event that the Real Estate Taxes payable for any Tax Year shall
exceed the amount of such Real Estate Taxes, as finally determined, payable with
respect to the Base Tax Year, Tenant shall pay to Landlord, as additional rent
("Tenant's Tax Payment") for such Tax Year, an amount equal to the Percentage of
the excess. By or after the start of the Tax Year following the Base Tax Year,
and by or after the start of each Tax Year thereafter, Landlord shall furnish to
Tenant a statement of the
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Real Estate Taxes payable with respect to such Tax Year, and a statement of the
Real Estate Taxes payable during the Base Tax Year. Notwithstanding the
foregoing, in the event that the Real Estate Taxes for any Tax Year shall be
more than fifty (50%) percent in excess of the Real Estate Taxes for the
preceding Tax Year (or, with regard to the First Tax Year, more than fifty (50%)
percent in excess of the Real Estate Taxes for the Base Tax Year), Tenant's Tax
Payment shall be limited to the amount that Tenant's Tax Payment would be if
there had been only a fifty (50%) percent year to year increase in Real Estate
Taxes.
Within thirty (30) days after the issuance by the governmental authority
having jurisdiction thereover of tax bills for Real Estate Taxes assessed,
levied and/or imposed upon the Land and Building for any Tax Year, Landlord
shall submit to Tenant a photostatic copy of such bill and/or bills and
thereafter on or about each respective anniversary date shall submit a copy of
the tax bill and/or bills for the Real Estate Taxes assessed, levied or imposed
upon the Land and Building for such Tax Year, together with a statement which
shall indicate the amount, if any, of Tenant's Tax Payment. Landlord's failure
to submit copies of bills as aforesaid shall not be considered a default by
Landlord or a defense by Tenant to such tax payment.
Within thirty (30) days after the issuance of the statement Tenant shall
pay Tenant's Tax Payment in the amount set forth on such statement. Such
statement shall be conclusively deemed binding upon Tenant unless Tenant shall
have objected thereto in writing within thirty (30) days of receipt thereof.
In the event Landlord shall receive a final reduction or refund of Real
Estate Taxes for any Tax Year for which Tenant is obligated to pay any
additional rent under the provisions of this subsection B of Section 3.04, the
amount or the proceeds of such reduction or refund, less legal fees and other
expenses incurred in collecting the same or achieving such reduction, shall be
applied and allocated to the periods for which such final reduction or refund
was obtained, and proper adjustment shall be made between Landlord and Tenant.
Tenant has been advised that proceedings to protest the Real Estate Tax
Assessment for the Base Tax Year may have been filed and may result in a
reduction of Real Estate Taxes for the Base Tax Year.
Any payments or refunds due hereunder for any period of less than a full
Tax Year at the commencement or end of the Term of this Lease shall be equitably
prorated to reflect such event.
In addition to Tenant's obligation to pay Tenant's Tax Payment as
aforesaid, Tenant shall pay to Landlord as additional rent payable upon demand,
any occupancy tax or rent tax now in effect or hereafter enacted, if payable by
Landlord in the first instance or hereafter required to be paid by Landlord.
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Section 3.05. Upon the date of the expiration or any sooner termination of
this Lease, whether the same be the date hereinabove set forth as the expiration
of the Term of this Lease or any prior or subsequent date, a proportionate share
of the Fixed Rent, adjustments and additional rents for the year (calendar or
fiscal) in which such expiration or termination occurs, shall immediately become
due and payable by Tenant to Landlord as hereinafter provided, if not
theretofore already billed and paid. Such proportionate share shall be based
upon the length of time that this Lease shall have been in existence during such
year. Promptly after any such expiration or termination, Landlord shall compute
the amounts due from Tenant, as aforesaid, which computations shall either be
based on that year's actual figures or be an estimate based on the most recent
statements theretofore prepared by Landlord and furnished to Tenant pursuant to
this Lease. If an estimate is used, then Landlord shall promptly cause
statements to be prepared on the basis of the comparative year's actual figures
as soon as they are available, and within ten (10) days after such statement or
statements are prepared by Landlord and furnished to Tenant, Landlord and Tenant
shall make appropriate adjustments of any estimated payments theretofore made.
Tenant's obligation to pay any and all rents, adjustments and additional
rents under this Lease shall continue and shall cover all periods up to the
Expiration Date. Landlord's and Tenant's obligations to make the adjustments
hereinabove referred to shall survive any expiration or termination of this
Lease. Any delay or failure of Landlord in billing any Fixed Rent or additional
rent herein provided for shall not constitute a waiver of or in any way impair
the continuing obligation of Tenant to pay such rent adjustments hereunder.
ARTICLE 4.
ELECTRICITY
-----------
Section 4.01. The Fixed Rent reserved in this Lease includes the agreed sum
of $20,785.44 per annum in consideration of which Landlord, as an additional
service, will supply Tenant with electricity for normal use in the Demised
Premises between the hours 8:00 A.M. and 6:00 P.M. on Business Days. Landlord
and Tenant agree that the aforesaid sum was determined based on an electrical
survey, a copy of which is annexed hereto as Schedule F and made a part hereof
(the "Electric Survey"). Electricity shall be supplied 24 hours a day, seven
days a week, however in the event Tenant uses electricity in excess of that
contemplated in the Electric Survey, the Fixed Rent reserved herein may be
increased as provided in Section 4.03 hereof. If Landlord's electric rates
(i.e., the public utility rate schedule at the time in question, including all
surcharges, taxes, fuel adjustments, taxes regularly passed on to consumers by
the public
<PAGE>
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utility, and other sums payable in respect thereof for the supply of electric
energy to Landlord for the Building) are increased, the Fixed Rent reserved in
this Lease shall be adjusted by applying to the sum specified above, the same
percentage as such rate increase, and such adjusted Fixed Rent shall be billed
by Landlord to Tenant, with effect as of the date of the increase of Landlord's
electric rate. Landlord shall not be liable in any way to Tenant for any failure
or defect in the supply or character of electric energy furnished to the Demised
Premises by reason of any requirement, act or omission of the public utility
serving the Building with electricity or for any other reason not attributable
to the Landlord. At Landlord's option, Tenant shall purchase from the Landlord
or Landlord's agent all lighting tubes, lamps, bulbs and ballasts used in the
Demised Premises and Tenant shall pay Landlord's reasonable charges therefor
which shall be commercially competitive, for providing and installing same on
demand, as additional rent; if Landlord's charges shall cease to be commercially
competitive, Tenant shall no longer be required to purchase same from Landlord
or Landlord's agent
Section 4.02. Tenant's use of electric energy in the Demised Premises shall
not at any time exceed the capacity of any of the electrical conductors,
machinery and equipment in or otherwise serving the Demised Premises. In order
to insure that such capacity is not exceeded and to avert possible adverse
effect upon the Building electric service, Tenant shall not, without Landlord's
prior written consent in each instance, connect any additional fixtures,
machinery, appliances or equipment to the Building electric distribution system
or make any alteration or addition to the equipment specified on the Electric
Survey, or the electric system of the Demised Premises existing on the
Commencement Date other than lamps, typewriters, copiers, computer terminals,
copying machines, communications equipment such as telephones, fax machines,
appliances, and other small office machines necessary for Tenant's use of the
Demised Premises that consume comparable or less amounts of electricity. Should
Landlord grant such consent, all additional risers or other equipment required
therefor shall be provided by Landlord, and the cost thereof shall be paid by
Tenant upon Landlord's demand. As a condition to granting such consent, Landlord
may require Tenant to agree to an increase in the Fixed Rent by an amount which
will reflect the value to Tenant (which shall be based upon what Tenant would
pay the public authority for such service if the same were supplied directly to
Tenant) of the additional service to be furnished by Landlord, that is, the
potential additional electrical energy to be made available to Tenant based upon
the estimated additional capacity of such additional risers or other equipment.
If Landlord and Tenant cannot agree on the amount of such increase, Tenant shall
nevertheless pay the same as billed until such amount shall be determined by an
independent utility consultant to be selected by Landlord and paid equally by
Landlord and Tenant. The determination of the consultant shall be binding upon
the
<PAGE>
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parties. When the amount of such increase is so determined, the parties shall
execute an agreement supplementary hereto to reflect such increase in the amount
of the Fixed Rent stated in this Lease and in the amount set forth in Section
4.01, effective from the date such additional service is made available to
Tenant, but such increase shall be effective from such date even if such
supplementary agreement is not executed.
Section 4.03. If there shall be an increase in the space constituting the
Demised Premises, or if Tenant's failure to maintain its machinery and equipment
in good order and repair causes greater consumption of electrical current, or if
Tenant uses electricity in excess of that contemplated in the Electric Survey,
the Fixed Rent herein reserved shall be increased accordingly. The amount of
such increase shall be billed by Landlord to Tenant, effective as of the date of
the increased usage. Such sum shall be due, and shall be paid by Tenant, as
additional rent hereunder at the time billed. If Tenant disputes the amount of
such increase, Tenant shall nevertheless pay the same as billed, and the amount
shall be determined by an independent utility consultant to be selected and paid
equally by Landlord and Tenant. The determination of the consultant shall be
binding upon the parties.
Section 4.04. A. Landlord reserves the right to discontinue furnishing
electric energy to Tenant in the Demised Premises at any time upon not less than
ninety (90) days prior written notice to Tenant provided that Landlord shall
have made such election as to the majority of all tenants occupying the Building
and further provided that electric service is available directly from the public
utility servicing the Building (Landlord hereby agreeing, unless otherwise
required by law, not to discontinue furnishing electricity to Tenant until such
time as Tenant is able to obtain same directly from the public utility). If
Landlord exercises such right of termination, this Lease shall continue in full
force and effect and shall be unaffected thereby, except only that, from and
after the effective date of such termination, Landlord shall not be obligated to
furnish electric energy to Tenant and the Fixed Rent under this Lease shall be
reduced by the amount set forth in Section 4.01, plus or minus the amount of any
change pursuant to Sections 4.01, 4.02, 4.03 and 4.05. If Landlord so
discontinues furnishing electric energy to Tenant, Tenant shall arrange to
obtain electric energy directly from the public utility company furnishing
electric service to the Building. Such electric energy may be furnished to
Tenant by means of the then existing Building system feeders, risers and wiring
to the extent that the same are available, suitable and safe for such purposes.
All meters and additional panel boards, feeders, risers, wiring and other
conductors and equipment which may be required to obtain electric energy
directly from such public utility company shall be installed and maintained by
Tenant at its expense.
<PAGE>
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B. In the event that Landlord shall discontinue furnishing electric energy
to Tenant as provide above, if Tenant's cost of electric energy as charged by
the public utility shall be in excess of one hundred thirty (130%) percent of
the amount Tenant was paying to Landlord immediately preceding such
discontinuance (and provided that Tenant has not used amounts of electricity
more than when Landlord was furnishing electric energy to Tenant), then Tenant
shall have the option to terminate this Lease upon ten (10) days prior written
notice to Landlord and upon the expiration of such ten (10) day period, this
Lease shall cease and terminate and be of no further force or effect.
Section 4.05. Tenant covenants and agrees that at no time will the
connected electrical load serving the Demised Premises exceed 5 watts per square
foot. Should Landlord consent to an increase in the connected electrical load,
as a condition to granting such consent, Landlord may require Tenant to agree to
an increase in the Fixed Rent by an amount which will reflect the value to
Tenant of the additional connected electrical load. If Tenant disputes the
amount, Tenant shall nevertheless pay the same as billed, and the amount shall
be determined by an independent utility consultant to be selected and paid
equally by Landlord and Tenant. The determination of the consultant shall be
binding upon the parties.
Section 4.06. If any tax is imposed upon Landlord with respect to
electrical energy furnished as a service to Tenant by any Federal, State or
Municipal Authority, Tenant covenants and agrees that where permitted by law or
applicable regulations, Tenant's pro rata share of such taxes shall be
reimbursed by Tenant to Landlord.
Section 4.07. (a) Landlord shall have the right to procure periodic
surveys made by an independent utility consultant selected by Landlord and if
such utility consultant determines that there has been (i) an increase in
Tenant's use of electrical current or (ii) the amount set forth in Section 4.01
is insufficient, then, the amount set forth in Section 4.01 shall be adjusted
and in addition to the other requirements and obligations imposed on Tenant in
this Article, Landlord shall pay the fees of the utility consultant making such
survey. The findings of such utility consultant shall be binding and conclusive
upon the parties. Notwithstanding anything contained in this Article 4 to the
contrary, provided Tenant continues to use amounts of electricity as
contemplated in the Electric Survey, Landlord agrees that the amount set forth
in Section 4.01 shall not be subject to increase for a period of two (2) years
after the Commencement Date.
(b) If Tenant wishes to dispute any determination of the
additional rental value of electricity service to the Demised Premises on the
basis of any survey made pursuant to Section 4.07(a) or as otherwise determined
pursuant
<PAGE>
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to Sections 4.02 and 4.03 hereof, it shall notify Landlord to such effect
within thirty (30) days after receipt of written notice of such determination.
Unless and until such dispute is determined in Tenant's favor, Tenant shall pay
the Fixed Rent as computed in accordance with such determination. The dispute
shall be determined in the following manner: Tenant shall retain an independent
electrical engineer or consultant ("Tenant's Consultant") to review Landlord's
survey or other basis of Landlord for such determination, as the case may be,
and, if deemed advisable, to make an independent survey. Not later than thirty
(30) days after Tenant shall have given Landlord the notice of dispute, Tenant
shall deliver to Landlord (i) Tenant's Consultant's comments on Landlord's
survey or on Landlord's other basis for such determination, and/or (ii) Tenant's
Consultant's survey. Landlord shall refer such comments and/or survey to the
consultant who prepared the original survey or to its electrical consultant
("Landlord's Consultant") who shall meet with Tenant's Consultant for the
purpose of reaching agreement upon the additional rental value of the
electricity service to the Demised Premises. If they are unable to reach such
agreement within thirty (30) days after the delivery of such comments or report,
Landlord's Consultant and Tenant's Consultant shall appoint a disinterested
third electrical consultant, who shall, within twenty (20) days thereafter,
resolve whatever differences may remain between Landlord's Consultant and
Tenant's Consultant and on the basis of such resolution determine the additional
rental value of the electricity service to the Demised Premises. If Landlord's
Consultant and Tenant's Consultant are unable to agree upon a disinterested
third electrical consultant within the thirty (30) day period above specified
for agreement between Landlord's Consultant and Tenant's Consultant, and if the
parties are unable to agree upon such a third electrical consultant within ten
(10) days thereafter, either party, upon written notice to the other, may apply
for the appointment of such a third electrical consultant to the President of
the Real Estate Board of New York, Inc. or any organization successor thereto,
or in his absence or refusal or failure to act, to the Supreme Court of the
State of New York in the County of New York. The fees and expenses of
Landlord's Consultant shall be borne entirely by Landlord. The fees and
expenses of Tenant's Consultant shall be borne entirely by Tenant. The fees and
expenses of the disinterested third electrical consultant shall be shared
equally by Landlord and Tenant. If and to the extent that the additional rental
value of the electricity service to the Demised Premises shall be so determined
to be less than the value originally determined by Landlord's Consultant, the
amount of the resulting overpayment of the Fixed Rent shall be refunded by
Landlord to Tenant on Tenant's demand therefor.
Section 4.08. Notwithstanding the aforesaid provisions of this Article,
if, pursuant to an action of the Public Service Commission of the State of New
York, or otherwise, submetering of electricity is permitted at the Building
then Landlord shall,
<PAGE>
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have the option, at Landlord's sole cost and expense, of installing submeters to
measure Tenant's electricity consumption. Upon installation of the submeters,
Tenant's electricity consumption and demand shall be measured by said submeters,
and subject to the terms and conditions of Section 4.09 hereof, Tenant agrees to
purchase such electricity from Landlord or Landlord's designated agent at
Landlord's electric rates, plus five (5%) percent thereof to reimburse Landlord
for administrative services in connection with supplying and billing such
electricity and for line loss. All such sums shall be paid by Tenant to
Landlord as additional rent hereunder. If more than one meter measures the
electricity consumption and demand of Tenant in the Building, the service
rendered through each meter shall be aggregated and billed in accordance with
the above rate classification, unless Landlord shall elect separate billing on a
per-meter basis. Landlord may at any time render bills for Tenant's consumption
and demand and Tenant shall pay the same within thirty (30) days following the
date the same are rendered. If Landlord exercises such right of submetering,
this Lease shall continue in full force and effect and shall be unaffected
thereby, except only that, from and after the effective date of such
submetering, the Fixed Rent under this Lease shall be reduced by the amount set
forth in Section 4.01, plus or minus the amount of any change pursuant to
Sections 4.01, 4.02, 4.03 and 4.05, and Tenant shall purchase electric energy
pursuant to this Section 4.08.
Section 4.09. If at any time during the Term of this Lease Tenant shall be
legally able to obtain electric energy from a third party supplier, Landlord
agrees that Tenant, upon not less than 30 days prior written notice, shall have
the option to do so. Such electric energy furnished by said third party
supplier may be furnished to Tenant by means of the then existing Building
system feeders, risers and wiring but only to the extent that same are
available, suitable and safe for such purposes. Any meters, panel boards,
feeders, risers, wiring and other conductors and equipment which may be required
to obtain electric energy directly from such third party supplier shall be
installed and maintained by Tenant at its sole cost and expense. If Tenant
exercises its option as aforesaid, this Lease shall continue in full force and
effect and shall be unaffected thereby, except only that, from and after the
date Tenant begins receiving electric energy from said third party supplier,
Landlord shall not be obligated to furnish electric energy to Tenant and the
Fixed Rent under this Lease shall be reduced by the amount set forth in Section
4.01, plus or minus the amount of any change pursuant to Sections 4.01, 4.02,
4.03 and 4.05.
<PAGE>
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ARTICLE 5.
USE
---
Section 5.01. Tenant shall use and occupy the Demised Premises for
administrative, executive and general business office purposes only and for no
other purposes.
Section 5.02. Tenant shall not suffer or permit the Demised Premises or
any part thereof to be used in any manner, or suffer or permit anything to be
done therein, or suffer or permit anything to be brought into or kept in the
Demised Premises which would in any way (i) violate any law or requirement of
public authorities, (ii) cause structural injury to the Building or any part
thereof, (iii) interfere with the normal operation of the heating, air
conditioning, ventilating, plumbing or other mechanical or electrical systems of
the Building or the elevators installed therein, (iv) constitute a public or
private nuisance, or (v) alter the appearance of the exterior of the Building or
of any portion of the interior thereof other than the Demised Premises.
Tenant's signage on its entrance door shall be subject to Landlord's approval.
Section 5.03. Tenant shall not, without the prior written consent of
Landlord (which shall not be unreasonably withheld or delayed), allow a
"Servicing Company" (defined below) to install any telephone, data, information
or other communications equipment in the Demised Premises to service premises
occupied by persons other than Tenant and/or its affiliates. For example, the
Demised Premises may not be used as a so-called "switching" or "relay" station
serving third parties (that is, parties other than Tenant and its affiliates)
without such consent by Landlord. In granting such consent, Landlord may require
that the Servicing Company enter into a license agreement with Landlord
confirming that the Servicing Company shall have no independent rights in the
Demised Premises and that upon termination of this Lease, for whatever reason,
the Servicing Company will have no right to leave its equipment in the Demised
Premises. Landlord may make a reasonable charge to the Servicing Company for
allowing it to install its equipment in the Demised Premises. A "Servicing
Company" shall mean a person, firm, corporation or other entity other than
----------
Tenant whose equipment services not only the Demised Premises, but other
- ------
premises or parties as well.
ARTICLE 6.
REPAIRS, ALTERATIONS AND LIENS
------------------------------
Section 6.01. Tenant shall take good care of the Demised Premises and the
fixtures and appurtenances and equipment therein and, at its sole cost and
expense, make all repairs thereto as and when needed to preserve the aforesaid
in good working order and condition (other than structural repairs and repairs
to plumbing, wiring and other Building equipment for the general
<PAGE>
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supply of water, heat, air-conditioning, gas and electricity which are not
caused by the carelessness, omission, neglect, improper conduct or other cause
of Tenant, its servants, employees, agents, visitors or licenses). Except to
the extent caused by the negligence of Landlord and its agents, all damage or
injury to the Demised Premises and to its fixtures, appurtenances and equipment
or to the Building of which the same form a part, or to its fixtures,
appurtenances and equipment caused by Tenant moving property, or resulting from
any air-conditioning unit or system, any short circuit, flow or leakage of
water, steam, illuminating gas, sewer gas, sewerage or odors, or by frost or by
bursting or leaking of pipes or plumbing works or gas, or from any other cause
of any other kind or nature whatsoever due to carelessness, omission, neglect,
improper conduct or other cause of Tenant, its servants, employees, agents,
visitors or licenses, shall be repaired, restored or replaced promptly by
Tenant, at its sole cost and expense, to the satisfaction of Landlord. If
Tenant fails to commence and diligently prosecute such repairs, restorations or
replacements, within the time period set within Section 17.01, (except in the
event of an emergency in which cease no notice shall be required), same may be
made by Landlord at the expense of Tenant and any actual out-of-pocket costs
incurred by Landlord therefor shall be collectible as additional rent or
otherwise, and shall be paid by Tenant within thirty (30) days after rendition
of a bill or statement therefor.
Section 6.02. Landlord shall, at its expense, make all repairs and
replacements, structural and otherwise, necessary in order to keep in good order
and repair the exterior of the Building and the public portions of the Building,
the need for which Landlord shall have knowledge (including the public halls and
stairways, plumbing, wiring and other Building equipment for the general supply
of water, heat, air-conditioning, gas and electricity) except repairs
hereinabove provided to be made by Tenant and repairs, the need for which Tenant
has not reported to Landlord. Except in the event of an emergency, all repairs
to be performed by Landlord which affect the Demised Premises shall be performed
upon not less than three (3) days prior written notice to Tenant, and Landlord
shall use reasonable efforts not to interfere with the conduct of Tenant's
business; provided that the foregoing shall not be deemed to require that
Landlord employ labor on an overtime or premium pay basis.
Section 6.03. All repairs, restorations or replacements by either party
shall be of first-class quality and done in good and workmanlike manner. Tenant
shall, and shall include in all contracts, subcontracts and purchase orders, a
requirement that such contractors, subcontractors or materialmen, as the case
may be, shall, cause all workers at the Demised Premises to work in a
cooperative manner with each other and with Building personnel and in a manner
which will not disrupt access to or use of the common areas of the Building,
cause any labor dispute with other
<PAGE>
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workers in the Building, cause inconvenience to the other tenants in the
Building or interfere with the conduct of other tenants' business. Tenant
agrees that should Tenant, its agents and/or contractors, enter upon the Demised
Premises for the purpose of performing any work, the labor employed by Tenant or
anyone performing such work, for or on behalf of Tenant, shall always be
cooperative and compatible with the labor employed by Landlord or any
contractors or subcontractors of Landlord so as to prevent any labor dispute or
walk-out by Landlord's contractors and subcontractors. Should such labor be
uncooperative or incompatible, Landlord may require Tenant to withdraw such
labor from the Demised Premises. In the event Tenant or Tenant's contractor
shall enter upon the Demised Premises or any other part of the Building, Tenant
agrees to indemnify and save Landlord free and harmless, from and against any
and all claims whatsoever arising out of said entry or such work, except to the
extent such claim is due to the negligence of Landlord, its agents or
contractors. Tenant's agents and contractors and their employees shall comply
with the special rules, regulations and requirements of Building management
(which are applicable generally to all tenants of the Building), with respect
to the performance and coordination of said agents, contractors and their
employees so as to avoid intrusion into the operation of the Building and to
avoid disturbing the quiet enjoyment of other tenants.
Section 6.04. Tenant shall not store or place any materials or other
obstructions in the lobby or other public portions of the Building, or on the
sidewalk adjacent to the Building.
Section 6.05. Tenant shall do no work and shall make no alterations,
decorations, installations, additions or improvements in or to the Demised
Premises, including, but not limited to, installation of a water cooler, an air-
conditioning or cooling system unit or part thereof, or other apparatus of like
or other nature without Landlord's prior written consent, which consent shall
not be unreasonably withheld or delayed in the cease of alterations,
decorations, installations, additions or improvements in the Demised Premises
which are non-structural in nature and do not affect the structure, exterior or
common areas of the Building or adversely affect the functioning of the heating,
ventilating or air-conditioning, electrical, mechanical, plumbing or elevator
systems of the Building or other tenants' use thereof, and then only by
contractors or mechanics approved by Landlord ("Approved Contractors"). Such
approval must be obtained prior to any bidding for said work. For purposes
hereof, Landlord agrees that the term "decorations" shall not include the
hanging of paintings, pictures, artwork and bulletin boards in the Demised
Premises which are capable of being removed from the Demised Premises without
damage to the pictures or artwork and without damage, except to a de minimis
extent, to the Demised Premises. Landlord agrees that it shall respond to any
request for its consent to Tenant's proposed alterations,
<PAGE>
-16-
decorations, installations, additions or improvements within five (5) Business
Days after receipt of all information and documents relevant thereto and if
Landlord shall fail to so respond within said five (5) Business Days, Landlord
shall be deemed to have consented to Tenant's proposed alterations, decorations,
installations, additions or improvements provided that Tenant's request for
consent contained a legend in bold typeface to the effect that Landlord's
failure to respond within said five (5) Business Days shall be deemed Landlord's
consent. If Landlord shall reject Tenant's proposed alterations, decorations,
installations, additions or improvements, in whole or in part, Landlord shall
state with reasonable specificity the basis for such rejection and shall suggest
changes, which, if incorporated, would make Tenant's proposed alterations,
decorations, installations, additions or improvements acceptable to Landlord.
Landlord covenants that it will maintain a list with a minimum of two (2)
Approved Contractors for each category of work (other than for electric work,
for painting and for carpeting, for which there may be only one (1) Approved
Contractor, for each such category) during the Term. The charges of such
Approved Contractors and the quality of their work shall be reasonably
competitive with other reputable contractors of comparable skill and experience
for similar work in similar buildings in Manhattan. A current list of Approved
Contractors has heretofore been delivered to Tenant, but Tenant understands and
agrees that such list may be changed in Landlord's sole discretion from time to
time, provided that Landlord shall always maintain the minimum number of
Approved Contractors as provided herein. Landlord shall throughout the Term,
deliver to Tenant an updated list of Approved Contractors upon Tenant's request
therefor. In the event Tenant claims that the charges of any such Approved
Contractor are not competitive as aforesaid, Tenant shall send notice to
Landlord asserting such claim, and if Landlord and Tenant cannot resolve such
dispute within fifteen (15) days after Landlord's receipt of Tenant's notice,
then, at Tenant's option such dispute shall be resolved by arbitration in
Manhattan by an arbitrator selected from the panel of retired judges maintained
by Comprehensive Alternative Dispute Resolution Enterprises, Inc. ("CADRE"). If
CADRE shall no longer exist or shall be unwilling or unable to act, such dispute
shall be resolved by another reputable commercial arbitration company which has
expedited arbitration procedures, as Landlord shall select (the "Company"),
provided, however, that Tenant may dispute Landlord's choice of the Company, in
which event the parties shall mutually agree upon the Company, and if the
parties shall be unable to agree upon the Company, the Company shall be
appointed by any judge of a court of competent jurisdiction in the City of New
York. Upon selection of the Company, the parties agree that the balance of this
Section 6.05 shall continue to apply with the substitution of the Company in
lieu of CADRE. If Tenant so desires to submit such dispute to CADRE, Tenant
shall notify Landlord of such desire, and within ten (10) Business Days
thereafter, Tenant shall make such submission and deliver all applicable
<PAGE>
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applications and documents to CADRE with a copy of the entire submission being
delivered simultaneously to Landlord. The arbitration shall be conducted
pursuant to the then existing rules, regulations, practices and procedures of
CADRE for expedited arbitration, it being the intent of the parties to conduct
the arbitration in the most expeditious manner permitted by the rules. Any
determination pursuant to this Section shall be final and binding upon the
parties and each party shall pay its respective costs of any proceedings
pursuant to this Section (except that the prevailing party shall have the right
to be reimbursed for its reasonable fees and expenses within twenty (20) days
after submission of a bill therefor to the losing party). All such work,
alterations, decorations, installations, additions or improvements shall be done
at Tenant's sole expense and at such times and in such manner as Landlord may
from time to time designate and in full compliance with all governmental bodies
having jurisdiction thereover. Tenant's work, alterations, decorations,
installations, additions or improvements shall be completed free of all liens
and encumbrances and, as a condition to Landlord's consent to the making by
Tenant of alterations, decorations, installations, additions or improvements to
the Demised Premises, Tenant agrees to obtain, and deliver to Landlord, at the
earliest opportunity permitted by applicable law, written and unconditional
waivers of mechanics' liens upon the real property in which the Demised Premises
are located, for all work, labor and services to be performed and materials to
be furnished by them in connection with such work, signed by all contractors,
subcontractors, materialmen and laborers to become involved in such work. As a
condition to Landlord's permission to Tenant to make any alterations,
decorations, installations, additions or improvements to the Demised Premises
prior to the Commencement Date (including any initial installations), Landlord
may require that Tenant agree with Landlord to fixing the Commencement Date of
this Lease.
Landlord shall not be liable for any failure of the air-conditioning and
ventilating equipment in the Demised Premises installed by Landlord caused by
any work, alterations, decorations, installations, additions or improvements by
Tenant, and Tenant shall correct any such condition causing such failure
promptly upon notice from Landlord of the need therefor. If Tenant shall fail
to correct same, Landlord may make such correction and charge Tenant for the
cost thereof. Such sum due Landlord shall be deemed additional rent and shall
be paid by Tenant promptly upon being billed therefor.
Section 6.06. Prior to commencing any work pursuant to the provisions of
Section 6.05, Tenant shall furnish to Landlord:
(i) Copies of all governmental permits and authorizations which may be
required in connection with such work.
<PAGE>
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(ii) A certificate evidencing that Tenant (or Tenant's contractors) has
(have) procured workers' compensation insurance covering all persons employed in
connection with the work who might assert claims for death or bodily injury
against Landlord, "Overlandlord" (as hereinafter defined), Tenant or the
Building.
(iii) Such additional personal injury and property damage insurance (over
and above the insurance required to be carried by Tenant pursuant to the
provisions of Article 9) as Landlord may reasonably require because of the
nature of the work to be performed by Tenant.
Section 6.07. All work, alterations, decorations, installations, additions
or improvements upon the Demised Premises made by either party, including all
paneling, decorations, partitions, railings, mezzanine floors, galleries and the
like, affixed to the realty or for which Tenant shall have received a credit or
contribution shall, unless Landlord elects otherwise (which election shall be
made by giving a notice pursuant to the provisions of Article 30 not less than
thirty (30) days prior to the expiration or other termination of this Lease or
any renewal or extension thereof) become the property of Landlord and shall
remain upon, and be surrendered with the Demised Premises as a part thereof at
the end of the Term or renewal or extension term, as the case may be. In the
event that Landlord shall elect otherwise, then such alterations, decorations,
installations, additions or improvements which are atypical of an ordinary
office installation (atypical shall be deemed to include, but not be limited to,
a raised floor, louvered windows, any kitchen facility, any vault and any audio
or video installation), made by Tenant upon the Demised Premises as Landlord
shall select shall be removed by Tenant, and Tenant shall restore the Demised
Premises to its original condition as of the Commencement Date (ordinary wear
and tear and damage by fire or other casualty excepted), at its own cost and
expense, at or prior to the expiration of the Term. Landlord hereby agrees that
no item of Landlord's Work shall be required to be removed by Tenant at the end
of the Term hereof.
Where furnished by or at the expense of Tenant (except where same is a
replacement of an item theretofore furnished and paid for by Landlord or against
which Tenant has received a credit or contribution from Landlord), all movable
property, furniture, furnishings and trade fixtures other than those affixed to
the realty so that they cannot be removed without material damage shall remain
the property of Tenant and shall be removed from the Demised Premises on or
before the Expiration Date. In the event of damage to the Demised Premises or
the Building by reason of such removal, Tenant shall restore the same to good
order and condition (normal wear and tear excepted). If Tenant should desire
to leave any part of such property in the Demised Premises upon the expiration
of the Term, it shall so notify Landlord in writing not less than thirty (30)
days prior to the expiration of
<PAGE>
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the Term, specifying the items of property which it desires to so leave. If
within fifteen (15) days after the service of such notice Landlord shall request
Tenant to remove any of the said property, Tenant shall, at its expense, at or
before the expiration of the Term, remove said property and, in case of damage
to the Demised Premises or the Building by reason of such removal, restore the
Demised Premises to good order and condition (normal wear and tear and damage by
fire or other casualty excepted).
Section 6.08. Landlord shall not be responsible for supervision and/or
coordination in respect to Tenant's activities pursuant to this Lease.
Landlord's managing agent shall perform such supervision and coordination and,
with respect to any work, alteration, decoration, addition or improvement
costing more than $15,000, Tenant agrees to pay such managing agent, promptly
upon being billed therefor, a sum equal to six (6%) percent of the cost of such
work for indirect costs, field supervision and coordination in connection
therewith. Tenant agrees to keep records of Tenant's work, alterations,
decorations, additions and improvements costing in excess of $15,000 and of the
cost thereof. Tenant agrees to furnish to Landlord's managing agent copies of
such records certified as correct by Tenant within forty-five (45) days after
Landlord's managing agent's request therefor. Notwithstanding anything
contained herein to the contrary, the supervisory fee described above shall not
apply to any work performed by Tenant in preparation for its initial occupancy
of the Demised Premises.
Section 6.09. Tenant will not do any act or suffer any act to be done
which will in any way encumber the title of Landlord or Tenant in and to the
Demised Premises or the Building or the Land, nor will the interest or estate of
Landlord or Tenant in the Demised Premises or the Building or the Land be in any
way subject to any claim by way of lien or encumbrance, whether by operation of
law or by virtue of any express or implied contract by Tenant.
Section 6.10. Tenant will not suffer or permit any liens to stand against
the Demised Premises, the Building or the Land or any part thereof, by reason of
any work, labor, services or materials done for, or supplied to, or claimed to
have been done for, or supplied to, Tenant, or anyone holding the Demised
Premises or any part thereof through or under Tenant. If any such lien is at
any time filed against the Demised Premises or the Building or the Land, Tenant
will cause the same to be discharged of record within thirty (30) days after the
date that Tenant first has actual knowledge of filing of the same, by either
payment, deposit or bonding (and the failure of Tenant to do so shall be a
material default hereunder entitling Landlord to give a notice to Tenant
pursuant to the provisions of Section 17.01 (1) hereof). In addition to any
other right or remedy of Landlord Landlord may, but will not be obligated to,
procure the
<PAGE>
-20-
discharge of such lien either by paying the amount claimed to be due by deposit
in court or bonding, and/or Landlord will be entitled, if Landlord so elects, to
compel the prosecution of an action for the foreclosure of such lien by the
lienor and to pay the amount of the judgment, if any, in favor of the lienor
with interest computed at the Interest Rate, costs and allowances. Any amount
paid or deposited by Landlord for any of the aforesaid purposes, and all legal
and other expenses of Landlord, including, without limitation, attorneys' fees
incurred in defending such action or in procuring the discharge of such lien,
with all necessary disbursements in connection therewith, will become due and
payable on the date of payment or deposit, as additional rent.
Section 6.11. Nothing in this Lease will be deemed to be, or construed in
any way as constituting, the consent or request of Landlord, express or implied
by inference or otherwise, to any person, firm or corporation for the
performance of any labor or the furnishing of any materials for any
construction, rebuilding, alteration or repair of or to the Demised Premises,
the Building or the Land or any part thereof, nor as giving Tenant any right,
power or authority to contract for or permit the rendering of any services or
the furnishing of any materials which might in any way give rise to the right to
file any lien against Landlord's interest in the Demised Premises, the Building
or the Land.
ARTICLE 7.
FLOOR LOAD, NOISE, WINDOW CLEANING
----------------------------------
Section 7.01. Tenant shall not place a load upon any floor of the Demised
Premises which exceeds 120 pounds per square foot which is the load per square
foot which such floor was designed to carry and which is allowed by law.
Section 7.02. Business machines and mechanical equipment belonging to
Tenant which cause noise or vibration that may be transmitted to the structure
of the Building or the Demised Premises to such a degree as to be objectionable
to Landlord shall be placed and maintained by the party owning the machines or
equipment, at such party's expense, in settings of cork, rubber or spring type
vibration eliminators sufficient to eliminate noise or vibration.
Section 7.03. Tenant will not clean, nor require, permit, suffer or allow
any window in the Demised Premises to be cleaned from the outside in violation
of Section 202 of the Labor Law or of the rules of the Board of Standards and
Appeals or of any other board or body having or asserting jurisdiction. Prior
to the Commencement Date, Landlord, at its sole cost and expense, shall (i)
replace any broken glass in the exterior windows of the Demised Premises and
(ii) clean the inside and outside (to the extent practical) of such windows.
<PAGE>
-21-
ARTICLE 8.
LAWS, ORDINANCES, REQUIREMENTS OF PUBLIC AUTHORITIES
----------------------------------------------------
Section 8.01. Tenant shall, at its expense, comply with all laws, orders,
ordinances and regulations or any direction made pursuant to any law, ordinance,
rule, regulation or order of any public office or officer which or who shall,
with respect to the particular manner of use of the Demised Premises (as opposed
to mere use and occupancy as contemplated by Article 5) or to any abatement of
nuisance, impose any violation, order or duty upon Landlord or Tenant arising
from Tenant's particular manner of use of the Demised Premises (as opposed to
mere use and occupancy as contemplated by Article 5), or as a result of any
installations made therein (whether or not in compliance with the work article
hereof) by Tenant or at Tenant's request, or required by reason of a breach of
any of Tenant's covenants or agreements hereunder.
Section 8.02. If Tenant should desire to contest the validity of any such
law, ordinance, rule, regulation or order with which Tenant is obligated to
comply, it may, at its expense, carry on such contest and non-compliance by it
during such contest (so long as Tenant proceeds with due diligence) shall not
constitute a breach of this Lease provided that it shall, to the satisfaction of
Landlord, indemnify and hold Landlord harmless from and against all liability
for any loss, damages and expenses (including, without limitation, attorneys'
fees) which might result from or be incurred in connection with such contest or
noncompliance. Notwithstanding the foregoing, non-compliance as aforesaid shall
not commence or continue if it might subject Landlord to any fine or penalty or
to prosecution for a crime, or if it would constitute a default by Landlord
under any mortgage or lease affecting the Building and/or the Land.
Section 8.03. If Tenant receives written notice of any violation of law,
ordinance, rule, regulation or order applicable to the Demised Premises, it
shall give prompt notice thereof to Landlord.
Section 8.04. Except as aforesaid, Landlord shall, at its expense, comply
with or cause to be complied with, all laws, ordinances, rules, regulations and
orders of federal, state, county and municipal authorities and any direction
made pursuant to law of any public officer or officers which shall, with respect
to the public portions of the Building, impose any violation, order or duty upon
Landlord or Tenant and with respect to which Tenant is not obligated by Section
8.01 to comply. Except as aforesaid, Landlord shall further, at its expense,
comply with or cause to be complied with, all laws, ordinances, rules,
regulations and orders of federal, state, county and municipal authorities and
any direction made pursuant to law of any public officer or officers which
affect Tenant's use or enjoyment of, or access to, the Demised Premises and with
respect
<PAGE>
-22-
to which Tenant is not obligated by Section 8.01 to comply. Landlord may, at its
expense, contest the validity of any such law, ordinance, rule, order or
regulation.
Section 8.05. Landlord hereby agrees to comply with all present and future
laws, ordinances, rules, regulations and orders which are violated as a result
of any conditions to the Demised Premises which exist immediately prior to the
Commencement Date ("Pre-Existing Conditions"). Landlord further agrees to
indemnify and hold Tenant harmless from and against any loss, costs or expenses
which Tenant may incur arising out of the existence of any such Pre-Existing
Condition which violates any present or future laws, ordinances, rules,
regulations and orders as aforesaid.
ARTICLE 9.
INSURANCE, PROPERTY LOSS, REIMBURSEMENT
---------------------------------------
Section 9.01. Tenant shall not do or permit to be done any act or thing
upon the Demised Premises which will invalidate or be in conflict with the
Certificate of Occupancy or the terms of the New York State standard form of
fire, boiler, sprinkler, water damage or other insurance policies covering the
Building and the fixtures and property therein and Tenant shall, at its own
expense, comply with all rules, orders, regulations or requirements of the New
York Board of Fire Underwriters or any other similar body having jurisdiction
and shall not knowingly do or permit anything to be done in or upon the Demised
Premises in a manner which increases the rate of fire insurance upon the
Building or on any property or equipment located therein over the rate in effect
at the commencement of the Term of this Lease. Landlord agrees to provide Tenant
with a copy of any notice of increase in the rate of fire insurance caused by
Tenant, and Tenant shall have the right to take action to prevent such increase
if any cure period is available to Landlord to remedy the conditions which
caused such increase.
Section 9.02. If, by reason of any action or omission of Tenant, the rate
of fire, boiler, sprinkler, water damage or other insurance (with extended
coverage) on the Building or on the property and equipment of Landlord shall be
higher than it otherwise would be, Tenant shall reimburse Landlord for that part
of the fire, boiler, sprinkler, water damage or other insurance premiums
thereafter paid by Landlord which shall have been charged because of such
failure by Tenant, and Tenant shall make the reimbursement on the first day of
the month following such payment by Landlord or such other tenants. In any
action or proceeding wherein Landlord and Tenant are parties, a schedule or
"make up" of any insurance rate for the Building or Demised Premises issued by
the New York Fire Insurance Exchange, or other body establishing fire insurance
rates for the Building, shall be conclusive evidence of the facts therein stated
and of the several items and charges in the insurance rates then applicable
<PAGE>
-23-
to the Building or Demised Premises. Landlord agrees to provide Tenant with a
copy of any notice of increase in the rate of fire insurance caused by Tenant,
and Tenant shall have the right to take action to prevent such increase if any
cure period is available to Landlord to remedy the conditions which caused such
increase.
Section 9.03. Tenant, at Tenant's own cost and expense, shall maintain
insurance protecting and indemnifying Landlord and Tenant (and at Landlord's
request, the landlord under any ground or underlying lease [herein
"Overlandlord"], as well as the holder of any mortgage affecting the Land, the
Building or both) against any and all claims for injury or damage to persons or
property for the loss of life or of property occurring upon, in or about the
Demised Premises and the public portions of the Building used by Tenant, its
employees, agents, contractors, customers and invitees arising out of the
negligent act or omission of any of the foregoing, such insurance to afford
minimum protection during the Term of this Lease of not less than a single
combined limit of $2,000,000 in respect of property damage and bodily injury or
death to any one person or in respect of any one occurrence or accident (which
may be maintained by umbrella coverage). Landlord may from time to time
require that the amount of liability insurance to be maintained by Tenant under
this Article be increased so that Landlord shall be adequately protected giving
due consideration to all relevant circumstances and conditions. Landlord hereby
agrees to maintain throughout the Term the insurance required to be maintained
by Landlord pursuant to the mortgage currently encumbering the Building (or, if
no mortgage shall encumber the Building, commercially reasonable levels of fire
and extended coverage insurance covering the Building and general liability
insurance in amounts and types customarily carried by owners of similar
buildings in the area of the Building.
All such insurance shall be effected under valid and enforceable policies
(which may cover the Demised Premises and other locations), shall be issued by
insurers of recognized responsibility and shall contain a provision whereby the
insurer agrees not to cancel the insurance without ten (10) days' prior written
notice to Landlord.
On or before the Commencement Date of this Lease, Tenant shall furnish
Landlord with a certificate evidencing the aforesaid insurance coverage and
renewal certificates shall be furnished to Landlord at least thirty (30) days
prior to the expiration date of each policy for which a certificate was
theretofore required to be furnished.
Section 9.04. Tenant shall give Landlord immediate notice in case of a
fire or accident in the Demised Premises or the Building, or of defects therein
or in any fixtures or equipment promptly after Tenant becomes aware of the same.
<PAGE>
-24-
Section 9.05. Tenant shall indemnify and hold Landlord harmless from and
against all liabilities, suits, claims, demands and actions, and costs and
expenses of any kind or nature, due to or arising out of any injury to person or
property, including death resulting at any time therefrom, occurring in or about
the Demised Premises (unless caused by or due to the negligence or willful
misconduct of Landlord, its agents, employees, contractors or invitees, in which
event Tenant's indemnification herein shall be only to the extent, if any, of
Tenant's negligence or willful misconduct or that of Tenant's agents, employees,
contractors or invitees). To the extent of any valid and collectible insurance
furnished by Tenant for the protection of Landlord, Tenant's obligation to
indemnify and hold Landlord harmless against liability which is covered by such
insurance shall be deemed, to the extent thereof, to be satisfied.
Section 9.06. Landlord and Tenant shall each endeavor to secure an
appropriate clause in, or an endorsement upon, each fire or extended coverage or
rent insurance policy obtained by it and covering the Building, the Demised
Premises or the personal property, fixtures and equipment located therein or
thereon, pursuant to which the respective insurance companies waive subrogation
or permit the insured, prior to any loss, to agree with a third party to waive
any claim it might have against said third party. The parties hereto shall give
prompt notice to the other in the event such clause is or becomes unavailable.
The waiver of subrogation or permission for waiver of any claim shall extend to
the agents of each party and the employees of each party and its respective
agents and, in the case of Tenant, shall also extend to all other persons and
entities occupying or using the Demised Premises. If and to the extent that
such waiver or permission can be obtained only upon payment of an additional
charge, then the party benefiting from the waiver or permission shall pay such
charge upon written demand, or shall be deemed to have agreed that the party
obtaining the insurance coverage in question shall be free of any further
obligations under the provisions hereof relating to such waiver or permission.
Subject to the foregoing provisions of this Section 9.06, each party hereby
releases the other with respect to any claim (including a claim for negligence)
which it might otherwise have against the other party for loss, damages or
destruction with respect to its properly by fire or other casualty (including
rental value or business interest, as the case may be) occurring during the Term
of this Lease.
Section 9.07. Tenant agrees to look solely to Landlord's estate and
interest in the Land and Building, or the lease of the Building, or of the Land
and Building, and the Demised Premises, and the proceeds of any casualty
insurance policy thereon, for the satisfaction of any right or remedy of Tenant
for the collection of a judgment (or other judicial process) requiring the
payment of money by Landlord, in the event of any liability
<PAGE>
-25-
by Landlord, and no other property or assets of Landlord shall be subject to
levy, execution, attachment, or other enforcement procedure for the satisfaction
of Tenant's remedies under or with respect to this Lease, the relationship of
Landlord and Tenant hereunder, or Tenant's use and occupancy of the Demised
Premises, or any other liability of Landlord to Tenant.
ARTICLE 10.
DAMAGE OR DESTRUCTION BY FIRE OR OTHER CAUSE
--------------------------------------------
Section 10.01. If the Building or the Demised Premises shall be partially
or totally damaged or destroyed by fire or other cause, then whether or not the
damage or destruction shall have resulted from the fault or neglect of Tenant,
or its employees, agents or visitors (and if this Lease shall not have been
terminated as in this Article 10 hereinafter provided), Landlord shall to the
extent permitted by available insurance proceeds, repair the damage and restore
and rebuild the Building and/or the Demised Premises (without limiting the
rights of any insurance company, subrogated to Landlord's rights hereunder
pursuant to the terms of any insurance policy as to which Landlord shall have
been unable to obtain a waiver of subrogation in accordance with Section 9.06
hereof to seek recovery from Tenant, and any rights of Landlord under any other
provisions of this Lease or at law or in equity), with reasonable dispatch
after notice to it of the damage or destruction; provided, however, that
Landlord shall not be required to repair or replace any of Tenant's property.
Notwithstanding anything contained herein to the contrary, in no event shall
Tenant be relieved of liability or responsibility for damage or destruction
resulting from the fault or neglect of Tenant if the insurance policies carried
by Landlord on the Building do not contain a waiver of the right of subrogation.
Section 10.02. If the Building or the Demised Premises shall be partially
destroyed by fire or other cause, the rents payable hereunder shall be abated to
the extent that the Demised Premises shall have been rendered untenantable and
for the period from the date of such damage or destruction to the date the
damage shall be repaired or restored. If the Demised Premises or a major part
thereof shall be totally (which shall be deemed to include substantially
completely) untenantable on account of fire or other cause, the rent shall abate
as of the date of the damage or destruction and until Landlord shall repair,
restore and rebuild the Building and the Demised Premises, provided, however,
that should Tenant occupy or reoccupy a portion of the Demised Premises during
the period the Demised Premises are made completely untenantable, rents
allocable to such portion shall be payable by Tenant from the date of such
occupancy.
Section 10.03. If the Building or Demised Premises shall be totally
damaged or destroyed by fire or other cause, or if the
<PAGE>
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Building shall be so damaged or destroyed by fire or other cause that Landlord
shall decide not to restore or rebuild it, then in either such case Landlord may
terminate this Lease by giving Tenant notice to such effect within ninety (90)
days after the date of the casualty, provided, however, that in the event of a
total damage or destruction to the Building, Landlord shall have made such
election as to all or substantially all of the tenants occupying the Building.
If the Demised Premises shall be substantially damaged or destroyed during the
final two (2) years of the Term, each of Landlord and Tenant shall have the
option, to be exercised by giving written notice to the other, within thirty
(30) days of the occurrence of such damage, to terminate this Lease and the Term
and estate hereby granted as of the date of such damage or destruction. In case
of any damage or destruction mentioned in this Article 10, Tenant may terminate
this Lease by notice to Landlord, (x) unless, in the reasonable opinion of a
reputable architect or contractor selected by Landlord, and reasonably
satisfactory to Tenant, who shall be experienced with regard to restoration of
comparable buildings following such a casualty (which opinion shall be delivered
to Tenant within forty-five (45) days following the occurrence of such damage),
the damage or destruction can be repaired and restored such that the Building
and the Demised Premises shall be tenantable within nine (9) months following
the occurrence of such damage (subject to extension as set forth immediately
below), or (y) if Landlord has not completed the making of the required repairs
and restored and rebuilt the Building and the Demised Premises within nine (9)
months from the date of such damage or destruction, or within such period after
such date (not exceeding three (3) months) as shall equal the aggregate period
Landlord may have been delayed in doing so by adjustment of insurance, labor
trouble, governmental controls, act of God, or any other cause beyond Landlord's
reasonable control, and such termination shall be effective upon the expiration
of thirty (30) days after the date of such notice. Upon the termination of
this Lease as provided above, Tenant may remove its fixtures, personal property
and inventory from the Demised Premises.
Section 10.04. No damages, compensation or claim shall be payable by
Landlord for inconvenience, loss of business or annoyance arising from any
repair or restoration of any portion of the Demised Premises or of the Building
pursuant to this Article 10. Landlord shall endeavor to effect such repair or
restoration promptly and in such manner as not unreasonably to interfere with
Tenant's business, provided no additional costs, for labor at overtime or
premium rates, or otherwise, are incurred thereby.
Section 10.05. Tenant covenants and agrees to cooperate with Landlord, the
landlord under any ground or underlying lease to which this Lease is subject and
subordinate or any mortgagee of any mortgage to which this Lease is subordinate
in their
<PAGE>
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attempts to collect insurance proceeds (including rent insurance proceeds)
payable to any of such parties.
Section 10.06. Landlord will not carry separate insurance of any kind on
Tenant's property and Landlord shall not be obligated to repair any damage
thereto or replace the same.
Section 10.07. In the event of the termination of this Lease pursuant to
any of the provisions of this Article 10, this Lease and the Term and estate
hereby granted shall expire as of the date of such termination with the same
effect as if that were the Expiration Date, and the Fixed Rent and additional
rent payable hereunder shall be apportioned as of such date.
Section 10.08. The provisions of this Article 10 shall be considered an
express agreement governing any case of damage or destruction of the Demised
Premises by fire or other casualty, and Section 227 of the Real Property Law of
the State of New York providing for a contingency in the absence of an express
agreement, and any other law of like import, now or hereafter in force, shall
have no application to the Demised Premises and this Lease.
ARTICLE 11.
ASSIGNMENT, SUBLETTING, MORTGAGING
----------------------------------
Section 11.01. (a) Tenant will not by operation of law or otherwise,
assign, mortgage or otherwise encumber this Lease, nor the estate and Term
hereby granted, nor sublet or permit the Demised Premises or any part thereof to
be used by others, without Landlord's prior written consent in each instance.
The consent by Landlord to any assignment or subletting shall not in any manner
be construed to relieve Tenant from obtaining Landlord's express written consent
to any other or further assignment or subletting.
If Tenant desires to assign or sublet all or any portion of the Demised
Premises, Tenant agrees to use as its exclusive rental agent for such purpose
the then designated leasing agent of the Building and to notify such leasing
agent of its desire to assign this Lease or sublet the Demised Premises. Upon
obtaining a proposed assignee or sublessee, upon terms satisfactory to Tenant,
Tenant shall submit to Landlord in writing (1) the name of the proposed assignee
or subtenant; (2) the terms and conditions of the proposed assignment or
subletting; (3) the nature and character of the business of the proposed
assignee or subtenant and any other information reasonably requested by
Landlord.
Upon receipt of the foregoing submission from Tenant Landlord shall have
the following options to be exercised within fifteen (15) Business Days from the
date of such receipt:
<PAGE>
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1. If an assignment shall be proposed or if a proposed subletting shall
be for all or substantially all of the Demised Premises, Landlord shall have the
option to terminate this Lease effective as of the date proposed by Tenant for
such assignment or subletting.
2. If a proposed sublease shall be for less than all or substantially
all of the Demised Premises or if it shall be for less than the balance of the
Term of this Lease, Landlord shall have the option to terminate this Lease as to
the portion of the Demised Premises proposed to be sublet for such portion of
the Term as is included in such proposed sublease, effective as of the effective
date of such proposed sublease. In the event of the exercise of such option
under this subparagraph 2, the rent and all other charges payable hereunder
shall be equitably apportioned, and Tenant shall be responsible for the cost of
constructing any necessary demising walls.
3. (a) Landlord shall have the option to require Tenant to execute an
assignment or sublease to Landlord, or to any party designated by Landlord, upon
the same terms and conditions as contemplated with the proposed assignee or
subtenant, except that (A) Landlord (or Landlord's designee) as assignee or
sublessee shall have an express unlimited right to further assign or sublease to
others and to make any alterations required in connection therewith, and (B) the
rent or consideration payable under such assignment or sublease to Landlord (or
Landlord's designee) shall be the lower of (i) the rental payable by Tenant to
Landlord under this Lease, or (ii) the rental payable by the proposed assignee
or subtenant pursuant to the assignment or sublease originally proposed by
Tenant.
(b) If Landlord shall not exercise any of its foregoing options
within the time set forth above, provided Tenant shall not then be in default
hereunder, Landlord's consent to any such proposed assignment or subletting
shall not be "unreasonably" withheld, as described in paragraph (c) of this
Section 11.01.
If Landlord shall not exercise any of the options described in paragraph
(a) above and Tenant shall thereupon assign this Lease or sublet all or any
portion of the Demised Premises, then and in that event Tenant shall pay to
Landlord as additional rent the difference, if any, between the Fixed Rent plus
additional rent allocable to that part of the Demised Premises affected by such
assignment or sublease pursuant to the provisions of this Lease, and the Fixed
Rent and additional rent payable by the assignee or sublessee to Tenant. Such
additional rent payments shall be made monthly within five (5) days after
receipt of the same by Tenant. Any other cash or other consideration payable to
Tenant in connection with such assignment or sublease or the sale of Tenant's
property in connection therewith shall be similarly paid over to Landlord when
and as received by Tenant.
<PAGE>
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If Tenant fails to consummate any proposed assignment or subletting to
which Landlord shall have consented within sixty (60) days after granting such
consent, paragraph (a) shall again apply to said proposed assignment or
subletting.
No option exercised by Landlord pursuant to the above provisions of
paragraph (a), and no assignment or sublease made to Landlord under the above
provisions of paragraph (a), shall be binding upon any purchaser of any ground
or underlying lease who acquires such ground or underlying lease by reason of
the foreclosure of any mortgage to which this Lease is subordinate, nor upon any
assignee of any ground or underlying lease who takes such assignment in lieu of
such foreclosure, it being understood, however, that such purchaser or assignee
may, at its option, elect to enforce such option, assignment or sublease.
(c) In determining reasonableness with respect to its consent to a
proposed assignment or sublease by Tenant, Landlord may take into consideration
all relevant factors surrounding the proposed assignment or sublease, including,
without limitation, the following:
(i) the financial stability and business reputation of the
proposed assignee or subtenant;
(ii) the nature of the business and the proposed use of the
Demised Premises by the proposed assignee or subtenant in relation to the
majority of other tenants in the Building;
(iii) that the proposed assignee or subtenant shall not be a tenant
of other space in the Building or a party which has dealt with Landlord or
Landlord's agent (directly or through a broker) with respect to space in the
Building during the six (6) months immediately preceding Tenant's request for
Landlord's consent, provided Landlord has space in the Building for such
proposed assignee or subtenant;
(iv) restrictions contained in leases of other tenants of the
Building;
(v) the effect that the proposed assignee's or subtenant's
occupancy or use of the Demised Premises would have upon the operation and
maintenance of the Building and Landlord's investment therein;
(vi) that not more than one entity shall occupy the Demised
Premises at any time.
Section 11.02. If this Lease shall be assigned, or if the Demised Premises
or any part thereof be sublet or occupied by any person or persons other than
Tenant, Landlord may after default by Tenant, collect rent from the assignee,
subtenant or occupant and apply the net amount collected to the rent herein
reserved,
<PAGE>
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but no such assignment, subletting, occupancy or collection of rent shall be
deemed a waiver of the covenants in this Article, nor shall it be deemed
acceptance of the assignee, subtenant or occupant as a tenant, or a release of
Tenant from the full performance by Tenant of all the terms, conditions and
covenants of this Lease.
Section 11.03. Each assignee or transferee shall assume and be deemed to
have assumed this Lease and shall be and remain liable jointly and severally
with Tenant for the payment of the rent, additional rent and adjustments of
rent, and for the due performance of all the terms, covenants, conditions and
agreements herein contained on Tenant's part to be performed for the Term of
this Lease. Notwithstanding the forgoing, in the event of an assignment of this
Lease to an entity whose business and intended use of the Demised Premises is
acceptable to Landlord and which has a net worth, as determined in accordance
with generally accepted accounting principals, at least equal to the net worth,
similarly determined, of Tenant as of the date of this Lease then, in such
event, Landlord agrees to release Tenant from any and all liability arising
under this Lease from after the effective date of such assignment. No
assignment shall be binding on Landlord unless such assignee or Tenant shall
deliver to Landlord a duplicate original of the instrument of assignment which
contains a covenant of assumption by the assignee of all of the obligations
aforesaid and shall obtain from Landlord the aforesaid written consent prior
thereto.
Section 11.04. For the purposes of this Lease, any sale, transfer or
assignment of any of the stock of a corporate Tenant or any transfer in the
control of Tenant by operation of law or otherwise shall be deemed an
assignment.
Section 11.05. The listing of any name other than that of Tenant, whether
on the doors of the Demised Premises, on the Building directory or otherwise,
shall not operate to vest any right or interest in this Lease or the Demised
Premises. It is expressly understood that any such listing is a privilege
extended by Landlord that is revocable at will by written notice to Tenant.
Section 11.06. Tenant shall reimburse Landlord for any costs incurred by
Landlord to review the requested consent provided in Article 11, including
attorneys' fees.
Section 11.07. If Landlord shall recover or come into possession of the
Demised Premises before the Expiration Date, Landlord shall have the right to
take over any sublease made by Tenant and to succeed to all lights of Tenant
thereunder, Tenant hereby assigning (effective as of the date of Landlord's
succession of Tenant's estate in the Demised Premises) such subleases as
Landlord may elect to take over. Every subletting hereunder shall be subject to
the condition that, from and after
<PAGE>
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the termination of this Lease or re-entry by Landlord hereunder or other
succession by Landlord to Tenant's estate in the Demised Premises, the subtenant
under such sublease shall waive any right to surrender possession or to
terminate the sublease and, at Landlord's election, shall be bound to Landlord
for the balance of the term thereof and shall attorn to and recognize Landlord,
as its landlord, under all of the then executory terms of such sublease, except
that Landlord shall not be (a) liable for any previous act, omission or
negligence of Tenant under such sublease, (b) subject to any counterclaim,
defense or offset theretofore accruing to such subtenant against Tenant, (c)
bound by any previous modification or amendment of such sublease made without
Landlord's consent or by any previous prepayment of more than one month's rent
and additional rent unless paid as provided in the sublease, or (d) obligated to
perform any repairs or other work in the subleased space or the Building beyond
Landlord's obligations under this Lease, and each subtenant shall execute and
deliver such instruments as Landlord may reasonably request to evidence and
confirm such attornment.
Section 11.08. Notwithstanding anything to the contrary elsewhere
contained herein (including Section 11.01(a) hereof), provided that Tenant shall
not be in default in any of the terms of this Lease beyond notice and the
expiration of any applicable grace period, Tenant may, without Landlord's
consent but upon not less than ten (10) days' prior written notice to Landlord,
sublet to any corporations or other business entities which control, are
controlled by, or are under common control with Tenant (herein referred to as a
"Related Entity") all or part of the Demised Premises or permit any Related
Entity to occupy the same for any of the purposes permitted to Tenant, subject
however to compliance with Tenant's obligations under this Lease. Such
subletting or occupancy shall not be deemed to vest in any such Related Entity
any right or interest in this Lease nor shall such subletting or occupancy
relieve, release, impair or discharge any of Tenant's obligations hereunder.
Tenant shall deliver to Landlord a copy of any such sublease or occupancy
agreement for all or any portion of the Demised Premises.
Section 11.09. Notwithstanding anything to the contrary elsewhere
contained herein (including Section 11.01(a), which shall not be applicable to
an assignment or transfer pursuant to this Section 11.09), Tenant may, upon
prior written notice to Landlord, assign or transfer its entire interest in this
Lease and the leasehold estate hereby created to a "Successor Corporation" (as
such term is hereinafter defined) of Tenant, provided that Tenant shall not be
in default in any of the terms of this Lease beyond notice and the expiration of
any applicable grace period. A "Successor Corporation", as used in this Section,
shall mean (a) a corporation into which or with which Tenant, its corporate
successors or permitted assigns, is merged or consolidated, in accordance with
applicable statutory provisions for the merger or consolidation of a
corporation,
<PAGE>
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provided that by operation of law or by effective provisions contained in the
instruments of merger or consolidation, the liabilities of the corporations
participating in such merger or consolidation are assumed by the corporation
surviving such merger or consolidation, or (b) a corporation, partnership or
other business entity acquiring this Lease and the Term and the estate hereby
granted, the goodwill and all or substantially all of the other property and
assets (other than capital stock of such acquired corporation) of Tenant, its
corporate successors or permitted assigns, and assuming all or substantially all
of the liabilities of Tenant, its corporate successors or permitted assigns, or
(c) any corporate successor to a Successor Corporation becoming such by either
of the methods described in subdivisions (a) and (b) above, provided that, (x)
immediately after giving effect to any such merger or consolidation, or such
acquisition and assumption, as the case may be, the corporation, partnership or
other business entity surviving such merger or created by such consolidation or
acquiring such assets and assuming such liabilities, as the case may be, shall
have a net worth, as determined in accordance with generally accepted accounting
principles, at least equal to the greater of (i) the net worth, similarly
determined, of Tenant, immediately prior to such merger or consolidation or such
acquisition and assumption, as the case may be, or (ii) the net worth, similarly
determined, of Tenant as of the date of this Lease and (y) proof of such net
worth, as evidenced by a statement from a certified public accounting firm
reasonably satisfactory to Landlord shall have been delivered to Landlord at
least ten (10) days prior to the effective date of any such merger or
consolidation, or acquisition and assumption, as the case may be. Upon the
compliance with the foregoing provisions of this Section 11.09, and the delivery
to Landlord of the agreement of the Successor Corporation, in form and substance
satisfactory to Landlord, to assume all the terms of this Lease to be performed
by Tenant, and to be bound thereby, the corporation, partnership or other
business entity so assigning or transferring this Lease shall thereafter be
released and discharged from any obligations thereafter arising under this
Lease.
Section 11.10. In the event that any subtenant approved by Landlord
pursuant to the terms and conditions of this Article 11 (not including any
subtenant for which Landlord's consent is not required pursuant to the terms and
conditions of this Article 11) occupies substantially all of the Demised
Premises for the balance of the Term and provided such subtenant agrees to
attorn to Landlord upon all of the terms and conditions of this Lease (including
the Fixed Rent and additional rent payable under this Lease by Tenant (computed
at the rate per square foot payable by Tenant hereunder)), Landlord shall, upon
the written request of Tenant, deliver to such subtenant a non-
disturbance/attornment agreement in Landlord's then standard form.
<PAGE>
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ARTICLE 12.
NO LIABILITY ON LANDLORD
------------------------
Section 12.01. Landlord or its agents shall not be liable for any damage
to property of Tenant or of others entrusted to employees of the Building, nor
for the loss of or damage to any property of Tenant by theft or otherwise.
Landlord or its agents shall not be liable for any injury or damage to persons
or property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water, rain or snow, leaks from any part of the Building or from
the pipes, appliances or plumbing works or from the roof, street or sub-surface
or from any other place or by dampness or by any other cause of whatsoever
nature, unless caused by or due to the negligence of Landlord, its agents,
servants or employees; nor shall Landlord or its agents be liable for any such
damage caused by other tenants or persons in the Building or caused by
operations in construction of any private, public or quasi-public work; nor
shall Landlord be liable for any latent defect in the Demised Premises or in the
Building of which they form a part.
If at any time any windows of the Demised Premises are temporarily closed
("temporarily" for the purposes of this Section 12.01 meaning a period not in
excess of thirty (30) consecutive days), darkened or bricked up for any reason
whatsoever (other than by reason of Landlord's own arbitrary, unjustified
acts), Landlord shall not be liable for any damage Tenant may sustain thereby,
and Tenant shall not be entitled to any compensation therefor nor abatement of
rent nor shall the same release Tenant from its obligations hereunder nor
constitute an eviction. In the event that the windows are closed, darkened or
bricked up for more than thirty (30) consecutive days (and same shall not have
been required by law), there shall be, as Tenant's sole remedy, an equitable
abatement for the Fixed Rent and additional rent hereunder until such condition
shall be remedied. Landlord agrees that Landlord will not permanently close,
darken or brick up the windows of the Demised Premises unless required by law.
ARTICLE 13.
MOVING OF HEAVY EQUIPMENT
-------------------------
Section 13.01. Tenant shall not move any safe, heavy equipment or bulky
matter in or out of the Building without Landlord's written consent, which
consent Landlord agrees not to unreasonably withhold or delay. For purposes
hereof, the term "bulky matter" shall not include ordinary personal computers
and related equipment. If the movement of such items requires special handling,
Tenant agrees to employ only persons holding a Master Riggers License to do said
work and all such work shall be done in full compliance with the Administrative
Code of the City of New York and other municipal requirements. All such
movements
<PAGE>
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shall be made during hours which will least interfere with the normal operations
of the Building, and all damage caused by such movement shall be promptly
repaired by Tenant at Tenant's expense.
ARTICLE 14.
CONDEMNATION
------------
Section 14.01. In the event that the whole or any material portion of the
Demised Premises shall be lawfully condemned or taken in any manner for any
public or quasipublic use, this Lease and the Term and estate hereby granted
shall forthwith cease and terminate as of the date of vesting of title. In the
event that only an immaterial part of the Demised Premises shall be so condemned
or taken, then, effective as of the date of vesting of title, the rent hereunder
for such part shall be abated. In the event that only a part of the Building
shall be so condemned or taken, then (a) if substantial structural alteration or
reconstruction of the Building shall in the reasonable opinion of Landlord be
necessary or appropriate as a result of such condemnation or taking (whether or
not the Demised Premises be affected), Landlord may, at its option, terminate
this Lease and the Term and estate hereby granted as of the date of such vesting
of title by notifying Tenant in writing of such termination within sixty (60)
days following the date on which Landlord shall have received notice of vesting
of title, or (b) if Landlord does not elect to terminate this Lease, as
aforesaid, this Lease shall be and remain unaffected by such condemnation or
taking, except that the Fixed Rent and additional rent shall be abated to the
extent, if any, hereinbefore provided in this Article 14. In the event that
only a part of the Demised Premises shall be so condemned or taken and this
Lease and the Term and estate hereby granted are not terminated as hereinbefore
provided, Landlord will, at its expense, restore with reasonable diligence the
remaining structural portions of the Demised Premises as nearly as practicable
to the same condition as it was prior to such condemnation or taking.
In the event of termination in any of the cases hereinabove provided in
this Article 14, this Lease and the Term and estate hereby granted shall expire
as of the date of such termination with the same effect as if that were the date
hereinbefore set for the expiration of the Term of this Lease, and the rent
hereunder shall be apportioned as of such date.
In the event of any condemnation or taking hereinabove mentioned of all or
a part of the Building, Landlord shall be entitled to receive the entire award
in the condemnation proceeding, including any award made for the value of the
estate vested by this Lease in Tenant, and Tenant hereby expressly assigns to
Landlord any and all right, title and interest of Tenant now or hereafter
arising in or to any such award or any
<PAGE>
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part thereof, and Tenant shall be entitled to receive no part of such award.
ARTICLE 15.
ENTRY, RIGHT TO CHANGE PUBLIC PORTIONS OF THE BUILDING
------------------------------------------------------
Section 15.01. Tenant shall permit Landlord to erect, use and maintain
pipes and conduits in and through the Demised Premises. All such pipes and
conduits shall either be concealed above the suspended ceiling area, or within
the demising walls or installed in the service columns, or shall be installed
along the walls of the Demised Premises and appropriately enclosed, where
feasible. In the event the construction deprives the Tenant of the use of a
material or substantial portion of the usable area of the Demised Premises
(other than on a temporary basis), the Tenant shall be entitled to an pro rata
abatement of rent for the space so permanently taken. Landlord agrees that in
the event more than ten (10%) of the Demised Premises is permanently taken
pursuant to this Article 15 and such taking materially interferes with Tenant's
ability to conduct its business in the balance of the Demised Premises, Tenant
shall, within thirty (30) days after such permanent taking, have the right to
cancel and terminate this Lease upon written notice to Landlord. Landlord or
its agents or designees shall have the right, but only upon not less than ten
(10) days prior notice (except in emergencies, in which event no notice shall be
required) given to Tenant or any authorized employee of Tenant at the Demised
Premises, to enter the Demised Premises at reasonable times during business
hours, for the purpose of making such repairs or alterations as shall be
required or as Landlord shall have the right to make by the provisions of this
Lease. Landlord shall be allowed to take all material into and upon the Demised
Premises that may be required for the repairs and alterations above mentioned
without the same constituting an eviction of Tenant in whole or in part, and the
rent reserved hereunder shall in no wise abate, except as otherwise provided in
this Lease, while said repairs or alterations are being made, by reason of loss
or interruption of the business of Tenant because of the prosecution of any such
work, or otherwise. Landlord agrees to do any work pursuant to this Article in
such a manner so as not to unreasonably interfere with Tenant's business,
provided no additional costs, for labor at overtime or premium rates, or
otherwise, are incurred thereby (unless the health or safety of Tenant's
employees is threatened, in which event Landlord shall employ overtime labor if
doing so will eliminate such threat) and at Tenant's option a representative of
Tenant may be present during the performance of any such work.
Section 15.02. During the twelve (12) months prior to the expiration of
the Term of this Lease, Landlord may exhibit the Demised Premises to prospective
tenants. Landlord shall also have the right to enter the Demised Premises for
the purpose of
<PAGE>
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inspecting the same or exhibiting the same to prospective purchasers or lessees
of the entire Building or to prospective mortgagees of the property of which the
Demised Premises forms a part. The holders of any mortgage of Landlord's
interest in the property, or such holders' agents or designees, shall also have
such right of inspection for itself and for any prospective assignees of any
such mortgagees. Landlord agrees, to the extent practicable, to give Tenant
reasonable prior notice of any exhibition or inspection pursuant to this Section
15.02 and to perform any such exhibition or inspection at times convenient to
Tenant and in a manner so as to minimize interference with Tenant's business.
Section 15.03. Landlord shall have the right at any time without thereby
creating an actual or constructive eviction or incurring liability to Tenant
therefor, to change the arrangement or location of such of the following as are
not contained within the Demised Premises or any part thereof: entrances,
passageways, elevators, doors and doorways, corridors, stairs, toilets and other
like public service portions of the Building, provided any such changes do not
require Tenant to perform any work in the Demised Premises and further provided
such changes do not unreasonably interfere with Tenant's access to and use of
the Demised Premises.
ARTICLE 16.
BANKRUPTCY
----------
Section 16.01. (a) Anything elsewhere in this Lease to the contrary
notwithstanding, this Lease may be cancelled by Landlord by the sending of a
written notice to Tenant within a reasonable time after the happening of any one
or more of the following events: (i) Tenant shall (A) have applied for or
consented to the appointment of a receiver, trustee, liquidator, or other
custodian of Tenant or any of its properties or assets, (B) have made a general
assignment for the benefit of creditors, (C) have commenced a voluntary case for
relief as a debtor under the United States Bankruptcy Code or filed a petition
to take advantage of any bankruptcy, reorganization, insolvency, readjustment of
debts, dissolution or liquidation law or statute or an answer admitting the
material allegations of a petition filed against it in any proceeding under any
such law, or (D) be adjudicated a bankrupt or insolvent; or (ii) without the
acquiescence or consent of Tenant an order, judgment or decree shall have been
entered by any court of competent jurisdiction approving as properly filed a
petition seeking relief under the United States Bankruptcy Code or any
bankruptcy, reorganization, insolvency, readjustment of debts, dissolution or
liquidation law or statute with respect to Tenant or appointing a receiver,
trustee, liquidator or other custodian of all or a substantial part of its
properties or assets, and such order, judgment or decree shall have continued
unstayed and in effect for any period
<PAGE>
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of not less than sixty (60) days. Neither Tenant, nor any person claiming
through or under Tenant (except for any subtenant who has received a non-
disturbance/attornment agreement from Landlord in accordance with Section 11.10
hereof) or by reason of any statute or order of court, shall thereafter be
entitled to possession of the Demised Premises, but shall forthwith quit and
surrender the Demised Premises. If this Lease shall be assigned in accordance
with its terms, the provisions of this Article shall be applicable only to the
party then owning Tenant's interest in this Lease.
(b) It is stipulated and agreed that in the event of the termination of
this Lease pursuant to paragraph (a) hereof, Landlord shall forthwith,
notwithstanding any other provisions of this Lease to the contrary but subject
to applicable law, be entitled to recover from Tenant as and for liquidated
damages an amount equal to the difference between the rent reserved hereunder
for the unexpired portion of the Term demised and the then fair and reasonable
rental value of the Demised Premises for the same period. In the computation of
such damages the difference between any installment of rent becoming due
hereunder after the date of termination and the fair and reasonable rental value
of the Demised Premises for the period for which such installment was payable
shall be discounted to the date of termination at one (1%) percent above the
then prime commercial lending rate of Marine Midland Bank N.A. If the Demised
Premises or any part thereof be re-let by Landlord for the unexpired Term of
this Lease, or any part thereof, before the presentation of proof of such
liquidated damages to any court, commission or tribunal, the amount of rent
reserved upon such re-letting shall be prima facie evidence as to the fair and
reasonable rental value for the part or the whole of the Demised Premises so re-
let during the term of the re-letting. Nothing herein contained shall limit or
prejudice the Right of Landlord to prove for and obtain as liquidated damages by
reason of such termination, an amount equal to the maximum allowed by any
statute or rule in effect at the time when, and governing the proceedings in
which, such damages are to be approved, whether or not such amount be greater,
equal to, or less than the amount of the difference referred to above.
Notwithstanding the foregoing provisions of this Section 16.01(b), if this Lease
shall be terminated as a result of any of the conditions described in Section
16.01(a), then, in such event, Landlord agrees to use commercially reasonable
efforts to relet the Demised Premises and thus to mitigate Tenant's damages
provided for in this Section 16.01(b).
<PAGE>
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ARTICLE 17.
DEFAULTS AND REMEDIES AND WAIVER OF REDEMPTION
----------------------------------------------
Section 17.01. (1) If (A) Tenant defaults in fulfilling any of the
covenants of this Lease, (i) with respect to the covenant for the payment of
Fixed Rent or additional rent, if such default shall continue for five (5) days,
and (ii) with respect to any other covenants, if such default shall continue for
twenty (20) days, in either event, after Landlord shall have given to Tenant a
written notice specifying such default, or (B) the Demised Premises become
vacant or abandoned, or (C) in the case of the happening of a default or
omission (other than in the payment of Fixed Rent, additional rent or other
charges hereunder and other than the failure to cause a lien against the Demised
Premises, the Building or the Land to be discharged of record within the time
period provided elsewhere in this Lease) which cannot with due diligence be
completely cured or remedied within such twenty (20) day period, if Tenant
shall not have diligently commenced curing such default within such twenty (20)
day period, and shall not thereafter with reasonable diligence and in good
faith be proceeding to remedy or cure such default, then, in any such case,
Landlord may give to Tenant a notice of intention to terminate this Lease upon
the expiration of five (5) days from the service of such notice of intention,
and upon the expiration of said five (5) days, this Lease and the Term hereof
shall terminate, and Tenant shall then quit and surrender the Demised Premises
to Landlord, but Tenant shall remain liable as hereinafter provided.
(2) If (A) the notice provided for in (1) hereof shall have been given,
and the Term shall expire as aforesaid; or (B) if Tenant shall make any default
in the payment of Fixed Rent or additional rent herein reserved, or any part of
either, or in making any other payment herein provided within the time period
provided for in subsection (1) above; or (C) if any execution or attachment
shall be issued against Tenant or any of Tenant's property whereupon the Demised
Premises shall be taken or occupied or attempted to be taken or occupied by
someone other than Tenant; or (D) if Tenant shall fail to move into or take
possession of the Demised Premises within ninety (90) days after commencement of
the Term of this Lease, of which facts Landlord shall be the sole judge; then in
any of such events Landlord may, to the extent legally permissible without
further notice, re-enter the Demised Premises either by force or otherwise, and
dispossess Tenant and the legal representatives of Tenant or any other occupants
of the Demised Premises by summary proceedings or otherwise and remove their
effects and hold the Demised Premises as if this Lease had not been made. If
Tenant shall make default hereunder, beyond the expiration of any applicable
notice and cure periods, prior to the date fixed as the commencement of any
renewal or extension of this Lease, Landlord may cancel and terminate such
renewal or extension agreement by written notice, but Tenant shall remain liable
as hereinafter provided.
<PAGE>
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Section 17.02. In case of any such default, after the expiration of the
applicable notice and cure periods provided in Section 17.01(1), re-entry,
expiration and/or dispossess by summary proceedings or otherwise, (i) the rent
shall become due thereupon and be paid up to the time of such re-entry,
dispossess and/or expiration together with such costs as Landlord may incur for
legal expenses, reasonable attorneys' fees, brokerage and/or putting the Demised
Premises in good order, or for preparing the same for re-rental; (ii) Landlord
may re-let the Demised Premises or any part or parts thereof, either in the name
of Landlord or otherwise, for a term or terms, which may at Landlord's option be
less than or exceed the period which would otherwise have constituted the
balance of the Term of this Lease and may grant concessions or free rent; and/or
(iii) Tenant or the legal representatives of Tenant shall also pay Landlord as
liquidated damages for the failure of Tenant to observe and perform Tenant's
covenants herein contained, at the election of Landlord, either:
(a) a sum which at the time of such termination of this Lease or at the
time of any such re-entry by Landlord, as the case may be, represents the then
value of the excess, if any, of (1) the aggregate of the installments of Fixed
Rent and the additional rent (if any) which would have been payable hereunder
by Tenant, had this Lease not so terminated, for the period commencing with
such earlier termination of this Lease or the date of any such re-entry, as
the case may be, and ending with the date hereinbefore set for the expiration
of the full term hereby granted pursuant to Articles 1 and 2 hereof, over (2)
the aggregate rental value of the Demised Premises for the same period, said
lump sum to be discounted to the Expiration Date of this Lease at the then
prevailing prime rate of interest; or
(b) sums equal to the aggregate of the installments of Fixed Rent and
additional rent (if any) which would have been payable by Tenant had this Lease
not so terminated, or had Landlord not so re-entered the Demised Premises,
payable upon the due dates therefor specified herein following such termination
or such re-entry and until the date hereinbefore set for the expiration of the
full Term hereby granted; provided, however, that if Landlord shall re-let the
Demised Premises during said period, Landlord shall credit Tenant with the net
rents received by Landlord for such re-letting, such net rents to be determined
by first deducting from the gross rents as and when received by Landlord from
such re-letting the expenses incurred or paid by Landlord terminating this Lease
or of re-entering the Demised Premises and of securing possession thereof,
including, without limitation, attorneys' fees and costs of removal and storage
of Tenant's property, as well as the expenses of re-letting, including
repairing, restoring, altering, decorating and preparing the Demised Premises
for new tenants, brokers' commissions, advertising costs, reasonable attorneys'
fees, and all other similar or dissimilar expenses chargeable against the
Demised Premises and the rental therefrom in connection with such
<PAGE>
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re-letting, it being understood that any such re-letting may be for a period
equal to or shorter or longer than the remaining Term of this Lease; provided,
further, that (1) in no event shall Tenant be entitled to receive any excess of
such net rents over the sums payable by Tenant to Landlord hereunder, (2) in no
event shall Tenant be entitled in any suit for the collection of damages
pursuant to this paragraph (b) to a credit in respect of any net rents from a
re-letting except to the extent that such net rents are actually received by
Landlord prior to the commencement of such suit, and (3) if the Demised Premises
or any part thereof should be re-let in combination with other space, then
proper apportionment on a square foot area basis shall be made of the rent
received from such re-letting and of the expenses of re-letting.
For the purpose of paragraph (a) of this Section 17.02, the amount of
additional rent which would have been payable by Tenant under Article 3 hereof
for each year, as therein provided, ending after such termination of this Lease
or such re-entry, shall be deemed to be an amount equal to the amount of such
additional rent payable by Tenant for the calendar year and Tax Year ending
immediately preceding such termination of this Lease or such re-entry. Suit or
suits for the recovery of such damages, or any installments thereof, may be
brought by Landlord from time to time at its election, and nothing contained
herein shall be deemed to require Landlord to postpone suit until the date when
the Term of this Lease would have expired if it had not been terminated under
the provisions of Articles 16 or 17 hereof, or under any provision of law, or
had Landlord not re-entered the Demised Premises.
Landlord, at Landlord's option, may make such alterations, repairs,
replacements and/or decorations in the Demised Premises as Landlord in
Landlord's sole judgment considers advisable and necessary for the purpose of
re-letting the Demised Premises; and the making of such alterations and/or
decorations shall not operate or be construed to release Tenant from any
liability hereunder as aforesaid. Landlord shall in no event be liable in any
way whatsoever for failure to re-let the Demised Premises, or in the event that
the Demised Premises are re-let, for failure to collect the rent thereof under
such reletting. In the event of a breach or threatened breach by Tenant of any
of the covenants or provisions hereof, Landlord shall have the right of
injunction and the right to invoke any remedy allowed at law or in equity as
if re-entry, summary proceedings and other remedies were not herein provided
for. Mention in this Lease of any particular remedy shall not preclude
Landlord from any other remedy, in law or in equity. Tenant hereby expressly
waives any and all rights of redemption granted by or under any present or
future laws in the event of Tenant being evicted or dispossessed for any cause,
or in the event of Landlord obtaining possession of the Demised Premises, by
reason of the violation by Tenant of any of the covenants and conditions of this
Lease, or otherwise.
<PAGE>
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ARTICLE 18.
LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
------------------------------------------------
Section 18.01. If Tenant shall default in the observance or performance of
any term or covenant on its part to be observed or performed under or by virtue
of any of the terms or provisions in any Article of this Lease and such default
shall continue beyond any applicable notice and cure period (provided, however,
in the case of an emergency neither notice nor the expiration of any cure
periods shall be necessary), Landlord, without being under any obligation to do
so and without thereby waiving such default, may remedy such default for the
account and at the expense of Tenant. If Landlord makes any expenditures or
incurs any obligations for the payment of money in connection therewith,
including, but not limited to, attorneys' fees in instituting, prosecuting or
defending any action or proceedings, such sums paid or obligations incurred with
interest computed at the Interest Rate and costs shall be deemed to be
additional rent hereunder and shall be paid to it by Tenant on demand.
ARTICLE 19.
COVENANT OF QUIET ENJOYMENT
---------------------------
Section 19.01. Landlord covenants that upon Tenant paying the rent and
additional rents and observing and performing all the terms, covenants and
provisions of this Lease on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the Demised Premises, subject nevertheless to
the terms and conditions of this Lease.
ARTICLE 20.
EXCAVATION
----------
Section 20.01. In the event that an excavation should be made for building
or other purposes upon land adjacent to the Building, or should be authorized to
be made, Tenant shall, if necessary, afford to the person or persons causing or
authorized to cause such excavation, license to enter upon the Demised Premises
for the purpose of doing such work as shall reasonably be necessary to protect
or preserve the wall or walls of the Building, or the Building, from injury or
damage and to support them by proper foundations, pinning and/or underpinning.
ARTICLE 21.
SERVICES AND EQUIPMENT
----------------------
Section 21.01. So long as Tenant is not in default under any of the
covenants of this Lease, Landlord shall, at its cost and expense:
<PAGE>
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(a) Provide necessary elevator facilities on Business Days from 8:00 A.M.
to 6:00 P.M. and shall have sufficient elevators available at all other times.
At Landlord's option, the elevators shall be operated by automatic control or by
manual control, or by a combination of both of such methods. Tenant shall have
access to the Demised Premises twenty-four (24) hours a day, seven (7) days per
week.
(b) Maintain and keep in good order and repair the heating system
installed by Landlord. The aforesaid system will be operated by Landlord when
seasonably required on Business Days, and shall be effective from 8:00 A.M. to
6:00 P.M. Landlord shall have no responsibility or liability for the ventilating
conditions and/or temperature of the Demised Premises during the hours or days
Landlord is not required to furnish heat pursuant to this paragraph. Any use or
occupancy of the Demised Premises during the hours or days Landlord is not so
required to furnish heat to the Demised Premises shall be at the sole risk,
responsibility and hazard of Tenant. If the Demised Premises shall be
uninhabitable during such times as Landlord is not required to furnish heat to
the Demised Premises pursuant to this paragraph, such condition shall not
constitute nor be deemed to be a breach or a violation of this Lease or of any
provision thereof, nor shall it be deemed an eviction nor shall Tenant claim
or be entitled to claim any abatement of rent nor make any claim for any damages
or compensation by reason of such condition of the Demised Premises. It is
Landlord's recommendation that Tenant cause all of the windows in the Demised
Premises to be kept closed to facilitate proper functioning of the heating
system. If Tenant shall elect not to do so, any improper functioning of the
heating system resulting therefrom shall be the sole responsibility of Tenant
to cure (at Tenant's sole cost and expense). Tenant shall keep entirely
unobstructed all of the vents, intakes, outlets and grilles, at all times and
shall comply with and observe all reasonable regulations and requirements
prescribed by Landlord for the proper functioning of the heating system.
(c) Air-conditioning service ("A/C Service") shall be furnished to the
Demised Premises by way of an existing air-cooled package type air-conditioning
unit (the "A/C Unit"). Tenant shall, at Tenant's expense, maintain and repair
and replace (as necessary) the A/C Unit, including, without limitation, the
periodic cleaning of filters, replacement of fuses and bets, the calibration of
thermostats and all start-up and shutdown maintenance of the A/C Unit. Landlord
hereby agrees to "balance" the A/C Service in the Demised Premises as part of
Landlord's Work, however, it is understood that Landlord shall have no further
obligation to "balance" the A/C Service after the Commencement Date. Such
maintenance obligations shall be performed throughout the Term by a reputable
air-conditioning maintenance company engaged by Tenant at Tenant's expense (and
first approved by Landlord). Tenant shall pay on demand all
<PAGE>
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expenses incurred in connection with the maintenance and repair of the A/C Unit.
In the event of the total breakdown of the A/C Unit In such a manner that the
same cannot reasonably be repaired, Landlord shall replace the A/C Unit at its
own cost and expense. All electricity used in connection with the operation of
the A/C Unit shall be supplied by Landlord upon and subject to all of the terms
and conditions contained in Article 4 hereof. The existing A/C Unit, and any
replacements thereof or additional units installed by Tenant during the Term,
shall be and remain at all times the property of Landlord, and Tenant shall
surrender the A/C Unit and all such repairs and replacements to Landlord in good
working order and condition on the Expiration Date. If any permit or license
shall be required for the operation of any A/C Unit serving the Demised
Premises, Landlord shall have the option of obtaining the same on Tenant's
behalf and at Tenant's expense, or requiring Tenant, at Tenant's expense, to
obtain and maintain any such permit or license. It is Landlord's recommendation
that Tenant cause all of the windows in the Demised Premises to be kept closed
to facilitate proper functioning of the A/C Unit. If Tenant shall elect not to
do so, any improper functioning of the A/C Unit resulting therefrom shall be the
sole responsibility of Tenant to cure (at Tenant's sole cost and expense).
Tenant shall keep entirely unobstructed all of the vents, intakes, outlets and
grilles, at all times and shall comply with and observe all reasonable
regulations and requirements prescribed by Landlord for the proper functioning
of the A/C Unit.
(d) Furnish hot and cold water for lavatory, drinking and office cleaning
purposes. If Tenant requires, uses or consumes water for any other purpose,
Tenant agrees to Landlord installing a meter or meters or other means to measure
Tenant's water consumption, and Tenant further agrees to reimburse Landlord for
the cost of the mater or meters and the installation thereof, and to pay for the
maintenance of said meter equipment and/or to pay Landlord's cost of other means
of measuring such water consumption by Tenant. Tenant shall reimburse Landlord
the cost of all water consumed, as measured by said meter or meters or as
otherwise measured, including sewer rents.
Section 21.02. A. Landlord reserves the right to interrupt, curtail or
suspend the services required to be furnished by Landlord under this Article 21
when the necessity therefor arises by reason of accident, emergency, mechanical
breakdown, or when required by any law, order or regulation of any federal,
state, county or municipal authority, or for any other cause beyond the
reasonable control of Landlord. Landlord shall use due diligence to complete
all required repairs or other necessary work as quickly as possible so that
Tenant's inconvenience resulting therefrom may be for as short a period of time
as circumstances will permit. No diminution or abatement of rent or other
compensation shall or will be claimed by Tenant as a result therefrom, nor shall
this Lease or any of the
<PAGE>
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obligations of Tenant be affected or reduced by reason of such interruption,
curtailment or suspension.
B. Notwithstanding the foregoing, in the event that as a result of such
interruption, curtailment or suspension of services not necessitated by
Tenant's acts and not occurring as a result of a requirement of law or a
situation beyond Landlord's reasonable control, Tenant shall be unable to
conduct and shall actually discontinue conducting its normal business operations
in the Demised Premises for a period of ten (10) consecutive Business Days or
longer and shall notify Landlord of such discontinuance at the inception of such
period (the "Inception Notice"), then Tenant shall be entitled to an abatement
of the Fixed Rent and additional rent payable with respect to the Demised
Premises for the period beginning on the day after the Demised Premises were so
rendered unusable for the conduct of Tenant's normal business operations (and
such Inception Notice was given) and ending on the earlier of the date on which
(a) Tenant resumes occupancy of the Demised Premises for the conduct of its
business or (b) the Demised Premises are rendered usable for the conduct of
Tenant's business operations (regardless of any delay by Tenant in thereafter
resuming such business operations).
Section 21.03. Landlord will not be required to furnish any other
services, except as otherwise provided in this Lease.
Section 21.04. (a) Tenant, at its sole cost and expense, shall cause the
Demised Premises to be exterminated on a monthly basis to the satisfaction of
Landlord and shall for such purposes employ exterminators designated by
Landlord, which exterminators charges shall be reasonably comparable to the
charges of other exterminators of similar skill, quality and experience for
similar services in similar buildings in Manhattan.
(b) If Tenant shall have facilities on the Demised Premises for
cooking, drinking, eating, washing and/or storage of food, or similar items,
Tenant shall, on a weekly basis, cause the portion of the Demised Premises on
which such facilities are located to be exterminated to the satisfaction of
Landlord by exterminators designated by Landlord. The foregoing shall not,
however, constitute any approval or consent to the use of the Demised Premises
for such purposes.
(c) If Tenant fails to comply with the provisions of this Section,
Landlord, in addition to any other remedies available to it under this Lease or
pursuant to law, may perform such service, and the cost therefor shall be paid
by Tenant on demand as additional rent hereunder.
Section 21.05. Tenant shall clean the Demised Premises and arrange for the
removal of all rubbish and refuse therefrom in accordance with the standards of
the Building (the "Building
<PAGE>
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Standard"). Tenant shall employ for such purposes only the maintenance and
trash removal contractors designated by Landlord for use in the Building (such
contractors' charges to be reasonably comparable to the charges of other
contractors of similar skill, quality and experience for similar services in
similar buildings in Manhattan). All such charges shall be paid promptly by
Tenant directly to such contractors.
Section 21.06. It is expressly agreed that only Landlord or any one or
more persons, firms or corporations authorized in writing by Landlord will be
permitted to sell, deliver or furnish any food or beverages, either personally
or through the use of vending machines, for consumption within the Demised
Premises or elsewhere in the Building. Landlord expressly reserves the light to
act as or to designate at any time, or from time to time, an exclusive supplier
or suppliers of such food and beverages; and Landlord further expressly reserves
the right to exclude from the Building any person, firm or corporation
attempting to deliver or purvey any such food or beverages but not so designated
by Landlord. It is understood, however, that Tenant or regular office employees
of Tenant who are not employed by any supplier of such food or beverages or by
any person, firm or corporation engaged in the business of purveying such food
or beverages, may personally bring food or beverages into the Building for
consumption within the Demised Premises by employees and invitees of Tenant, but
not for resale to or for consumption by any other tenant. Landlord may fix in
its absolute discretion, at any time and from time to time, the hours during
which, the regulations under which, foods and beverages may be brought into the
Building by regular employees of Tenant. Notwithstanding the foregoing, it is
understood that Tenant or regular office employees of Tenant who are not
employed by any supplier of such food or beverages or by any person, firm or
corporation engaged in the business of purveying such food or beverages, may
personally bring food or beverages into the Building for consumption within the
Demised Premises by employees of Tenant, but not for resale to or for
consumption by any other tenant. It is further understood that Tenant may order
food and beverages for delivery to Tenant in the Demised Premises for
consumption by Tenant's employees and invitees from contractors, restaurants and
caterers selected by Tenant, without obtaining Landlord's prior consent,
provided, however, that if Landlord determines that the delivery by any such
contractor, restaurant or caterer poses a security risk to the Building
personnel or to other tenants in the Building or otherwise causes a nuisance or
disruption in the Building, Landlord may exclude same from the Building.
ARTICLE 22.
DEFINITION OF LANDLORD
----------------------
Section 22.01. The term "Landlord" wherever used in this Lease shall be
limited to mean and include only the owner or
<PAGE>
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owners at the time in question of the Land and the Building or the Building or
the tenant under a ground or underlying lease affecting the Land and the
Building or the Building, or both, to whom this Lease may be assigned, or a
mortgagee in possession, so that in the event of any sale, assignment or
transfer of the Land and the Building or the Building, or of such ground or
underlying lease, such owner, tenant under a ground lease or mortgagee in
possession shall thereupon be released and discharged from all covenants,
conditions and agreements of Landlord thereafter accruing hereunder; but such
covenants, conditions and agreements shall be binding upon each new owner,
tenant under a ground or underlying lease, or mortgagee in possession for the
time being of the Land and the Building, until sold, assigned or transferred.
ARTICLE 23.
INVALIDITY OF ANY PROVISION
---------------------------
Section 23.01. If any term, covenant, condition or provision of this Lease
or the application thereof to any circumstance or to any person, firm or
corporation shall be invalid or unenforceable to any extent, the remaining
terms, covenants, conditions and provisions of this Lease, or the application
thereof to any circumstances or to any person, firm or corporation other than
those as to which any term, covenant, condition or provision is held invalid or
unenforceable, shall not be affected thereby and each remaining term, covenant,
condition and provision of this Lease shall be valid and shall be enforceable to
the fullest extent permitted by law.
ARTICLE 24.
BROKER
------
Section 24.01. The parties hereto agree that Janet Liff and
SageGroupAssociates Inc. (collectively, the "Brokers") were the only brokers who
negotiated and brought about this transaction, and Landlord agrees to pay the
Brokers a commission therefor as per separate agreements. Tenant represents and
warrants that it has not dealt with any broker other than the Brokers with
respect to the Demised Premises, and Tenant agrees to indemnify and save
Landlord harmless from any claims made by other brokers claiming to have dealt
with Tenant. Landlord represents that it has not dealt with any broker other
than the Brokers, and Landlord agrees to indemnify and save Tenant harmless from
any claims made by other brokers claiming to have dealt with Landlord.
ARTICLE 25.
SUBORDINATION
-------------
<PAGE>
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Section 25.01. This Lease is subject and subordinate to all ground or
underlying leases and to all mortgages which may now or hereafter affect such
leases or the Building of which the Demised Premises forms a part, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
This clause shall be self-operative, and no further instrument of subordination
shall be required by any mortgagee. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Landlord may request. Tenant
hereby constitutes and appoints Landlord the Tenant's attorney-in-fact to
execute any such certificate or certificates for and on behalf of Tenant.
Section 25.02. At the option of Landlord or any successor landlord or the
holder of any mortgage affecting the Demised Premises, Tenant agrees that
neither the cancellation nor termination of any ground or underlying lease to
which this Lease is now or may hereafter become subject or subordinate, nor any
foreclosure of a mortgage affecting said premises, nor the institution of any
suit, action, summary or other proceeding against Landlord herein or any
successor landlord, or any foreclosure proceeding brought by the holder of any
such mortgage to recover possession of such property, shall by operation of law
or otherwise result in cancellation or termination of this Lease or the
obligations of Tenant hereunder, and upon the request of any such landlord,
successor landlord, or the holder of such mortgage, Tenant covenants and agrees
to attorn to Landlord or to any successor to Landlord's interest in the Demised
Premises, or to such holder of such mortgage or to the purchaser of the
mortgaged premises in foreclosure.
Section 25.03. In the event of any act or omission by Landlord which would
give Tenant the right to terminate this Lease or to claim a partial or total
eviction, pursuant to the terms of this Lease, if any, Tenant will not exercise
any such right until:
(i) it has given written notice of such act or omission to the following
(whose names and addresses shall previously have been furnished to Tenant) by
delivering such notice of such act or omission addressed to the last address so
furnished:
(a) the holder of any first mortgage, and
(b) the landlord under any ground or underlying lease to which this
Lease is subject and subordinate; and
(ii) a reasonable period for remedying such act or omission shall have
elapsed following such giving of notice during which such parties, or any of the
parties, with reasonable diligence, following the giving of such notice, has not
commenced and continued to remedy such act or omission or to cause the same to
be remedied.
<PAGE>
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Section 25.04. If, in connection with obtaining financing, a banking,
insurance or other recognized institutional lender shall request reasonable
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, in Tenant's good faith opinion, increase the obligations
of Tenant hereunder or materially or adversely affect the leasehold interest
hereby created or Tenant's use and enjoyment of the Demised Premises or reduce
Landlord's obligations under the Lease.
Section 25.05. Landlord agrees to use its best efforts to obtain from its
current and any future mortgagee for the benefit of Tenant a Subordination, Non-
disturbance and Attornment Agreement in such mortgagee's standard form, provided
that such "best efforts" shall not require Landlord to expend any sum of money
(other than its legal expenses and processing expenses (if any) charged by the
mortgagee for processing said Subordination, Non-disturbance and Attornment
Agreement) and further provided that Landlord shall have no liability
whatsoever, and the obligations of the parties hereto shall not be affected in
any manner whatsoever, if any such mortgagee shall fail to deliver such
agreement.
ARTICLE 26.
ESTOPPEL CERTIFICATE
--------------------
Section 26.01. Tenant agrees, at any time, and from time to time, upon not
less than ten (10) days prior notice from Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing addressed to Landlord certifying that
this Lease is unmodified and in full force and effect (or, if there have been
modifications, that the same is in full force and effect as modified and stating
the modifications), stating the dates to which the Fixed Rent, additional rental
and other charges have been paid, and stating whether or not to the best
knowledge of the signer of such certificate, there exists any default in the
performance of any covenant, agreement, term, provision or condition contained
in this Lease, and any claim or offset in favor of Tenant, and, if any,
specifying each such default, claim or offset in favor of Tenant, and, if any,
specifying each such default, claim or offset of which signer may have
knowledge, it being intended that any such statement delivered pursuant hereto
may be relied upon by Landlord and by any purchaser or prospective purchaser of
the Building and/or the Land and by any mortgagee or prospective mortgagee of
any mortgage affecting the Building and/or the Land, and by any landlord under a
ground or underlying lease affecting the Land or the Building.
Section 26.02. Landlord agrees, at any time, and from time to time, upon
not less than ten (10) days prior notice from Tenant, to execute, acknowledge
and deliver to Tenant a statement
<PAGE>
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in writing addressed to Tenant certifying that this Lease is unmodified and in
full force and effect (or, if there have been modifications, that the same is in
full force and effect as modified and stating the modifications), stating the
dates to which the Fixed Rent, additional rent and other charges have been paid,
and stating whether or not, to the best knowledge of the signer of such
certificate for and on behalf of Landlord, there exists any default in the
performance of any covenant, agreement, term, provision or condition contained
in this Lease and, if any, specifying each such default of which such signer may
have knowledge.
ARTICLE 27.
LEGAL PROCEEDINGS, WAIVER OF JURY TRIAL
---------------------------------------
Section 27.01. Landlord and Tenant hereby waive, to the extent such waiver
is not prohibited by law, the right to a jury trial in any action, summary
proceeding or legal proceeding between or among the parties hereto or their
successors arising out of this Lease or Tenant's occupancy of the Demised
Premises or Tenant's right to occupy the Demised Premises.
Section 27.02. Tenant hereby waives the right to interpose a counterclaim
(other than a mandatory counterclaim) in any summary proceeding instituted by
Landlord against Tenant or in any action instituted by Landlord for unpaid rent
or additional rent under this Lease.
Section 27.03. A. Subject to the provisions of Section 27.03B, in the
event Tenant claims or asserts that Landlord has violated or failed to perform a
covenant of Landlord not to unreasonably withhold or delay Landlord's consent or
approval, or in any case where Landlord's reasonableness in exercising its
judgment is in issue, Tenant's sole remedy shall be an action for specific
performance, declaratory judgment or injunction, and in no event shall Tenant be
entitled to any money damages for a breach of such covenant, and in no event
shall Tenant claim or assert any claims in any money damages in any action or by
way of set-off, defense or counterclaim, and Tenant hereby specifically waives
the right to any money damages or other remedies.
B. In the event that Tenant shall request Landlord's consent
to an assignment of this Lease or a proposed subletting or occupancy of all or
any portion of the Demised Premises or to any proposed alteration, decoration,
installation, addition or improvement ("Tenant Improvement") to the Demised
Premises and Tenant believes that Landlord has unreasonably withheld or delayed
the same, such dispute, but no other matter whatsoever (except for any other
matter under this Lease for which arbitration is provided as the method of
dispute resolution, in which event such matter shall be resolved in a separate
arbitration proceeding), shall be resolved by
<PAGE>
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arbitration in Manhattan by an arbitrator selected from the panel of retired
judges maintained by Comprehensive Alternative Dispute Resolution Enterprises,
Inc. ("CADRE"). If CADRE shall no longer exist or shall be unwilling or unable
to act, such dispute shall be resolved by another reputable commercial
arbitration company which has expedited arbitration procedures which meet the
time frame set forth herein, as Landlord shall select (the "Company"), provided,
however, that Tenant may dispute Landlord's choice of the Company, in which
event the parties shall mutually agree upon the Company, and if the parties
shall be unable to agree upon the Company, the Company shall be appointed by any
judge of a court of competent jurisdiction in the City of New York. Upon
selection of the Company the parties agree that the balance of this Section
27.03B shall continue to apply with the substitution of the Company in lieu of
CADRE. If Tenant so desires to submit such dispute to CADRE, Tenant shall
notify Landlord of such desire, and within ten (10) Business Days thereafter,
Tenant shall make such submission and deliver all applicable applications and
documents to CADRE with a copy of the entire submission being delivered
simultaneously to Landlord. The arbitration shall be conducted pursuant to the
then existing rules, regulations, practices and procedures of CADRE and provided
such rules so permit, CADRE shall select a single arbitrator (who shall be
impartial and shall have experience regarding the matter to be determined)
within five (5) Business Days after Tenant's submission or application, the
arbitration shall commence two (2) Business Days thereafter and shall be
conducted for at least seven (7) hours on each Business Day thereafter until
completion, each party having no more than a total of fifteen (15) hours to
present its case and to cross-examine or interrogate persons supplying
information or documentation on behalf of the other party. If such rules do not
permit such expedited procedure, then such rules of CADRE shall govern, it being
the intent of the parties to conduct the arbitration in the most expeditious
manner permitted by the rules. The arbitrator shall make a determination within
five (5) Business Days after conclusion of the arbitration; such determination
to be strictly limited to whether or not Landlord's failure to consent to any
proposed assignment of this Lease or proposed sublease or occupancy of all or
any portion of the Demised Premises or proposed Tenant Improvement, was
reasonable, and, if such failure shall be found to be unreasonable, whether the
same was in bad faith. No monetary award shall be awarded as a result of any
proceeding pursuant to this Section, Landlord's sole responsibility in the event
of a negative determination being the requirement of granting its consent to
Tenant's proposed assignment, sublease or occupancy or proposed Tenant
Improvement, as the case may be, except that (i) the prevailing party shall have
the right to be reimbursed for its reasonable fees and expenses within twenty
(20) days after submission of a bill therefor to the losing party, and (ii) in
the event that pursuant to this arbitration procedure Landlord shall be found to
have acted in bad faith in withholding its consent to Tenant's
<PAGE>
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proposed assignment, sublease or occupancy, but, due solely to the delay caused
by such procedure, Tenant's proposed assignee or sublessee or occupant shall not
be obligated to assume this Lease or sublease or occupy the proposed portion of
the Demised Premises, Landlord shall, at Tenant's option be required to step
into the position of such assignee or sublessee or occupant upon the terms and
conditions contained in the submission required to be made to Landlord
(including, if the same would have been the obligation of the subtenant or
occupant, constructing, at Landlord's own cost and expense any required demising
walls). Any determination pursuant to this Section shall be final and binding
upon the parties and each party shall pay its respective costs of any
proceedings pursuant to this Section (except that the prevailing party shall
have the right to be reimbursed for its reasonable fees and expenses within
twenty (20) days after submission of a bill therefor to the losing party).
ARTICLE 28.
SURRENDER OF PREMISES/HOLDOVER
------------------------------
Section 28.01. Upon the expiration or other termination of the Term of
this Lease, Tenant shall quit and surrender the Demised Premises in good order
and condition, ordinary wear and tear and damage by fire or other casualty, the
elements and any cause beyond Tenant's reasonable control excepted, and shall
remove all its property therefrom, except as otherwise provided in this Lease.
Tenant's obligation to observe or perform this covenant shall survive the
expiration or other termination of the Term of this Lease.
Section 28.02. If at any time during the last month of the Term of this
Lease, Tenant shall have removed all or substantially all of Tenant's property
from the Demised Premises, Landlord may, and Tenant irrevocably grants to
Landlord a license to, immediately enter and alter, renovate and redecorate the
Demised Premises, without diminution or abatement of rent, or incurring
liability to Tenant for any compensation, and such acts shall have no effect on
this Lease.
Section 28.03. Tenant agrees it shall indemnify and save Landlord harmless
against all costs, claims, loss or liability resulting from delay by Tenant in
surrendering the Demised Premises upon expiration or sooner termination of the
term of this Lease, including, without limitation, any claims made by any
succeeding tenant founded on such delay unless such delay was caused by
Landlord. The parties recognize and agree that the damage to Landlord resulting
from any failure by Tenant timely to surrender the Demised Premises will be
substantial, will exceed the amount of monthly rent theretofore payable
hereunder, and will be impossible of accurate measurement. Tenant therefore
agrees that if possession of the Demised Premises is not surrendered to Landlord
within two (2) days after the date of the
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expiration or sooner termination of the Term of this Lease, then Tenant will pay
Landlord as liquidated damages for each month and for each portion of any month
during which Tenant holds over in the Demised Premises after expiration or
sooner termination of the Term of this Lease, a sum equal to two (2) times the
average rent and additional rent which was payable per month under this Lease
during the six (6) month period preceding such expiration or termination of the
Term of this Lease. Notwithstanding, the foregoing, provided that during the
six (6) month period immediately preceding the Expiration Date, Tenant has
entered into a new lease or has been negotiating in good faith the terms of a
new lease, in either case to commence on or prior to the Expiration Date, then
Tenant shall pay Landlord as liquidated damages for each month and for each
portion of any month, not to exceed six (6) months, during which Tenant holds
over in the Demised Premises after expiration of the Term of this Lease, only a
sum equal to the average rent and additional rent which was payable per month
under this Lease during the six (6) month period preceding such expiration of
the Term of this Lease. After six (6) months beyond the Expiration Date, the
provisions of the immediately preceding sentence shall not apply. The aforesaid
obligations shall survive the expiration of sooner termination of the Term of
this Lease.
ARTICLE 29.
RULES AND REGULATIONS
---------------------
Section 29.01. Tenant, its servants, employees, agents, visitors, and
licensees shall observe faithfully and comply strictly with the rules and
regulations set forth in Schedule C attached hereto and made a part hereof.
Landlord shall have the right from time to time during the Term of this Lease to
make reasonable changes in and additions to the rules thus set forth. Landlord
agrees not to enforce the rules and regulations against Tenant in a
discriminatory manner unless compliance is necessitated due to the manner in
which Tenant uses and occupies the Demised Premises, or any act or omission by
Tenant.
Section 29.02. Any failure by Landlord to enforce any rules and
regulations now or hereafter in effect, either against Tenant or any other
tenant in the Building, shall not constitute a waiver of any such rules and
regulations.
ARTICLE 30.
NOTICES
-------
Section 30.01. Any notice, request or demand permitted or required to be
given by the terms and provisions of this Lease, or by any law or governmental
regulation, either by Landlord to Tenant or by Tenant to Landlord, shall be in
writing. Unless otherwise required by such law or regulation, such notice,
<PAGE>
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request or demand shall be given, and shall be deemed to have been served and
given by Landlord and received by Tenant, when Landlord (1) shall have deposited
such notice, request or demand by registered or certified mail enclosed in a
securely closed postpaid wrapper, in a United States Government general or
branch post office, addressed to Tenant at the Demised Premises, and (2) until
Tenant has moved its offices to the Demised Premises, shall have deposited such
notice, request or demand by registered or certified mail enclosed in a securely
closed postpaid wrapper in such a post office addressed to Tenant at its address
as stated on the first page of this Lease. Additionally a copy of all notices to
Tenant shall be sent to Tenant at: CitySearch, Inc., 790 East Colorado
Boulevard, Suite 200, Pasadena, CA 91101 Att: Chief Financial Officer. Such
notice, request or demand shall be given, and shall be deemed to have been
served and given by Tenant and received by Landlord, when Tenant shall have
deposited such notice, request or demand by registered or certified mail
enclosed in a securely closed postpaid wrapper in such a post office addressed
to Landlord at 777 Third Avenue, New York, New York 10017. Either party may, by
notice as aforesaid, designate a different address or addresses for notices,
requests or demands to it.
ARTICLE 31.
NO WAIVER; ENTIRE AGREEMENT
---------------------------
Section 31.01. The failure of Landlord to seek redress for violation of,
or to insist upon the strict performance of, any covenant or condition of this
Lease, or any of the Rules and Regulations set forth or hereafter adopted by
Landlord shall not prevent a subsequent act which would have originally
constituted a violation from having all the force and effect of an original
violation. The receipt by Landlord of rent with knowledge of the breach of any
covenant of this Lease shall not be deemed a waiver of such breach. The failure
of Landlord to enforce any of the Rules and Regulations set forth, or hereafter
adopted, against Tenant and/or any other tenant in the Building shall not be
deemed a waiver of any such Rules and Regulations. No provision of this Lease
shall be deemed to have been waived by Landlord, unless such waiver be in
writing signed by Landlord. No payment by Tenant or receipt by Landlord of a
lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated 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 may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
rent or pursue any other remedy in this Lease provided.
Section 31.02. This Lease with the Schedules annexed hereto, if any,
contains the entire agreement between Landlord and Tenant, and any executory
agreement hereafter made between
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Landlord and Tenant shall be ineffective to change, modify, waive, release,
discharge, terminate, or effect an abandonment of this Lease, in whole or in
part, unless such executory agreement is in writing and signed by the party
against which enforcement of the change, modification, waiver, release,
discharge, termination or the effecting of the abandonment is sought.
ARTICLE 32.
CAPTIONS
--------
. .
Section 32.01. The captions of Articles in this Lease are inserted only as
a matter of convenience and for reference, and they in no way define, limit or
describe the scope of this Lease or the intent of any provision thereof.
ARTICLE 33.
INABILITY TO PERFORM
--------------------
Section 33.01. This Lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder on the
part of Tenant to be performed shall in no way be affected, impaired or excused
because Landlord is unable to fulfill any of its obligations under this Lease or
to supply or is delayed in supplying any service expressly or impliedly to be
supplied or is unable to make, or is delayed in making any repair, additions,
alterations or decorations or is unable to supply or is delayed in supplying any
equipment or fixtures if Landlord is prevented or delayed from so doing by
reason of strike or labor troubles or any outside cause whatsoever including but
not limited to, governmental preemption in connection with a National Emergency
or by reason of any rule, order or regulation of any department or subdivision
thereof of any government agency or by reason of the conditions of supply and
demand which have been or are affected by war or other emergency. This Lease and
the obligation of Landlord to perform all of the covenants and agreements
hereunder on the part of Landlord to be performed shall, except as otherwise
specifically set forth herein, in no way be affected, impaired or excused
because Tenant is unable to fulfill any of its obligations under this Lease
(expressly excluding the obligation of Tenant to pay any Fixed Rent, additional
rent or any other monetary item hereunder) if Tenant is prevented or delayed
from so doing by reason of strike or labor troubles or any outside cause
whatsoever beyond the reasonable control of Tenant (which shall not be deemed to
include Tenant's failure to possess or inability to procure sufficient funds or
to obtain labor and/or materials at a below average price) including but not
limited to, governmental preemption in connection with a National Emergency or
by reason of any rule, order or regulation of any department or subdivision
thereof of any government agency or by reason of
<PAGE>
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the conditions of supply and demand which have been or are affected by war or
other emergency.
ARTICLE 34.
NO REPRESENTATION BY LANDLORD
-----------------------------
Section 34.01. Landlord or Landlord's agents have made no representations
or promises with respect to the Building, the Land or the Demised Premises
except as herein expressly set forth, and no rights, easements or licenses are
acquired by Tenant by implication or otherwise except as expressly set forth in
the provisions of this Lease. The taking of possession of the Demised Premises
by Tenant shall be conclusive evidence, as against Tenant, that Tenant accepts
said premises and that the Demised Premises and the Building of which the same
form a part were in good and satisfactory condition at the time such possession
was so taken subject to Landlord's obligation under Section 2.02 hereof.
ARTICLE 35.
NAME OF BUILDING
----------------
Section 35.01. The Building may be known as or by such name as Landlord,
in its sole discretion, may elect, and Landlord shall have the right from time
to time to change such designation or name without Tenant's consent.
ARTICLE 36.
SUCCESSORS AND ASSIGNS
----------------------
Section 36.01. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and, except as otherwise
provided herein, their assigns.
ARTICLE 37.
DEFERRED COLLECTIONS
--------------------
Section 37.01. If all or any part of the Fixed Rent or additional rents,
as above defined, shall at any time become uncollectible, reduced or required to
be refunded by virtue of any rules, regulations, orders, laws and ordinances
(including, without limitation, rent control or stabilization laws), or
governmental or quasi-governmental authorities having jurisdiction ("Laws and
Ordinances"), then for the period prescribed by said Laws and Ordinances, Tenant
shall pay to Landlord the maximum amounts permitted pursuant to said Laws and
Ordinances. Upon the expiration of the applicable period of time
<PAGE>
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during which such amounts shall be uncollectible, reduced or refunded, Tenant
shall pay to Landlord as additional rent, within fifteen (15) days after demand,
all such uncollected, reduced or refunded amounts that would have been payable
for the period absent such Laws and Ordinances; provided, however, that the
retroactive collection thereof shall then be lawful.
ARTICLE 38.
FEES/INTEREST/LATE CHARGES
--------------------------
Section 38.01. Whenever any default by Tenant causes Landlord to incur
attorneys' fees and/or any other costs or expenses, Tenant agrees that it shall
pay and/or reimburse Landlord for such fees, costs or expenses promptly upon
being billed therefor. Landlord and Tenant hereby agree that the non-prevailing
party in any legal proceeding between them shall pay the reasonable legal fees
and disbursements of the prevailing party within thirty (30) days after receipt
of a bill therefor. In the event of any settlement of such proceeding, or any
partial award to either party, the parties shall each pay their own legal fees
and disbursements and neither party shall be responsible for payment to the
other for the same.
Section 38.02. If any monies owing by Tenant under this Lease are paid
more than ten (10) days after the date such monies are payable pursuant to the
provisions of this Lease, Tenant shall pay Landlord interest thereon, at the
Interest Rate, for the period from the date such monies were originally payable
to the date such monies are paid. In the event that three (3) times in any
twelve (12) month period Tenant shall have defaulted beyond any applicable
notice and cure period in the payment of Fixed Rent or additional rent, or any
part of either, then any further default by Tenant within such twelve (12) month
period shall permit Landlord to collect from Tenant, upon demand, in addition to
any interest payable pursuant to this Article 38, or elsewhere in this Lease, a
late charge equal to the amount of Fixed Rent and additional rent so due
multiplied by a percentage equal to the then prime rate of interest charged by
Marine Midland Bank, N.A. as compensation to Landlord for the costs incurred by
it as a result of such defaults, Landlord and Tenant acknowledging that the
actual amount of such costs would be impossible to ascertain.
ARTICLE 39.
ABATEMENT OF RENT
-----------------
Section 39.01. Anything herein to the contrary notwithstanding, provided
this Lease shall be in full force and effect and Tenant shall not be in default
hereunder beyond any applicable notice and grace periods, the Fixed Rent shall
abate
<PAGE>
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at the rate of $4,166.66 per month for a period of six (6) months from and after
the Commencement Date.
ARTICLE 40.
SECURITY DEPOSIT
----------------
Section 40.01. Upon execution of this Lease, Tenant shall deliver to
Landlord an irrevocable letter of credit (the "Letter of Credit") in the amount
of $26,250 issued by a New York City commercial bank acceptable to Landlord in
its discretion, and in the form of the letter of credit annexed hereto as
Schedule D, to be held by Landlord as security ("Security Deposit") for the
faithful performance and observance by Tenant of the terms, provisions and
conditions of this Lease. It is agreed that in the event Tenant defaults, in
respect of any of the terms, provisions and conditions of this Lease, including,
but not limited to, the payment of Fixed Rent or additional rent, Landlord may
draw down upon the Letter of Credit and use, apply or retain the whole or any
part of the proceeds thereof to the extent required for the payment of any Fixed
Rent and additional rent or any other sum as to which Tenant is in default or
for any sum which Landlord may expend or may be required to expend by reason of
Tenant's default in respect of any of the terms, covenants and conditions of
this Lease, including, but not limited to, any damages or deficiency in the re-
letting of the Demised Premises, whether such damages or deficiency accrued
before or after summary proceedings or other re-entry by Landlord. In the event
that Tenant shall fully and faithfully comply with all of the terms, provisions,
covenants and conditions of this Lease, the Security Deposit shall be returned
promptly to Tenant after the date fixed as the Expiration Date hereof and after
delivery of entire possession of the Demised Premises to Landlord. In the event
of an assignment by Landlord of its interest in the Lease, Landlord shall have
the right to transfer the Security Deposit to the assignee and Landlord shall
thereupon be released by Tenant from all liability for the return of such
Security Deposit and Tenant agrees to look to the assignee solely for the return
of said Security Deposit, and it is agreed that the provisions hereof shall
apply to every transfer or assignment made of the Security Deposit to a new
assignee. Tenant further covenants that it will not assign or encumber or
attempt to assign or encumber the Security Deposit and that neither Landlord nor
its successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
Section 40.02. In the event of a default by Tenant of any of the terms,
provisions and conditions of this Lease Landlord shall be permitted to draw down
the entire amount of the Letter of Credit (or a portion thereof) and apply the
proceeds (or a portion thereof) in accordance with Section 40.01 of this Article
<PAGE>
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and retain the balance for the Security Deposit required hereunder.
Section 40.03. If Landlord shall apply all or any portion of the Security
Deposit (by way of a draw on the Letter of Credit), then Tenant shall deposit
with Landlord, upon demand, a sufficient amount of cash or an additional Letter
of Credit to bring the balance of cash and the Letter of Credit held by Landlord
hereunder to the amount of the Security Deposit. Any use by Landlord of all or
any portion of the Security Deposit pursuant to the provisions hereof shall be
deemed an involuntary payment by Tenant and shall not be deemed a waiver by
Landlord of Tenant's default or Landlord's right to terminate this Lease
pursuant to the provisions of this Lease.
Section 40.04. Provided Tenant has not been in default under the terms and
conditions of the Lease during the first eighteen (18) months of the Term,
Landlord shall return the Letter of Credit to Tenant upon the expiration of said
eighteen (18) month period. Upon the return of the Letter of Credit as
aforesaid, this Article 40 shall be deemed to be null and void and of no further
force and effect.
ARTICLE 41.
TENANT'S EXPANSION OPTION
-------------------------
Section 41.01. In the event that Tenant has notified Landlord in writing
that it desires to lease additional space in the Building (any such space is
hereinafter referred to as the "Expansion Space") and provided same becomes
available for direct leasing (i.e., a lease of such space expires or is
----
terminated and such space is not leased again by the same tenant or occupant, or
the successors or assigns or subtenants of such tenant or occupant, by renewal
or a new lease or modification of a previous lease, and such space is not
subject to any other lease or an option contained in another lease, or the space
is not subject to a lease as of the date hereof, and the space is not one with
respect to which Landlord has commenced negotiations with any other proposed
tenant), then, Landlord shall send Tenant a notice setting forth the date on
which Landlord has obtained, or anticipates obtaining, vacant possession of the
Expansion Space. Upon Landlord giving such a notice, provided this Lease shall
be in full force and effect and provided that Tenant shall not be in default
hereunder beyond any applicable notice and grace period either as of the date of
Tenant's exercise of the expansion option herein described or as of the day
which would otherwise be the first day of Tenant's leasing of the Expansion
Space (which conditions regarding default may be waived by Landlord in its sole
discretion), and further provided that there shall be not less than five (5)
years remaining in the Term as of the Expansion Space Commencement Date (as
hereinafter defined) (unless Tenant shall simultaneously exercise its extension
option contained in Article 42 hereof), then Tenant shall have the
<PAGE>
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option, exercisable by notice to Landlord given within five (5) days after
Landlord's notice to Tenant, time being of the essence with respect to Tenant's
notice, to lease the Expansion Space from Landlord upon the terms and conditions
hereinafter set forth. In the event Tenant fails to exercise its option to
accept the Expansion Space within five (5) days from the date of the applicable
notice from Landlord, Landlord shall have the right to lease the Expansion Space
to any other proposed tenant for any term whatsoever and Tenant shall be deemed
to have waived its rights to the Expansion Space.
Section 41.02. If Tenant exercises its option to lease the Expansion Space
in a timely manner, then on the date (the "Expansion Space Commencement Date")
Landlord delivers possession of the Expansion Space to Tenant, the Expansion
Space shall be added to the Demised Premises. Tenant acknowledges that it will
take the Expansion Space "as-is", and Landlord shall not be obligated to perform
any work, furnish any materials, or give Tenant any rent credit or work
allowance or any sum of money with respect thereto, and the Expansion Space
shall become part of the Demised Premises upon and subject to all of the terms
and conditions of this Lease (including the provisions of Section 2.02 hereof
with regard to latent defects and Section 8.05 with respect to Pre-Existing
Conditions), except that the Fixed Rent payable by Tenant for the Expansion
Space shall be equal to the greater of (i) the Fixed Rent then in effect from
time to time for the Demised Premises (on a per square foot basis) including all
escalations and additional rent payable as herein provided or (ii) the fair
market rental value of the Expansion Space (the "Expansion FMRV"). The
Expansion FMRV shall be determined in accordance with the following procedure:
(i) Immediately after the exercise by Tenant of its option
contained herein, Landlord and Tenant shall use their best efforts to agree
upon the Expansion FMRV. In the event Landlord and Tenant cannot reach
agreement within fifteen (15) Business Days after the date of Tenant's
notice of exercise of its option contained herein, Landlord and Tenant
shall each select a reputable, licensed real estate broker having an office
in New York County and familiar with the rentals then being charged in the
Building and in comparable buildings (respectively, "Landlord's Broker" and
"Tenant's Broker") who shall confer promptly after their selection by
Landlord and Tenant and shall use their best efforts to agree upon the
Expansion FMRV, taking into consideration all relevant factors, including,
as a primary factor, the rental which Landlord is then commanding or
requiring for leases of comparable space in the Building (or, if there is
then no comparable space in the Building, taking into consideration the
quality of non-comparable space in the Building relative to the Expansion
Space). If
<PAGE>
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Landlord's Broker and Tenant's Broker cannot reach agreement within forty-
five (45) days after the date of Tenant's notice of exercise of its option
contained herein, then within ten (10) days thereafter, they shall
designate a third reputable, licensed real estate broker having an office
in New York County (the "Independent Broker"). Upon the failure of
Landlord's Broker and Tenant's Broker to agree upon the designation of the
Independent Broker, then the Independent Broker shall be appointed by the
appropriate official of the Real Estate Board of New York, Inc. upon ten
(10) days notice, or by any other real estate trade organization exercising
functions similar to those exercised by The Real Estate Board of New York,
Inc. Concurrently with such appointment, Landlord's Broker and Tenant's
Broker shall each submit a letter to the Independent Broker, with a copy to
Landlord and Tenant, setting forth such broker's estimate of the Expansion
FMRV, taking into consideration the factors described above (respectively,
"Landlord's Broker's Letter" and "Tenant's Broker's Letter").
(ii) In the event the Expansion FMRV set forth in Landlord's
Broker's Letter and Tenant's Broker's Letter shall differ by less than
$2.50 per square foot for any year during the remainder of the Term, then
the Expansion FMRV shall not be determined by the Independent Broker, and
the Expansion FMRV shall be the average of the Expansion FMRV set forth in
Landlord's Broker's Letter and Tenant's Broker's Letter. In the event the
Expansion FMRV set forth in Landlord's Broker's Letter and Tenant's
Broker's Letter shall differ by more than $2.49 per square foot per annum
for any year during the remainder of the Term, the Independent Broker shall
conduct such investigations and hearings as he may deem appropriate and
shall, within sixty (60) days after the date of his designation, choose
either the rental set forth in Landlord's Broker's Letter or Tenant's
Broker's Letter to be the Expansion FMRV during the Term and such choice
shall be binding upon Landlord and Tenant. Landlord and Tenant shall each
pay the fees and expenses of its respective broker. The fees and expenses
of the Independent Broker shall be shared equally by Landlord and Tenant.
Section 41.03. In the event the Fixed Rent for the Expansion Space shall
not have been determined prior to the Expansion Space Commencement Date, then
the Fixed Rent for the Expansion Space to be paid by Tenant to Landlord until
such determination has been made shall be the Fixed Rent for the Demised
Premises (on a per square foot basis) immediately
<PAGE>
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preceding the Expansion Space Commencement Date, including all escalations or
additional rent payable pursuant to Article 3 hereof or as otherwise provided
herein. After such determination of the Fixed Rent for the Expansion Space has
been made, any excess rental for the Expansion Space theretofore paid by Tenant
to Landlord shall be credited by Landlord against the next ensuing monthly
installments of Fixed Rent payable by Tenant to Landlord and any deficiency in
Fixed Rent due from Tenant to Landlord attributable to the Expansion Space shall
be immediately paid.
Section 41.04. Promptly after Tenant exercises its option to lease the
Expansion Space and the Fixed Rent for the Expansion Space shall have been
determined, Landlord and Tenant shall execute and deliver an agreement (i)
incorporating the Expansion Space into the definition of the Demised Premises,
(ii) setting forth the Fixed Rent for the Expansion Space, (iii) amending
Section 3.04 to reflect the increase in the Percentage attributable to the
Expansion Space and the increase in the Wage Rate Factor attributable to the
Expansion Space and (iv) amending Section 4.01 to reflect the increase in the
dollar amount set forth therein attributable to such Expansion Space; provided
the failure of the parties to enter into such an agreement shall not affect
their respective rights and obligations hereunder.
Section 41.05. Under no circumstances shall Landlord have any liability
for the failure of any occupant of all or a portion of the Expansion Space to
vacate same at the end of the term of such occupant's lease. Landlord agrees to
take such actions as are reasonable, in its sole judgment, to obtain vacant
possession of any such space at the end of such term provided Landlord's failure
to deliver such possession to Tenant shall in no event affect the enforceability
of this Lease.
ARTICLE 42.
TENANT'S EXTENSION OPTION
-------------------------
Section 42.01. Provided this Lease shall then be in full force and effect
and Tenant shall not be in default hereunder beyond any applicable notice or
grace period either as of the date of Tenant's exercise of the extension option
described herein or as of the day which would otherwise be the first day of the
Extension Term, as defined herein (which conditions regarding default may be
waived by Landlord in its sole discretion), Tenant shall have the right, at its
option, to extend the Term for a single five (5) year period (the "Extension
Term"). The Extension Term shall commence on the day immediately following the
original Expiration Date and shall expire on the day prior to the fifth (5th)
anniversary of such date unless the Extension Term shall sooner end pursuant to
any of the terms, covenants or conditions of this Lease or pursuant to law.
Tenant shall give Landlord written notice of Tenant's intention to exercise such
<PAGE>
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option on or before the date which is nine (9) months prior to the original
Expiration Date, the time of exercise being of the essence, and upon the giving
of such notice, this Lease and the Term shall be extended without execution or
delivery of any other or further documents, with the same force and effect as if
the Extension Term had originally been included in the Term and the Expiration
Date shall thereupon be deemed to be the last day of the Extension Term. All of
the terms, covenants and conditions of this Lease shall continue in full force
and effect during the Extension Term, including items of additional rent and
escalation which shall remain payable on the terms herein set forth, except that
the Fixed Rent shall be as determined in accordance with Section 42.02 of this
Article and Tenant shall have no further right to extend the Term pursuant to
this Article.
Section 42.02. The Fixed Rent payable by Tenant for the Demised Premises
during the Extension Term shall be the greater of (i) the Fixed Rent then in
effect, including all escalations and additional rent payable as herein
provided, or (ii) the fair market rental value of the Demised Premises taking
into consideration all relevant factors, including, as a primary factor, the
rental which Landlord is then commanding or requiring for comparable space in
the Building (or, if there is then no comparable space in the Building, taking
into consideration the quality of non-comparable space in the Building relative
to the Demised Premises) (fair market rental value taking into account the
foregoing is hereinafter referred to as the "FMRV"). The FMRV shall be
determined in accordance with the following procedure:
(i) Immediately after the exercise by Tenant of its option under
Section 42.01 above, Landlord and Tenant shall use their best efforts to
agree upon the FMRV. In the event Landlord and Tenant cannot reach
agreement within fifteen (15) Business Days after the date of Tenant's
notice of exercise of its option, Landlord and Tenant shall each select a
reputable qualified, licensed real estate broker having an office in New
York County and familiar with the rentals then being charged in the
Building and in comparable buildings (respectively, "Landlord's Broker" and
"Tenant's Broker") who shall confer promptly after their selection by
Landlord and Tenant and shall use their best efforts to agree upon the
FMRV. If Landlord's Broker and Tenant's Broker cannot reach agreement
within sixty (60) days after the date of Tenant's notice of exercise of its
option, then within ten (10) days thereafter, they shall designate a third
reputable, licensed real estate broker having an office in New York County
(the "Independent Broker"). Upon the failure of Landlord's Broker and
Tenant's Broker to agree upon the designation of the Independent Broker,
then the Independent Broker shall be appointed by the appropriate official
of The Real Estate Board of New York, Inc. upon ten (10) days notice, or by
any other real estate trade
<PAGE>
-63-
organization having jurisdiction and exercising functions similar to those
exercised by The Real Estate Board of New York, Inc. Concurrently with such
appointment, Landlord's Broker and Tenant's Broker shall each submit a
letter to the Independent Broker, with a copy to Landlord and Tenant,
setting forth such broker's estimate of the FMRV (respectively, Landlord's
Broker's Letter" and "Tenant's Broker's Letter").
(ii) In the event the FMRV set forth in Landlord's Broker's Letter
and Tenant's Broker's Letter shall differ by less than $2.50 per square
foot for each year during the Extension Term, then the FMRV shall not be
determined by the Independent Broker, and the FMRV shall be the average of
the FMRV set forth in Landlord's Broker's Letter and Tenant's Broker's
Letter. In the event the FMRV set forth in Landlord's Broker's Letter and
Tenant's Broker's Letter shall differ by more than $2.49 per square foot
per annum for any year during the Extension Term, the Independent Broker
shall conduct such investigations and hearings as he may deem appropriate
and shall, within sixty (60) days after the date of his designation, choose
either the rental set forth in Landlord's Broker's Letter or Tenant's
Broker's Letter to be the FMRV during the Extension Term and such choice
shall be binding upon Landlord and Tenant. Landlord and Tenant shall each
pay the fees and expenses of its respective broker. The fees and expenses
of the Independent Broker shall be shared equally by Landlord and Tenant.
Section 42.03. In the event the Extension Term shall commence prior to
determination of the Fixed Rent during the Extension Term as herein provided,
then the Fixed Rent to be paid by Tenant to Landlord until such determination
has been made shall be the Fixed Rent for the twelve (12) month period
immediately preceding the commencement of the Extension Term, including all
escalations or additional rent payable pursuant to Article 3 hereof or as
otherwise provided herein. After such determination has been made for the Fixed
Rent during the Extension Term, any excess rental for the Extension Term
theretofore paid by Tenant to Landlord shall be credited by Landlord against the
next ensuing monthly Fixed Rent payable by Tenant to Landlord and any deficiency
in Fixed Rent due from Tenant to Landlord during the Extension Term shall be
immediately paid.
Section 42.04. Promptly after the Fixed Rent has been determined, Landlord
and Tenant shall execute and deliver an agreement setting forth the Fixed Rent
for the Extension Term, as finally determined, provided the failure of the
parties to do so shall not affect their respective rights and obligations
hereunder.
<PAGE>
-64-
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease as of the day and year first above written.
SAGE REALTY CORPORATION, AGENT
By: [SIGNATURE ILLEGIBLE]
-----------------------------------
Landlord
CITYSEARCH, INC.
By: [SIGNATURE ILLEGIBLE]
-----------------------------------
Tenant
<PAGE>
State of California
County of Los Angeles
On May 1, 1997 before me, BETTYE FUSSELL, NOTARY PUBLIC
----------- ------------------------------------------------------
DATE NAME, TITLE OF OFFICER . E.G. "JANE DOE, NOTARY PUBLIC"
personally appeared DOUGLAS MCPHERSON
-------------------------------------------------------------
NAME(S) OF SIGNER(S)
[_] personally known to me - OR - [X] 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 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.
[SEAL APPEARS HERE] WITNESS my hand and official seal.
/s/ Bettye Fussell
----------------------------------------
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
OFFICE LEASE
_______________________________ ---------------------------------------
TITLE(S) TITLE OR TYPE OF DOCUMENT
[_] PARTNER(S) [_] LIMITED
[_] GENERAL /////////////////////////
---------------------------------------
NUMBER OF PAGES
[_] ATTORNEY-IN-FACT
[_] TRUSTEE(S)
[_] GUARDIAN/CONSERVATOR /////////////////////
[_] OTHER:_________________________ ---------------------------------------
_______________________________ DATE OF DOCUMENT
_______________________________
SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES) ONE
---------------------------------------
___________________________________ SIGNER(S) OTHER THAN NAMED ABOVE
___________________________________
<PAGE>
ACKNOWLEDGEMENTS
State of New York )
ss.:
County of Queens )
On the 7th day of May 1997, before me personally came Robert Kaufman
to me known, who being by me duly sworn, did depose and say that he resides at
[SIGNATURE ILLEGIBLE] that he is the Executive VP of SAGE REALTY COPORATION, the
corporation described in and which executed the foregoing instrument; and that
he signed his name thereto by authority of the Board of Directors of said
corporation.
[SIGNATURE ILLEGIBLE]
---------------------------------
Notary Public
<PAGE>
CORPORATE TENANT
- ----------------
State of New York )
ss.:
County of New York)
On the ____ day of __________________ 1997, before me personally came
______________________ to me known, who being by me duly sworn, did depose and
say that he resides at _________________________________; that (s)he is the
____________ of CITYSEARCH, INC., the corporation described in and which
executed the above instrument; and that (s)he signed (her) his name by authority
of the Board of Directors of such corporation.
______________________________
Notary Public
<PAGE>
SCHEDULE "A"
FLOOR PLAN
SEE ATTACHED
<PAGE>
[FLOOR PLAN APPEARS HERE]
<PAGE>
SCHEDULE "B"
LANDLORD'S WORK
I. PLANS AND WORK
1. Plan Submission
---------------
Tenant has submitted to Landlord for review and approval complete and
detailed final architectural, mechanical and engineering plans and
specifications labeled 3-GN, 3-WL, 3-KC, 3-DM, 3-ET (all dated 4/22/97) and 3-CP
and 3-DT (all dated 4/28/97) prepared by Emery Roth Associates showing the
alterations required by Tenant to the Demised Premises in order to prepare the
Demised Premises for Tenant's occupancy. In addition to submission of the
aforesaid plans and specifications, Tenant shall also furnish any and all
documents and information which Landlord may reasonably require for submission
to its insurance compan(ies), mortgagee(s), contractors and other interested
parties.
2. Authorization to Proceed
------------------------
The plans and specifications, as approved by Landlord, are hereinafter
referred to as the "Final Plans" and all work required by the Final Plans to be
preformed by Landlord is hereinafter referred to as "Landlord's Work." Landlord
shall perform Landlord's Work in accordance with good construction practices
using new or like new materials.
The submission of the Final Plans to Landlord shall be deemed
authorization by Tenant for Landlord to proceed with the work shown on the Final
Plans, subject to the provisions hereof. Any approvals required to be given by
either party shall be deemed given, unless within five (5) days after any
submission the party receiving the same notifies the submitting party of an
objection thereto. Any architect or designer now or hereafter acting for or on
behalf of Tenant shall be deemed an agent of Tenant and authorized to bind
Tenant in all respects.
3. Compliance with Laws & Codes
----------------------------
Landlord hereby agrees to be responsible for Landlord's Work meeting
applicable laws, rules, ordinances, requirements and or regulations of any
governmental or quasi-governmental authority having jurisdiction thereover.
Neither Landlord's approval of the Final Plans, performance of the Landlord's
Work nor any statement made herein or in the body of the Lease shall constitute
an express or implied representation of Landlord that any or all work performed
and installation supplied pursuant to the Final Plans is suitable for the
particular requirements of Tenant or any specific or general use and purpose of
Tenant.
<PAGE>
-2-
4. Filing with Governmental Agencies
---------------------------------
Landlord shall cause the Final Plans and/or appropriate building
notices and forms relating thereto to be filed with and approved by any
governmental and quasi-governmental authorities having jurisdiction over
Landlord's Work. All costs, fees and expenses incurred in connection with
obtaining the approvals of and filings with such governmental and quasi-
governmental authorities as well as all engineering and architectural costs
associated therewith, if any, shall be paid for by Landlord. Any additional
approvals or filings necessitated by changes made by Tenant to the Final Plans
shall be at the sole cost and expense of Tenant.
5. Architectural & Engineering Services
------------------------------------
The Final Plans shall be prepared by Tenant at Landlord's own cost and
expense.
The air conditioning system to serve the Demised Premises will be
designed and initially balanced at Landlord's expense. Any changes to the Final
Plans and any changes to the original air-conditioning design necessitated by
any changes made by Tenant to the Final Plans shall be at Tenant's expense.
6. Entry by Tenant
---------------
Prior to the Commencement Date, entry by Tenant, its agents,
contractors or subcontractors, in or on the Demised Premises for performance of
work in the Demised Premises not included within Landlord's Work, or for any
other purpose whatsoever, shall be at Tenant's sole risk and responsibility.
Upon the request of Landlord, Tenant shall deliver to Landlord policies and
certificates of insurance reasonably satisfactory to Landlord. In the event
Tenant or Tenant's contractor shall enter upon or perform work in the Demised
Premises or any other part of the Building, Tenant agrees to indemnify and save
Landlord free and harmless, from and against any and all claims whatsoever
arising out of said entry or such work.
Tenant agrees that should Tenant, its agents, contractors or
subcontractors, enter upon the Demised Premises for the purpose of performing
any work not included within Landlord's Work, or for any other purpose
whatsoever, the labor employed by Tenant or anyone performing such work, for or
on behalf of Tenant, shall always be harmonious and compatible with the labor
employed by Landlord or any agents, contractors or subcontractors of Landlord.
Should such labor be unharmonious or incompatible, Landlord may require Tenant,
its agents and/or contractors to withdraw from the Demised Premises. Tenant's
agents, contractors and subcontractors and their respective employees shall
comply with the special rules, regulations and requirements of Building
management for the performance and coordination of said agents,
<PAGE>
-3-
contractors, subcontractors and their employees so as to avoid the intrusion
into the operation of the Building and to avoid disturbing the quiet enjoyment
of other tenants.
As a condition to Landlord's permission to Tenant to make any of
Tenant's installations in the Demised Premises, Landlord may require that Tenant
agree with Landlord the fixing of the Commencement Date of this Lease.
Landlord agrees to remain responsible for one (1) year following
substantial completion of Landlord's Work to cure all defects in workmanship,
design, materials or equipment with respect to Landlord's Work (notice of which
shall be given to Landlord within such one (1) year period), and for a longer
period, if and to the extent that the cure of any such defect is covered under
the terms of any warranty or guaranty that Landlord may have received from any
supplier, contractor or subcontractor.
II. SUBSTANTIAL COMPLETION
----------------------
Landlord's Work shall be deemed to be substantially completed
("Substantially Completion" or "Substantial Completion") on the date (the
"Substantial Completion Date") when Landlord's Work shall have been completed in
accordance with the Final Plans with the exception of punchlist items (i.e.,
insubstantial details of construction, mechanical adjustment or decoration which
remain to be performed in connection with Landlord's Work which shall be
completed with reasonable promptness after the Commencement Date). Landlord
hereby agrees to cause its contractor to cooperate with Tenant's contractors in
order to phase the construction of Landlord's Work with Tenant's work provided
that completion of Landlord's Work will not be delayed nor the cost of
Landlord's Work be increased thereby.
III. DELAYS
------
The term "Tenant Delay" shall mean any delay that Landlord may
encounter in the completion Landlord's Work by reason of any act, neglect,
failure or omission of Tenant, its agents, servants, contractors, architect or
employees, in the performance of Tenant's obligations under this Schedule B,
including:
l. Changes
-------
Any delay due to changes made by or on behalf of Tenant in the Final Plans;
2. Tenant Work
-----------
Any delay caused by work by or on behalf of tenant, other than Landlord's Work
as described in the Final Plans; and
<PAGE>
-4-
3. Non-payment of Tenant Contribution
----------------------------------
Non-payment of any installment of Tenant's Contribution (as defined in Section
IV below), or any other payment required of Tenant under this Schedule B or
elsewhere in the Lease, when due.
If the Substantial Completion Date shall be delayed by reason of a
Tenant Delay, the Demised Premises shall be deemed to be Substantially Completed
for purposes of the Commencement Date (as defined in the Lease) as of the date
that the Demised Premises would have been Substantially Completed but for any
such Tenant Delay, as determined by Landlord in its reasonable discretion,
whether or not any such Tenant Delay could have been avoided by the commitment
by Landlord of additional personnel to the performance of Landlord's Work. In
addition, Tenant shall, promptly upon demand, reimburse Landlord for all damages
resulting from such Tenant Delay.
IV. LIABILITY FOR ABOVE BUILDING STANDARD WORK
------------------------------------------
Tenant shall be liable to Landlord or Landlord's designated agent for
costs incurred by Landlord in the completion of Landlord's Work to the extent
that such costs are incurred as a result of a change requested by Tenant in the
work as shown on the Final Plans. In computing the cost to Tenant of any change
to the Final Plans requested by Tenant, Landlord agrees to charge Tenant only
for the increased cost of Landlord's Work (i.e. deducting any savings which it
realizes by reason of such change from any increase it incurs by reason of such
change). Landlord or Landlord's agent shall inform Tenant by notice of the
cost of such extra work which shall be payable by Tenant together with a
handling and supervision fee as charged by Landlord's contractor which shall not
exceed twenty-one percent (21%) (such costs together with such fee being
collectively, "Tenant's Contribution") as additional rent within ten (10) days
of delivery to Tenant of an invoice for same. Landlord shall perform such extra
work only if Tenant approves the cost thereof in writing within three (3) days
from Landlord's notice thereof.
<PAGE>
SCHEDULE "C"
RULES AND REGULATIONS
---------------------
l. The rights of tenants in the entrances, corridors, elevators and
escalators of the Building are limited to ingress to and egress from the
tenants' premises for the tenants and their employees, licensees and invitees,
and no tenant shall use, or permit the use of, the entrances, corridors,
escalators or elevators for any other purpose. No bicycles, dogs or other
animals may be brought into the Building by Tenant, or its employees, licensees
or invitees. No tenant shall invite to the tenant's premises, or permit the
visit of, persons in such numbers or under such conditions as to interfere with
the use and enjoyment of any of the plazas, entrances, corridors, escalators,
elevators and other facilities of the Building by other tenants. Fire exits and
stairways are for emergency use only, and they shall not be used for any other
purposes by the tenants, their employees, licensees or invitees. No tenant
shall encumber or obstruct, or permit the encumbrance or obstruction of, any of
the sidewalks, plazas, entrances, corridors, escalators, elevators, fire exits
or stairways of the Building. Landlord reserves the right to control and
operate the public portions of the Building and the public facilities, as well
as facilities furnished for the common use of the tenants, in such manner as it
deems best for the benefit of the tenants generally.
2. The cost of repairing any damage to the public portions of the
Building or the public facilities or to any facilities used in common with other
tenants, caused by a tenant or the employees, licensees or invitees of the
tenant, shall be paid by such tenant.
3. Landlord may refuse admission to the Building outside of ordinary
business hours to any person not known to the watchman in charge or not having a
pass issued by Landlord or not properly identified, and may require all persons
admitted to or leaving the Building outside of ordinary business hours to
register. Tenant's employees, agents and visitors shall be permitted to enter
and leave the Building whenever appropriate arrangements have been previously
made between Landlord and Tenant with respect thereto. Each tenant shall be
responsible for all persons for whom he requests such permission and shall be
liable to Landlord for all acts of such persons. Any person whose presence in
the Building at any time shall, in the judgment of Landlord, be prejudicial to
the safety, character, reputation and interests of the Building or its tenants
may be denied access to the Building or may be ejected therefrom. In case of
invasion, riot, public excitement or other commotion, Landlord may prevent all
access to the Building during the continuance of the same, by closing the doors
or otherwise, for the safety of the tenants and protection of property in the
Building. Landlord may require any person leaving the Building with any package
or other object to exhibit a pass from the tenant from whose
<PAGE>
C-2
premises the package or object is being removed, but the establishment and
enforcement, or failure to enforce, of such requirements shall not impose any
responsibility on Landlord for the protection of any tenant against the removal
of property from the premises of the tenant. Landlord shall, in no way, be
liable to any tenant for damages or loss arising from the admission, exclusion
or ejection of any person to or from the tenant's premises or the Building under
the provisions of this rule.
4. Except to the extent otherwise permitted in the lease, no tenant
shall obtain or accept or use in its premises ice, drinking water, food,
beverage, towel, barbering, boot blacking, floor polishing, lighting
maintenance, cleaning or other similar services from any persons not authorized
by Landlord in writing to furnish such services, provided always that the
charges for such services by persons authorized by Landlord are not excessive.
Such services shall be furnished only at such hours, in such places within the
tenant's premises and under such regulations as may be fixed by Landlord.
5. No awnings or other projections over or around the windows shall
be installed by any tenant and only such window blinds as are supplied, or
permitted by Landlord shall be used in a tenant's premises.
6. There shall not be used in any space, or in the public halls of
the Building, either by Tenant or by jobbers or others, in the delivery or
receipt of merchandise or mail, any hand trucks, except those equipped with
rubber tires and side guards.
7. All entrance doors in each tenant's premises shall be left locked
when the tenant's premises are not in use. Entrance doors shall not be left
open at any time. All windows in each tenant's premises shall be kept closed at
all times, and all blinds or drapes therein above the ground floor shall be
lowered or closed when and as reasonably required because of the position of the
sun, during the operation of the Building air conditioning system to cool or
ventilate the tenant's premises.
8. No noise, including the playing of any musical instruments, radio
or television, which, in the judgment of Landlord, might disturb other tenants
in the Building shall be made or permitted by any tenant and no cooking shall be
done in Tenant's premises except as expressly approved by Landlord. Tenant may
heat food (but not cook) items in the Demised Premises using a microwave or
toaster oven. Nothing shall be done or permitted in any tenant's premises and
nothing shall be brought into or kept in any tenant's premises which would
impair or interfere with any of the Building services or the proper and economic
heating, cleaning or other servicing of the Building or the premises, or the use
or enjoyment by any other tenant of any other premises, nor shall there be
installed by any tenant any
<PAGE>
C-3
ventilating, air conditioning, electrical or other equipment of any kind which,
in the judgment of Landlord, might cause any such impairment or interference.
No dangerous, inflammable, combustible or explosive object or material shall be
brought into the Building by any tenant or with the permission of any tenant
(which shall not be deemed to include ordinary office supplies in small
quantities as shall be necessary for the conduct of Tenant's business.)
9. Tenant shall not permit any cooking or food odors emanating from
the Demised Premises to seep into other portions of the Building.
10. No acids, vapors or other materials shall be discharged or
permitted to be discharged into the waste lines, vents or flues of the Building
which may damage them. The water and wash closets and other plumbing fixtures
in or serving any tenant's premises shall not be used for any purpose other than
the purpose for which they were designed or constructed, and no sweepings,
rubbish, rags, acids or other foreign substances shall be deposited therein.
All damages resulting from any misuse of the fixtures shall be borne by the
tenant who, or whose servants, employees, agents, visitors or licensees, shall
have caused the same.
11. No signs, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any tenant on any part of the
outside or inside the premises or the Building without the prior written consent
of Landlord. In the event of the violation of the foregoing by any tenant,
Landlord may remove the same without any liability, and may charge the expense
incurred by such removal to the tenant or tenants violating this rule. Interior
signs and lettering on doors and elevators shall be inscribed, painted, or
affixed for each tenant by Landlord at the expense of such tenant, and shall be
of a size, color and style acceptable to Landlord.
12. No additional locks or bolts of any kind shall be placed upon any
of the doors or windows in any tenant's premises, and no lock on any door
therein shall be changed or altered in any respect. Duplicate keys for a
tenant's premises and toilet rooms shall be procured only from Landlord, which
may make a reasonable charge therefor which charge shall be equal to Landlord's
out of pocket cost therefor. Upon the termination of a tenant's lease, all keys
to the tenant's premises and toilet rooms shall be delivered to Landlord.
13. No tenant shall mark, paint, drill into, or in any way deface any
part of the Building or the premises demised to such tenant (which shall not be
deemed to include display or installation of such items as bulletin boards,
pictures, etc.) Not boring, cutting or stringing of wires shall be permitted,
except with the prior written consent of Landlord, and as
<PAGE>
C-4
Landlord may direct. Not tenant shall install any resilient tile or similar
floor covering in the premises demised to such tenant except in a manner
approved by Landlord.
14. No tenant shall use or occupy, or permit any portion of the
premises demised to such tenant to be used or occupied, as an office for a
public stenographer or typist, or as a barber or manicure shop, or as an
employment bureau. No tenant or occupant shall engage or pay any employees in
the Building, except those actually working for such tenant or occupant in the
Building or advertise for laborers giving an address at the Building.
15. No premises shall be used, or permitted to be used, at any time,
as a store for the sale or display of goods or merchandise or any king, or as a
restaurant, shop, booth, bootblack or other stand, or for the conduct of any
business or occupation which involves direct patronage of the general public on
the premises demised to such tenant, or for manufacturing or for other similar
purposes.
16. The requirements of tenants will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside for the regular duties, unless under
special instructions from the office of the Landlord.
17. Each tenant shall, at its expense, provide artificial light in
the premised demised to such tenant for Landlord's agents, contractors and
employees while performing janitorial or other cleaning services and making
repairs or alterations in said premises.
18. Employees of Tenant shall not loiter around the hallways,
stairways, elevators, front, roof or any other part of the Building used in
common by the occupants thereof.
19. Any cuspidors or similar containers or receptacles used in the
Demised Premises shall be cared for and cleaned by and at the expense of Tenant.
20. Any and all wet and/or food garbage, including coffee grinds, is
to be deposited in a plastic liner bag in a waste basket or other receptacle.
21. Tenant shall separate all refuse and rubbish of Tenant in
accordance with the methods and procedures set forth, from time to time, by
Landlord.
<PAGE>
SCHEDULE "D"
FORM OF LETTER OF CREDIT
Dated:____________________
Sage Realty Corporation, As Agent
777 Third Avenue
New York, New York 10017
Re: Irrevocable Clean Letter of Credit
----------------------------------
Gentlemen:
By order of our client, ________________________________________, we
hereby open our clean Irrevocable Letter of Credit No. _____ in your favor for
an amount not to exceed in the aggregate $_______________ U.S. Dollars effective
immediately.
Funds under this credit are available to you against your site draft
drawn on us mentioning thereon our Credit No. _______.
This Letter of Credit shall expire sixteen months from the date
hereof, provided, however, that it is a condition of this Letter of Credit that
it shall be deemed automatically extended, from time to time, without amendment,
for one year from the expiry date hereof and from each and every future expiry
date, unless at least thirty (30) days prior to any expiry date we shall notify
you by registered mail that we elect not to consider this Letter of Credit
renewed for any such additional period.
This Letter of Credit is transferable and may be transferred one or
more times. However, no transfer shall be effective unless advice of such
transfer is received by us in the form attached signed by you.
We hereby agree with you that all drafts drawn or negotiated in
compliance with the terms of this Letter of Credit will be duly and promptly
honored upon presentment and delivery of your draft to our office at
__________________________________ if negotiated on or prior to the expiry date
as the same may from time to time be extended.
<PAGE>
D-2
Except as otherwise specified herein, this Letter of Credit is subject
to the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500.
Very truly yours,
(Name of Bank)
By:____________________
<PAGE>
Re: Credit ___________________
Issued By: ___________________
Gentlemen:
For value received, the undersigned beneficiary irrevocably transfers
to:
____________________________
(Name of Second Beneficiary)
____________________________
(Address)
all rights of the undersigned beneficiary to draw under the above Letter of
Credit in its entirety.
By this transfer, all rights of the undersigned beneficiary in such
Letter of Credit are transferred to the second beneficiary and the second
beneficiary shall have the sole rights of beneficiary thereof, including the
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 second beneficiary without necessity of any consent of or
notice of the undersigned beneficiary.
The advice of such Letter of Credit is returned herewith, and we ask
you to endorse the assignment on the reverse thereof and forward it direct to
the second beneficiary with your customary notice of transfer.
Enclosed is remittance of $100.00 in payment of your transfer
commission and in addition thereto we agree to pay you on demand any expenses
which may be incurred by you in connection with this transfer.
Very truly yours,
Signature of Beneficiary
SIGNATURE AUTHENTICATED
(Bank)
(Authorized Signature)
<PAGE>
1997 HOLIDAY OBSERVANCES
SCHEDULE" "E"
<TABLE>
<CAPTION>
LOCAL #32B/J LOCAL #94 SAGE REALTY LIFT CO.
(CLEANING)* (ENGINEERS) * (ELEVATORS)
<S> <C> <C> <C> <C>
NEW YEAR'S DAY
WEDNESDAY, JANUARY 1 X X X X
- -----------------------------------------------------------------------------------
MARTIN LUTHER KING DAY
MONDAY, JANUARY 20 X - - -
- -----------------------------------------------------------------------------------
LINCOLN'S BIRTHDAY
WEDNESDAY, FEBRUARY 12 - - - X
- -----------------------------------------------------------------------------------
PRESIDENT'S DAY
MONDAY, FEBRUARY 17 X - X X
- -----------------------------------------------------------------------------------
GOOD FRIDAY
FRIDAY, MARCH 28 X - - -
- -----------------------------------------------------------------------------------
MEMORIAL DAY
MONDAY, MAY 26 X X X X
- -----------------------------------------------------------------------------------
INDEPENDENCE DAY
FRIDAY, JULY 4 X X X X
- -----------------------------------------------------------------------------------
LABOR DAY
MONDAY, SEPTEMBER 1 X X X X
- -----------------------------------------------------------------------------------
COLUMBUS DAY
MONDAY, OCTOBER 13 X - X X
- -----------------------------------------------------------------------------------
VETERAN'S DAY
TUESDAY, NOVEMBER 11 - - - X
- -----------------------------------------------------------------------------------
THANKSGIVING DAY
THURSDAY, NOVEMBER 27 X X X X
- -----------------------------------------------------------------------------------
DAY AFTER THANKSGIVING
FRIDAY, NOVEMBER 28 X - X X
- -----------------------------------------------------------------------------------
CHRISTMAS
THURSDAY, DECEMBER 25 X X X X
- -----------------------------------------------------------------------------------
DAY AFTER CHRISTMAS
FRIDAY, DECEMBER 26 - - X -
- -----------------------------------------------------------------------------------
NEW YEAR'S DAY
THURSDAY, JANUARY 1, 1998 X X X X
- -----------------------------------------------------------------------------------
DAY AFTER NEW YEAR'S
FRIDAY, JANUARY 2, 1998 - - X -
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
LOREC INC.
ELECTRIC EVALUATION REPORT
--------------------------
For: Sage Realty Corporation Date: 4/25/97
Re: CitySearch
3rd floor, Portion
320 West 13th Street, NYC
SUMMARY OF DATA PROVIDED:
- -------------------------
------------------------
Energy Demand
Kwhrs Kw
------------------------
Lighting 2,593 11.99
Misc Equipment 672 2.90
Computers 2,784 9.90
HVAC 5 mos 2,188 10.96
------------------------
Totals 8,237 35.75
------------------------
Evaluation Under Utility Rate
- -----------------------------
Utility: Con Edison
Rate: SC4-I Winter/Summer rates averaged
Fuel Adj 0.008611
Rate Adj 0.080526
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Energy $237 kwhrs@ $0.0543 $447.24
Fuel Adj: $237 kwhrs@ $0.008611 $70.92
Demand 35.7 kw@ $26.93 $962.70
Subtotal $1,480.86
Rate Adj Av 1996 8.0526% $119.25
Subtotal $1,600.11
Sales Tax 8.25% $132.01
---------
Total Value per Month $1,732.12
---------------------
----------------------------------
Annual Value: $20,785.44
==================================
</TABLE>
<PAGE>
LOREC. inc
- --------------------------------------------------------------------------------
Electricity Evaluation Report
For: Sage Realty Corporation Date 4/25/97
Re: CitySearch
3rd Floor, Portion, 320 West 13 Street, NYC
Data Submitted:
<TABLE>
<CAPTION>
QTY W Each Description Comm Coinc Hours: Kw K whrs
Load Factor month Demand
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lighting
- ---------------------------------------------------------------------------------------------------------------------------
1 11,625 Lighting per space 11,625 1.00 210 11.63 2,441
- ---------------------------------------------------------------------------------------------------------------------------
28 20 Dark Lamp 560 0.50 165 0.28 94
- ---------------------------------------------------------------------------------------------------------------------------
2 40 Exit 80 1.00 730 0.08 38
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Lighting Totals 12,265 11.99 2,593
- ---------------------------------------------------------------------------------------------------------------------------
Misc Equipment
- ---------------------------------------------------------------------------------------------------------------------------
1 400 Refrigerator 400 0.65 100 0.30 40
- ---------------------------------------------------------------------------------------------------------------------------
1 1,200 Micro Wave 1,200 0.10 2 0.10 2
- ---------------------------------------------------------------------------------------------------------------------------
1 500 Coffee Maker 500 0.50 40 0.30 20
- ---------------------------------------------------------------------------------------------------------------------------
1 400 Phone Switch 400 1.00 730 0.40 292
- ---------------------------------------------------------------------------------------------------------------------------
1 26 Fax 26 1.00 80 0.00 2
- ---------------------------------------------------------------------------------------------------------------------------
1 26 Fax 36 0.50 10 0.00 0
- ---------------------------------------------------------------------------------------------------------------------------
1 2,200 Copier 2,200 0.69 100 1.30 220
- ---------------------------------------------------------------------------------------------------------------------------
1 1,200 Copier 1,200 0.40 80 0.50 96
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Equipment Totals 5,962 2.90 672
- ---------------------------------------------------------------------------------------------------------------------------
Computers
- ---------------------------------------------------------------------------------------------------------------------------
25 344 PC + Monitor 9,632 0.90 210 8.70 2,923
- ---------------------------------------------------------------------------------------------------------------------------
25 0 Lamp 0 0.00 0 0.00 0
- ---------------------------------------------------------------------------------------------------------------------------
1 150 Printer 150 0.90 150 0.10 23
- ---------------------------------------------------------------------------------------------------------------------------
1 150 Printer 150 0.50 50 0.10 8
- ---------------------------------------------------------------------------------------------------------------------------
1 500 File Server 500 0.90 730 0.50 365
- ---------------------------------------------------------------------------------------------------------------------------
1 500 SQL Server 500 0.90 730 0.50 365
- ---------------------------------------------------------------------------------------------------------------------------
Computer Totals 10,932 9.90 2,784
- ---------------------------------------------------------------------------------------------------------------------------
HVAC
- ---------------------------------------------------------------------------------------------------------------------------
2 17,300 15 Ton A/C 35,000 0.75 150 26.30 5,250
- ---------------------------------------------------------------------------------------------------------------------------
(5 Month/Yr)
- ---------------------------------------------------------------------------------------------------------------------------
HVAC Total 35,000 26.30 5,250
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Installation List Page 1
<PAGE>
EXHIBIT 10.15
Standard Form of OFFICE BUILDING LEASE Developed by PORTLAND METROPOLITAN
ASSOCIATION OF BUILDING OWNERS AND MANAGERS
OFFICE LEASE
[LOGO OF
PORTLAND
APPEARS
HERE] This lease, made and entered into at Portland, Oregon, this 6th day of
March 1997 by and between
H. NAITO CORPORATION, an Oregon Corporation,
LANDLORD:
and CitySearch, Inc., a Delaware Corporation,
TENANT:
Landlord hereby leases to Tenant the following: Suite 700
(the Premises)
in Montgomery Park (the Building)
at 2701 NW Vaughn St., Portland, Oregon, containing approximately
4,696 rentable square feet as outlined in red on the attached Exhibit A
calculated using a load factor of twelve percent.
Tenant's Proportion Share for purposes of Section 19 shall be 0.701%.
This lease is for a term commencing April 1, 1997, 1997 and continuing
through March 31, 2002 at a Monthly Base Rental as follows: Six
Thousand Eight Hundred Forty Eight and no/100 Dollars ($6,848.00).
Rent is payable in advance on the 1st day of each month commencing
April 1, 1997. Landlord and Tenant covenant and agree as follows:
1.1 Delivery of Possession.
Should Landlord be unable to deliver possession of the Premises on the
date fixed for the commencement of the term, commencement will be
deferred and Tenant shall owe no rent until notice from Landlord
tendering possession to Tenant. If possession is not so tendered
within 90 days following commencement of the term, then Tenant may
elect to cancel this lease by notice to Landlord within 10 days
following expiration of the 90-day period. Landlord shall have no
liability to Tenant for delay in delivering possession, nor shall such
delay extend the term of this lease in any manner unless the parties
execute a written extension agreement.
2.1 Rent Payment.
Tenant shall pay the Base Rent for the Premises and any additional
rent provided herein without deduction or offset. Rent for any partial
month during the lease term shall be prorated to reflect the number of
days during the month that Tenant occupies the Premises. Additional
rent means amounts determined under Section 19 of this Lease and any
other sums payable by Tenant to Landlord under this Lease. Rent not
paid when due shall bear interest at the rate of one percent per month
until paid. Landlord may at its option impose a late charge of $.05
for each $1 of rent for rent payments made more than 10 days late in
lieu of interest for the first month of delinquency, without waiving
any other remedies available for default. Failure to impose a late
charge shall not be a waiver of Landlord's rights hereunder.
3.1 Lease Consideration.
Upon execution of the lease Tenant has paid the Base Rent for the
first full month of the lease term for which rent is payable and in
addition has paid the sum of $ 6,848.00 as lease consideration.
Landlord may apply the lease consideration to
Please Initial
[ILLEDGIBLE]
__________ ------------
Landlord Tenant
<PAGE>
At no time shall Tenant be liable for any costs, abatement fines,
penalties, or charges resulting from Landlord's lack of compliance
with local, state or federal ordinances, laws, rules or regulations.
If Tenant does incur such costs, fines or penalties resulting from
Landlord's failure to Comply with local, state or federal ordinances,
laws, rules or regulations, Landlord agrees to hold harmless and
indemnify Tenant for all liabilities incurred by Tenant within 30 days
of receipt of an itemized accounting of liability pay the cost of
performing any obligation which Tenant fails to perform within the
time required by this lease, but such application by of Landlord shall
not be the exclusive remedy for Tenant's default. If the lease
consideration is applied by Landlord, Tenant shall on demand pay the
sum necessary to replenish the lease consideration to its original
amount. To the extent not applied by Landlord to cure defaults by
Tenant, the lease consideration shall be applied against the rent
payable for the last month of the term. The lease consideration shall
not be refundable.
4.1 Use. Tenant shall use the Premises as a business office and for no
other purpose without Landlord's written consent. In connection with
its use, Tenant shall not annoy, obstruct, or interfere with the
rights of other tenants of the Building. Tenant shall create no
nuisance nor allow any objectionable fumes, noise, or vibrations to be
emitted from the Premises. Tenant shall not conduct any activities
that will increase Landlord's insurance rates for any portion of the
Building or that will in any manner degrade or damage the reputation
of the Building.
4.2 Equipment
Tenant shall install in the Premises only such office equipment as is
customary for general office use and shall not overload the floors or
electrical circuits of the Premises or Building or alter the plumbing
or wiring of the Premises or Building. Landlord must approve in
advance the location of and manner of installing any wiring or
electrical, heat generating or communication equipment or
exceptionally heavy articles. All telecommunications equipment,
conduit, cables and wiring, additional dedicated circuits and any
additional air conditioning required because of heat generating
equipment or special lighting installed by Tenant shall be installed
and operated at Tenant's expense. Landlord shall have no obligation to
pay for installation of equipment by any telecommunications provider
whose equipment is not then servicing the Building.
4.3 Signs.
No signs, awnings, antennas, or other apparatus shall be painted on or
attached to the Building or anything placed on any glass or woodwork
of the Premises so as to be visible from outside the Premises
without Landlord's written approval as to design, size, location, and
color. All signs installed by Tenant shall comply with Landlord's
standards for signs and all applicable codes and all signs and sign
hardware shall be removed upon termination of this lease with the sign
location restored to its former state unless Landlord elects to retain
all or any portion thereof. See Exhibit "B", paragraph 7.
5.1 Utilities and Services.
Landlord will furnish water and electricity to the Building at all
times and will furnish heat and air conditioning (if the Building is
air conditioned) during the normal Building hours as established by
Owner*. Janitorial service will be provided in accordance with the
regular schedule of the Building. which schedule and service may
change from time to time. Tenant shall comply with all government laws
or regulations regarding the use or reduction of use of utilities on
the Premises. Interruption of services or utilities shall not be
deemed an eviction or disturbance of Tenant's use and possession of
the Premises, render Landlord liable to Tenant for damages, or relieve
Tenant from performance of Tenant's obligations under this lease.
*Landlord shall take all reasonable steps to correct any interruptions
in service. Electrical service furnished will be 110 volts unless
different service already exists in the Premises. Tenant shall provide
its own surge protection for power furnished to the Premises. *8:00
a.m. to 6:00 p.m. Monday through Friday and 8:00 a.m. to 12:00 noon
Saturday.
5.2 Extra Usage.
If Tenant uses excessive amounts of utilities or services of any kind
because of operation outside of normal Building hours, high demands
from office machinery and equipment, nonstandard lighting, or any
other cause. Landlord may impose a reasonable charge for supplying
such extra utilities or services, which charge shall be payable
monthly by Tenant in conjunction with rent payments In case of dispute
over any extra charge under this paragraph, Landlord shall designate a
qualified independent engineer whose decision shall be conclusive on
both parties. Landlord and Tenant shall each pay one-half of the cost
of such determination.
5.3 Security.
Landlord may but shall have no obligation to provide security service
or to adopt security measures regarding the Premises, and Tenant shall
cooperate with all reasonable security measures adopted by Landlord.
Tenant may install a security system within the leased Premises with
Landlord's written consent which will not be unreasonably withheld.
Landlord will be provided with an access code to any security system
and shall not have any liability for accidentally setting off Tenant's
security system. Landlord may modify the type or amount of security
measures or services provided to the Building or the Premises at any
time.
6.1 Maintenance and Repair.
Landlord shall have no liability for failure to perform required
maintenance and repair unless written notice of such maintenance or
repair is given by Tenant and Landlord fails to commence efforts to
remedy the problem in a reasonable time and manner. Landlord shall
have the right to erect scaffolding and other apparatus necessary for
the purpose of making repairs, and Landlord shall have no liability
for interference with Tenant's use-because of repairs and
installations. Tenant shall have no claim against Landlord for any
interruption or reduction of services or interference with Tenant's
occupancy, and no such interruption or reduction shall be construed as
a constructive or other eviction of Tenant.* Repair of damage caused
by negligent or intentional acts or breach of this lease by Tenant,
its employees or invitees shall be at Tenant's expense.
* Except where caused by the negligence or willful misconduct of
Landlord or its agents.
Please Initial
[ILLEDGIBLE]
__________ ------------
Landlord Tenant
<PAGE>
Tenant shall not make any significant alterations, additions, or
improvements to the Premises, change the color of the interior, or
install any wall or floor covering without Landlord's prior written
consent which may be withheld in Landlord's sole discretion. Any such
improvements, alterations, wiring, cables or conduit installed by
Tenant shall at once become part of the Premises and belong to
Landlord except for removable machinery and unattached movable trade
fixtures. Landlord may at its option require that Tenant remove any
improvements, alterations, wiring, cables or conduit installed by or
for Tenant and restore the Promises to the original condition upon
termination of this lease.* Landlord shall have the right to approve
the contractor used by Tenant for any work in the Premises, and to
post notices of nonresponsibility in connection with work being
performed by Tenant in the Premises. Work by Tenant shall comply with
all laws then applicable to the Promises. *So long as Landlord
provided notice to Tenant prior to commencement of construction of
such improvement, alterations, etc.
7.1 Indemnity.
Tenant shall not allow any liens to attach to the Building or Tenant's
interest in the Premises as a result of its activities. Tenant shall
indemnify and defend Landlord and its managing agents from any claim,
liability, damage, or loss occurring on the Premises, arising out of
any activity by Tenant, its agents, or invitees or resulting from
Tenant's failure to comply with any term of this lease. Neither
Landlord nor its managing agent shall have any liability to Tenant
because of loss or damage to Tenant's property or for death or bodily
injury caused by the acts or omissions of other Tenants of the
Building, or by third parties (including criminal acts).*
7.2 Insurance.
Tenant shall carry liability insurance with limits of not less than
ONE Million Dollars ($1,000,000) combined single limit bodily injury
and property damage which insurance shall have an endorsement naming
Landlord and Landlord's managing agent, if any, as an additional
insured, cover the liability insured under paragraph 7.1 of this lease
and be in form and with companies reasonably acceptable to Owner.
Prior to occupancy, Tenant shall furnish a certificate evidencing such
insurance which shall state that the coverage shall not be cancelled
or materially changed without 10 days advance notice to Landlord and
Landlord's managing agent, if any. A renewal certificate shall be
furnished at least 10 days prior to expiration of any policy, upon
request from Landlord.
8.1 Fire or Casualty.
"Major Damage" means damage by fire or other casualty to the Building
or the Promises which causes the Premises or any substantial portion
of the Building to be unusable, or which will cost more than 25
percent of the pre-damage value of the Building to repair, or which is
not covered by insurance. In case of Major Damage, Landlord may elect
to terminate this lease by notice in writing to the Tenant within 30
days after such date. If this lease is not terminated following Major
Damage, or if damage occurs which is not Major Damage, Landlord shall
promptly restore the Premises to the condition existing just prior to
the damage. Tenant shall promptly restore all damage to tenant
improvements or alterations installed by Tenant or pay the cost of
such restoration to Landlord if Landlord elects to do the restoration
of such improvements. Rent shall be reduced from the date of damage
until the date restoration work being performed by Landlord is
substantially complete, with the reduction to be in proportion to the
area of the Premises not useable by Tenant.
8.2 Waiver of Subrogation.
Tenant shall be responsible for insuring its personal property and
trade fixtures located on the Premises and any alterations or tenant
improvements it has made to the Premises. Neither Landlord, its
managing agent nor Tenant shall be liable to the other for any loss or
damage caused by water damage, sprinkler leakage, or any of the risks
that are or could be covered by a special all risk property insurance
policy, or for any business interruption, and there shall be no
subrogated claim by one party's insurance carrier against the other
party arising out of any such loss.* This waiver is binding only if it
does not invalidate the insurance coverage of either party hereto.
*Except where caused by the negligence or willful misconduct of
Landlord or its agents.
9.1 Eminent Domain.
If a condemning authority takes title by eminent domain or by
agreement in lieu thereof to the entire Building or a portion
sufficient to render the Premises unsuitable for Tenant's use, then
either party may elect to terminate this lease effective on the date
that the condemning authority.* Rent shall be reduced for the
remainder of the term in an amount proportionate to the reduction in
area of the Premises caused by the taking. All condemnation proceeds
shall be shared with Tenant according to the percentage the leased
premises bear to the total. * authorizes condemnation.
10.1 Assignment and Subletting.
This lease shall bind and inure to the benefit of the parties, their
respective heirs, successors, and assigns, provided that Tenant shall
not assign its interest under this lease or sublet all or any portion
of the Premises without first obtaining Landlord's consent in writing.
This provision shall apply to all transfers by operation of law
including but not limited to mergers and changes in control of Tenant.
No assignment shall relieve Tenant of its obligation to pay rent or
perform other obligations required by this lease, and no consent to
one assignment or subletting shall be a consent to any further
assignment or subletting. Landlord shall not unreasonably withhold its
consent to any assignment or subletting provided the proposed Tenant
is compatible with Landlord's normal standards for the Building. If
Tenant proposes a subletting or assignment to which Landlord is
required to consent under this paragraph. Landlord shall have the
option if terminating this lease and dealing directly with the
proposed subtenant or assignee, or any third party. If an assignment
or subletting is permitted, any cash profit, or the net value of any
other consideration received by Tenant as a result of such transaction
shall be paid to Landlord promptly following its receipt by Tenant.
Tenant shall pay any reasonable costs incurred by Landlord in
connection with a request for assignment or subletting. including
reasonable attorneys' fees.
See Exhibit "B", paragraph 7.
* Except where caused by the negligence or willful misconduct of
Landlord or its agents.
Please Initial
[ILLEDGIBLE]
__________ ------------
Landlord Tenant
<PAGE>
11.1 Default.
Any of the following shall constitute a default by Tenant under this
lease:
(a) Tenant's failure to pay rent or any other charge under this lease
within 20 days after it is due, or failure to comply with any other
term or condition within 20 days following written notice from
Landlord specifying the noncompliance. If such noncompliance cannot be
cured within the 20-day period, this provision shall be satisfied if
Tenant commences correction within such period and thereafter proceeds
in good, faith and with reasonable diligence to effect compliance as
soon as possible. Time is of the essence of this lease.
(b) Tenant's insolvency, business failure or assignment for the
benefit of its creditors. Tenant's commencement of proceedings under
any provision of any bankruptcy or insolvency law or failure to obtain
dismissal of any petition filed against it under such laws within the
time required to answer, or the appointment of a receiver for all or
any portion of Tenant's properties or financial records.
(c) Assignment or subletting by Tenant in violation of paragraph
10.1.
(d) Failure to occupy the Premises within twenty (20) days after
notice from Landlord tendering possession.
11.2 Remedies for Default.
In case of default as described in paragraph 11.1 Landlord shall have
the right to the following remedies which are intended to be
cumulative and in addition to any other remedies provided under
applicable law:
(a) Landlord may at its option terminate the lease by notice to
Tenant. With or without termination, Landlord may retake possession of
the Premises and may use or relet the Premises without accepting a
surrender or waiving the right to damages. Following such retaking of
possession, efforts by Landlord to relet the Premises shall be
sufficient if Landlord follows its usual procedures for finding
tenants for the space at rates not less than the current rates for
other comparable space in the Building, if Landlord has other vacant
space in the Building, prospective tenants may be placed in such other
space without prejudice to Landlord's claim to damages or loss of
rentals from Tenant only if the other space is significantly better
suited for prospective Tenant's needs.
(b) Landlord may recover all damages caused by Tenant's default which
shall include an amount equal to rentals lost because of the default,
lease commissions paid for this lease, and the unamortized cost of any
tenant improvements installed by Landlord to meet Tenant's special
requirements. Landlord may sue periodically to recover damages as they
occur throughout the lease term, and no action for accrued damages
shall bar a later action for damages subsequently accruing. Landlord
may elect in any one action to recover accrued damages plus damages
attributable to the remaining term of the lease. Such damages shall be
measured by the difference between the rent under this lease and the
reasonable rental value of the Premises for the remainder of the term,
discounted to the time of judgement at the prevailing interest rate on
judgements.
(c) Landlord may make any payment or perform any obligation which
Tenant has failed to perform, in which case Landlord shall be entitled
to recover from Tenant upon demand all amounts so expended, plus
interest from the date of the expenditure at the rate of one (1%)
percent per month. Any such payment or performance by Landlord shall
not waive Tenant's default.
12.1 Surrender.
On expiration or early termination of this lease Tenant shall deliver
all keys to Landlord and surrender the Premises vacuumed, swept, and
free of debris and in the same condition as at the commencement of the
term subject only to reasonable wear from ordinary use. Tenant shall
remove all of its furnishings and trade fixtures that remain its
property and repair all damage resulting from such removal. Failure to
remove shall be an abandonment of the property, and Landlord may
dispose of it in any manner without liability. If Tenant fails to
vacate the Premises when required, including failure to remove all its
personal property, Landlord may elect either: (i) to treat Tenant as a
tenant from month to month, subject to the provisions of this lease
except that rent shall be 125% of the total rent being charged when
the lease term expired, and any option or other rights regarding
extension of the term or expansion of the Premises shall no longer
apply, or (ii) to eject Tenant from the Premises and recover damages
caused by wrongful holdover.
13.1 Regulations.
Landlord shall have the right but shall not be obligated to make,
revise and enforce reasonable regulations or policies consistent with
this lease for the purpose of promoting safety, health (including
moving, use of common areas and prohibition of smoking), order,
economy, cleanliness, and good service to all tenants of the Building.
All such regulations and policies shall be complied with as if part of
this lease.
14.1 Access.
During times other than normal Building hours Tenant's officers and
employees or those having business with Tenant may be required to
identify themselves or show passes in order to gain access to the
Building. Landlord shall have no liability for permitting or refusing
to permit access by anyone. Landlord may regulate access to any
Building elevators outside of normal Building hours. Landlord shall
have the right to enter upon the Premises at any time by passkey or
otherwise to determine Tenant's compliance with this lease, to perform
necessary services, maintenance and repairs or alterations to the
Building or the Premises or to show the Premises to any prospective
tenant or purchasers. Except in case of emergency such entry shall be
at such times and in such manner as to minimize interference with
the reasonable business use of the Premises by Tenant. Entry during
normal business hours, except in emergency situations, shall take
place with reasonable advance notice.
14.2 Furniture and Bulky Articles.
Tenant shall move furniture and bulky articles in and out of the
Building or make independent use of the elevators only at times
approved by Landlord following at least 24 hours written notice to
Landlord of the intended move. Landlord will not unreasonably withhold
its consent under this paragraph.
Please Initial
________ ______________
Landlord Tenant
<PAGE>
15.1 Notices.
Notices between the parties relating to this lease shall be in
writing, effective when delivered, or if mailed, effective on the
second day following mailing, postage prepaid, to the address for the
party stated in this lease or to such other address as either party
may specify by notice to the other. Notice to Tenant shall be
delivered to Chief Financial Officer CitySearch 790 E. Colorado Blvd.,
Suite 200 Pasadena, CA 91101. Rent shall be payable to Landlord at
the same address and in the same manner, but shall be considered paid
only when received.
16.1 Subordination and Attornment.
This lease shall be subject to and subordinate to any mortgages, deeds
of trust, or land sale contracts (here after collectively referred to
as encumbrances) now existing against the Building. At Landlord's
option this lease shall be subject and subordinate to any future
encumbrance hereafter placed against the Building (including the
underlying land) or any modifications of existing encumbrances, and
Tenant shall execute such documents as may reasonably be requested by
Landlord or the holder of the encumbrance to evidence this
subordination. If any encumbrance is foreclosed, then if the purchaser
at foreclosure sale gives to Tenant a written agreement to recognize
Tenant's lease. Tenant shall attorn to such purchaser and this Lease
shall continue. See Exhibit B, paragraph 9 for non-disturbance
agreement.
16.2 Transfer of Building.
If the Building is sold or otherwise transferred by Landlord or any
successor, Tenant shall attorn to the purchaser or transferee and
recognize it as the lessor under this lease, and, provided the
purchaser or transferee assumes all obligations hereunder, the
transferor shall have no further liability hereunder.
16.3 Estoppels.
Either party will within 10 days after notice from the other execute,
acknowledge and deliver to the other party a certificate certifying
whether or not this lease has been modified and is in full force and
effect: whether there are any modifications or alleged breaches by the
other party; the dates to which rent has been paid in advance, and the
amount of any security deposit or prepaid rent; and any other facts
that may reasonably be requested. Failure to deliver the certificate
within the specified time shall be conclusive upon the party of whom
the certificate was requested that the lease is in full force and
effect and has not been modified except as may be represented by the
party requesting the certificate. If requested by the holder of any
encumbrance, or any ground lessor, Tenant will agree to give such
holder or lessor notice of and an opportunity to cure any default by
Landlord under this lease.
17.1 Attorneys' Fees.
In any litigation arising out of this lease, the prevailing party
shall be entitled to recover attorneys' fees at trial and on any
appeal.
18.1 Quiet Enjoyment.
Landlord warrants that so long as Tenant complies with all terms of
this lease it shall be entitled to peaceable and undisturbed
possession of the Premises free from any eviction or disturbance by
Landlord. Neither Landlord nor its managing agent shall have any
liability to Tenant for loss or damages arising out of the acts,
including criminal acts, of other tenants of the Building or third
parties, nor any liability for any reason which exceeds the value of
its interest in the Building, except where caused by the negligence
or wilful misconduct of Landlord or its agents.
*****
19.2 Additional Rent-Cost-of-Living Adjustment.
On each anniversary date of this lease, the Landlord shall adjust the
base rental in the same percentage as the increase, if any, in the
Consumer Price Index published by the United States Department of
Labor, Bureau of Labor Statistics. The charge shall be computed by
comparing the schedule entitled "U.S. City Average, All Items, All
Urban Consumers, 1982 - 84 = 100* for the latest available month
preceding the month in which the lease term commenced with the same
figure for the same month in the years for which the adjustment is
computed. All comparisons shall be made using index figures derived
from the same base period and in no event shall this provision operate
to decrease the monthly rental for the Premises below the initial
stated monthly rental, plus property tax adjustments and operating
expense adjustments as provided in this Lease. If the index cited
above is revised or discontinued during the term of this Lease then
the index that is designated by the Portland Metropolitan Association
of Building Owners and Managers to replace it shall be used. The above
notwithstanding, the CPI adjustment shall not exceed 4% of the
previous year's Base Rental.
******
Please Initial
________ ______________
Landlord Tenant
<PAGE>
19.4 Disputes.
If Tenant disputes any computation of additional rent or rent
adjustment under paragraphs 19.1 through 19.3 of this lease, it shall
give notice to Landlord not later than one year after the notice from
Landlord describing the computation in question, but in any event not
later than 30 days after expiration or earlier termination of this
lease. If Tenant fails to give such a notice, the computation by
Landlord shall be binding and conclusive between the parties for the
period in question.
20.1 Complete Agreement; No Implied Covenants.
This lease and the attached Exhibits and Schedules if any, constitute
the entire agreement of the parties and supersede all prior written
and oral agreements and representations and there are no implied
covenants or other agreements between the parties except as expressly
set forth in this Lease. Neither Landlord nor Tenant is relying on any
representations other than those expressly set forth herein.
20.2 Space Leased AS IS.
Unless otherwise indicated on Exhibit C and stated in this Lease, the
Premises are leased AS IS in the condition now existing with no
alterations or other work to be performed by Landlord.
20.3 Captions.
The titles to the paragraphs of this lease are descriptive only and
are not intended to change or influence the meaning of any paragraph
or to be part of this lease.
20.4 Nonwaiver.
Failure by Landlord to promptly enforce any regulation, remedy or
right of any kind under this Lease shall not constitute a waiver of
the same and such right or remedy may be asserted at any time after
Landlord becomes entitled to the benefit thereof notwithstanding delay
in enforcement.
20.5 Exhibits.
The following Exhibits are attached hereto and incorporated as a part
of this lease:
See EXHIBITS A, B, C, AND D.
Please Initial
[ILLEDGIBLE]
__________ ------------
Landlord Tenant
<PAGE>
IN WITNESS WHEREOF, the duly authorized representatives of the parties have
executed this lease as of the day and year first written above.
LANDLORD: By: [SIGNATURE ILLEGIBLE]
-----------------------------
Address for notices:
P.O. BOX 3458
- ------------------------ Title: Chief Legal Officer
-------------------------
Portland, OR 97208
- ------------------------ By._____________________________
TENANT:
Title:__________________________
Address for notices:
Chief Financial Officer
- ------------------------
City Search
- ------------------------
790 E. Colorado Blvd., Suite 200
Pasadena, CA 91101
<PAGE>
EXHIBIT "A"
MONTGOMERY PARK
[MONTGOMERY PARK 7th FLOOR PLAN APPEARS HEAR]
<PAGE>
EXHIBIT "B"
Additional Lease Provisions
Lease between H. Naito Corporation
and
CitySearch, Inc.
1. PARKING
During the term of this lease, Landlord shall provide parking for Tenant's
customers while they are conducting business with Tenant. Landlord shall
also provide Tenant with fourteen (14) monthly parking space(s). Said
space(s) may be unassigned and/or limited to a designated lot. Up to 31
additional parking spaces will be provided at a monthly fee of $40.00 per
space per month, subject to the annual CPI adjustments not to exceed 4% as
described in paragraph 19.2
2. COMPLETION OF BUILDING
Construction of additional tenant improvements in the Building may take
place after the commencement of the term of this lease. Landlord's
construction work shall be done in such a way as to interfere as little as
reasonably possible with the use of the premises by Tenant. Landlord may
close entrances, doors, corridors, elevators, parking areas, roads, drives,
walkways and other facilities as may be reasonably necessary to complete
said work, provided that Tenant shall have access to the premises
sufficient for the conduct of Tenant's business. Tenant and Tenant's guests
shall have no inconvenience, interference, disturbance or annoyance
resulting from Landlord's performance of any such work pursuant to this
paragraph.
3. RULES AND REGULATIONS
Tenant shall comply and cause Tenant's employees, agents, invitees and
customers to comply with the rules and regulations respecting the use of
the premises and the Building set forth in Exhibit "D." Landlord reserves
the right to make such other and reasonable rules and regulations as in its
judgment may from time to time be needed to the right to amend any of the
rules and regulations from time to time. Without limiting the generality of
the foregoing, such rules may establish hours during which the building
shall be open for use, may regulate the parking area, may regulate the
receiving and delivery of goods and merchandise to the premises and may
regulate the removal of garbage and refuse from the premises.
4. TENANT IMPROVEMENTS
Landlord, at its cost, agrees to remove part of the existing build-out in
suite 700 and construct new office improvements as shown and described in
the attached Exhibit C. These improvements shall be completed in a
workmanlike manner according to industry and comparable office building
standards.
<PAGE>
5. OCCUPANCY OF TEMPORARY SPACE
Landlord agrees to make suite 770 available to Tenant as temporary space
commencing February 15, 1997. Tenant agrees to pay $1,667.00 month, or the
appropriate prorated daily amount, for so many days as Tenant occupies
suite 770. Lease payments for suite 770 will cease on April 1 or on the day
before Tenant occupies suite 700, whichever occurs earlier.
6. AFTER-HOURS HEATING, VENTILATION AND IF AIR CONDITIONING (HVAC)
After-hours HVAC service will be available at a cost of $8.10 for any
given two-hour period or fraction or multiple thereof: or if 24-hour,
seven-day-per-week service is required, at a cost of $461.53 per month.
Said cost shall be subject to annual CPI adjustments not to exceed 4% as
specified in paragraph 19.2.
7. CONSENT BY LANDLORD TO BE REASONABLE
Whenever Landlord's consent is called for in this lease, Landlord agrees
not to unreasonably withhold such consent or approval.
8. RIGHTS OF FIRST REFUSAL
a. Tenant shall have the first right of refusal to lease, subject to the
same terms as this lease, the adjoining suite 762 and 730 (outlined in blue
on "Exhibit A" hereof) when the present lease expires on June 30, 1997.
However, this right shall be secondary to the present tenant's right to
renew or extend its lease, and it shall under all circumstances expire at
midnight on July 31, 1997, unless extended by mutual written agreement.
b. Suite 730 is currently vacant and offered for lease by Landlord. So long
as Tenant is not in default, Tenant shall have a first right of refusal
on said space or any part thereof following the successful effort by
Landlord to lease said premises to a third party tenant. The first right
of refusal shall be exercised by Tenant within three business days of
written notice of the terms offered by a bona fide prospective lessee,
subject only to rights of the third party Tenant to whom Landlord leases
said space.
9. NON-DISTURBANCE
In the event of any attornment by Tenant pursuant to paragraph 16.1, it is
understood and agreed that this Lease and Tenant's rights hereunder shall
continue undisturbed while Tenant is not in default hereunder, subject
however to the provisions of the terms of Article 16.1.
10. OPTION TO TERMINATE
Tenant shall have the right to terminate the entire lease or any
independently leasable portion of the leased premises anytime after the
third year of the lease. Tenant shall provide nine (9) months' advance
written notice of its intent to exercise this option. It is agreed and
understood that the penalty for such termination shall be the repayment to
Landlord of any
<PAGE>
unamortized tenant improvements and leasing commissions attributable to the
portion or portions of space so terminated, calculated at an annual rate of
10 percent interest.
11. ACCESS
Tenant and Tenant's employees shall have access to the Premises 24 hours
each day, seven days each week upon presentation of appropriate
identification.
12. CONFIDENTIALITY CLAUSE
No publicity concerning the tenancy of CitySearch shall be allowed by
Landlord or its agents. Any information provided by CitySearch to Landlord
shall not be used for any purpose other than evaluating the proposed lease,
and for the purpose of listing Tenant's name on building directories,
tenant lists and rental rolls necessary for the regular operation of the
building.
<PAGE>
EXHIBIT "C"
-----------
"DESCRIPTION OF TENANT IMPROVEMENT WORK TO BE DONE IN SUITE 700"
Landlord shall, at its sole cost and expense, build Tenant premises according to
the plan attached hereto as part of this "Exhibit C". This will include but not
necessarily be limited to the following:
A. DEMOLITION.
- --------------
Demo Center Island Area, cabinets, two offices, one conference room, one storage
room, one conference room wall and part of kitchen cabinetry per plans. Includes
removing electrical & communication wiring, unwanted wall trim in back
conference room. Demo carpet and base.
B. CONSTRUCTION.
- ----------------
1. Build demising wall to separate Suite 700 from that part of the former Suite
700 which is not included in the present lease (future Suite 730).
2. Build two 36' X 54" pony walls, one 35' X 54" and one 9' 10" X 54" pony wall.
And one 14' pony wall per plans; finish ready to paint. Includes all duplex
receptacles shown on plan, and running conduit as needed for electrical.
3. Minor ceiling tile work; and patching/finishing wall ends ready to paint.
4. Move fire extinguisher in kitchen to post including patching wall hole where
removed.
5. Patch walls where trim removed.
6. Cut 6 desks 4" shorter.
7. Frame & hang two new doors, (one with window) including special hardware &
wiring for emergency exit fire door.
8. Remove small table in kitchen & phone jack, new wall paper, new flooring.
9. HVAC as necessary to modify system appropriately to allow for changes in
suite.
10. Electrical necessary to change unwanted existing recessed lighting to 2' X
4' drop-in fluorescence fixtures (leaving recessed in reception area). Add 3
duplex receptacles behind new reception wall. Add exit sign over fire door.
11. Add duplex on outside wall of smallest conference room, run conduit down
post and provide duplex receptacle on separate circuit for copier. Install one
power pole for freestanding wall. Install dedicated circuit with quadplex
receptacle and grounding bar in phone room. And change sensors to switches in 6
conference rooms. Including Conf. "F".
12. Electrical and building permits.
13. Add sound proofing to door between conference rooms A & E.
C. Install new carpet and base as selected by Landlord and approved by Tenant.
- --
D. Paint and otherwise finish the space to make ready for occupancy.
- --
<PAGE>
"EXHIBIT C"
PAGE 2
[DEMOLITION PLAN APPEARS HERE]
<PAGE>
"EXHIBIT A"
Page 3
[CONSTRUCTION PLAN APPEARS HERE]
<PAGE>
EXHIBIT "D"
RULES AND REGULATIONS
1. Use of Common Areas. The sidewalks, halls, passages, exits, entrances,
-------------------------
elevators, and stairways of the Building shall not be obstructed by any of the
lessees 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 general public, and Lessor shall in all cases
retain the right to control and prevent access thereto of all persons whose
presence in the judgement of Lessor would be prejudicial to the safety,
character, reputation and interests of the Building and its lessees, provided
that nothing herein shall be construed to prevent such access to persons with
whom any lessee normally deals in the ordinary course of its business unless
such persons are engaged in illegal activities. The roof of the Building is not
a common area. No lessee, and no employees or invitees of any lessee, shall go
upon the roof of the Building except as authorized by Lessor.
2. Prohibited Uses. The premises shall not be used for manufacturing or
---------------------
for lodging. No cooking shall de done or permitted by any lessee on the
premises, except that use by Lessee of equipment including microwave approved by
Underwriter's Laboratory for brewing coffee, tea, hot chocolate and similar
beverages shall be permitted, provided that such use is in accordance with all
applicable federal, state, and city laws, codes, ordinances, rules and
regulations.
3. Keys. Lessor will furnish each lessee free of charge with one key for
----------
each employee plus two additional keys to each door lock in the premises. Lessor
may make a reasonable charge for any additional keys. No lessee shall have any
keys made. No lessee shall alter any lock or install a new or additional lock or
any bolt on any door of its premises without the prior written consent of
Lessor. Lessee shall in each case furnish Lessor with a key for any such lock.
Each lessee, upon termination of its tenancy, shall deliver to Lessor all keys
to doors in the Building which shall have been furnished to Lessee.
4. Nuisances and Dangerous Substances. No lessee shall use or keep in the
--------------------------------------
premises or the Building any kerosene, gasoline or inflammable or combustible
fluid or material, other than limited quantities thereof reasonably necessary
for the operation or maintenance of office equipment, or without Lessor's prior
written approval, use any method of heating or air conditioning, other than that
supplied by Lessor. No lessee shall use or keep or permit to be used or kept any
foul or noxious gas or substance in the premises, or permit or suffer the
premises to be occupied or used in a manner offensive or objectionable to Lessor
or other occupants of the Building by reason of noise, odors or vibrations, or
interfere in any way with other lessees of those having business therein. Nor
shall any animals or birds be brought in or kept in or about the premises of
the Building.
5. Building Directory. The directory of the Building will be provided for
------------------------
the display of the name and location of lessees and in Lessor's discretion a
reasonable number of the principal officers and employees of lessees, and lessor
reserved the right to exclude any other names therefrom. Any additional name
which any lessee shall desire to place upon said directory must first be
approved by Lessor, and if so approved, a charge may be made therefor.
6. Window Coverings. No curtains, draperies, blinds, shutters, shades,
----------------------
screens or other coverings, hangings or decorations shall be attached to, hung
or placed in, or used in connection with, any window of the Building without the
prior written consent of Lessor. In any event with the prior written content of
lessor such items shall be installed on the office side of Lessors standard
window covering and shall in no may be visible from the exterior of the
Building.
7. Heating, Ventilating and Air Conditioning. Lessee shall cooperate with
-----------------------------------------------
Lessor in obtaining maximum effectiveness of the heating, ventilating and air
conditioning (HVAC) system. Lessee shall not obstruct, alter or in any way
impair the efficient operation of Lessor's HVAC system, and shall not tamper
with or change the setting of any thermostats, temperature control vanes, or
discharge or return air registers or ducts.
8. Floor Coverings. No lessee 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 Lessor. The expense of
repairing any damage resulting from a violation of this rule or removal of any
floor covering shall be borne by the lessee by whom, or by whose contractors,
employees or invitees, the damage shall have been caused.
9. Closing Procedure. Each lessee shall see that the doors of its
-----------------------
premises are closed and locked and that all water faucets, water apparatus are
shut off before lessee or its employees leave the premises, so as to prevent
waste or damage, and for any default or carelessness by a lessee in this regard,
the lessee shall be liable for all injuries sustained by other lessees or,
occupants of the Building or Lessor. All lessees shall keep the doors to the
building corridors closed at all times, except for ingress and egress.
10. Plumbing Facilities. The toilets, urinals, wash bowls and other
------------------------
apparatus shall not be used for any purpose, other than that for which they are
constructed; no foreign substance of any kind whatsoever shall be thrown therein
and the expense of any similar breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the lessee who, or whose employees or
invitees, shall have caused it.
<PAGE>
11. Use of Hand Trucks. There shall not be used in any space, or in the
------------------------
public halls of the Building, whether by any lessee or others, any hand trucks,
except those equipped with rubber tires and side guards or such other material
handling equipment as Lessor may approve. No other vehicles of any kind shall be
brought by any lessee into the Building or kept in or about its premises.
12. Soliciting. Canvassing, peddling, soliciting and distribution of
----------------
handbills or any other written materials in the Building are prohibited, and
each lessee shall cooperate to prevent the same.
13. Lessee's Requirements. The reasonable requirements of the lessees will
---------------------------
be attended to, but only upon application by telephone or in person at the
office Building. Employees of the Lessor or its manager shall no perform any
work or do anything outside or their regular duties unless under special
instructions from Lessor.
14. Parking. All parking ramps and areas, walkways, plaza and other
-------------
public areas forming a part of the Building shall be under the sole and absolute
control of Lessor, with the exclusive right to regulate and control these areas.
Lessee and its employees and invitees shall park their cars and trucks only in
areas designated by Lessor from time to time for that purpose, and further
agrees to conform to the rules and regulations that may be established by Lessor
for these areas from time to time.
15. Fire and Safety Regulations. Lessees shall comply with all safety,
---------------------------------
fire protection and evacuation procedures and regulations established by Lessor
or any governmental agency.
16. Responsibility for Theft. Lessee 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.
17. Enforcement. Lessor may waive any one or more of these Rules and
----------------
Regulations for the benefit of any particular lessee or lessees, no such waiver
by Lessor shall be construed as a waiver of such Rules and Regulations in favor
of any lessee or lessees, nor prevent Lessor from thereafter enforcing any such
Rules and Regulations against any or all of the lessees of the Building.
18. Effect on Lease. These Rules and Regulations are in addition to, and
---------------------
shall not be construed to in any way modify or amend, in whole or in part, the
terms, covenants, agreements and conditions of any lease of premises in the
Building.
19. Additional and Amended Rules. Lessor reserves the right to make such
----------------------------------
other and reasonable rules and regulations as in its judgement may from time to
time be needed for the safety, care and cleanliness of the Building and for the
preservation of good order therein and the right to amend any of the rules and
regulations from time to time.
20. Smoking Prohibited. Smoking of cigarettes, pipes and cigars shall be
------------------------
prohibited in the Premises. Under the Oregon Indoor Clean Air Act (ORS 433.835
through 433.875), smoking shall be prohibited in the common areas of the
building including, but not limited to, restrooms, public corridors, meeting
rooms, the atrium, elevators, and elevator lobbies. Smoking shall be permitted
only in a designated smoking room or rooms. Landlord reserves the right at any
time and at its sole discretion to eliminate any or all designated smoking room
or rooms.
21. Signage. Tenant shall not place, or cause to be placed or maintained,
-------------
any sign or advertising matter of any kind anywhere within the Montgomery Park
Building, except in the interior of the Leased Premises, without Landlord's
prior written approval. NO HANDWRITTEN SIGNS SHALL BE PERMITTED. No symbol,
design, name, mark or insignia adopted by Landlord for the Montgomery Park
Building shall be used without the prior written consent of Landlord. No
illuminated signs located in the interior of the Leased Premises and which are
visible from outside of the Leased Premises shall advertise any product. All
signs located in the interior of the Leased Premises shall be in good taste so
as not to detract from the general appearance of the Leased Premises and the
Montgomery Park Building. Tenant shall maintain in good condition and repair at
all times any sign or advertising matter of any kind which has been approved by
Landlord for use by Tenant. Landlord approved signs shall be displayed only in
the display areas designated as such by Landlord, unless otherwise specifically
agreed to in writing by Landlord.
<PAGE>
EXHIBIT 10.16
AUSTIN CENTRE LEASE AGREEMENT
By and Between
BRAZOS AUSTIN CENTRE, LTD.
("Landlord")
and
CITYSEARCH, INC.
("Tenant")
<PAGE>
AUSTIN CENTRE LEASE AGREEMENT
-----------------------------
This Lease is entered into as of August 15, 1996, between BRAZOS AUSTIN
CENTRE, LTD., a Texas Corporation ("Landlord"), whose address for purposes of
notice hereunder is 701 Brazos Suite 190, Austin, Texas, 78701 and CitySearch,
Inc., a Delaware corporation, "Tenant"), whose address prior to the Commencement
Date (defined in Section 2.01 hereof) and for purposes of notice is 4502 Dyer
St., Suite 201, La Crescenta, California 91314 and whose address after the
Commencement Date shall be 701 Brazos, Suite 440, Austin, Texas. 78701.
W I T N E S S E T H:
ARTICLE 1
1.01 PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases
--------
from Landlord, for the rent and subject to the provisions of this Lease, the
space (the "Premises") reflected on the floor plan(s) attached as Exhibit A
hereto, located on floor four (4) of the building (the "Building") known as
Austin Centre located at 701 Brazos, Austin Travis County, Texas (such Building,
the enclosed arrium area and ground-level open areas and walkways appurtenant to
the Building, any parking areas and garages serving the Building, any other
structure or improvement utilized in the operation or maintenance of the
Building, and the land (the "Land") on which all such improvements are located
said Land being more particularly described on Exhibit B attached hereto and
made a part hereof for all purposes and any present or future associated
underground or elevated pedestrian tunnels or walkways being hereinafter
collectively referred to as the "Project"). As used herein, the term "Project"
does not include the building located on the land that is now known and operated
as Omni Austin Hotel of Austin Centre (the "Hotel"). Landlord and Tenant hereby
agree that the Premises contain 4,473 square feet of rentable area and the
Project contains 343,664 square feet of rentable area.
ARTICLE 2
2.01 TERM. Subject to the other provisions hereof, and any exhibits
----
hereto, this Lease shall be for a term of approximately sixty-six and one half
(66 1/2) months commencing on the Commencement Date (defined in Section 2.02
hereof) and expiring on March 31, 2002 (the "Expiration Date"). Such term, as
it may be modified, is herein called the "Term."
2.02 COMMENCEMENT. As used herein, "Commencement Date" means the latter
------------
to occur of: (a) the date Tenant's leasehold improvements are substantially
completed (or would have been substantially completed except for delays caused
by Tenant) in accordance with Exhibit C attached hereto and made a part hereof
for all purposes, or (b) September 16, 1996. Notwithstanding the foregoing, if
Tenant occupies all or any part of the Premises prior to (a) or (b) above, the
Commencement Date shall be the date of such occupancy. If Landlord is unable to
deliver possession of the Premises to Tenant on or before September 16, 1996,
Landlord agrees that it will continue to provide Tenant with office space on the
third and fourth floors and the use of twenty-five (25) telephones at no cost
(excluding long distance and information charges) until the Landlord delivers
possession.
Within five (5) days after the Commencement Date and at any time thereafter
upon the request of Landlord, Tenant shall execute and deliver to Landlord a
declaration (in the form of Exhibit F hereto) specifying, among other things,
the date upon which the same occurred.
2
<PAGE>
ARTICLE 3
3.01 BASE RENT. Tenant, in consideration for this Lease, agrees to pay to
---------
Landlord a base rental ("Base Rent") in the amounts and installments indicated
below for each square foot of rentable area agreed by Landlord and Tenant to be
within the Premises, payable at Landlord's address herein provided in legal
tender of the United States of America without notice, demand, counterclaim,
set-off or abatement, in advance on the first day of each calendar month
throughout the Term:
Lease Dates Base Rent
----------- ---------
09/16/1996 - 03/15/1997 Free Rent Period (No Base Rent or Rental
Adjustment)
03/16/1997 - 03/31/1993 $3,727.50 per month (based on a rental rate
of $10.00 per rental square foot per year)
04/01/1998 - 03/31/1999 $3,913.88 per month (based on a rental rate
of $10.50 per rental square foot per year)
04/01/1999 - 03/31/2000 $4,100.25 per month (based on a rental rate
of $11.00 per rental square foot per year)
04/01/2000 - 03/31/2001 $4,286.63 per month (based on a rental rate
of $11.50 per rental square foot per year)
04/01/2001 - 03/31/2002 $4,473.00 per month (based on a rental rate
of $12.00 per rental square foot per year)
3.02 RENTAL ADJUSTMENT Tenant's pro rata share of all Operating
-----------------
Expenses (defined in Section 3.03 hereof) for purposes of rental adjustment is
agreed to be 1.3016% ("Tenant's Pro Rata Share"). On or before the Commencement
Date and thereafter on or before the first day of each calendar year of the
Term, Landlord shall provide to Tenant the Estimated Operating Expense (defined
in Section 3.03 hereof) for the upcoming year. In addition to the Base Rent,
Tenant shall pay in advance on the first day of each calendar month during the
Term, installments equal to one-twelfth (1/12) of Tenant's Pro Rata Share of the
Estimated Operating Expense. Within one hundred fifty (150) days after the
end of each calendar year during the Term, Landlord shall furnish to Tenant a
statement certified by Landlord of the Actual Operating Expense (defined in
Section 3.03 hereof) for the immediately preceding calendar year, which
statement shall specify the various types of Operating Expenses and set forth
Landlord's calculations of Tenant's Pro Rata Share thereof. If Tenant's Pro Rata
Share of the Estimated Operating Expense paid to Landlord during the previous
calendar year exceeds Tenant's Pro Rata Share of the Actual Operating Expense,
then Landlord shall refund the difference to Tenant at the time Landlord
furnishes the statement of the Actual Operating Expense. Otherwise, within
fifteen (15) days after Landlord furnishes such statement to Tenant, Tenant
shall make a lump sum payment to Landlord equal to Tenant's Pro Rata Share of
the positive difference between the Actual Operating Expense and the Estimated
Operating Expense theretofore paid by Tenant. As used in this Lease the term
"Rent" shall refer collectively to the Base Rent and all rental adjustments. If
the Term commences on a day other than the first day of the month or calendar
year, or terminates on a day other than the last day of a month or calendar
year, then Tenant shall be required to pay only a pro rata portion of the
installments and adjustments of Rent due for such month or year.
3.03 OPERATING EXPENSES.
-------------------
(a) "Operating Expenses" shall mean and include all reasonable
amounts, expenses, and costs of whatsoever nature incurred because of or in
connection with the ownership, management, operation, repair, maintenance
or security of the Project, all additional facilities which may be added to
the Project, and Landlord's personal property which may be utilized in
connection therewith. Operating Expenses shall not include capital
improvements, depreciation, interest and principal payments on mortgage and
3
<PAGE>
other nonoperating debts of Landlord, management fees and management
overhead to the extent they exceed market rates, attorney's fees related to
disputes with other tenants, and specific costs for special items or
services billed to and paid by specific tenants. Operating Expenses shall,
however, include the amortization of capital improvements (over the
expected payback period) which are primarily for the purpose of reducing
Operating Expenses or which are required by governmental or quasi-
governmental authorities. Operating Expenses shall be determined on an
accrual basis in accordance with generally accepted accounting principles
consistently applied. The "Estimated Operating Expense" (currently 58.25.
per rental square foot per year) shall equal the Landlord's estimate of
Operating Expenses for the applicable calendar year. Landlord's statement
of Estimated Operating Expense shall control for the year specified in such
statement and for each succeeding year during the Term until Landlord
provides a new statement of the Estimated Operating Expense." The Actual
Operating Expense" shall equal the operating expenses actually incurred
for the applicable calendar year. Notwithstanding any provision contained
herein to the contrary, if less than 95% of the total square feet of
rentable area in the Building is occupied by tenants or Landlord is not
supplying services to 95% of the total square feet of rentable area of the
Building at any time during any calendar year. Operating Expenses for such
calendar year shall be determined to be an amount equal to the like expense
which would normally be expected to be incurred had such occupancy been 95%
of the Building's total square feet of rentable area and had Landlord been
supplying services to 95% of the Building's total square feet of rentable
area throughout such calendar year.
(b) Operating Expenses from the Commencement Date through September
15, 1997 shall not exceed $8.25 per rentable square foot; for the balance
of 1997, Operating Expenses shall not exceed $8.50 per rentable square
foot. Controllable Operating Expenses (defined as all Operating Expenses
except real estate taxes, insurance and utilities) shall not increase more
than eight percent (8%) per year.
3.04 SECURITY DEPOSIT. Tenant shall deposit with Landlord on the date
----------------
Tenant executes this Lease the sum of Thirteen Thousand Four Hundred Nineteen
and No/100 Dollars ($13,419.00) as a "Security Deposit" on the understanding:
(a) the Landlord shall apply $6,709.50 to the payment of the first accruing
rental installment due and subsequent rental installments until exhausted,
provided Tenant is not in default under this Lease at that time: (b) that the
Security Deposit or any portion thereof may be applied to the curing of any
Default (defined in Section 13.01 hereof), without prejudice to any other remedy
or remedies which the Landlord may have on account thereof, and upon such
application Tenant shall pay Landlord on demand the amount so applied which
shall be added to the Security Deposit so the same will be restored to its
original amount: (c) that Landlord shall not be obligated to hold the Security
Deposit as a separate fund, but may commingle it with other funds: and (d) that
if no Default exists and no event has occurred that with notice and/or the
passage of time would constitute a Default, the remaining balance of the
Security Deposit shall be returned to Tenant, without interest, within thirty
(30) days after the expiration of the Term; provided, however, that Landlord
shall have the right to retain and expend such remaining balance for cleaning
and repairing the Premises if Tenant shall fail to deliver the Premises at the
termination of this Lease in a near and clean condition and in as good a
condition as existed at the date of possession of same by Tenant, ordinary wear
and tear only excepted.
ARTICLE 4
4.01 USE. Tenant shall use and occupy the Premises only for office purposes
---
and for no other purposes. Tenant shall not do or permit anything to be done
in or about the Premises nor bring or keep anything therein that will in any
way increase the existing rate of or affect any fire or other insurance upon the
Project or any of its contents, or cause cancellation of any insurance policy
covering the Project or any part thereof or any of its contents. Tenant shall
not do or permit anything to be done in or about the Premises that will in any
way obstruct or interfere with the rights of other tenants or occupants of the
Project or injure or annoy them or tend to lower the first class character of
the building or create unreasonable elevator loads or otherwise interfere with
standard Building operations. Tenant shall not 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. Tenant shall not use the Premises or permit
anything to be done in or about the Premises that will in any way conflict with
any reasonable rule or
4
<PAGE>
regulation of Landlord, any reasonable restrictive covenant imposed by Landlord,
or any law, statute, ordinance or any governmental or quasi-governmental
authority now in force or that may hereafter be enacted or promulgated.
ARTICLE 5
5.01 LANDLORD'S SERVICES. Provided Tenant is not in default hereunder,
-------------------
Landlord shall, at Landlord's expense, except as provided to the contrary in
this Lease, furnish to Tenant the following services:
(a) Subject to curtailment as required by governmental laws, rules or
regulations, air conditioning and central heat, in season, at such
temperatures and in such amounts as are deemed by Landlorn to be standard
for first class office buildings in Austin, Texas, during normal Building
hours, which are presently scheduled to be 7:00 a.m. through 6:00 p.m. on
weekdays and 8:00 a.m. through 2:00 p.m. on Saturdays, exclusive of normal
business holidays. Normal business holidays for purposes of this Lease
shall include, without limitation New Year's Day, Martin Luther King Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
the Friday following Thanksgiving Day and Christmas Day. If in the case of
any holiday described herein a different day shall be observed than the
respective day described then the day which constitutes the day observed by
national banks in Austin, Texas, on account of such holiday shall
constitute the holiday under this Lease.
(b) Janitorial services in the Premises and public portions of the
Building for all days except Saturdays, Sundays, and normal business
holidays.
(c) Water at those points of supply provided for drinking, toilet, and
lavatory purposes.
(d) Normal and customary routine maintenance for all public,
structural, and exterior portions of the Project according to Landlord's
standards.
(e) Electric lighting service for all public portions of the Project
in the manner and to the extent deemed by Landlord to be in keeping with
the standards of a first class office building in Austin, Texas.
(f) Reasonably adequate, non-exclusive automatic passenger elevator
service at all times for access to and egress from the Premises. Freight
elevator service, in common with other tenants, shall be provided during
reasonable business hours as prescribed by Landlord, exclusive of
Saturdays, Sundays, and normal business holidays.
(g) Electric energy that Tenant shall require for standard office
equipment such as personal computers, typewriters, dictation machines,
calculators, other machines of a similar low electrical consumption, and
Building Standard (defined in Exhibit C attached hereto) lighting in the
Premises. Without Landlord's prior written consent, Tenant shall not be
entitled to employ lighting on the Premises that consumes electrical
current in excess of Building Standard lighting nor utilize any office
equipment that requires a voltage other than 120 volts single phase.
(h) Building security to encourage compliance with the Rules and
Regulations (defined in Section 15.09 hereof) and to limit after-hour
access to the Building; provided, however, Landlord shall have no
responsibility to prevent, and shall not be liable to Tenant for, liability
or loss to Tenant, its agents, employees and visitors arising out of losses
due to theft, burglary, or damage or injury to persons or property caused
by persons having or gaining access to the Building or the Premises, unless
caused by Landlord's negligence, and Tenant hereby releases Landlord from
all liability relating thereto.
(i) Window washing services for the outside portions of the Building
at least one (1) time per calendar year.
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(j) Replacement of florescent light bulbs in any florescent light
fixtures which are located in the Premises and which contain the Building
Standard light bulbs (Paralux 3 tube Florescent Lighting).
5.02 ADDITIONAL SERVICE COST. Tenant shall pay Landlord, upon demand, such
-----------------------
additional amounts as are necessary to recover additional costs incurred by
Landlord in performing or providing janitorial, maintenance, security, or other
services or requirements of Tenant(and in paying additional taxes) as to any
non-Building Standard installations in the Premises. Tenant shall pay Landlord,
upon demand, monthly as billed charges for providing off-hour and nonstandard
air conditioning, heating and electricity; provided, however, that there shall
be no charge for off-hour air conditioning and heating prior to September 1,
1997, and the charge thereafter shall be $7.50 per hour.
5.03 SERVICE INTERRUPTION. To the extent any of the services described
--------------------
above require electricity, gas, water or other services supplied by public
utilities. Landlord's covenants hereunder shall impose on Landlord only the
obligation to use its good faith efforts to cause the applicable public
utilities to furnish the same. Any failure or defect in the services described
above shall not be construed as an eviction of Tenant nor entire Tenant to any
reduction, abatement, offset, or refund of Rent or to any damages from Landlord.
Landlord shall not be in breach or default under this Lease, provided Landlord
uses reasonable diligence during normal business hours to restore any such
failure or defect after Landlord receives written notice thereof.
ARTICLE 6
6.01 ALTERNATIONS Tenant shall not make or allow to be made any
------------
alterations, installations, additions or improvements in or to the Premises, or
place safes, vaults or other heavy furniture or equipment within the Premises,
without Landlord's prior written consent. All alterations, installations,
additions or improvements, other than movable furniture and movable trade
fixtures, made by Tenant to the Premises shall remain upon and be surrendered
with the Premises and become the property of Landlord at the expiration or
termination of this Lease or the termination of Tenant's right to possession of
the Premises: provided, however, that Landlord may require Tenant, at Tenant's
cost, to remove any or all of such items that are not Building Standard upon the
expiration or termination of this Lease or the termination of Tenant's riitht to
possession of the Premises. Tenant, at its sole cost and prior to the expiration
or termination of this Lease. shall remove all of T enant's property from the
Premises and make, or reimburse Landlord for the reasonable cost of, all repairs
to the Premises and/or Project for damage resulting from such removal, provided
that Landlord has indicated that it will require such removal at the time of
providing consent to such alterations, installations, additions or improvements.
All work shall be completed promptly and in a good and workmanlike matter and
shall be performed in such a manner that no mechanic's, materialman's or other
similar liens shall attach to Tenant's leasehold estate, and in no event shall
Tenant permit, or be authorized to permit, any such liens or other claims to be
asserted against Landlord or Landlord's rights, estate and interests with
respect to the project or this Lease. Landlord may require, at Tenant's sole
cost and expense, a lien and completion bond in an amount equal to the estimated
cost of any improvements, additions or alterations in the Premises.
6.02 TENANT REPAIRS By taking possession of the Premises, Tenant shall be
--------------
deemed to have accepted the Premises as being in good, sanitary order, condition
and repair. Tenant shall, at Tenant's sole cost and expense, keep the Premises
in good condition and repair, damage thereto from causes beyond the reasonable
control of Tenant and ordinary wear and tear damage excepted. Any injury or
damage to the Premises or Project, or the appurtenances or fixtures thereof,
caused by or resulting from the act, omission or neglect of Tenant or Tenant's
employees, servants, agents, invitees, assignees, or subtenants shall be
repaired or replaced by Tenant, or at Landlord's option by Landlord, at the
expense of Tenant. If Tenant fails to maintain the Premises or falls to repair
or replace any damage to the Premises or Project resulting from the negligence
or intentional act of Tenant, its employees, servants, agents, invitees,
assignees or subtenants, Landlord may, but shall not be obligated to, cause
such maintenance, repair or replacement to be done, as Landlord deems necessary,
and Tenant shall immediately pay to Landlord all reasonable costs related
thereto plus a charge for overhead of 15% of such costs.
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6.03 LANDLORD REPAIRS: Unless otherwise Stipulated herein, Landlord shall
----------------
not be required to make any improvements to or repairs of any kind or character
to the Premises during the Term, except such repairs to Building Standard
improvements as may be deemed necessary by Landlord for normal maintenance
operations; provided, however, non-Building Standard leasehold improvements
will, at Tenant's written request, be maintained by Landlord at Tenant's
expense, at a cost or charge equal to the costs incurred in such maintenance
plus an additional charge or 15%. Notwithstanding any provisions of this
Lease to the contrary, all repairs, alterations or additions to the base
Building or its systems (as opposed to those involving only Tenant's Leasehold
improvements), and all repairs, alterations or additions to Tenant's non-
Building Standard leasehold improvements which affect the Building's
structural components or major mechanical, electrical or plumbing systems in the
Building, to be made by or for or on behalf of Tenant, shall be made by Landlord
or its contractor only, and, except as otherwise provided in Exhibit C attached
hereto, shall be paid for by Tenant in an amount equal to Landlords, costs plus
an additional charge of 15%.
ARTICLE 7
7.01 LANDLORD INSURANCE. Landlord shall insure the Project and shall
------------------
maintain liability and other insurance in such amounts as may be required by
Landlord's mortgagee, or in such greater amounts as Landlord, in its sole
discretion, may deem appropriate. The cost of such insurance, including any
deductible paid thereunder by Landlord, shall be an "Operating Expense" as
defined in Section 3.03 hereof. Such insurance shall be for the sole benefit of
Landlord and, if required, Landlord's mortgagee. If the annual premiums to be
paid by Landlord exceed the standard rates because of Tenant's operations
within or contents of the Premises or because improvements to the Premises are
beyond Building Standard, Tenant shall promptly pay the excess amount of the
premium upon request by Landlord (and if necessary, Landlord may allocate the
insurance costs of the Building to give effect to this sentence).
7.02 TENANT INSURANCE. Tenant shall, at Tenant's expense fully insure its
----------------
property located in the Premises against fire and other casualty and shall
maintain comprehensive general liability insurance insuring Landlord and Tenant
against any liability arising out of ownership, use, occupancy or maintenance of
the Premises and all areas appurtenant thereto, including contractual liability
insurance (with respect to Section 7.04 hereof), with insurance companies
approved by Landlord and with limits of liability of at least $2,000.000 in each
occurrence for Bodily Injury and Property Damage combined and $2,000,00O general
aggregate for Bodily Injury and Property Damage combined with the endorsement
of comprehensive general liability CG-2504. Tenant shall cause Landlord to be
named as an additional insured under such policies and shall, not less than
twenty (20) days prior to (a) the Commencement Date, and (b) the expiration of
old policies, furnish Landlord with certificates of insurance with loss payable
clauses satisfactory to Landlord. The limit of such insurance shall not,
however, limit the liability of Tenant hereunder. Tenant may carry such
insurance under a blanket policy, provided such insurance has a Landlord's
protective liability endorsement attached thereto. If Tenant fails to procure
and maintain said insurance, Landlord may, but shall not be required to, procure
and maintain same, but at the expense of Tenant. No policy shall be cancelable
or subject to reduction of coverage except after thirty (30) days prior written
notice to Landlord.
7.03 WAIVER OF SUBROGATION. Whenever (a) any loss, cost, damage or expense
---------------------
resulting from fire, explosion or any other casualty or occurrence is incurred
by either of the parties to this Lease in connection with the Premises or the
Project, and (b) such party is then covered (or is required under this Lease to
be covered) in whole or in part by insurance with respect to such loss, cost,
damage or expense, then the party so insured hereby releases the other party
from any liability it may have on account of such loss, cost, damage or expense
to the extent of any amount recovered by reason of such insurance, and waives
any right of subrogation which might otherwise exist on account thereof,
provided that such release of liability and waiver of the right to subrogation
shall not be operative in any case where the effect thereof is to invalidate
such insurance coverage or increase the cost thereof (provided, that in the case
of increased cost, the other party shall have the right, within thirty (30) days
following written notice, to pay such increased costs, thereupon keeping such
release and waiver in full force and effect). Landlord and Tenant shall use
their respective best efforts to obtain such a release and
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waiver of subrogation from their respective insurance carriers and shall obtain
any special endorsements, if required by their insurer, to evidence compliance
with the aforementioned waiver.
7.04 INDEMNITY. Tenant hereby indemnifies and holds Landlord harmless from
---------
and against any and all claims arising from Tenant's use of the Premises for the
conduct of its business or from any activity, work or other thing done,
permitted or suffered by Tenant on or about the Project and shall further
indemnify and hold harmless Landlord from and against 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
omission of, or due to the negligence of, the Tenant, or any officer, agent,
employee, guest or invitee of Tenant, and from and against all costs, attorney's
fees expenses and Liabilities incurred in or related to any such claim or any
action or proceeding brought thereon. Tenant as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons including death in, upon or about the Project except for such,
damage or injury caused by Landlord's negligence, and Tenant hereby waives all
claims in respect thereof against Landlord.
ARTICLE 8
8.01 CASUALTY. Tenant shall give Landlord written notice of any fire or
--------
other casualty occurring within the Premises on the next business day following
such occurrence or Tenant's knowledge thereof, whichever is later. If the
Premises or Project (provided such damage to the Project would constitute an
interference with Tenant's quiet enjoyment of the Premises), or any portion of
either, shall be damaged by fire or other casualty covered by the insurance
carried by Landlord hereunder and the cost of repairing such damage shall not be
greater than 10% of the then full replacement cost thereof, then, subject to
the following provisions of this Article. Landlord shall repair the Premises
and/or Project. If the Premises or Project shall be damaged (a) by fire or other
casualty not covered by insurance carried by Landlord hereunder, (b) by fire or
other casualty covered by insurance carried by Landlord hereunder and Landlord's
mortgagee requires that such insurance proceeds be used to retire the mortgage
debt, or (c) to an extent greater than 40% of the then full replacement cost
thereof, then Landlord shall have the option (i) to repair or reconstruct the
damaged Premises or Project to substantially the same condition as immediately
prior to such fire or other casualty, or (ii) to terminate this Lease by so
notifying Tenant within one hundred twenty (120) days after the date of such
fire or other casualty, such termination to be effective as of the date of such
fire or other casualty. The Rent required to be paid hereunder shall be abated
in proportion to the portion of the Premises, if any, which is rendered
untenantable by fire or other casualty hereunder until repairs of the Premises
are completed or if the Premises are not repaired, until the Expiration Date
hereunder. Other than such rental abatement, no damages, compensation or claims
shall be payable by Landlord for loss of the use of the whole or any part of the
Premises, Tenant's personal property, or any inconvenience, loss of business, or
annoyance arising from any such repair and reconstruction. If the damage results
from the fault or negligence of Tenant, its agents, employees, licensees or
invitees, Tenant shall not be entitled to any abatement or reduction of any Rent
or other sums due hereunder, and such damage shall be repaired by Tenant, or at
Landlord's option by Landlord, at Tenant's expense. If this Lease is terminated
as provided in (c)(ii) above, all Rent shall be apportioned and paid up to the
date of such termination. Landlord shall not be required to repair or replace
any furniture, furnishings, or other personal property that Tenant may be
entitled to remove from the Premises or any property constructed and installed
by or for Tenant pursuant to Section 6.01 hereof or any installations in excess
of Building Standard.
8.02 END OF TERM CASUALTY. Notwithstanding anything to the contrary in
--------------------
this Article, Landlord shall not have any obligation whatsoever to repair,
reconstruct or restore the Premises or the Project when the damage resulting
from any casualty covered under this Article occurs during the last twelve (12)
months of Term or any extension thereof.
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ARTICLE 9
9.01 CONDEMNATION. If more than 20% of the Premises should be taken for
------------
any public or quasi-public use, by right of eminent domain or otherwise, or
should be sold in lieu of condemnation, then either party hereof shall have the
right, at its option, to terminate this Lease as of the date when physical
possession of the Premises is taken by the condemning authority. If 20% or less
of the Premises is so taken or sold or if this Lease is not terminated upon any
taking or sale of greater than 20% of the Premises, the Rent payable hereunder
(including an appropriate adjustment of the Pro Rata Share) shall be abated in
proportion to the portion of the Premises which is rendered untenantable by such
condemnation and Landlord shall, to the extent Landlord deems feasible and if
permitted by Landlord's mortgagee, ground lessor or other secured parry,
restore the Premises to substantiallv its former condition, but Landlord shall
not in any event be required to spend for such work an amount in excess of the
amount received by Landlord as compensation for such taking. If any part of the
Project other than the Premises may be so taken or sold, Landlord shall have
the right at its option to terminate this Lease as of the date when physical
possession of such part of the Project is taken by the condemning authority.
Al1 amounts awarded upon taking of any part or all of the Project or the
Premises shall belong to Landlord and Tenant shall not be entitled to, and
expressly assigns all claims, rights and interests to, any such compensation to
Landlord.
ARTICLE 10
10.01 ENTRY. Landlord, its agents, employees and representatives, shall
-----
have the right to enter the Premises at any time upon reasonable notice to
Tenant under the circumstances (which notice may be oral and not in compliance
with Section 15.08 hereof, but no notice shall be required in the case of
routine maintenance or an emergency) to show the Premises to prospective
tenants or purchasers or for any purpose that Landlord may reasonably deem
necessary for the operation and maintenance of the Project. 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. 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 upon and about the Premises, excluding Tenant's vaults, safes and files.
Landlord shall have the right to use any and all means which Landlord may deem
proper to open the doors in, upon and about the Premises in an emergency in
order to obtain entry to the Premises without liability to Tenant, except for
any failure to exercise due care for Tenant's property.
ARTICLE II
11.01 SUBORDINATION. This Lease is and shall be subject and subordinate to
-------------
any and all ground or similar leases affecting the Project, and to all
mortgages, deeds of trust, and security agreements that may now or hereafter
encumber or affect the Project or any interest of Landlord therein and/or the
contents of the Building, and to any advances made on the security thereof and
to any and all increases, renewals, modifications, consolidations, replacements
and extensions of any such leases, mortgages. deeds of trust and/or security
agreements. This clause shall be self-operative and no further instrument of
subordination need be required by any owner or holder of such ground lease
mortgage, deed of trust or security agreement. Tenant agrees to execute and
return any estoppel certificate, consent or agreement reasonably requested by
any such lessor, mortgagee, trustee or secured party in connection with this
Section within ten (10) days after receipt of same, and Tenant hereby
irrevocably appoints Landlord as Tenant's attorney-in-fact to execute the same
if Tenant fails to respond within such period. Tenant shall furnish any
mortgagee of Landlord secured by a lien on the Project, any lessor to Landlord
under a ground lease of the Project, or any secured party under a security
agreement encumbering the interest of Landlord, with written notice of any
default or breach by Landlord at least sixty (60) days prior to the exercise by
by Tenant of any rights and/or remedies of Tenant hereunder arising out of such
default or breach.
11.02 ATTORNMENT. If any ground or similar such lease, mortgage, deed of
----------
trust or security agreement is enforced by the ground lessor, the mortgagee, the
trustee, or the secured party, Tenant shall, upon
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request attorn to the lessor under such lease or the mortgage or purchaser at
such foreclosure sale, or any person or party succeeding to the interest of
LandLord as a result of such enforcement as the case may be, and execute
instrument(s) confirming such attornment: provided however, that if this Lease
was approved and accepted in writing by such lessor, mortgagee, trustee or
secured party. Tenant's attornment shall be conditioned upon the agreement by
such successor to landlord's interest not to disturb Tenant's possession
hereunder during the Term so 1ong as Tenant performs its obligations under this
Lease. In the event of such enforcement and upon Tenant's attornment as
aforesaid. Tenant will automatically become the tenant of the successor to
Landlord's interest without charge in the terms or provisions of this Lease;
provided, however, that such successor to Landlord's interest shall not be bound
by (a) any payment of Rent for more than one month in advance (except
prepayments for security deposits, if any), (b) any amendments or modifications
of this Lease made without the prior written consent of such lessor or
mortgagee, or (c) any credits, offsets, defenses or claims which Tenant may have
against Landlord.
11.03 QUIET ENJOYMENT. Tenant, on paying the Rent and keeping and
---------------
performing the conditions and covenants herein contained, shall and may
peaceably and quietly enjoy the Premises for the Term, subject to the aforesaid
underlying leases, mortgages, deeds of trust and security agreements, all
applicable laws and other governmental and legal requirements, applicable
insurance requirements and regulations, and the provisions of this Lease. It is
understood and agreed that this covenant and any and all other covenants of
Landlord contained in this Lease shall be binding upon Landlord and its
successors only with respect to breaches occurring during its and their
respective ownership of the Landlord's interest hereunder.
ARTICLE 12
12.01 ASSIGNMENT AND SUBLETTING. Tenant shall not, voluntarily, by
-------------------------
operation of law, or otherwise, assign, transfer, mortgage, pledge, or encumber
this Lease or sublease the Premises or any part thereof, or suffer any person
other than Tenant, its employees, agents, servants and invitees to occupy or use
the Premises or any portion thereof, without the express prior written consent
of Landlord which will not be unreasonably withheld. Any attempt to do any of
the foregoing without such written consent shall be null and void and of no
effect and shall further constitute a material default under this Lease. If
Tenant so requests Landlord's consent, said request shall be in writing
specifying the identity of the proposed transferee, the duration of said desired
sublease or assignment, the date same is to occur, the exact location of the
space affected thereby and the proposed rentals on a square foot basis
chargeable thereunder, and shall be submitted to Landlord at least thirty (30)
days in advance of the date on which Tenant desires to make such assignment or
sublease or allow such occupancy or use. Upon such request Landlord may, with
reasonable business judgment, (a) grant such consent subject to Landlord's
approval of the assignee, transferee, subtenant, or mortgagee, or (b) deny such
consent. If Landlord does not give such consent in writing within fifteen (15)
days of the date such consent is requested, then Landlord's consent shall be
deemed to have been denied. In no event may Tenant assign this Lease or
sublease the Premises or any portion thereof to any party whose operations in
the Project would not be in keeping with, or would detract from, the operations
of other tenants in the Project. Tenant shall advise Landlord within thirty
(30) days of any change in a majority of the voting rights or other controlling
rights or interests of Tenant.
In any situation in which Landlord consents to an assignment or sublease
hereunder. Tenant shall promptly deliver to Landlord a fully executed copy of
the final sublease agreement or assignment instrument and all ancillary
agreements relating thereto. No assignment shall be effective unless the
assignee has agreed within the assignment instrument to assume the obligations
of Tenant hereunder and to be personally bound by all of the covenants, terms
and conditions hereof on the part of Tenant to be performed or observed
hereunder.
12.02 CONTINUED LIABILITY. Tenant shall, despite any permitted assignment
-------------------
or sublease, remain directly and primarily liable for the performance of all of
the covenants, duties, and obligations of Tenant hereunder, and Landlord shall
be permitted to enforce the provisions of this Lease against Tenant or any
assignee or sublessee without demand upon or proceeding in any way against any
other person.
12.03 CONSENT. Consent by Landlord to a particular assignment or sublease
-------
shall not be deemed a consent to any other or subsequent transaction. If this
Lease is assigned or if the Premises are subleased without
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the permission of Landlord, then LandLord may nevertheless collect Rent from
the assignee or sublessee and apply the net amount collected to the Rent payable
hereunder, but no such transaction or collection of Rent or application thereof
by Landlord shall be deemed a waiver of any provision hereof or a release of
Tenant from the performance of the obligations of the Tenant hereunder.
12.04 PROCEEDS. All cash or other proceeds of any assignment, sale or
--------
sublease of Tenant's interest in this Lease, whether consented to by Landlord or
not, shall be paid to Landlord notwithstanding the fact that such proceeds
exceed the Rent called for hereunder, and Tenant hereby assigns all rights it
might have or ever acquire in any such proceeds to Landlord.
ARTICLE 13
13.01 DEFAULT. Each of the following shall constitute a "Default" by
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Tenant:
(a) The failure of Tenant to pay the Rent or any part thereof when
due, and the failure to cure the problem within five (5) days of receipt
of written notice from Landlord; provided, however that Landlord shall not
be obligated to give written notice more than three (3) times in any twelve
month period:
(b) Tenant shall become insolvent or unable to pay its debts as they
become due, or Tenant notifies Landlord that it anticipates either
condition:
(c) Tenant takes any action to, or notifies Landlord that Tenant
intends to, file a petition under any section or chapter of the United
States Bankruptcy Code, as amended from time to time or under any
similar law or statute of the United States or any state thereof: or a
petition shall be filed against Tenant under any such statute or Tenant
notifies Landlord that it knows such a petition will be filed: or the
appointment of a receiver or trustee to take possession of substantiallv
all of Tenant's assets located at the Premises or of Tenant's interest in
this Lease: or the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease; unless the application of this subsection 13.01(c)
shall contravene any applicable law:
(d) Tenant shall fail to fulfill or perform, in whole or in part,
any of its obligations under this Lease (other than the payment of Rent)
and such failure or nonperformance shall continue for a period of thirty
(30) days after written notice thereof has been given by Landlord to
Tenant:
(e) Tenant shall vacate or abandon the Premises or any significant
portion thereof:
(f) Tenant shall fail to take possession of the Premises when
Landlord notifies Tenant that the Premises are ready for occupancy;
(g) The occurrence of any event or condition having a material and
adverse effect on the assets, liabilities, financial condition, business or
operations of Tenant as they exist on the date of this Lease, or the
ability of Tenant to meet its obligations under this Lease on a timely
basis as provided herein: or
(h) Any representation or warranty by Tenant in this Lease or in any
certificate, statement or other document furnished pursuant to or under
this Lease, including, without limitation, financial statements, proves to
be or becomes incorrect in any material respect.
13.02 RIGHTS UPON DEFAULT. If a Default by Tenant occurs, then at any time
-------------------
thereafter prior to the curing thereof, with or without notice or demand,
Landlord may exercise any and all rights and remedies available to Landlord
under this Lease, at law or in equity, including without limitation, termination
of this Lease and termination of Tenant's right to possession without
terminating the Lease. If Tenant is in Default for nonpayment of Rent and if
Tenant fails to pay same in full within five (5) days after Landlord hand
delivers to the
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Premises written notice of Landlord's intent to exercise its lockout rights,
then Landlord shall be entitled to change or modify door locks on all entry
doors of the Premises and Tenant shall not be entitled to a key to re-enter the
Premises until all delinquent Rent is paid in full: provided, however, Landlord
shall immediately thereafter post a notice on an entry door to the Premises,
stating that Landlord has exercised such lockout rights. If Tenant vacates or
abandons the Premises or any significant portion thereof. Landlord may
permanently change the locks without notice to Tenant, and Tenant shall not be
entitled to a key to re-enter the Premises. The two preceding sentences shall
supersede any conflicting provisions of Section 93.002 of the Texas Property
Code or any successor statue In the event of a Default, Landlord may, without
additional notice and without court proceedings, re-enter and repossess the
Premises and remove all persons and property therefrom, and Tenant hereby agrees
to surrender possession of the Premises, waives any claim arising by reason
thereof or by reason of issuance of any distress warrant or writ of
sequestration, and agrees to hold Landlord harmless from any such claims. If
Landlord elects to terminate this Lease, it may treat the default as an
entire breach of this Lease and Tenant shall immediately become liable to
Landlord for damages equal to the total of (a) the cost of recovering,
reletting, including, without limitation, the cost of leasing commissions
attributable to the unexpired portion of the Term of this Lease, and remodeling
the Premises, (b) all unpaid Rent and other amounts earned or due through such
termination, including interest thereon at the rate specified in Section 13.04
hereof, plus (c) the present value (discounted at the rate of 8% per annum) of
the balance of the Rent for the remainder of the Term less the present value
(discounted at the same rate) of the fair market rental value of the Premises
for said period and (d) any other sum of money and damages owed by Tenant to
Landlord. If Landlord elects to terminate Tenant's right to possession of the
Premises without terminating this Lease. Landlord may (but shall not be
obligated to) rent the Premises or any part thereof for the account of Tenant to
any person or persons for such rent and for such terms and conditions as
Landlord deems appropriate, and Tenant shall be liable to Landlord for the
amount, if any, by which the Rent for the unexpired balance of the Term exceeds
the net amount, if any, received by Landlord from such reletting, being the
gross amount so received by Landlord less the costs of repossession, reletting,
remodeling, and other expenses incurred by Landlord. Such sum or sums shall be
paid by Tenant in monthly installments on the first day of each month of the
Term. In no case shall Landlord be liable for failure to relet the Premises or
to collect the rent due under such reletting, and in no event shall Tenant be
entitled to more than 50% of any excess rents received by Landlord. All rights
and remedies of Landlord shall be cumulative and not exclusive.
13.03 COSTS. If a Default by Tenant occurs, then Tenant shall reimburse
-----
Landlord on demand for all costs reasonably incurred by Landlord in connection
therewith including, but not limited to, reasonable attorney's fees, court
costs, and related costs, plus interest thereon from the date such costs are
paid by Landlord until Tenant reimburses Landlord, at the rate specified in
Section 13.04 hereof.
13.04 INTEREST. ALL late payments of Rent, costs or other amounts due from
--------
Tenant under this Lease shall bear interest from the date due until paid at the
rate of 18% per annum; provided, however, in no event shall the rate of interest
hereunder exceed the maximum non-usurious rate of interest (the Maximum Rate)
permitted by the applicable laws of the State of Texas or the United States of
America, whichever shall permit the higher non-usurious rate, and as to which
Tenant could not successfully assert a claim or defense of usury, and to the
extent that the Maximum Rate is determined by reference to the laws of the State
of Texas the Maximum Rate shall be the indicated rate ceiling (as defined and
described in Texas Revised Civil Statutes, Article 5069-1.04, as amended) at the
applicable time in effect.
13.05 LANDLORD'S LIEN. Landlord reserves (and is hereby granted) a first and
---------------
superior lien and security interest (which shall be in addition to and not in
lieu of the statutory landlord's lien) on all fixtures, equipment, and personal
property (tangible and intangible) (excluding any confidential or proprietary
information or trade secrets, or trade secret information, stored in any form)
now or hereafter placed by Tenant in or on the Premises to secure all sums due
by Tenant hereunder, which lien and security interest may be enforced by
Landlord in any manner provided by law, including, without limitation, under and
in accordance with the Texas Uniform Commercial Code. The provisions of this
Section shall constitute a security agreement under the Texas Uniform Commercial
Code and, at Landlord's request. Tenant shall execute and file, where
appropriate, all documents required to perfect the security interest herein
granted in accordance with the Texas Uniform Commercial Code. Landlord may at
its election at any time file a copy of this Lease as a financing statement.
Unless otherwise provided by law and for the purpose of exercising any right
pursuant to this Section. Landlord
12
<PAGE>
and Tenant agree that reasonable notice shall be met if such notice is given by
five days' written notice, certified mail, return receipt requested, to Landlord
or Tenant at the address specified herein.
13.06 NON-WAIVER. The failure of Landlord to seek redress for violation
----------
of, or to insist upon the strict performance of, any covenant or condition of
this Lease shall not prevent a subsequent act or omission that would have
originally constituted a violation of this Lease from having all the force and
effect of an original violation. The receipt by Landlord of Rent with or without
knowledge of the breach of any provision of this Lease shall not be deemed a
waiver of such breach, shall not reinstate this Lease or Tenant's right of
possession if either or both have been terminated, and shall not otherwise
affect any notice, election, action, or suit by Landlord. No provision of this
Lease shall be deemed to have been waived by Landlord unless such waiver is in
writing signed by Landlord. No act or thing done by Landlord during the Term
shall be deemed an acceptance of a surrender of the Premises and no agreement to
accept such surrender shall be valid, unless express and in writing signed by
Landlord.
ARTICLE 14
14.01 FINANCIAL STATEMENTS. Tenant, at the reasonable request of Landlord
--------------------
from time to time, shall deliver to Landlord current financial statements,
including, without limitation, balance sheets, profit and loss statements,
reconciliations of capital and surplus, changes in financial condition,
schedules of sources and applications of funds, and operating statements with
respect to the business of Tenant, all of which shall, at the request of
Landlord, be certified by an independent certified public accountant. Landlord
agrees that such information shall be kept confidential.
14.02 CORPORATE RESOLUTIONS. If Tenant is a corporation, Tenant shall,
---------------------
within thirty (30) days following the execution and delivery of this Lease,
deliver a fully executed Certificate of the Secretary in the form attached
hereto as Exhibit G. Such certificate shall have attached a copy of the
resolution(s) of Tenant's corporate board authorizing its officers to enter into
this Lease; the resolution(s) may be in the form indicated or otherwise.
ARTICLE 15
15.01 AMENDMENT. Any agreement hereafter made between Landlord and Tenant
---------
shall be ineffective to modify, release, or otherwise affect this Lease, in
whole or in part unless such agreement is in writing and signed by the party to
be bound thereby.
15.02 SEVERABILITY. If any term or provision of this Lease shall, to any
------------
extent, be held invalid or unenforceable by a final judgment of a court of
competent jurisdiction, the remainder of this Lease shall all not be affected
thereby.
15.03 ESTOPPEL LETTERS. Tenant shall promptly upon request from Landlord
----------------
execute and acknowledge a certificate containing such information as may be
reasonably requested for the benefit of Landlord, any prospective purchaser or
any current or prospective mortgagee of all or any portion of the Project.
15.04 LANDLORD'S LIABILITY AND AUTHORITY. The liability of Landlord to
----------------------------------
Tenant for any default by Landlord under the terms of this Lease shall be
limited to the interest of Landlord in the Project, it being intended that
Landlord, its officers, directors and employees shall not be personally liable
for any judgment or deficiency. Whenever in this Lease there is imposed upon
Landlord the obligation to use its best efforts, reasonable efforts, diligence
or act in good faith, Landlord shall be required to do so only to the extent the
same is economically feasible and otherwise will not impose upon Landlord
extreme financial or other burdens.
15.05 HOLDOVER. If Tenant shall remain in possession of the Premises after
--------
the Expiration Date or earlier termination of this Lease, then Tenant shall be
deemed a tenant-at-will whose tenancy is terminable at any time. In such event,
Tenant shall pay Rent at one and one quarter the daily rental rate prevailing on
the date of
13
<PAGE>
such termination or expiration, but otherwise shall be subject to all of the
obligations of Tenant under this Lease. Additionally, Tenant shall pay to
LandLord all damages sustained by Landlord on account of such holding over by
Tenant.
15.06 SURRENDER. Upon the expiration or earlier termination of the Term.
---------
Tenant shall peaceably quit and surrender the Premises in good order and
condition excepting ordinary wear and tear, but subject to Sections 6.01 and
6.02 hereof. All obligations of Tenant for the period of time prior to the
expiration or earlier termination of the Term shall survive such expiration or
termination.
15.07 PARTIES AND SUCCESSORS. Subject to the limitations and conditions
----------------------
set forth elsewhere herein, this Lease shall bind and inure to the benefit
of the respective heirs, legal representatives, successors, and permitted
assigns and/or sublessees of the parties hereto. The term "Landlord", as used in
this Lease, so far as the performance of any covenants or obligations on the
part of Landlord under this Lease are concerned, shall mean only the owner of
the Project at the time question, so that in the event of any transfer of title
to the Project, the party by whom may such transfer is made shall be relieved of
all liability and obligations of the Landlord arising under this Lease from and
after the date of such transfer. Landlord shall have the right to transfer,
sell, assign, mortgage or encumber, in whole or in part, all of its rights and
obligations hereunder and in the Building, the Land, the Project and other
property of Landlord referred to herein.
15.08 NOTICE. Except as otherwise provided herein, any statement, notice
------
or other communication that Landlord or Tenant may desire or be required to
give to the other shall be deemed sufficiently given or rendered if hand
delivered, or if sent by registered or certified mail, return receipt
requested, addressed at the address(es) first hereinabove given or at such other
addresses(es) as the other parry shall designate from time to time by prior
written notice, and such notice shall be effective when the same is received or
in the case of mail notice, the earlier of when delivery is attempted or
acceptance of a letter is declined, and otherwise upon receipt, if mailed as
herein provided.
15.09 RULES AND REGULATIONS. Tenant, its servants, employees, agents,
---------------------
visitors, invitees, and licensees, shall observe faithfully and comply strictly
with the Rules and Regulations set forth in Exhibit D hereto, and shall abide by
and conform to such further Rules and Regulations as Landlord may from time to
time reasonably make, amend or adopt, after Tenant receives a copy thereof.
15.10 CAPTIONS. The captions in this Lease are inserted only as a matter
--------
of convenience and for reference and they in no way define, limit, or describe
the scope of this Lease or the intent of any provision hereof.
15.11 NUMBER AND GENDER. All genders used in this Lease shall include the
-----------------
other genders, the singular shall include the plural, and the plural shall
include the singular, whenever and as often as may be appropriate.
15.12 GOVERNING LAW. This Lease shall be governed by and construed in
-------------
accordance with the Laws of the State of Texas.
15.13 INABILITY TO PERFORM. Notwithstanding Section 15.18 hereof, whenever
--------------------
a period of time is herein prescribed for the taking of any action by Landlord,
Landlord shall not be liable or responsible for, and there shall be excluded
from the computation of such period of time, any delays due to strikes, riots,
acts of God, shortages of labor or materials, war, governmental laws,
regulations or restrictions, or any other cause whatsoever beyond the control of
Landlord, and such nonperformance or delay in performance by Landlord shall not
constitute a breach or default by Landlord under this Lease nor give rise to any
claim against Landlord for damages or constitute a total or partial eviction,
constructive or otherwise.
15.14 USE OF NAME. Tenant shall not, except to designate Tenant's business
-----------
address (and then only in a conventional manner and without emphasis or
display), use the name or mark "Austin Centre" for any purpose whatsoever.
14
<PAGE>
15.15 BROKER. Tenant represents and warrants that Tenant has dealt with,
------
and only with OMNI Commercial Realty Advisors, Inc. as Landlord's exclusive
broker and Tynes Realty as Tenant's exclusive broker in connection with this
Lease and that, insofar as Tenant knows, no other broker(s) negotiated this
Lease or are entitled to any commission in connection herewith. Tenant shall
indemnify and hold harmless Landlord from and against all claims (and costs of
defending against and investigating such claims) of any other broker(s) or
similar parties claiming under Tenant in connection with this Lease. Landlord
shall indemnify and hold harmless Tenant from and against all claims (and
costs of defending against and investigating such claims) of any other broker(s)
or similar parties claiming under Landlord in connection with this Lease.
15.16 MEMORANDUM OF LEASE. Without the prior written consent of Landlord
-------------------
(which may be granted or withheld in Landlord's sole discretion), Tenant shall
not record this Lease or any memorandum or other instrument with respect to this
Lease. Upon the date of execution of this Lease, or at any time thereafter, and
at the request of Landlord, Tenant and Landlord shall execute a memorandum in
recordable form setting forth the material terms and conditions of this Lease.
15.17 ENTIRE AGREEMENT. This Lease, including all Exhibits attached
----------------
hereto (which Exhibits are hereby incorporated herein and shall constitute a
portion hereof), contains the entire agreement between Landlord and Tenant with
respect to the subject matter hereof. Tenant hereby acknowledges and agrees
that neither Landlord nor Landlord's agents or representatives have made any
representations, warranties, or promises with respect to the Project, the
Premises, Landlord's services, or any other matter or thing except as herein
expressly set forth, and no rights, easements, or licenses are acquired by
Tenant by implication or otherwise except as expressly set forth in this Lease.
The taking of possession of the Premises by Tenant shall be conclusive evidence,
as against Tenant, that Tenant accepts the Premises and the Project, and that
same were in good and satisfactory condition at the time such possession was so
taken. Further, the terms and provisions of this Lease shall not be construed
against or in favor of a party hereto merely because such party is the
"Landlord" or the "Tenant" hereunder or such party or its counsel is the
draftsman of this Lease.
15.18 TIME OF ESSENCE. Time is of the essence of this Lease and each and
---------------
all of its provisions in which performance is a factor.
15.19 PARKING. Tenant shall have the right to use the parking facilities
-------
of the Building, subject to the monthly rates, rules and regulations, and any
other charges of Landlord for such parking facilities, all as more particularly
set forth on Exhibit E hereto.
15.20 TENANT 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 upon all of Tenant's leasehold improvements, equipment, furniture,
fixtures and personal property located in the Premises; except such property
which has been paid for by Landlord and is the standard of the Building.
15.21 ATTORNEY'S FEES. In the event Tenant defaults in the performance of
---------------
any of the terms, agreements or conditions contained in this Lease and Landlord
places the enforcement of this Lease, or any part thereof, or the collection of
any rent due or to become due hereunder, or recovery of the possession of the
Premises, in the hands of any attorney who files suit upon the same, the Tenant
shall pay the Landlord's reasonable attorney's fees.
15.22 LANDLORD ALTERATIONS OR MODIFICATIONS. Notwithstanding anything
-------------------------------------
herein to the contrary, Landlord expressly reserves the right in its sole
discretion to temporarily or permanently change the location of, close, block or
otherwise alter any entrances, corridors, skywalks, tunnels, doorways, or
walkways leading to or providing access to the Building or any part thereof or
otherwise restrict the use of same provided such acts do not unreasonably impair
Tenant's access to the Premises. Landlord shall not incur any liability
whatsoever to Tenant as a consequence thereof and such acts shall not be deemed
to be a breach of any of Landlord's obligations hereunder. Landlord agrees to
exercise good faith in notifying Tenant within a reasonable time in advance of
any alterations, modification or other acts of Landlord under this Section.
15
<PAGE>
15.23 NAME CHANGE. Landlord and Tenant covenant and agree that Landlord
-----------
hereby reserves and shall have the right at any time and from time to time to
change the name of the Building as Landlord may deem advisable, and Landlord
shall not incur any liability whatsoever to Tenant as a consequence thereof.
LANDLORD:
BRAZOS AUSTIN CENTRE, LTD.
By:_______________________________
Printed Name:_____________________
Title:____________________________
Date:_____________________________
TENANT:
CITYSEARCH, INC.
By: [SIGNATURE ILLEGIBLE]
-------------------------------
Printed Name: Bradley Ramberg
---------------------
Title: CFO - VP Finance
----------------------------
Date:
----------------------------
16
<PAGE>
EXHIBITS:
EXHIBIT A: FLOOR-PLANS
EXHIBIT B: LEGAL DESCRIPTION
EXHIBIT C: WORK-LETTER
EXHIBIT D: RULES AND REGULATIONS
EXHIBIT E: PARKING
EXHIBIT F: COMMENCEMENT DATE DECLARATION
EXHIBIT G: CERTIFICATE OF THE SECRETARY
EXHIBIT H: NONE
EXHIBIT I: NONE
EXHIBIT J: RIGHT OF FIRST REFUSAL
EXHIBIT K: NONE
EXHIBIT L: MEMORANDUM OF LEASE
EXHIBIT M: LIMITED TERMINATION OPTION
17
<PAGE>
EXHIBIT A
---------
TO LEASE BETWEEN
BRAZOS AUSTIN CENTRE, LTD., AS LANDLORD
AND CITYSEARCH, INC., AS TENANT
FLOOR-PLANS
-----------
[SEE ATTACHED]
INITIALED FOR IDENTIFICATION BY LANDLORD ______ AND TENANT ILLEGIBLE]
-----------
<PAGE>
EXHIBIT A
[PLAN OF CITYSEARCH SUITE 440 APPEARS HERE]
<PAGE>
EXHIBIT B
---------
TO LEASE BETWEEN
BRAZOS AUSTIN CENTRE, LTD., AS LANDLORD
AND CITYSEARCH, INC., AS TENANT
LEGAL DESCRIPTION
-----------------
A FIELD NOTE DESCRIPTION OF A 1.75 ACRE TRACT OF LAND BEING ALL OF BLOCK 85
ORIGINAL CITY OF AUSTIN, TRAVIS COUNTY, TEXAS. PLAT OF SAID ORIGINAL CITY OF
AUSTIN BEING RECORDED AT THE GENERAL LAND OFFICE IN AUSTIN, TEXAS. SAID 1.75
ACRE TRACT BEING MORE PARTICULARLY DESCRIBED BY METES AND BOUNDS AS FOLLOWS:
COMMENCING at a concrete monument found in the intersection or the centerlines
of East Eighth Street and Brazos Street.
THENCE S 26 degrees 03'0l" E, a distance of 56.52 feet to a punchhole set in
concrete at the intersection of the south right-of-way line of East Eighth
Street and the east right-of-way lines of Brazos Street, and being a
perpendicular distance of 40.00 feet east of the said monumented centerline of
Brazos Street and being a perpendicular distance of 40.00 feet south of the
monumented centerline of East Eighth Street for the northwest corner and POINT
OF BEGINNING hereof:
THENCE with the west line of said Block 85 being parallel to and a perpendicular
distance of 40.00 feet east of the said monumented centerline of Brazos Street S
19 degrees 00'00" W, for a distance of 276.69 feet to an iron pin in the north
right-of-way line of East Seventh Street and being a perpendicular distance of
40.00 feet north of the monumented centerline of East Seventh Street for the
southwest corner hereof:
THENCE with the south line of said Block 85 being parallel to and a
perpendicular distance of 40.00 feet north of the monumented centerline of East
Seventh Street S 71 degrees 06"5l" E, a distance of 276.17 feet to an iron pin
set in the west right-of-way line of San Jacinto Street and being a
perpendicular distance of 40.00 feet to the west of said monumented centerline
of San Jacinto Street for the southeast corner hereof:
THENCE with the east line of said Block 85 being parallel to and a
perpendicular distance of 40.00 feet west of the monumented centerline of San
Jacinto Street N 18 degrees 59'22" E, for a distance of 276.52 feet to an
iron pin set in the south right-of-way line of East Eighth Street and being a
perpendicular distance of 40.00 feet south of the said monumented centerline of
East Eighth Street for the northeast corner hereof:
THENCE with the north line of said Block 85 being parallel to and a
perpendicular distance of 40.00 feet south of the monumented centerline of East
Eighth Street N 71 degrees 06"03" W, a distance of 276.12 feet to the POINT OF
BEGINNING and containing 1.75 acres of land, more or less.
INITIALED FOR IDENTIFICATION BY LANDLORD ______ AND TENANT [SIGNATURE ILLEGIBLE]
---------------------
<PAGE>
EXHIBIT C
---------
TO LEASE BETWEEN
BRAZOS AUSTIN CENTRE, LTD., AS LANDLORD
AND CITYSEARCH, INC., AS TENANT
WORK-LETTER
-----------
1. Prior to the Commencement Date, Landlord shall, at its sole cost and
expense, do the work described and reflected in the approved plans (herein
called the "Work") necessary to furnish and install within the Premises, the
tenant improvements defined below as Building Standard. The cost of the Work
shall be advanced by Landlord for the benefit of Tenant, to be repaid by Tenant
in the form of Base Rent. All Work completed by Landlord will meet applicable
building codes.
For purposes of this Lease. "Building Standard" shall mean those
improvements and other items as approved by Landlord as standard for buildout
purposes on initial space and for expansion and additional space in the
Building. The following shall apply unless otherwise specified in this Lease or
in the plans and specifications for the Work:
a. Ceiling Systems: 2' X 4" suspended lay-in acoustical ceiling. Ceiling
---------------
tile is regular edged and is cut to resemble 1' X 1'.
b. HVAC System: A multi-zoned heating, ventilating, and air conditioning
-----------
system is provided with perimeter slot diffusers, light fixture mounted supply
troffers and ceiling mounted supply and return air grilles. Main duct runs and
mixing boxes are provided on each floor for spin-in connections to supply
points. Each zone is individually controlled by a wall mounted thermostat.
Landlord's central plant will provide heat and conditioned air to each floor in
quantities necessary to support typical office use occupancy during ordinary
business hours as set forth in this Lease.
c. Window Wall: Window blinds in Landlord selected color will be provided
-----------
at each exterior window. Interior window blinds will be provided to Tenant if
they are determined by Landlord to be appropriate for the project.
d. Public Restroom: Complete men's and women's restroom facilities are
---------------
provided on each floor. All restrooms meet current handicap requirements.
e. Interior Partition: One (1) linear foot of latex flat painted
------------------
partition with rubber base per twelve (12) square feet of rentable area.
Measurement will be through door openings.
f. Demising Partitions: One-half (1/2) the total length of demising
-------------------
partitions separating tenants on multi-tenant floors will be added to interior
partition footage.
g. Interior Doors: One (1) solid core wood veneer door with hollow metal
--------------
frames and latchset will be provided per three hundred (300) square feet of
rentable area.
h. Entry Doors: Front and rear entry doors will be provided with
-----------
a building standard lockset and closer. Two (2) keys will be supplied with each
lockset.
i. Light Fixtures: One (1) 2' X 4' parabolic lay-in fluorescent light
--------------
fixture will be provided for each ninety (90) square feet of rentable area.
Light fixtures are capable of receiving saddle type air troffer for supply air
or adjustable slots for return air.
INITIALED FOR IDENTIFICATION BY LANDLORD ______ AND TENANT [SIGNATURE ILLEGIBLE]
---------------------
C-1
<PAGE>
j. Light Switches: One (1) single pole wall switch for lighting control
--------------
will be provided for each three hundred twenty five (325) square feet of
rentable area.
k. Duplex Outlets: One (1) 120 volt house circuited duplex wall outlet
--------------
will be provided for each one hundred twenty five (125) square feet of rentable
area.
l. Telephone Outlets: One (1) wall mounted telephone pull string will be
-----------------
provided for each two hundred twenty (220) square feet of rentable area.
m. Flooring: Building standard flooring will be 32 ounce carpet glued
--------
directly to the concrete slab.
Standard line VCT can be installed in lieu of carpet at no additional cost.
In order to ensure that the Landlord is able to maintain and monitor the
quality of the building construction, the design intent of the systems,
including warranties, guarantees, etc. and to further protect the unit prices
established for the Building Standard items, it shall be understood that all
Work will be performed by Landlord's contractor unless otherwise provided
herein. It shall be understood that all mechanical, structural, electrical,
plumbing and fire sprinkler engineering required to develop Tenant's
improvements through modifications to Building Standard requested by Tenant and
approved by Landlord to accommodate Tenant's layout will be done by the
Landlord's engineers at Tenant's expense.
2. Landlord shall provide, in consultation with Tenant, architectural
working drawings for the improvements to the Premises (hereinafter called
"Drawings"). The Drawings shall include partition and door location drawings,
telephone and electric drawings and reflect ceiling drawings, and include any
specifications required by Tenant including, but not limited to, paint colors,
finish details, and non-standard construction work to be performed within the
Premises by Landlord's contractors. Tenant covenants and agrees to deliver to
Landlord all information necessary to cause said Drawings to be prepared in a
timely matter. Landlord will, at Landlord's sole cost and expense, have
mechanical (sprinkler, air conditioning, hearing, electric and plumbing)
drawings prepared by Landlord's mechanical engineer or contractor covering, and
limited to the mechanical elements of the Work as shown on the Drawings as the
Work relates specifically to Building Standard installations as set forth in
Paragraph 1 above. The cost of mechanical drawings relating to Work in addition
to or exceeding Building Standard installations shall be paid by Tenant.
3. Except as set forth in Paragraph 1 and Paragraph 2, Landlord has no
other agreement with Tenant and has no other obligation to do any other work
with respect to the Premises. Any other work in the Premises that may be
permitted by Landlord pursuant to the terms and conditions of this Lease shall
be done at Tenant's sole cost and expense and in accordance with said terms and
conditions. If Landlord agrees to perform, at Tenant's request and upon
submission by Tenant (at Tenant's sole cost and expense) of all necessary
drawings, plans and specifications (the "Extra Work Drawings"), any other work
in addition to the Work (the"Extra Work"), such Extra Work will be done at
Tenant's sole cost and expense. Landlord shall submit to Tenant written
estimates of the cost of Extra Work. Such estimate shall include a charge of 7
% of the total expenses and costs otherwise chargeable for the Extra Work, for
Landlord's overhead (exclusive of and in addition to the general contractor's
overhead and profit), whether the Extra Work is to be performed by Landlord or
others). If Tenant shall fail to approve said estimates within seven (7) days
from the receipt thereof, the same shall be deemed disapproved in all respects
by Tenant and Landlord shall not be authorized to proceed thereon. Upon
Landlord's approval of the Extra Work Drawings, Tenant agrees to pay 50% of the
cost of the Extra Work to Landlord and the balance of the cost upon being billed
therefor by Landlord at any time and from time to time thereafter. Landlord
shall not be liable for any damages, nor shall the Commencement Date be
delayed, nor any Rent abated, as a result of the construction or performance of
any Extra Work or any delay in such construction or performance.
4. Landlord, at Landlord's discretion, may permit Tenant and Tenant's
agents to enter the Premises prior to the Commencement Date in order that Tenant
may do such other work as may be required by Tenant to
INITIALED FOR IDENTIFICATION BY LANDLORD ______ AND TENANT BR
---------------
C-2
<PAGE>
make the Premises ready for Tenant's use and occupancy thereof. If Landlord
permits such entry prior to commencement of the Term, then such permission is
conditioned upon Tenant and Tenant's agents, contractors, workmen, mechanics,
suppliers and invitees, working in harmony and not interfering with Landlord and
Landlord's agents in doing Landlord's work in the Premises or for other tenants
and occupants of said Building. If at any time such entry shall cause or
threaten to cause such disharmony or interference. Landlord shall have the right
to withdraw such permission upon twenty-four (24) hours written notice to
Tenant. Tenant agrees that any such entry into and occupation of the Premises
shall be deemed to be under all of the terms, covenants, conditions and
provisions of this Lease except as to the covenant to pay Rent, and further
agrees Landlord shall not be liable in any way for any injury, loss or damage
that may occur to any of Tenant's work and installations made in the Premises or
to properties placed therein prior to the Commencement Date, the same being at
Tenant's sole risk.
5. Tenant agrees that in the event Tenant shall have:
(A) caused changes to be made in the Drawings after they have
been prepared by Landlord or in the mechanical drawings and/or specifications
thereof or work or improvements required thereby (notwithstanding Landlord's
approval of such changes), or
(B) directly, or indirectly through any person, firm or
corporation employed by Tenant, unreasonably interfered with or delayed the work
of Landlord's contractor, or
(C) caused any delay in Landlord's completion of the Premises
through any fault or negligence of Tenant or its agents.
thereby delaying Tenant's occupancy of the Premises, Tenant shall commence
payment of Rent on the Commencement Date specified in Article 2 of this Lease.
INITIALED FOR IDENTIFICATION BY LANDLORD ______ AND TENANT [SIGNATURE ILLEGIBLE]
C-3
<PAGE>
EXHIBIT D
---------
TO LEASE BETWEEN
BRAZOS AUSTIN CENTRE, LTD., AS LANDLORD
AND CITYSEARCH INC., AS TENANT
RULES AND REGULATIONS
---------------------
1. The sidewalks, walks, plaza entries, corridors, concourses, ramps,
staircases, escalators and elevators of the Project shall not be obstructed or
used by Tenant, or the employees, agents, servants, visitors or licensees of
Tenant for any purpose other than ingress and egress to and from the Premises.
No bicycle or motorcycle shall be brought into the Building or kept on the
Premises without the prior written consent of Landlord.
2. No freight, furniture or bulky matter of any description will be received
into the Project or carried into the elevators except in such a manner, during
such hours and using such elevators and passageways as may be approved by
Landlord, and then only upon having been scheduled in advance. Any hand trucks,
carryalls of similar equipment used for the delivery or receipt of merchandise
or equipment shall be equipped with rubber tires, side guards and such other
safeguards as Landlord shall require.
3. Landlord shall have the right to prescribe the weight, position and
manner of installation of safes or other heavy equipment which shall, if
considered necessary by Landlord, be installed in a manner that shall insure
satisfactory weight distribution. All damage done to the Premises shall be
repaired at the expense of Tenant. The time, routing and manner of moving
safes or other heavy equipment shall be subject to prior approval by Landlord.
4. Only persons authorized by Landlord will be permitted to furnish
newspapers, ice, towels, barbering, shoe shining, janitorial services, floor
polishing and other similar services and concessions to Tenant, and only at
hours and under regulations fixed by Landlord. Tenant shall use no other method
of heating or cooling than that supplied by Landlord without Landlord's prior
written consent.
5. Neither Tenant nor the employees, agents, servants, visitors or
licensees of Tenant shall at any time place, leave or discard any rubbish paper,
articles or objects of any kind whatsoever outside the doors of the Premises or
in the corridors or passageways of the Project. No animals or birds shall be
brought or kept in or about the Project.
6. Landlord shall have the right to prohibit any advertising by Tenant
which in Landlord's opinion, tends to impair the reputation of the Project or
its desirability for offices and, upon written notice from Landlord, Tenant will
refrain from or discontinue such advertising.
7. Tenant shall not place or cause or allow to be placed, any sign,
placard, picture, advertisement, notice or lettering whatsoever, in, about or on
the exterior of the Premises, Building or Project except in and at such places
as may be designated by Landlord and consented to by Landlord in writing. Any
such sign, placard, advertisement, picture, notice or lettering and graphics on
corridor doors shall conform to the building standard prescribed by Landlord. No
trademark shall be displayed in any event.
8. Canvassing, soliciting or peddling in the Building and/or Project is
prohibited and Tenant shall cooperate to prevent same.
9. Landlord shall have the right to exclude any person from the Project
other than during customary business hours as set forth in the Lease, and any
person in the Project will be subject to identification by employees and agents
of Landlord. All persons in or entering the Project shall be required to comply
with the security policies of the Project.
INITIALED FOR IDENTIFICATION BY LANDLORD _____ AND TENANT BR
---------------
D-1
<PAGE>
If Tenant desires additional security service for the Premises, Tenant shall
have the right (with the prior written consent of Landlord) to obtain such
additional service at Tenant's sole cost and expense. Tenant shall keep doors to
unattended areas locked and shall otherwise exercise reasonable precautions to
protect property from theft, loss or damage. Landlord shall not be
responsible for the theft, loss or damage of any property or for any error with
regard to the exclusion from or admission to the Project of any person. In case
of invasion, mob, riot or public excitement, the Landlord reserves the right to
prevent access to the Project during the continuance of same by closing the
doors or taking other measures for the safety of the tenants and protection of
the Project and property or persons therein.
10. Only workmen employed, designated or approved by Landlord may be employed
for repairs, installations, alterations, painting, material moving and other
similar work that may be done in or on the Premises.
11. Tenant shall not conduct any restaurant, luncheonette, automat or
cafeteria for the sale of food or beverages to its employees or to others.
Tenant may, however, operate a coffee bar and microwave oven by and for its
employees.
12. Tenant shall not bring or permit to be brought or kept in or on the
Premises or Project any inflammable, combustible, corrosive, caustic, poisonous,
or explosive substance, or cause or permit any odors to permeate in or emanate
from the Premises, or permit or suffer the Premises to be occupied or used in a
manner offensive or objectionable to Landlord or other occupants of the Project
by reason of light, radiation, magnetism, noise, odors and/or vibrations, or
interfere in any way with other tenants or those having business in the Project.
13. Tenant shall not mark paint, drill into, or in any way deface any part
of the Project or the Premises, provided that Tenant may hang artwork,
whiteboards, corkboards and similar items as a part of their normal business
operations. No boring, driving of nails or screws, cutting or stringing of wires
shall be permitted, except with the prior consent of Landlord and as Landlord
may direct. Tenant shall not install any resilient tile or similar floor
covering in the Premises except with the prior approval of Landlord. The use of
cement or other similar adhesive material is expressly prohibited.
14. No additional locks or bolts of any kind shall be placed by Tenant on
any door in the Project or the Premises, and no lock on any door therein shall
be changed or altered by Tenant in any respect. Landlord shall furnish two keys
for each lock on exterior doors to the Premises and shall on Tenant's request
and at Tenant's expense, provide additional duplicate keys. All keys shall be
returned to Landlord upon the termination of this Lease, and Tenant shall give
to Landlord the explanations of the combinations of all safes, vaults and
combination locks remaining with the Premises. Landlord may at all times keep a
pass key to the Premises. All entrance doors to the Premises shall be left
closed at all times and left locked when the Premises are not in use.
15. Tenant shall give immediate notice to Landlord in case of theft,
unauthorized solicitation or accident in the Premises or in the Project or of
defects therein or in any fixtures or equipment, or of any known emergency in
the Project.
16. Tenant shall not allow the Premises to be used for photographic,
lithographic or multigraphic reproductions except in connection with its own
business and not as a service for others without Landlord's prior written
consent.
17. Tenant shall not use or permit any portion of the Premises to be used as
an office for a public stenographer or typist, offset printing, the sale of
liquor or tobacco, a barber or manicure shop, an employment bureau, a labor
union office, a doctor's or dentist's office, a dance or music studio, any type
of school, or for any use other than those specifically granted in this Lease.
18. Tenant shall not advertise for laborers giving the Premises as an
address, nor pay such laborers at a location in the Premises.
INITIALED FOR IDENTIFICATION BY LANDLORD __________AND TENANT
[SIGNATURE ILLEGIBLE]
- ---------------------
D-2
<PAGE>
19. The requirements of Tenant will be attended to only upon application at
the office of Landlord in the Building or at such other address as may be
designated by Landlord in the Lease. Employees of Landlord shall not perform any
work or do anything outside of their regular duties, unless under special
instructions from the office of Landlord.
20. Tenants shall not place a load upon any floor of the Premises that
exceeds the load per square foot that such floor was designed to carry and that
is allowed by law. Business machines and mechanical and electrical equipment
belonging to Tenant that cause noise, vibration, electrical or magnetic
interference, or any other nuisance that may be transmitted to the structure or
other portions of the Project or to the Premises to such a degree as to be
objectionable to Landlord or that interfere with the use or enjoyment by other
tenants of their premises or the public portions of the Project shall be placed
and maintained by Tenant, at Tenant's expense, in settings of cork, rubber,
spring type, or other vibration eliminators sufficient to eliminate noise or
vibration.
21. No awnings, draperies, shutters or other interior or exterior window
coverings that are visible from the exterior of the Building or from the
exterior of the Premises within the Building may be Installed by Tenant.
22. Tenant shall not place, install or operate within the Premises or any
other part of the Project any engine, stove or machinery, or conduct mechanical
operations therein, without the written consent of Landlord.
23. No portion of the Premises or any other part of the Project other than
that portion of the Project operated as a hotel shall at any time be used or
occupied as sleeping or lodging quarters.
24. Tenant shall at all times keep the Premises neat and orderly.
25. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed, 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.
26. Landlord reserves the right to exclude or expel from the Project any
person who, in the judgement of Landlord, is intoxicated or under the Influence
of liquor or drugs, or who shall in any manner do any act in violation of any of
the Rules and Regulations of the Project.
27. No noxious, illegal or offensive activities shall be carried on in the
Premises or the Project, nor shall anything be done which is an annoyance or
nuisance or which interferes with the quiet enjoyment of other occupants of the
Project. No activity is permitted which increases the rate of insurance for the
Project or causes any insurance policy to be cancelled or not renewed, or which
will impair the structural integrity of the Project.
28 . Tenants and their employees, agents, visitors and licensees shall conduct
themselves in an orderly, polite and inoffensive manner throughout the Project.
Any tenant or employee, agent, visitor or licensee of any tenant who is
intoxicated or under the influence of alcoholic beverages or drugs anywhere in
the Project will be in violation of these rules and regulations.
29. Landlord reserves the right, without the approval of Tenant, to rescind
any Rules or Regulations, to add new reasonable Rules or Regulations or make
reasonable amendments thereto, and to waive any Rules or Regulations with
respect to any tenant or tenants.
INITIAL FOR IDENTIFICATION BY LANDLORD _____ AND TENANT BR
----------------
D-3
<PAGE>
EXHIBIT E
---------
TO LEASE BETWEEN
BRAZOS AUSTIN CENTRE, LTD. AS LANDLORD
AND CITYSEARCH, INC. AS TENANT
PARKING
-------
(a) Guaranteed Spaces - Austin Centre Garage. Landlord agrees to provide,
----------------------------------------
and Tenant agrees to rent through the Term of the Lease, six (6) unreserved
spaces for the parking of automobiles in the parking garage located at Austin
Centre, Austin, Travis County, Texas. Tenant shall rent all such spaces unless
and until Landlord releases Tenant from such spaces after Tenant gives at least
sixty (60) days prior written notice to Landlord that Tenant desires to take
fewer spaces, but Landlord shall be under no obligation to later make available
to Tenant any spaces relinquished by Tenant. As rental for such parking spaces
provided to Tenant hereunder, Tenant shall pay to Landlord or the operator of
the garage, as may be designated from time to time by Landlord, monthly in
advance in the same manner and in addition to the Base Rent provided in the
Lease, rental on each such parking space at the rate of $80.00 for each
unreserved space per month, plus tax.
(b) Guaranteed Spaces - St. David's Garage. Landlord also agrees to make
--------------------------------------
available to Tenant through the term of the Lease up to fourteen (14) spaces in
the St. David's Garage at an initial cost of $68.00 per space per month, plus
tax; rates for these spaces may be adjusted from time to time as specified by
the operator of the garage. Landlord shall have no obligation to make available
to Tenant any such spaces used and later relinquished by Tenant.
(c) Optional Spaces - St. David's Garage. If Tenant has used all of its
------------------------------------
Guaranteed Spaces in the St. David's Garage, then, subject to availability.
Tenant may lease up to five (5) additional spaces in the St. David's Garage on a
month to month basis at the rates specified from time to time by the operator of
the garage.
(d) Default in Payment of Parking Fees. Upon the failure of Tenant to pay
----------------------------------
any parking fees when due, and the failure to cure such problem within five (5)
days of receipt of written notice from Landlord (provided, however, that
Landlord shall not be obligated to give written notice more than three (3) times
in any twelve month period), Landlord shall be relieved of any further
obligations under this Exhibit E furthermore, if Tenant has not paid such
overdue amounts within ninety (90) days of receipt of the written notice or if
Tenant is otherwise in default under the Lease at such time, then Tenant's
failure to pay will be deemed to be a default under the Lease and Landlord may
then exercise any other remedy allowed under this Lease.
(e) Miscellaneous. Tenant shall comply with all traffic, security, safety
-------------
and other rules and regulations promulgated from time to time by Landlord.
Tenant shall indemnify and hold harmless Landlord from and against all claims,
losses, liabilities, damages, costs and expenses (including, but not limited to,
attorneys' fees and court costs) arising or alleged to arise out of Tenant's use
of any such parking spaces, except to the extent caused by Landlord's
negligence. In the event any of the guaranteed parking spaces are or become
unusable at any time or from time to time throughout the Term, whether due to
casualty or any other cause, this Lease shall continue in full force and
effect; provided however, (i) Landlord shall make reasonable efforts to provide
alternate parking and (ii) Tenant shall be entitled to an abatement of the rent
due for any such space for so long as it is unavailable for use by Tenant during
normal Building hours.
INITIALED FOR IDENTIFICATION BY LANDLORD _____ AND TENANT [SIGNATURE ILLEGIBLE]
---------------------
<PAGE>
FOR EXAMPLE PURPOSES ONLY -- TO BE COMPLETED
UPON ACTUAL OCCUPANCY OF THE PREMISES.
EXHIBIT F
---------
TO LEASE BETWEEN
BRAZOS AUSTIN CENTRE, LTD., AS LANDLORD
AND CITYSEARCH, INC., AS TENANT
COMMENCEMENT DATE DECLARATION
-----------------------------
This declaration is executed with respect to that certain Austin Centre
Lease Agreement (the "Lease") dated August 15, 1996 by and between Brazos Austin
Centre, Ltd., a Texas corporation ("Landlord"), and CitySearch Inc., a Delaware
corporation ("Tenant"), covering approximately 4,473 square feet of rentable
area on floor four (4) of the Building. Capitalized terms used but not defined
herein shall have the meanings given to them in the Lease.
By their respective execution below. Landlord and Tenant each hereby
stipulates and agrees that:
(1) The Commencement Date (as defined in Section 2.02 of the Lease)
occurred on_________, 1996 and the Expiration Date is March 31, 2002;
(2) The Premises contain 4,473 rentable square feet:
(3) Tenant's Pro Rata Share for purposes of calculating rental
adjustments based on payment of Operating Expenses is 1.3016%; and
(4) Base Rent is payable in monthly installments as follows:
Lease Dates Base Rent
----------- ---------
09/16/1996 - 03/15/1997 Free Rent Period (No Base Rent or
Rental Adjustment)
03/16/1997 - 03/31/1998 $3,727.50 per month (based on a rental
rate of $10.00 per rental square foot
per year)
04/01/1998 - 03/31/1999 $3,913.88 per month (based on a rental
rate of $10.50 per rental square foot
per year)
04/01/1999 - 03/31/2000 $4,100.25 per month (based on a rental
rate of $11.00 per rental square foot
per year)
04/01/2000 - 03/31/2001 $4,286.63 per month (based on a rental
rate of $11.50 per rental square foot
per year)
INITIALED FOR IDENTIFICATION BY LANDLORD_____ AND TENANT BR
----------------
F-1
<PAGE>
04/01/2001 - 03/31/2002 $4,473.00 per month (based on a rental
rate of $12.00 per rental square foot
per year)
This declaration may be relied upon by any person having or acquiring an
interest in the Lease or the Building, without notice to or consent of
Landlord or Tenant.
LANDLORD:
BRAZOS AUSTIN CENTRE, LTD.
By:_________________________________
Printed Name:_______________________
Title:______________________________
Date:_______________________________
TENANT:
CITYSEARCH, INC.
By:_________________________________
Printed Name:_______________________
Title:______________________________
Date:_______________________________
INITIALED FOR IDENTIFICATION BY LANDLORD____________AND TENANT___________
F-2
<PAGE>
EXHIBIT G
---------
TO LEASE BETWEEN
BRAZOS AUSTIN CENTRE LTD., AS LANDLORD
AND CITYSEARCH INC., AS TENANT
CERTIFICATE OF THE SECRETARY
----------------------------
The undersigned, Secretary of CitySearch, Inc., a Delaware corporation (the
"Corporation"), hereby certifies that attached is a true and correct copy of the
resolutions duly adopted by unanimous consent dated 03/30/91, 1996, of all
directors of the Board of Directors of the Corporation and that the same have
not been amended, altered or rescinded and are now in full force and effect;
that the Corporation is duly organized and existing under the laws of the State
of Delaware; that all franchise and other taxes, if any, required to maintain
the corporate existence of the Corporation have been paid when due and that no
such taxes are delinquent that no proceedings are pending for the forfeiture of
the Certificate of Incorporation of the Corporation or for its dissolution,
voluntary or involuntary; that the Corporation is duly qualified to do business
in the State of Texas and is in good standing in such state; that there is no
provision of the Articles of Incorporation or Bylaws of the Corporation limiting
the powers of the Board of Directors to pass or consent to the resolutions set
out in the instrument attached hereto and that said resolutions are in
conformity with the provisions of said Articles of Incorporation and Bylaws; and
that the Secretary is the keeper of the records and minutes of the proceedings
of the Board of Directors of the Corporation.
This is to further certify that the persons named below are the duly
elected and qualified officers of the Corporation, holding the respective
offices set forth opposite their names, that they continue to hold these
offices at the present time, and that the respective signatures set opposite
their names are the genuine, original signatures of each respectively:
Name Title Signature
Charles Conn President /s/ Charles Conn
------------------ -----------------------
Bradley Ramberg Vice President /s/ Bradley Ramberg
------------------ -----------------------
Jeffrey Brewer Secretary /s/ Jeffrey Brewer
------------------ -----------------------
Thomas H. Layton Treasurer /s/ Thomas H. Layton
------------------ -----------------------
INITIALED FOR IDENTIFICATION BY LANDLORD______ AND TENANT BR
----------------
G-1
<PAGE>
IN WITNESS WHEREOF I have hereunto affixed my name as Secretary and have
caused the corporate seal of the Corporation to be hereto affixed this 3rd
day of August, 1996.
/s/ Jeffrey Brewer
---------------------------------
Secretary
The undersigned, Charles Comm, President of the Corporation, hereby
certifies that Jeffrey Brewer is the duly elected and qualified Secretary of the
Corporation, that the signature above is his (her) genuine signature, that
attached is a true and correct copy of the resolutions duly adopted by the Board
of Directors of the Corporation, which are now in full force and effect and that
the foregoing certificate is true and correct.
/s/ Charles Comm
---------------------------------
President
INITIAL FOR IDENTIFICATION BY LANDLORD____________AND TENANT ILLEGIBLE
---------
G-2
<PAGE>
RESOLUTIONS OF CORPORATE BOARD
------------------------------
RESOLVED: That CitySearch Inc. (this "Corporation") enter into the Austin Centre
Lease Agreement (the "Lease") dated August 15, 1996, with Brazos Austin Centre,
Ltd., a Texas corporation ("Landlord"), covering premises located on the 4th
floor of Austin Centre (the "Building").
FURTHER RESOLVED: That the Lease shall be in form and substance satisfactory to
Landlord and in form and substance approved by the officer of this Corporation
executing the same, his approval of each such instrument to be conclusively
evidenced by his execution thereof.
FURTHER RESOLVED: That the President or any Vice President of this Corporation
be and each hereby is severally authorized and directed for and on behalf, and
as the act and deed of this Corporation to execute and deliver to Landlord the
Lease and any addenda, amendments and supplements thereto, and to take such
other action in the consummation of the transaction herein contemplated as the
officer acting shall deem to be necessary or desirable, without the necessity of
attestation by the secretary or any other officer of this Corporation and with
or without the seal of this Corporation; any and all acts heretofore taken by
the President or any Vice President of this Corporation to such end are hereby
expressly ratified and confirmed as the acts and deeds of this Corporation.
INITIALED FOR IDENTIFICATION BY LANDLORD_____________AND TENANT ILLEGIBLE
---------
G-3
<PAGE>
EXHIBIT J
---------
TO LEASE BETWEEN
BRAZOS AUSTIN CENTRE, LTD., AS LANDLORD
AND CITYSEARCH, INC., AS TENANT
RIGHT OF FIRST REFUSAL
----------------------
1. Landlord hereby grants to Tenant a right of first refusal (the "Right
of First Refusal") exercisable as hereinafter set forth, covering the property
designated as Refusal Space on Exhibit A. All rights of Tenant to lease the
Refusal Space pursuant to the Right of First Refusal shall be applicable to the
entire Refusal Space or to any portion thereof which may become available from
time to time. The Right of First Refusal shall be as follows:
(a) Upon receipt of a bona fide offer for the lease of any
portion of the Refusal Space, which offer Landlord wishes to
accept, and provided Tenant is not at such time in default
under the Lease, Landlord shall give Tenant notice (the
"Notice") in writing of the terms and conditions of the
offer. Tenant may exercise the Right of First Refusal by
delivering to Landlord written notice of Tenant's election
on or before the tenth (10th) calendar day after the date of
Landlord's delivery to Tenant of the Notice. In the event
Tenant exercises its Right of First Refusal, it shall be
required to lease the Refusal Space on the same terms and
conditions provided in the Notice, subject to section (c)
below.
(b) In the event Landlord does not actually receive notice of
Tenant's election to lease the Refusal Space described in
the Notice within the period provided herein, then Landlord
shall be free to lease such space to one or more third
parties.
(c) All Refusal Space leased to Tenant pursuant to the Right of
First Refusal, shall at Landlord's option, be for a term
which is coterminous with the initial Term of this Lease and
any renewal or extension thereof.
(d) The term "Premises", as used in this Lease and/or the
Underlying Lease, shall include all expansions thereof that
may occur from time to time pursuant to this Right of First
Refusal.
(e) This Right of First Refusal shall terminate at the end of
the twelfth month following the Commencement Date.
INITIALED FOR IDENTIFICATION BY LANDLORD _____ AND TENANT [SIGNATURE ILLEGIBLE]
---------------------
<PAGE>
EXHIBIT L
---------
TO LEASE BETWEEN
BRAZOS AUSTIN CENTRE, LTD., AS LANDLORD
AND CITYSEARCH, INC., AS TENANT
MEMORANDUM OF LEASE
-------------------
THE STATE OF TEXAS (S)
(S) KNOW ALL MEN BY THESE PRESENTS THAT:
COUNTY OF TRAVIS (S)
This Memorandum of Lease is executed in connection with that certain Austin
Centre Lease Agreement (the "Lease") between Brazos Austin Centre, Ltd., a
Texas corporation ("Landlord") and CitySearch, Inc., a Delaware corporation
("Tenant") dated August 15, 1996, relating to the real property (the "Land")
situated on Travis County, Texas, described in Exhibit "B" attached hereto and
-----------
made a part hereof for all purposes, which land has a street address of 701
Brazos Street, Austin, Travis County, Texas.
Landlord has leased to Tenant, and Tenant has leased from Landlord for the
rent and subject to the provisions of the Lease, certain space described in the
Lease located on floor four (4) of the building known as Austin Centre as more
particularly described on Exhibit "A" hereto.
----------
The initial term of the Lease commences on ___________ and expires on
March 31, 2002.
This Memorandum of Lease is executed for purposes of giving public notice
of the matter contained herein, and shall not operate to add to, reduce, or
change any of the substantive rights of any of the parties to the Lease.
LANDLORD:
BRAZOS AUSTIN CENTRE LTD.
By:________________________________
Printed Name:______________________
Title:_____________________________
Date:______________________________
TENANT:
CITYSEARCH, INC.
By: /s/ Bradley Ramberg
--------------------------------
Printed Name: Bradley Ramberg
----------------------
Title: CFO
-----------------------------
Date: 9/12/96
------------------------------
INITIALED FOR IDENTIFICATION BY LANDLORD______ AND TENANT [SIGNATURE ILLEGIBLE]
---------------------
L-1
<PAGE>
THE STATE OF TEXAS (S)
(S)
COUNTY OF TRAVIS (S)
THIS INSTRUMENT was acknowledged before me on ________________________,
1996, by _________________ ,__________________ of Brazos Austin Centre Ltd., a
Texas corporation, on behalf of said corporation.
__________________________________
Notary Public in and for
The State of Texas
__________________________________
Typed or Printed Name of Notary
My Commission Expires:____________
THE STATE OF CALIFORNIA (S)
(S)
COUNTY OF LOS ANGELES (S)
THIS INSTRUMENT was acknowledged before me on Sept 12, 1996, by Bradley
Ramberg, CFO of CitySearch Search, Inc., a Delaware corporation on behalf of
said corporation.
[STAMP APPEARS HERE] [SIGNATURE ILLEGIBLE]
---------------------------------------
NotarY Public in and for
The State of California
Kevin Asaturian
---------------------------------------
Typed or Printed Name of Notary
My Commission Expires: Jan 15, 2000
INITIALED FOR IDENTIFICATION BY LANDLORD___________ AND TENANT_________
L-2
<PAGE>
EXHIBIT M
---------
TO LEASE BETWEEN
BRAZOS AUSTIN CENTRE LTD., AS LANDLORD
AND CITYSEARCH, INC., AS TENANT
LIMITED RIGHT OF TERMINATION
----------------------------
Notwithstanding anything to the contrary contained in the Lease. Tenant
shall have the limited right to change the Expiration Date of the Lease to March
15, 2000. Tenant may do so if, and only, if, (i) Tenant delivers written notice
of the new Expiration Date to Landlord no later than September 15, 1999, (ii)
Tenant is not then in default under the Lease, and (iii) Tenant pays to
Landlord at the time notice is given the sum of the following amounts:
(a) the full amount of the unamortized portion of the Tenant improvement
costs incurred by Landlord and the real estate commission paid by Landlord
to the Broker;
(b) one half (1/2) of the full rental abatement given to Tenant in Section
3.01 of the Lease: and
(c) the sum of $1,000.00 to cover after hours utility charges.
For purposes of calculating the unamortized portion of the improvement
costs and Broker's commission, such expenses shall be deemed to be amortizing on
a straight line basis over the unmodified lease term.
INITIALED FOR IDENTIFICATION BY LANDLORD___________ AND TENANT [SIGNATURE
----------
ILLEGIBLE
- ---------
<PAGE>
[LOGO OF CONSTRUCTIONS CONSTRUCTIONS & ASSOCIATES, INC
& ASSOCIATES, INC Date: 29-Jul-98
APPEARS HERE] FOR: CITY SEARCH
SUITE 440 4,473 SF
701 BRAZOS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
COSTS PERCENT
SUMMARY OF REMODEL COSTS TOTALS /SF OF TOTALS
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
DEMOLITION/CONC CUT & FOUR SACK $ 1,025 $ 0.13 1%
MILLY/CRK $ 1,500 $ 0.34 2%
DOORS/FRAMES/HARDWARE $ 9,329 $ 2.09 13%
GLASS AND GLAZING $ 910 $ 0.21 1%
DRYWALL/ACCUSTICAL $10,850 $ 2.43 15%
FLOORING $ 7,290 $ 1.63 10%
PAINT $ 5,554 $ 1.24 8%
SIGNAGE (ALLOWANCE) N/A $ 0.00 0%
FOOD SERVICE EQUIPMENT $ 675 $ 0.15 1%
METAL SHELVING $ 395 $ 0.09 1%
FIRE PROTECTION $ 2.185 $ 0.48 3%
PLUMBING $ 3,344 $ 0.76 5%
HVAC $ 8,871 $ 1.49 9%
ELECTRICAL $12,524 $ 2.80 18%
--------------------------------------------
SUBTOTAL $62,241 $13.91 87%
GENERAL CONDITIONS $ 5,550 $ 1.24 8%
--------------------------------------------
SUBTOTAL $87,791 $15.16 95%
OVERHEAD AND PROFIT 5.00% $ 3,390 $ 0.76 5%
--------------------------------------------
SUBTOTAL $71,187 $15.81 100%
STATE REMODEL TAX 5.25% N/A $ 0.00 0%
--------------------------------------------
N/A SHELL SPACE SUBTOTAL $71,181 $15.81 100%
-----------------------------------------------------------------------------------------
TOTAL PROJECT COST $71,181 $15.81 100%
-----------------------------------------------------------------------------------------
QUALIFICATIONS:
-----------------------------------------------------------------------------------------
1. POWER TO LOW WALLS BY POLE TO PLENUM SPACE.
2. OWNER TO REMOVE EXISTING BUILDING STOCK IN
SPACE.
3. WE ASSUME AVAILABLE SPACE IN EXISTING
ELECTRICAL PANEL NO NEW PANEL BE NECESSARY.
UTAH
SAN ANTONIO
HOUSTON
DALLAS
FORT WORTH
DENVER
NEW YORK
BOSTON
WASHINGTON
LONDON
</TABLE>
<PAGE>
[LOGO OF CITYSEARCH
APPEARS HERE]
VIA FEDERAL EXPRESS
AUGUST 20, 1996
Mr. Casey Beasley
OMNI Commercial Realty Advisors
823 Congress Avenue, Suite 111
Austin, TX 78701
Dear Casey:
I am enclosing two copies of the Austin Centre Lease Agreement by and
between Brazos Austin Centre, Ltd. and CitySearch Inc. both of which have
been executed by us. As we discussed, we are holding onto Exhibits G and
L. As soon as all of our Board members are in town, we will return
Exhibit G. I will return Exhibit L next week. I am also enclosing three
copies of the approved space plan. Please return one fully executed lease
and space plan to me.
If you have questions, please call me at (818) 542-3862.
Sincerely,
/s/ Bradley Ramberg
Bradley Ramberg
Chief Financial Officer
BR/pc
Enclosures
<PAGE>
EXHIBIT 10.17
LEASE
OFFICE BUILDING
PARTIES
THIS LEASE made this 10th day of September 1996 between Judge Building
Group Lessor, and City Search, Inc., as Lessee.
WITNESSETH:
PREMISES
Lessor does hereby lease to Lessee and Lessee hereby hires from Lessor
those certain premises (hereinafter called "premises") consisting
ofapproximately 4,645 rentable square feet, said premises being situated on the
third floor of building, located at Judge Building, Suite 300 Salt Lake City,
Utah 84111.
Said letting and hiring is upon and subject to the terms, covenants and
conditions herein set forth and the Lessee covenants as a material part of the
consideration for this Lease to keep and perform each and all of said terms,
covenants and conditions by it to be kept and performed and that this Lease is
made upon the conditions of such performance.
1. PURPOSE. The premises are to be used for the conduct of general offices and
such other uses as are compatible or necessary thereto and for no other purpose
without the written consent of Lessor.
TERM AND POSSESSION. The term of this Lease shall commence on the date that
possession is provided to Lessee which shall be on or before See Addendum A,
and the term shall expire at midnight following the expiration of 5 years from
the commencement date.
If the Lessor, for any reason whatsoever, cannot deliver possession of the
said premises to Lessee at the commencement of the term hereof, this Lease shall
not be void or voidable, nor shall Lessor be liable to Lessee for any loss or
damage resulting therefrom, but in that event all rent shall be abated during
the period between the commencement of the said term and the time when Lessor
delivers possession.
3. RENT. Lessee shall pay as base annual rent on the leased premises during
the term hereof the amount set forth on the schedule below, with one-twelfth
(1/12) of said amount to be paid each month. On the commencement date, Lessee
shall pay in advance the rent attributable to the calendar or fractional
calendar month with which the term of this Lease begins (if prorated) together
with the rent attributable to the first full calendar month. Lessee shall pay in
advance one-twelfth of the annual rent specified in this Section 3. Each rental
payment or other sum required to be paid by Lessee under this Lease shall be
delivered to Lessor at Judge Building Group, C/O D.M. Properties, Inc., 2180 E.
4500 So. #110 Accounting Office SLC, UT 84117 or to such other address as
Lessor may hereafter designate in a written notice given to Lessee. Any
installment of rent, other sum, or any portion of such installment or sum
required under this Lease to be paid by Lessee which has not been paid within
ten (10) days after the due date thereof shall, whether or not demand therefore
is made or notice of default is given, bear interest at the rate of twelve
percent (12%) per annum from the due date thereof until paid in full. In
addition thereto, Lessor may charge a sum equal to five percent (5%) of each
unpaid amount as a service fee to compensate Lessor for the additional time and
expense necessitated in the handling of delinquent payments.
The rental schedule for base rent is as follows:
<TABLE>
<S> <C> <C>
Year #1 $ 61,546.25 per year payable at the rate of
----------
$ 5,128.85 on or before the first day of each month.
----------
Year #2 $ 64,623.56 per year payable at the rate of
----------
$ 5,385,29 on or before the first day of each month.
----------
Year #3 $ 67,854.74 per year payable at the rate of
----------
$ 5,654 56 on or before the first day of each month.
----------
Year #4 $ 71,247.47 per year payable at the rate of
----------
$ 5,937.28 on or before the first day of each month.
----------
Year #5 $ 74,809.84 per year payable at the rate of
----------
$ 6,234.15 on or before the first day of each month.
----------
</TABLE>
4. RENTAL ADJUSTMENTS FOR BUILDING OPERATING EXPENSES. Lessee agrees to pay as
additional rent for the premises an amount equal to Lessee's proportionate share
of the increase in Operating Expenses (as hereinafter defined) in connection
with the premises, the office building, and the common areas (hereinafter
collectively referred to as the "Property"), which in the aggregate are
in excess of $ 1996 Base Year ("Base Operating Expenses") per annum.
-------------------
Operating Expenses
As used herein, the term "Operating Expenses" shall include (but not be
limited to) the following costs of operation and maintenance: Real property
taxes and assessments; rent taxes (if applicable); water and sewer charges;
insurance premiums; utilities; supply and materials costs; license and permit
fees; costs incurred in the management of the Property, including professional
management fees; costs for services of independent contractors, and costs of
employee compensation (including salaries, employment taxes and fringe benefits)
connected with the day-to-day operation, repair, and maintenance of the
Property, including without limitation, janitorial service, gardening, security,
parking, elevator, painting, plumbing, electrical, carpentry, heating,
ventilation, air conditioning, window washing, parking and grounds maintenance,
snow removal, and refuse service. Operating expenses shall not include
depreciation on the building on which the premises are a part or equipment
therein, loan payments, or brokerage commissions.
Leasee's proportionate share of any increase in Operating Expenses is
5.75%. This percentage is that portion of the total gross rentable area of the
building occupied by the Lessee hereunder.
Lessor shall give to Lessee on or before the first day of April of each
year following the year in which the Lease commences a statement of the increase
in rent payable by Lessee hereunder (both on an annual basis and on a monthly
installment basis), but failure
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<PAGE>
14
No Lessee shall lay linoleum, tile, carpet or other similar floor covering
so that the same shall be affixed to the floor of the premises in any manner
except as approved by the Lessor. The expense of repairing any damage resulting
from a violation of this rule or removal of any floor covering shall be borne
by the Lessee by whom, or by whose contractors, employees or invitees, the
damage shall have been caused.
15
No furniture, packages, supplies, equipment or merchandise will be received
in the building or carried up or down in the elevators, except between such
hours and in such elevators as shall be designated by Lessor.
16
On Saturdays, Sundays and legal holidays, and on other days between the
hours of 6:00 P.M. and 8:00 A.M. the following day, access to the building, or
to the halls, corridors, elevators or stairways in the building, or to the
premises may be refused unless the person seeking access is known to the person
or employee of the building in charge and has a pass or is properly identified.
The Lessor shall in no case be liable for damages for any error with regard to
the admission to or exclusion from the building of any person. In case of
invasion, mob, riot, public excitement, or other commotion, the Lessor reserves
the right to prevent access to the building during the continuance of the same
by closing the doors or otherwise, for the safety of the Lessees and protection
of property in the building and the building.
17
Lessee shall see that the doors of the premises are closed and securely
locked before leaving the building and must observe strict care and caution that
all water faucets or water apparatus are entirely shut off, so as to prevent
waste or damage, and for any default of carelessness Lessee shall make good all
injuries sustained by other tenants or occupants of the building of Lessor.
18
Lessor reserves the right to exclude or expel from the building any person
who, in the judgment of Lessor, is intoxicated or under the influence of liquor
or drugs, or who shall in any manner do any act in violation of any of the rules
and regulations of the building.
19
The requirements of Lessee will be attended to only upon application at the
Office of the Building. Employees of Lessor shall not perform any work or do
anything outside of their regular duties unless under special instructions from
the Lessor, and no employee will admit any person (Lessee or otherwise) to any
office without specific instructions from the Lessor.
20
No vending machine or machines of any description or kind may be maintained
or operated upon the premises without the written consent of Lessor.
21
Lessor shall have the right, exercisable without notice and without
liability to Lessee, to change the name and the street address of the building
of which the premises are a part.
22
Lessee shall not disturb, solicit, or canvass any occupant of the building
and shall cooperate to prevent same.
23
Without the written consent of Lessor, Lessee shall not use the name of the
building in connection with or in promoting or advertising the business of
Lessee except as Lessee's address.
24
The word "building" as used herein means the building of which the premises
are a part.
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<PAGE>
Lessor to give such Statement by said date shall not constitute a waiver
by Lessor of its right to require an increase in rent, so long as such notice is
given not later than December 31 of the year in question. Upon receipt of said
Statement, Lessee shall pay in full, within fifteen (15) days thereafter.
Lessee's share of the total amount of the increase due (based upon the number of
months the Lease was in effect during the prior year), and in addition for the
then current year Lessee shall pay the Lessor an amount equal to one monthly
installment multiplied by the number of months from January in the calendar
year in which the Statement is rendered to the month of such payment, both
months inclusive. Subsequent monthly installments shall be payable concurrently
with the regular monthly rent payments for the balance of that calendar year,
and shall continue until the next comparison year's Statement is rendered. If
the next or any succeeding comparison year results in a greater increase in
Operating Expenses, then upon receipt of the Statement from Lessor, Lessee shall
pay a lump sum equal to Leasee's share of such total increase in Operating
Expenses less the total of the monthly installments of estimated increase paid
in the previous calendar year for which comparison is then being made; and the
estimated monthly installments to be paid for the next year following said
comparison year shall be adjusted to reflect such increase. If in any comparison
year the Leasee's share of Operating Expenses are less than the preceeding year,
then upon receipt of Lessor's Statement, any overpayment made by Lessee on the
monthly installment basis provided above shall be credited towards the next
monthly rent following due and the estimated monthly installments of Operating
Expenses to be paid shall be adjusted to reflect such lower Operating Expenses
for the most recent comparison year.
By way of example and illustration of the above provisions, the following
hypothetical Lease is assumed:
(a) Leasee's base monthly rent is $1,000; (b) Leasee's Lease commenced on
July 1 of the prior year; (c) Lessee's portion of the increase in Operating
Expenses for the comparison year is $360, or $30 per month; and (d) the
Statement is delivered to Lessee on March 1 of the current calendar year.
Under the above facts, Lessee would be required to pay to Lessor upon
receipt of the Statement the sum of $240, representing the monthly increase
attributable to the last six months of the year in which the Lease commenced and
the first two months of the current calendar year, and commencing March of the
current calendar year, Leasee's total monthly rent would be increased to $1,030.
Lessor agrees to maintain records concerning the cost of Operating Expenses
for all comparison years for a period not less than 150 days after the date
Lessor delivers to Lessee the Statement setting forth the previous year's
cost increase. Lessee shall have the right to inspect and copy such records.
If the Lease term has expired and Lessee has vacated the premises, when
the final determination is made of Lessee's share of Operating Expense increases
for the year in which this Lease terminates, Lessee shall immediately pay any
increase due over the estimated expenses paid, and conversely, any overpayment
made in the event said expense is decreased shall be immediately rebated by
Lessor to Lessee.
USES PROHIBITED. Lessee shall not do or permit anything to be done in or
about the premises nor being or keep anything herein which will in any way
increase the existing rate of or affect any fire or other insurance upon the
building or any of its contents, or cause a cancellation of any insurance policy
covering said building or any part thereof or any of its contents. Lessee shall
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, immoral, unlawful or objectionable purpose, nor shall Lessee cause,
maintain or permit any nuisance in, on or about the premises. Lessee shall not
commit or suffer to be committed any waste in or upon the premises.
6. COMPLIANCE WITH LAW. Lessee 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. Lessee 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 Leasee's improvements or acts. The judgment of any court of
competent jurisdiction or the admission of Lessee in any action against Lessee,
whether Lessor be a party thereto or not, that Lessee has violated any law,
statute, ordinance or governmental rule, regulation or requirement, shall be
conclusive of that fact as between Lessor and Lessee.
7. ALTERATIONS. As of the date Lessor delivers the premises to Tenant and
continuing thereafter until the original term expires, Lessee shall have the
right to make non-structural alterations, additions and improvements to the
premises, including, but not limited to, the installation of partitions,
carpeting, light fixtures, window hangings, wall hangings, furnitures, and trade
fixtures (the "Improvements"); provided, in no event shall Lessee make such
alterations or improvements without first obtaining Lessor's prior approval of
the proposed improvement, which consent shall not be unreasonably withheld.
Lessee may contract with a third party or Lessor for the construction of such
improvements; provided, Lessor shall have the right to approve any such third
party contractor, which approval shall not be unreasonably withheld.
Upon the expiration or termination of the Lease, Lessee, upon Lessor's
demand, shall at its cost remove any improvements to the premises which are
designated by Lessor to be removed and Lessee shall forthwith and with all due
diligence and at its sole cost and expense, repair any damage to the premises
caused by such removal. Upon the expiration or termination of the Lease, Lessee
shall have the right to remove all improvements owned by it which are not
attached or affixed to the premises.
8. REPAIRS AND DAMAGES. By entry hereunder Lessee accepts the premises as
being in good, sanitary order, condition and repair. Lessee hereby waives all
rights to make repairs at the expense of Lessor as provided by any law, statute
or ordinance now or hereafter in effect. Lessee shall, upon the expiration or
sooner termination of the term hereof, surrender the premises to Lessor in the
same condition as when received, ordinary wear and tear and damage by fire,
earthquake, act of God or the elements excepted. It is specifically understood
and agreed that Lessor has no obligation and has made no promises to any part
thereof and that no representations respecting the condition of the premises or
the building of which the premises are a part have been made by Lessor to Lessee
except as specifically herein set forth.
9. ABANDONMENT. Lessee shall not vacate or abandon the premises at any time
during the term, and if Lessee shall abandon, vacate or surrender said premises,
or be dispossessed by process of law, or otherwise, any personal property
belonging to Lessee and left on the premises shall be deemed to be abandoned.
10. LIENS. Lessee shall keep the premises and the property in which the
premises are situated free from any liens arising out or any work performed,
materials furnished or obligations incurred by Lessee.
11. ASSIGNMENT AND SUBLETTING. Lessee shall not assign, transfer, mortgage,
pledge, hypothecate or encumber this Lease, or any interest therein, and shall
not sublet the said premises or any part thereof, or any right or privilege
appurtenant thereto, or suffer any other person (the agents and servants of
Lessee excepted) to occupy or use the said premises, or any portion thereof,
without the written consent of Lessor first had and obtained, which consent
shall not be unreasonably withheld, and a consent to one assignment, subletting,
occupation or use by another person. Any such assignment or subletting without
such consent shall be void, and shall at the option of Lessor, terminate this
Lease. Any sublease or assignment agreed to by Lessor shall in no way relieve
Lessee of responsibility of making rent payments to Lessor in the event of a
default by the assignee or "sub-lessee" in making their rent payments for the
terms of the original lease or any extensions thereof. This Lease shall not, nor
shall any interest therein, be assignable as to the interest of Lessee by
operation of law, without the written consent of Lessor.
12. INDEMNIFICATION OF LESSOR. Lessor shall not be liable to Lessee, and
Lessee hereby waives all claims against Lessor, for any injury or damage to any
person or property in or about the premises by or from any cause whatsoever,
and, without limiting the generality of the foregoing, whether caused by water
leakage of any character from the roof, walls, basement or other portion of the
premises or the building, or caused by gas, fire, oil, electricity or any cause
whatsoever in, on or about the premises of the building or any part thereof,
Lessee shall hold Lessor harmless from any and all claims or liability from
injury or damage to any person or property whatsoever: (1) occurring in or about
the premises or any part thereof and (2) occurring in or about any facilities
without
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<PAGE>
prejudice to the generality of the term "facilities," elevators, stairways,
passageways, hallways and parking areas, the use of which Lessee may have in
conjunction with other tenants of the building, 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 Lessee, its agents, servants, employees or
invitees.
13. INSURANCE. Lessee agrees during the term hereof to carry public liability
insurance covering the premises in an amount of not less than Two Hundred Fifty
Thousand Dollars ($250,000.00)for injury and/or death to any one person and Five
Hundred Thousand Dollars ($500,000.00) for injury and/or death to any number of
persons in any one accident, and property damage insurance in an amount of One
Hundred Thousand Dollars($100,000.00) in companies satisfactory to Lessor in the
name of Lessee (with Lessor named as an additional insured), to pay the premiums
therefor and to deliver said policies or certificates thereof to Lessor, and the
failure of Lessee either to effect said insurance in the names herein called
for, or to permit Lessor to procure said insurance, or to pay the requisite
premiums therefor or to deliver said policies or certificates or duplicates
thereof to Lessor, shall permit Lessor to procure said insurance and pay the
requisite premiums therefor, which premiums shall be repayable to Lessor with
the next installment of rent. Each insurer under the policies required hereunder
shall agree by endorsement on the policy issued by it or by independent
instrument furnished to Lessor that it will give Lessor no fewer than ten (10)
days written notice before the policy or policies in question shall be altered
or cancelled.
14. SERVICES AND UTILITIES. Lessor agrees to furnish to the premises during
reasonable hours of generally recognized business days, to be determined by
Lessor, and subject to the rules and regulations of the building of which the
premises are a part, water and electricity suitable for the intended use of the
premises, heat and air conditioning necessary for the comfortable use and
occupation of the premises, and janitorial service. Lessor shall also maintain
and keep lighted the common stairs, entries and toilet rooms in the building of
which the demised premises are a part. Lessee shall not be entitled to any
abatement or reduction of rental by reason of Lessor's failure to furnish any of
the foregoing when such failure is caused by accidents, breakage, repairs,
strikes, lockouts of other labor disturbances or labor disputes of any
character, or by any other similar cause, beyond the reasonable control of
Lessor; provided, should Lessor fail to furnish such services for a continuous
period of time in excess of ten (10) days unless the result of causes beyond
Lessor's reasonable control, Lessee shall, as of the eleventh (11th) day have
the right to reduce its rental by reason of such failure to supply services.
Wherever heat generating machines or equipment are used in the premises which
affect the temperature otherwise maintained by the air conditioning system.
Lessor 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 Lessee to Lessor upon
demand by Lessor.
Lessee will not, without the written consent of Lessor, use any apparatus
or device in the premises, including but without limitation thereto, computers,
electronic data processing machines, punch card machines and machines using
current in excess of 110 volts, which 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, any apparatus or device, for
the purposes of using electric current or water. If Lessee shall require water
or electric current in excess of that usually furnished or supplied for use of
the premises as general office space, Lessee shall first procure the consent of
Lessor, which Lessor may refuse, to the use thereof and Leasee may cause a water
meter or electric current meter to be installed in the premises, so as to
measure the amount of water and electric current consumed for any such use. The
cost of any such meters and installation, maintenance and repair thereof shall
be paid for by Lessee and Lessee agrees to pay to Lessor promptly upon demand
therefor by Lessor for all such water and electric current consumed as shown by
said meters, at the rates charged for such services by the local public utility
furnishing the same, plus any additional expenses incurred in keeping account of
the water and electric current so consumed.
15. PERSONAL PROPERTY TAXES. Lessee agrees to 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 equipment, furniture, fixtures and other
personal property located in the premises; except that which may be owned by
Lessor.
16. RULES AND REGULATIONS. Lessee shall faithfully observe and comply with the
rules and regulations printed as Exhibit "A" to this Lease and all reasonable
modifications of and additions thereto from time to time put into effect by
Lessor, provided that in such event Lessor shall give notice thereof to Lessee.
Lessor shall not be responsible to Lessee for the non-performance by any other
tenant or occupant of the building of any of said rules and regulations.
17. HOLDING OVER. If, with Lessor's consent, Lessee holds possession of the
premises after the term of this Lease, Lessee shall become a tenant from month
to month upon the terms herein specified but at a monthly rental equivalent to
the then prevailing rental paid by Lessee at the expiration of the term of this
Lease pursuant to all of the provisions of Paragraphs 4 and 5 hereof payable in
advance on or upon the first day of each month, and Lessee shall continue in
possession until such tenancy shall be terminated by Lessor, or until Lessee
shall have given to Lessor a written notice at least one month prior to the date
of termination of such monthly tenancy of his intention to terminate such
tenancy.
18. ENTRY BY LESSOR. Lessor reserves and shall at any and all times have the
right to enter the premises to inspect the same, to supply janitorial service
and any other service to be provided by Lessor to Lessee hereunder, and submit
said premises to prospective purchasers 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 scaffolding and other necessary structures where
reasonably required by the character of the work to be performed, always
providing the entrance to the premises shall not be blocked thereby, and further
providing that the business of Lessee shall not be interfered with unreasonably.
Lessee hereby waives any claim for damages for any injury or inconvenience to or
interference with Lessee's business, any loss of occupancy or quiet enjoyment of
the premises, and any other loss occasioned thereby. For each of the aforesaid
purposes, Lessor shall at all times have and retain a key with which to unlock
all of the doors in, upon and about the premises, excluding Lessee's vaults and
safes, and Lessor shall have the right to use any and all means which Lessor may
deem proper to open said doors in an emergency, in order to obtain entry to the
premises, and any entry to the premises obtained by Lessor by any of said 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
of Lessee from the premises or any portion thereof.
19. DEFAULT. The occurrence of any of the following shall constitute a material
default and breach of this Lease by Lessee:
(i) Any failure by Lessee to pay the rental or to make any other
payments required to be made by Lessee hereunder (where such failure continues
for ten [10] days after written notice thereof by Lessor to Lessee).
(ii) The abandonment or vacation of the premises by Lessee.
(iii) A failure by Lessee to observe and perform any other provision
of this Lease to be observed or performed by Lessee, where such failure
continues for thirty (30) days after written notice thereof by Lessor to Lessee;
provided, however, that if the nature of such default is such that the same
cannot reasonably be cured within such thirty day period Lessee shall not be
deemed to be in default of Lessee shall within such period commence such cure
and thereafter diligently prosecute the same to completion.
(iv) The making by Lessee of any general assignment for the benefit
of creditors; the filing by or against Lessee of a petition to have Lessee
adjudged a bankrupt or of a petition for reorganization or arrangement under any
law relating to bankruptcy (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days): the appointment of a
trustee or receiver to take possession of substantially all of Lessee's assets
located at the premises or of Lessee's interest in this Lease, including an
attempted assumption of this Lease by the Trustee under Section 70B of the
Bankruptcy Act, where possession is not restored to Lessee within thirty (30)
days; or the attachment, execution or other judicial seizure of substantially
all of Lessee's assets located at the premises or of Lessee's interest in this
Lease, where such seizure is not discharged within thirty (30) days.
In the event of any such default by Lessee, then in addition to any other
remedies available to Lessor at law or in equity, Lessor shall have the
immediate option to terminate this Lease and all rights of Lessee hereunder by
giving written notice of such intention to terminate. In the event that Lessor
shall elect to so terminate this Lease then Lessor may recover from Lessee:
(i) The worth at the time of award of any unpaid rent which had been
earned at the time of such termination; plus
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<PAGE>
(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 Lessee 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 Lessee proves could be reasonably avoided; plus
(iv) Any other amount necessary to compensate Lessor for all the
detriment proximately caused by Lessee's failure to perform his obligation under
this Lease or which in the ordinary course of things would be likely to result
therefrom, and
(v) At Lessor's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by applicable law.
The term "rent," as used herein, shall be deemed to be and to mean the
rental, rental adjustment payments and all other sums required to be paid by
Lessee pursuant to the term of this Lease.
As used in subparagraphs (i) and (ii) above, the "worth at the time of
award" is computed by allowing interest at the rate of ten percent (10%) per
annum. As used in paragraph (iii) above, the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank at the time of award plus one percent (1%).
In the event of any such default by Lessee, Lessor shall also have the
right, with or without terminating this Lease, re-enter the premises and remove
all persons and property from the premises; such property may be removed and
stored in a public warehouse or elsewhere at the cost of and for the account of
Lessee.
In the event of the vacation or abandonment of the premises by Lessee or in
the event that Lessor shall elect to reenter as provided above or shall take
possession of the premises pursuant to legal proceeding or pursuant to any
notice provided by law, then if Lessor does not elect to terminate this Lease as
provided above, then Lessor may from time to time, without terminating this
Lease, either recover all rental as it becomes due or relet the premises or any
part thereof for such term or terms and conditions as Lessor in its sole
discretion may deem advisable with the right to make alterations and repairs to
the premises.
In the event that Lessor shall elect to so relet, then rentals received by
Lessor from such reletting shall be applied; first, to the payment of any
indebtedness other than rent due hereunder from Lessee to Lessor; second, to the
payment of any cost of such reletting; third, to the payment of the cost of any
alteration and repairs to the premises; fourth, to the payment of rent due and
unpaid hereunder; and the residue, if any, shall be held by Lessor and applied
in payment of future rent as the same may become due and payable hereunder.
Should that portion of such rentals received from such reletting during any
month which is applied by the payment of rent hereunder, be less than the rent
payable during that month by Lessee hereunder, then Lessee shall pay such
deficiency to Lessor immediately upon demand therefor by Lessor. Such deficiency
shall be calculated and paid monthly. Lessee shall also pay to Lessor, as soon
as ascertained, any costs and expenses incurred by Lessor in such reletting or
in making such alterations and repairs not covered by the rentals received
from such reletting.
No re-entry or taking possession of the premises by Lessor pursuant to this
Paragraph 19 shall be construed as an election to terminate this Lease unless a
written notice of such intention be given to Lessee or unless the termination
thereof be decreed by a court of competent jurisdiction. Notwithstanding any
reletting without termination by Lessor because of any default by Lessee, Lessor
may at any time after such reletting elect to terminate this Lease for any such
default.
20. RECONSTRUCTION. In the event the premises or the building of which the
premises are a part are damaged by fire or other perils covered by extended
coverage insurance, Lessor agrees to forthwith repair the same; and this Lease
shall remain in full force and effect, unless otherwise terminated in accordance
with this Article, except that Lessee shall be entitled, to a proportionate
reduction of rent while such repairs are being made, such proportionate
reduction to be based upon the extent to which the making of such repairs shall
interfere with the business carried on by Lessee in the premises. Provided,
however, if the damage or destruction renders the premises or the common areas
of the building providing access to the premises unusable, Lessee may terminate
this Lease effective as of the date of the damage and destruction by giving
notice thereof in writing to Lessor unless Lessor shall, after receipt of the
notice, immediately take all necessary emergency action so that the premises can
be utilized for Leasee's normal business use with a minimum of disruption and
thereafter Lessor, within seven (7) days of the date Leasee's notice is given
commences removal of the debris and the restoration of the premises. If
notwithstanding such damage or destruction the building in which the premises is
located remains open for business with the public, Lessor's restoration and
repair shall be completed as soon as reasonably feasible and in no event later
than one-hundred twenty (120) days after such damage and destruction. If the
premises and/or the building are so damaged or destroyed that it will not be
open to the public or usable by Lessee for a period in excess of one hundred
twenty (120) days, Lessee shall have the right to terminate this Lease by giving
Lessor written notice thereof, said notice to be effective as of the date it is
given.
In the event the destruction of the premises or of the building is to an
extent greater than twenty-five percent (25%) of the then full replacement
value, then Lessor shall have the option either: (1) to repair or restore such
damage, this Lease continuing in full force and effect; provided, Lessee has not
terminated this Lease in accordance with the provisions of this Article, but the
rent to be proportionately reduced as provided above in this paragraph; or (2)
give notice to Lessee at any time within thirty (30) days after such damage,
terminating this Lease as of the date of such notice. In the event of giving of
such notice, this Lease shall expire and all interest to the Lessee in the
premises shall terminate on the date so specified in such notice and the rent,
reduced by any proportionate reduction, based upon the extent, if any, to which
such damage interfered with the business carried on by Lessee in the premises,
shall be paid up to date of such termination.
Notwithstanding anything to the contrary contained in this Paragraph,
Lessor 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 twelve (12) months of the term of this
Lease or any extension thereof.
Lessor shall not be required to repair any injury or damage by fire or
other cause, or to make any repairs or replacement of any panels, decoration,
office fixtures, railing, ceiling, floor covering partitions, or any other
property installed in the premises by Lessee.
21. EMINENT DOMAIN. If all or any part 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, to terminate
this Lease, and Lessor shall be entitled to any and all income, rent, award, or
any interest therein whatsoever which may be paid or made in connection with
such public or quasi-public use or purpose, and Lessee shall have no claim
against Lessor for the value of any unexpired term of this Lease. If a part of
the premises shall be so taken or appropriated and neither party hereto shall
elect to terminate this Lease, the rental thereafter to be paid shall be
equitably reduced. Before Lessee may terminate this lease by reason of taking
or appropriation as above provided, such taking or appropriation shall be of
such an extent and nature as to substantially handicap, impede or impair
Lessee's use of the premises for a period in excess of sixty (60) days. If any
part of the building other than the premises shall be so taken or appropriated,
Lessor shall have the right, at its option, to terminate this Lease and shall be
entitled to the entire award, as above provided.
22. PLATS AND RIDERS. Clauses, plats and riders, if any, signed or initialed by
Lessor and Lessee and endorsed on or affixed to this Lease are a part hereof.
23. SALE BY LESSOR. In the event of a sale or conveyance by Lessor of the
building containing the premises, the same shall operate to release Lessor from
any future liability upon any of the covenants or conditions, express or
implied, herein contained in favor of Lessee, and in such event Lessee agrees to
look solely to the responsibility of the successor in interest of Lessor in and
to this Lease. This Lease shall not be affected by any such sale, and Lessee
agrees to attorn to the purchaser or assignee.
24. 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 such
amount as the Court may adjudge reasonable as attorneys' fees.
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<PAGE>
EXHIBIT "A"
RULES AND REGULATIONS ATTACHED TO
AND MADE A PART OF THIS LEASE
1
No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside or
inside of the building without the written consent of Lessor first having been
obtained and Lessor shall have the right to remove any such sign, placard,
picture, advertisement, name or notice without notice to and at the expense of
Lessee.
All approved signs or lettering on doors shall be printed, painted, affixed
or inscribed at the expense of Lessee by a person approved of by Lessor.
Lessor shall not place anything or allow anything to be placed near the
glass of any window, door, partition or wall which may appear unsightly from
outside the premises; provided, however, the Lessor is to furnish and install a
building standard drapery or blinds at all exterior windows.
2
The bulletin board or directory of the building will be provided
exclusively for the display of the name and location of Lessee only and Lessor
reserves the right to exclude any other name therefrom.
3
The sidewalks, halls, passages, exits, entrances, elevators and stairways
shall not be obstructed by any of the Lessees or used by them for any purpose
other than for ingress to and egress from their respective premises. The halls,
passages, exits, entrances, elevators, stairways, balconies and roof are not for
the use of the general public and the Lessor shall in all cases retain the right
to control and prevent access thereto by all persons whose presence in the
judgment of the Lessor shall be prejudicial to the safety, character, reputation
and interests of the building and its Lessees, provided that nothing herein
contained shall be construed to prevent such access to persons with whom the
Lessee normally deals in the ordinary course of Lessee's business unless such
persons are engaged in illegal activities. No Lessee and no employees or
invitees of any Lessee shall go upon the roof of the building.
4
Lessee shall not alter any lock or install any new or additional locks or
any bolts on any door of the premises.
5
The toilet rooms, 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 Lessee who, or whose employees or invitees shall have
caused it.
6
Lessee shall not overload the floor of the premises or mark, drive nail,
screw or drill into the partitions, woodwork or plaster, or in any way deface
the premises of any part thereof, without Lessor's written consent.
7
No furniture, freight or equipment of any kind shall be brought into the
building without the consent of Lessor and all moving of the same into or out of
the building shall be done at such time and in such manner as Lessor shall
designate. Lessor shall have the right to prescribe the weight, size and
position of all safes and other heavy equipment brought into the building and
also the times and manner of moving the same in and out of the building. Safes
or other heavy objects shall, if considered necessary by Lessor, stand on wood
strips of such thickness as is necessary to properly distribute the weight.
Lessor will not be responsible for loss of or damage to any such safe or
property from any cause and all damage done to the building by moving or
maintaining any such safe or other property shall be repaired at the expense of
Lessee.
8
Lessee shall not employ any person or persons other than the janitor of
Lessor for the purpose of cleaning the premises unless otherwise agreed to by
Lessor. Except with the written consent of Lessor, no person or persons other
than those approved by Lessor shall be permitted to enter the building for the
purpose of cleaning the same. Lessee shall not cause any unnecessary labor by
reason of Lessee's carelessness or indifference in the preservation of good
order and cleanliness. Lessor shall in no way be responsible to any Lessee for
any loss of property on the premises, however occurring, or for any damage done
to the effects of any Lessee by the janitor or any other employee or any other
person. Janitor service shall include ordinary dusting and cleaning by the
janitor assigned to such work and shall not include cleaning of carpets or rugs,
except normal vacuuming, or moving of furniture or other special services.
9
Lessee shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the premises, or permit or suffer the premise to be occupied
or used in a manner offensive or objectionable to the Lessor or other occupants
of the building by reason of noise, odors and/or vibrations, or interfere in any
way with other Lessees or those having business therein, nor shall any animals
or birds be brought in or kept in or about the premises or building.
10
No cooking shall be done or permitted by any Lessee on the premises, nor
shall the premises be used for the storage of merchandise, for washing clothes,
for lodging, or for any improper, objectionable or immoral purposes.
11
Lessee shall not use or keep in the premises or the building any kerosene,
gasoline or inflammable or combustible fluid or material, or use any method of
heating or airconditioning other than that supplied by Lessor.
12
Lessor will direct electricians as to where and how telephone and telegraph
wires are to be introduced. No boring or cutting for wires will be allowed
without the consent of Lessor. The location of telephones, call boxes and other
office equipment affixed to the premises shall be subject to the approval of
Lessor.
13
Each Lessee, upon the termination of the tenancy, shall deliver to the
Lessor the keys of offices, rooms and toilet rooms which shall have been
furnished the Lessee or which the Lessee shall have had made, and in the event
of loss of any keys so furnished, shall pay the Lessor therefor.
-1-
<PAGE>
25. SURRENDER OF PREMISES. The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, shall not work a merger, and shall at
the option of the Lessor, terminate all or any existing sublease or
subtenancies, or may, at the option of Lessor, operate as an assignment to it of
any or all such subleases or subtenancies.
26. WAIVER. The waiver by Lessor of any term, covenant or condition herein
contained shall not be deemed to be a 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 Lessor shall
not be deemed to be a waiver of any preceding breach by Lessee of any term,
covenant or condition of this Lease, other than the failure of Lessee to pay
the particular rental so accepted, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
27. NOTICES. All notices and demands which may or are required to be given by
either party to the other hereunder shall be in writing. All notices and demands
by the Lessor to the Lessee shall be sent by United States certified or
registered mail, postage prepaid, addressed to the Lessee as follows, or to such
other place as the Lessee may from time to time designate in a notice to the
Lessor. All notices and demands by the Lessee to the Lessor shall, be sent by
United States certified or registered mail, postage prepaid, addressed to the
Lessor as follows, or to such other person or place as the Lessor may from time
to time designate in a notice to the Lessee.
LESSOR'S ADDRESS LESSEE'S ADDRESS
Judge Building Group City Search, Inc.
- ------------------------------------------ ------------------------------
Judge Building, Suite 200 4502 Dyer Street, Suite 201
- ------------------------------------------ ------------------------------
8 East Broadway, Salt Lake City, Utah 84111 La Cresenta, CA 91214
- ------------------------------------------ ------------------------------
Attention: Daniel A Miller Attention: Chief Financial
- ------------------------------------------ ------------------------------
Officer
------------------------------
Whenever this Lease requires Lessee to obtain consent from Lessor prior to
acting, such consent shall be obtained from the General Partner of Lessor.
28. DEFINED TERMS AND MARGIN HEADINGS. The words "Lessor" and "Lessee" as used
herein shall include the plural as well as the singular. Words used in masculine
gender include the feminine and neuter. If there be more than one Lessee the
obligations hereunder imposed upon Lessee shall be joint and several. The
marginal headings and titles to the paragraphs of the Lease are not a part of
this Lease and shall have no effect upon the construction or interpretation of
any part hereof.
29. TIME. Time is of the essence of this Lease and each and all of its
provisions.
30. SUCCESSORS AND ASSIGNS. The covenants and conditions herein contained
shall, subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators, and assigns of the parties hereto.
31. COMMON AREAS - All those portions of the Property not occupied by the
buildings thereon or not set aside for the exclusive use of the Lessor or of a
particular Lessee shall be common area available for the joint use of Lessor and
all tenants of the Property, their customers, invitees, and employees for
receipt of goods, and for general right of passage access to the respective
buildings, stores, suites, and rented or leased areas. Lessor reserves the right
to construct additional buildings on the Property or to enclose or otherwise
devote portions of the common area to the exclusive use of the Lessor or of
specific tenant or tenants.
32. SECURITY DEPOSIT. Lessee has deposited with Lessor the sum of $5,128.85
---------
________________________________________________________________________________
________________________________________________________________________________
Said sum shall be held by Lessor as security for the faithful performance by
Lessee of all of the terms, covenants, and conditions of this Lease to be kept
and performed by Lessee during the term hereof. If Lessee defaults with respect
to any provisions of this Lease, including but not limited to the provisions
relating to the payment of rent, and maintaining premises in good condition,
Lessor may (but shall not be required to) use, apply or retain all or any part
of this security deposit for the payment of any rent or any damages, or other
sum in default, or for the payment of any other amount which Lessor may spend by
reason of Leasee's default or to compensate Lessor for any other loss or damage
which Lessor may suffer by reason of Lessee's default. If any portion of said
deposit is so used or applied. Lessee shall, upon demand therefor, deposit cash
with Lessor in an amount sufficient to restore the security deposit to its
original amount and Lessee's failure to do so shall be a material breach of this
Lease. Lessor shall not be required to keep this security deposit separate from
its general funds, and Lessee shall not be entitled to interest on such deposit.
If Lessee 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 Lessee (or, at Lessee's option, to the last assignee of Lessee's
interest hereunder)at the expiration of the Lease term. In the event of
termination of Lessor's interest in this Lease, Lessor shall transfer said
deposit to Lessor's successor in interest.
33. COMPLETION OF PREMISES. If applicable, Lessor shall use reasonable speed
and diligence in completing the premises for the certification of occupancy no
later than the commencement date of this Lease. In the event Lessor is delayed
in obtaining certification of occupancy due to an act of God, fire, earthquake,
explosion, war, riot, inability to procure materials of labor, failure of
transportation, strikes, action of labor unions, condemnation, lawful orders of
government authorities or any other cause not within the reasonable control of
Lessor, the commencement date and the ending date of this Lease shall be changed
commensurate with the delay as aforesaid.
34. FORCE MAJEURE. Except for purpose of rental, Lessor and Lessee shall be
excused for the period of any delay in the performance of any obligations
hereunder when prevented from so doing by cause or causes beyond the respective
control of each including labor disputes, civil commotion, war, governmental
regulations or controls, fire or other casualty, weather, inability to obtain
any material or services, or acts of God.
35. SUBORDINATION, ATTORNMENT. This Lease, at Lessor's option, shall be
subordinate to the lien of any first deed of trust or first mortgage
subsequently placed upon the real property of which the demised premises are a
part, and to any and all advances made on the security thereof, and thereof;
provided, however, that as to the lien of any such deed of trust or mortgage
Lessee's right to quiet possession of the premises shall not be disturbed if
Lessee is not in default and so long as Lessee shall pay rent and observe and
perform all of the provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgagee, trustee or ground lessor
shall elect to have this Lease prior to the lien of its mortgage, deed of trust,
or ground lease, and shall give written notice to Lessee, this Lease shall be
deemed prior to such mortgage, deed of trust, or ground lease, whether this
Lease is dated prior or subsequent to the date of said mortgage, deed of trust
or ground lease or the date of recording thereof.
In the event any proceedings are brought for foreclosure, or in the event
of the exercise of the power of sale under any mortgage or deed of trust made by
the Lessor covering the demised premises, Lessee shall attorn to the purchaser
upon any much foreclosure or sale and recognize such purchaser as the Lessor
under this Lease.
36. WAIVER OF SUBROGATION. So long as their respective insurers so permit,
Lessee and Lessor hereby mutually waive their respective rights of recovery
against each other for any loss insured by liability, fire, extended coverage
and other property insurance
-5-
<PAGE>
policies existing for the benefit of the respective party. Each party shall
obtain any special endorsements, if required by their insurer evidence
compliance with the aforementioned waiver.
37. LESSOR LIABILITY. Lessee covenants and agrees that, if Lessor is a
partnership or corporation, any claims that Lessee may have now or hereafter
against Lessor shall be asserted against, and satisfiable only out of the assets
of the Lessor partnership or corporation, as may be the case, and not from any
of the personal assets of any of the individual partners, officers, directors
or stockholders of Lessor, and Lessee hereby waives and releases each of the
individual partners, officers, directors and stockholders, now or hereafter
existing in Lessor's partnership or corporation, as may be the case, together
with their estates, representatives and assigns.
IN WITNESS WHEREOF Lessor and Lessee have executed this Lease the day and
year first above written.
LESSOR LESSEE
JUDGE BUILDING GROUP CITY SEARCH, INC.
- -------------------------------------- ----------------------------------------
By
By /s/ Daniel A. Miller By /s/ Brad Ramberg
----------------------------------- -------------------------------------
Daniel A. Miller Brad Ramberg
Owner/Partner Chief Financial Officer
Lessee agrees to comply and conform with municipal, state, and federal laws and
statutes that are in effect concerning hazardous waste, toxic substances, and
chemical substances. Lessee agrees to indemnify Lessor and hold Lessor free and
harmless from any liability and cost caused by Lessee's maintenance of hazardous
waste and other toxic substances on or about the premises. Lessee shall have the
obligation to store and dispose of such waste at Lessee's expense.
Exhibits "A" and "B" attached hereto are incorporated herein by this reference.
<PAGE>
EXHIBIT 'B'
[THIRD LEVEL FLOOR PLAN APPEARS HERE]
<PAGE>
LEASE ADDENDUM "A"
-------------------
This Lease Addendum "A" ("Addendum") is entered into on this 10th day of
September, 1996, by and between Judge Building Group, as Lessor, and City
Search, Inc., as Lessee, and modifies and supersedes the provisions of the
printed form lease agreement ("Lease") entered into between the parties on the
same date hereof covering Suite 300 ("Premises") at the Judge Building, 8 East
Broadway, Salt Lake City, Orem, Utah, in the event of any inconsistencies
between the two.
1. Lease commencement date shall be the date of completion of improvements to
the Premises, which is estimated to be 45 days from execution of the Lease.
Lessee shall pay first month's rent and security deposit upon execution of the
Lease.
2. Lessor shall build-out the Premises in accordance with the layout and
specifications contained in Exhibit "B" attached hereto. Lessor will install
dedicated conduit for all electrical, telephone, and data outlets indicated on
Exhibit "B." Carpeting allowance shall be $14.00 per yard installed. Build-out
shall be done in accordance with building standard construction (vanilla finish)
for wall, doors, jambs, base, lighting, standard grid ceiling, and HVAC. Any
upgrades desired by Lessee shall be at Lessee's expense. Lessee, however, may
elect to have "open ceiling environment" instead of a grid ceiling, in which
case Lessee shall pay 50% of the net additional cost of the open ceiling
environment. Within seven days of execution of the Lease, Lessor shall submit to
Lessee an estimate of the net additional cost of the open ceiling environment,
and Lessee shall notify Lessor within five days thereafter if it desires to have
an open ceiling environment. If Lessee does not notify Lessor of its decision
within said five day period, Lessor shall be entitled to proceed with
installation of the standard grid ceiling. In the event Lessee selects the open
ceiling environment, Lessee understands that sound acoustics of the Premises
will diminish and that certain exposed equipment and fixtures that serve the
Premises will make the Premises noisier and louder, and Lessee agrees that
Lessor shall have no responsibility or obligation to mitigate such increased
sound or noise levels.
3. Lessee shall have access to the premises seven days a week. Lessee's
business hours may extend to after normal business hours and weekends, with use
of HVAC at no extra cost. However, Lessee agrees not to work multiple shifts or
have over-lapping shifts. Further, Lessee agrees not to have more than 40
employees that work
<PAGE>
throughout the day at the premises, excepting out of town personnel that work on
a non-recurring basis and regional sales meetings. Lessor will, however, allow
Lessee to exceed said limit to meet demand during periodic peak business cycles
as long as the use of additional employees does not interfere with any other
tenant's peaceful enjoyment of their premises; and provided, further, that the
limit in no event can exceed 50 people without first obtaining Lessor's prior
written consent.
4. Upon execution of the Lease and Pending completion of the premises, Lessee
shall have free use of the space directly east of the Premises, known as Suite
310. Suite 310 consists of approximately 3,000 feet. Lessor shall install
ceiling lights and light fixtures in Suite 310, but Lessee shall otherwise
occupy Suite 301 in its "as-is" condition, and shall be responsible for all
other improvements it needs or desires, including additional electrical, walls,
carpeting, etc. Lessee shall also provide its own janitorial service for said
suite. Lessee shall vacate Suite 310 at the time of completion of the Premises.
5. Lessee shall have the right to five (5) free parking spaces in the
Convenience Parking Lot, located between 400 South and 500 South and Main
Street, for as long as Lessor has the right to lease such parking from the owner
of said lot. In the event Lessor looses the right to lease any of said parking
spaces, there shall be a rent credit to Lessee in the amount of $35.00 per month
per space. In addition, Lessee shall have the right to rent an additional 13
spaces in said lot at the same rate that Lessor pays (currently around $35 per
month), provided Lessee rents such spaces concurrently with the execution of
this Lease. If Lessee later reduces the amount of such parking spaces, Lessor
shall have no obligation to provide the "surrendered" spaces to Lessee for the
remainder of the Lease term.
Lessee shall also have the right to two unreserved parking spaces, at the
prevailing monthly rates, in the Exchange Place Garage, located to the east of
the Judge Building. The cost of such parking shall be paid by Lessee.
Other than as provided above, Lessor shall have no further obligation to
provide parking to Lessee.
6. Lessee shall have an option to extend the term of the Lease for an
additional five years under the following terms and conditions:
a. Lessee must deliver written notice to Lessor of its intention to
extend the term of the Lease at least 6 months prior to the expiration of the
initial term of the Lease.
b. The base lease rate for the first year of the extension term shall be
5% greater than the base rate for the fifth year of the initial Lease term (or
at such mutually agreed to rate that is
2
<PAGE>
determined within 30 days after Lessee serves notice of its desire to extend the
term of the Lease), with 5% annual base rate increases thereafter. The expense
pass-through provisions of Paragraph 4 of the Lease, as modified herein, shall
continue in effect.
c. Lessee must not be in breach or default of the Lease at the time of
exercise of the extension option, or have been more than 10 days late in the
payment of rent more than 5 times during the initial Lease term, unless waived
by Lessor.
d. All other terms and provisions of the Lease and Addendum shall remain
in full force and effect during the extension term.
7. Effective one year after the Lease commencement date, Lessee shall have a
limited, one time, right of first refusal to lease Suite 310 in accordance with
the following terms and conditions:
a. Lessee must have been timely in its rent payments and not otherwise in
breach of the Lease.
b. Lessee shall have the right to lease Suite 310 under the same terms as
Lessor is willing to lease such space to a new tenant ("New Tenant"). Lessee
shall have three days in which to elect in writing to lease Suite 310 after
Lessor informs Lessee in writing of the lease terms for the New Tenant. In the
event Lessee exercises it right of first refusal, it shall have a tenant
improvement allowance equal to Lessor's cost of providing tenant improvement for
the New Tenant, with any additional improvement cost to be borne by Lessee.
c. Lessee shall execute a new lease for Suite 310 within four days after
exercise of it right of first refusal, and its failure to timely do so shall
result in a relinquishment and release of its right of first refusal.
d. If Lessee does not timely elect to lease such space within the three
day notice period as above provided, Lessee shall have no further right of first
refusal to lease such space, unless Lessor fails to consummate a lease with the
New Tenant. If Lessor fails to consummate a lease with the New Tenant, then
Lessee shall continue to have a right of first refusal, on the same terms
provided herein, until such time as Lessor consummates a lease with a New Tenant
for Suite 310.
e. Time is strictly of the essence herein, it being acknowledged by
Lessee that the right of first refusal granted to Lessee hereby is an impediment
to Lessor's ability to freely lease Suite 310.
8. The 12% interest charge provided in Paragraph 3 of the Lease shall be
applicable only if and when Lessee is more than 30 days
3
<PAGE>
late in its payment of rent.
9. Paragraph 4 of the Lease is modified as follows: Notwithstanding Lessee's
calculated portion of increases in operating expenses above base year expenses
in any given year, as per paragraph #4 of the Lease, Lessee's portion of
increase in any given year shall not exceed the equivalent of a 2% increase in
Lessee's then prevailing base lease rate. This 2% "cap" on expense pass-throughs
shall be cumulative annually.
The 15 days reference in the fourth paragraph of Paragraph 4 of the Lease shall
be extended to 30 days.
10. Paragraph 5, line 2, of the Lease is modified by deleting the words "or
other" and adding the word "liability."
11. Paragraph 6, line 6, of the Lease is modified by adding the phrase "and
excluding any noncomplying conditions existing prior to the commencement of
Lessee's lease" after the phrase "Lessee's improvements or acts."
12. Paragraph 7 of the Lease is modified as follows: Lessee shall have the
right to make non-structural modifications or additions not exceeding $2,000 in
cost without obtaining Lessor's consent. For any modifications or additions that
require Lessor's consent, Lessor shall indicate whether it will require removal
of such modifications or additions at the time Lessor gives its consent.
13. Paragraph 8 of the Lease is modified as follows: The second sentence of
said paragraph is hereby deleted, and the following sentence substituted in lieu
thereof: "Any repairs to the Premises (other than those required because of the
nature of Lessee's operations) that are required to be made by Lessor in order
to comply with applicable law, statute, or ordinance now or hereafter in effect,
shall not be made without the joint approval of Lessor and Lessee."
14. Paragraph 12 of the Lease is modified as follows: The indemnification and
waiver provisions therein shall be mutual between Lessor and Lessee, and shall
not be applicable for any damage or injuries caused by the negligence,
recklessness, or wanton disregard of the parties.
15. Paragraph 13 of the Lease is modified as follows: Lessee shall only be
required to provide insurance information upon Lessor's request.
16. Paragraph 14, second paragraph, of the Lease and Regulation #6 shall be
modified as follows: (a) Lessee shall be entitled to drive nails and screws to
hang art, whiteboard, corkboards, etc, as part of normal business operations
without the prior written consent of Lessor; (b) The failure to provide services
and rent reduction
4
<PAGE>
right time periods are changed from 10 and 11 days, respectively, to 3 & 4 days
respectively; (c) Lessee shall have the right to use computers (except for main
frame type computers).
17. To the extent that Paragraph 19, sixth paragraph, beginning with the phrase
"As used in subparagraphs (i) and (ii) above" is considered to include
prejudgment interest, it shall be applicable only if Utah law allows prejudgment
interest.
18. Paragraph 20 of the Lease is modified as follows: (a) 25% is changed to
30%; (b) The phrase "as of the date notice is given" is changed to "as of the
date the premises becomes unusable."
19. Paragraph 23 of the Lease is changed by adding the following sentence:
"Lessee, however, shall have the right to deliver a statement to Lessor's
successor in interest that sets forth any claims or grievances that Lessee has
against Lessor."
20. Paragraph 26, line 1, of the Lease is amended by adding the phrase "or by
Lessee" after the words "by Lessor."
21. All notices sent by Lessor pursuant to Paragraph 27 of the Lease shall be
noted: "Attention: Chief Financial Officer."
22. The sentence of Regulation #8 beginning with the phrase "Lessor in no way
shall be responsible" is hereby deleted.
23. Regulations #10 & #15 are hereby deleted.
24. Regulation #21 is modified as follows: Lessor shall give notice to Lessee
of any building name or address changes.
25. Concurrently with the execution of the Lease and this Addendum, Lessee
shall deliver to Lessor a corporate resolution duly authorizing Lessee's
execution of the Lease and Addendum.
IN WITNESS WHEREOF Lessor and Lessee have executed this Addendum "A" the day and
year first above written.
Lessor: The Judge Building Group
by: [SIGNATURE ILLEGIBLE]
-----------------------
Managing Partner
Lessee: City Search, Inc
by: [SIGNATURE ILLEGIBLE]
------------------------
Its ____________________
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Exhibit 10.18
SOBEL BUILDING DEVELOPMENT PARTNERS
680 Eighth Street
San Francisco, California 94103
(415) 861-4443
THIS LEASE executed this 31st day of May 1996, between SOBEL BUILDING
DEVELOPMENT PARTNERS, a California general partnership (hereinafter "Landlord"),
and, Perfect Market, Inc., DBA; City Search, A Delaware Corporation,
(hereinafter "Tenant" without distinction as to number or gender).
RECITALS
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A. Pursuant to the provisions of that certain Lease ("the Master
Lease") dated January 10, 1986, between Sheron Sugarman, Cynthia Morris, Joanne
Liss and Steve Cohen (who, along with their successors and assignees, are
referred to herein collectively as "Owner") and Landlord, Landlord has leased
that certain improved real property and the improvements thereon (collectively,
the "Building") commonly known as 680-Eighth Street, in the City and County of
San Francisco, California and described more fully in Exhibit A attached hereto
and incorporated herein.
B. This Lease is a sublease of part of the Building and, as such, is
expressly made subject to all of the terms and provisions of the Master Lease
and the rights of the Owner thereunder.
C. A copy of the Master Lease and any amendments thereto is
available for inspection at reasonable times at the office of the Landlord.
NOW, THEREFORE, FOR VALUABLE CONSIDERATION, Landlord and Tenant hereby
agree as follows:
1. Premises. Landlord hereby leases to Tenant and Tenant hereby
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hires from and takes from Landlord those certain premises (the "Premises")
situated in the building, more particularly described as follows: Suite 240
consisting of approximately 5,200 rentable square feet on the second floor, as
set forth in Exhibit B attached and incorporated herein. The Building in which
the Premises are located contains approximately 76,500 rentable square feet. The
Premises consist of 6.8% of the total rentable square footage of the Building.
2. Term. The term of this lease shall be for Three (3) years and
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fifteen (15) days, commencing on June 15, 1996 and ending on June 30, 1999. If
the term of the Lease extends beyond December 31, 2010, the effectiveness of any
portion of the term of this Lease after such date is conditioned upon Landlord's
exercising its option to extend the term of the Master Lease beyond such date.
See paragraph 34 for option terms.
3. Rent. The rent under this Lease shall be paid in monthly
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installments in advance, payable on the first day of each month, which Tenant
agrees to pay to Landlord, at the office of the Landlord, or such other place or
places as may be designated from time to time by Landlord, in United States
Legal Tender, as follows:
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<TABLE>
<CAPTION>
Period Rent per Month
<S> <C>
June 15, 1996 through June 30, 1996 $3,900.00
July 1, 1996 through June 30, 1997 7,800.00
July 1, 1997 through June 30, 1998 8,034.00
July 1, 1998 through June 30, 1999 8,275.00
</TABLE>
It is hereby mutually understood and agreed that the above letting and
hiring is upon the following terms and conditions.
4. The Master Lease. Tenant hereby recognizes that the estate of
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Landlord in the Premises and the Building is that of the "Lessee" under the
Master Lease. Tenant agrees that all rights, power, privileges and options
granted to Tenant by this Lease are subject to the provisions of the Master
Lease and no such right, power, privilege or option may be exercised or enjoyed
by Tenant if and to the extent that the exercise or enjoyment thereof would not
be permitted by, or would violate the terms of, the Master Lease, and that
Tenant will not commit or suffer any act of omission or commission which would
violate any of the terms or conditions of the Master Lease.
5. Delivery of Possession. If Tenant occupies the Premises prior to
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the commencement of the term, such occupancy shall not advance the termination
date. Tenant at its option, along with any of its vendors, contractors, agents,
etc., shall be permitted to enter the Premises at any time during normal
business hours prior to the Commencement Date, with no obligation to pay rent,
for the purpose of installing furniture fixtures, and equipment, provided that
Tenant does not interfere or delay Landlord's work. Landlord agrees that Tenant
shall receive 5 days of free rent for each day premises are delivered late
(beyond the expected June 15, 1996 (at 11 a.m.) delivery date).
6. Payment of Rent. Tenant agrees to pay Landlord the rental herein
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reserved at the time and in the manner herein provided without any demand
therefore or deduction or offset therefrom whatsoever, free of any and all
claims and demands against Landlord of any kind or character, except as
specifically provided in Paragraph 15.6 of this Lease.
7. Use of Premises. The Premises shall be used, occupied and
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conducted exclusively as and for offices and for no other purpose (see paragraph
29). No unusual or heavy machinery or equipment which will by reason of its
weight, vibration or noise (a) affect the structure of the Building, (b)
constitute a nuisance, or (c) affect or disturb the quiet use and possession of
any part of the Building by Landlord or any other tenant in the Building, shall
be maintained in or upon the Premises. The Premises shall be used, occupied and
conducted by Tenant without any annoyance, disturbance, detriment or injury to
Landlord or to any of the tenants of Landlord in, or occupants of, or other
persons lawfully in, other parts of the Building or to the business of such
other tenants, occupants or persons. Tenant shall not maintain or permit or
suffer to be maintained or permitted any nuisance or waste in or about the
Premises, or bring or keep anything therein which will in any way affect or
increase fire or other insurance on the Building or any of its contents. Tenant
will not use or allow the Premises to be used for any unlawful, immoral or
objectionable purpose, See paragraph 29.
8. Assignment and Subletting. Tenant agrees not to assign this Lease
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or any interest therein nor to sublet the whole or any part of the Premises
unless and until the area encompassed by the proposed sublease or assignment is
first offered in writing to Landlord for a period of ten (10) days, with
Landlord having the
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option to take said proposed assigned or sublet space for its own account and to
relet the same for its own account and proportionately abating Tenant's rent
during the term of said proposed sublease or assignment. If Landlord chooses not
to exercise this option, Tenant with Landlord's written consent first obtained
may sublet or assign all or a portion of the Premises, providing the proposed
sublessee or assignee first pays in advance two months' rent which will be
applied to the rent due during the last two months of the proposed subleasing or
assignment and provided further that, in the event said sublessee or assignee
pays rent (or other form of compensation however designated) greater than that
due from Tenant, said excess shall be paid over to Landlord by Tenant as
received and the same shall constitute additional rent due Landlord from Tenant
under this Lease. Consent to any assignment or subletting shall apply only in
the given instance and a further assignment or subletting by Tenant or its
assignee or subtenant shall be made only after obtaining Landlord's prior
written consent as provided in Section 8. Nothing contained herein will obligate
Landlord to consent to any proposed assignment or sublease if the proposed
sublessee or assignee does not meet Landlord's reasonable financial criteria or
would otherwise be considered an undesirable tenant, because of its business or
business reputation, the character of the Building and the types and mix of
other tenants. Upon any subletting, nothing contained herein shall be construed
to relieve Tenant of any of its obligations contained in this Lease including,
without limitation, the obligation to pay rent. Tenant shall not require
Landlord's consent to sublease Premises or assign the lease to a bona fide
subsidiary or affiliate of the Tenant.
9. Acceptance, Alterations, Repairs and Inspection. Landlord shall,
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at its sole cost, keep, repair and maintain the structural portions of the
Building, common areas in the Building, exterior walls and roof of the Building,
Building utility systems and sidewalks adjacent to the Building in good and
sanitary order, condition and repair, except where said conditions exist because
of the lack of ordinary care by Tenant, in which case Tenant shall promptly
reimburse Landlord for any expenses incurred in connect herewith. Tenant shall,
at its sole cost and expense, keep the premises in good and sanitary order,
condition and repair, except where such disrepair is due to a violation of the
Lease by Landlord, in which case Landlord shall make such repair. By entry
hereunder, and subject to the completion of any improvements referred to in
Exhibit C, Tenant accepts the Premises and the Building as being in good and
sanitary order, condition and repair and agrees that on the last day of the term
of this Lease or, upon sooner termination of this Lease, to surrender to
Landlord all of the Premises in the same condition as when received, reasonable
wear and tear thereof excepted. Unless otherwise provided by written agreement,
all additions to, improvements and alterations of premises, except movable
furniture and trade fixtures, shall become the property of Landlord at
Landlord's option, and shall remain upon and be surrendered with the premises.
Tenant shall not make any additions or improvements to or alterations or
modifications of the premises without the prior written consent of Landlord,
which shall not be unreasonably withheld. As a condition to any such consent
Landlord may, among other things, require performance or completion bonds for
the work, copies of plans and specifications and other relevant information.
Notwithstanding the foregoing, Tenant may make non structural additions,
improvements, alterations or modifications to the Premises with an aggregate
cost not exceeding One Thousand Dollars ($1,000.00) in any six month period
without seeking Landlord's prior consent. Tenant shall keep the Premises and the
Building free from any liens arising out of any work performed, materials
furnished, or obligations incurred by Tenant. Tenant agrees that if it shall
make any repairs, alterations, modifications or improvements, after having
obtained Landlord's consent where required, it will not commence such
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action until two (2) days after written notice to Landlord in order that
Landlord may post appropriate notices of non responsibility to avoid any
liability for liens. Tenant will at all times permit such notices to be posted
and remain posted until the completion and acceptance of the work. If Tenant
fails to remove any liens promptly, Landlord may, at its option, do so, in which
case Tenant shall immediately upon demand reimburse Landlord for all such
amounts paid and costs and expenses incurred. All such amounts shall constitute
additional rent due Landlord from Tenant under this lease.
10. Compliance with Law. Tenant shall, at its sole cost and expense,
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comply with all the requirements of all Municipal, State and Federal authorities
now in force or which may hereinafter be in force pertaining to the Premises,
and shall faithfully observe in the use of the premises all Municipal ordinances
and State and Federal statutes now in force or which may hereinafter be in
force. The judgment of any court of competent jurisdiction, or the admission of
Tenant in any action or proceeding against Tenant, whether Landlord be a party
thereto or not, that Tenant has violated any such ordinance or statute in the
use of the Premises shall be conclusive of the fact as between Landlord and
Tenant. Nothing contained in this Section 10 shall require Tenant to make any
structural changes or any changes affecting Building utility systems. Tenant
will not be responsible for the cost of compliance with the Americans with
Disabilities Act or any comparable State or Local statute.
11. Exculpation of Landlord and Owner. Tenant waives all claims
---------------------------------
against Landlord, Owner and their agents and employees for damage to person or
property arising from any reason, except that Landlord shall be liable for
damage to Tenant from the negligent or willful acts or omissions of Landlord or
its agents or employees.
12. Indemnity. Tenant on behalf of itself, its agents, its
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employees, its guests and invitees shall defend and indemnify and hold Landlord,
Owner and their agents and employees harmless from and against all damages,
which result from the acts or omissions of Tenant or its agents or employees,
including reasonable attorneys' fees, arising out of any damage to any such
person or their property occurring in, on or about the Premises or the Building,
unless such damages result from Landlord's negligent or willful acts or
omissions.
13. Liability and Property Insurance. Landlord agrees to carry and
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keep in force during the term hereof a standard fire and extended coverage
insurance policy of the Building. Tenant agrees to take out and keep in force
during the term hereof, at Tenant's expense, (a) bodily injury and property
damage liability insurance in companies and through brokers approved by Landlord
(with at least a Best A-Rating) to protect against any liability to the public
incident to the use of or resulting from any accident occurring in or about the
Premises or the Building, the liability under such insurance to be not less that
One Million Dollars ($1,000,000.00) for any one person injured or $1,000,000.00
for any one accident and (b) property insurance of $1,000,000.00 covering loss
or damage to the Premises (including any improvements constructed). These
policies (1) shall name Owner (Cynthia & Craig Morris, Joanne and Robert Liss,
Sheron & Charles Sugarman, THE LISS LIVING TRUST U/A DATED 4/15/91 and THE
CHARLES AND SHERRI SUGARMAN LIVING TRUST U/A DATED 8/24/90) and Landlord (Sobel
Building Development Partners) and such lenders, if any, as may be designated by
Landlord, as additional insureds, (2) a certificate of insurance is to be
delivered to the Landlord upon issuance and renewal
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and (3) shall contain a written obligation on the part of the insurance carriers
to notify Landlord in writing thirty (30) days prior to any cancellation
thereof. Notwithstanding the foregoing, Owner, Landlord and their lenders, if
any, need not be named as additional insureds for Tenant's furniture, equipment
and personal property. Tenant agrees that, if it does not keep such insurance in
full force and effect, Landlord may, at its option, take out the necessary
insurance and pay the premium. In such a case, Tenant shall reimburse Landlord
for the amount so paid and such amount shall constitute additional rent due
Landlord from Tenant under this Lease. The policies provided for herein together
with proof of payment of premium therefore shall be delivered to Landlord within
ten (10) days after the date of execution of this Lease, and renewal
certificates and proof of payment of premiums therefor shall be delivered to
Landlord not less than fifteen (15) days prior to the renewal date of any such
insurance policies.
14. Defaults: Remedies. 14.1 Defaults. The occurrence of any one or
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more of the following events shall constitute a material default and breach of
this Lease by Tenant:
(a) The vacating or abandonment of the Premises by Tenant:
(b) The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant here under, within five (5) days of
written notice following the date such amount is due;
(c) The failure by Tenant 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 Section 14.1(b)above, where such failure shall continue
for a period of thirty (30) days after written notice from Landlord to Tenant,
provided, however, that if the nature of Tenant's default is such that more than
thirty (30) days are reasonably required for its cure, the Tenant shall not be
deemed to be in default if Tenant commences such cure within said 30-day period
and thereafter diligently prosecutes such cure to completion;
(d) (i) The making by Tenant of any general arrangement for the
benefit of creditors;
(ii) The filing by or against Tenant of a petition to have Tenant
adjudged a bankrupt or a petition for re-organization or arrangement under any
law relating to bankruptcy (unless, in the case of a petition filed against the
Tenant, the same is dismissed within sixty (60) days);
(iii) The appointment of a trustee or receiver to take possession of
all or substantially all of Tenant's assets located at the premises or of
Tenant's interest in this Lease.
(iv) The attachment, execution or other judicial seizure of all or
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 thirty (30)
days.
(e) The discovery by Landlord that any financial statement given to
Landlord by Tenant, any sublessee or assignee of Tenant, any successor in
interest of Tenant or any guarantor of Tenant's obligations here under, or any
of them, was materially false.
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14.2 Remedies. In the event of any such material default or breach by
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Tenant, Landlord may at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have by reason of such default or breach take any of the following
actions:
(a) Terminate Tenant's right to possession of the Premises by any
means, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Premises to Landlord. In such event, Landlord shall
be entitled to recover from Tenant: (1) the worth at the time of award of the
unpaid rent which had been earned at the time of termination: (2) 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: (3) 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; and (4) any other amount necessary to
compensate Landlord for all the detriment proximately caused by Tenant's failure
to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.
(b) Have this Lease continue in effect for so long as Landlord does
not terminate this Lease and Tenant's right to possession of the Premises, in
which event Landlord shall have the right to enforce all of Landlord's rights
and remedies under this Lease, including the right to recover the rent as it
becomes due under this Lease.
(c) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the State of California.
(d) The "worth at the time of award" of the amounts referred to in
Sections 14.2(a)(1) and 14.2(a)(2) above shall be computed by allowing interest
at the maximum annual interest rate allowed by law for business loans (not
primarily for personal, family or household purposes) not exempt from the usury
law at the time of termination or, if there is no such maximum annual interest
rate, at the Bank of America N.T. & S.A. "Prime Rate" charged on such
termination then in effect plus two (2) percentage points. The "worth at the
time of award" of the amount referred to in Section 14.2(a)(3) above shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of the award plus one percent (1%) per annum.
For the purpose of determining unpaid rent under Sections 14.2(a)(1), (2) and
(3) above, such unpaid rent shall be the rent payable by Tenant in accordance
with all of the provisions of this Lease.
14.3 Default by Landlord. Landlord shall not be in default unless
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Landlord fails to perform obligations required of Landlord within a reasonable
time, but in no event later than thirty (30) days after written notice by Tenant
to Landlord and to any lenders whose names and addresses shall have been
theretofore furnished to Tenant in writing, specifying wherein Landlord has
failed to perform such obligation, provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days are required for
the performance, then Landlord shall not be in default if Landlord commences the
performance within such 30-day period and thereafter diligently prosecutes the
same to completion. Tenant's sole remedy in the event of Landlord's default
shall be in damages. Tenant shall not have the right to any rent abatement or
reduction, but may terminate this Lease if Landlord fails to cure its default.
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15. Damage or Destruction.
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15.1 Partial Damage -- Insured. Subject to the provisions of Sections
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15.3, 15.4 and 15.5, if the Premises are damaged and such damage was caused by a
casualty covered under any insurance policy required to be maintained by Tenant
pursuant to Section 13 or any insurance policy carried by Landlord, Landlord
shall first apply the proceeds paid under any such policy of insurance to the
repair of such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. Notwithstanding the foregoing to the
contrary, Landlord shall have no duty to repair or replace Tenant's fixtures,
equipment, personal property, alterations or improvements to the Premises,
including without limitation those described in Exhibit C, and Tenant shall
promptly, at its sole cost and expense, repair and replace such items, unless
such damage results from Landlord's negligent or willful acts.
15.2 Partial Damage -- Uninsured. Subject to the provisions of
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Sections 15.3, 15.4 and 15.5, if the Premises are damaged, except by a negligent
or willful act of Tenant or Landlord (in which event Tenant or landlord shall
make all required repairs at its own expense), and such damage was caused by a
casualty not covered under an insurance policy required to be maintained by
Tenant under Section 13, or otherwise maintained by Landlord, Landlord may, at
its option, either (i) repair such damage as soon as reasonably possible, at
Landlord's expense, in which event this lease shall continue in full force and
effect, or (ii) give written notice to Tenant within sixty (60) days after the
date of the occurrence of such damage of Landlord's intention to cancel and
terminate this Lease as of the date of occurrence of such damage. In the event
Landlord elects to give such notice of Landlord's intention to cancel and
terminate this Lease, Tenant shall have the right within ten (10) days after
receipt of such notice to give written notice to Landlord of Tenant's intention
to repair such damage at Tenant's expense, without reimbursement from Landlord,
in which event this Lease shall continue in full force and effect and Tenant
shall proceed to make such repairs as soon as is reasonably possible. If Tenant
does not give such notice within such 10-day period, this Lease shall be
canceled and terminated as of the date of the occurrence of such damage.
Notwithstanding the foregoing to the contrary, if Landlord elects to repair the
premises after an uninsured casualty, Landlord shall have no duty to repair or
replace any of Tenant's fixtures, equipment, personal property or alterations or
improvements to the Premises, including without limitation those described in
Exhibit C, and Tenant shall promptly, at its sole cost and expense, repair and
replace such items unless such damage was caused by a negligent or willful act
of landlord.
15.3 Total Destruction. If at any time during the term hereof the
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Premises are totally destroyed from any cause whether or not covered by
insurance required to be maintained under this Lease (including any total
destruction required by an authorized public authority), this Lease shall
automatically terminate as of the date of such total destruction.
15.4 Damage Near End of Term. If the Premises are partially destroyed
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or damaged during the last one (1) year of the term of this Lease, Landlord may,
at Landlord's option, cancel and terminate this Lease as of the date of the
occurrence of such damage by giving written notice to Tenant of Landlord's
election to do so within sixty (60) days after the date of the occurrence of
such damage.
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15.5 Damage to Building. In the event of any casualty to the Building
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(whether or not including damage to the Premises), the repair or restoration of
which would in Landlord's reasonable judgment cost in excess of fifty percent
(50%) of the full replacement cost of the Building, Landlord may, at its option,
terminate this Lease by written notice given to Tenant within sixty (60) days of
the date of such damage.
15.6 Abatement of Rent: Tenant's Remedies. (a) If the Premises are
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partially destroyed or damage and Landlord or Tenant repairs or restores them
pursuant to the provisions of this Section 15, the rent payable here under for
the period during which such damage, repair or restoration continues shall be
abated in proportion to the degree to which Tenant's use of the Premises is
impaired. Except for abatement of rent, if any, Tenant shall have no right to
claim against Landlord for any damage suffered by reason of such damage,
destruction, repair or restoration except where such damage or destruction was
the result of Landlord's negligence.
(b) If Landlord shall be obligated to repair or restore the Premises
under the provisions of this Section 15, it shall commence said repairs within
sixty (60) days after such obligation accrues, unless prevented by any
governmental agency, Acts of God, labor interruptions or strikes or events of a
similar nature, and if Landlord fails to commence such repair or restoration
within said sixty (60) day period, Tenant may, at its option, cancel and
terminate this Lease by giving Landlord written notice of Tenant's election to
do so at any time prior to the commencement of such repair or restoration. In
such event, this Lease shall terminate as of the date of such notice.
15.7 Termination -- Advance Payments. Upon termination of this lease
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pursuant to this Section 15, an equitable adjustment shall be made concerning
advance rent and any advance payment made by Tenant to Landlord. Landlord shall,
in addition, return to Tenant so much of Tenant's security deposit as has not
theretofore been applied by Landlord.
15.8 Waiver. Tenant waives the provisions of California Civil Code
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Sections 1932(2) and 1933(4) which relate to termination of leases when the
thing leased is destroyed and agrees that such event shall be governed by the
terms of this Lease.
16. Holding Over. On the last day of the term of this Lease or sooner
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termination of this Lease, Tenant agrees to peacefully and quietly surrender and
yield possession of the premises unto Landlord in as good order, state and
condition as the same were at the time of delivery of possession of the premises
to Tenant, reasonable use and wear and tear thereof excepted. Should Tenant hold
over said term hereby created with the consent of Landlord, such tenancy shall
be deemed to be merely one from month-to-month, at a monthly rental of one
hundred ten percent (110%) of the monthly rental in effect at the end of the
term of this Lease and upon all the other terms and conditions contained in this
Lease.
17. Non-Waiver. The waiver of any breach of this Lease by either of
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the parties or the failure or omission of the parties to exercise and remedy for
a violation of any of its terms, conditions or covenants shall in no way be
deemed to be a consent by the parties to such violation and shall in no way
estop or prevent the parties from exercising any of their rights under this
Lease thereafter either for
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such or any subsequent violation of any term, condition or covenant. The
acceptance or payment of rent here under shall not be, and shall not be
construed to be, a waiver of any breach, term, covenant or condition of this
Lease.
18. Utilities and Services.
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(a) Landlord agrees to furnish power to the premises, and heat and
air for the normal use of the premises.
(b) Landlord shall provide Tenant with after-hours control of heating,
ventilation and air conditioning (HVAC) for the Premises. Landlord shall install
a new electrical submeter in Tenant's Premises.
(c) Landlord to pay twelve cents (SO.12) per month, per usable square
foot, for Tenant's utilities service. Tenant to pay any additional cost for said
monthly service.
(d) Normal janitorial service shall be provided to the premises, and
the common areas of the Building, five nights per week.
The foregoing services and utilities shall be provided in an amount
and at such times customarily used in similar type buildings in the geographical
area in which the Landlord competes. The interruption or curtailment of any such
services caused by any event beyond the control of Landlord, including repairs,
renewals, improvements, alterations, strikes, lockouts, accidents, inability to
obtain fuel or supplies, or voluntary or involuntary governmental regulation
shall not constitute eviction or disturbance of Tenant's use of the Premises and
shall not entitle Tenant to abatement of rent or any other claim against
Landlord. Landlord shall use its best efforts at all times to continue said
service to the common areas.
19. Security Deposit. Tenant has, contemporaneously with the execution
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of this Lease, deposited with Landlord the sum of $7,800.00 (Seven Thousand
Eight Hundred Dollars) receipt of which is hereby acknowledged by Landlord. This
sum shall be held by Landlord as security for the faithful performance by Tenant
on all of the terms, covenants and conditions of this Lease by Tenant to be kept
and performed during the term hereof. If at any time during the term of this
Lease any of the rent herein reserved shall be overdue and unpaid or any other
sum payable by Tenant to Landlord here under shall be overdue and unpaid,
the Landlord May, at its option (but Landlord shall not be required to),
appropriate and apply any portion of said $7,800.00 to the payment of any such
overdue rent or other sum. In the event of the failure of Tenant to keep and
perform all of the terms, covenants and conditions of this Lease to be kept and
performed by Tenant, then at the option of Landlord, it may, after terminating
this Lease, appropriate and apply said entire $7,800.00 (or so much thereof as
may be necessary) to compensate Landlord for all loss or damage sustained or
suffered by Landlord due to such breach on the part of Tenant. Should the entire
$7,800.00 (or any portion thereof) be appropriated or applied by Landlord for
the payment of overdue rent or other sums then due and payable to Landlord by
Tenant here under, then Tenant shall, upon written demand of Landlord, forthwith
remit to Landlord a sufficient amount in cash to restore said security to the
original sum of $7,800.00. Tenant's failure to do so within ten (10) days after
receipt of such demand shall constitute a breach of this Lease. Should Tenant
comply with all of said terms, covenants and conditions and promptly pay all
of the rental herein provided as it falls due, and all other sums payable by
Tenant to Landlord here under, then said
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falls due, and all other sums payable by Tenant to Landlord here under, then
said sum shall be returned in full to Tenant at the end of the term of this
Lease or upon the earlier termination of the Lease under the provisions of
Section 15 hereof.
20. Operating Expenses and Property Taxes. (a) Landlord shall pay for
-------------------------------------
the cost of insurance for the Building, water and sewer, elevator, maintenance
management, scavenger and other services and expenses related to the Premises
and the Building. Landlord shall also pay for PG&E, scavenger and janitorial for
the common areas of the Building.
(b) Tenant shall be responsible for paying its proportionate share of
increases in actual operating expenses and real property taxes for the Premises
above a Base Year of 1996. Said increases shall not exceed ten percent (10%) in
any given year. Tenant shall not be required to pay for any capital repairs or
alterations other than those which may be required by applicable codes, law or
regulations which become effective after lease commencement, and only then
depreciated over the useful life of the repair or alteration. Tenant shall not
pay operating expense and real estate tax increases until after the first
anniversary of the Commencement Date of the lease. Tenant shall be entitled to
review the documentation for such expenses.
21. Building Directory/Signage. Landlord, at its cost, shall place,
--------------------------
construct and maintain a directory, which shall be located in the lobby of the
Building, exclusively for the display of the names of tenants in the Building
and their respective suite numbers.
(a) Tenant and Landlord shall agree on all signage requested by
Tenant, which signage must comply with Building standards already in place. All
signage shall be furnished and installed at Tenant's expense. Landlord shall
cooperate, without charge to Tenant, in assisting Tenant in obtaining any
required government approvals.
22. Parking. Landlord agrees Super Parking, Inc., a tenant of
-------
Landlord, shall provide twenty five (25) parking stalls in the surface parking
lots adjacent to and within one block of the Building. The rate charged to
Tenant by Super Parking, Inc. for these parking stalls shall be $75.00 per month
per stall for the first year of the lease, subject to fair market increases not
to exceed three percent (3%) per annum.
23. Real Property Taxes. Landlord shall be responsible for the payment
-------------------
of all "real property" taxes on the property of which the Premises is a part
during the lease term. Tenant shall not be responsible for any increase in taxes
due to a sale or transfer of the property. "Real property tax" as used herein
shall include all real estate and personal property taxes (excluding any
personal property taxes assessed any other tenant of the Building), assessments
and any and all other impositions, fees and charges, whether extraordinary or
ordinary, general or special, which may at any time or from time to time during
the term of this Lease be levied or assessed or imposed or charged against or
with respect to, or become a lien against, (i) the Premises, (ii) the Building,
(iii) the land on which the Building is located, (iv) any part of the foregoing,
(v) this Lease, (vi) the operation of the Building or the Premises or any part
thereof by Landlord, Tenant, or Owner (including, without limitation, any and
all payroll, transit impact, housing fund, child care funds, license, business
and occupation taxes, fees, charges and other impositions), and any taxes or
other impositions imposed in lieu of said taxes, assessments, fees, charges and
other impositions, and any taxes, assessments, fees and other impositions
imposed
10
<PAGE>
upon the rental here under or under the Master Lease by any government authority
having jurisdiction thereover. Without limiting the generality of the foregoing,
"real property" tax shall also include all taxes on Owner or Landlord measured
by gross receipts from the Building levied during the term hereof under the
provisions of the Gross Receipts Tax Ordinance of the City and County of San
Francisco as from time to time amended, or any statutory successor, or under the
provisions of any statute, ordinance or regulation of any other governmental
body. "Real property" taxes shall be prorated at the commencement and at the
expiration of the term hereof. "Real property" taxes shall not include any
estate or inheritance taxes or any net income tax of Landlord or owner unless
the same is imposed in lieu of or as a replacement for what would otherwise be a
"real property" tax, or any taxes which Landlord is not required to pay under
the terms of the Master Lease.
24. Personal Property Taxes.
-----------------------
(a) Tenant shall pay prior to deliquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property (collectively "personal property") of Tenant contained in the Premises
or elsewhere. When possible, Tenant shall cause all personal property to be
assessed and billed separately from the Premises, Building or land on which they
are located.
(b) If any of Tenant's personal property shall be assessed with any
real property of Owner or Landlord, Tenant shall pay Landlord the taxes
attributable to Tenant's personal property within ten (10) days after receipt of
a written statement setting forth the taxes applicable.
25. Rental Adjustments. See paragraph 3.
------------------
26. Condemnation. If the Premises or any portion thereof are taken
------------
under power of eminent domain, or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than fifteen percent (15%)
of the floor area of the Premises is taken by condemnation, Tenant may, at
Tenant's option, to be exercised in writing only within ten (10) days after
Landlord shall have given Tenant written notice of such taking (or in the
absence of such notice, within ten [10] days after the condemning authority
shall have taken possession), terminate this Lease as of the date the condemning
authority takes such possession. If Tenant does not terminate the Lease in
accordance with the foregoing, the Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the rent shall be
reduced in the proportion of the floor area taken bears to the total floor area
of the Premises. Any award for the taking of all or any part of the Premises
under the power of eminent domain or any payment made under threat of the power
of eminent domain shall be the property of Landlord, whether such award shall be
made as compensation for diminution in value of the leasehold or for the taking
of the fee (or any interest therein), or as severance damages; provided,
however, that Tenant shall be entitled to any award for loss of or damage to
Tenant's trade fixtures and removable personal property, Tenant's relocation
expenses and interruption of Tenant's business. In the event that this Lease is
not terminated by reason of such condemnation, Landlord shall, to the extent of
severance damages received by Landlord in connection with such condemnation,
repair any damage to the Premises caused by such condemnation except to the
extent that Tenant has been reimbursed therefor by the condemning authority.
Tenant shall pay any amount in excess of
11
<PAGE>
such severance damages required to complete such repair. If there is a
condemnation of any portion of the Building or the land on which the Building is
located, and such taking is of so much of the Building that Landlord determines
that it cannot resonably and economically operate the Building for the purpose
for which it was operated prior to such condemnation, Landlord may, in such an
event terminate this Lease by giving Tenant written notice thereof with ninety
(90) days of the date of such condemnation and, in such a case, any award will
be located as provided above.
27. Attornment. See Exhibit E Recognition and Attornment Agreement.
----------
28. General Provisions.
------------------
28.1 Estoppel Certificate. (a) Tenant shall at any time upon not less
--------------------
than ten (10) days prior written notice from Landlord execute, acknowledge and
deliver to Landlord a statement in writing certifying (i) that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and that this Lease, as so modified, is in full force and
effect) and the date to which the rent and other charges are paid in advance, if
any, (ii) 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
(iii) such other matters as may be reasonably requested by Landlord. Any such
statement may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Land and improvements in which the Premises are located or
any interest therein.
(b) Tenant's failure to deliver such statement within such time shall
be a material breach of this Lease and shall be conclusive upon the Tenant (i)
that this Lease is in full force and effect, without modification except as may
be represented by Landlord, (ii) that there are no uncured defaults in
Landlord's performance, and (iii) that not more than one month's rent has been
paid in advance.
(c) If Landlord desires to finance or refinance its interest in the
property and improvements upon which the Premises are located, or any parts
thereof, Tenant hereby agrees to deliver to any lender designated by Landlord
such financial statements of Tenant as may be reasonably required by lender.
Such statements shall include the past three (3) years' financial statements of
Tenant. All such financial statements shall be received by Landlord in
confidence and shall be used only for the purposes herein set forth.
28.2 Severability. If the invalidity of any provision of this Lease is
------------
determined by a court of competent jurisdiction, it shall in no way affect the
validity of any other provision hereof.
28.3 Late Charges. Tenant hereby acknowledges that the 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 amounts of which would be
impossible to ascertain. Such cost include, but are not limited to, processing
and accounting charges, late charges which may be imposed upon Landlord by the
terms of the Master Lease or any mortgage or deed of trust covering Landlord's
interest in the property on which the Premises is located, interest penalties
and lost opportunity. Accordingly, if any installment of rent or an other sum
due from Tenant shall not be received by Landlord within five (5) days after
such amount shall be due, Tenant shall pay Landlord a late charge equal to Five
Hundred Dollars
12
<PAGE>
($500.00) The parties hereby agree that such late charge represent a fair and
reasonable estimate of the costs Landlord will incur by reason of late payment
by Tenant. Acceptance of such late charge by Landlord after Tenant's first late
payment shall in no event constitute a waiver of Tenant's default with respect
to such overdue amount nor prevent Landlord from exercising any other rights and
remedies granted hereunder.
28.4 Interest on Past-Due Obligations. Except as expressly provided
--------------------------------
herein, any amount due Landlord and not paid when due shall bear interest from
the date due at a rate equal to the lesser of (a) three percent (3%) above the
reference rate or the publicly announced prime rate of interest charged on such
due date by the San Francisco Main Office of Bank of America, N.T. & S.A. (or
any successor bank thereto) to substantial commercial borrowers for ninety (90)
day loans or (b) the maximum rate permitted by law. Such payment of interest
shall not excuse or cure any default by Tenant under this Lease; provided,
however, that interest shall not be payable on late charges incurred by Tenant.
28.5 Time is of the Essence. Time is of the essence.
----------------------
28.6 Captions. Section headings in this Lease are for convenience
--------
purposes only and shall not be interpreted as a substantive part of this Lease.
28.7 Recording. Tenant shall not record this Lease or any memorandum
---------
of this Lease without Landlord's prior written consent, and such recordation
shall, at the option of Landlord, constitute a noncurable default of Tenant
hereunder.
28.8 Cumulative Remedies. No remedy or election hereunder shall be
-------------------
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
28.9 Covenants and Conditions. Each provision of this Lease
------------------------
performable by Tenant shall be deemed both a covenant and a condition.
28.10 Binding Effect: Choice of Law. Subject to any provisions hereof
-----------------------------
restricting assignment or subletting by Tenant, this Lease shall bind the
parties, their personal representatives, successors and assigns. This Lease
shall be governed by the laws of the State of California.
28.11 Subordination. (a) This Lease, at Landlord's option, shall be
-------------
subordinate to any ground lease, mortgage, deed of trust, or any other
hypothecation or security now or hereafter placed upon the real property of
which the Premises are a part (or upon Landlord's leasehold interest in such
real property) and to any and all advance made on the security thereof and to
all renewals, modifications, consolidations, replacements and extensions
thereof. Notwithstanding such subordination, Tenant's right to quiet possession
of the Premises shall not be disturbed by Landlord or any person succeeding to
Landlord's interest in the Premises if Tenant is not in default and so long as
Tenant shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Tenant, this Lease shall be deemed prior to such mortgage,
deed of trust or ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
13
<PAGE>
recording thereof.
(b) Tenant agrees to execute any documents required to effectuate such
subordination or to make this Lease prior to the lien of any mortgage, deed of
trust or ground lease, as the case may be, and failing to do so within ten (10)
days after written demand, does hereby make, constitute and irrevocably appoint
Landlord as Tenant's attorney-in-fact and in Tenant's name, place and stead, to
do so.
28.12 Waiver of Subrogation. So long as the applicable policy is not
---------------------
affected and the cost thereof is not increased thereby, each of the parties
hereto does hereby waive its entire right of recovery against the other for
any damages caused by an occurrence insured against such party and the rights of
any insurance carrier to be subrogated to the rights of the insured under the
applicable policy.
28.13 Modification of Public Areas. Landlord shall have the right to
----------------------------
change or modify public areas of the Building wherein the Premises are located
so long as said changes or modifications do not materially interfere with or
affect Tenant's quiet enjoyment.
28.14 Quitclaim Deed. At the expiration of the term of this Lease or
--------------
its earlier termination under the terms hereof, Tenant, upon Landlord's written
request, shall provide within ten (10) days a quitclaim deed in favor of
Landlord or its assigns whereby Tenant releases any and all of its interest in
the Premises or the land and improvements of which the Premises are a part.
28.15 Merger. The voluntary or other surrender of the Lease by Tenant,
------
or a mutual cancellation thereof, or a termination by Landlord, shall not work
as a merger, and shall, at the option of Landlord, operate as an assignment to
Landlord of any or all subtenancies.
28.16 Corporate Authority. If any party executing this Lease is a
-------------------
corporation, such 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.
28.17 Quiet Possession. Upon Tenant paying the fixed rent reserved
----------------
hereunder and observing 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
of the provisions of this Lease.
28.18 Advertisements and Signs. Landlord reserves the exclusive
------------------------
right to use the exterior walls and roof of the Premises and the Building and
access thereto and Tenant shall not inscribe, paint or affix any signs,
advertisements, placards or awnings on the exterior walls, windows or roof of
the Premises or the Building without prior written consent of Landlord. It is
understood and agreed that any sign so placed on the premises or building with
consent of Landlord shall be removed by Tenant at termination of this Lease and
any damage or injury to the Premises resulting therefrom shall be repaired by
Tenant at its sole cost. In the event of the failure of Tenant to remove such
signs or repair any damage resulting there from, Landlord may remove said signs
and repair at the Tenant's expense.
28.19 Auctions. Tenant shall hold no auction upon the Premises without
--------
14
<PAGE>
the prior written consent of Landlord.
28.20 Entry by Landlord and Owner. Tenant shall permit Owner and
---------------------------
Landlord and their agents to enter into and upon the premises with twenty four
(24) hour notice to Tenant, except in the case of emergency, for the purpose of
inspecting the same, for the purpose of showing the Premises to prospective
tenants, prospective buyers, lenders and insurance carriers, and for the purpose
of maintaining the Building in which the Premises are situated, or for the
purpose of making repairs.
28.21 Cost of Suit. If either party becomes a party to any
------------
litigation concerning this Lease, the Premises, or the Building or the land
thereunder, by reason of any act or omission of the other party or its
authorized representatives, and not by any act or omission of the party that
becomes a party to that litigation or any act or omission of its authorized
representatives, the party that causes the other party to become involved in the
litigation shall be liable to that party for reasonable attorneys' fees and
court costs incurred by it in the litigation as fixed by a court of competent
jurisdiction. If either party commences an action against the other party
arising out of or in connection with this Lease, the prevailing party shall be
entitled to have and recover from the losing party reasonable attorneys' fees
and costs of suit as fixed by a court of competent jurisdiction.
28.22 Notices. All notices or demands to be given to Landlord or
-------
Tenant shall be deemed sufficiently served if the same is in writing and is
enclosed in a sealed envelope and is delivered personally or is deposited in the
United States Mail, certified or registered mail, return receipt requested,
postage prepaid and addressed to the Tenant at City Search, 4502 Dyer Street,
Suite 201, La Crecenta, CA 91214, and to Landlord at 680 Eighth St., San
Francisco, California 94103. Any such notice shall be deemed to have been served
and received upon such personal delivery or upon such mailing; provided,
however, if such notice pertains to the change of address of either party, such
notice shall be deemed to have been served only upon actual receipt thereof.
28.23 Sale or Transfer of Premises. If Landlord sells or transfers all
----------------------------
or any portion of its interest in the land and improvements of which Premises
are a part, Landlord, on consummation of the sale or transfer, shall be released
and discharged from any liability under this Lease upon the transfer of all
prepaid rent and any unexpended security deposit to Landlord's successor.
28.24 Financial Statements. Tenant shall cause to be furnished to
--------------------
Landlord within ten (10) days of preparation its most current financial
statement and balance sheet prepared in accordance with generally accepted
accounting principles. Said information as a minimum shall be furnished not less
frequently than annually.
28.25 Brokerage. Julien J. Studley, Inc. is acting as Tenant's
---------
exclusive agent in this transaction. Landlord shall pay to Julien J. Studley,
Inc. a brokerage commission of five percent (5%) of the fully serviced rental
paid by Tenant during the initial lease term. The first half of the commission
will be due and payable upon complete execution of the lease. The second half
will be due and payable sixty (60) days from the Commencement Date of the lease.
28.26 Exhibits. Exhibits A through E inclusive, are incorporated in
--------
15
<PAGE>
this Lease and made a part hereof.
28.27 Integrated Agreements -- Modification. This Lease contains all
-------------------------------------
the agreements of the parties and cannot be amended or modified except by a
written agreement executed by all parties or their successors.
28.28 Rules and Regulations. The Commencement of the lease term is
----------------------
expressly conditioned upon Landlord being able to complete the desired
remodeling to his satisfaction and further conditioned upon Landlord being able
to obtain all of the necessary permits. Tenant shall comply with Landlord's
rules and regulations for the Building attached hereto as Exhibit D and to such
modifications and amendments thereto as may be made by Landlord after the date
of this Lease.
28.29 Joint and Several Liability. All of the terms, covenants and
---------------------------
conditions contained in this Lease to be performed by either party, if such
party shall consist of more than one person or organization, shall be deemed
joint and several.
29. Primary Use. In no event shall the premises be used for any
-----------
purpose other than as described in paragraph 7 herein.
30. Insolvency or Bankruptcy. The appointment of a receiver to take
------------------------
possession of all or substantially all of the assets of Tenant or of the
operations of Tenant in the demised premises, or a general assignment by Tenant
for the benefit of creditors, or the filing of proceedings in insolvency or
bankruptcy by or against Tenant shall entitle Landlord, at its option to
terminate the lease; provided, however, if Tenant cures its insolvency or
bankruptcy within thirty (30) days of written notice thereof, the lease shall
not terminate.
31. Freight Movement. Furniture, merchandise and other bulk objects
----------------
shall be brought into and removed from the Building only through the freight
entrance, and the time and manner of movement of such objects shall be subject
to reasonable requirements of Landlord. Freight movement to and from the
premises shall be accomplished as promptly as possible. Such moving shall be at
Tenant's sole expense. No such objects shall be brought into or removed from the
Building during any major market exhibition without the prior written consent of
Landlord.
32. Prior Entry. Tenant shall have the right to install telephone and
-----------
computer cables, and equipment so long as Tenant performs such work through a
licensed contractor and said work is done in a good workmanlike manner to City
and County specifications. Lessee shall be responsible for all costs and
expenses occasioned by such installation and work. In such event, lessee shall
be bound by all of the terms, covenants and conditions of this Lease Agreement.
33. Option Premises/Right of First Refusal. Suite 244, the option
--------------------------------------
premises (600 rentable square feet, approximately). Tenant shall have the option
to lease the Option Premises, by providing written notice to Landlord within one
hundred twenty (120) days of the Commencement Date of the lease. The Option
Premises shall be leased under the same terms and conditions as the Initial
Premises, including Tenant Improvements to be determined. The Commencement Date
for the Option Premises shall be within sixty (60) days of the date the option
is exercised.
(a) Tenant shall be granted the continuing Right of First Refusal to
lease
16
<PAGE>
Option Premises and contiguous space to the Premises, that is or comes available
throughout the initial lease or renewal term, including the Option Premises.
The Lease of Suite 255 expires on May 31, 2001. The Lease of Suite
231 expires on June 30, 1997 and there is one (1) three (3) year option, which
if exercised, expires on June 30, 2000.
(b) Landlord shall provide written notifications to Tenant of all good
faith acceptable offers received for any space that comes available pursuant to
this right of first refusal. Tenant shall have seven (7) business days in which
to elect to lease such space, or any portion thereof, at the terms presented in
such written notification from the Landlord, including rent at fair market
value. Landlord, at Landlord's sole cost, shall construct in the First Refusal
premises tenant improvements of the same quality and scope as those constructed
in the Initial Premises. In the event Tenant elects not to exercise its right to
lease any such space, Landlord may offer such space to third parties upon
substantially the same terms and conditions that it offered the space to Tenant.
34. Option To Extend. Tenant shall have the right to renew the lease
----------------
for one (1) three (3) year period. Notice for the renewal option shall be given
to Landlord in writing no later than four (4) months prior to the expiration of
the prior term. If said Option is exercised by Tenant, the rent shall be
increased by 3% at the end of years three (3), four (4), and five (5).
Executed at San Francisco, California, on May 31, 1996.
------
LANDLORD TENANT
SOBEL BUILDING DEV. PARTNERS
[SIGNATURE ILLEGIBLE] /s/ Thomas Layton
- ---------------------------- --------------------------------
For Leon Baumgarten Thomas Layton
General Partner Chief Operating Officer
Perfect Market, Inc.
17
<PAGE>
ALL OF THE REAL PROPERTY SITUATE IN THE CITY AND COUNTY OF SAN FRANCISCO,
STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:
PARCEL ONE:
----------
BEGINNING AT THE POINT OF INTERSECTION OF THE NORTHWESTERLY LINE OF
TOWNSEND STREET AND THE SOUTHWESTERLY LINE OF EIGHTH STREET IN THE CITY OF SAN
FRANCISCO; THENCE SOUTH 45 DEGREES 08 FEET 40 INCHES (THE BEARING OF SAID
NORTHWESTERLY LINE OF TOWNSEND STREET BEING TAKEN AS SOUTH 45 DEGREES 08 FEET 40
INCHES WEST FOR THE PURPOSE OF THIS DESCRIPTION) ALONG SAID NORTHWESTERLY LINE
OF TOWNSEND STREET, A DISTANCE OF 81.75 FEET TO THE POINT OF BEGINNING OF THE
PROPERTY TO BE DESCRIBED; THENCE FROM SAID POINT OF BEGINNING SOUTH 45 DEGREES
08 FEET 40 INCHES WEST ALONG SAID NORTHWESTERLY LINE OF TOWNSEND STREET, A
DISTANCE OF 18.53 FEET TO THE POINT OF INTERSECTION OF SAID NORTHWESTERLY LINE
OF TOWNSEND STREET AND THE NORTHERLY LINE OF DIVISION STREET; THENCE SOUTH 25
DEGREES 39 FEET 21 INCHES WEST ALONG SAID NORTHERLY LINE OF DIVISION STREET, A
DISTANCE OF 207.19 FEET TO A POINT ON THE EASTERLY LINE OF THAT CERTAIN PARCEL
OF LAND CONVEYED BY THE WESTERN PACIFIC RAILROAD COMPANY TO THE STATE OF
CALIFORNIA, BY DEED RECORDED FEBRUARY 26, 1952, IN BOOK 5876, PAGE 453 OFFICIAL
RECORDS OF SAN FRANCISCO COUNTY; THENCE NORTHWESTERLY ALONG A 1147.0 FOOT RADIUS
CURVE TO THE LEFT (THE CENTER OF SAID CURVE BEARS SOUTH 23 DEGREES 06 FEET 03
INCHES WEST) THROUGH AN ANGLE OF 4 DEGREES 59 FEET 48 INCHES, AN ARC DISTANCE OF
100.03 FEET; THENCE NORTHEASTERLY ALONG A 372.745 FOOT RADIUS CURVE TO THE RIGHT
(THE CENTER OF SAID CURVE BEARS SOUTH 65 DEGREES 15 FEET 13 INCHES EAST) THROUGH
AN ANGLE OF 9 DEGREES 39 FEET 53 INCHES, AN ARC DISTANCE OF 62.88 FEET; THENCE
TANGENT TO SAID CURVE NORTH 34 DEGREES 24 FEET 40 INCHES EAST, A DISTANCE OF
141.77 FEET TO A POINT ON SAID SOUTHWESTERLY LINE OF EIGHTH STREET; THENCE
SOUTH 44 DEGREES 51 FEET 20 INCHES EAST ALONG SAID SOUTHWESTERLY LINE OF EIGHTH
STREET, A DISTANCE OF 166.30 FEET; THENCE SOUTH 45 DEGREES 08 FEET 40 INCHES
WEST, A DISTANCE OF 81.75 FEET; THENCE SOUTH 44 DEGREES 51 FEET 20 INCHES EAST,
A DISTANCE OF 93.0 FEET TO THE POINT OF BEGINNING, CONTAINING 39, 808 SQUARE
FEET, MORE OR LESS, AND BEING A PORTION OF 100 VARA BLOCK NO. 420.
PARCEL TWO:
----------
BEGINNING AT THE POINT OF INTERSECTION OF THE NORTHWESTERLY LINE OF
TOWNSEND STREET AND THE SOUTHWESTERLY LINE OF EIGHTH STREET IN THE CITY AND
COUNTY OF SAN FRANCISCO; THENCE FROM SAID POINT OF BEGINNING SOUTH 45 DEGREES 08
FEET 40 INCHES WEST (THE BEARING OF SAID NORTHWESTERLY LINE OF TOWNSEND STREET
BEING TAKEN AS SOUTH 45 DEGREES 08 FEET 40 INCHES WEST FOR THE PURPOSE OF THIS
DESCRIPTION) ALONG SAID NORTHWESTERLY LINE OF TOWNSEND STREET, A DISTANCE OF
81.75 FEET TO A POINT ON THE NORTHEASTERLY LINE OF PARCEL CONVEYED BY THE
WESTERN PACIFIC RAILROAD COMPANY TO J.W. EHRLICH, TRUSTEE FOR THE HEIRS OF THE
PRINCIPALS OF MAX SOBEL WHOLESALE LIQUORS, BY DEED RECORDED OCTOBER 18, 1955, IN
BOOK 6717 OF OFFICIAL RECORDS, AT PAGES 161 TO 166, INCLUSIVE IN THE OFFICE OF
THE RECORDER OF THE CITY AND COUNTY OF SAN FRANCISCO; THENCE NORTH 44 DEGREES 51
FEET 20 INCHES WEST ALONG SAID NORTHEASTERLY LINE, A DISTANCE OF 93.00 FEET;
THENCE AT A RIGHT ANGLE NORTH 45 DEGREES 08 FEET 40 INCHES EAST ALONG THE
SOUTHEASTERLY LINE OF SAID PARCEL CONVEYED TO J.W. EHRLICH, TRUSTEE, A DISTANCE
OF 81.75 FEET TO A POINT ON SAID SOUTHWESTERLY LINE OF EIGHTH STREET; THENCE
SOUTH 44 DEGREES 51 FEET 20 INCHES EAST ALONG SAID SOUTHWESTERLY LINE OF EIGHTH
STREET, A DISTANCE OF 93.00 FEET TO THE POINT OF BEGINNING.
BEING PART OF 100 VARA BLOCK NO. 420.
EXHIBIT "A"
<PAGE>
PARCEL THREE
------------
BEGINNING AT THE MOST NORTHERLY CORNER OF THAT CERTAIN PARCEL OF LAND
CONVEYED BY THE WESTERN PACIFIC RAILROAD COMPANY, TO J. W. EHRLICH, TRUSTEE FOR
SHERON SOBEL, CYNTHIA SOBEL, JOANNE COHEN AND STEVEN COHEN, AS RECORDED OCTOBER
18, 1955 IN VOLUME 6717, AT PAGES 161 TO 166 INCLUSIVE, OFFICIAL RECORDS, OF THE
CITY AND COUNTY OF SAN FRANCISCO, SAID POINT OF BEGINNING, ALSO BEING ON THE
SOUTHERLY LINE OF 8TH STREET, SAID CITY OF SAN FRANCISCO; THENCE FROM SAID POINT
OF BEGINNING SOUTH 34 DEGREES 24 FEET 40 INCHES WEST ALONG THE WESTERLY LINE OF
SAID PARCEL CONVEYED TO J.W. EHRLICH, TRUSTEE, A DISTANCE OF 141.77 FEET; THENCE
CONTINUING ALONG SAID WEST LINE ON THE ARC OF A CURVE TO THE LEFT HAVING A
RADIUS OF 372,745 FEET (THE CENTER OF SAID CURVE BEARS SOUTH 55 DEGREES 35 FEET
20 INCHES EAST), THROUGH A CENTRAL ANGLE OF 9 DEGREES 39 FEET 53 INCHES, AN ARC
DISTANCE OF 62.88 FEET, TO A POINT ON THE NORTHEASTERLY LINE OF THE PARCEL OF
LAND CONVEYED BY THE WESTERN PACIFIC RAILROAD COMPANY TO THE STATE OF
CALIFORNIA, AS RECORDED FEBRUARY 26, 1952 IN VOLUME 5876, AT PAGE 453, OFFICIAL
RECORDS OF THE CITY AND COUNTY OF SAN FRANCISCO; THENCE NORTHERLY AND WESTERLY
ALONG SAID NORTHEASTERLY PROPERTY LINE ALONG THE ARC OF A CURVE TO THE LEFT
HAVING A RADIUS OF 1,147.00 FEET (THE CENTER OF SAID CURVE BEARS SOUTH 78
DEGREES 06 FEET 15 INCHES WEST), THROUGH A CENTRAL ANGLE OF 4 DEGREES 59 FEET 29
INCHES, AN ARC DISTANCE OF 99.92 FEET; THENCE ON THE ARC OF A CURVE TO THE RIGHT
HAVING A RADIUS OF 372.245 FEET (THE CENTER OF SAID CURVE BEARS SOUTH 73 DEGREES
57 FEET 51 INCHES EAST), THROUGH A CENTRAL ANGLE OF 24 DEGREES 11 FEET 13
INCHES, AN ARC DISTANCE OF 157.14 FEET, TO A POINT ON THE SOUTHERLY LINE OF 8TH
STREET; THENCE SOUTH 44 DEGREES 51 FEET 20 INCHES EAST ALONG SAID SOUTHERLY LINE
OF 8TH STREET, A DISTANCE OF 68.49 FEET TO THE POINT OF BEGINNING.
BEING A PORTION OF 100 VARA BLACK 420.
RESERVING FROM Parcel One of said real property (i) the free-standing sign
on the southerly portion of said Parcel One and (ii) an easement of ingress and
egress from Division Street across said Parcel One and of use of the area within
said Parcel One immediately surrounding said sign for the purposes of operating,
maintaining, repairing and replacing said sign for the benefit of Grantors,
their assigns, agents and invitees.
<PAGE>
EXHIBIT C
---------
Landlord shall provide Tenant's improvements as follows:
1. Three (3) private offices with sliding glass doors.
2. Two (2) conference rooms with glass windows (panels).
3. Four, fifty four inch (54") high walls.
4. Open kitchen with sink, counter and cabinetry.
5. Vinyl tile in kitchen.
6. Supply room or shelving.
7. Carpet throughout of Tenant's choice (not to exceed $15.00 per square
yard) installed.
8. Painting throughout in colors of Tenant's choice with Landlord
approval.
9. The exposed structural columns within the Premises shall be
"fired-out" with a finish acceptable to Tenant.
10. Lighting sufficient to illuminate desk-heights surfaces.
11. Electrical outlets, located at a ratio of one (1) outlet per twelve
(12) lineal feet of partition for the office areas, including the
fifty four (54") high walls. Landlord agrees to install conduit (for
cabling) at each electrical outlet.
12. Electrical outlets shall be fifty percent (50%) duplex and fifty
percent (50%) fourplex. Four dedicated outlets will be installed.
13. Tenant to plan, install, and pay for all telephone equipment, computer
cables, and computer equipment.
14. Landlord shall improve to building standard the appearance of the
secondary entrance of the stairway from Eighth Street.
15. See Exhibit C-1 for Tenant's floor plan.
16. Landlord agrees that all improvements shall be to the standard of
Suite 244.
<PAGE>
EXHIBIT C-1(a)
[EIGHTH STREET -- PARTIAL SECOND FLOOR PLAN]
<PAGE>
EXHIBIT B
[EIGHTH STREET -- PARTIAL SECOND FLOOR PLAN]
<PAGE>
EXHIBIT C-1(b)
PERFECT MARKET/CITY SEARCH
[EIGHTH STREET -- PARTIAL SECOND FLOOR PLAN]
<PAGE>
EXHIBIT D
---------
RULES AND REGULATIONS
---------------------
1. The sidewalks, halls, passages, exits, entrances, elevators and
stairways of the building shall not be obstructed by any of the tenants or used
by them for any purpose other than for ingress to and egress from their
respective premises. The halls, passages, exits, entrances, and stairways are
not for the general public, and Landlord shall, in all cases, retain the right
to control and prevent access thereto of all persons whose presence, in the
judgment of Landlord, would be prejudicial to the safety, character, reputation
and 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 its business, unless such
persons are engaged in illegal activities.
2. No sign, placard, picture, name, advertisement or notice visible
from the exterior of any tenant's premises shall be inscribed, painted, affixed
of otherwise displayed by any tenant on any part of the building without the
prior written consent of Landlord. Landlord will adopt and furnish to tenant
general guidelines relating to signs inside the building on the office floors.
Tenant agrees to conform to such guidelines, but may request approval of
Landlord for modifications, which approval will not be unreasonably withheld.
All approved signs of lettering on doors shall be printed, painted, affixed or
inscribed at the expense of the tenant by a person approved by Landlord, which
approval will not be unreasonably withheld. Material visible from outside the
building will not be permitted. Landlord may from time to time replace the
directory sign with a new sign of equal or better quality. Landlord may, from
time to time, remove and/or relocate signs placed outside of any tenant's
premises.
3. The premises shall not be used for lodging. No cooking shall be
done or permitted by any tenant on the premises, except that use by the tenant
of Underwriters's Laboratory approved equipment for brewing coffee, tea, hot
chocolate and similar beverages shall be permitted, provided that such use is in
accordance with all applicable federal, state and city laws, codes, ordinances,
rules and regulations.
4. Landlord will furnish each tenant free of charge a key to each
door lock in the premises. Landlord may make a
EXHIBIT D
---------
-1-
<PAGE>
reasonable charge for any additional keys. No tenant shall have any duplicate
keys made without prior written approval of Landlord, no tenant shall alter any
lock or install a new or additional lock or any bolt on any door of its premises
without the prior written consent of Landlord. Tenant shall in each case furnish
Landlord with a key for any such lock. Each tenant, upon the termination of its
tenancy, shall deliver to Landlord all keys to doors in the building which shall
have been furnished to tenant.
5. No tenant shall use or keep in the premises or the building any
kerosene, gasoline or inflammable or combustible fluid or material other than
limited quantities thereof reasonably necessary for the operation or maintenance
of office equipment, or, without Landlord's prior written approval, use any
method of heating or air conditioning other than supplied by Landlord, no
tenant shall use or keep or permit to be used or kept any foul or noxious gas or
substance in the premises, or permit or suffer the premises to be occupied or
used in a manner offensive or objectionable to Landlord or other occupants of
the building by reason of noise, odors or vibrations, or interfere in any way
with other tenants or those having business therein.
6. Landlord shall have the right, exercisable without notice and
without liability to any tenant, to change the name and street address of the
building.
7. 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, 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.
8. The Premises shall not be used for manufacturing of any kind, or
any business or activity other than that specifically provided for in Tenant's
lease.
EXHIBIT D
---------
-2-
<PAGE>
9. 110 tenant shall install any radio or television antenna,
loudspeaker, or other device on the roof or exterior walls of the building.
10. There shall not be used in any space, or in the public halls 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 the Building or kept in or about its premises.
11. EACH TENANT SHALL STORE ALL ITS TRASH AND GARBAGE WITHIN ITS
------------------------------------------------------------
PREMISES.
- --------
12. 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
of San Francisco without being in violation of any low or ordinance governing
such disposal. All garbage and refuse disposal shall be made only through
entryways and elevators provided for such purposes and at such times as Landlord
shall designate.
13. Canvassing, peddling, soliciting, and distribution of handbills
or any other written materials in the building are prohibited, and each tenant
shall cooperate to prevent the same.
14. Landlord may waive any 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 of the tenants of the building.
15. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend in whole or in part the terms,
covenants, agreements and conditions of any lease of premises in the building.
16. 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 the
safety, care and cleanliness of the building, and for the preservation of good
order therein.
EXHIBIT D
---------
-3-
<PAGE>
EXHIBIT E
RECOGNITION AND ATTORNMENT AGREEMENT
This Agreement ("Agreement") is made on __________________________________, 19__
between Cynthia Morris, THE LISS LIVING TRUST U/A DATED 4/15/91 and CHARLES,
AND SHERRI SUGARMAN LIVING TRUST U/A DATED 8/24/90 (collectively
"Masterlandlord"), whose address is 5710 Paradise Drive, Suite 3A, Corte Madera,
CA 94925, SOBEL BUILDING DEVELOPMENT PARTNERS, a California General Partnership
("Landlord"), whose address is 680 Eighth Street, San Francisco, CA 94103, and
Perfect Market, Inc. DBA: City Search ("Tenant"), whose address is
- -------------------------------------
680 Eighth Street, Suite 240 who agree as follows:
- ----------------------------
San Francisco, CA 94103
1. RECITALS. This Agreement is made with reference to the following facts
and objectives.
(a) Master Landlord is the owner in fee of improved real property
located in the City of San Francisco, County of San Francisco, commonly known as
680 Eighth Street.
(b) On January 10, 1986, Master Landlord leased to Landlord and
Landlord leased from Master Landlord, the real property described in this
Agreement. The lease between Master Landlord and Landlord shall be referred to
as 'the Master Lease.
(c) Landlord and Tenant are contemplating entering into a sublease of
a part of the real property (the "Premises"), a copy of which sublease Master
Landlord has received. The sublease shall be referred to as the "Lease".
(d) The parties desire, under the provisions set forth in this
Agreement, to assute to Tenant possession of the Premises for the entire term of
the Lease even if Landlord defaults under the Master Lease or the Master Lease
terminates before expiration of the Lease.
2. MASTER LANDLORD'S CONSENT TO LEASE. Master Landlord consents to Landlord
and Tenant entering into the Lease, without waiver of the restriation in the
Master Lease concerning further assignment or subletting.
3. ATTORNMENT. If after expiration of the applicable period that Landlord
has in which to cure its defaults, Landlord defaults under the Master Lease, the
Master Landlord shall notify the Tenant of the default. On receipt of the notice
from Master Landlord, Tenant shall attorn to Master Landlord and perform all
Tenant's obligations under the Lease directly to Master Landlord as if Master
Landlord were the Landlord under the Lease. If Tenant is not, at the time of the
notice, in default, Master Landlord shall continue to recognize the estate of
Tenant created under the Lease. If Tenant is not in default, the Lease shall
continue with the same force and effect as if Master Landlord and Tenant had
entered into a Lease on the same provisions as those contained in the Lease.
4. TERMINATION OF MASTER LEASE BY DESTRUCTION OR CONDEMATION. If Master
Lease terminates as provided in paragraphs 18 & 20 of the Master Lease, the
Lease shall also terminate on the date that the Master Lease terminates.
5. TENANT'S LIABILITY TO LANDLORD. From the date Tenant attorns to Master
Landlord as provided in this Agreement, Tenant shall not be further liable to
Landlord for performance under the Lease, and Landlord shall return to Tenant,
immediately on Tenant's demand, the security deposit plus accrued interest and
other prepaid sums the Tenant paid to Landlord under provisions of the Lease.
<PAGE>
6. CONDITIONS OF MASTER LANDLORD'S RECOGNITION AND TENANT'S ATTORNMENT.
Master, Landlord's obligation to recognize Tenant's rights under the Lease, and
Tenant's obligation to attorn to Master Landlord, are subject to the following:
(a) Master Landlord and Tenant, from the date of recognition and
attornment, shall have the same rights that can be enforced against each other
as Landlord and Tenant have that can be enforced against each other under the
Lease. Master Landlord shall not be liable for any act or omission of Landlord
and its authorized representatives, shall not be subject to any offsets or
defenses that Tenant has against Landlord, and shall not be bound by any prepaid
rent, security deposit or other prepaid sum that Tenant has paid in advance to
Landlord.
(b) Master Landlord and Tenant immediately shall enter into a written
agreement with the same provisions as those in the Lease, except for any changes
that are necessary because of the substitution of Master Landlord in the place
of Landlord.
7. AMENDMENT OF LEASE. Landlord and Tenant shall not enter into any
agreement that amends the Lease without Master Landlord's consent. Any amendment
of the Lease in violation of this provision shall have no force or effect on
Master Landlord.
8. MISCELLANEOUS.
(a) No Effect on Master Lease. Nothing in this Agreement shall be
deemed to change in any manner the provisions of the Master Lease between Master
Landlord and Landlord, or to waive any right that Master Landlord may now have
or later acquire against Landlord by reason of the Master Lease.
(b) Attorney's Fees. If any commences an action against any of the
other parties arising out of or in connection with this Agreement, the
prevailing party shall be entitled to recover from the losing party reasonable
attorney's fees and costs of suit.
(c) Notice. Any notice, demand, request, consent, approval, or
communication that any party desires or is required to give to another party or
any other person shall be in writing and either served personally or sent by
prepaid, first-class-mail. Any notice, demand, request, consent, approval, or
communication that any party desires or is required to give to the other party
at the address set forth in the introductory paragraph of this Agreement. Any
party may change its address by notifying the other parties of the change of
Address. Notice shall be deemed communicated within forty-eight(48) hours from
the time of mailing if mailed as provided in this paragraph.
(d) Successors. This Agreement shall be binding on and inure to the
benefit of the parties and their successors.
MASTER LANDLORD LANDLORD TENANT
By______________________ By [SIGNATURE ILLEGIBLE] By [SIGNATURE ILLEGIBLE]
-------------------- --------------------
Title___________________ Title Agent for Title COO
----------------- ----------------
Leon Baungerton
General Partner
Page 2
<PAGE>
EXHIBIT 10.19
OFFICE LEASE
790 EAST COLORADO BOULEVARD
PASADENA, CALIFORNIA 91101
Lessor:
BPG PASADENA, L.L.C.,
a Delaware Limited Liability Company
and
Lessee:
CITYSEARCH, INC., a Delaware Corporation
Dated: September 30, 1996
<PAGE>
BARKER PACIFIC GROUP
October 3, 1996
Mr. Brad Ramberg
CitySearch, Inc.
4502 Dyer Street
Suite 201
La Crescenta, CA 91214
Dear Brad:
Attached is a fully executed copy of the Lease for your files.
I am assuming that I will continue to coordinate directly with you
concerning the build-out. Please keep me advised relative to the computer
room facility as I do not want to let the ball drop on our end, relative to
special work that needs to be done in that area.
We look forward to having you relocate to the building, and I will be in
touch with your associate, Bob Dinan, concerning the public information
program.
Very truly yours,
/s/ Michael D. Barker
Michael D. Barker
Managing Director
attachment
cc: Bob Fitzgerald
Drew Planting
MDB/cer
<PAGE>
790 EAST COLORADO BOULEVARD
---------------------------
SUMMARY OF BASIC LEASE INFORMATION
----------------------------------
The undersigned hereby agree to the following terms of this Summary of Basic
Lease Information (the "Summary"). This Summary is hereby incorporated into
and made a part of the attached Office Lease (this Summary and the Office Lease
to be known collectively as the "Lease") which pertains to the office building
and parking structure the "Project") located at 790 East Colorado Boulevard,
Pasadena, California 91101. Each reference in the Office Lease to any term of
this Summary shall have the meaning as set forth in this Summary for such term.
In the event of a conflict between the terms of this Summary and the Office
Lease, the terms of the Office Lease shall prevail. Any capitalized terms used
herein and not otherwise defined herein shall have the meaning as set forth in
the Office Lease.
<TABLE>
<CAPTION>
TERMS OF LEASE DESCRIPTION
-------------- -----------
(References are to the Office Lease)
<S> <C>
1. Date: September 30, 1996
2. Lessor: BPG Pasadena, L.L.C.
790 East Colorado Boulevard
Pasadena, California 91101
Attention: Natalie P. Loucks
With copy to:
Attention: Richard J.Johnson
Barker Pacific Group, Inc.
100 First, Suite 2200
San Francisco, CA 94105
3. Lessee: CITYSEARCH, INC.
4502 Dyer Street, Suite 201
La Crescenta, CA 91214
Attention: Chief Financial Officer
and
790 East Colorado Boulevard
Suite 200
Pasadena, California 91101
Attention: Chief Financial Officer
(After Lease Commencement Date)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4. a. Premises (Article I): 22.389 rentable square feet of space comprising all of Level 2 and a portion
of Level 3 of the Project as set forth in Exhibit B-I attached hereto.
b. Expansion Premises 5.173 rentable square feet of space located on the 3rd floor of the Project
as set forth in Exhibit B-2, attached hereto.
5. Term (Article 3): Five (5) years, Lessee may terminate the Lease after 36 months, subject to:
5.1 Lease Term: (a) no material default of Lease: (b) nine (9) months prior written notice:
(c) payment of five (5) months Base Rental: and (a) payment of all
unamortized Lessee improvement provided by Lessor and unamortized Lease
commissions paid by Lessor at 12% interest rate.
6 Lease Commencement Date: The earlier of (i) the date Lessee commences business in the Premises, and
(ii) the later of (A) November 1, 1996 or (B) the date of Substantial
Completion of the Premises by Lessor (subject to acceleration pursuant to
Section 5 of Exhibit B attached to the Office Lease). The Lease Commencement
Date is scheduled to be November 1, 1996. Lessor shall endeavor to deliver
to Lessee thirty (30) days' prior written notice of Lessor's estimate of when
the date of Substantial Completion of the Premises shall occur. Lessor shall
abate the Annual Base Rental three (3) days for each day the Lease premises
are not substantially complete by November 20. 1996. Lessor's obligation
hereunder shall be subject to Lessee's compliance with its scheduled
commitments as set forth in the Work Letter (Exhibit D).
7. Lease Expiration Date: The last day of the month in which the 60th month anniversary of the Lease
Commencement Date occurs.
8. Base Rent (Article 4)
</TABLE>
<TABLE>
<CAPTION>
Annual
Monthly Rental Rate
Lease Annual Installment per Rentable
Year Base Rent of Base Rent Square Foot
----- --------- ------------ ------------
<S> <C> <C> <C>
Months 1-9 416,435.00 34,702.95 $18.60
Months/9-12 512,653.20 42,721.10 $18.60
2 529,190.40 44,099.20 $19.20
3 562,264.80 46,855.40 $21.00
4 578,802.00 48,233.50 $21.00
5 578,802.00 48,233.50 $21.00
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9. Additional Rent (Article 4)
9.1 Base Year: Basic costs for Calendar year 1997.
9.2 Lessee's Initial Share 21.10% (based upon a Building rentable area). The percentage share is based
of Direct Expenses: on Lessee's ratio of leased premises to the total rentable area of the
Buildings as defined by the BOMA. The percentage share will be adjusted to
include the Expansion Premises upon commencement of the Lease of the
Expansion Premises.
10. Security Deposit (Article 4.9): One month's rent.
11. a. Parking Passes (Article 20.20): Lessee shall be granted a ratio of four (4) parking passes for each 1.000
square feet of its Premises and expansion premises and right of first offer
space.
Monthly parking passes, based on stipulated ratio of passes, shall be:
Months 1 - 6 No charge
Months 6 - 12 $35.00
Months 13 - 24 $40.00
Months 25 - 36 $45.00
Months 37 - 48 $50.00
Months 49 - 60 $55.00
The above monthly amounts shall not exceed comparable parking charges in
comparable office buildings located in the Lake Street office corridor of
Pasadena.
b. Additional Parking Subject to availability and subject to the prior rights of other lessees at
the Project, Lessee may acquire additional parking passes at the market rate
for such spaces, and shall receive additional parking preferential to those
who are not Building occupants.
12. Brokers (Section 20.16): Lessee Agent:
Drew Planting and Robert Fitzgerald
Cushman & Wakefield of California
555 S. Flower Street, Suite 4200
Los Angeles, CA 90071-2418
and
Lessor Agent:
Barker Pacific Group, L.L.C.
790 E. Colorado Boulevard, 9th Floor
Pasadena, CA 91101
</TABLE>
<PAGE>
The foregoing terms of this Summary are hereby agreed to by Lessor and Lessee.
"LESSOR":
BPG PASADENA, L.L.C.
By:___________________________________
Its: Managing Member
----------------------------------
"LESSEE":
CITYSEARCH, INC.
By: /s/ [SIGNATURE ILLEGIBLE]
-----------------------------------
Its: Chief Financial Officer
----------------------------------
<PAGE>
"90 EAST COLORADO BOULEVARD
--------------------------
OFFICE LEASE
------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE SUBJECT MATTER PAGE
- ------- -------------- ----
<S> <C> <C>
ARTICLE 1 REAL PROPERTY, BUILDING AND PREMISES.................................... 1
ARTICLE 2 PLANS AND CONSTRUCTION.................................................. 4
ARTICLE 3 TERM, USE, COMPLIANCE WITH LAWS......................................... 5
ARTICLE 4 RENTAL.................................................................. 7
ARTICLE 5 SERVICES AND UTILITIES.................................................. 12
ARTICLE 6 REPAIRS................................................................. 13
ARTICLE 7 ADDITIONS AND ALTERATIONS............................................... 14
ARTICLE 8 COVENANT AGAINST LIENS.................................................. 15
ARTICLE 9 INSURANCE............................................................... 15
ARTICLE 10 DAMAGE AND DESTRUCTION.................................................. 17
ARTICLE 11 NON-WAIVER.............................................................. 18
ARTICLE 12 EMINENT DOMAIN.......................................................... 18
ARTICLE 13 ASSIGNMENT AND SUBLETTING............................................... 19
ARTICLE 14 SURRENDER OF PREMISES OWNERSHIP AND REMOVAL OF TRADE FIXTURES........... 21
ARTICLE 15 HOLDING OVER............................................................ 22
ARTICLE 16 ESTOPPEL, ATTORNMENT AND SUBORDINATION.................................. 22
ARTICLE 17 DEFAULTS: REMEDIES...................................................... 23
ARTICLE 18 GRAPHICS................................................................ 25
ARTICLE 19 LESSOR'S RIGHT TO CURE DEFAULT; PAYMENT BY LESSEE....................... 25
ARTICLE 20 MISCELLANEOUS PROVISIONS................................................ 26
</TABLE>
EXHIBITS
- --------
A. LEGAL DESCRIPTION
B. OUTLINE OF FLOOR PLAN OF PREMISES
C. LESSEE WORK LETTER
D. LESSEE'S FINAL SPACE PLAN
E. NOTICE OF LEASE TERM DATES
F. RULES AND REGULATIONS
G. FORM OF LESSEE ESTOPPEL CERTIFICATE
H. CLEANING SPECIFICATIONS
<PAGE>
<TABLE>
<CAPTION>
INDEX OF MAJOR DEFINED TERMS
----------------------------
DEFINED TERMS LOCATION OF DEFINITION
IN OFFICE LEASE
---------------
<S> <C>
Additional Rental............................................ Article 4.6
Adjacent Parking Structure................................... Article 1.1
Base Rent.................................................... Article 8 of Summary
Base Year................................................... Article 9.1 of Summary
Basic Costs.................................................. Article 4.4
Calendar Year................................................ Article 4.3.2
Basic Services............................................... Article 5.1
Commencement Date............................................ Article 3.1
Expense Rental............................................... Article 4.1(b)
Expense Rental Adjustment.................................... Article 4.2(b)
Expense Year................................................. Article 4.3.3
Force Majeure................................................ Article 4.27
Hazardous Material........................................... Article 20.24
Holidays..................................................... Article 5.1
Impositions.................................................. Article 4.4(1)
Scheduled Commencement Date.................................. Article 2.2(c)
Lease Expiration Date........................................ Article 7 of Summary
Lease Term................................................... Article 5 of Summary
Operating Expenses........................................... Article 4.2.5
Preliminary Plans............................................ Article 2.1(a)
Premises..................................................... Article 4 of Summary
Project...................................................... Article 1.1
Rentable Area................................................ Article 1.5
Security Deposit............................................. Article 4.9
Signage...................................................... Article 5.6
Systems and Equipment........................................ Article 5.1
Lessee Work Letter........................................... Article 2.1(b)
Transfer Notice.............................................. Article 13.1
Transfer Premium............................................. Article 13.1
Transferee................................................... Article 13.1
Transfers.................................................... Article 13.1
</TABLE>
790 EAST COLORADO BOULEVARD
---------------------------
OFFICE LEASE
------------
This Office Lease, which includes the preceding Summary of Basic Lease
Information (the "Summary") attached hereto and incorporated herein by the
reference (the Office Lease and Summary to be known sometimes collectively
hereafter as the "Lease"), dated as of the date set forth in Section 1 of the
Summary, is made by and between BPG PASADENA, L.L.C., a Delaware Limited
Liability Company ("Lessor"), and CITYSEARCH, INC., a Delaware Corporation
("Lessee").
ARTICLE I
---------
REAL PROPERTY, BUILDING AND PREMISES
------------------------------------
1.1 Real Property, Building and Premises. Upon and subject to the
------------------------------------
terms, covenants and conditions hereinafter set forth in this Lease, Lessor
hereby leases to Lessee and Lessee hereby leases from Lessor the premises set
forth in Section 4 of the Summary (the "Premises"), which Premises are located
in the "Project," as that term is defined in this Section 1.1. The outline of
the floor plan of the Premises is set forth in Exhibit B attached hereto. The
---------
Premises are a part of the office building (the "Project") located at 790 East
Colorado Boulevard, Pasadena, California 91101. The office building, the parking
garage facility located adjacent to the office building ("Adjacent Parking
Structure"), the outside plaza areas, land and other improvements surrounding
the Project which are designated from time to time by Lessor as common areas
appurtenant to or servicing the Project, and the land upon which any of the
foregoing are situated, are herein sometimes collectively referred to as the
"Real Property." Lessee is hereby granted the right to the nonexclusive use of
the common corridors and hallways, stairwells, elevators, rest rooms and other
public or common areas located on the "Real Property," provided, however, that
the manner in which such public and common areas are maintained and operated
shall be at the sole discretion of Lessor and the use thereof shall be subject
to such rules, regulations and restrictions as Lessor may make form time to
time, subject to non-discrimination standards. Lessor reserves the right to make
alterations or additions to or change the location of elements of the Real
Property and the common areas thereof provided however, that Lessor shall not
make any alterations or changes to the Common Areas that would materially
decrease the level of service provided to Lessee. Except when and where Lessee's
right of access is specifically excluded above and elsewhere on this Lease,
Lessee shall have the right of access to the Premises twenty-four (24) hours per
day, seven (7) days per week during the Lease Term.
1.2 Condition of the Premises. Except as specifically set forth
-------------------------
in this Lease and in the Lessee Work Letter attached hereto as Exhibit C. Lessor
shall not be obligated to provide or pay for any improvement work or services
related to the improvement of the Premises. Lessee also acknowledges that Lessor
has made no representation or warranty regarding the condition of the Premises
or the Project except as specifically set forth in this Lease and the Lessee
Work Letter. Lessor shall deliver the Premises free and clear of debris, and
shall thoroughly clean the Premises, following Lessee's move into the Premises.
Lessor thereafter warrants that the Project will be leased, operated and
maintained as an institutional quality office building.
1.3 Common Area. Appurtenant to the Premises and subject to
-----------
reasonable rules and regulations from time to time made by the Lessor of which
Lessee is given notice, Lessee shall have the right to the use of the following
common ("Common Areas"):
(a) Building Common Area. The common stairways, corridors
--------------------
and accessways, vending or mail areas, lobbies and foyers, entrances, stairs,
escalators, elevators, rest rooms, janitorial, telephone, mechanical and
electrical rooms and any passageways thereto, and the common pipes, ducts,
conduits, wires and appurtenant equipment serving the Premises.
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(b) Land Common Area. The common walkways and sidewalks
-----------------
necessary for access to the Project. Lessee's acceptance of the Premises shall
constitute an acknowledgment and acceptance of the various temporary
inconveniences that may be associated with the use of the Common Areas.
1.4 Lessor's Reserved Rights in Premises and Common Areas. Lessor
-----------------------------------------------------
reserves the right, provided that the exercise of such right does not materially
decrease the level of service provided to Lessee from time to time.
(a) Building Changes. To install, use, maintain, repair and
----------------
replace pipes, ducts, conduits, wires and appurtenant meters and equipment for
service to other parts of the Project above the ceiling surfaces, below the
floor surfaces, within the walls and in the central core areas, and to relocate
any pipes, ducts, conduits, wires and appurtenant meters and equipment in the
Premises which are so located or located elsewhere outside the Premises.
(b) Boundary Changes. To change the lines of the lot on which
----------------
the office building and parking structure stands ("Lot") and to redesign and
restripe the parking facilities in the Garage and make other reasonable changes
and grant others rights thereto, including without limitation the granting of
easements, rights of way and rights of ingress and egress and similar rights to
users of parcels adjacent to the Lot.
(c) Facility Changes. To alter or relocate any other common
----------------
areas of facilities associated with the Project.
(d) Garage Parking and Storage. To grant exclusive use to
--------------------------
portions of the Garage in the Project to other Tenants of the Building and to
impose parking charges from time to time for use of the Garage, except however,
as limited by the parking charges to be paid by Lessee as set forth in the
Summary and per article 20.20 below
1.5 Rentable Area. The term "Rentable Area" shall be deemed to
-------------
include.
(a) in the case of a single tenancy floor the aggregate of (i)
all floor area of the Premises measured from the inside surface of the outer
glass and extensions of the plane thereof in non-glass areas to the inside
surface of the opposite outer glass and extensions of the plane thereof in non-
glass areas and shall include all areas within the outside walls, excluding only
the areas ("Service Areas") used for elevator mechanical rooms, building stairs,
fire towers, elevator shafts, flues, vents, stacks, vertical pipe shafts and
vertical ducts, but including any such Service Arears which are for the specific
use of the particular tenant such as special stairs or elevators, and (ii)
Lessee's Percentage Share (defined in Article 1.6 below of the square footage of
the Project's elevator and main mechanical rooms, fire control stations and
building lobbies ("Building Areas"); and
(b) in the case of a partial tenancy floor, the aggregate of (i)
all floor area of the Premises within the inside surface of the outer glass
and extensions of the plane thereof in non-glass areas to the mid-point of the
demising walls separating the Premises from areas leased by or held for lease to
other tenants or from Project Common Areas located on such floor and other
similar facilities for the use of all tenants on such floor, (ii) Lessee's
allocable portion based upon the ratio which the Rentable Area of the Premises
bears to the Rentable Area of the floor ("Lessee's Floor Share") of the Project
Common Areas located on such floor and other similar facilities for the use of
all tenants on such floor, and (iii) Lessee's Percentage Share of the Project
Areas.
In determining Rentable Area, no deductions shall be made for
columns or projections necessary for the Project. The Rentable Area of the
Premises and the Rentable Area of the Project (which for the purposes of this
Lease is exclusive of retail and storage or basement uses) have been calculated
on the basis of the foregoing definition and shall be consistent with the
standards established by the Building Owners and Management Association, "BOMA",
are hereby stipulated for all purposes hereof to be the approximate amounts
stated in the Basic Lease Information, subject to confirmation by actual
measurement by Lessor's architect, at the request of either party prior to
Lessee's occupancy.
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1.6 Lessee's Percentage Share. The term "Lessee's Percentage Share"
-------------------------
shall mean the percentage figure specified in the Basic Lease Information which
represents the ratio that the Rentable Area of the Premises bears one hundred
(100%) of the Rentable Area then leased in the Project. In the event Lessee's
Percentage Share is changed during a calendar year by reason of a change in
the Rentable Area of the Premises or a charge in the total Rentable Area of
the Project, Lessee's Percentage Share shall be re-calculated pursuant to the
aforementioned formula and shall be determined on the basis of the number of
days during such calendar year at each such percentage, provided however that
Lessee's financial obligation shall not be increased thereby.
1.7 Right of First Offer. During the term of the Lease, Lessee
--------------------
shall have a right of first offer to lease that portion of the rentable area of
seventh (7th) floor of the Project consisting of approximately 13.896 rentable
square feet, as depicted on Exhibit B, attached hereto, (the First Offer Space)
---------
which becomes available for lease as described hereinbelow, Lessee's right of
first offer shall be on the terms and conditions set forth in this Section 1.7.
Lessee shall not have any such first offer right to lease the First Offer Space
(and/or Initial Space as the case may be) pursuant to this Section 1.7 until (A)
with respect to the First Offer Space, after a Vacant Space Lease has been
executed for such Vacant Space and such First Offer Space becomes available for
lease following the expiration of such Vacant Space Lease (including renewals)
and the Lessee thereunder has vacated such Vacant Space.
1.8 Procedure for Offer. Upon receipt of a written offer from a
-------------------
third party for all or a portion of the subject Space, Lessor shall give Lessee
written notice (the "First Offer Notice") that the First Offer Space requires a
response pursuant to the terms of Lessee's Right of First Offer, as set forth in
this Article 1. Pursuant to such First Offer Notice, Lessor shall offer to lease
to Lessee the First Offer Space for a term coterminous with the Lease Term. The
First Offer Notice shall describe the space so offered to Lessee including
without limitation, Lessor's determination of the rentable square footage
thereof, and shall set forth the "First Offer Rent" as that term 15 defined in
Section 1.10 below, and the other terms upon which Lessor is willing to lease
such space to Lessee.
1.9 Procedure for Acceptance. If Lessee wishes to exercise Lessee's
------------------------
right of first offer with respect to the space described in the First Offer
Notice, then within ten (10) business days of delivery of the First Offer Notice
to Lessee. Lessee shall deliver notice to Lessor of Lessee's exercise of its
Right of First Offer in respect to the space described in the First Offer Notice
at the First Offer Rent and upon the terms contained in such notice. If Lessee
does not wish to exercise its Right of First Offer within such ten (10) business
day period, then Lessor shall be free to lease the space described in the First
Offer Notice to anyone to whom Lessor desires on any terms Lessor desires,
whereupon, Lessee's Right of First Offer shall terminate with respect to such
First Offer Space. Notwithstanding anything to the contrary contained herein,
Lessee must elect to exercise its Right of First Offer, if at all, with respect
to all of the space offered by Lessor to Lessee at any particular time, and
Lessee may not elect to lease only a portion thereof.
1.10 First Offer Space Rent. The rent payable by Lessee for the
----------------------
First Offer Space (the "First Offer Rent") shall be equal to the Fair Market
Rental Rate for the First Offer Space. In the event Lessor and Lessee cannot
mutually agree upon the terms for such space, an Arbitrator will be appointed
consistent with the terms of Article 3.7.
1.11 Construction In First Offer Space. Subject to any improvement
---------------------------------
allowance granted to Lessee or Lessee improvement work to be provided by Lessor
as a component of First Offer Rent, Lessee shall take the First Offer Space in
its "as-is" condition as of the date of delivery of such space, and the
construction of improvements in the First Offer Space shall be Lessee's sole
responsibility (except that Lessor will provide a tenant improvement allowance
equal to the Tenant Improvement Allowance for the Initial Premises reduced pro-
rata by the remaining Lease Term), with any such construction to comply with the
terms of Article 8 of this Lease. Notwithstanding the foregoing, should Tenant
exercise its Right of First Offer within 12 calendar months prior to its
Termination Rights and should Tenant receive a Tenant Improvement Allowance,
then should Tenant exercise its Termination Right, Tenant in addition to paying
the unamortized costs shall also pay on a penalty, equal to one month's Base
Rent as set forth in Section 8 of the Summary of Basic Lease Information. The
parties will consider the condition of the Space to determine the Fair Market
Rental Rate.
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1.12 Amendment to Lease. If Lessee timely exercises Lessee's right
------------------
to lease the First Offer Space, Lessor and Lessee shall within thirty (30) days
thereafter execute an amendment to the Lease memorializing Lessee's lease for
such First Offer Space upon the terms and conditions set forth in this Article
1. Lessee shall commence payment of Rent for the First Offer Space, and the
term of the First Offer Space shall commence upon the date of delivery of the
First Offer Space to Lessee in a condition mutually agreed by the parties (the
"First Offer Commencement Date") and terminate coterminous with the termination
of the Lease Term.
1.13 Suspension of Right of First Offer. Lessee shall not have the
----------------------------------
right to lease any First Offer Space if, as of the date of the attempted
exercise of any right of first offer by Lessee, or as of the scheduled date of
delivery of such First Offer Space to Lessee. Lessee is in material default
under this Lease beyond any applicable notice and cure periods. In addition, the
rights to lease the First Offer Space shall be personal to the Original Lessee,
or any affiliate entity acquiring entity or restructured entity, which is
comprised of Lessee, subject to the creditworthiness of the subject affiliate,
acquiring or restructured entity executing this Lease (the "Original Lessee")
and may only be exercised by the Original Lessee (and not by any assignee or any
sublessee or other, transferee of Lessee's interest in this Lease or the
Premises, or any part thereof) if, at the time of the attempted exercise of any
such right of first offer, the Original Lessee is in physical occupancy and
possession of the entire Premises.
1.14 Expansion Premises. On or before Nine (9) months from the
------------------
Commencement Date, Lessee hereby commits the lease, occupy and use all the
remaining Space not initially leased on Level 3 as depicted in Exhibit B-2. The
terms and conditions of the Expansion Premises shall be the same rental and same
level of tenant improvements, to be provided by Lessor subject to Lessee's
submittal of an Approved Space Plan for the Expansion Premises. The term of the
lease for the Expansion Premises shall terminate on the same date as the lease
covering the Initial Premises and all terms and conditions set forth in this
lease shall be applicable to the Expansion Premises.
ARTICLE 2
-------
PLANS AND CONSTRUCTION
----------------------
2.1 Plans.
-----
(a) Preliminary Plans. Lessor and Lessee have approved the
-----------------
preliminary plans and outline specifications identified in Exhibit D for the
construction of the Premises ("Preliminary Plans").
(b) Work Letter. Lessee has delivered to Lessor for Lessor's
-----------
review and approval the Space Plan (and any revisions thereto) and the Working
Drawings (substantially in conformity with the Space Plan), containing the
information required by the Work Letter attached hereto as Exhibit C for the
construction of the Premises (defined more completely in the Work Letter as
"Improvements"). Any changes to the Improvements requested by Lessee shall only
be made in accordance with the terms of the Work Letter.
2.2 Construction of Improvements and Payment.
----------------------------------------
(a) Construction. Lessor shall construct or install the
-------------
Improvements in the Premises substantially in accordance with the Working
Drawings and pursuant to the schedule set forth in the Work Letter.
(b) Payment. Lessor shall determine Lessee's share of the cost
-------
of constructing or installing the Improvements based on the parties' obligations
as specified in the Work Letter. Lessee shall be solely responsible for the
payment of Lessee Extra Work (as defined in the Work Letter).
(c) Completion. Lessor shall use diligence to construct or
-----------
install the
4
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Improvements in a professional workmanlike manner in the Premises so that they
are Substantially Complete (as defined in the Work Letter) by the Scheduled
Commencement Date set forth in the Basic Lease Information; provide, however,
that the Scheduled Commencement Date shall be extended for a period equal to the
period of any delays affecting the construction of the Improvements because of
fire, earthquake, weather, acts of God, acts or the public enemy, riot,
insurrection, governmental authorities (permitting or inspection), governmental
regulations of the sales of materials or supplies or the transportation thereof,
strikes of boycotts, unavailability of material or labor at reasonable and
customary prices, moratoria Lessee Delays (as defined in the Work Letter) at the
time and in the manner described in the Work Letter.
(d) Delays. Except for Lessee delays, if for any reason Lessor
------
cannot deliver possession of the Premises to Lessee on the Scheduled
Commencement Date, this Lease shall not be void or voidable, except however,
Lessee shall be granted three (3) days for each work day the Premises are not
delivered by Lessor in a Substantially Complete form. Should Lessee Delay
contribute to the delay, Lessor shall be granted one additional work day of
delay for each day of delay resulting from Lessee Delays. Notwithstanding the
foregoing, if possession of the Premises has not been delivered to Lessee within
three (3) months following the Scheduled Commencement Date, this Lease shall
automatically terminate. No delay in delivery of possession shall operate to
extend the Lease term.
ARTICLE 3
-------
TERM: USE: COMPLIANCE WITH LAWS
-------------------------------
3.1 Commencement of Term. Subject to and upon the terms and
--------------------
conditions set forth herein, and receipt by Lessee of a thirty (30) day prior
written notice of Lessor's intent to deliver the Premises, the term shall be for
a period specified in the Summary as Term, commencing upon the earliest of the
following dates ("Commencement Date"):
(a) The date on which the Improvements to the Premises are
Substantially Complete (defined in the Work Letter, Exhibit C);
(b) The date on which the Improvements to the Premises would
have been Substantially Complete had there been no Lessee Delays (defined in the
Work Letter); or
(c) The date upon which Lessee actually commences to do business
in the Premises with Lessor's written consent.
(d) November 20, 1996 (except for the area referred to as the
computer room).
Upon the Commencement Date, Lessor and Lessee shall execute an
amendment to this Lease, as shown in Exhibit E attached herewith and made a
part of this Lease setting forth the Commencement Date and Term Expiration Date.
3.2 General Use and Compliance with Laws. Lessee shall only use the
------------------------------------
Premises for general office, administrative and for any other legally
permissible use comparable with a first class office building but for no other
use without the prior written consent of Lessor. Subject to Article 4.4 (4) (i),
Lessee shall comply with and faithfully observe all of the requirements of
municipal, county, state, federal and other applicable governmental authorities,
or which may hereafter be in force, pertaining to the use and occupancy of the
Premises, Lot. Garage and Project and shall secure any necessary permits
pertaining to Lessee's use and occupancy of the Premises. In Lessee's use and
occupancy of the Premises. Lessee shall not subject the Premises to any use that
would tend to damage any portion thereof or which shall in any way increase
the existing rate of any insurance on the Project or any portion thereof or
cause any cancellation of any insurance policy covering the Project or any
portion thereof. Lessee shall not do or permit anything to be done in or about
the Premises which shall in any way obstruct or interfere with the rights of
other tenants of the Project, or injure or annoy them, or use or allow the
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Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Lessee or Lessee's customers cause, maintain, or permit any
nuisance in, on or about the Premises or commit or suffer to be committed any
waste in, on or about the Premises. Lessee shall not bring into the office
building, or keep or arrange in the Premises any furniture, equipment, materials
or other objects which individually or collectively overload Premises or the
office building. Lessor reserves the right to prescribe the weight and position
of all safes, fixtures and heavy installations that Lessee desires to place in
the Premises so as to distribute properly the weight, or to rescure plans
prepared by a qualified structural engineer for such heavy objects at Lessee's
sole cost and expense. Notwithstanding the foregoing Lessor shall have no
liability for damage caused by the installation of such safes and heavy
equipment. Furthermore, business machines and mechanical equipment belonging to
Lessee that cause noise and or vibration that may be transmitted to the
structure of the office building or to any other tenants in the office building
shall be placed and maintained by Lessee, at Lessee's sole cost and expense, in
settings of cork, rubber or spring type noise and or vibration eliminators and
Lessee shall take such other measures directed by Lessor as needed to eliminate
such vibration and/or noise. Lessee recognizes that the Project is maintained by
Lessor as a location for first-class type of office business and retail
occupancy.
3.3 Option Right. In the event Lessee has not elected to exercise
------------
its termination right as set forth in the Summary. Lessor hereby grants to
Lessee one (1) option to extend the Lease Term for a period of five (5) years
(the "Option Term"). The option shall be exercisable only by written notice
delivered by Lessee to Lessor as provided below, provided that, as of the date
of delivery of such notice. Lessee is not in material default under this Lease
beyond any applicable notice and cure periods. Upon the proper exercise of such
option to extend, and provided that, as of the end of the initial Lease Term,
Lessee is not in material default under this Lease beyond any applicable notice
and cure periods, the Lease Term as it applies to the Premises, and any
Expansion Premises or any Premises leased in the Project by Lessee, shall be
extended for the Option Term. The rights contained in this Section 3.3 shall be
personal to the Original Lessee or its permitted assignee such as affiliates,
acquiring entity or restructured entity, but not by any assignee, or any
sublessee or other non-approved transferee of Lessee's interest in this Lease or
the Premises, or any part thereof.
3.4 Option Rent. The rent payable by Lessee during the Option
-----------
Term (the "Option Rent") shall equal ninety-five percent (95%) of the "Fair
Market Rental Rate" for the Premises. The term "Fair Market Rental Rate" for the
Premises during the Option Term and the Fair Market Rental Rate for the First
Offer Space for purposes of determining the First Offer Rent pursuant to Section
1.7) shall mean the annual amount per rentable square foot being charged on a
full service basis by Lessor as of the first day of the Option Term (or the
First Offer Commencement Date for the First Offer Rent, as the case may be) for
unencumbered non-sublease, non-equity space comparable to the Premises (or First
Offer Space as applicable) in the Office Building (defined as those signed
within 6 months of the valuation date) or if not enough comparable transactions
exist in the office building then the annual amount per rentable square foot
being charged on a full service basis for comparable space in Comparable
Buildings (as that term is defined below, giving appropriate consideration to
(appropriate concessions) "Rent Concessions and to all economic terms, such as
annual rental rates per rentable square foot, escalation clauses (such as net,
base year or expense stop), commercial provisions, relocation payments, locating
free rent, if any, length of the lease term, size and location of premises being
leased and other generally acceptable terms and conditions for the tenancy of
the space in question, including Lessee improvements or allowances provided or
to be provided for such comparable space (provided, however, that the amount of
such improvements or allowances shall be reduced, when calculating the Option
Rent for First Offer Rent, as the case may be by deducting the value of the
existing improvements in the Premises (or First Offer Space, as the case may
be), as of the first day of the Option Term, (or First Offer Commencement Date,
as the case may be) with such value to be based upon the age, of the
improvements provided, however, in calculating the Fair Market Rental Rate, no
consideration shall be given in to the fact that (i) any rental abatement is or
is not given such Lessees in connection with the construction of improvements in
such comparable space, or (ii) Lessor is or is not required to pay a real estate
brokerage commission in connection with the Option Term for First Offer Space,
or the fact that comparable deals do or do not involve the payment of real
estate brokerage commissions. If in determining the Fair Market Rental Rent.
Rent Concessions are granted Lessor may at Lessor's sole option, elect any or a
portion of the following:
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(a) To grant some or all of the Rent Concessions to Lessee in
the form as described above of as free rent and/or an improvement allowance):
or.
(b) To adjust the rental rate component of the Fair Market
Rental Rate to be an effective rental rate which takes into consideration the
total dollar value of such Rent Concessions (in which case the Rent Concessions
evidenced in the effective rental rate shall not be granted to Lessee). The term
"Comparable Building" as used in this Lease shall mean first-class office
buildings located in the Lake Street Corridor of the Central Business District
of Pasadena, California.
3.5 Exercise of Option. The Lease Extension Option shall be
------------------
exercised by Lessee, if at and only in the following manner: (1) Lessee shall
deliver written notice to Lessor not more than fourteen (14) months nor less
than nine (9) months prior to the expiration of the initial Lease Term, stating
that Lessee may be interested in exercising its option: (ii) Lessor, after
receipt of Lessee's notice, shall deliver notice the "Option Rent Notice") to
Lessee not less than thirty (30) days, setting forth the Option Rent and, (iii)
if Lessee wishes to exercise such option, Lessee shall, on or before the date
occurring nine (9) months prior to the expiration of the initial Lease Term,
exercise the option by delivering written notice thereof to Lessor, and upon,
and concurrent with, such, exercise Lessee may, at its option, object to the
Option Rent contained In the Option Rent Notice, in which case the parties shall
follow the procedure, and the Option Rent shall be determined, as set forth in
Section 3.6 below.
3.6 Determination of Option Rent. In the event Lessee timely and
-----------------------------
objects in writing to the Option Rent (or First Offer Rent, as the case may be)
initially determined by Lessor and based on ninety-five percent (95%) of the
then Fair Market Value for comparable space on comparable buildings located in
Pasadena, California, Lessor and Lessee shall attempt to agree upon the Option
Rent (or First Offer Rent, as the case may be), using their best good-faith
efforts. If Lessor and Lessee fail to reach agreement within twenty (b) dave
following Lessee's objection to the Option Rent( or First Offer Rent, as the
case may be) (the "Outside Agreement Date"), then each party shall submit to
tine other party a separate written determination of the Option Rent (or First
Offer Rent, as the case may be) within ten (10) business days after the Outside
Agreement Date, and such determinations shall be submitted to arbitration in
accordance with the provisions herein. Failure of Lessee or Lessor to submit a
written determination of the Option Rent (or First Offer Rent, as the case may
be) within such ten (10) business day period shall conclusively be deemed to be
the non-determining party's approval of the Option Rent (or First Offer Rent, as
the case may be) submitted within such ten (10) business day period by the
other party.
3.7 Option Terms - Arbitration. Lessor and Lessee shall each
---------------------------
appoint one arbitrator who shall by profession be an independent real estate
broker who shall have been active over the five (5) year period ending on the
date of such appointment in the leasing of first-class office buildings in
Pasadena, California. The determination of the arbitrators shall be limited
solely to the issue of whether Lessor's or Lessee's submitted Option Rent (or
First Offer Rent, as the case may be) is the closest to the actual Option Rent
(or First Offer Rent, as the case may as determined by the arbitrators, taking
into account the requirements of Section 3.6 of this Lease with respect to the
Option Rent and Section 1.10 of this Lease with respect to the First Offer Rent.
Each such arbitrator shall be appointed within thirty (30) days after the
Outside Agreement Date and adopt procedures as follows:
(a) The two (2) arbitrators so appointed shall within ten (10)
days of the date of the appointment of the last appointed arbitrator agree upon
and appoint a third arbitrator who shall be qualified under the same criteria
set forth hereinabove for qualification of the initial two (2) arbitrators:
(b) The three (3) arbitrators shall with in thirty (30) days
after the appointment of the third arbitrator reach a decision as to whether
the panel shall use Lessor's or Lessee's submitted Option Rent (or First Offer
Rent, as the case may be) and shall notify Lessor and Lessee thereof:
(c) The decision of the majority of the three (3) arbitrators
shall be binding upon Lessor and Lessee:
7
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(d) If either Lessor or Lessee fails to appoint an arbitrator
within thirty (30) days after the applicable Outside Agreement Date, the
arbitrator appointed by one of them shall reach a decision, notify Lessor and
Lessee thereof, and such arbitrator's shall be binding upon Lessor and Lessee;
(e) If the two (2) arbitrators fail to agree upon and appoint a
third arbitrator within the time period provided above, then the parties shall
mutually select the third arbitrator. If Lessor and Lessee are unable to agree
upon the third arbitrator within ten (10) days, then either party may upon at
least five (5) days prior written notice to the other party, request the
Presiding judge of the Los Angeles County Superior Court, acting in his her
private and non-judicial capacity, to appoint the third arbitrator. Following
the appointment the third arbitrator the panel, of arbitrators shall within
thirty (30) days thereafter reach a decision as to whether Lessor's or Lessee's
Option Rent (or First Offer Rent, as the case may be shall be used and shall
notify Lessor and Lessee thereof; and
(f) The cost of the arbitrators and the arbitration proceeding
shall be paid by Lessor and Lessee equally, except that each party shall pay for
the cost of its own witnesses, agents and attorneys.
ARTICLE 4
-------
RENTAL
------
4.1 Rent. Lessee shall pay, without notice or demand, to Lessor at
----
such place as Lessor may from time to time designate in writing, in currency or
a check for currency which, at the time of payment, is legal tender for private
or public debts in the United States of America, "Rent" as set forth in Section
8 of the Summary, pay payable in equal monthly installments in advance on or
before the first day of each and every month during the Lease Term, without any
set off or deduction whatsoever. Rental shall collectively mean the following
sums (collectively "Rent").
(a) Base Rental. Base Rental as specified in The Summary of
-----------
Basic Lease information includes a component applicable to Basic Costs (defined
in Article 4.4). The Base Year for the calculation of Basic Costs is 1997, and
the Base Year "shall mean the period set forth in Section 9.1 of the Basic
Lease Information adjusted to reflect 95% building occupancy. The "Expense
Year" shall mean each calendar year in which any portion, of the Lease Term
falls, through and including the calendar year in which the Lease Term expires.
4.2 Calculation and Payment of Additional Rent.
------------------------------------------
(a) Base Rental Adjustment. The Base Rental adjustments for the
----------------------
Term are set forth in the Summary.
(b) Additional Rent Estimate. The amount to be paid initially as
------------------------
Expense Rental has been estimated by Lessor for the calendar year, 1997,
Lessee's first full calendar year of the Term. Thereafter, Lessee's payment of
Basic Costs shall be estimated and adjusted by Lessor as soon as reasonably
possible after the end of each calendar year. The estimates and adjustments
shall be made in accordance with the following procedures.
(c) Calculation of Excess. If for any Expense Year ending or
---------------------
commencing within the Lease Term, Tenant's Share of Direct Expenses for each
Expense Year exceeds Tenant's proportionate share of the amount of Direct
Expenses applicable to the Base Year, then Tenant shall pay to Landlord, in the
manner set forth herein, as Additional Rent an amount equal to the excess. The
foregoing shall be referred to as Lessee's share of Basic Costs.
(d) Statement of Actual Direct Expenses and Payment by Tenant.
---------------------------------------------------------
Within 120 days following the end of each Expense Year, Lessor shall deliver to
Lessee a Statement ("Statement") which Statements should be derived from a
audit conducted by an, independent certified public accountant (which accountant
is a
8
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member of a nationally recognized accounting firm) which shall state the Basic
Costs on a line item basis as to the general categories of Basic Costs, incurred
or accrued for each preceding Expense Year and which shall indicate the amount,
if any, of any Excess. Upon receipt of the Statement for each Expense Year
ending during the lease term if an Excess in present, Tenant shall pay with its
next installment of Base Rent due but in no event prior to thirty (30) days
after the receipt of such Statement the full amount of the excess for such
Expense Year, less the amount, if any, paid during such Expense Year as defined.
In the event that a Statement shows that the amount paid by Tenant exceeds
Tenant's Share of the Increase in Basic Cost for the Expense Year in question
("overpayment") Tenant may credit the amount of such overpayment against the
next due installments of Base Rent and Additional Rent provided that even
though the Lease Term has expired and Tenant has vacated the premises, when the
final determination is made to Tenant's Share of the Basic Cost for the Expense
Year in which this Lease expires or earlier terminates taking into
consideration that the Lease expiration date may have occurred prior to the
final day of the applicable Expense Year if (i) any overpayment is present then
Landlord shall concurrent with Landlords delivery to Tenant of the Statement pay
to Tenant the amount of such over payment or (ii) an excess is present. Tenant
shall within thirty (30) days pay to Landlord an amount as calculated pursuant
to the provisions herein.
(e) Prior to the commencement of each calendar year after Base
Year, or as soon thereafter as practicable, Lessor shall give Lessee written
notice of its estimate of Basic Costs for the ensuing twelve (12) month
period; provided that if such notice is not given twenty (20) days prior to the
commencement of the calendar year, Lessee shall continue to pay on the basis of
the then applicable Lessee's Percentage Share of Basic Costs until the month
after such notice is given.
4.3 Basic Costs. The term "Basic Costs" shall consist of all
-----------
operating expenses of the Project including without limitation those specified
below, which shall be computed on a cash basis and shall consist of all
expenditures by Lessor to maintain in quality, first-class condition all
facilities in operation from the beginning of the Term of this Lease and such
additional facilities in subsequent years as may be determined by Lessor to be
necessary or generally beneficial to the Project. The term Basic Costs as used
herein shall mean all expenses, costs and disbursements of every kind and nature
which Lessor shall pay or become obligated to pay because of or in connection
with the ownership, management and operation of the Project, including without
limitation the following:
(a) Wages, salaries, taxes, insurance and related expenses and
benefits of all on-site and off-site employees directly engaged in the
operation, maintenance or access control of the Project.
(b) All supplies, tools, equipment and materials directly used
in the operation and maintenance of the Project, including any lease payments
therefor.
(c) Cost of all utilities for the Project, including the cost of
water, power, sewer, heating, lighting, air conditioning and ventilating for the
Project. Such cost of utilities shall expressly exclude any utility costs paid
by any Lessees in the Project, or reimbursed to Lessor by any Lessees for
separately metered services.
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(d) Cost of all maintenance, repair and replacement expenses,
janitorial, building engineering, landscaping, security, legal, other consulting
fees and service agreements for the Project and the equipment therein, excluding
such costs that exceed the amounts as determined by Article 4.4(i), including
without limitation alarm service, window cleaning and elevator maintenance.
(e) Cost of all insurance relating to the Project including
without limitation the cost of casualty, earthquake, rental abatement and
personal injury and property liability insurance applicable to the Project and
Lessor's personal property used in connection therewith.
(f) All real property taxes and assessments levied against the
Project and the various estates therein and the underlying land, all personal
property taxes levied on personal property of Lessor used in the management
operation, maintenance and repair of the Project, all taxes, assessments and
reassessments
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of every kind and nature whatsoever levied or assessed in lieu of or in
substitution for existing or additional real or personal property taxes and
assessments on the Project or the sale, conveyance, assignment, ground lease or
other transfer thereof, service payment in lieu of taxes, excises, transit
charges and fees, housing, park and child care assessment, development and other
assessments: reassessments, levies, fees or charges, general and special,
ordinary and extraordinary, unforeseen as well as foreseen, of any kind which
are assessed, levied, charged, confirmed, or imposed by any public authority
upon the Project, its operations or the Rent provided for in this Lease, or
amounts necessary to be expended because of governmental orders, whether general
or special, ordinary or extraordinary, unforeseen as well as foreseen, or any
kind and nature for public improvements, services, benefits, or any other
purposes which are assessed, levied, confirmed, imposed or become a lien upon
the Premises or Project or become payable during the Term (hereinafter
collectively "Impositions").
(i) Installment Election. In the case of any Impositions
--------------------
which may be evidenced by improvement or other bonds or which may be paid in
annual or other periodic installments, Lessor shall elect to cause such bonds to
be issued or cause such assessment to be paid in installments over the maximum
period permitted by law.
(ii) Limitation. Nothing contained in this Lease shall
----------
require Lessee to pay any franchise, estate, inheritance or succession transfer
tax of Lessor, or any income, profits or revenue tax or charge, upon the net
income of Lessor from all sources: provided, however, that if at any time during
the Term under the laws of the United States government or the State of
California, or any political subdivision thereof, a tax or excise on Rent, or
any tax however described, is levied or assessed by any such political body
against Lessor on account of Rent, or a portion thereof, Lessee shall pay one
hundred percent (100%) of any such tax or excise as Additional Rent (defined in
Article 4.6).
(iii) Real Property Tax Reassessment. If the Project is
------------------------------
sold, conveyed or title otherwise transferred, and if, as a result thereof, the
taxing authorities increase the real and personal property taxes, assessments,
levies and fees set forth in Article 4.4(f) and other surcharges levied against
the Project ("Property Taxes") in accordance with California Constitution
Article XIIIA (such events together with the dollar amount of increased Property
Taxes is a "Proposition 13 Readjustment"), Basic Costs shall be adjusted so that
Basic Costs include (I) the Lessor of (a) the amount of Property Taxes payable
after the Proposition 13 Readjustment, inclusive of any increase allowed under
Proposition 13 had there been no such transfer, or (b) the Property Taxes as
adjusted in accordance with the actual increase in the Consumer Price Index
("CPI") for All Urban Consumers. All Items for the Los Angeles Long Beach Area,
as published by the Bureau of Labor Statistics of the U.S. Department of Labor
as follows: the Property Taxes shall be adjusted by multiplying the Property
Taxes as of the first full year of operation of the Property by a factor
computed by adding one (1) to a fraction, the numerator of which shall be the
difference between the CPI for the month nearest preceding the Proposition 13
Readjustment ("Adjustment Index") less the CPI for the month nearest preceding
the Commencement Date ("Base Index") and the denominator of which shall be the
Base Index, (II) all increases in Property Taxes which would occur
notwithstanding such Proposition 13 Readjustment, including without limitation
construction assessments, annual notification of new values and supplemental
assessments, and (III) all increases in Property Taxes which occur because of
changes in the laws, ordinances, orders, rules and regulations or because of
voter action relating to Property Taxes.
(g) Repairs, replacements and general maintenance (excluding
repairs and general maintenance paid by proceeds of insurance or by Lessee or
other third parties, and alterations attributable solely to tenants of the
Building other than Lessee).
(h) All maintenance costs relating to public and service areas
of the Project, including without limitation sidewalks, landscaping, service
areas, mechanical rooms and Project exteriors.
(i) Amortization of the useful life of the cost of installation
of capital improvement terms which are primarily for the purpose of reducing
operating costs or which may be required by governmental authority.
Notwithstanding this clause, any costs incurred by Lessor which may be expended
to bring the Building into compliance with the American Disability Act (ADA) or
hazardous material regulations, shall be fully borne by Lessor and shall be
excluded from Base Costs.
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(j) Lessor's central accounting costs and audit fees
attributable to the Project.
(k) A management cost recovery equal to three percent (3%) of
Rent collections, provided that Lessor operate the Project through a full-time
manager in a first-class efficient and as cost-effective a manner as possible so
as to minimize operating expenses.
(l) All costs and expenses associated with the operation and
maintenance of the Garage.
Except as specifically provided above, Basic Costs shall not include
replacement of capital Improvement items, specific costs billed to and paid by
specific tenants, expenses attributable to retail or commercial tenants, or
expenses attributable to the management or operation of the visitor parking
areas of the Garage.
Notwithstanding any other provision herein to the contrary, it is
agreed that in the event the office building is not at least ninety-five
percent (95%) occupied during any calendar year of the Lease Term, an adjustment
shall be made in computing the Basic Costs for such year so that the Basic
Costs shall be computed for such year as though the office building had been
ninety-five percent (95%) occupied during such year, Lessor and Lessee agree
that Lessee's Percentage Share of Basic Costs shall be paid during the entire
term of this Lease, beginning with the Commencement Date commencement and
continuing to the day of termination.
At its expense, Lessee shall have the right at any time to review and
copy Lessor's books and records relating to the Basic Costs for the previous
year.
Lessor and Lessee acknowledge that certain of the costs of management,
operation and maintenance of the Project are allocated entirely to the office
tenants of the Project. Certain or such costs are allocated entirely to the
retail operations, and certain of such costs are allocated among the office
tenants of the office building and retail operations. The determination of such
costs and their allocation shall be in accordance with generally accepted
accounting principles applied on a consistent basis.
4.5 Monthly Rental Payments. Rental under Article 4.1(a) and (b)
-----------------------
shall be due and payable in twelve (12) equal installments of one-twelfth (1/12)
each on the first day of each calendar month during the Term and any extensions
or renewals thereof without demand, counterclaim or offset. If the Term
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, then the Rental under Article
4.1 (a) and (b) for the first and last fractional months shall be appropriately
prorated. If the Term commences on a day other than the first day of a calendar
year for purposes of calculating Lessee's Percentage Share of Basic Costs, the
Basic Costs and the Expense Factor shall each be reduced by the proportion, that
the number of days of the Term falling within such calendar year bears to three
hundred sixty-five (365) days. Rental under Article 4.l (c) and any other
amounts due under this Lease shall be collected pursuant to written notices
from Lessor and payment shall be due within thirty (30) days of such notice.
4.6 Additional Rental. Lessee shall also pay as additional rental
-----------------
all such other sums of money (including without limitation parking rental
pursuant to Article 20.20) and rental in the initial amount specified in the
Summary for use of storage space which may be subject to its availability,
separately leased by Lessee. The initial rental shall be $1.00 per square foot
per month without services and shall be subject to adjustment in like manner as
provided in Article 4.2. as shall become due and payable by Lessee to Lessor, ("
Additional Rental"). Such Additional Rental shall not be subject to abatement,
set-off or deduction whatsoever, including without limitation all amounts
Lessee shall be responsible for paying pursuant to the terms of Article 7.3 of
this Lease. Except for amounts billed to Lessee under the terms of the Work
Letter (which shall be payable pursuant to the terms of the Work Letter), Lessee
shall pay to Lessor all amounts of Additional Rental within thirty (30) days
of Lessee's receipt of a bill therefor. Lessor shall have the same remedies of
default for the payment of Additional Rental as are available to Lessor in the
payment of Rental. All Rental amounts due under Article 4.1 of this Lease and
all amounts of Additional Rental shall be collectively referred to as "Rent".
11
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4.7 No Deduction or Offer. Rent shall be paid to Lessor, without
---------------------
deduction or offset, in lawful money of the United States of America at Lessor's
address as set forth in the Summary or to such other person or at such place as
Lessor may from time to time designate in writing. No payment by Lessee or
receipt by Lessor of a lessor amount of Rent shall be other than on account of
the earliest rental or payment due, nor shall any endorsement or statement on
any check or letter accompanying any such check or payment constitute an accord
and satisfaction and Lessor may accept any such check or payment or pursue any
other remedy under this Lease, at law or in equity.
4.8 Late Payment and Interest. If any installment of Rent is not
-------------------------
paid within five (5) days of the date when due, subject to three (3) days
prior written notice, such past due Rent shall bear interest from five (5) days
after the due date until paid at the lesser of (a) three per cent (3%) per
annum over the prime rate of interest announced from time to time by Wells Fargo
National Association, Los Angeles, California. In the event such late charge; is
imposed by Lessor for two (2) consecutive months for whatever reason Lessor
shall have that option to require that, beginning with the first payment of Rent
due following the imposition of the second consecutive late charge. Lessee shall
increase the amount of the Security Deposit required under Article 4.9 by one
hundred percent (100%) which additional Security Deposit shall be retained by
Lessor. This provision shall not relieve Lessee from payment of Rent at the time
and in the manner herein specified. The payment by Lessee and receipt by Lessor
of the payment charges interest is not a release on waiver by the Lessor of a
default by Lessee.
4.9 Security Deposit. Upon execution of this Lease, Lessee shall
----------------
deposit the amount specified in the Summary as a security deposit ("Security
Deposit"), with Lessor. The Security Deposit shall secure Lessee's obligations
under this Lease to pay Rent and other monetary amounts, to maintain the
Premises and repair damages thereto, to surrender the Premises to Lessor in
clean condition and repair upon termination of this Lease and to discharge
Lessee's other obligations hereunder. If Lessee fails to perform Lessee's
obligations hereunder, Lessor may, but without any obligation to do so, apply
all or any portion of the Security Deposit towards fulfillment of Lessee's
unperformed obligations. If Lessor does so apply any potion of the Security
Deposit, Lessee, upon demand by Lessor, shall immediately pay Lessor a
sufficient amount in cash to restore the Security Deposit to the original
amount. Lessee's failure to forthwith remit to Lessor an amount in cash
sufficient to restore the Security Deposit to the original sum deposited within
five (5) days after receipt of such demand shall constitute an Event of Default
defined in Article 17). The Security Deposit shall be held by Lessor with
liability for interest at the annual rate or five and one-half percent (5.5%)
for the time such deposit is held by Lessor. Lessor is entitled to commingle the
security deposits with its own funds and the Lessor is not to be deemed a
trustee of fiduciary for Lessee in respect of the security deposit. Upon
termination of this Lease, if Lessee has then performed all of Lessee's
obligations hereunder, Lessor shall return the Security Deposit to Lessee. If
Lessor sells or otherwise transfers Lessor's right or interest under this Lease,
Lessor may deliver the Security Deposit to the transferee, whereupon Lessor
shall be released from any further liability to Lessee with respect to the
Security Deposit.
ARTICLE 5
---------
SERVICES AND UTILITIES
----------------------
5.1 Basic Services. Lessor shall provide the following Basic
--------------
Services to the Project on all days during the Lease Term, unless otherwise
stated below.
(a) Subject to all governmental rules, regulations and
guidelines applicable thereto, Lessor shall provide heating and air conditioning
for normal comfort for normal office use in the Premises, from Monday through
Friday, during the period from 7:00 a.m. to 6:00 p.m., and on Saturday during
the period from 8:00 a.m. to 1:00 p.m. except for the date of observation of New
Year's Day, Presidents' Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Christmas Day (collectively the "Holidays"). Lessor will
provide heating and air conditioning during other time periods as requested by
Lessee at a rate not to exceed Lessor's actual cost for Premises.
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(b) Lessor shall provide adequate electrical wiring and
facilities and power for normal general office use defined as 5 watts per
rentable square foot as depicted in the Preliminary Plan as approved by Lessor
and Lessee. Such electrical capacity excludes twenty-four (24) hour HVAC systems
as may be required for installation in the Premises by Lessee. Lessor shall
replace, as part of Basic Costs, lamps, starters and ballasts for Building
standard lighting fixtures within the Premises.
(c) Lessor shall provide city water from the regular Building
outlets for drinking, lavatory and plumbing requirements within the Premises.
(d) Lessor shall provide janitorial services five (5) days per
week, except the date of observation of the Holidays, in and about the Premises
and window washing services according to the specifications set forth in Exhibit
H.
(e) Lessor shall provide nonexclusive automatic passenger
elevator service at all times.
(f) Lessor shall provide nonexclusive freight elevator service
subject to scheduling by Lessor.
(g) Subject to Lessee's repair obligations set forth in Article
6 below, Lessor shall operate and maintain, as a Basic Cost Expense, the Project
(including the structural components of the Project and the Project's Systems
and Equipment) in a first-class manner and condition.
(h) Lessor shall maintain as a Basic Cost Expense, twenty-four
(24) hours per day, seven (7) days per week, a reasonable security and
supervision program for the Project, which may include, without limitation,
security personnel, cameras, roving patrols, a keyboard system and/or any other
security measures which Lessor deems appropriate.
5.2 Over Standard Use. Lessee shall not, without Lessor's prior
-----------------
written consent, use heat generating machines, machines other than normal
fractional horsepower office machines, or equipment or lighting other than
building standard lights in the Premises, which may affect the temperature
otherwise maintained by the air conditioning system or increase the water
normally furnished for the Premises by Lessor pursuant to the terms of Section
5.1. If such consent is given, Lessor shall have the right to install
supplementary air conditioning units or other facilities in the Premises,
including supplementary or additional metering devices, and the cost thereof
including the cost of installation, operation and maintenance, increased wear
and tear on existing equipment and other similar charges, shall be paid by
Lessee to Lessor upon billing by Lessor. If Lessee uses water or heat or air
conditioning in excess of that supplied by Lessor pursuant to Section 5.1 such
special HVAC units to provide twenty-four (24) hour service to specified areas
within the Premises. Lessee shall pay to Lessor, upon billing, the actual cost
of such excess consumption, the cost of the installation, operation, and
maintenance of equipment which is installed in order to supply such excess
consumption, and the cost of the increased wear and tear on existing equipment
caused by such excess consumption and Lessor may install devices to separately
meter any increased use and in such event Lessee shall pay the increased cost
directly to Lessor, on demand, including the cost of such additional metering
devices.
5.3 Interruption of Use. Lessee agrees that Lessor shall not be
-------------------
liable for damages, by abatement of Rent or otherwise, for failure to furnish or
delay in furnishing any service (including telephone and telecommunication
services), or for any diminution in the quality or quantity thereof, when such
failure or delay or diminution is occasioned, in whole or in part, by repairs,
replacements, or improvements, by any strike, lockout or other labor trouble, by
inability to secure electricity, gas, water or other fuel at the Project after
reasonable effort to do so by any accident or casualty whatsoever by act or
default of Lessee or other panics or by any other cause beyond Lessor's
reasonable control and such failures or delays or diminution shall never be
deemed to constitute an eviction or disturbance of Lessee's use and possession
of the Premises or relieve Lessee from paying Rent or performing any of its
obligations under this Lease. Furthermore, Lessor shall not be liable under any
circumstances for a loss of, or injury to, property or for injury to, or
interference with, Lessee's business, including, without
13
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limitation, loss of profits, however occurring, through or in connection with or
incidental to a failure to furnish any of the services or utilities unless
caused by Lessor's negligence or intentional misconduct. If Lessee's use of the
Premises is prevented, either due to an interruption of building services
or otherwise rendering the Premises untenantable (e.g. fire or casualty), for a
consecutive period of three (3) days or more, resulting in the inability of
Lessee to conduct its normal business activities, Lessee's Base Rent. Additional
Rent and parking charges shall be abated for the period of time such
interruption of services occurs.
5.4 Additional Services. Lessor shall also have the exclusive
-------------------
right, but not the obligation, to provide any additional services which may be
requested by Lessee, including, without limitation, locksmithing, lamp
replacement for non-Building standard lamps or fixtures, additional janitorial
service and additional repairs and maintenance, provided that Lessee shall pay
to Lessor upon billing, the actual cost to Lessor of providing such
additional services, plus a reasonable administration fee for any service which
Lessee is required to pay from time to time hereunder, shall be deemed
Additional Rent hereunder and shall be billed on a monthly basis.
5.5 Graphics. Lessor shall provide identification of Lessee's name
--------
and suite numerals at the main entrance door to the Premises. All graphics of
Lessee visible in or from public corridors or the exterior of the Premises, or
Project shall be subject to Lessor's reasonable approval. Special graphics,
logos and other Lessee graphics may be installed within the Premises at
Lessee's expense.
5.6 Signage. Lessee shall be granted the right to non-exclusive
-------
space on the Building's Colorado Boulevard monument sign, and or appropriate
walls and doors within the Premises, identifying Lessee's presence in the
Building. Such signage will be installed at Lessor's expense.
5.7 Keys and Locks. Lessor shall furnish Lessee two (2) keys for
---------------
each corridor door entering the Premises. Additional keys shall be furnished at
a charge by Lessor on an order signed by Lessee. All such keys shall remain the
property of Lessor. No additional locks shall be allowed on any door of the
Premises without Lessor's prior written permission, and Lessee shall not
make or permit to be made any duplicate keys, except those furnished by Lessor.
Upon termination of this Lease, Lessee may surrender to Lessor all keys of the
Premises, and give to Lessor the combination of all locks for safes, safe
cabinets and vault doors, if any, in the Premises.
ARTICLE 6
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REPAIRS
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6.l Lessee shall, at Lessee's own expense, keep the Premises (for
the purpose of this Article 6.1 Premises shall mean from area below the
suspended ceiling and in front of the walls, excluding special Tenant
installation e.g. separate HVAC units or computer equipment), including all
tenant improvements located within the Premises fixtures and furnishings
therein, in good order, repair and condition at all times during the Lease Term.
In addition, Lessee shall, at Lessee's own expense but under the supervision and
subject to the prior approval of Lessor, and within any reasonable period of
time specified by Lessor, promptly and adequately repair all damage to the
Premises and replace or repair all damaged or broken fixtures and appurtenances;
provided however, that, at Lessor's option, or if Lessee fails to make such
repairs. Lessor may, but need not, make such repairs and replacements, and
Lessee shall pay Lessor the cost thereof, including an additional three percent
(3%) of the cost thereof, as reimbursement to Lessor for all actual overhead,
general conditions, fees and other actual costs or expenses arising from
Lessor's management and coordination of repairs and replacements. Upon being
billed for same, Lessor may, but shall not be required to, enter the Premises at
all reasonable times to make such repairs, alternations, improvements and
additions to the Premises or to the Project or to any equipment located in the
Project as Lessor shall desire or deem necessary or as Lessor may be required to
do by governmental or quasi-governmental authority or court order or decree.
Lessee hereby waives and releases its right to make repairs at Lessor's expense
under sections 1941 and 1942 of the California Civil Code or under any similar
---------------------
law, statute, or ordinance now or hereafter in effect.
14
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ARTICLE 7
---------
ADDITIONS AND ALTERNATIONS
--------------------------
7.1 Lessor's Consent to Alternations. Lessee may not make any
--------------------------------
improvements, alterations, additions or changes to the Premises (collectively,
the "Alterations") without first procuring the prior written consent of Lessor
to such Alterations, which consent shall be requested by Lessee not less than
thirty (30) days prior to the commencement thereof, and which consent shall not
be unreasonably withheld, conditioned or delayed, by Lessor. The construction of
the initial improvements to the Premises shall be governed by the terms of the
Lessee Work Letter Exhibit C to this Lease.
7.2 Manner of Construction. Lessor may impose as a condition of its
----------------------
consent to all Alterations or repairs of the Premises or about the Premises,
such requirements as Lessor in its reasonable discretion may deem desirable,
including, but not limited to, the requirement that upon Lessor's request,
Lessee shall, at Lessee's expense, remove such Alterations upon the expiration
or any early termination of the Lease Term, and/or the requirement that Lessee
utilize for such purposes only contractors, materials, mechanics and management
selected by Lessee and approved by Lessor (which approval shall not be
unreasonably withheld, conditioned or delayed): provided, however, that Lessee
shall utilize subcontractors of Lessor's selection to perform all work that may
affect the Systems and Equipment, structural aspects of the Project, the Base,
Sheil and Core, or exterior appearance of the Project or common areas, provided
that Lessor shall cause such subcontractors selected by Lessor to charge Lessee
for such work in an amount equal to the cost that comparable first-class
reputable and reliable subcontractors would have charged Lessee if selected
pursuant to competitive bidding procedures. Lessee shall construct such
Alterations and perform such repairs in conformance with any and all applicable
rules and regulations of any federal state, country or municipal code or
ordinance and pursuant to a valid building permit issued by the City of Pasadena
in conformance with Lessor's construction rules and regulations Lessor's
approval of the plans, specifications and working drawings for Lessee's
Alterations shall create no responsibility or liability on the part of Lessor
for their completeness, design sufficiency, or compliance with all laws, rules
and regulations of governmental agencies or authorities. All work with respect
to any Alterations must be done in a good and workmanlike manner and diligently
prosecuted to completion to the end that the Premises shall at all times be a
complete unit except during the period of work. In performing the work of any
such Alterations, Lessee shall have the work performed in such manner is not to
obstruct access to the Project for any other Lessee of the Project, and is not
to obstruct the business of Lessor or other Lesses in the Project, or interfere
with the labor force working in the Project. In the event that Lessee makes any
Alterations, Lessee agrees to carry "Builder's All Risk" insurance in an amount
reasonably approved by Lessor covering the construction of such Alterations, and
such other insurance is Lessor may require, it being understood and agreed that
all of such Alteration shall be insured by Lessee pursuant to Article 9
immediately upon completion thereof. In addition, Lessor may, in its reasonable
discretion, require Lessee to obtain a lien and completion bond or some
alternate form of security satisfactory to Lessor in an amount sufficient to
ensure the lien-free completion of such Alterations and naming Lessor as a co-
obligee. Upon completion of any Alterations, Lessee agrees to cause a Notice of
Completion to be recorded in the Office of the Recorder of the County of Los
Angeles in accordance with section 3093 of the Civil Code of the State of
----------
California or any successor statute and Lessee shall deliver to the Building
management office a reproducible copy of the "as built" drawing of the
Alterations.
7.3 Payment for Improvements. The cost of all Alterations
------------------------
shall be paid Lessee. In the event Lessee orders any Alteration or repair
directly from Lessor, or from the contractor selected by Lessor, the charges for
such work shall be deemed Additional Rent under this Lease, payable upon billing
therefor, either periodically during construction or upon the substantial
completion of such work, at Lessor's option. Upon completion of such work Lessee
shall deliver to Lessor, if payment is made directly to contractors, evidence of
payment, contractors affidavit; and full and final waivers of all liens for
labor, services or materials. If Lessee orders any work directly from Lessor,
Lessee shall pay to Lessor an amount sufficient to reimburse Lessor for all
?????? overhead, general conditions fees and other actual costs and expenses
arising from Lessor's involvement with such work and for all amounts paid to
subcontractors by Lessor. If Lessee does not order any work directly from
Lessor, Lessee shall reimburse Lessor for Lessor's reasonable out-of-pocket
costs and expenses actually incurred in connection with Lessor's review of and
or involvement with such work.
15
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7.4 Lessor's Property and Fixtures. All Alternations, improvements,
-------------------------------
fixtures and/or equipment which may be installed or placed in or about the
Premises, and all signs, other than those described in Article 5.6 installed in,
on or about the Premises from time to time, shall be at the sole cost of Lessee
and shall be and become the property of Lessor, except that Lessee may remove
any Alterations, improvements, fixtures and/or equipment which Lessee can
substantiate to Lessor have not been paid for with any Lessee improvement
allowance funds provided to Lessee by Lessor, provided Lessee repairs any damage
to the Premises and Project caused by such removal. Furthermore, if Lessor, as a
condition to Lessor's consent to any Alterations requires that Lessee remove any
Alternations upon the expiration or early termination of the Lease Term. Lessor
may by written notice to Lessee prior to the end of the Lease Term, or
given upon any earlier termination of this Lease require Lessee at Lessee's
expense to remove such, Alterations and to repair any damage to the Premises
and Project caused by such removal. If Lessee fails to complete such removal
and/or to repair any damage caused by the removal of any Alterations. Lessor may
do so and may charge the cost thereof to Lessee. Lessee hereby, indemnifies and
holds Lessor harmless from any liability, cost, obligation, expense or claim of
lien in any mannerr relating to the installation, placement, removal or
financing of any such Alterations, improvements, fixtures and/or equipment in,
on or about the Premises.
ARTICLE 8
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COVENANT AGAINST LIENS
----------------------
8.l Lessee has no authority or power to cause or permit any lien or
encumbrance of any kind whatsoever, whether created by act of Lessee, operation
of law or otherwise, to attach to or be placed upon the Real Property, Project
or Premises, and any and all liens and encumbrances created by Lessee shall
attach to Lessee's interest only. Lessor shall have the right at all times to
post and keep posted on the Premises any notice which it deems necessary for
protection from such liens. Lessee covenants and agrees not to suffer or permit
any lien of mechanics or materialmen or others to be placed against the Real
Property to the Premises with respect to work or services claimed to have been
performed for or materials claimed to have been furnished to Lessee or the
Premises, and in case of any such lien attaching or notice of any lien. Lessee
covenants and agrees to cause in to be immediately released and removed of
record. Notwithstanding anything to the contrary set forth in this Lease, in
the event such lien is not released and removed on or before the date notice of
such lien is delivered by Lessor to Lessee. Lessor, at its sole option, may
immediately take all action necessary to release and remove such lien, without
any duty to investigate the validity thereof, and all sums, costs and expenses,
including reasonable attorneys' fee and costs, incurred by Lessor in connection
with such lien shall be deemed. Additional Rent under this Lease and shall
immediately be due and payable by Lessee.
ARTICLE 9
-------
INSURANCE
---------
9.l Lessor Coverage. During the Term. Lessor shall procure and
---------------
maintain in full force and effect with respect to the Project a policy or
policies of commercial and liability insurance including sprinkler, vandalism
and malicious mischief coverage, including earthquake and flood coverage at
Lessee's option, and any other endorsements required by the holder of any fee or
leasehold mortgage) in an amount that is customarily carrieds by first-class
office buildings in Los Angeles. If because of the nature of Lessee's operations
the annual premiums charged Lessor for such insurance exceed the standard
premium rates or result in increased exposure then Lessee, within thirty (30)
days of receipt of appropriate premium invoices, shall reimburse Lessor for such
increased amount.
9.2 Lessee Coverage.
---------------
(a) Commercial Insurance. During the Term and at its own
--------------------
cost and expense, Lessee shall maintain in full force and effect a policy or
policies of special cause of loss form insurance (including
16
<PAGE>
sprinkler, vandalism and malicious mischief coverage, including earthquake and
flood coverage at Lessee's option and any other endorsements required by the
holder of any fee or leasehold mortgage) in an amount adequate to cover damage
to the Premises, including without limitation Lessee's Improvements as defined
in Exhibit D. Merchandise fixtures, trade fixtures, furniture, furnishings
equipment goods, inventory and other personal property located on the Premises
or in the Project insuring the full replacement value of such items.
(b) General Liability. During the Term and at its own cost and
-----------------
expense, Lessee shall maintain in full force and effect a policy, or policies of
comprehensive commercial general liability insurance insuring Lessee's
activities with respect to the Premises. Building and/or Project against loss,
damage or liability for personal injury or death of any person or loss or damage
to property occurring in, upon or about the Premises, Building and or Project
with a combined single limit of One Million Dollars ($1,000,000): such
comprehensive commercial general liability insurance shall include broad form
contractual liability insurance coverage which shall insure Lessee's performance
of the indemnity provisions and elsewhere in this Lease.
(c) Workers' Compensation. During the Term and at its own cost
---------------------
and expense. Lessee shall maintain in full force and effect the statutory
amount of workers' compensation insurance required by the State of California
for the benefit of Lessee's employees, and employer's liability insurance with
no less than $1,000,000 per employee per occurence.
Lessee agrees that if Lessee does not procure and maintain such
insurance continuously, Lessor may (but shall not be required to) procure such
insurance on Lessee's behalf and Lessee shall pay to Lessor the cost thereof,
as Additional Rental within thirty (30) days of Lessee's receipt of a bill
therefor.
9.3 General Insurance Requirements
------------------------------
(a) All insurance required under this Article 9 shall be issued
by such good and reputable insurance companies qualified to do and doing
business in California and having a rating of not less than "A" or a class
rating of not less than "13" and a financial rating of not less than "X" as rate
in the most current copy to Best's Insurance report in the form customary to the
locality. All such Lessee insurance shall include (i) an endorsement expressly
providing that such policies shall not be cancelable or subject to reduction or
coverage or otherwise by subject to modification except after thirty (30) days
prior written notice to the parties named as insureds in this Article 9, (ii) an
endorsement providing that Lessor, its successors, assigns, and nominees holding
any interest in the Premises, including without limitation any ground lessor and
the holder to any fee or leasehold mortgage, shall be named as additional
insureds under such policy of insurance maintained by Lessee pursuant to this
Lease, (iii) an endorsement providing that such insurance as is afforded under
Lessee's policy in primary as respects lessor and that any other insurance
maintained by Lessor is excess and non-contributing with other insurance
required under this Article 9, (iv) an endorsement deleting any employee
exclusion on personal injury covered, (v) an endorsement including employees as
additional insureds, (vi) an endorsement deleting any liquor liability exclusion
and (vii) an endorsement providing for coverage of employer's automobile
ownership liability. All such insurance shall provide for severability of
interests: shall provide that an act or omission of one of the named insureds;
and shall not reduce or avoid coverage to the other named insured: and shall
afford coverage for all claims based in acts, omissions injury and damage which
claims occurred or arose (or the onset of which occurred or arose) in full or in
part during the policy period. Expiration of Lessee's policy shall not limit
recovery thereunder: "claims made" insurance policies are not acceptable to
satisfy Lessee's insurance requirements under this Article 9. Lessee shall
furnish to Lessor, upon the Commencement Date and thereafter within thirty (30)
days prior to the expiration of each such policy, a Certificate of Insurance and
endorsement(s) affording evidence of the above insurance requirements issued by
the insurance carrier of each policy of insurance carried by Lessee pursuant
hereto.
(b) Lessee's Use. Lessee will not keep, use, sell or
------------
offer for sale in, or upon the Premises any article which may be prohibited by
any insurance policy periodically in force covering the Project. If Lessee is
occupancy or business in or on the Premises, whether or not Lessor has
consented to the same, results in any increase in premiums for the insurance
periodically carried by Lessor with respect to the Project, Lessee shall pay any
such increase in premiums as Additional Rental within ten (10) days after being
billed thereof by Lessor.
17
<PAGE>
In determining whether increased premiums are a result of Lessee's use of the
Premises, a schedule issued by the organization computing the insurance rate on
the Project or the Lessee Improvements showing the various components or such
rate, shall be conclusive evidence of the several items and changes which make
up such rate.
(c) Waiver of Subrogation. Any policy or policies of special
---------------------
cause of loss form and comprehensive commercial general liability insurance,
which either party obtains in connection with the Premises, or Lessee's
personal property therein, shall include a clause or endorsement denying the
insurer any rights of subrogation against the other party to the extent rights
have been waived by the insured prior to the occurrence of injury or loss.
Lessor and Lessee hereby waive any rights of recovery against the other for
injury or loss due to hazards covered by insurance containing such a waiver of
subrogation clause or endorsements to the extent of the injury or loss covered
thereby and agree to obtain such a waiver from their respective insurance
carriers and deliver a copy thereof to the other party; each party shall provide
written notice to the other party if such waiver is not obtained and shall
indemnify, defend and hold the other harmless from all liabilities, penalties,
losses, costs, expenses, demands, causes of action, claims, judgments or damages
arising from the indemnifying party's failure to obtain such a waiver from its
insurance company.
ARTICLE 10
----------
DAMAGE AND DESTRUCTION
----------------------
10.1 Repair of Damage to Premises by Lessor. Lessee shall promptly
--------------------------------------
notify Lessor of any damage to the Premises resulting from fire or any other
casualty or condition existing in the Premises as a result of a fire or other
casualty that would give rise to the terms of this Article 10. If the Premises
or any common areas of the Building serving or providing access to the Premises
shall be damaged by fire or other casualty or be subject to a condition existing
as a result of a fire or other casualty. Lessor shall promptly and diligently,
subject to reasonable delays for insurance adjustment or other matters beyond
Lessor's reasonable control, and subject to all other terms of this Article 10,
restore the base, shell, and core of the Premises and such common areas to
substantially the same condition as existed prior to the casualty, expect for
modifications required by zoning and building codes and other laws or by the
holder of a mortgage on the Building or any other modifications to the common
areas deemed desirable by Lessor, provided access to the Premises and any common
restrooms serving the Premises shall not be materially impaired. Notwithstanding
any other provision of this Lease, upon the occurrence of any damage to the
Premises, Lessee may assign to Lessor (or to any party designated by Lessor) all
insurance proceeds payable to Lessee under Lessee's insurance required under
this Lease, and along with the proceeds received by Lessor from the Tenant
Improvement Insurance. Lessor shall repair any injury or damage to the Tenant
Improvements installed in the Premises and shall return such Lessee Improvements
to their original condition. In connection with such repairs and replacements.
Lessee shall, prior to the commencement of construction, submit to Lessor for
Lessor's review and approval, all plans, specifications and working drafts
relating thereto, and Lessor shall reasonably approve the contractors selected
by Lessee to perform such improvement work. Such submittal of plans and
construction of improvements shall be performed in substantial compliance with
the terms of the Work Letter as though such construction of improvements were
the initial construction of the Tenant Improvements. Neither Lessor nor Lessee
shall be liable for any inconvenience or annoyance to Lessee or its visitors, or
injury to Lessee's business resulting in any way from such damage or the repair
thereof: provided however, that if such fire or other casualty shall have
damaged the Premises or common areas necessary to Lessee's occupancy. Lessor
shall allow Lessee a proportionate abatement of Rent, during the time and to the
extent the Premises are unfit for occupancy for the normal conduct of Lessee's
business, and not occupied by Lessee as a result thereof, provided, further, if
the Premises is damaged such that the remaining portion thereof is not
sufficient to allow Lessee to conduct its operations therefrom. Lessor shall
allow Lessee a total abatement of Rent during the time and to the extent the
Premises are unfit for occupancy for the normal conduct of Lessee's business,
and not occupied by Lessee as a result of the subject damage.
10.2 Lessor's Option to Repair. Notwithstanding the terms of
-------------------------
Section 10.1 of this Lease. Lessor may elect not to rebuild and or restore the
Premises and or Project and instead terminate this Lease by notifying Lessee
in writing of such termination within sixty (60) days after the date of
damage, such notice to include a termination date giving Lessee ninety (90)
days to vacate the Premises, but Lessor may so elect only if the Project shall
be damaged by fire or other casualty or cause whether or not the Premises are
affected, and one or
18
<PAGE>
more of the following conditions is present: (a) repairs cannot reasonably be
completed withinin one hundred twenty (l20) days of the date of damage (when
such repairs are made without the payment of overtime or other premiums), (b)
the holder of any mortgage on the Building or ground or underlying lessor with
respect to the Real Property and or the Project shall require that the insurance
proceeds or any portion thereof be used to retire the mortgage debt or shall
terminate the ground or underlying lease, as the case may be: or (c) the damage
is nor fully covered, except for deductible amounts, by Lessor's insurance
policies.
l0.3 Damage Near End of Term. In addition, in the event that
-----------------------
the Premises or the Project is destroyed or damaged to any substantial extent
during the last twenty-four (24) months of the Lease Term, Lessor shall have the
option to terminate this Lease by giving written notice to Lessee of the
exercise of such option within thirty (30) days after such damage or
destruction, in which event this Lease shall cease and terminate as of the date
of such notice Upon any such termination of this Lease pursuant to this Section
10.2. Lessee shall pay the Base Rent and Additional Rent, properly apportioned
up to such date of termination, and both parties hereto shall thereafter be
freed and discharged of all further obligations hereunder, except as provided
for in provisions of this Lease which by their terms survive the expiration or
earlier termination of the Lease Term.
10.4 Waiver of Statutory Provisions. The provisions of this
------------------------------
Lease, including this Article l0 constitute an express agreement between Lessor
and Lessee with respect to any and all damage to, or destruction of, all or any
part of the Premises, the Project or any other portion of the Real Property, and
any statute or regulation of the State of California, including, without
limitation, sections 1932(2) and 1933(4) of the California Civil Code, with
---------------------
respect to any rights or obligations concerning damage or destruction in the
absence of an express agreement with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any other statute or regulation, now or hereafter in effect,
shall have no application to this Lease or any damage or destruction to all or
any part of the Premises, the Project or any other portion of the Real Property.
ARTICLE ll
----------
NON-WAIVER
----------
11.1 No waiver of any provision of this Lease shall be implied
by any failure of Lessor to enforce any remedy on account of the violation of
such provision, even if such violation shall continue or be repeated
subsequently, any waiver by Lessor of any provision of this Lease may only be
in writing, and no express waiver shall affect any provision other than the one
specified in such waiver and that one only for the time and in the manner
specifically stated. No receipt of monies by Lessor from Lessee after the
termination of this Lease shall in any way alter the length of the Lease Term
or of Lessee's right of possession hereunder or after the giving of any
notice shall reinstate, continue or extend the Lease Term or affect any notice
given Lessee prior to the receipt of such monies. It being agreed that after the
service of notice or the commencement of a suit or after final judgment for
possession of the Premises. Lessor may receive and collect any Rental due, and
the payment of said Rental shall not waive or affect said notice, suit or
judgment.
ARTICLE 12
----------
EMINENT DOMAIN
--------------
l2.1 Condemnation and Loss or Damage. If the whole or
-------------------------------
any part of the Premises or Project shall be taken by power of eminent domain
or condemned by any competent authority for any public or quasi-public use or
purpose, or if any adjacent property or street shall be so taken or condemned,
or reconfigured or vacated by such authority in such manner as to require the
use, reconstruction or remodeling of any part of the Premises or Project, or if
Lessor shall grant a deed or other instrument in lieu of such taking by eminent
domain or condemnation. Lessor shall have the option to terminate this Lease
upon ninety (90) days notice, provided such notice is given no later than one
hundred eighty (180) days after the date of such taking, condemnation,
reconfiguration, vacation, deed or other instrument. If more than twenty-five
percent (25%) of the rentable square
19
<PAGE>
feet of the Premises is taken, or if access to the Premises is substantially
impaired. Lessee shall have the option to terminate this Lease upon ninety (90)
days' notice, provided such notice is given no later than one hundred eighty
(180) days after the date of such taking Lessor shall be entitled to receive the
entire award or payment in connection therewith, except that Lessee shall have
the right to file any separate claim available to Lessee for any taking of
Lessee's personal property and fixtures belonging to Lessee and removable by
Lessee upon expiration of the Lease Term pursuant to the terms of this Lease,
and for moving expenses, so long as such claim does not diminish the award
available to Lessor, its ground lessor with respect to the Real Property or its
mortgagee, and such claim is payable seperately to Lessee. All Rental shall be
apportioned as of the date of such termination, or the date of such taking,
whichever shall first occur.
12.2 Temporary Taking. Notwithstanding anything to the
----------------
contrary contained in this Article 12 in the event of a temporary taking of all
or any portion of the Premises for a period of one hundred and eighty (180)
days or less, then this Lease shall not terminate but the Base Rent and the
Additional Rent shall be abated for the period of such taking in proportion to
the ratio that the amount of rentable square feet of the Premises taken bears to
the total rentable square feet of the Premises. Lessor shall be entitled to
receive the entire award made in connection with any such temporary taking.
12.3 Total Destruction. A total destruction of the Project
-----------------
shall automatically terminate the Lease.
ARTICLE 13
----------
ASSIGNMENT AND SUBLETTING
-------------------------
l3.1 Transfers. Lessee shall not, without the prior written
---------
consent of Lessor, assign, mortgage, pledge, hypothecate, encumber, or permit
any lien to attach to, or otherwise transfer, this Lease or any interest
hereunder or permit any assignment or other such foregoing transfer of this
Lease or any interest hereunder by operation of law, sublet the Premises or any
part thereof, or permit the use of the Premises by any persons other than Lessee
and its employees (all of the foregoing are hereinafter sometimes referred to
collectively as "Transfers" and any person to whom any Transfer is made or
sought to be made is hereinafter sometimes referred to as a "Transferee"). If
Lessee shall desire Lessor's consent to any Transfer, Lessee shall notify Lessor
in writing, which notice (the "Transfer Notice") shall include:
(a) the proposed effective date of the Transfer, which
shall not be less then fifteen (15) days nor more than one hundred eighty (180)
days after the date of delivery of the Transfer Notice:
(b) a description of the portion of the Premises to be
transferred (the "Subject Space");
(c) all of the terms of the proposed Transfer and the
consideration therefor, including a calculation of the "Transfer Premium," as
that term is defined in Section 13.3 below, in connection with such Transfer,
the name and address of the proposed Transferee, and a copy of all existing
and/or proposed documentation pertaining to the proposed Transfer, including all
existing operative documents to be executed to evidence such Transfer or the
agreements incidental or related to such Transfer; and,
(d) current financial statements of the proposed
Transferee certified by an officer, partner or owner thereof, and any other
information required by Lessor, which will enable Lessor to determine the
financial responsibility, character, and reputation of the proposed Transferee,
nature of such Transferee's business and proposed use of the Subject Space.
Lessee shall, thirty (30) days after written request by
Lessor, reimburse Lessor for all reasonable costs and expenses (including
reasonable attorneys' fees) incurred by Lessor in connection with its review of
a proposed Transfer.
13.2 Lessor's Consent. Lessor shall not unreasonably
----------------
withhold, condition or delay its
20
<PAGE>
consent to any proposed Transfer of the Subject Space to the Transferee on the
terms specified in the Transfer Notice. The parties hereby agree that it shall
be reasonable under this Lease and under any applicable law for Lessor to
withhold consent to any proposed Transfer where one or more of the following
apply:
(a) The Transferee is of a character or reputation or
engaged in a business which is not consistent with the quality of the
Building, or would be a significantly less prestigious occupant of the Project
than Lessee:
(b) The Transferee intends to use the Subject Space for
purposes which are not permitted hereunder.
(c) The Transferee is either a governmental agency or
instrumentality thereof:
(d) The Transfer will result in more than a reasonable
and safe number of occupants per floor:
(e) The Transferee is not a party of reasonable
financial worth and/or financial stability in light of the responsibilities
involved under the Lease on the date consent is requested:
(f) The proposed Transfer would cause Lessor to be in
violation of another lease or agreement to which Lessor is a party, or would
give an occupant of the Project a right to cancel its lease:
(g) The terms of the proposed Transfer will allow the
Transferee (subject to Transferee qualifying as an affiliate entity, acquiring
entity, related entity, merging entity, or company that has a financial
interest in Lessee) to exercise a right of renewal, right of expansion, right
of first offer, or other similar right held by Lessee (or will allow the
Transferee to occupy space leased by Lessee pursuant to any such right):
13.3 Effect of Transfer. If Lessor consents to a Transfer,
------------------
(i) the terms and conditions of this Lease shall in no way be deemed to have
been waived or modified, (ii) such consent shall not be deemed consent to any
further Transfer by either Lessee or a Transferee, (iii) Lessee shall deliver to
Lessor, promptly after execution, an original executed copy of all documentation
pertaining to the Transfer in form reasonably acceptable to Lessor, (iv) Lessee
shall furnish upon Lessor's request a complete statement, certified by an
independent certified public accountant, or Lessee's chief financial officer,
setting forth in detail the computation of any premium Lessee has derived and
shall derive from such Transfer, and (v) no Transfer relating to this Lease or
agreement entered into with respect thereto, whether with or without Lessor's
consent, shall relieve Lessee or any guarantor of the Lease from liability under
this Lease. Lessor or its authorized representatives shall have the right at all
reasonable times to audit the books, records and papers of Lessee relating to
any Transfer, and shall have the right to make copies thereof if the premium
respecting any Transfer shall be found understated. Lessee shall, within thirty
(30) days after demand, pay the deficiency and Lessor's costs of such audit, and
if understated by more than ten percent (10%), Lessor shall have the right to
cancel this Lease upon thirty (30) days' notice to Lessee.
13.4 Transfer Profits. In the event a sublease of Lessee's
----------------
space results in net rental greater than the Base Rental plus Additional Rental
less the unamortized cost of the Lessee Improvements or the costs of any
Sublease improvements (costs such as Tenant Improvements or Lease Commissions),
such net profits shall be shared fifty percent (50%) by Lessor and fifty percent
(50%) by Lessee.
l3.5 Additional Transfers. For purposes of this Lease, the term
--------------------
"Transfer" shall also include: (i) if Lessee is a partnership, the withdrawal or
change, voluntary, involuntary or by operation of law, of fifty percent (50%) or
more of the partners, or transfer of fifty percent (50%) or more of partnership
interests, within a twelve (l2) month period, or the dissolution of the
partnership without immediate reconstitution thereof.
21
<PAGE>
ARTICLE 14
-------
SURRENDER OF PREMISES OWNERSHIP
-------------------------------
AND REMOVAL OF TRADE FIXTURES
-----------------------------
14.1 Surrender of Premises. No act or thing done by Lessor or
---------------------
any agent or employee of Lessor during the Lease Term shall be deemed to
constitute an acceptance by Lessor of a surrender of the Premises unless such
intent is specifically acknowledged in a writing signed by Lessor. The delivery
of keys to the Premises to Lessor or any agent or employee of Lessor shall
not constitute a surrender of the Premises or effect a termination of this
Lease, whether or not the keys are thereafter retained by Lessor, and
notwithstanding such delivery. Lessee shall be entitled to the return of such
keys at any reasonable time upon request until this Lease shall have been
property terminated. The voluntary or other surrender of this Lease by Lessee,
whether accepted by Lessor or not, or a mutual Termination hereof, shall not
work a merger, and at the option of Lessor shall operate as an assignment to
Lessor of all subtenancies or subtenancies affecting the Premises.
14.2 Removal of Tenant Property by Lessee. Upon the
------------------------------------
expiration of the Lease Term, or upon any earlier termination of this Lease,
Lessee shall, quit and surrender possession of the Premises to Lessor in as good
order and condition as when Lessee took possession and as thereafter improved by
Lessor, reasonable wear and tear and repairs which are specifically made the
responsibility of Lessor hereunder excepted. Upon such expiration or
termination, Lessee shall, without expense to Lessor, remove or cause to be
removed from the Premises all debris and rubbish, and such items of furniture,
equipment free-standing cabinet worked other articles of personal property owned
by Lessee or installed or placed by Lessee at its expense in the Premises, and
such similiar articles of any other persons claiming under Lessee, as Lessor
may, in its sole discretion, require to be removed, and Lessee shall repair at
its own expense all damage to the Premises and Project resulting from such
removal.
ARTTCLE 15
----------
HOLDING OVER
------------
If Lessee holds over after the expiration of the Lease Term hereof,
with or without the express or implied consent of Lessor, such tenancy shall be
from month-to-month only, and shall not constitute a renewal hereof or an
extension for any further term, and in such case Base Rent shall be payable at a
monthly rate equal to one hundred thirty percent (130%), of the Base Rent
applicable during the last rental period of the Lease Term under this Lease.
Such month-to-month tenancy shall be subject to every other term, covenant
and agreement contained herein. Nothing contained in this Lease shall be
construed as consent by Lessor to any holding over by Lessee, and Lessor
expressly reserves the right to require Lessee to surrender possession of the
Premises to Lessor as provided in this Lease upon the expiration or other
termination of this Lease. The provisions of this Lease shall not be deemed to
limit or constitute a waiver of any other rights or remedies of Lessor provided
herein or at law. If Lessee fails to surrender the Premises upon thirty (30)
days following the termination or expiration of this Lease, in addition to any
other liabilities to Lessor accruing therefrom, Lessee shall protect, defend,
indemnify and hold Lessor harmless from all loss, costs (including reasonable
attorneys' fees) and liability resulting from such failure, including, without
limiting the generality of the foregoing, any claims made by any succeeding
Lessee founded upon such failure to surrender, and any lost profits to Lessor
resulting therefrom.
ARTTCLE 16
----------
ESTOPPEL ATTORNMENT AND SUBORDINATION
-------------------------------------
16.1 Estoppel Certificate. Within ten (10) days after request
therefor by either Lessee or Lessor, or if on any sale, assignment or
hypothecation by Lessor of Lessor's interest in the Building or the Project, or
any part thereof, an Estoppel Certificate shall be required: Lessee or Lessor,
as the case may be, shall deliver, in
22
<PAGE>
recordable form, a certificate to any proposed mortgagee or purchaser, and to
Lessor, certifying (if such be the case) that this Lease is in full force and
effect; the date of Lessee's most recent payment of Rent, and that Lessee has no
defenses or offsets outstanding, or stating those claimed by Lessee and any
other information reasonably requested.
(a) this Lease is in full force and effect without
modification, except as may be represented by Lessor;
(b) there are no uncured defaults in Lessor's
performance and Lessee has no right of offset couterclaim or deduction against
Rent hereunder; and,
(c) no more than one month's Base Rental has been paid
in advance.
16.2 Attornment. In the event any proceedings are brought
----------
for the foreclosure of, or in the event of exercise of the power of sale
under any mortgage or deed of trust made by lessor, its successors or assigns,
encumbering the Premises, or any part thereof, or in the event of termination
of a ground lease, if any, and if so requested. Lessee shall attorn to the
purchaser upon such foreclosure or sale or upon any grant of a deed in lieu of
foreclosure and recognize such purchaser as Lessor under this Lease.
16.3 Lease Superior. The rights of Lessee hereunder are and
--------------
shall superior to the lien of such mortgage securing the Building, or the lien
resulting from any other method of financing or refinancing, now or hereafter in
force against the Project, and to all advances made or hereafter to be made upon
the security. Provided that Lessee is not in default under any of the terms,
covenants and conditions of this Lease, neither this Lease nor any of the rights
of Lessee hereunder shall be terminated or subject to termination by any
trustee's sale, any action to enforce the security or by any proceeding or
action in foreclosure. If requested, Lessor and Lessee agrees to execute
documentation may be required to further effect the provisions of this Articie
16.
ARTICLE l7
----------
DEFAULTS REMEDIES
-----------------
17.1 Events of Default. The occurrence of any or the
-----------------
following events shall constitute an "Event of Default" on the part of Lessee
without notice from Lessor unless otherwise provided:
(a) Vacation or Abandonment. Vacation or abandonment
-----------------------
of the Premises;
(b) Payment. Failure to pay any installment of
-------
Base Rental. Additional Rental or other monies due and payable hereunder upon
the date when said payment is due, the failure continuing for a period of five
(5) days;
(c) Performance. Default in the performance of any of
-----------
Lessee's covenants, agreements or obligations hereunder (except default in the
payment of Rent), the default continuing for thirty (30) days after written
notice thereof from Lessor (provided that Lessee shall continuously and
diligently pursue the remedy of such default at all times until such default is
cured);
(d) Assignment. A general assignment by Lessee for the
----------
benefit of creditors;
(e) Bankruptcy. The filing of a voluntary petition by
----------
Lessee, or the filing of an involuntary petition by any of Lessee's creditors
seeking the rehabilitation, liquidation or reorganization of Lessee under any
law relating to bankruptcy, insolvency or other relief of debtors:
(f) Receivership The appointment of a receiver or other
------------
custodian to take possession of substantially all of Lessee's assets or of the
Premises or any interest of Lessee therein.
23
<PAGE>
(g) Insolvency or Dissolution. Lessee shall become insolvent or
-------------------------
unable to pay its debts, or shall fail generally to pay its debts as they become
due; or any court shall enter a decree or order directing the winding up or
liquidation of Lessee or of substantially all of its assets; or Lessee shall
take any action toward the dissolution or winding up of its affairs or the
cessation or suspension of its use of the Premises; and.
(h) Attachment. Attachment, execution or other judicial
----------
seizure of substantially all of Lessee's assets or the Premises or any interest
of Lessee under this Lease.
l7.2 Lessor's Remedies. If an Event of Default shall occur, at any
-----------------
time thereafter and without limiting Lessor in the exercise of any other right
or remedy at law or in equity, Lessor may elect any of the following remedies:
(a) Continuation of Lease. Notwithstanding Lessee's breach
---------------------
of the Lease and abandonment of the Premises, Lessor may continue the Lease in
full force and effect and enforce all of the Lessor's rights and remedies under
the Lease, as provided by California Civil Code section 1951.4. including the
----------
right to recover rents as it becomes due, so long as Lessor does not terminate
Lessee's right to possession. Acts of maintenance or preservation or efforts to
relet the Premises or the appointment of a receiver upon initiative of Lessor to
protect Lessor's interest under this Lease shall not constitute a termination of
Lessee's right to possession. At any time subsequent to vacation or abandonment
of the Premises by Lessee, Lessor may give notice of termination and shall
thereafter have all of the rights set forth in Article 17. ??(b) below.
(b) Termination. So long as the default continues Lessor shall
-----------
have the right to terminate this Lease by written notice to Lessee setting
forth: (i) the default: (ii) the requirements to cure it and (iii) a demand for
possession, which shall be effective upon the later of three (3) days after it
is given or the expiration of the times specified in Article 17.l hereinabove.
(c) Possession. Following termination of the Lease under
----------
Article 17.2(b) and without prejudice to any other remedies Lessor may have by
reason of Lessee's default or of such termination. Lessor may then or at anytime
thereafter: (i) peaceably re-enter the Premises or any part thereof upon
voluntary surrender by Lessee or expel or remove Lessee therefrom and any other
persons occupying them, using such legal proceedings as are then available: (ii)
repossess and enjoy the Premises, or relet the Premises or any part thereof for
such term or terms (which may be for a term extending beyond the Term) at such
rental or rentals and upon such other terms and conditions as Lessor in its sole
discretion shall determine, with the right to make reasonable alterations and
repairs to the Premises: and (iii) remove all personal property therefrom, store
such personal property at Lessee's expense and sell property and apply the
proceeds therefrom pursuant to applicable California law, all as attorney-in-
fact for Lessee. Lessee shall not be entitled to any reimbursement for the
unamortized cost of Lessee Extra Work.
(d) Recovery. Following termination under Article 17 2(b) above
--------
Lessor shall have all the rights and remedies to recover from Lessee damages as
provided by California Civil Code section 1951.2 (or any successor law)
----------
including without limitation: (i) the worth at the time of the award of the
unpaid Rent and other amounts which had been earned at the time of termination:
(ii) the worth at the time of the award of the amount by which the unpaid Rent
which would have been earned after termination until the time of the award
exceeds the amount of such Rent loss that Lessee proves could have been
reasonably avoided: (iii) the worth at the time of the award of the amount by
which the unpaid Rent loss Lessee proves could be reasonably avoided: and (iv)
any other amount necessary to compensate Lessor for all detriment approximately
caused by Lessee's failure to perform its obligations under this Lease or which
in the ordinary course of things would be likely to result therefrom. The "worth
at the time of the award" of the amounts referred to in (i) and (ii) are
computed by allowing interest at the rate of three percent (3%) per annum
over the prime rate of interest announced by Wells Fargo Bank, National
Association Los Angeles, California applicable to the time of award, but not to
exceed the highest rate legally permissible at the time of the award. The
"worth at the time of the award" of the amount referred to in (iii) above shall
be computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).
24
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(e) Receivership. Upon application by Lessor, Lessor may have a
------------
receiver appointed for Lessee to take possession of the Premises and to apply
all rental collected from the Premises and to exercise all other rights and
remedies granted to Lessor as attorney-in-fact for Lessee pursuant to Article
17.2(c) above.
(f) Additional Remedies. In addition to the foregoing remedies
-------------------
so long as this Lease is not terminated, Lessor shall have the right to remedy
any default of Lessee, to maintain or improve the Premises without terminating
the Lease, to incur expenses on behalf of Lessee in seeking a new subtenant or
to cause a receiver to be appointed to administer the Premises and new or
existing subleases, and to add to the Rent payable hereunder all of Lessor's
reasonable costs in doing so, with interest at the maximum rate set by statute.
Lessor may pursue any and all other remedies available to Lessor at law or in
equity, by statute or otherwise.
(g) Other Breaches. If Lessee causes or threatens a breach of
--------------
any of the covenants, agreements, terms or conditions contained in this Lease,
Lessor shall be entitled to retain all sums held by Lessor for Lessee's account
or in any account provide for herein to enjoin such breach or threatened breach,
and to invoke any right and remedy allowed at law or in equity or by statute or
otherwise as though re-entry, summary proceedings and other remedies were
not provided for in this Lease.
(h) Cumulative. Each right and remedy of Lessor provided for in
----------
this Lease shall be cumulative and shall be in addition to every other right or
remedy provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise. The exercise or beginning of the exercise
by Lessor of any one or more of the rights or remedies provided for in this
Lease, or nor or hereafter existing at law or in equity or by, statute or
otherwise, shall not preclude the simultaneous or later exercise by Lessor of
any or all other rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or statute or otherwise.
(i) No Waiver. Notwithstanding, no failure by Lessor to insist
--------
upon the strict performance of any term hereof or to exercise any right or
remedy consequent upon a breach thereof and no acceptance of full or partial
payment of Rent during the continuance of any such breach shall constitute a
waiver of any such breach or of any such term. Efforts by Lessor to mitigate the
damages caused by Lessee's breach of this Lease shall not be construed to be a
waiver of Lessor's right to recover damages under this Article l7. Nothing in
this Article 17 affects the right of Lessor to be indemnified and/or held
harmless by Lessee in accordance with the provisions of this Lease for
liability arising prior to the termination of this Lease for personal injuries
or property damage.
ARTICLE 18
----------
GRAPHICS
--------
18.1 In General. Lessee shall be entitled, at Lessor's cost,
----------
building standard to identification signage outside of Lessee's Premises on the
floor on which Lessee's Premises are located. The location, quality, design,
style, lighting and size of such signage shall be consistent with the Lessor's
Building standard signage program and shall be subject to Lessor's prior written
approval, in its sole discretion. Upon the expiration or earlier termination of
this Lease, Lessee shall be responsible, at its sole cost and expense, for the
removal of such signage and the repair of all damage to the Building caused by
such removal.
l8.2 Building Directory. At Lessor's cost Lessee shall be
-------------------
entitled to utilize up to tyventy (20) lines on the office building directory to
display Lessee's name and location in the Project.
l8.3 Prohibited Signage and Other Items. Any signs, notices, logos,
----------------------------------
pictures, names or advertisements which are installed and that have not been
individually approved by Lessor may be removed without notice by Lessor at the
sole expense of Lessee. Lessee may not install any signs on the exterior or roof
of the office building or the common areas of the Project. Any signs, window
coverings, or blinds (even if the same are located
25
<PAGE>
behind the Lessor approved window coverings for the office building), or
other items visible from the exterior of the Premises are subject to the prior
approval of Lessor, in its sole discretion.
ARTICLE 19
-------
LESSOR'S RIGHT TO CURE DEFAULT PAYMENTS BY LESSEE
-------------------------------------------------
l9.l Lessor's Cure. All covenants and agreements to be kept or
-------------
performed by Lessee under this Lease shall be performed by Lessee at Lessee's
sole cost and expense and without any reduction of Rent. If Lessee shall fail to
perform any of its obligations under this Lease within a reasonable time
after such performance is required by the terms of this Lease. Lessor may, but
shall not be obligated to, after reasonable prior notice to Lessee make any
such payment or perform any such act on Lessee's part without waiving its right
based upon any default of Lessee and without releasing Lessee from any
obligations hereunder.
19.2 Lessee's Reimbursement. Except as may be specifically provided
----------------------
to the contrary in this Lease, Lessee shall pay to Lessor, within fifteen (15)
days after delivery by Lessor to Lessee of statements therefor:(i) sums equal to
expenditures reasonably made and obligations incurred by Lessor in connection
with the remedying by Lessor of Lessee's defaults pursuant to the provisions
of Section 17.1; (ii) sums equal to all losses, costs, liabilities, damages and
expenses referred to in Article 9 of this Lease: and (iii) sums equal to all
expenditures made and obligations incurred by Lessor in collecting or attempting
to collect the Rent or in enforcing or attempting to enforce any rights of
Lessor under this Lease or pursuant to law, including, without limitation all
legal fees and other amounts so expended. Lessee's obligations under this
Section 19.2 shall survive the expiration or sooner termination of the Lease
Term.
ARTICLE 2O
-------
MISCELLANEOUS PROVISIONS
------------------------
20.1 Terms. The necessary grammatical changes required to make the
-----
provisions hereof apply either to corporations or partnerships or individuals,
men or women, as the case may require shall in all cases be assumed as though
in each case fully expressed.
20.2 Binding Effect. Each of the provisions of this Lease shall
--------------
extend to and shall, as the case may require, bind or inure to the benefit not
only of Lessor and of Lessee, but also of their respective successors or
assigns.
20.3 Easements. Lessor reserves the right to: (i) alter the
---------
boundaries of the Lot: and, (ii) grant easements on the Lot and dedicate for
public use portions thereof without Lessee's consent: provided, however, that
no such grant or dedication shall materially interfere with Lessee's use of the
Premises.
20.4 No Light Air or View Easement. Any diminution or shutting off
-----------------------------
of light, air or view by any structure which may be erected on lands adjacent
to or in the vicinity of the Project shall in no way affect this Lease or impose
any liability on Lessor.
20.5 Authorization. If Lessee executes this Lease as a corporation
-------------
or partnership, then Lessee and the persons executing this Lease on behalf of
Lessee, represent and warrant that such entity is duly qualified to do business
in California and that the individuals executing this Lease on Lessee's behalf
are duly authorized to execute and deliver this Lease on its behalf. In the case
of a corporation, in accordance with a duly adopted resolution of the board of
directors of the Lessee, a copy of which is to be delivered to Lessor on
execution hereof, and in accordance with the by-laws of Lessee and that this
Lease is binding upon Lessee in accordance with its terms, and in the case of
a partnership agreement and the most current amendment thereto, if any, copies
of which are to be delivered to Lessor with the execution hereof.
26
<PAGE>
20.6 Accord and Satisfaction. No payment by Lessee or receipt by
-----------------------
Lessor of a lesser amount than the Rent 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 Lessor may accept such check or payment without
prejudice to Lessor's right to recover the balance of such Rent or pursue any
other remedy provided in this Lease.
20.7 Peaceful Enjoyment. Subject to the other terms hereof. Lessee
------------------
shall and may peacefully have hold and enjoy the Premises, provided that Lessee
pays the Rent and other sums herein to be paid by Lessee and performs all of
Lessee's covenants and agreements contained herein. It is understood and agreed
that this covenant and any and all other covenants of Lessor contained in this
Lease shall be binding upon Lessor and its successors only with respect to
breaches occurring when Lessor has an ownership interest in the Project, and
shall be binding on Lessor's successors only with respect to breaches occurring
when such successors have an ownership interest in the Project. Lessor will
provide, upon execution of the Lease, a commercially reasonable non-disturbance
agreement from the Project lender recognizing Lessee's rights to the leased
premises.
20.8 Limitation of Lessor's Liability. The obligations of Lessor
--------------------------------
under this Lease shall not constitute personal obligations of the partners,
directors, officers or shareholders of Lessor, and Lessee shall look solely to
the real estate that is the subject of this Lease and to no other assets of
Lessor for satisfaction of any liability in respect of this Lease and shall not
seek recourse against the partners, directors, officers or shareholders of
Lessor or any of their personal assets for such satisfaction.
20.9 Time, Calendar Year: Calendar Days. Time is of the essence in
----------------------------------
the performance of all obligations under this Lease. As used in this Lease, the
term "calendar year" shall mean January l through December 3l. Except as
otherwise expressly provided herein, all references to days in this Lease shall
mean calender days, not working or business days: provided, however, that if a
certain date falls on a weekend or holiday, the next business day shall be
substituted for the applicable date.
20.10 Professional Fees. In any action or proceeding which Lessor or
-----------------
Lessee may be required to prosecute to enforce its respective rights
hereunder,the unsuccessful parties therein shall pay all costs and expenses
incurred by the prevailing party therein, including without limitation actual
professional fees such as appraisers, accountants and reasonable attorneys' fees
and expenses, to be fixed by the court, and such costs and attorneys' fees and
expenses shall be made a part of the judgment in such action. In any situation
in which a dispute is settled other than by action or proceeding, including a
default by Lessee, Lessee shall pay all Lessor's costs and, attorney's fees and
expenses relating thereto.
20.11 Severability. If any term or provisions of this Lease, or the
------------
application thereof to any person or circumstance, the deletion of which shall
not adversely affect the receipt of any material benefit of Lessor or Lessee,
shall be invalid, void or unenforceable to any extent, the remainder of this
Lease, and the application of such terms or provisions to other persons or
circumstances, shall not be affected, impaired or invalidated thereby and shall
be enforced to the greatest extent permitted by law.
20.12 Applicable Law. This Lease, and the rights and obligations of
--------------
the parties hereto, shall be construed and enforced in accordance with the laws
of the State of California.
20.13 Submission of Lease. The submission of this document for
-------------------
examination and negotiation neither constitutes an offer to lease, nor a
reservation of, nor option for leasing the Premises. This document shall become
effective and binding only upon execution and delivery by Lessor. No act or
omission of any employee or agent of Lessor or of Lessor's broker or managing
agent shall alter, change or modify any of the provisions hereof.
20.14 Rules and Regulations At all times during the Term. Lessee
---------------------
shall comply with rules and regulations (and such amendments as Lessor may
reasonably adopt) for the Project as set forth in Exhibit F attached hereto and
by this reference made a part hereof ("Rules and Regulations").
27
<PAGE>
20.15 No Nuisance. Lessee shall conduct it's business and control
-----------
its agents, employees, invitees and visitors in such a manner as not to
create any nuisance or interfere with, annoy or disturb any other tenant or
Lessor in its operation of the Building.
20.16 Broker. Lessee warrants that it has had no dealings with any
------
real estate broker or agent other than Lessee's Broker set forth in the Summary
("Broker") in connection with the negotiation of this Lease, and that it knows
of no other real estate broker or agent other than Lessee's Broker, who may be
entitled to any commission or finder's fee in connection with this Lease. Lessee
hereby indemnifies, defends, protects and holds Lessor harmless from and against
any and all claims, demands, losses, liabilities, lawsuits, judgements, costs
and expenses with respect to any leasing commission or equivalent compensation
alleged to be owing on account of Lessee's dealings with any real estate broker
or agent other than Broker as set forth in Broker's separate agreement with
Lessor.
20.17 Lessor's Right to Perform. Upon Lessee's failure to perform
-------------------------
any obligation of Lessee hereunder, subject to notice and reasonable period of
time, including without limitation, payment of Lessee's insurance premiums or
charges of contractors who have supplied materials or labor to the Premises.
Lessor shall have the right to perform such obligation of Lessee on behalf of
Lessee and, or to make payment on behalf of Lessee to such parties. Lessee shall
reimburse Lessor the reasonable cost of Lessor's performing such obligation on
Lessee's behalf, including any amounts that may be expended by Lessor, plus
interest at the rate set forth in Article 4.6 for past due installments of
Rent, as Additional Rental.
20.18 Modification for Lender. If, in connection with obtaining
-----------------------
construction interim or permanent financing for the Project, the lender or any
ground lessor shall request reasonable modifications in this Lease as a
condition to such financing. Lessee will not unreasonably withhold, delay or
defer its consent thereto, provided that such modifications do not increase the
obligations of Lessee hereunder or materially adversely affect the leasehold
interest hereby created or Lessee's rights hereunder.
20.19 Recording. Neither Lessor nor Lessee shall record this Lease
----------
nor a short form memorandum thereof without the written consent of the other.
20.20 Parking Facilities
------------------
(a) The Garage is available for the use of tenants of the
Project and their visitors and customers. All parking rights are subject to the
rules, regulations, charges, rates, validation and identification systems set
forth by Lessor from time to time. Lessor may restrict certain portions of the
Garage for the exclusive use of one or more tenants of the Project and may
designate other areas to be used at large only by customers and visitors of
tenants of the Project. Lessor reserves the right to delegate the operation of
the Garage to a parking operator which shall be entitled to all of the
obligations and benefits of Lessor.
(b) During the Lease Term Lessee shall have the right in
common with other tenants of the Project to rent use the number of undesignated
spaces in the Garage specified in the Summary Information: additional parking
spaces for Lessee's customers and visitors may be allowed at Lessor's option,
and as further provided in the Summary, subject to availability. Lessee shall
pay to Lessor as Additional Rental the parking space rental specified in the
Summary Information, which amount is the charge currently in effect for the
rental use of such parking facilities. Notwithstanding the foregoing. Lessor
reserves the right, from time to time, to make reasonable changes in, additions
to and deletions from the parking facilities and the purposes to which the same
may be devoted, provided that Lessor does not permanently reduce the number of
Lessee's parking spaces specified above. Furthermore, Lessor reserves the right,
from time to time, to make changes in the rental for such parking facilities
based upon the fair market value of such parking facilities as determined solely
by Lessor or governmental authorities.
(c) Lessor shall have the right to cause to be removed any
vehicles of Lessee, its customers or visitors that are parked in violation of
this Lease or in violation of the Rules and Regulations of the
28
<PAGE>
Building without liability of any kind to Lessor and Lessee agrees to indemnify,
defend, protect and hold Lessor harmless from and against any and all claims,
losses, damages, demands, costs and expenses (including without limitation
reasonable attorney's fees and expenses) asserted or arising with respect to or
in connection with the removal of any such automobile(s) as aforesaid. Lessor
shall not be liable for any claims, losses, damages, expenses or demands with
respect to any vehicles of Lessee, its customers or visitors that are parked in
the Garage, except for such loss or damage as may be caused by Lessor's gross
negligence or willful misconduct, and Lessee agrees to indemnify, defend,
protect and hold Lessor harmless from and against any such claim, loss, damage,
demand, cost or expense (including without limitation reasonable attorneys' fees
and expenses). From time to time, upon request of Lessor, Lessee shall supply
Lessor with a list of license plate numbers of all automobiles owned by its
employees and agents granted parking privileges.
20.2l No Merger. The voluntary' or other surrender of this
---------
Lease by Lessee, or a mutual cancellation thereof, shall not work a merger, and
at the option of Lessor shall terminate all or any existing assignments,
sublessees, or subtenancies, or at the option of Lessor may operate as an
assignment to it of any or all such assignments, subleases or subtenancies.
20.22 Amendment. Except as otherwise provided herein,
---------
no subsequent alteration, amendment, change or addition to this Lease shall be
binding upon Lessor or Lessee unless in writing and executed by Lessor and
Lessee.
20.23 Financial Statements. No more often than once per annum.
--------------------
Lessee shall upon twenty (20) days prior written notice from Lessor provide
Lessor with a most recent annual financial statement. Such statements shall be
prepared in accordance with generally accepted accounting principles.
20.24 Hazardous Substances: Indemnification.
-------------------------------------
(a) Except for general offices supplies typically used in an
office area in the ordinary course of business, such as copier toner, liquid
paper, glue, ink, and cleaning solvents, for use in the manner for which they
were designed, in such amounts as may be normal for the office business
operations conducted by Lessee in the Premises, neither Lessee nor its agents,
employees, contractors, licensees, sublesses, assignees, concessionaires or
invitees shall use, handle, store or dispose of any Hazardous Substances in, on,
under or about the Premises or the Project. Except for Hazardous Substances
customarily used in connection with general office uses. Lessee shall not cause
or permit any Hazardous Substance to be used, stored, generated or disposed of
on or in the Building or the Premises by Lessee. Lessee's agents, employees,
contractors, or invitees without first obtaining Lessor's written consent. If
any Hazardous Substances are used, stored, generated, or disposed of on or in
the Premises including those customarily used in connection with general office
uses, or if the Premises become affected by any release or discharge of a
Hazardous Substance. Lessee shall, if caused by a violation of the above,
indemnify, defend and hold harmless the Lessor from and against any and all
claims, damages, fines, judgments, penalties, costs, liabilities, or losses
(including, without limitation, a decrease in value of the Premises, damages
caused by loss or restriction of rentable or usable space, or any damages caused
by a diverse impact on marketing of the space, and any and all sums paid for
settlement of claims, attorneys' fees, consultant, and expert fees) arising
during or after the term of this Lease and arising as a result of such
contamination, release or discharge. This indemnification includes, without
limitation, any and all costs incurred because of any investigation of the site
or any clean-up, remediation, removal, or restoration mandated by federal, state
or local agency or political subdivision. Without limitation of the foregoing,
if Lessee causes or permits the presence of any Hazardous Substance on the
Premises and the same results in any contamination, release or discharge. Lessee
shall promptly, at its sole expense, take any and all necessary actions to
return the Premises to the conditions existing prior to the presence of any such
Hazardous Substance on the Premises. Lessee shall first obtain Lessor's approval
for any such remedial action. Furthermore, Lessee shall immediately notify
Lessor of any inquiry, test, investigation or enforcement proceeding by or
against Lessee or the Property concerning the presence of any Hazardous
Substance. Lessee acknowledges that Lessor, at Lessor's election, shall have the
sole right, at Lessee's expense, to negotiate, defend, approve and appeal any
action taken or order issued by any governmental authority with regard to any
Hazardous Substance contamination which Lessee is obligated hereunder to
remediate.
29
<PAGE>
(b) Lessor represents and warrants that Lessor has nor
knowingly used or permitted the use of any portion of Lessee's Premises, the
Project or Garage to be used in violation of any governmental law ordinances,
regulations or orders relating to environmental conditions including but not
limited to asbestos, soil and ground water conditions and Hazardous Materials.
(c) As used herein. "Hazardous Substance" means asbestos,
any petroleum fuel, polychorobiphenyls ("PCBs") and any hazardous or toxic
substance, material or waste which is or becomes regulated by any local
governmental authority, the State of California or the United States government,
including, but not limited to, any material or substance defined as a "hazardous
waste", "extremely" hazardous waste", "restricted hazardous waste", "hazardous
substances", "hazardous material" or "toxic pollutant" under the California
Health and Safety Code and/or under the Comprehensive Environmental Response,
Compensation and Liability Act. 42. U.S.C. section T9901, et. seq.
20.25 No Warranty. In executing and delivering this Lease,
-----------
Lessee has not relied on any representation including, but not limited to, any
representation whatsoever as to the amount of any item comprising Additional
Rent or the amount of the Additional Rent in the aggregate or that Lessor is
furnishing the same services to other Lessees, at all, on the same level or on
the same basis or any warranty or any statement of Lessor which is not set forth
herein or in one or more of the exhibits attached hereto.
20.26 Entire Agreement. It is understood and acknowledged that
----------------
there are no oral agreements between the parties hereto affecting this Lease and
this Lease supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Lessor to Lessee with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this
Lease. This Lease and any side letter or separate agreement executed by Lessor
and Lessee in connection with this Lease and dated of even date herewith contain
all of the terms, covenants, conditions, warranties and agreements of the
parties relating in any manner to the rental, use and occupancy of the Premises,
shall be considered to be the only agreement between the parties hereto and
their representatives and agents, and none of the terms, covenants, conditions
or provisions of this Lease can be modified, deleted or added to except in
writing signed by the parties hereto. All negotiations and oral agreements
acceptable to both parties have been merged into and are included herein. There
are no other representations or warranties between the parties, and all reliance
with respect to representations is based totally upon the representations and
agreements contained in this Lease.
20.27 Force Majeure. Any prevention, delay or stoppage due to
-------------
strikes, lockouts, labor disputes, Acts of God, inability to obtain services,
labor, or materials or reasonable substitutes therefor, governmental actions,
civil commotions, fire or other casualty, and other causes beyond the reasonable
control of the party obligated to perform, except with respect to the
obligations imposed with regard to Rent and other charges to be paid by Lessee
pursuant to this Lease (collectively, the "Force Majeure"), notwithstanding
anything to the contrary contained in this Lease, shall excuse the performance
of such party for a period equal to any such prevention, delay or stoppage and,
therefore, if this Lease specifies a time period for performance of an
obligation of either party, that time period shall be extended by the period of
any delay in such party's performance caused by a Force Majeure.
20.28 Waiver of Redemption. Lessor hereby waives for Lessee and
--------------------
for all those claiming under Lessee all right now or hereafter existing to
redeem by order or judgment of any court or by any legal process or writ.
Lessee's right of occupancy of the Premises after any termination of this Lease.
20.29 Joint and Several. If there is more than one Lessee, the
-----------------
obligations imposed upon Lessee under this Lease shall be joint and several.
20.30 Attorneys' Fees. If either party commences litigation
---------------
against the other for the specific performance of this Lease, for damages for
the breach hereof or otherwise for enforcement of any remedy hereunder. In the
event of any such commencement of litigation, the prevailing party shall be
entitled to recover
30
<PAGE>
from the other party such costs and reasonable attorneys' fees as may have been
incurred, including any and all costs incurred in enforcing, perfecting and
executing such judgment.
20.31 Independent Covenants. This Lease shall be construed as
---------------------
though the covenants herein between Lessor and Lessee are independent and not
dependent and Lessee hereby expressly waives the benefit of any statute to
the contrary and agrees that if Lessor fails to perform its obligations set
forth herein, Lessee shall not be entitled to make any repairs or perform any
acts hereunder at Lessor's expense or to any set-off of the Rent or other
amounts owing hereunder against Lessor: provided, however, that the foregoing
shall in no way impair the right of Lessee to commence a separate action against
Lessor for any violation by Lessor of the provisions hereof so long as notice is
first given to Lessor and any holder of a mortgage or deed of trust covering the
Building. Real Property or any portion thereof, of whose address Lessee has
therefore been notified, and an opportunity is granted to Lessor and such
holder to correct such violations as provided above.
20.32 Project Name and Signage. Lessor shall have the right at
------------------------
any time to change the name of the Project and to install, affix and maintain
any and all signs on the exterior and on the interior of the Project as Lessor
may, in Lessor's sole discretion, desire.
20.33 Transportation Management. Lessee shall fully comply with
-------------------------
all present or future programs intended to manage parking, transportation or
traffic in and around the Project, and in connection therewith. Lessee shall
take responsible action for the transportation, planning and management of all
employees located at the Premises by working directly with Lessor, any
governmental transportation management organization or any other
transportation-related committees or entities. Such programs may include,
without limitation: (i) restrictions on the number of peak-hour vehicle trips
generated by Lessee. (ii) increased vehicle occupancy; (iii) implementation of
an in-house ride-sharing program and an employee transportation coordinator:
(iv) working with employees and any Project or area-wide ride-sharing program
manager: (v) instituting employer-sponsored incentives (financial or in-kind) to
encourage employees to ride-share: and (vi) utilizing flexible work shifts for
employees.
20.34 No Discrimination. Lessee covenants by and for itself,
-----------------
its heirs, executors, administrators and assigns, and all persons claiming under
or through Lessee, and this Lease is made and accepted upon and subject to the
following conditions: that there shall be no discrimination against or
segregation of any person or group of persons, on account of race, color, creed,
sex, religion, marital status, ancestry, or national origin in the leasing,
subleasing, transferring, use or employment of the Premises, nor shall Lessee
itself, or any person, use claiming under or through Lessee, establish or permit
such practice or practices of discrimination or segregation with reference to
the selection, location, number, use or occupancy of tenants, lessees,
sublessees, subtenants or vendees in the Premises.
31
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be executed the
day and date first above written.
"Lessor":
BPG PASADENA, L.L.C.,
a Delaware Limited Liability Company
[SIGNATURE ILLEGIBLE]
- -----------------------------------
Its: Managing Member
--------------------------
"Lessee":
CITY SEARCH, INC.,
a Delaware Corporation
[SIGNATURE ILLEGIBLE]
By:----------------------------------
Its: ??????????????????
----------------------------
32
<PAGE>
EXHIBIT A
---------
790 EAST COLORADO BOULEVARD
---------------------------
LEGAL DESCRIPTION
-----------------
All the certain real property located in the County of Los Angeles. State of
California, described as follows:
APN 5734-013-022
PARCEL l OF THE PARCEL MAP NO.12432. IN THE CITY OF PASADENA, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA. AS PER MAP RECORDED IN BOOK 138, PAGES 66 AND 67
OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXHIBIT A - PAGE 1
<PAGE>
EXHIBIT B
---------
790 EAST COLORADO BOULEVARD
---------------------------
OUTLINE OF FLOOR PLAN OF PREMISES
---------------------------------
(TO BE PROVIDED BY LESSOR)
EXHIBIT B - PAGE 1
<PAGE>
EXHIBIT B
---------
790 E. COLORADO BLVD.
[SECOND FLOOR PLAN APPEARS HERE]
<PAGE>
EXHIBIT C
---------
790 EAST COLORADO BOULEVARD
---------------------------
WORK LETTER
-----------
This Work Letter shall set forth the terms and conditions relating to the
construction of the Lessee improvements in the Premises. This Work Letter is
essentially organized chronologically and addresses the issues of the
construction of the Premises, in sequence, as such issues will arise during the
actual construction of the Premises. All capitalized terms used but not defined
herein shall have the meanings given such terms in this Lease. All references in
this Work Letter to Articles or Sections of "this Lease" shall mean the relevant
portion of Articles 1 through 20 of this Lease to and of which this Work Letter
forms a part. All references in this Work Letter to Sections of "this Work
Letter" shall mean the relevant portion of Sections 1 through 6 of this Work
Letter.
AGREEMENT
---------
SECTION l
---------
DESIGN AND CONSTRUCTION OF LESSEE IMPROVEMENTS
----------------------------------------------
1.l Construction Drawings for Lessee Improvements. Prior to the
---------------------------------------------
execution of this Lease, Lessor and Lessee have approved a detailed space plan
and supplemental specifications for the construction of certain improvements in
the Premises a copy of which is included as Exhibit D to the Lease (the "Final
Space Plan"). Based upon and in conformity with the Final Space Plan. Lessor
shall cause its architect and engineers to prepare and deliver to Lessee, for
Lessee's reasonable approval, detailed specifications and engineered working
drawings for the Lessee improvements shown on the Final Space Plan (the "Working
Drawings"). To the extent that the finishes and specifications are not
completely set forth in the Final Space Plan for any portion of the Lessee
improvements depicted thereon, the actual specifications and finish work shall
be in accordance with the specifications for the building's standard improvement
package items, as determined by Lessor. Within three (3) days after Lessee's
receipt of the Working Drawings. Lessee shall approve or disapprove the same,
which approval shall not be unreasonably withheld; provided, however, that
Lessee may only disapprove the Working Drawings to the extent such Working Draw
ings are inconsistent with the Final Space Plan and only if Lessee delivers to
Lessor, within such thirty (30) day period, specific changes proposed by Lessee
which are consistent with the Final Space Plan and do not constitute changes
which would result in any of the circumstances described in items (i) through
the below. If any such revisions are timely and properly proposed by Lessee,
Lessor shall cause its architect and engineers to revise the Working Drawings to
incorporate such revisions and submit the same for Lessee's approval in
accordance with the foregoing provisions and the parties shall follow the
foregoing procedures for approving the Working Drawings until the same are
finally approved by Lessor and Lessee. Upon Lessor's and Lessee's approval of
the Working Drawings, the same shall be known as the "Approved Working
Drawings". Once the Approved Working Drawings have been approved by Lessor
and Lessee. Lessee shall make no changes or modifications thereto without the
prior written consent of Lessor, which consent may be withheld in Lessor's sole
discretion if such change or modification would: (i) directly or indirectly
delay the "Substantial Completion", as that term is in defined section 5 below,
of the Premises: (ii) increase the cost of designing or constructing the Lessee
Improvements above the cost of the Lessee Improvements depicted in the Final
Space Plan: (iii) be of a quality lower than the quality of the standard
improvement package items for the office building; and or (iv) require any
changes to the Base, Shell and Core of the Project. The Lessee improvements
shown on the Approved Working Drawings, excluding any of Lessee's furniture,
computer systems, telephone systems, equipment or other personal property
which may be depicted thereon, shall be referred to herein as the "Lessee
Improvements".
1.2 Limitation on Lessor's Liability. Lessor's submittal and/or approval
--------------------------------
of the Final Space Plan. Working Drawings and Approved Working Drawings
(collectively, the "Construction Drawings") as set forth in this Section 5 shall
not imply Lessor review of the same, or obligate Lessor to review the same for
quality, design, compliance with codes or other like matters.
<PAGE>
EXHIBIT B
---------
[790 E. COLORADO BLVD. -- THIRD FLOOR PLAN]
<PAGE>
SECTION 2
---------
CONSTRUCTION COSTS AND OVER-ALLOWANCE AMOUNT
--------------------------------------------
Lessor and Lessee hereby agree that Lessor shall at Lessor's sole cost and
expense, improve Lessee's Premises consistent with the space plan developed by
City Spaces and approved by CitySearch. The intention of the parties herein is
to develop at Landlord expense, standard professional office space in all areas
of Lessee's Premises except for the Computer Room. Specifically, Lessor shall at
Lessor's sole cost and expense provide all necessary improvements to the
Premises, including but not limited to, suspended ceilings, lighting, walls,
doors, floor coverings, furniture low wall partition systems,
telecommunications, cabling, fourplex electrical outlets (as required), a
men's & women's shower facility, and breakroom including sink coffee and
storage area. Lessor shall also build the demised area for the Computer Room
consistent with buildings standards for the Premises. Lessee, at Lessee's sole
cost and expense shall be responsible for the development of the Computer Room
beyond building standard including any additional air conditioning units, fire
suppression systems, floor support system, etc.
SECTION 3
---------
CONTRACTOR'S WARRANTIES AND GUARANTIES
--------------------------------------
Lessor will, upon completion of the Lessee Improvements and Lessee's
acceptance of the Premises, assign to Lessee all warranties and guaranties by
the contractor who constructs the Lessee Improvements (the "Contractor")
relating to the Lessee Improvements, and Lessee hereby waives all claims against
Lessor relating to, or arising out of the construction of the Lessee
Improvements except to extent of Lessor's cross negligence or willful
misconduct.
SECTION 4
---------
LESSEE'S COVENANTS
------------------
Lessee shall use its good faith efforts to cooperate with Lessor to
cause a Notice of Completion to be recorded in the Office of the Recorder
of the County of Los Angeles in accordance with section 3093 of the Civil Code
----------
of the State of California or any successor statute, including the execution of
any appropriate documents if necessary; provided, however, Lessor may itself
execute and file the same on behalf of Lessee as Lessee's agent for such purpose
SECTION 5
---------
COMPLETION OF THE LESSEE IMPROVEMENTS:
--------------------------------------
LEASE COMMENCEMENT DATE
-----------------------
Except as provided in this Section 5, the Lease Commencement Date shall
occur as set forth in the Summary and Article 3 of this Lease. For purposes of
this Lease "Substantial Completion" of the Premises shall occur upon the
completion of construction of the Lessee Improvements in the Premises pursuant
to the Approved Working Drawings, with the exception of any punch list items
and any Lessee fixtures, work-stations, built-in furniture, or equipment to
be installed by Lessee or under the supervision of a Contractor. If there shall
be a delay or there are delays in the Substantial Completion of the Premises or
in the occurrence of any of the other conditions precedent to the Lease
Commencement Date as set forth in the Summary of this Lease as a result of:
5.1 Lessee's failure to timely approve any matter requiring Lessee's
approval:
5.2 A breach by Lessee of the terms of this Work Letter or this Lease;
EXHIBIT C - PAGE 2
<PAGE>
5.4 Lessee's request for changes in any of the Construction Drawings, the
changes of which result in added time to the construction schedule:
5.5 Lessee's requirement for materials, components, finishes or
improvements which are not available in a commercially reasonable time (given
the anticipated Lease Commencement Date as set forth in this Lease) or which
are different than Lessor's standard improvement package items for the office
building:
5.6 Any other acts or omissions of Lessee, or its agents, or employees
except for computer room; then, notwithstanding anything to the contrary set
forth in this Lease or this Work Letter and regardless of the actual date of the
Substantial Completion of the Premises, the Lease Commencement Date shall be
deemed to be the date the Lease Commencement Date would have occurred pursuant
to the Summary if no Lessee Delay or delays, as set forth above had occurred.
SECTION 6
---------
MISCELLANEOUS
-------------
6.1 Lessee's Entry Into the Premises Prior to Substantial Completion.
----------------------------------------------------------------
Provided that Lessee and its agents do not interfere with Contractor's work in
the Project and the Premises. Contractor shall allow Lessee access to the
Premises prior to the Substantial Completion of the Premises for the purpose of
Lessee installing over-standard equipment or fixtures ( including Lessee's data
and telephone equipment, wall and floor coverings, security systems and
millwork) in the Premises. Prior to Lessee's entry into the Premises as
permitted by the terms of this Section 6.1. Lessee shall submit a schedule to
Lessor and Contractor, for their approval, which schedule shall detail the
timing and purpose of Lessee's entry. Lessee shall hold Lessor harmless from and
indemnity, protect and defend Lessor against any loss or damage to the Project
or Premises and against injury to any persons caused by Lessee's actions
pursuant to this Section 6.1.
6.2 Freight Elevators. Lessor shall, consistent with its obligations to
-----------------
other tenants of the Project, and subject to the needs of Lessor with respect to
Lessor's construction work in the Project, make the freight elevator reasonably
available to Lessee in connection with initial decorating, furnishing and
moving into the Premises.
6.3 Lessee's Representative. Lessee has designated Bradley Ramberg as its
-----------------------
sole representative with respect to the matters set forth in this Work Letter,
who, until further notice to Lessor, shall have full authority and
responsibility to act on behalf of the Lessee as required in this Work Letter.
6.4 Lessor's Representative. Lessor has designated Michael D. Barker as
-----------------------
its sole representative with respect to the matters set forth in this Work
Letter, who, until further notice to Lessee, shall have full authority and
responsibility to act on behalf of the Lessor as required in this Work Letter.
6.6 Time of the Essence in This Work Letter. Unless otherwise indicated,
---------------------------------------
all references herein to a " number of days" shall mean and refer to calendar
days. In all instances where Lessee is required to approve or deliver an item,
if no written notice of approval is given or the item is not delivered within
the stated time period, at Lessor's sole option, at the end of such period the
item shall automatically be deemed approved or delivered by Lessee and the next
succeeding time period shall commence.
6 7. Lessee's Material Default. Notwithstanding any provision to the
-------------------------
contrary contained in this Lease, if an event of default as described in
Article 17 of this Lease, or a default by Lessee under this Work Letter, has
occurred at any time on or before the Substantial Completion of the Premises,
then (i) in addition to all other rights and remedies granted to Lessor pursuant
to this Lease, Lessor shall have the right to cause Contractor to cease the
construction of the Premises (in which case, Lessee shall be responsible for
any delay in the Substantial Completion of the Premises caused by such work
stoppage as set forth in Section 5 of this Work Letter), and (ii) all other
obligations of Lessor under the terms of this Work Letter shall be forgiven
until such time as such default is cured pursuant to the terms of this Lease.
EXHIBIT C - PAGE 3
<PAGE>
EXHIBIT D
---------
790 EAST COLORADO BOULEVARD
----------------------------
LESSEE'S FINAL SPACE PLAN
-------------------------
<PAGE>
EXHIBIT E
---------
790 EAST COLORADO BOULEVARD
---------------------------
NOTICE OF LEASE TERM DATES
--------------------------
To: City Search, Inc. Date: September ____, 1996
4502 Dyer Street, Suite 201
La Crescenta, CA 91214
Re: Office Lease dated ____________________, 19___, between BPG Pasadena,
L.L.C., Lessor, and, CitySearch. Inc., Lessee. concerning Suite 200,
located at 790 East Colorado Boulevard, Pasadena, California 91101.
In accordance with the subject Lease, we wish to advise you and/or confirm as
follows:
l. The Premises have been accepted by the Tenant as being substantially
complete in accordance with the Lease and there is no deficiency in
construction.
2. Tenant has possession of the Premises and acknowledges that under the
provisions of the Lease, the term of said Lease shall commence as of
November 1, 1996 for a term of five (5) years, ending on October 31, 2001.
3. In accordance with the Lease, Rent commenced to accrue on ________________.
4. If the commencement date of the Lease is other than the first day of the
month, the first billing will contain a pro rata adjustment. Each billing
thereafter shall be for the full amount of the monthly installment as
provided for in the Lease.
5. Rent is due and payable in advance on the first day of each and every
month. Rent checks should be made payable to BPG Pasadena, L.L.C. and
delivered to:
6. Nationwide Remittance Centers - California, Inc.
Department 66099
El Monte, CA 91735-6099
7. The number of rentable square feet in the Premises is ___________.
EXHIBIT E - PAGE
<PAGE>
8. Tenant's Percentage Share is _________________%.
AGREED AND ACCEPTED:
Lessor: Lessee:
BPG Pasadena. L.L.C., City, Search, Inc.,
a Delaware Limited Liability Company a Delaware Corporation
790 East Colorado Boulevard 4502 Dyer Street, Suite 201
Pasadena, CA 91101 La Crescenta, CA 91214
By:__________________________________ By:_____________________________________
Managing Member
_____________________________________ ________________________________________
[Print Name] [Print Name]
EXHIBIT E - PAGE
<PAGE>
EXHIBIT F
---------
790 EAST COLORADO BOULEVARD
---------------------------
RULES AND REGULATIONS
---------------------
Lessee shall faithfully observe and comply with the following Rules and
Regulations. Lessor shall not be responsible to Lessee for the non-performance
of any of said Rules and Regulations by or otherwise with respect to he acts or
omissions of any other tenants or occupants of the Project.
1. Lessee shall not alter any lock or install any new or additional
locks or bolts on any doors or windows of the Premises without obtaining
Lessor's prior written consent. Lessee shall bear the cost of any lock changes
or repairs required by Lessee. Two keys will be furnished by Lessor for the
Premises, and any additional keys required by Lessee must be obtained from
Lessor at a reasonable cost to be established by Lessor.
2. All doors opening to public corridors shall be kept closed at all
times except for normal ingress and agrees to the Premises, unless electrical
hold-backs have been installed.
3. Lessor reserves the right to close and keep locked all entrance and
exit doors of the office building during such hours as are customary for
comparable buildings in the vicinity of the Project. Lessee, its employees and
agents must be sure that the doors to the office building are securely closed
and locked when the leaving Premises if it is after the normal hours of
business for the Project. Any Lessee, its employees, agents persons entering
or leaving the Project at any time when it is so locked, or any time when it
is considered to be after normal business hours for the Project, may be
required to sign the security register when so doing. Access to the Project
may be refused unless the person seeking access has proper identification or
has made a previous arrangement with regard to the admission to or exclusion
from the Project of any person. In case of invasion, mob, riot, public
excitement, or other commotion, Lessor reserves the right to prevent access to
the Project during the continuance of same by any means it deems appropriate
for the safety and protection of life and property.
4. Lessor shall have the right to prescribe the weight, size and
position of all safes and other heavy property brought into the Project. Safes
and other heavy objects shall, if considered necessary by Lessor, stand on
supports of such thickness as is necessary to properly distribute the weight.
Lessor shall not be responsible for loss or damage to any such safe or property
in any case. All damage done to any part of the Building, its contents,
occupants or visitors by moving or maintaining any such safe or other property
shall be the sole responsibility of Lessee and any expense of said damage or
injury shall be borne by Lessee.
5. No furniture, freight, packages, supplies, equipment or merchandise
will be brought into or removed from the Building or carried up or down in the
elevators, except upon prior notice to Lessor, and in such manner, in such
specific elevator, and between such hours as shall be designated by Lessor.
Lessee shall provide Lessor with not less than 24 hours prior notice of the need
to utilize an elevator for any such purpose, so as to provide Lessor with a
reasonable period to schedule such use and to install such padding or take such
other actions or prescribe such procedures as are appropriate to protect against
damage to the elevators or other parts of the Building. In no event shall
Lessee's use of the elevators for any such purpose be permitted during the hours
of 7:00 a.m. - 9:00 a.m., 11:30 a.m. - 1:30 p.m. and 4:30 p.m. - 6:30 p.m.
6. Lessor shall have the right to control and operate the public portions
of the Building, the public facilities, the heating and air conditioning, and
any other facilities furnished for the common use of tenants, in such manner as
is customary for comparable buildings in the vicinity of the Building.
7. The requirements of Lessee will be attended to only upon application
at the Office of the Building or at such office location designated by Lessor.
Employees of Lessor shall not perform any work or do anything outside their
regular duties unless under special instructions from Lessor.
EXHIBIT F - PAGE
<PAGE>
8. Lessee shall not disturb, solicit, or canvass any occupant of the
Building and shall cooperate with Lessor or Lessor's agents to prevent same.
9. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed, and no
foreign substance of any kind whatsoever shall be thrown therein. The expense
or any breakage, stoppage or damage resulting from the violation of this rule
shall be borne by the Lessee who, or whose employees or agents, shall have
caused it.
10. Lessee shall not overload the floor of the Premises, nor mark, drive
nails or screws, or drill into the partitions, woodwork or plaster or in any
way deface the Premises or any part thereof without Lessor's consent first had
and obtained, which consent shall not be unreasonably withheld or delayed;
provided, however, that Lessee may without Lessor's prior consent, place
pictures and normal wall hangings on the Premises so long as Lessee repairs any
damage resulting therefrom and Lessee restores the Premises to its condition
prior to the placement of such items.
11. Except for vending machines rented for the sole use of Lessee's
employees and invitees, no vending machine or machines of any description other
than fractional horsepower office machines, shall be installed, maintained or
operated upon the Premises without the written consent of Lessor.
12. Lessee shall not use or keep in or on the Premises or the Building any
kerosene, gasoline or other inflammable or combustible fluid or material.
13. Lessee shall not use any method of heating or air conditioning other
than that which may be supplied by Lessor without the prior written consent of
Lessor.
14. Lessee shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in or on the Premises, or permit or allow the Premises
to be occupied or used in a manner offensive or objectionable to Lessor or other
occupants of the Building by reason of noise, odors, or vibrations, or interfere
in any way with other tenants or those having business therein.
15. Lessee shall not bring into or keep within the Building or the
Premises any animals, birds, bicycles or other vehicles.
16. No cooking shall be done or permitted by any Lessee on the Premises,
nor shall the Premises be used for the storage of merchandise, for lodging or
for any improper, objectionable or immoral purposes. Notwithstanding the
foregoing. Underwriters' laboratory-approved equipment and microwave ovens may
be used in the Premises for heating food and brewing coffee, tea, hot chocolate
and similar beverages, provided that such use is in accordance with all
applicable federal, state and city laws, codes, ordinances, rules and
regulations, and does not cause odors which are objectionable to Lessor and
other tenants.
17. Lessor will approve where and how telephone and telegraph wires are
to be introduced to the Premises. No boring or cutting for wires shall be
allowed without the consent of Lessor. The location of telephone, call boxes
and other office equipment affixed to the Premises shall be subject to the
approval of Lessor.
18. Lessor reserves the right to exclude or expel from the Building any
person who, in the judgment of Lessor, is intoxicated or under the influence of
liquor or drugs, or who shall in any manner do any act in violation of any of
these Rules and Regulations.
19. Lessee, its employees and agents shall not loiter in the entrances or
corridors, nor in any way obstruct the sidewalks, lobby, halls, stairways or
elevators, and shall use the same only as a means of ingress and egress for the
Premises.
EXHIBIT F - PAGE
<PAGE>
20. Lessee shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Lessor to ensure the most effective operation of
the Building's heating and air conditioning system, and shall refrain from
attempting to adjust any controls. This includes the closing of exterior blinds,
disallowing the sun rays to shine directly into areas adjacent to exterior
windows.
21. Lessee shall store all its trash and garbage within the interior of
the 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 Los
Angeles County without violation of any law or ordinance governing such
disposal. All trash, garbage and refuse disposal shall be made only through
entry-ways and elevators provided for such purposes at such times as Lessor
shall designate.
22. Lessee shall comply with all safety, fire protection and evacuation
procedures and regulations established by Lessor or any governmental agency.
23. Lessee shall assume any and all responsibility for protecting the
Premises from robbery and pilferage, which includes keeping doors locked and
other means of entry to the Premises closed when the Premises are not occupied.
24. Lessor 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 Lessor
shall be construed as a waiver of such Rules and Regulations in favor of any
other tenant or tenants, nor prevent Lessor from thereafter enforcing any such
Rules or Regulations against any or all tenants of the Building.
25. No awnings or other projection shall be attached to the outside walls
of the Building without the prior written consent of Lessor. No curtains,
blinds, shades or screens shall be attached to or hung in or used in connection
with any window or door of the Premises without the prior written consent of
Lessor. All electrical ceiling fixtures hung in offices or spaces along the
perimeter of the Building must be fluorescent and or of a quality, tape, design
and bulb color approved by Lessor.
26. The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed by Lessee, nor shall any bottles,
parcels or other articles be placed on the window sills.
27. The washing and or detailing of, or the installation of windshields,
radios, telephones in or general worK on automobiles shall not be allowed on
the Real Property.
28. Food vendors shall be allowed in the Building upon receipt of a
written request from the Lessee. Food vendor shall service only those tenants
which have a written request on file in the Building Management Office. Under
no circumstance shall the food vendor display their products in the public or
common area of the Building, including corridors and elevator lobbies. Any
failure to comply with this rule shall result in immediate, permanent
withdrawal of the vendor from the Building.
29. Lessees must comply with requests made by the Lessor relative to
informing Lessee's employees of any items of importance affecting them as so
deemed by the Lessor.
30. Lessee shall comply with any non-smoking ordinance adopted by any
applicable governmental authority.
3l. Lessor reserves the right at any time to change or rescind any one or
more of these Rules and Regulations, or to make such other and further
reasonable Rules and Regulations as in Lessor's judgment may, from time to time
be necessary for the management, safety, care and cleanliness of the Premises
and Building, and for the preservation of good order therein, as well as for the
convenience of other occupants and tenants. Lessor shall not be responsible to
Lessee or to any other person for the non-observance of said Rules Regulations
by another
EXHIBIT F - PAGE
<PAGE>
Lessee or other person. Lessee shall be deemed to have read these Rules and
Regulations and to have agreed to abide by them as a condition of its occupancy
of the Premises.
EXHIBIT F - PAGE
<PAGE>
EXHIBIT G
-------
790 EAST COLORADO BOULEVARD
---------------------------
FORM OF LESSEE'S ESTOPPEL CERTIFICATE
-------------------------------------
The undersigned as Lessee under that certain Office Lease (the "Lease") made and
entered into as of 19__ and between BPG Pasadena L.L.C., a Delaware Limited
Liability Company, and the undersigned as Lessee for Premises on the floor(s)
of the Office Building located at 790 East Colorado Boulevard, Pasadena,
California 91101 certifies as follows:
1 . Attached hereto as Exhibit A is a true and correct copy of the Lease
and all amendments and modifications thereto. The documents contained in Exhibit
A represent the entire agreement between the parties as to the Premises.
2. The undersigned has commenced occupancy of the Premises described in
the Lease currently occupies the Premises, and the Lease Term commenced on
November 1, 1996.
3. The Lease is in full force and effect and has not been modified,
supplemented or amended in any way.
4. Lessee has not transferred, assigned or sublet any portion of the
Premises nor entered into any license or concession agreements with respect
thereto, except as follows:
5. Lessee shall not modify the Lease document or prepay any amounts owing
under the Lease to Lessor in excess of thirty (30) days without the prior
written consent of Lessor's mortgagee.
6. Base Rent became payable on November 1, 1996.
7. The Lease Term expires on October 31, 2001.
8. All conditions of the Lease to be performed by Lessor necessary to the
enforceability of the Lease have been satisfied and Lessor is not in default
thereunder.
9 No rental has been paid in advance and no security has been deposited
with Lessor except as provided in the Lease.
10. As of the date hereof, there are no existing defenses or offsets that
the undersigned has, which preclude enforcement of the Lease by Lessor.
11. All monthly installments of Base Rent, all Additional Rent and all
monthly installments of estimated Additional Rent have been paid when due
through. The current monthly installment of Base Rent is $___________________.
12. The undersigned acknowledges that this Estoppel Certificate may be
delivered to Lessor's prospective mortgagee, or a prospective purchaser, and
acknowledges that it recognizes that if the same is done, said mortgagee,
prospective mortgagee, or prospective purchaser will be relying upon the
statements contained herein in making the loan or acquiring the property of
which the Premises are a part, and in accepting an assignment of the Lease as
collateral security, and that receipt by it of this certificate is a condition
of making of the loan or acquisition of such property.
EXHIBIT G - PAGE
<PAGE>
13. If Lessee is a corporation or partnership each individual executing
this Estoppel Certificate on behalf of Lessee hereby represents and warrants
that Lessee is a duly formed and existing entity qualified to do business in
California and that Lessee has full right and authority to execute and deliver
this Estoppel Certificate and that each person signing on behalf of Lessee is
authorized to do so.
Executed at ________________ on the _________ day of _____________, 19____.
" Lessee":
CitySearch, Inc.,
a Delaware Corporation________________________
By:___________________________
Its:__________________________
BY:___________________________
ITS:__________________________
EXHIBIT G - PAGE
<PAGE>
EXHIBIT H
-------
CLEANING SPECIFICATIONS
-----------------------
JANITORIAL SPECIFICATIONS
GENERAL SERVICES
Daily Services
Clean Entry Glass Doors.
Sweep with Chemically-Treated Dust Mop or Vacuum all Floors.
Spot Clean Composition Floors and Carpets
Dust Desk, Chairs and all other Office Furniture.
Clean all Ash Trays and Sand Urns.
Properly Position Furniture in Offices.
Empty all Waste Baskets and Carry Trash to Pick Up Area.
Spot Clean Door, Door Frames and Counters.
Spot Clean Partition and Door Glass.
Spot Clean around Wall Switches.
Clean and Polish Drinking Fountains.
Clean Elevator and Elevator Tracks.
Leave on Designated Lights.
Police Stairway Entries.
Weekly Services
Dust Ledges and Window Sills.
Perform Los Dusting.
Dust the Baseboards.
Sweep Vacuum Stairways Dust Rails.
Remove Fingerprints form Woodwork, Walls and Partitions.
Monthly Services
Perform High Dusting, i.e.. Door Sashes and Tops of Partitions.
RESTROOM SERVICES
Daily Services
Empty and Wipe Out all Waste Paper receptacles.
Empty Sanitary Napkin Containers and Replace Insert.
Polish all Metal and Mirrors.
Clean and Polish all Dispensers.
Clean and Disinfect Wash Basins, Toilet Bowls and Urinals.
Disinfect Underside and Tops of Toilet Seats.
Spot Clean Tile Walls and Toilet Partitions.
Spot Clean Walls Around Wash Basins.
Clean Floors with a Germicidal Solution.
Refill Soap, Towel, Tissue and Seat Cover Dispensers.
Weekly Services
Wash Down Ceramic Tile Walls and Toilet Compartment Partitions.
Perform High Dusting.
Monthly Services
Brush Down Vents.
Machine Scrub Floors.
EXHIBIT H - PAGE
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITOR
We consent to the reference to our firm under the captions "Experts" and
"Selected Financial Data" and to the use of our report dated March 11, 1998
(except Note 10, as to which the date is May 26, 1998), in the Registration
Statement Form S-1 and related Prospectus (the Registration Statement) of
CitySearch, Inc. dated June 22, 1998.
Our audit also included the financial statement schedule of CitySearch, Inc.
listed in Item 16(b). The schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on the schedule based
on our audit. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.
Ernst & Young LLP
Los Angeles, California
July 14, 1998
The foregoing consent is in the form that will be signed upon the completion
of the restatement of the capital accounts described in note 10 to the
financial statements.
/s/ Ernst & Young LLP
Los Angeles, California
July 14, 1998
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